30 Apr 2014

No effect on rents, says Labour

12:16 pm on 30 April 2014

The Labour Party has dismissed criticism that one element of its policy to keep inflation under control without pushing interest rates too high would drive up rents.

The New Zealand Property Investors' Federation opposes Labour's intention to ring-fence losses on property investments to stop them being offset against other income.


Photo: RNZ

The Federation argues a similar policy in Australia was abandoned after rents there went up 25 percent and a similar thing would happen here under Labour's policy.

Labour's finance spokesperson David Parker said the federation simply wants property investors to continue getting a tax refund paid for by other taxpayers.

"I reject the idea that just because we remove a tax advantage that they've currently got somehow rents would go up.

Rents are already high in New Zealand and I think the constraint on rents is the ability of people to afford to pay them."

Mr Parker also rejected the Government's criticism that Labour's policy would drive up consumer prices if it succeeded in bringing down the value of the dollar.

He said Labour's policy would take pressure off the dollar and lead to higher growth and higher wages.

Labour told to leave KiwiSaver alone

A leading expert on superannuation schemes says the Labour Party's proposal for using KiwiSaver as a tool to curb inflation would undermine the scheme's credibility.

As part its policy announced on Tuesday, Labour said if it was elected to government it would make KiwiSaver compulsory and consider increasing contribution levels as needed to help control inflation.

Mr Parker said it would mean the Reserve Bank would not always have to raise interest rates to fight inflation and that would take pressure off the value of the dollar.

Federated Farmers said the policy had merit and the Northern Employers and Manufacturers' Association said it might be effective in curbing inflation.

However actuary Jonathan Eriksen said the changes to the KiwiSaver scheme would take the control out of the hands contributors.

"If it becomes something where you don't know how much you're going to contribute, your sense of control and your sense of investment and looking after your own future gets undermined."

Mr Erikson said the Reserve Bank is already managing the economy well.

Auckland University economics professor Tim Hazledine said Labour's idea was a clever way of relieving inflationary pressure. Increasing savings and lowering interest rates would also help to rein in the over-inflated dollar, he said.