One of the most important policy changes in coming years might well be the Closer Economic Relationship (CER) between Australia & NZ. Having moved to NZ to escape the stupidity of the Australian tax system, I would like to warn NZ'ers they might be moving inextricably towards fascism faster than they already are, if PM John Keys keeps forging ahead with his CER agreement. NZ'ers might be thinking that Australia is the stronger economy, so how bad could the tax system be? Well its a nightmare. The reason the Australian economy has out-performed the NZ economy lies in factors such as:
1. The larger size of its economy
2. The huge stimulus provided by Australia's commodity resources
3. Less generous welfare policies - no entrenched welfare system
4. Stronger savings culture
5. Greater commercial acumen
The negatives of NZ joining Australia as one country have already been provided for in the Australian Constitution. The Founding Fathers saw the prospect of NZ being part of Australia. Perhaps they considered the possibility of economic failure. But NZ is far from a failure. Its just that the country would benefit from greater market integration. Certainly foreign investors are less inclined to invest in a different country with 'another' tax regime. If NZ could market itself as Australia 'plus' lower taxes, that would certainly be a great benefit for the country. Of course it has to be good for NZ business as well. I would think that the NZ economy is equal in size to Queensland. Its no 'Sunshine Coast', but rest assured with greater integration, you will see more Australians moving to NZ for the sake of lower property prices, as well as to buy holiday houses.
So when is the property boom going to start? Well given the tight property market in both countries, we might ask what will the focus be? I have no doubt that the greatest attraction for Australians is likely to be the tourist centres of South Island. In order of priority I would think:
1. Queenstown-Wanaka: Lower (domestic) travel costs between Sydney, Melb, Brisbane and Queenstown will result in far greater investment in these areas. We must remember that Wanaka and Queenstown have panoramic views of lakes and mountains, and they occupy confined valleys, so the value of those views is going to skyrocket, and I dare say these places will be destroyed if not properly managed.
2. Blenheim-Picton: The problem for this area is that there is no airport servicing this area for Australians, though I am guessing this will change with greater market deregulation.
3. Christchurch: This city has a lot of appeal too because it is a larger commercial hub, and its at least in the proximity of the North Island attractions, particularly Mt Cook.
4. Auckland: Auckland is NZ's largest commercial centre. No great value in itself, though people might appreciate it as a transport and North Island hub.
How are NZ'ers likely to respond to the thought of being part of Australia? Well there is always proud people who want to keep their own identity. Certainly being a state gives them that, but with some loss of independence? Does it matter if you are controlled by a government in Canberra or Wellington? Yes, clearly it does if federal policy is different. But isn't Keys indicating a desire to shift us towards Australian policy, or is NZ going to be a state with a difference?
Keys is signalling that travel could be as much as 20% cheaper, and that taxation systems will be alligned. He said that travel will be streamlined by Xmas, which is the far more important issue for property investors. Allignment of tax systems will take longer of course. So what will NZ'ers think? Are we the same?
Having lived in NZ, I find NZ'ers more outgoing, more reliant on the State, more easy-going. They are more lifestyle-orientated, less money-orientated. Of course this analysis is skewed by the fact that I've shifted from an Australian city to a rural NZ town, so herein lies the problem. City-siders in NZ are likely to welcome the integration, but rural NZ'ers might regret it. Of course it comes down to values. But towns which were slow, friendly places might resent the invasion of Aussies during the holiday season. Not because they are Aussies, but because they have changed the town's culture. It would be no different than the Wellington school excursion to New Plymouth, which resulted in the students trashing a motel. It upsets local communities. Australia is something bigger. People will have to adjust, and they don't want to. They will not make the connection between these issues and increased business activity and jobs.
Clearly the biggest benefit will be in property prices, which is why we recommend buying property here. The appeal is particularly attractive for Australians given the fact that:
1. The Australian dollar is even stronger than the NZD
2. There is a lot of property already in foreclosure, mostly city apartments in Auckland and Christchurch. People have lost jobs.
One does need to watch the exchange rates. High end properties are still too expensive. Apartment yields are good, and rural property in towns are often still very cheap, even if you are close to the beach. Want to know more about buying property in NZ - see our $20 study.
1. The larger size of its economy
2. The huge stimulus provided by Australia's commodity resources
3. Less generous welfare policies - no entrenched welfare system
4. Stronger savings culture
5. Greater commercial acumen
The negatives of NZ joining Australia as one country have already been provided for in the Australian Constitution. The Founding Fathers saw the prospect of NZ being part of Australia. Perhaps they considered the possibility of economic failure. But NZ is far from a failure. Its just that the country would benefit from greater market integration. Certainly foreign investors are less inclined to invest in a different country with 'another' tax regime. If NZ could market itself as Australia 'plus' lower taxes, that would certainly be a great benefit for the country. Of course it has to be good for NZ business as well. I would think that the NZ economy is equal in size to Queensland. Its no 'Sunshine Coast', but rest assured with greater integration, you will see more Australians moving to NZ for the sake of lower property prices, as well as to buy holiday houses.
So when is the property boom going to start? Well given the tight property market in both countries, we might ask what will the focus be? I have no doubt that the greatest attraction for Australians is likely to be the tourist centres of South Island. In order of priority I would think:
1. Queenstown-Wanaka: Lower (domestic) travel costs between Sydney, Melb, Brisbane and Queenstown will result in far greater investment in these areas. We must remember that Wanaka and Queenstown have panoramic views of lakes and mountains, and they occupy confined valleys, so the value of those views is going to skyrocket, and I dare say these places will be destroyed if not properly managed.
2. Blenheim-Picton: The problem for this area is that there is no airport servicing this area for Australians, though I am guessing this will change with greater market deregulation.
3. Christchurch: This city has a lot of appeal too because it is a larger commercial hub, and its at least in the proximity of the North Island attractions, particularly Mt Cook.
4. Auckland: Auckland is NZ's largest commercial centre. No great value in itself, though people might appreciate it as a transport and North Island hub.
How are NZ'ers likely to respond to the thought of being part of Australia? Well there is always proud people who want to keep their own identity. Certainly being a state gives them that, but with some loss of independence? Does it matter if you are controlled by a government in Canberra or Wellington? Yes, clearly it does if federal policy is different. But isn't Keys indicating a desire to shift us towards Australian policy, or is NZ going to be a state with a difference?
Keys is signalling that travel could be as much as 20% cheaper, and that taxation systems will be alligned. He said that travel will be streamlined by Xmas, which is the far more important issue for property investors. Allignment of tax systems will take longer of course. So what will NZ'ers think? Are we the same?
Having lived in NZ, I find NZ'ers more outgoing, more reliant on the State, more easy-going. They are more lifestyle-orientated, less money-orientated. Of course this analysis is skewed by the fact that I've shifted from an Australian city to a rural NZ town, so herein lies the problem. City-siders in NZ are likely to welcome the integration, but rural NZ'ers might regret it. Of course it comes down to values. But towns which were slow, friendly places might resent the invasion of Aussies during the holiday season. Not because they are Aussies, but because they have changed the town's culture. It would be no different than the Wellington school excursion to New Plymouth, which resulted in the students trashing a motel. It upsets local communities. Australia is something bigger. People will have to adjust, and they don't want to. They will not make the connection between these issues and increased business activity and jobs.
Clearly the biggest benefit will be in property prices, which is why we recommend buying property here. The appeal is particularly attractive for Australians given the fact that:
1. The Australian dollar is even stronger than the NZD
2. There is a lot of property already in foreclosure, mostly city apartments in Auckland and Christchurch. People have lost jobs.
One does need to watch the exchange rates. High end properties are still too expensive. Apartment yields are good, and rural property in towns are often still very cheap, even if you are close to the beach. Want to know more about buying property in NZ - see our $20 study.
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