nexus fixes: The economy (again)

One of the major advantages to having a thriving group of contributors and Student Editors is diversity of opinions. That is why when we published a Nexus Fixes Everything last week on “How to get the economy to bounce back” we started a major debate…. With Josh. We didn’t quite get to the “if you think you can do it better then you write it” stage but it was implied. What we now have is a Nexus Fixes the Economy grounded more in centre right economic theory than socialism. As for which one is the best to drive the country forward, we have no idea. Then again, neither do the people in the debating chamber.

If you haven’t caught on already, the New Zealand economy is in a bit of strife right now. We’ve nearly beaten COVID-19 fair and square, it’s on its knees in the corner of the ring begging for mercy and we’re about to deliver the final blow to this two and a half month long bout. Clock it once more in the jaw and teabag the shit out of it. This is all well and good, but we also need to make sure we don’t let the economy get completely turned upside down and shaken around, leaving many people out of work and money to feed their families. The Treasury is forecasting 9.8% unemployment by Q3 of this year, so we haven’t even seen the worst of it yet. In an NZ Herald article published on the 28th of May it reported that there had been 14,156 job losses just from major companies. 3500 of those coming from Air New Zealand alone. Skyline Skyrides cut half of their staff, which is the biggest tourism operator in Rotorua and Queenstown. Since the start of the COVID-19 restrictions, 43,000 people have signed up to the Jobseeker Benefit (as of 28th May) indicating large losses of jobs. 

The current coalition Government has been polling well, but there are some New Zealanders who think that they are out of touch with the economic sector. They have to get the people of New Zealand working and spending again. It just has to be done, but they have to do it right. Their good poll results won’t last if it turns out they’re out of their depth in recovering an economy. Here are some ideas that I think might help the economy recover.

  1. Remove Auckland Regional Fuel Tax

The Auckland Regional Fuel tax has been in effect for some while now, as just another tax added on top of the batshit crazy amount that we pay at the pump anyway. In the first six months of it being in action it gathered up a cool $77.7 million dollars from New Zealanders just filling up their cars in Auckland. You might be asking where they spend it, the answer to that is that Auckland Transport reckons they’re gonna be spending it on intense transport development over 14 areas of Auckland. They managed to spend half of the first six months of revenue in the first year of the tax being in effect. The same Government that complains about the cost of living in this country actively makes it more expensive every year by increasing fuel tax and road user charges. I ran some quick math to figure out how much more money would be in the pockets of Auckland households if this small tax didn’t exist. Given there are roughly 540,000 dwellings in Auckland, it would equate to $144 every six months, which is not too bad. Not everyone in Auckland owns a car, but there are also businesses who pour tens of thousands if not hundreds of thousands of dollars into fuel costs every year that would be instantly better off if they had another 11.5 cents off per litre of fuel. 

  1. Lower the Excise Tax On Fuel 

According to the AA, just under a third of the cost of 91 at the pump is the actual cost of fuel. Despite oil prices falling globally, the price of fuel in this country is kept artificially high by fuel taxes. 50% of it is excise tax, not including the Auckland regional tax. In the year ended June 2019, the average New Zealand household was spending $48.50 a week on petrol. That’s an unreal amount for some who are working the lower wage jobs. If we were to throw it away entirely (which I’m not sure would be a great idea), it would be the equivalent of some receiving a 50c wage rise, which would be fantastic as opposed to increasing the minimum wage and just driving up the cost of goods and services (we’ll save this one for another paragraph).

 I’d be all for the full excise tax if there were actually any new highway projects being announced, instead the previous Governments plans were scrapped. So I don’t see why we need to be shafted at the pump by the Government when those tax dollars aren’t actually being actively spent on huge roading projects. Yeah sure, they want to spend billions on rail infrastructure with the tax revenue, but how is that actually going to benefit most of the population who require a car to commute to a worksite? Rail will only benefit those living in Auckland/Wellington/Maybe Christchurch, and those moving cargo around the country. But I suppose that would also result in job losses for freight companies since you only need a couple of people to drive a train as opposed to one person per truck. In the piece last week we mentioned that the Government’s dreams of electric cars and trains are nice in theory, but they’re just not realistic for most of the population yet so I don’t see why we should be shafting the rest of the population on fuel to get them into cars they can’t afford. In a time where people are struggling to make ends meet, I say we slash excise tax on fuel by at least 50%, essentially giving everyone a small pay rise and leaving more money in their pockets to spend and rejuvenate the economy, or just to make ends meet. 

  1. Get rid of the lower income tax brackets

The lowest 20% of earners in this country barely make up 2% of the total income tax paid. Chuck the next 10% of earners on top of that and the figure sits just under 5% of income tax paid in total. I say do away with the lowest tax bracket which is 10.5% on the first $14,000 of income, instantly leaving an extra $1,470 in people’s pockets per year, largely leaving the total income tax paid by New Zealanders untouched. If you’re someone who works a minimum wage job, this would be a huge benefit to you. How would this be done? Either pay it anyway, and you get it in your tax refund at the end of the year, or the clever accountant of the employer you work for would use their accountant brain to come up with an accountant way of doing it. To offset any income tax loss, increase the tax on the top earners by a bit. Make the real big earners pay a bit more, they can afford to, they’re not the ones on the lower wages struggling to get by with the high costs of living. Maybe while we’re at it we could take GST off food, or the healthy food at least, like vegetables and fruits. Encourage more people to buy them and consume a more healthy diet. We wonder why we have an obesity problem in this country despite the healthy food generally being more expensive and it baffles me. 

  1. Scrap the business size limit for Government interest free loans

Last week I interviewed John Lawrenson, who is CEO of the Lawrenson Group. He pointed out that with the loan scheme the Government is offering, he is not able to qualify for it because he employs over a certain number of people. He added that this does not make sense, he has gone through the effort and risk to create 200 jobs, and for that he is punished by not being eligible for a loan scheme that is intended to help businesses through these tough times. So do away with the employee cap on the eligibility, because they’re loans on the Government’s balance sheet that they will make money.

Some of us out there may think that nationalizing the power or giving out a universal income would help us live in a perfect world. The reality is that we need real solutions from business people who know their shit and know what businesses need in order to be able to give people what they need to survive and do well. The same goes for the Government, it just seems like sometimes they are so out of touch with the real world and it is us who suffer as a consequence of their lack of real world knowledge, for example how expensive it actually is to run a car these days. No one at Nexus or anywhere else thinks there is one solution that will stop this from being a long and painful recovery. This just shows how important business is to us as a society, and that no matter what we do, it is always involved somehow.

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