Excessive taxes on alcohol - backpacker beware

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If you value drinking alcohol, you might want to consider not coming to NZ for a holiday. NZ is already charging a tax of $2.47 per litre on alcohol between 2.5-14% concentration, whether beer or wine. The government is also taking measures, probably punitive, to regulate the campervan trade in NZ.

These are big disincentives for foreigners to travel to NZ, and yet the government is considering another increase in alcohol tax to 'reduce binge drinking among the young'. This is the most insane policy you could imagine. First of all, the tax has already been increased for the same reasons before, to no avail. Is this not simply about using 'punitive taxes' to resolve holes in the national budget. Business will of course need to pass on the costs, which will see a bottle of beer priced between $7-8, and a glass of wine between $16-18. I suggest the increases might even be greater if businesses experience a fall in patronage.

My guess is that the policy would result in several negative effects:

1. Increases organised crime activity in the realm of boot-legging. Maybe the sellers will give you a rebate if you bring your own potatoes.

2. Closure of businesses - restaurants and bars are big employers in NZ, so more taxes is simply going to stop people going out. Expect rural town employers to be particularly hard hit, which will mean population declines in rural areas as rural people are forced to move to the city. I suspect they will move to Australia instead.

3. Less tourism - The backpacker trade will die off because alcohol would be a major expense for this group. They might not spend as much as the premium traveller, but they spend 1-6 months in the country (compared to a few days for business travellers and 1-2 weeks for wealthy retirees), with all funds being recycled through the economy, as well as spreading to the rural areas through the backpacker network. Expect more tourists to head to Australia. OK, Australia does not have the mountain vistas of NZ, but USA, Canada, Europe does, so travellers from those countries will not miss them. Australia will be a more holiday friendly place.

4. Greater use of alcohol substitutes - You can't use punitive measures to correct some action you consider inappropriate. There is a need for education - but not the idiotic messages we are accustomed to on TV. The problem is more fundamental. The problem is that academics do not understand the alcoholism issue. What they don't realise is that kids are going to explore other options like 'glue sniffing', meth, etc. The implication is that the government is driving people into more illicit activities as well as more dangerous activities. Having researched this issue I can tell you that the behaviourist school of stupidity is driving public policy on such issues. Governments are therefore labouring under the misconception that humans are animalistic. The reality is they totally lack any theory of values.

I will be among the first to suggest that alcoholism consumption is a problem, but the solution is never greater taxation. Taxation is slavery - not education! It might change behaviour at the margin, or in the short term, but the 'externalities' of such policies are far greater than any benefit. The implication is greater use of meth, greater use of methylated spirits (i.e. cheaper), greater illicit activity.

NZ might just learn that one of the appeals of travelling to NZ is the low cost of living. After all it is so far away, and does not have a lot of culture to offer. Basically its an 'outdoors experience'. My advice is - ditch the taxes, as well as the bureaucrat/academic reports which suggest punitive measures are the best way of avoiding youth binge drinking.

Send a message to the NZ government that taxation is NOT the solution! Take a holiday in Australia if you are in this part of the world. Better still punish the Australian government (who do the same thing) and tax a holiday in the Philippines or Vietnam. Alcohol there is just $1/beer. With the savings you will be able to buy an apartment for $50K. :)

Another paradox of these silly policies is that youth unemployment is pretty bad in NZ, and kids wanting a sense of efficacy are turning to alcohol or drugs to medicate their low self esteem. The government I believe is quickly taking this country into an escalating crime regime. You guessed it! That means more taxation to regulate behaviour because we didn't learn in the N^{th round of tax increases. We need a change in government administration so we can avoid the spiraling crime and incompetence as practiced by Western governments around the world. They are truly the pits. There is simply a complete lack of good sense and reason needs to be the standard of value. What qualifications do these people have? What life experience? The problem is they are not analytical thinkers. They are lawyers with 'good memories'. Precisely not the type of people you want drafting law.}

^{Details on NZ tax - see Wikipedia.}

Performance of Wanganui Mayor NZ

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Michael Laws is a rather high profile mayor in NZ. Mostly it is because of his antics. It always gets a lot of national attention, as well as derision. His conservatism is popular with the retirees in Wanganui I suspect. But let's look at his performance. The council rates are increasing by 4.5% in 2010/11. This seems most enough when you consider inflation, but one might ask why councils can't achieve cost reductions through efficiencies, particularly when we are talking about a rural region subject to steady population.

I think one of the biggest opportunities for saving public money is by adopting a per volume cost for water usage. I note the impact of free water on the community. My neighbour said 'Andrew, don't worry about wasting water, its free'. I replied 'nothing is free', someone always pays. The reality is that Wanganui water is expensive because it is derived from bores as opposed to regulated dam storage. The implication is that if there was an increase in population, we would need to develop more boring capacity. I note that the council recently developed new boring capacity to substitute for the failed no. 1 bore. It should have simply adopted a pro-rata pricing of water. Now, this might be harder than it sounds, i.e. Maybe the water in NZ is unmetered. I guess, unlike Australia, they are so accustomed to having free water. Even so, even if usage was collectively based on the premise of 'user pays', it might still have some effect, even if weaker. i.e. My neighbour would be less inclined to say 'its free', knowing that collectively I was paying more because of his actions.

Another big mistake is for Wanganui Council to have paid $20 million (my understanding) for Wanganui Gas. This utility is a legacy of the old electricity and gas board days. By buying the balance of the utility from its JV partner, it is exposing rate payers to commercial risks which we don't need. Consider for starters that the industry is undergoing consolidation. How is its retail arm 'Energy Direct' going to compete with the full service providers. I might add that the window of opportunity to sell this utility is dying. Consider that the ratio of residential to industrial gas prices in NZ are the highest in the world- even higher than statist Japan, where consumers always get a bad deal. Literally slaves to the state. NZ residential gas prices based on last years prices are 10x greater than the prices for utilities. The reason of course is that the NZ privatisation scheme was a sham, and the very uncompetitive regime for gas and electricity in NZ. Consider that consumers are baying full price for electricity, when most capacity is operated at almost zero cost. Water is free, and no fuel cost. Markets demand you pay the marginal price, which is the cost of high-cost wind, also near-free to operate, but costly to install. The implication is that if some person decided to commission a 600MW power plant, prices could halve, and the utilities would still make a great profit. The current regime is huge profits for the utilities, as well as government, and it raises the question of whether the utilities have paid huge kickbacks to secret bank accounts in Switzerland in order to structure 'deals' like these. Hard to say if its incompetence or corruption. There is a fine line between stupidity and deceit.

It ought to be apparent though that Wanganui Council has on benefit to derive from being in the industry given that the returns are never going to be greater. Get out why you can! Coal seam gas would erode their profitability when developed in the Waikato Basin, greater convergence can be expected, etc. There is better ways to attract jobs that by propping up historical practices.

It is apparent that the council is creating a problem of future unfunded liabilities by underspending on the maintenance of public infrastructure. These problems or cost items will not disappear, which means that the Council is moderating rate increases by increasing future contingencies. I am a believer in very small government, so the idea of a local government having $84 million in debt is ridiculous, particularly one which cannot attract people (i.e. rate payers). Worse still is the fact that they project it will increase to $96 million before falling. Who can know that is reasonable - that the debt will fall to $66mil in 2018/19? Are they projecting a population explosion to justify it, or an increase in future rates? Hard to see if this is possible if they are pushing capital outlays into the future.

Laws makes the argument that Wanganui will be among the 'elite' group of 16 councils (of 73) able to reduce debt in this period. This says nothing since Wanganui is among the few councils likely to be forecasting stagnant population growth. i.e. No capital expenditure demands. Such 'relativist' statements are therefore misleading.

I do think the council is doing a good job improving the visual appeal of the city. This will attract tourism, and improve property prices. Wanganui is a great place to live, and I also support their desire to improve the negative perception of Wanganui. People seem to think this town is overrun by gangs. I have yet to see any gang activity in the year I have lived here. Not seen a gang member at all, and we live close to hot spots of trouble. Maybe this is the result of the anti-crime initiatives, because I must say in the first 8 months of living here, I was seeing a police car every day. Now its once a week.

I also appreciate the opportunity the council has given to make public submissions. Not a believer in representative democracy, but better than nothing. No accountability, so its one-sided representation. What is the point of disclosure if you have no recourse for 3-4 years; and that recourse is zilch in comparison to the rest of the unthinking electorate.