Mike Hosking: Three threats to the economy may come crashing together

COMMENT

I have been trying to work out which one of three serious threats to our economy is going to hurt the government most.

Two of them are of their specific doing, so perhaps they're slightly blinded to the pending trouble.

One is a direct result of their actions although at least in part affected by matters beyond their control.

One is the Fair Pay reforms to our workplaces. Two, the capital gains tax. And three, our economic growth.

Now one and two are policies they deliberately and presumably enthusiastically promoted.

The Fair Pay recommendations are just that, it's possible the madness drummed up by the committee led inexplicably by Jim Bolger, could in part be rejected or watered down, you would hope so, but don't hold your breath.

But if this government thinks New Zealanders want a return to the 70's and 80's in terms of sector wide agreements, and a banning of individual contracts, then they need their heads read.

When given the choice in 1990 by the Bolger government, we embraced choice, we opted for individuality, we backed our own talents over the Victorian shackled views of the unions who'd held this country to ransom for decades.

The professions that remain heavily unionised are there in 2019 for all to see.

All troubled, all aggrieved, all involved in ongoing industrial action ... 2018 was full of their plight.

The capital gains tax though, might be counteracted to a degree with the promise that overall, the tax system and its changes would remain fiscally neutral.

If labour go into election year offering most workers a personal tax cut to offset the CGT imposed on comparatively a few, they may get away with it.

But the bit to watch, that few if any seem to have picked up on, is at what rate are they pinging you on CGT. The suggestion seems to be the marginal rate which means 28 or 33 per cent. That is a spectacularly high rate, Labour before they dumped it in campaigning on it last time, had it at 15 per cent ... good luck selling it at more than double that rate.

But it does play to Labour's base, how many traditional Labour supporters have shares and investment homes, the sort of thing a CGT will capture.

If the Labour voters see the "rich pricks" (Michael Cullen head of the committee making the recommendations) getting taxed and they get money in their pocket then the wider fall out may be able to be managed.

And then three, growth.

Most people have missed this, given the number came out just before Christmas.

Our Q3 GDP was 0.3 per cent, which is abysmal.

Add that to Q1 at 0.5 and Q2 at 1 per cent and you have the calendar year ending September at 1.8 per cent growth.

You would need Q4's number to be 1.7 per cent to get us to the international average, to even get us within range of our major trading partners.

Will we get 1.7 per cent in Q4 ? No we will not, nor indeed anywhere close to it.

Which means we will in all probability be growing annually at little more than 2 % per cent which is an indictment on this government's performance.

They have taken a rock star economy and strangled it.

They will look to blame international uncertainty, don't believe them.

The IMF forecast for global growth is an average of 3.5 per cent. We should be doing that or close, we are not.

And having ended the calendar year with anaemic growth, chuck in a capital gains tax and see what that does to investment intention. And lock our workplaces back up in a way Jim Knox and Ken Douglas would have been proud of.

And the three issues calamitously and spectacularly come crashing into each other.

On the upside, that may make Kiwibuild look like a clever idea that's a raging success.