Newsroom Pro's 8 Things: Cullen releases Tax Working Group paper; Diplomat's Twitter fail; Labour's coffers filled; Auckland house inflation stirs again


In today's email we note the release of the first report from the Tax Working Group, and covered the latest news in the political economy.

1. Capital gains and land tax in the open

The Government's Tax Working Group has ramped up its call for submissions with the release this morning of a 57-page background paper that rips the lid off the capital gains and land tax debate again.

Group Chair Michael Cullen acknowledged these tax ideas would be "contentious", but reassured submitters that the discussion would not include taxes on the family home or the land underneath it. He said inheritance taxes had also been ruled out.

“I want to take this opportunity to remind New Zealanders that the family home is completely out of the mix, but that still leaves plenty of scope to review other ways such taxes might be applied," Cullen said.

“This is very much the discussion and consideration phase. No decisions have been made and there are no preconceived ideas about where this process will end up. Every idea will be examined on its merits," he said.

“We’re not being asked how to raise more revenue for the government, but we are being asked how to maintain the current level in the face of some major future challenges such as an ageing population and new technologies.”

See Thomas Coughlan's preview published this morning on Newsroom Pro.

2. What not to do on Twitter

Newsroom's Foreign Affairs and Trade Editor Sam Sachdeva reported this morning a high-ranking Kiwi diplomat is in hot water after telling the US Democratic Party to “get your shit together or we will all die”.

The Ministry of Foreign Affairs and Trade has confirmed it is taking “appropriate action” against Caroline Beresford, New Zealand’s deputy head of mission to the United States, following her now-deleted posts on Twitter.

In response to a tweet by US politics website The Hill, outlining the potential of a Bernie Sanders-Elizabeth Warren presidential ticket to take on Trump at the 2020 election, Beresford took issue with a suggestion that the pair could “win big”.

“No it couldn’t. Please get your shit together or we will all die,” she said, in what appears to be a reference to concerns about the administration of current US President and Republican Donald Trump.

In other tweets, also deleted later, Beresford said Democrats had “learned nothing”, and added: “If this is what they have against Trump we should be planning for the eight years.”

In an email to Newsroom, Beresford confirmed that she was the author of the tweets.

“Yes I did send those tweets and realised very quickly that they were inappropriate, which is why I deleted them."

See Sam's story in full on Newsroom Pro, where it was published first this morning.

3. The money follows Labour into power

Victoria University political academic Bryce Edwards has taken a closer look at the disclosures by the political parties about how much they spent in the election and how much money is flowing into their coffers.

He finds a few surprises, including that Labour is much better off than might be expected after nine years in opposition, in part because of a flood of money after Jacinda Ardern became the leader and because money often follows the power.

The Labour Party is far from poor, Bryce writes. In fact, the latest political funding and spending news suggests it’s actually flush with cash. Bryce looks at how modern political finance trends mean that “money follows power” rather than just going to the parties of the right.

There tends to be an assumption that the National Party receives significantly more political funding than the Labour Party. Helped along somewhat by the Labour Party itself, the story goes that the traditional party of the left and of trade unions is bereft of resources, and has trouble competing with the wealthy right.

It’s true that for much of the twentieth century Labour did not have access to donations from the wealthy, and was more reliant on its mass membership and trade union affiliates for getting things done. National, on the other hand, was the party of business and the rich.

Read Bryce's full commentary here on Newsroom Pro, where it was published first this morning.

4. Online voting back on the agenda

Newsroom's National Affairs Editor Shane Cowlishaw has taken a deeper look at the Labour Government's keenness to reopen the idea of using online voting in the next local body elections.

Plans to allow people to cast their vote through the internet during the 2016 local government elections were canned at the last minute due to security concerns, Shane reports.

It left the eight councils that had expressed interest in the trial fuming, after they contributed resources and funding to get the system ready in time.

The work they had done was not enough to allay the fears of the Department of Internal Affairs and the National-led government, who announced that the trial would not be authorised because final security testing was still to be completed.

Now it appears the idea is being resurrected, with Local Government Minister Nanaia Mahuta being briefed on funding options for a 2019 trial.

A financial contribution from central government will be a welcome sweetener for many councils and companies involved in the previously aborted trial.

See Shane's full story on Newsroom Pro, where it was published first yesterday.

5. Briefly in the political economy...

Deeper deficit - Statistics New Zealand reported this morning that New Zealand's current account deficit widened from 2.5 percent of GDP in the September quarter to 2.6 percent or $7.7 billion in the December quarter. This was slightly wider than expected as the goods deficit widened slightly and the services surplus fell. The income deficit (which covers the dividends and interest paid to overseas investors) widened by $217 million to $2.733 billion.

Not such deep debt - However, New Zealand's net international liability position (an equivalent of net debt) continued to improve as New Zealand fund managers continued to buy overseas shares and bonds and the current account deficit grew at a slower rate than GDP growth. Net overseas financial liabilities fell to 54.8 percent of GDP from 56 percent. This is a new low for the series dating back to June 2000, and down from a high of 84 percent of GDP in March 2009.

House price inflation - Auckland house prices are perking up again. The Real Estate Institute reported this morning that house price inflation in Auckland (as measured by its House Price Index) was 1.4 percent in February from January and inflation was 1.1 percent from a year ago. Inflation outside of Auckland was 1.3 percent for the month and 6.9 percent for the year. Only Canterbury showed any deflation (0.1 percent) in February.

'You're fired' - US President Donald Trump fired Secretary of State Rex Tillerson overnight and replaced him with CIA Director Mike Pompeo. On Monday Tillerson joined British Prime Minister Theresa May in blaming Russia for the poisoning of a former Russian spy in Britain. The White House didn't blame Russia. Tillerson was also blindsided by Trump's decision to meet Kim Jong Un without consulting his advisers. (Reuters)

6. Coming up...

Economists are expecting Statistics New Zealand to report GDP growth in the December quarter of around 0.7 percent at 10.45 am tomorrow. They are now fine-tuning their numbers as the components of GDP (wholesale trade, building work put in place, retail trade and current account) come through. Growth in the quarter from a year ago is expected to be around 3.1 percent.

7. One fun thing...

Donald Trump said some stuff today, including this: “We should have a new force called the Space Force. It’s like the Army and the Navy, but for space, because we’re spending a lot of money on space.”

Philip Matthews found the best image to go with it: "Space Force."

I am a Muppets fan, so this appealed to me.

8. This morning's political links

These are available in the morning subscriber email.