There's a few tales of doom and gloom out there, and Government, particularly our Liarbour government, can take its share of the blame. First, high house prices means that an unaffordable deposit of $122,000 is now needed for that first home. Such higher housing costs are now reflected in higher rentals too as landlords struggle with higher mortgages, rates and other bills. Now, that will make it harder for people to save for their first home, won't it? And then there's the higher food, fuel and mortage costs, making people feel incredibly poor. Indeed, more kiwis feel poorer now than last year compared to those who feel better off. Consumer confidence is slumping. Now, where does government fit in? Liarbour tax rises in 1999 helped fuel the housing boom as it became more tax efficient for landlords to invest in property. Higher government spending helped fuel higher interest rates- the highest in the developed world- which is now reinforcing the nasty effects from the global credit crunch. Yet higher government spending has not improved services. Fuel prices are rising thanks in part to their tax policies, such as 5 cents or so on petrol, and this before planned Greenhouse taxes come in. Food prices are also higher, thanks in part to the biofuels policies Liarbour supports. But back to energy, where Fairfax columnist Bernard Hickey has some strong analysys of the power genration sector, pointing out a major rip-off of the consumer by state owned power companies, which in turn prevents the Reserve Bank of New Zealand from reducing interest rates ahead of an impending slump. Commenting on power company profits, annnounced yesterday, Bernard says:
"these power generators are putting up prices much faster than the rest of the economy and are just another source of government-generated inflation that is keeping interest rates higher for longer than they need to be. These higher power charges, higher profits and higher dividends have simply become another tax on every household."
Bernard brands it 'state-owned profiteering', noting many produce and sell power in captive, monopolistic markets, and there is no need for marketing, etc.
But the general picture is clear. Inflation generated by local government, central government and government-owned corporates is high and rising.
There seems to be insufficient investment in new generation capacity and lines capacity to handle growth or the risk of some of our ageing infrastructure failing.
Noting how the government, as owner, then pockets the money, Hickey concludes:
We (1.6 million households) pay through higher electricity charges and then we pay again through higher interest rates. That’s because the Reserve Bank has no choice but to keep rates high when inflation continues to bubble along above its 2-3% target range.
So how does Liarbour plan to spend it $175 million windfall? I heard more talk on tv about john Key bringing forward taxcuts to help hardpressed householders, but Cullen wants to spend up large buying back the railways.
Considering how government operates the energy sector, I am sure that makes us all feel better doesn't it?