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Posts Tagged ‘NZIER’

Silly Idea # 341,907,775 – increasing our population

23 November 2012 22 comments

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From the Silly Ideas files comes this local story from the NZ Herald, regarding a proposition from  ExportNZ and the New Zealand Institute of Economic Research (NZIER),

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Full story

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ExportNZ  executive director, Catherine Beard, has suggested,

One of the obvious ways to overcome these problems is to make New Zealand a bigger country with bigger companies. We need a national debate on population policy and how big we should be by 2060.

Once grown, the challenge is then keeping these companies in New Zealand so the country benefits from them. The alternative is selling out to other countries and losing talent overseas for better jobs and better pay.”

The NZIER suggested  a population of 15 million for New Zealand, by 2060 .

NZIER deputy chief executive, John Ballingall, stated (with a straight face I assume),

We need to ensure existing capability-enhancing policies are delivering value for money. Our immigration, tax, welfare and foreign investment policies need to enhance rather than restrict the ability of New Zealand firms to gain scale.

On-going efforts to cut less vital spending like Working for Families and interest-free student loans will ease the pressure on the kiwi dollar. Public spending has acted like a tax on the export sector.”

Leaving aside the issue of migration for a moment, the question that  demands an answer is:  do these people actually think through issues before making public pronouncements?

Because reading their comments and thinking through the issues to inevitable conclusions leads this blogger to conclude that NZEIR and ExportNZ indulge in superficial thinking and short-term, easy “solutions”.

For starters, what would be the consequences of a population of 15 million people?

This country already suffers from the following;

  • 175,000 unemployed.

How does adding ten and a half million people help address those already jobless?

  • More pollution.

I think most of us know by now that our “100% Pure” and “Clean and Green” reputation is now mostly a fiction to rival that of elves, goblins, hobbits, pixies, Easter bunny, Little Red Riding Hood, Mickey Mouse, et al.

With 52% of our rivers having water quality at poor or very poor, what would tripling our population do to our environment?

Think of 15 million people needing clean water to drink; cook with; shower in; and wash laundry in… and then think of 15 million toilets flushing…

How does adding ten and a half million people help our “100% Pure” image?

Do we downgrade to “75 Pure”?

“50% Pure”?

Or wait for those 15 million toilets to flush simultaneously  and call ourselves “100% Pure Manure“?

  • Housing

We already have a pressing,  critical housing shortage. The cost of housing is spiralling further and further out of reach from New Zealanders.

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Source

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As our population has increased, so has housing affordability and availability worsened. Housing was more affordable fourty years ago and young New Zealanders are having to migrate to Australia to buy a home of their own.

The ‘market’ has been spectacularly inept at meeting demand. And when we do build houses, they tend to “dissolve in the rain”, as Bernard Hickey said with disturbing accuracy on 28 October.

How does adding ten and a half million people help address our critical housing problems?

  • Transport

Something for every Aucklander to ponder: think of your roads now, clogged with cars, with a city of over 1.5 million  people.

Now treble it.

Point made, I think?

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Perhaps the most laughable aspect to NZIER’s comments was when John Ballingall, said,

On-going efforts to cut less vital spending like Working for Families and interest-free student loans will ease the pressure on the kiwi dollar.

It may “ease the pressure on the kiwi dollar” – but how much extra pressure will be put on New Zealanders; their families; and students?

And what might possibly be the consequences of putting more pressure on Kiwi families and students? Clue: Australia.

There are six  countries on this planet with populations ranging from 14,478,000 to 15,883,000;

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     Malawi   –  15,883,000
Burkina Faso   –  15,730,977
Guatemala  –   14,713,763
Mali  –   14,528,662
Ecuador  –   14,483,499
Cambodia  –   14,478,000

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Source: List of countries by population

None of the above nations have a GDP, per capita, higher than ours. So can we deduce that tripling our population is no guarantee of increasing our exports and thereby our wealth?

I believe that would be the first safe conclusion.

The second safe  contention might be the impact on our environment, with 15 million souls living within our shores, would result in environmental degradation  that would seriously harm our Destination New Zealand tourism  – a NZ$9.6 billion industry according to March 2012 figures.

The damage caused to our expanding tourism industry would most likely outweigh any benefits accrued from an increase in exports.

Third and last contention;  trebling our population seems a simplistic and hopelessly lazy “solution” to a problem that appears more rooted in other factors such as National’s blind obedience to neo-liberal policies, and it’s refusal to address the high value of our dollar.

It seems bizarre that ExportNZ has wandered off on some weird  tangeant, and ignored the real problems affecting exporters. It’s almost as if Ms Beard; her colleagues; and NZIER, have experienced a collective – dare I say it – brain fade.

If this is the best that our business leaders can come up with, then I despair for our country.

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Ports of Auckland Ltd – THAT magic 12% figure!

14 March 2012 4 comments

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Much has been made of Port of Auckland Ltd being required to make a 12% return to it’s shareholder and owner, the Auckland City Council.

As recently as last Sunday (11 March), Len Brown confirmed the figure (albeit in a roundabout way), in an interview with Paul Holmes,

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LEN  And by that, I mean that we are the 1.5 million Aucklanders, we own the shares, and as a consequence of that, I’m looking after their interests.  I want that port to be successful.  I certainly want a greater return on our investment-
 
PAUL Let’s talk about that shortly, but I wondered about your position because you have said and I quote you, ‘We deserve a port that’s competitive, a decent return for ratepayers and a settlement that is sustainable.’  That sounds like the port’s position, Mr Mayor.
 
LEN  No, it sounds like our position – our position, the council’s position and the position of any Aucklanders.  Look, my commitment during the campaign was not selling the ports; we will hold the port shares.  Secondly, we wanted the ports to be more commercial and present a much better return for ratepayers.

PAUL And that return, of course, the figure that you’ve come up with is you want an increase from 6.3% I think it is at the moment.

LEN  Yeah.
 
PAUL After tax.

LEN  12% over five years in terms of return on investment.
 
PAUL Where did you get the 12% from?  Pluck it out of the air?
 
LEN  No-

PAUL There’s not a port in Australasia, Mr Brown, making 12%.

LEN  So our view was, though, that the port was not performing as well as it was.  Now, you’ve heard Mr Pearson say it’s an aspirational target.  What we’re saying to the port is this is our view.  We believe as a consequence of the assessments that we’ve done within the  council-
 
PAUL Well, how firm are you on this?  Have you laid down the law on the 12%?

LEN  We have given it to them in our statement of corporate intent.  Right at the start of the year, I went down to the port, met all the workers and the employees and the company directors down there and said, ‘Right, this is what we’re expecting from the port.’  And we had an hour’s Q & A-
 
PAUL This is what we’re expecting.  Is this-?  I mean, were you laying the law about the return you want in five years – 12%?
 
LEN  We were laying down the law in terms of what we expected from the port in terms of its return and in terms of its performance generally.

PAUL Where did you get the 12%?

LEN  So, the 12% was an estimate, a view that certainly I’ve been working on for right through the last sort of 18 months, two years.  It was view that was discussed our own table with the officers, with our own council-
 
PAUL So it’s a guess?  It’s a good guess?

LEN  No, it’s an estimate.
 
PAUL (laughs)
 
LEN  This is what we think we should be aiming to achieve.  And so we went back to the company and said, ‘Okay, this where we think you should be.  What is your advice back to us?’  Their advice was, ‘Give us five years and we believe that we can receive that.’

PAUL Well, excuse me, look at this.  Okay, 12%, that’s your estimate – guesstimate.  Tauranga returns 6.8%, Lyttelton 8.6%, Sydney 6.7%, Melbourne 3.1%, Auckland 6% — 6.3% after tax.

LEN  So not just about return either-
 
PAUL Where’s the 12% being made anywhere?

LEN  It’s about competitiveness against other ports.  So we are losing share against Tauranga.  We are competing flat out against Brisbane, in particular, and Sydney.  It was our desire that we wanted the port to be much much stronger in terms of its-
 
PAUL Do you endorse what Mr Pearson was saying about he cannot believe the waste of resource at the Ports of Auckland?
 
LEN  Look, there’s a whole lots of things that we cannot believe about the performance of the Ports of Auckland, so it just was not about-

PAUL Can I just say to you again-?

LEN  a stronger return on investment.

Source: TVNZ Q+A

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Yet,  at a meeting of the CCO Strategy Review Subcommittee, held on 21 April last year, a motion was passed to the effect;

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PRESENT
Chairperson Mayor Len Brown, JP
Deputy Chairperson Deputy Mayor Penny Hulse
Councillors Cr Ann Hartley, JP
Mr Tony Kake
Cr Richard Northey, ONZM
Cr Sir John Walker, KNZM, CBE
Cr Penny Webster
ALSO PRESENT
Councillors Dr C Casey
C Fletcher
D Morrison
C Penrose
S Stewart  [until 11.25pm, part item 11]
W Walker

12  Shareholder Comments on the draft 2011-2014 Statements of Intent/Statement of
Corporate Intent of Substantive Council Controlled Organisations/Watercare Services
Limited

CCOS/2011/4
MOVED by Mayor Brown, seconded Cr Hulse:

b)

Auckland Council Investments Limited

ii) Replace the proposed shareholder comment on page 135 “Add a series of
performance measures/targets to measure port productivity and profitability.
This should include lifting the rate of return investment (from 6%-12% over
three years)” with
“Immediately following completion of the long-term strategy for POAL add to
ACIL’s statement of intent, a series of performance measures and stretch
targets to measure port productivity and profitability. The targets should
require a significant improvement in the performance of POAL, including the
rate of return on investment.”

CARRIED

Source: Council  Sub-Committee Minutes

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So it seems evident that Auckland City Council no longer demands an outrageously high rate of return from Ports of Auckland. The target now requires  “a significant improvement in the performance of POAL, including the
rate of return on investment” – which could be anything; 7%, 8%, 9%, etc.

I believe that there is evidence (more in a moment on that) that what we’re seeing here is Auckland City Council/Ports of Auckland in a war of competition with other local ports – Tauranga to be specific.  Since corporatisation of New Zealand ports,   there has been a steady drive to increasing profits; returns to shareholders; and “efficiency”.  This involves aggressively attracting new clients to use port facilities.

Considering that there is only a limited number of shipping coming to New Zealand at any given moment, ports can only increase business at the expense of other ports. In essence, they are “cannibalising” each other.

A New Zealand Institute of  Economic Research (NZIER) report entitled “Port Performance and Ownership
An assessment of the evidence Report to the Local Government  Forum 9 August 2010” makes the following observations,

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On the other hand, Maersk undoubtedly extracted significant discounts from Auckland to secure its business. Its standard business practice is to play off competing ports aggressively against one another in terms of price and the facilities they provide, such as fixed berth slots and equipment for loading and unloading. It cannot be criticised for its approach; it is operating in a very competitive market and needs to have as cost competitive a port service as it can find and negotiate. As Figure 8 shows, Port of Tauranga’s net profit after tax for continuing activities has been significantly better than Ports of Auckland’s since the Maersk decision in 2006.”

“…there is some evidence that Ports of Auckland, and possibly Lyttelton Port Company, have in recent times succumbed to local pressures to retain and grow the volume of trade through their port by agreeing to provide international shipping lines with levels of service at charges such that the services may not make a full economic return.”

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This seems to be born out by data, such as presented by the (NZIER),

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The graphs above show that despite having a higher a higher container volumes at Auckland than  Tauranga (1995 to 2009), Port of Auckland’s net profit after tax still dropped.

As NZIER stated,

It is extremely unlikely, therefore, that the commercial realities of the Maersk decision supported any change in the relative values of Tauranga and Auckland to the significant favour of Auckland. Indeed, the evidence suggests the impact was probably exactly opposite to this.”

With this in mind, the ongoing competition between NZ ports to attract business from shipping companies such as Maersk appears to be a self-defeating process; a race to the bottom.

In which case, POAL’s agenda for “greater productivity”  (ie; more profits) is now impacting on port worker’s incomes.  Driving down wages and casualising the workforce has the natural consequence of reducing the wages bill for the company.

This is what it’s all about; aggressive competition between ports.

And Maersk benefits.

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Other Blogsites Views

No Right Turn: Ports and transparency

Bowalley Road: Only People Power Can Save Our Ports

Bowalley Road: A Study In Mauve

Pundit: Solving the Ports of Auckland dispute

Related Issues

Bryan Gould: Our workers being squeezed by the bottom line

Acknowledgement

Cathy Casey, Auckland City Councillor

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From 2011 back to 1991?

1 December 2011 23 comments

Even without a Tardis, John Key’s National government is set to return New Zealand to 1991, as it plans to cut spending and make more state sector workers redundant,

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Full Story

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Yet, the NZIER is warning of dire consequences  should National proceed with more cuts to state sector spending,

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Source

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Many will recall that it was precisely brecause of severe cuts to state spending in 1991 that made New Zealand’s recession so much worse at the time. Ruth Richardson even boasted that her budget was the “Mother of All Budgets”.

Economic data is presented here, in graph form, and shows the immediate conseqences that impacted on New Zealand soon after Richardson’s Budgetary cuts were implemented. Unemployment skyrocketed to approximately 11% – the highest since Depression days in the 1930s.

It is generally considered that Richardson’s harsh cuts unnecessarily deepened New Zealand’s recessionary effects. It caused considerable misery throughout the country as businesses collapsed; GDP fell; the prison population increased; and credit ratings agencies downgraded the country.

As John Key’s government lays plans for implementing more state sector cuts, it is clearly apparent that New Zealand’s economy is still struggling,

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And just to really drive home the fact that matters are becoming dire,  ratings agency Standard & Poor’s today downgraded the credit ratings of our major banks;  ANZ New Zealand, ASB, BNZ, and Westpac New Zealand,along with their Australian parents.

Things are not looking terribly flash,

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Whilst it is abundantly obvious that we cannot influence events on the other side of the globe, and that the slow disintergration of the Eurozone; the economic downturn in China; and America’s mind-numbingly huge deficit – that our government can still play a role in what happens locally.

First and foremost, now is not the time to be cutting back on state sector spending and government workers. Adding to unemployment will not help matters and will simply,

  • reduce overall consumption spending by unemployed civil servants
  • make it harder for 154,000 currently unemployed to find jobs
  • reduce overall economic activity

John Key needs to read up on our recent history and learn from the mistakes of his predecessors, Jim Bolger and Ruth Richardson.

He needs to understand that government cutbacks during a recession will not help – and will actually make matters much worse.

Instead, the incoming government should be considering the following;

  • Shelve all plans for further cutbacks
  • Abandon further cutbacks of state sector employees
  • Implement a crash training programme for those currently unemployed, removing barriers such as fees
  • Raise the minimum wage to $15 an hour
  • Compensate the increase in  minimum wage with a correlating tax write-off/reduction, for companies affected for one year
  • Increase the top tax rate for income earners over $100,000
  • Review Working for Famlies for those earning over $100,000

Some high income earners, businesspeople, and free marketeers may squeal at the above suggestions – but we either pay to keep our economy afloat and maintain high employment – or we’ll pay for  welfare, increased crime, social dislocation and other problems, as well more skilled Kiwis fleeing to Australia.

Why not pay to achieve positive outcomes instead of the proverbial ambulance at the bottom of the cliff?

Because either way, we will pay.

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Additional

Wellington hit with leap in mortgagee sales

Wellington furniture company in liquidation

Fourth National Government of New Zealand

The 1991 Budget and Tertiary Education: Promises, Promises…

Reserve Bank – Employment-Unemployment

Dept of Corrections: Prison sentenced snapshot trend since 1980

Annual figures for Bankruptcies and Liquidations since 1988

Chris Ford: National/ACT Coalition aiming to complete New Right revolution

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Can we do it? Bloody oath we can!

3 August 2011 43 comments

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STATE HOUSE RESIDENTS MOVED

Meanwhile, almost 400 tenants have been kicked out of state houses in the last three years.

Housing Minister Phil Heatley said 241 tenancies were ended in the last year.

Tenancies were ended because people had failed to inform Housing New Zealand about income from employment, business interests, assets, that they lived with a partner of sublet the house.

Since July 2010, 119 tenants were successfully prosecuted for fraud.

Housing New Zealand has also identified $6.6 million from the last 12 months that is owed to the Crown, largely for overpaid rent subsidies.

“The state housing system is designed to help people in their time of need. It’s unfair and unacceptable for people to abuse the system and commit fraud to get benefits they are not entitled to. People who deliberately rip-off the system deprive families in real need,” Heatley said.

The houses were now freed up for those with genuine need, he said.

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On most levels, the mis-use of State assets (ie; owned by us, the People)  is a rort that cannot and should not be tolerated.  Housing Minister, Phil Heatley is correct when he reminds us that,

“The state housing system is designed to help people in their time of need. It’s unfair and unacceptable for people to abuse the system and commit fraud to get benefits they are not entitled to. People who deliberately rip-off the system deprive families in real need.”

Although I note that Mr Heatley’s admonitions did not stop certain Ministers of the Crown from ripping of the tax-payer, when it suited them…

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And similar cases where Members of Parliament used their accomodation allowance in ways in was not intended…

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Defence Minister Wayne Mapp said his previous apartment had been very small and was not suitable for him and his wife, now he was spending more time in Wellington as a minister.

He confirmed the apartment was owned by his superannuation trust and was rented to National MP Bakshi Singh, for $400 a week.

As an MP Mr Singh can claim up to $24,000 year in accommodation costs from Parliamentary Service.

Dr Mapp also collected around $700 a week for his new larger apartment and said he could see why his rental income should be used to offset his expense claims.

“I can see why people have concerns and the review will deal with that,’ Dr Mapp said.

Housing Minister Phil Heatley also said he was renting out his old apartment and claiming a $1000 a week in accommodation expenses in a larger home to accommodate his wife and young children.

Mr Heatley would not say whether this was rented to an MP.  – Source

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It seems that rules are different for some folk.

The shortage of state housing is a serious matter, though. This critical problem of decent, affordable housing is not helped by the fact that the Fourth National government (1996-1999) sold around 13,000 State Houses in the 1990s.  These properties were supposedly made available to tenants – but actually went mostly to property speculators (who later sold them for tax-free capital gains).

When Labour was elected to power in November 1999, they immediatly placed a moratorium on the sale of state housing. According to HNZ, they currently ” own or manage more than 66,000 properties throughout the country, including about 1,500 homes used by community groups”

This government has re-instated the sale of state houses.  It does not take rocket science to work out that selling of state housing reduces the availability of housing stock.   Housing Minister Phil Heatley said that,

“… about 40,000 of the 69,000 state house stock will be available for sale,”  but then added,  “that the vast majority of tenants do not earn enough to be required to pay market rent means relatively few will be in a position to buy“. (Source.)

There seems to be nothing stopping tenants from buying their state house and immediatly on-selling it to a Third Party.

Is it any wonder that the shortage of state housing is not being addressed in any meaningful way? It certainly does help those on the current waiting list (as of 30 June);

  • 402 were Priority Eligible — A
  • 3,352 were Priority Eligible — B

Plus a further 5,132 in categories “C” and “D”.

Problem:  there are currently 8,886 people on the HNZ waiting-list.

Solution: build more houses.

This may seem like a ‘flippant’ answer to a desperate problem – but it is not.

The building of 10,000 new state houses may seem an outrageously expensive idea.  But it would address at least three pressing problems in our economy and society;

1. Persistantly high unemployment.

2. Low growth.

3. Inadequate housing for the poorest of our fellow New Zealanders.

At an average housing cost of $257,085 (calculated at DBH website @ $1,773/m for a 145 square metre, small house), the cost (excluding land) is $2.57 billion dollars,  including GST (approximate estimate).

By contrast, the October 2010 tax cuts gave $2.5 billion to the top 10% of income earners.

For roughly the cost of last year’s tax cuts, we could have embarked on a crash building-programme to construct ten thousand new dwellings in this country. The immediate effects would have been profound for the building industry and would have created work for;

  • architects
  • builders
  • glaziers
  • roofers
  • electricians
  • plumbers
  • drain layers
  • painters
  • plasterers
  • tilers
  • landscapers
  • bricklayers
  • concreting contractors
  • insulation installers
  • home-heating installers
  • carpet layers
  • etc, etc.

Work would flow through to associated contractors;

  • truck drivers
  • building waste disposal

Turnover would increase for timber and framing suppliers as well as other building supplies outlets.

In turn, those in the building and associated industries would enjoy massive increase in demand for their products.

And equally important, those on the unemployment queue would suddenly be in high demand, as we needed to train more tradespeople. Which would mean a flow-on effect to polytechnics as they suddenly needed to train hundreds more tradespeople.

A further flow-on effect would impact positively on service industries, as money flowed into the economy, into supermarkets; entertainment; clothing; and elsewhere into the retail sector. As Bill Kaye-Blake of  NZIER, said in April of this year;

The economy is sluggish because people are not spending.

It would be a boom-time, as two and a half billion dollars was spent on products and services.

Would it actually end up costing taxpayers $2.57 billion dollars? The answer is ‘no’.  Government would actually re-coup much of that initial outlay through;

  • gst
  • paye
  • other taxes
  • reduced spending on welfare for unemployed
  • and investment re-couped by rent paid for new rentals

Would it work?

Yes, it would.  An NZIER survey expects a strong pick-up in 2013 when the rebuilding phase hits full-flight, with 3.9% annual growth predicted from a previous forecast of 2.6%.

The government has a strong role to play in tough economic times. A “hands off” approach will achieve nothing except unnecessarily drawing out an already painful recession, and prompting more frustrated  New Zealanders to “cross the Ditch” to Australia, where their government has announced a  programme aimed at 500,000 new jobs.

There is no reason why a determined government cannot adopt a bold programme for economic growth.

Instead of borrowing to pay for tax cuts we can ill afford, we should be investing in jobs.  The rest will almost invariably take care of itself.

We have the resources. We have the money. We have the demand for new housing. What else is missing?

The will to do it.

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Updates

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Fletcher shares at 2-year low after warning

Wellington rental market tough for tenants

Major housing shortage looms

Business NZ sees no economic plan

Downturn in building sector ideal timing for state house build

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