Donald Trump's moves to pull out of the Iranian nuclear deal and start trade wars with Europe and China created further fallout for oil prices and Harley Davidson. Winston Peters said he wanted houses to be affordable for people on the living wage, but only if house prices did not fall. That would imply a 100 year wait for Aucklanders on the living wage.
Trump fallout rains down
Oil prices rose 3.5 percent overnight to over US$70/barrel after America warned its allies to stop importing oil from Iran by November 4.
The move follows US President Donald Trump's decision to pull out of the Iran nuclear deal. ( Bloomberg )
Elsewhere, concerns about a trade war with China softened a bit and US stocks rose after Trump signalled he may agree to a softer plan to block Chinese investment in Amercian technology companies. ( Bloomberg )
However, Trump also lashed out at Harley Davidson's decision to move some production overseas to avoid the retaliatory tariffs on its exports to Europe, tweeting he might tax the motorcyle maker more. (New York Times)
"If they move, watch, it will be the beginning of the end — they surrendered, they quit!. The Aura will be gone and they will be taxed like never before!," Trump tweeted.
"A Harley-Davidson should never be built in another country-never! Their employees and customers are already very angry at them."
Harley Davidson is also setting up a plant in Thailand to avoid tariffs for exports into Asia.
100 year wait for an affordable home
Winston Peters dug himself a deeper hole with his comments on housing affordability yesterday, saying he saw a house price to income multiple of five times a single living wage as the appropriate measure, but that it would have to happen without house prices falling.
That would mean living wages would have to wait over 100 years to afford a home in Auckland at current wage inflation rates.
Peters' comments imply either a more than halving of house prices nationally to just over $200,000 at the current living wage, or a 70 year wait for living wage earners at current wage inflation rates if prices were to stay flat. Even a doubling of wage inflation would mean a 30 year wait nationally and a 50 year wait in Auckland with flat house prices. It would be over a century in Auckland at current wage inflation rates.
Peters initially said on Monday he saw the Government aiming for a house price to household income multiple of five times income. Initially, he said that meant a couple's income and he did not see house prices falling.
But yesterday he said that meant five times a single living wage, which would suggest a house price of just over $200,000 at the current living wage of $20.55/hour or $43,000 per year. The current house price to living wage multiple is 13 times the national median price nationally and 19.8 in Auckland. To achieve that multiple with flat house prices at current levels would imply a single living wage of $112,400 nationally and $170,400 in Auckland.
He said the Government aimed to lift wages to achieve that, without reducing house prices. At current wage inflation rates of around 1.5 percent and with flat house prices, it would take over 70 years for wages to 'catch up' to reduce the multiple to five nationally and over 100 years in Auckland. Even if wage inflation doubled, it would take over 30 years to catch up nationally and 50 years in Auckland.
Phil Twyford later clarified the Government was focused more on the median house price to median household income multiple, which is the measure accepted by the UN and World Bank. The measure used by interest.co.nz's decade-long study of housing affordability, which I helped design, uses a definition of one male median income and half a female median income. At current prices, the multiple is currently 6.33 nationally and 9.2 for the wider Auckland area.
A median multiple shift to five nationally is more realistic if house prices stayed flat and wages grew 27 percent. Even if wage inflation doubled to 3 percent, that would take eight years nationally. It would take 20 years in Auckland.