Speaker 1: Kielda.
Speaker 2: I'm Chelsea Daniels and this is the Front Page, a
Speaker 2: daily podcast presented by the New Zealand Herald. If you've
Speaker 2: been struggling with the cost of living, some good news
Speaker 2: is in store. While kiwis have to wait a few
Speaker 2: more weeks to see the government's tax cuts come through.
Speaker 2: From July first, parents, investment property owners and auckland drivers
Speaker 2: are due for some relief. It could all be short lived, though,
Speaker 2: with many counsels eyeing major rates increases to tackle their
Speaker 2: flailing budgets. Today on the Front Page will be joined
Speaker 2: by Infometrics Chief executive Brad Olsen to discuss the ongoing
Speaker 2: struggle with the cost of living and how these changes
Speaker 2: might help. But first let's go through what those changes
Speaker 2: exactly are new and expect parents are the big winners
Speaker 2: with the maximum weekly rate for paid parental leave will
Speaker 2: increase from seven hundred and twelve dollars seventeen to seven
Speaker 2: hundred and fifty four dollars eighty seven gross per week,
Speaker 2: and families will be able to receive early childhood education
Speaker 2: tax credits up to seventy five dollars a week. Some
Speaker 2: relief is on the way for residents in the country's
Speaker 2: biggest city. The Auckland regional fuel tax scheme that has
Speaker 2: been in place since the first of July twenty eighteen,
Speaker 2: is due to end after five years. From July first,
Speaker 2: the extra tax of eleven point five cents per liter
Speaker 2: on petro and diesel will be gone. That means the
Speaker 2: driver of a Toyota high Lux will save around nine
Speaker 2: dollars twenty every time they fill up, while a Toyota
Speaker 2: Corolla driver will save around five dollars seventy five. Those
Speaker 2: with residential investment properties are also due to benefit. The
Speaker 2: government has reduced the bright line test to two years
Speaker 2: for all properties after the previous government increased it to
Speaker 2: ten years. The change means people who sell residential investment
Speaker 2: property within two years of purchasing it will have to
Speaker 2: pay tax on any gains received. If you sell it
Speaker 2: after three years, though you won't be taxed. The Earthquake
Speaker 2: Commission's Disputes Resolution Scheme will also begin on July first.
Speaker 2: This is an independent process for people who want to
Speaker 2: dispute the outcome of a natural hazard insurance claim. Bad
Speaker 2: news for hikers. From July first, great walk, hut and
Speaker 2: campsite prices will increase by eighteen percent, except for Paparoa,
Speaker 2: which will increase by six percent. July first also marks
Speaker 2: the start of the ratings year for many councils, when
Speaker 2: homeowners can expect rates increases to come into effect. Many
Speaker 2: of these are still to be ratified at the time
Speaker 2: of recording, but in Auckland councilors endorsed a six point
Speaker 2: eight percent increase this year, while water and wastewater prices
Speaker 2: will increase by seven point two percent. In Wellington they're
Speaker 2: looking at a sixteen point four percent increase for the
Speaker 2: next year, while christ Church City Council is looking at
Speaker 2: a nine point nine to five percent increase. So how
Speaker 2: will this impact the cost of living? We're joined now
Speaker 2: by Infometrics Chief executive and economist Brad Olson. Brad looking
Speaker 2: at the changes for ECE and parental leave for instance.
Speaker 2: How important is it to provide support for parents at
Speaker 2: times like this?
Speaker 3: Oh, I mean, we know that everyone is hurting with
Speaker 3: those higher and higher costs that households have been hit
Speaker 3: with over time, so every little bit counts. And we
Speaker 3: know that increasingly childcare has been increasing in price as well,
Speaker 3: particularly early childhood, so that support coming through there is
Speaker 3: a bit of admind that, of course households will have
Speaker 3: to do they've got to submit, you know, their documents
Speaker 3: and similar to make sure they get paid need. But
Speaker 3: it does also provide an opportunity for them to get
Speaker 3: some of that funding, some of that money so they
Speaker 3: can afford some of those higher costs. Increasing the likes
Speaker 3: of parental leave and the payment levels for that also
Speaker 3: important because life is getting more expensive. We don't want
Speaker 3: to be overly or unduly penalizing people who are becoming parents.
Speaker 3: We know that it's difficult enough to raise a kid financially,
Speaker 3: and we know that fewer and fewer people are doing
Speaker 3: it and having fewer kids over time. That creates sort
Speaker 3: of a demographic shift, and so we've got to provide
Speaker 3: every support we can to those who are adding to
Speaker 3: the future population and ensuring that not only are they
Speaker 3: adding to society, but they're also adding to the future workforce.
Speaker 2: Do you think it's becoming a bit too expensive to
Speaker 2: have children now?
Speaker 3: I think there's sort of a number of reasons that
Speaker 3: are hitting particularly younger Kiwis and look, younger people across
Speaker 3: the world when it comes to having children. Some of
Speaker 3: it is expense that's definitely true. Part of it's going
Speaker 3: to be around, you know, the likes of housing costs
Speaker 3: and similar as well. If it takes you too long
Speaker 3: to buy a house because of how expensive they are,
Speaker 3: then that sort of delay all of your plans around
Speaker 3: having kids. It's also that to afford a house you
Speaker 3: might have to have both parents who are working again.
Speaker 3: That is and is as conducive to having kids as
Speaker 3: it was before. But there's so many other things out there,
Speaker 3: you know, the likes of the climate that's changing, the
Speaker 3: risk of geopolitical unrest and what have you, and everyone's
Speaker 3: increasingly busier over time. So there's a lot of different reasons.
Speaker 3: But it also means that although it's difficult and often
Speaker 3: not the right thing to do to try and incentivize
Speaker 3: people to have kids, you equally don't want to disincentivize
Speaker 3: and create a barrier to do it. So those sorts
Speaker 3: of policies payp rental, leave, the likes of early childhood support,
Speaker 3: they are important to at least provide some support through
Speaker 3: the households at a time when costs are high.
Speaker 2: Do we need to find more ways of addressing this
Speaker 2: or am I going to be stuck together with a
Speaker 2: thousand other millennials in a rest home having robots look
Speaker 2: after us.
Speaker 3: Well, if you don't have the robots look after you,
Speaker 3: there might not be of a lot of other people
Speaker 3: to do that. We know that demographic shifts are coming
Speaker 3: through over time. We're seeing that what we usually would
Speaker 3: call natural increase, which is where there are more births
Speaker 3: and deaths. That is to clim over time as there
Speaker 3: are more people that are of course aging over time
Speaker 3: and because of that, more deaths that are starting to
Speaker 3: come through. But the fertility rate is dropping. People are
Speaker 3: having fewer kids per person. Some people aren't having any
Speaker 3: kids at all, and so you know, you want a
Speaker 3: replacement rate of two point one kids on average, and
Speaker 3: you're getting I think it's something like one point six
Speaker 3: on the latest figures. Parts of the world are seeing
Speaker 3: even lower numbers. So we do have to be I
Speaker 3: think conscious about it. And it does suggest that, yeah,
Speaker 3: we need to think about innovation over time, the likes
Speaker 3: of you know, using AI and technology. It's not going
Speaker 3: to place everything. But unless we do something about it,
Speaker 3: unless we ensure that we've got you know, the up
Speaker 3: and coming generation who are well equipped with skills, we
Speaker 3: could find ourselves where people need to work sort of
Speaker 3: three jobs to try and go through all the work
Speaker 3: that we've got at the moment, because we simply won't
Speaker 3: have a growing population of workers, will have a growing
Speaker 3: population of retirees.
Speaker 1: New Zealand's population is getting older. By twenty thirty six,
Speaker 1: there will be one point two five million people eaged
Speaker 1: over sixty five. That demographic time bomb poses policy challenges
Speaker 1: for the government with growing healthcare and pension bills. At
Speaker 1: the moment, eighteen billion dollars is spent on all people
Speaker 1: and health and superannuation costs.
Speaker 2: What about those single and or childless people out there,
Speaker 2: And good on the government giving money towards parents with
Speaker 2: the paper and to leave ECE allowance, et cetera. But
Speaker 2: what about those people in the middle there who are
Speaker 2: single and or childless.
Speaker 3: Well, it's one of those saying single, childless and without
Speaker 3: a lot of supporter is definitely sort of more normal
Speaker 3: now than it seems to have been in the past.
Speaker 3: A lot of our sort of social supports are set
Speaker 3: up around households and family households with children, that's understandable,
Speaker 3: you know, get that wrong, and without enough support for children,
Speaker 3: we sort of set up a whole new generation for
Speaker 3: failure or for less success than before. But we've got
Speaker 3: to sort of support more broadly what's happening out there
Speaker 3: the economy. I think, you know, the work that the
Speaker 3: government's done around the likes of the independent to earn
Speaker 3: a tax credit and ensuring that sort of lowest middle
Speaker 3: income group who might not have that wider family or
Speaker 3: not have working for families tax credits for example, that
Speaker 3: they are supported.
Speaker 2: If we're going to change the subject tobit the bright
Speaker 2: line test going down to two years from ten years,
Speaker 2: what sort of impact could that have on the housing
Speaker 2: market do you think?
Speaker 3: Yeah, the property market is fascinating at the moment in
Speaker 3: terms of you know, we've seeing a lot more people
Speaker 3: who have put their houses up for sale in recent times.
Speaker 3: Even though house prices are broadly tracking sideways, most people
Speaker 3: are pulling down their expectations of how much they think
Speaker 3: house prices will increase. And so with that shift in
Speaker 3: the bright line test, yes, it'll only be two years
Speaker 3: that you've got to hold a house now before you
Speaker 3: can sell it without definitely having to pay tax. There'll
Speaker 3: be a question I think out there for a lot
Speaker 3: of people who might want to move houses a bit
Speaker 3: quicker over sure I might be able to do it
Speaker 3: without incurring a tax fee, Do I still make enough
Speaker 3: money and is that still an option for me? We've
Speaker 3: seen that property investors haven't been as active in the
Speaker 3: market in the last wee while. Alongside the fact that
Speaker 3: you're going to have the changes to the brightline test
Speaker 3: coming through, you've also, of course already seen some of
Speaker 3: the changes through from interested auctibility and the Reserve bankers
Speaker 3: introducing debt to income limits. As we go through the
Speaker 3: year and into next year, all of that probably suggests
Speaker 3: that there's maybe a bit of an upside for house
Speaker 3: sales and housing activity, but not a huge amount, just
Speaker 3: because there's a bit of a natural cap with those
Speaker 3: higher interest rates, with all the other movements in the market,
Speaker 3: and the pressure that households are under, and the fact
Speaker 3: that look, even with interested auctibility, even if you're not
Speaker 3: having to pay tax from brightline, you're still if you're
Speaker 3: an investor having to pour a couple hundred dollars a
Speaker 3: week into a new investment property, you're not making many
Speaker 3: capital gains. So it's not a game changer. It might
Speaker 3: shift things at the margin.
Speaker 2: All prices have been falling a bit in recent months. Hey,
Speaker 2: is that a silver lining for the country or a
Speaker 2: bit more of a headache.
Speaker 3: I think it's a silver lining. I think. I mean
Speaker 3: one thing, it sort of suggests that thinking of housing
Speaker 3: as this you know, golden investment opportunity that can never
Speaker 3: fail and is you know, just gold plated, is quite
Speaker 3: clearly false and might not continue. That's I think important
Speaker 3: for people to look and go, well, actually, where else
Speaker 3: might I need to put my money to get a
Speaker 3: reasonable return and thinking about the risk profile that they
Speaker 3: are taking on board. Over time, it will also mean
Speaker 3: in general terms that you're starting to get a bit
Speaker 3: more affordability for buyers coming through. Let's be clear, it's
Speaker 3: still very expensive out there for people that are still
Speaker 3: spending a high proportion of their income in the sort
Speaker 3: of probably high forty percent still to service a first
Speaker 3: year mortgage if they're buying. But with a lot more
Speaker 3: people selling houses at the moment, and still not that
Speaker 3: many buyers available just because they can't get a mortgage
Speaker 3: given the high interest rates as easily, it means that
Speaker 3: the smaller pool of buyers that are out there, they
Speaker 3: have a lot more choice, They've got a lot more
Speaker 3: ability to bargain and drive those prices down. Like you've
Speaker 3: been saying, house prices have been falling because there's more competition.
Speaker 3: I think that's a good thing, but it also suggests
Speaker 3: that over time we've still just need to build more
Speaker 3: houses to increase supply. And I actually pretty heartened that
Speaker 3: the Housing Minister christ Bishop has said actually he does
Speaker 3: want house prices to fall. Often we don't have politicians
Speaker 3: being quite as straight up as they need to be.
Speaker 3: He's put a pretty clear line in the sand they
Speaker 3: need to go down.
Speaker 2: While the bright line test might be good news for
Speaker 2: property investments for other homeowners, though many councils have proposed
Speaker 2: significant rates increases this year, do those increases balance out
Speaker 2: any relief that might be provided by central government at
Speaker 2: the moment?
Speaker 3: They probably do. The rate rises that we're seeing across
Speaker 3: the country are significant. Some analysis that Local Government New
Speaker 3: Zealand did earlier this year suggested that the average rates
Speaker 3: rise this year might be something around fifteen percent. That
Speaker 3: would be the largest average rates increase since councils were
Speaker 3: amalgamated into their current sort of form ineeen eighty nine
Speaker 3: or so, So there are some big numbers coming through
Speaker 3: that is causing a lot of pain out there for households.
Speaker 3: But it's also because we've underinvested and we've underpaid effectively
Speaker 3: over time for our infrastructure. That means that you know,
Speaker 3: we've seen some pretty big cost increases in recent years.
Speaker 3: We've seen quite clearly the last couple of weeks why
Speaker 3: we need to have more money going into infrastructure. That's
Speaker 3: what's driving those rates increases. We did some of our
Speaker 3: asisidinfmetrics earlier this year showing that the cost of building
Speaker 3: a bridge is up thirty eight percent over the last
Speaker 3: three years. Putting in water pipes and roads and similar
Speaker 3: up about twenty seven thirty percent over the last couple
Speaker 3: of years. It's those big increases. It's costing more, we're
Speaker 3: needing to do more infrastructure. That's meaning those rates rises
Speaker 3: are up. So there is a difficult balance here for
Speaker 3: the community. On one hand, it is a struggle to
Speaker 3: pay for and it's difficult to figure out how you
Speaker 3: get that money. Equally, don't get it and you could
Speaker 3: see a number of our critical network infrastructure pieces fall
Speaker 3: down around our ears. That's not an outcome anyone wants.
Speaker 2: Looking at inflation, the cost of food, interest rates, etc.
Speaker 2: Does it look like things are balancing out now.
Speaker 3: We're certainly getting better numbers coming through. We're still seeing
Speaker 3: prices go up on average, and they still increasing it
Speaker 3: a faster clipped than anyone would like. We'd be expecting
Speaker 3: to see inflation more around two percent. It's still currently
Speaker 3: running at four percent on the latest numbers. That's too
Speaker 3: high and still causing some big pressure for households. It's
Speaker 3: also that that four percent comes on top of of
Speaker 3: course bigger increases the last couple of years, So we
Speaker 3: might be seeing less intense pressure now, but there is
Speaker 3: still that build up effect that households are being hit with.
Speaker 3: I think the encouragement that we're seeing at the moment
Speaker 3: is that some of those much more volatile cost increases
Speaker 3: that had been a lot larger have now settled back.
Speaker 3: The likes of food price inflation at its lowest in
Speaker 3: five years on the most recent numbers. That's encouraging because
Speaker 3: it suggests that again you're not sort of getting both
Speaker 3: barrels from every single direction when it comes to household
Speaker 3: cost pressures. But there are still a number of thorny,
Speaker 3: sticky arts of inflation, the likes of rents, the likes
Speaker 3: of energy costs, the likes of insurance, and also local
Speaker 3: government rates are still at a much higher clip. They're
Speaker 3: still keeping that pressure on and so for households they
Speaker 3: might not be seeing as fast as an increase, but
Speaker 3: in general prices are still going up and that makes
Speaker 3: life increasingly difficult. Inflation is still too high. It's four percent,
Speaker 3: but the bands meant to be one to three percent,
Speaker 3: and once inflation gets into the artery of the economy, it's,
Speaker 3: as we're discovering, very hard to get out. The one
Speaker 3: silver lining is that wages are also continuing to remain
Speaker 3: at a growing pace. That means that a lot of
Speaker 3: households are probably able to match things up. But then
Speaker 3: you bring in on top of that the interest rate increases.
Speaker 3: That's the challenge for a lot of households is how
Speaker 3: they pay for all of those high costs across the board.
Speaker 3: It is challenging for a lot of people.
Speaker 2: And it also suggests that I can now buy cheese again.
Speaker 2: It was at an astronomical level the last couple of years.
Speaker 2: Things cheese, milk, bread, et cetera. Do you think that's
Speaker 2: what people focus on because they can see the docket,
Speaker 2: can't they.
Speaker 3: Absolutely and this is why we sort of look so
Speaker 3: much at the likes of food costs, at petrol costs
Speaker 3: and similar I mean, petrol costs actually aren't a particularly
Speaker 3: large part of people's household spending. But the number that
Speaker 3: you notice so often because you drive past the fuel
Speaker 3: pump and you look at what you know you'll have
Speaker 3: to be paying for. What we do see is that food.
Speaker 3: You know, it is absolutely critical. It's the thing that
Speaker 3: households have most shifted their spending on over the last
Speaker 3: couple of years now because it is so important. So yeah,
Speaker 3: it's definitely something we notice. It is interesting though, that
Speaker 3: some studies do show and this is one of the
Speaker 3: reasons that we have a two percent inflation target rather
Speaker 3: than a zero percent inflation target. Humans we notice price
Speaker 3: increases a lot more than we notice decreases. You know,
Speaker 3: you'll talk to people out the increasing price of cheese
Speaker 3: in that when you know you're over at someone's house.
Speaker 3: You don't often say, oh, geez, I noticed all these
Speaker 3: things going down in price, because we take them and
Speaker 3: we lock them in as a wind. But we mow
Speaker 3: and then winge a lot about the increases totally fairly.
Speaker 3: But we notice them a lot more because of that.
Speaker 2: Cucumbers as well, I can buy cucumbers again. Is there
Speaker 2: anything that you couldn't buy, Brad that you are now
Speaker 2: buying again from the supermarket?
Speaker 3: Well, I mean a lot of that depends on seasonality.
Speaker 3: I'm a huge fan of tomatoes at the moment, of course,
Speaker 3: out of season, but if you go back a couple
Speaker 3: of months, you were getting a punner of cherry tomatoes
Speaker 3: for two three dollars. That was a great time compared
Speaker 3: to when they were sort of six seven dollars. Even
Speaker 3: in season periods. I think people are looking out at,
Speaker 3: you know, what they can buy. What is interesting is
Speaker 3: that we've still seen that sort of shift where households
Speaker 3: are increasingly looking for how they make their dollar go
Speaker 3: as far as possible. Are they still buying more expensive
Speaker 3: cuts of steak or are they going to that sort
Speaker 3: of cheaper mince option. There does seem to be a
Speaker 3: bit of a shift towards that cheaper option. Quite understandably,
Speaker 3: I think for a lot of households, though, they're also
Speaker 3: thinking about, you know, the nutrition that they're trying to
Speaker 3: get in, but trying to balance that out against the cost.
Speaker 3: So increasingly we are seeing produce that is coming back
Speaker 3: into line with more normal seasonal prices rather than some
Speaker 3: of the really insane higher prices you saw in recent years.
Speaker 3: That's a good news story a balance though for our
Speaker 3: primary sector, you've seen some cheaper cuts of meat coming
Speaker 3: through in recent times. You go back a couple of months,
Speaker 3: lamb was quite a bit cheaper. Great if you're trying
Speaker 3: to put together some lamb chops for the family, But
Speaker 3: of course the person on the farm who's selling the
Speaker 3: lamb not making quite as much money, and so that's
Speaker 3: a bit of pressure on the other side of the
Speaker 3: economic equation.
Speaker 2: If we look towards the end of July, Brad, the
Speaker 2: much hyped tax cuts are coming through. Finally, what impact
Speaker 2: do you think that'll have on the economy.
Speaker 3: Probably not a huge deal over all, because effectively, households
Speaker 3: will already be looking at that money and going, look,
Speaker 3: I've basically reallocated that to my higher and higher bills
Speaker 3: over time, automate interestry payments that I don't struggle as
Speaker 3: much as I might be at the moment. There will
Speaker 3: also be some households, though, who you know, are not
Speaker 3: necessarily being hit with high interest rates or high rental costs,
Speaker 3: have paid off their home loan before, are in a
Speaker 3: pretty good position. They might save some of that money,
Speaker 3: particularly if they're sort of worried about the future or
Speaker 3: they already have done it. A fair bit of spending overall.
Speaker 3: We're expecting that, of course, compared to any other time
Speaker 3: or normal times, the likes of those tax cuts will
Speaker 3: be increasing spending relatively speaking, it's just because those higher
Speaker 3: interest rates. Overall spending is still going to be dragged
Speaker 3: down because of how much that hit households in So
Speaker 3: it'll provide a little bit of extra relief at a
Speaker 3: time when the pressure is still on and so that
Speaker 3: pain is still going to be felt.
Speaker 2: Thanks for joining us, Brad. That said, for this episode
Speaker 2: of The Front Page. You can read more about today's
Speaker 2: stories and extensive news coverage at enzadherld dot co dot z.
Speaker 2: The Front Page is produced by Ethan Sales with sound
Speaker 2: engineer Patty Fox. I'm Chelsea Daniels. Subscribe to The Front
Speaker 2: Page on iHeartRadio or wherever you get your podcasts, and
Speaker 2: tune in tomorrow for another look behind the headline. Funds