An Aussie clue to aid Ardern

Trans-Tasman relations may be at a low ebb, but the prime minister could heed a lesson from Australia on using the phrase ‘‘Never ever’’ in politics. In 2019, Jacinda Ardern ruled out ever implementing a capital gains tax under her leadership. The surprise decision reversed a position Labour had taken for more than a decade, and went against the advice of a tax working group appointed by Ardern. Perhaps it’s time for her to revisit her options, with house prices spiralling and the Government riding high.

Across the ditch, John Howard famously ruled out a goods and services tax in 1995, only to reverse that position within a year or so of being elected. ‘‘Never ever?’’ an interviewer asked Howard at the time. ‘‘Never ever.

It’s dead. It was killed by voters at the last election,’’ he replied.

While changing the tax system may be unpopular, it’s also a lever for reshaping the economy. Over time, tax changes typically become accepted as normal. As the adage goes, an ‘‘old tax is a good tax’’.

It’s also easier to ask forgiveness than it is to get permission; despite the initial controversy, Howard went on to become one of the country’s most enduring conservative leaders.

There’s reason to believe New Zealanders would accept that a change of heart is needed here too. A survey this week showed seven out of 10 New Zealanders believe the Government should increase income support for those on low wages or not in paid work, indicating the compassion shown by New Zealand’s ‘‘team of five million’’ has outlasted the darkest days of the Covid-19 pandemic. The UMR poll was largely consistent across salary groups, age ranges and the political spectrum.

Official figures released on Tuesday show 18.2 per cent of children were living in relative poverty in the year ended June 2020, after housing costs were deducted, only a slight improvement on 2019. Getting to grips with the rising housing costs people are facing would make a huge difference, child poverty experts say.

Houses are as unaffordable as they’ve been in at least 17 years, according to a report this week by property data firm CoreLogic. It noted a growing divide between the wealth of existing homeowners and those struggling to get their first home.

Housing plays a significant role in wealth inequality in New Zealand. Some 70 per cent of household wealth is held by just 20 per cent of households, according to economic consultancy Berl. The tax working group found the case for taxing more gains from residential rental property was the clearest.

Addressing imbalances in the housing market would benefit the broader economy. Housing wealth is often used to start small businesses, and provides these ventures with a buffer against economic shocks.

Introducing a broad capital gains tax isn’t a cure-all. Critics say non-tax factors such as constraints on the supply of housing, including land-use regulation, along with foreign buyers and immigration, have been driving up house prices. The Government has tackled two of those issues: it is reshaping the Resource Management Act and has banned foreign buyers. The pandemic, meanwhile, has curtailed immigration.

Perhaps the most important impact of any capital gains tax would be in reshaping the belief that property investment is tax-favoured. It could signal to the electorate that the Government is willing to tackle all causes of rising house prices.

... despite the controversy, Howard became one of the country’s most enduring conservative leaders.