Migration, rising house prices & falling net wages
“Our whole economy now depends on increasing house prices that in turn depend on levels of migration that are at record levels. It is not sustainable,” Act leader Richard Prebble said in his state-of-the-nation speech in Auckland today.
Below are 3 extracts from his address. The 1st relates to debt, which is arising through property price rises and will impact on property. The 2nd relates to the state of political balance, which Mr Prebble sees as precarious. The 3rd relates to real incomes, which will again impact on property.
“The Westpac Household Savings Indicators reported in November last year revealed that households now owe $80 billion dollars, 8.6% more than a year ago.
“Household borrowing in the 90s increased from 57% of disposable income in 1990 to 112% in 2002.
The average Kiwi has never been more in debt. When the official figures are released I predict that retail spending at Christmas & the now important Boxing Day/January sales were a record, and we owe record credit card debt. Spending through the bank’s electronic system payment was up 11% in December. And let’s not forget that student debt has doubled under Labour.
“Our banks that have financed household debt have borrowed from overseas. Our own savings are insufficient. The Reserve Bank Governor (now MP Don Brash) stated: ‘NZ banks now rely more heavily on overseas borrowing than banks in any developed country — roughly a third of the total assets of the banking system are now fuelled by borrowing overseas.’
“The alarming state of our trading banks’ balance sheets does not concern the Reserve Bank. Banks borrowing overseas to onlend for domestic mortgages & credit card spending is a crash waiting to happen. The official answer is that our major banks are Australian and they are strong enough to refinance their NZ subsidiaries in the event of a downturn.
“No one asks what happens if Australia also has a downturn? No one asks what if the Australian banks also tighten up in New Zealand. Our whole economy now depends on increasing house prices that in turn depend on levels of migration that are at record levels. It is not sustainable.”
Abolishing Privy Council
Mr Prebble began his look at the political balance by focusing on the constitutional issue of abolishing the Privy Council and setting up a new Supreme Court with its membership drawn entirely by the present government, and probably not containing existing Appeal Court members.
“Abolishing the Privy Council is an important step to the Socialist Republic nightmare. But the Greens, if they are consistent with their election promise, must make the GE ban a precondition of support. Labour in turn, if they are consistent with their election promise, the government must lift the GE moratorium. So it’s an interesting year. This government is nothing like as stable as commentators opine. Minority governments can always fall.”
Actual wages fall
Lastly, the state of the family pocket:
“While gross wages have basically matched inflation, government has taken much more in tax, so take-home pay of the average worker has actually fallen in real terms.
“Over this summer I have had the parliamentary library research real take home pay. The average worker’s take-home pay after tax & inflation is $14/week less today than when Labour took office, a reduction of 2.4%.
“Increased income tax, user charges, petrol tax, government charges & stealth taxes have reduced the real income of the average working person. What families have done is take on more debt to keep up living standards. As interest rates are lower, households can do this.
“So now we have the most heavily indebted families in our history. A small increase in mortgage rates will have a disastrous effect on New Zealand families.”