Is Nicola Willis Competent?
Why Our Economy Is Failing 101
She speaks well. She has some catchy one liners. But Finance Minister Nicola Willis’ understanding of how an economy works is naive and her decisions are driven more by right wing ideology than logic.
Take her position on a Capital Gains Tax.
During an RNZ interview with Corin Dann earlier this month she said ,
“When you look at our economy, one of the challenges we have is that our firms don’t actually have that much capital invested in them. That has affected our productivity. So when you look at all of those factors, do we really want to say to small businesses, to KiwiSavers, to people wanting to invest, actually, if you invest more capital, you’ll face more tax”.
To which Dann correctly replied,
“Are you saying that a capital gains tax would somehow discourage investment in business? Because I think you’ll find most economists and tax experts will argue the opposite; that there has been a bias to housing at the expense of money going into the productive sector.”
I could quote you any number of economists who would back Dann against Willis because in short, if you can make a lot more money investing in property and reaping tax free profits ( as our Prime Minister recently just did ) then why would you invest in business?
Second. Notice how Willis conflates the idea of a Capital Gains Tax on businesses with one just on property. A comprehensive CGT on everything is not what is being currently suggested – just a tax on the profit you can make out of buying and selling properties. Talk about a straw man argument! Jeesh!!
Third. According to Willis’ argument we should have thriving investment in business because we don’t have a Capital Gains Tax on housing. But we don’t! And if you look at countries that do have a CGT like Australia and the UK they have lots of investment in business and are more productive.
Then there is Willis’ whole austerity agenda.
While both she and her boss Christopher Luxon grabbed a photo op when the Reserve Bank recently announced lower inflation, the fact is their unnecessary austerity measures are pushing us deeper into recession. Almost every week we hear of businesses closing, putting large numbers of New Zealanders out of work.
If people aren’t earning they can’t pay taxes.
Tax cuts don’t help the unemployed!
The only people who really benefit from a tax cut are those who are already well off.
And then there is this interesting quote from economist Geoff Bertram currently the visiting scholar at Herenga Waka - Victoria University of Wellington
“Using the interest rate as the weapon against inflation squeezes manufacturers, tourism and farmers, but leaves non-tradables largely untouched.
Right now in New Zealand, the IS curve is remorselessly shifting left as the economy plunges into a deeper recession exacerbated by government austerity - an ideologically driven quest for instant fiscal surpluses, low public debt and a shrinking public sector relative to GDP.
Falling interest rates will struggle to make expansionary headway against that austerity.
Meanwhile, corporate profiteering and rising government charges continue to put upward pressure on the Phillips Curve, and the balance of payments is weakening. This means the country as a whole is piling up increasing debts to the rest of the world (largely through the Australian-owned banks).
The question is, does the current government understand where its policies are taking us?”
Good question Geoff.
My answer ?
Nope!
You can read Bertram’s complete commentary here:
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Thanks for picking up on that absurd remark of hers on CGT. she has no appreciation of the multitplier effects of the ongoing cuts and the consequent effect on the distribution of income and wealth and the social disintegration as we wait for growth spurts from the free market-- it will be so difficult to fix--
She is also dishonest, messaging from the trump playback that if a lie is repeated often enough it becomes a fact. Such as "we inherited a HUGE overspend", "Labour got the economy in a HUGE mess" etc., ignoring international praise that Ao/NZ took the best path through covid.
But, don't underestimate their intentions. I expect that by next election time they will have engineered an improvement for centre right voters and others with short memories that gains them support.