In my opinion New Zealand is heading for recession. We need the government to realign peoples mindsets so that they can position themselves to cope with it. This is a general theory at the moment and will likely be revised.
It’s too late to play with the house price boom. I found out the other day that in 1974 after the last major house price crash, that the then Labour government introduced the rental property tax that they want to introduce now. The horse has bolted.
In light of this legislative retardation and cliche usage I have another. It’s time to bite the bullet.
Simply put:
Increase GST to either 17.5% or 20% but introduce exemptions to petrol, diesel and most foods.
Remove income tax on savings accounts at banks.
Give tax cuts, preferably to a flat tax rate.
The whole idea is to decrease consumer spending. 20% GST is effectively forced price rises across board whilst keeping food affordable or even cheaper (helps poorer families). Cheaper petrol helps people get to work.
Tax cuts allow people to spend money on their mortgages and paying off their credit card debt.
Ideally we’d be able to encourage people to pay off debt first (like credit cards) and paying off their mortgage. I’m not sure what mechanisms would be available for this but I’ll continue to investigate this.
Unfortunately the above will never happen as it would likely be election suicide for Labour (poor people hate tax cuts for rich people and increasing GST is government stealing) so we’ll have to wait for the recession and National to have a majority to crash through some reforms just like Labours Roger Douglas did in the early 80′s. Too little too late though to round off the cliche usage.
