Landlord tax breaks and a slap on the wrist for the Reserve Bank dominated Parliament on its second-to-last sitting day before MPs rush off to campaign.
Wellington business editor Jenée Tibshraeny joined the Front Page to break it all down.
Labour leader Chris Hipkins surprised many by announcing late Monday that Labour would not reverse interest deductibility for landlords.
“Labour really took me by surprise,” Tibshraeny said.
“What it means is the status quo will be continued under Labour. Currently, if you are a property investor, you receive income from your tenants, you receive rent, and then when you go to pay tax at the end of the year, you can deduct expenses off that income that you receive. So you can minus your rates and your insurance, and importantly, you can deduct your interest that you pay the bank, your mortgage interest.
“It sounds rather niche, interest deductibility, but it’s actually a pretty massive policy.”
Tibshraeny said there would be a number of reasons for Labour’s surprise decision, including pressure over National’s tax attack ads.
“National’s campaign has been pretty strong adding up all the various taxes that the left-wing parties are campaigning on introducing, and saying, ‘If you vote these guys in, you’re going to get nine new taxes’.
“I’m sure Labour is sensitive to that, and those lines from the right-wing parties are misconstruing the truth, to be fair. There is no way that a left-wing government would add every tax that every party is proposing. They’d have to pick one or maybe two. But they must be feeling it, especially given a lot of people are struggling, the cost of living’s still high [and] wages haven’t been rising too much. The thought of having to pay more tax is just not that palatable. So, it’s a sore spot, and National’s definitely been hitting it.”
An independent review of the way the Reserve Bank set monetary policy during the Covid-19 pandemic has confirmed what has been widely acknowledged.
Tibshraeny said: “The report largely affirmed what we already know, and that is that the Reserve Bank overcooked its response to the pandemic. It slashed interest rates, and figuratively printed money, and then it didn’t pull back that stimulus soon enough. It kept going when the economy was hot and that created inflation, which then meant the Reserve Bank had to hike interest rates aggressively.
“That really hurt the economy. What they did say, though, they didn’t squarely put this at the feet of the people who worked at the Reserve Bank during the pandemic, like Adrian Orr and Christian Hawkesby.
“They said that actually the framework under which they were operating had vulnerabilities, and if there was an equally intelligent group of people sitting around the table deciding what to do with the OCR [Official Cash Rate], then, they’d face similar issues or mistakes would still be made. That was the takeout, in a nutshell.”
And Tibshraeny will have more on Labour’s tax policies on Wednesday on the Herald’s new election explainer series, The Bottom Line.
Listen to the full episode to hear more about:
- Why Labour backed down on removing landlords’ interest deductions
- What the Reserve Bank got wrong during the Covid response
- Whether Labour’s dual mandate contributed to those mistakes
- What the Government’s books could reveal before the election
The Front Page is a daily news podcast from the New Zealand Herald, available to listen to every weekday from 5pm.
You can follow the podcast at iHeartRadio, Apple Podcasts, Spotify or wherever you get your podcasts.
