NZ votes ‘yes’ to housing ponzi economy


By Leith van Onselen

In the months leading-up to Saturday’s New Zealand election, various Roy Morgan Research surveys revealed significant voter angst over housing, specifically concerns about affordability/increasing prices as well as homelessness/housing shortages.

Labour went to the election with an excellent housing platform that addresses both supply and demand with negative gearing reform, banning foreign buyers of existing homes, tighter capital gains taxes, removal of urban growth boundaries, plus bond financing for infrastructure. It also outlined a plan to reduce immigration by around a third in order to relieve chronic housing and infrastructure pressures.

Given the National Government’s epic failures on housing, as well as recently thwarting legislation that would have removed Auckland’s urban growth boundary and freed up density controls, I was expecting that Kiwi voters would swing to Labour and thrust them into government.

However, the latest results from Saturday’s election shows that National has dominated the vote; albeit not by enough to gain the 61 seat majority required to form government (it effectively sits on 59 seats with the support of ACT):


Labour has a working agreement with The Greens to form a coalition government, but this still leaves it nine seats short of a majority.


This leaves Winston Peters’ New Zealand First (NZF) as the ‘kingmaker’ that holds the balance of power and gets to decide whether National or Labour will form government.

The ‘nationalist’ NZF should be more oriented towards Labour given Peters has strongly backed both housing reform and lower immigration. However, it is unclear whether he could work with the left-leaning Greens.

Peters said yesterday that he had started talks with members of his party about who to support in a coalition government, but declined to put a timeframe on a decision.


Meanwhile, Labour’s housing spokesman, Phil Twyford, still holds hope that Labour can form a coalition Government with NZF:

So there you have it – a hung parliament with National probably in the box seat to form a minority government given its huge advantage in seats.

Despite Kiwis voicing strong concerns about housing in the lead-up to the election, nearly half voted for a continuation of the status quo: an immigration-fueled ponzi economy, as clearly articulated by JBWere’s Bernard Doyle:


New Zealand has been in a productivity recession since 2012. Not that you’d notice from headline GDP numbers, which continue to print impressively…

In the absence of productivity gains, our economy has relied on more people, working more hours. Net migration provides a conveyor belt of fresh labour, but it comes with attendant bottlenecks in housing and infrastructure…

An economic growth model that is reliant on pushing the capacity envelope can be prone to mishap. Against that, our key sources of demand: agricultural commodities, tourism and net migration, are volatile and have a habit of evaporating at short notice. Moreover asset prices have become a vulnerability: both housing and equity markets in New Zealand are priced for perfection…

The New Zealand economy appears locked in a volume game. Since the turn of the century, the economy has grown in size by around 50%. However most of the growth has come from more workers, working harder…

High immigration is touted as a solution to alleviating capacity pressures, but it becomes a game of bop-a-mole. Shortages of labour in specific sectors (agriculture, tourism) may be relieved, but exacerbated in others (housing, infrastructure, education). Why? Migrants, like locals, need accommodation, transport, schools, hospitals and other necessities of life…

Assuming National earn a fourth term, watch on as housing, infrastructure and living standards continue to get crush-loaded.

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About the author
Leith van Onselen is Chief Economist at the MB Fund and MB Super. He is also a co-founder of MacroBusiness. Leith has previously worked at the Australian Treasury, Victorian Treasury and Goldman Sachs.