Economic Week - April 20

by Nick Clark

 Tax Survey Results

Federated Farmers is hard at work on a submission to the Government’s Tax Working Group.  To inform our work we did a major member survey last month.  We received nearly 1,400 responses and the results and the comments have given us invaluable information. We thank everyone who took the time to complete the survey.

This week we advised Federated Farmers members of the survey results and they are available here.  The highlights:

Capital gains tax

  • 81% opposed a capital gains tax excluding the family home, with 11% supporting. 
  • 45% would oppose a CGT no matter what, but 47% would support it if it were applied as a ‘bright-line test’, with five years the most favoured time period. 

Land tax

  • 91% opposed a land tax excluding land under the family home, with 2% supporting.
  • 80% would oppose a land tax no matter what.

Environmental taxation

  • 84% supported tax incentives for environment-related on-farm investments or improvements, with 9% opposed. 
  • 82% opposed any form of environmental taxation. 
  • 51% would never support environment taxes no matter what the revenue raised was spent on.  There was minority support for these taxes to be used to fund on-farm environmental initiatives.

Company tax

  • 12% supported a ‘progressive company tax’ (i.e., a lower rate for small companies), with 26% opposed and 55% thinking ‘maybe’ depending on what is considered ‘small’. There was a lot of concern about compliance implications.

GST

  • 66% opposed exempting basic items, such as food, from GST, with 29% supporting.

Submissions close on 30 April and we encourage farmers to visit the Tax Working Group’s website and let them know what you think about tax.

Inflation low

The Consumers Price Index rose 0.5% in the March 2018 quarter.  The annual inflation rate came it at 1.1%, down from 1.6% in the year ended December 2017.

Government-influenced price changes affected the annual figure, with higher cigarette and tobacco prices being countered by cheaper tertiary education.

The main upward driver for inflation though remains housing and household utility prices, which increased 3.1% in the year to March 2018, led by construction and rents.

The dip in inflation was no surprise as economists had factored in the impact of the ‘fees free first year’ policy.  Although inflation has fallen and is low it’s likely to start rising from here and it’s highly unlikely that there will be any cuts to the OCR. 

GDT up

The Global Dairy Trade auction broke its recent run of losses, rising 2.7% at this week’s event.

All seven products on offer rose in price.  Whole milk powder, the biggest product by volume, was up a modest 0.9% but there were stronger gains for the other products.  Skim milk powder was up 3.6%, anhydrous milk fat up 5.3%, butter up 2.9%, cheddar up 4.6%, rennet casein up 3.1% and lactose up 14.8%.

The average selling price was US$3,587 per tonne and 19,262 tonnes of product was sold.

The GDT Price Index is up 13.0% for the year to date and is 3.8% higher than the same time last year.

Food prices up

Recent storms resulted in a spike in vegetable prices, according to Statistics NZ’s monthly Food Price Index.

Overall, food prices were up 1.0% in the month of March.  Fruit and vegetable prices rose 5.8% (7.0% after seasonal adjustment).  Meat, poultry, and fish prices rose 1.2% (with beef & veal up 2.1% and mutton, lamb & hogget up 1.2%). Grocery food prices had no change overall (with bread & cereals down 1.6% and milk, cheese & eggs up 0.7%).

Comparing March 2018 with March 2017, food prices were up 1.4%.  Fruit and vegetable prices increased 4.2%; meat, poultry, and fish prices increased 1.2% (with beef & veal down 0.3% and mutton, lamb & hogget up 14.1%).  Grocery food prices decreased 0.1% (with bread & cereals down 1.3% and milk, cheese & eggs down 0.2%.

NIWA Soil Moisture Data

NIWA’s latest soil moisture maps continue to show wetter than usual conditions over most of the country.  East Cape is the region that continues to be significantly drier than usual, with more localised dry patch in Rangitikei.

 

Exchange Rates

NZ Dollar versus

This Week

(19/4/18)

Last Week (12/4/18)

Last Month (19/3/18)

Last Year (19/4/17)

US Dollar

0.7315

0.7363

0.7220

0.7044

Australian Dollar

0.9420

0.9491

0.9357

0.9353

Euro

0.5915

0.5953

0.5883

0.6569

UK Pound

0.5157

0.5191

0.5182

0.5491

Japanese Yen

78.62

78.68

76.46

76.43

Chinese Renmimbi

4.5939

4.6207

4.5664

4.8458

Trade Weighted Index

75.18

75.61

74.50

76.60

Source: Reserve Bank of NZ

 

Wholesale Interest Rates

 

This Week

(19/4/18)

Last Week (12/4/18)

Last Month (19/3/18)

Last Year (19/4/17)

OCR

1.75%

1.75%

1.75%

1.75%

90 Day Bank Bill

2.06%

2.03%

1.93%

1.97%

10 Year Government Bond

2.85%

2.78%

2.84%

2.93%

Source: Reserve Bank of NZ