Bernard Hickey writes:
"The accounts illustrate vividly how unequal the recovery has been and how Government and Reserve Bank policies have engineered, deliberately or otherwise, the biggest and fastest increase in wealth for home and business owners in the history of Aotearoa-NZ".
A MASSIVE WEALTH TRANSFER IN BLACK AND WHITE.
Statistics NZ reported its national accounts for the September quarter yesterday, which included its measures of the income, savings and net worth of various sectors of society, including households, non-financial businesses (ie not banks) and both central and local Government.
It’s possible to untangle the various flows of cash from one sector to the other and what has happened to their savings and the value of the their assets through the Covid k-shaped ‘rekovery’.
The accounts illustrate vividly how unequal the recovery has been and how Government and Reserve Bank policies have engineered, deliberately or otherwise, the biggest and fastest increase in wealth for home and business owners in the history of Aotearoa-NZ. This happened at the expense of the renters of today and tomorrow, who have experienced a massive real wage shock because inflation has been more than twice wage growth, and rents have risen faster than wages. Renters have also missed out on the bonanza in asset values and now face the widest gap in wealth in our history, with the inequality focused on home ownership.
Beneficiaries and the poorest were given an extra $48m in cash grants in 21 months, while households with homes and businesses received an extra $18.8b in cash and were able to increase their cash holdings in banks by $51.6b.
Any of those renters hoping to make the leap into home ownership now face a chasm to save a deposit in the hundreds of thousands, while also having to pay the most expensive rents relative to incomes in the world from wages that have fallen 2-3% in real terms over the last year. And that’s before they try to get a loan from a bank asking them whether they’re pregnant and why they bought lunch.
The national accounts show that household net worth rose by $629b between the end of December 2019 and the end of September 2021, while the net worth of non-financial businesses rose $323b. In short, asset owners got $952b richer during Covid, while the poor saw their real incomes go backwards and their debts to MSD rise by $400m to $1b by mid-2021 (CPAG)
So what happened to all the cash?
The accounts show the Government paid a total of $19.95b in subsidies to businesses over that period, made up of wage subsidies, resurgence payments and other support packages, while businesses recorded profits totalling $27.16b, up by $15.492b in the previous 21 month period. That begs the question: why weren’t businesses told, or even asked nicely, to pay back their extra surplus, driven largely by taxpayer cash? And where is the outrage from the Taxpayers Union, ACT and National, who profess to care about misuse or unfair payment of taxpayer funds to individuals?
The Government has not asked those businesses to repay the cash from the increased profits, and the businesses themselves have repaid less than $4b of the money given to them as wage subsidies and resurgence support payments. It hasn’t come back to the Government either, at least not yet. The cumulative corporate tax profits paid in the 21 months since Covid was $19.73b, which was actually down from the previous 21 months at $19.95b.
And then there was the money printing
Also over that period, the Reserve Bank printed $58b to buy Government bonds and relaxed lending restrictions, which dragged mortgage rates lower and sparked a rise in house and commercial property prices of 20% to 40%, depending on location and property type.
Here’s a compilation that follows the money, comparing the post-Covid period with the pre-Covid period. It shows the Government gave businesses an extra $18.8b in cash in wage subsidies from the March 2020 quarter to the September 2021 quarter inclusive. Businesses then increased their profits by $15.5b and increased the cash in their transaction and deposit bank accounts by $26.3b.
Also over that time, household cash balances rose by $25.3b.
Over the same period, the Government increased cash grants for the poorest by $48m to a total of $3.233b, compared with the same 21 month period before Covid. Since Covid, demand for food parcels at the Auckland City Mission more than doubled to 20,238 in the six months to June 2021 from the same six months in 2019.
In summary, the Government’s Covid policies made the rich almost $1t richer, while the poor were allowed to get $400m further in debt to the Government itself, and were forced to apply for more than twice as many food parcels in our largest city.
The Government’s emergency cash support for businesses was given without any means testing and there has been no comprehensive review of whether they still need it, or whether it should have been clawed back.
Meanwhile, the PM extols ‘Labour values’ to Labour MPs
PM Jacinda Ardern said last week to her MPs at their caucus retreat at a wedding venue on the South Taranaki coast that her Government had managed equity and fairness with ‘Labour values’ during the Covid crisis.
“The test of equity and fairness is how you manage a crisis ... I'd like to think through the last two years we've demonstrated Labour values. We will continue to demonstrate our ability to manage challenges and change when it comes to climate, housing, poverty, everything we continue to face as a nation." Jacinda Ardern last week.
Bernard Hickey
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