The general election is more than a year away but the battle lines are already forming. Two combatants, Labour and the Greens, have entered into a formal Memorandum of Understanding (MOU) to work together with the simple objective of ousting National from the treasury benches. It creates an interesting dynamic, given NZ First has repeated its view that it would not be part of a coalition that involved the Greens.
Now that Labour has stated a clear preference for the Greens, it makes a post-election coalition arrangement between Labour and NZ First less likely. NZ First also has a hard-line against working with the Maori Party (and any other party, which includes the Greens, that wants to put the Treaty of Waitangi as the core of our constitutional arrangements) so it is fast running out of dance partners; although it appears content to dance alone! The outcome of the next general election is already becoming set in stone, but more on that later.
If a Labour-Green coalition were to gain power, what would it mean for property investors?
Labour has indicated the two-year bright-line test on the sale of investment property is likely to be extended to five years. That means in effect, a capital gains tax for most property investors. The Greens 2014 election policy goes one step further by saying it would introduce a capital gains tax on all realised assets except the family home.
Labour is also likely to ring-fencing rental losses. That means losses arising from a rental activity could not be offset against other income in the year the loss was incurred. The loss would have to be carried forward to offset future rental profits, should there be any.
At the last election the Greens said they would: Lower the corporate tax-rate from 28c to 27c; increase personal tax rate from 33% to 40% for all income above $140,000; raise trust tax rate from 33% to 40%, create a state-owned Green Investment Bank to facilitate private capital flowing into eco-friendly investments. Labour said it would increase the top tax rate to 36 percent on income over $150,000 and raise the trustee income tax rate from 33 to 36%.
The Greens would require all rented houses to have a Warrant of Fitness “that includes insulation, clean heating, weather tightness and basic service standards”. Labour too would require all rental properties to have a WOF and has twice attempted to have legislation past in Parliament to that effect.
From the Green’s point of view, the prenup’ agreement makes sense – they are trying to change the perception of voters so they are seen as more mainstream and less scary – hence the suit and tie appearance. Long gone are the bird-infested beards, roman sandals and walk socks.
For Labour the reason for the tie-up is less obvious. Perhaps by demonstrating they can work with the Greens they hope to convince voters that the Greens are a viable coalition partner. To date, the perception of a red/green government has not helped Labour – I don’t think the MOU will change that.
A prediction for next years election result? My guess is National will win the most seats at the next election, but not enough to govern alone. NZ First is on track to hold the balance of power. It is likely to give confidence and supply to National but sit on the crossbenches and consider each policy on a case by case basis, thereby extending its influence for the full electoral term rather than limiting it to a post-election day coalition agreement.
NZ First is growing its constituency by challenging the other parties on racial issues, which only they can do without being dismissed as racists. I continue to believe Shane Jones will re-enter politics as a candidate for NZ First, and become the leader in waiting.
Given its current leader and the influence the trade union movement has on the party, Labour is unlikely to make inroads into National’s support. To beat National they need to move into the centre field, not left field. It seems the union dominance within the party has forced them in that direction, and their leader typifies the by-gone era of grumpy trade unionists condemning villainous bosses. The only people who find that representation appealing are grumpy trade unionists. Perhaps yet another election loss will force them to realise they need to change with the times and replace Andrew Little with a fresh face like Chris Hipkins with Jacinda Adern as the deputy.
Frank Newman is a property market commentator. The opinions expressed in this articles is his own and may not represent the views of the Landowners Coalition Inc.