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A Blinding Sense of Commonsense - 07 December 2012

This morning's presentation at The Admirals' Breakfast Club featured Dr Oliver Hartwich, Executive Director of The New Zealand Initiative. The New Zealand Initiative is the result of the amalgamation of the New Zealand Institute and the New Zealand Business Roundtable. The New Zealand Initiative is an independent think tank contributing intelligent, well researched and pragmatic insights into steps that New Zealand can take to improve both our social and economic policy; thus improving the prosperity and potential of all New Zealanders.


Dr Hartwich's presentation focused on the New Zealand housing market. He drew some very interesting parallels between the rampant house price inflation in the UK, Australia, New Zealand, Ireland and Northern Europe - particularly Germany, Switzerland and Austria - where house price inflation does not exist. His presentation outlined the core reason for this and that is the different tax system that exists. Specifically in Northern Europe, home owners are treated as customers i.e. they are desired and seen as valuable. Using Switzerland as a specific example, Dr Hartwich pointed out that the 26 cantons or local councils see growth as a positive and are doing their very best to encourage local development. The local populations support their councils in this objective because they know that by attracting both commercial and private investment in their area they are going to be sharing the infrastructure load with a greater number of tax payers and, therefore, their taxes (rates) are going to consequently reduce. The tax system in Switzerland is made up of three levels i.e. national, regional and local. The net effect of this structure means that local councils have real power. It means that they can make real decisions and attract executives of real quality.


The net effect is that in these enlightened Northern European countries housing is not seen as an investment, it is seen as satisfying a social need and that in turn means that individuals are focusing their investment decisions on productive, growing areas of the economy. This in turn encourages a diversification of investment and a higher commitment to savings in general.


Dr Hartwich presented a compelling argument for the New Zealand housing market to admit itself to an appropriate medical facility where New Zealand's addiction to housing 'investment' can be treated and the withdrawal symptoms managed to ensure the improved productive health of the New Zealand economy and affordable housing for all New Zealanders.

 

John Dawson, COO'EE

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