Labour’s reality gap on housing and interest rates

Peter Cresswell writes about the increasing ‘reality gap’ with Labour rhetoric and shallow policy thinking on housing, interest rates and capital gains taxes.

Their real big tool, it turns out once the hand waving subsides, is their old friend the Capital Gains Tax which, he insists is going to ?cool? house prices and rents so markedly ? by?up to a third, he told Radio NZ?s Suzy Ferguson this morning! ? that this will leave ample room for folk forced to save to afford the forced-saving his little ?complementary? tool of a variable-compulsory savings rate will still require.

Do you see a problem here?? It?s called a reality gap ? a gap that no amount of hand waving can massage.

It?s a little like the realty gap with Labour?s housing policy itself.? Their housing policy requires homes by the thousand to be built for well under $300,000 or else,?as Labour?s Phil Twyford concedes, the Labour Party’s Kiwibuild policy “will quickly run out of money.” Yet the room full of experts in which Twyford had made that concession had already established that homes by the thousand?could not?be built for well under $300,000, leaving the Labour Party’s Kiwibuild policy as little more than a wet rag to wave around on the election trail that will quickly run out of money if they ever get a chance to try it.

The ?suite of tools? Cunliffe began to reveal this morning has a similar reality gap: because just as Labour?s housing policy relies on a figure the industry can?t produce, Cunliffe?s ?real big tool??relies on house price reductions that no capital gains tax anywhere in the world has delivered.

What he seems not to have noticed is that?virtually every western country in the world apart from ours had a capital gains tax, yet every one of those places still experienced a housing bubble just like ours. ?

So the way they hope to bring down housing prices, down enough to make their complementary big tool affordable for low-income earners and others, is to point to a real big tool that in nowhere in the world has done what they say the tool will do.

This is worse than hand waving. It?s more like a failed conjuror who?s forgotten to even bother pretending to hide his techniques.

So what would they do, in both housing and monetary policy, were they to introduce their tools in government only to discover reality had other ideas?

Labour’s Capital Gains Tax actually isn’t a policy either.

In the lead up tot eh 2011 election it was announced by Phil Goff as the next best thing, it was popular, it was a ‘game changer’ and …”oh you want the detail?…just wait we will form an expert panel to flesh out the details, trust us”.

Except no one did trust them and Phil Goff’s Labour sunk to their lowest vote in 80 years.

And the policy is still on the books and the detail is still as sparse as it was 5 years ago when they adopted it. They simply have not done the work, and now with their new”big tool” to solve interest rates and inflation they again are talking about fleshing out the detail with an as yet unnamed ‘expert panel’, which will no doubt include corporate bludger Selwyn Pellett…and they are still asking us to trust them.

Same old smoke and mirrors from Labour, and they still haven’t learned that the voting public are not as dumb as they would like to think they are.

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