The Importance of Nationals Policy Position

The Importance of Nationals Policy Position

So, no question there’s been a bit of a pause and time to breathe. The impacts of LVR’s, Interest Deductibility, CCFA, RTA changes, have taken effect and an increase in interest rates and inflation are further dampening the market.

However, this weeks clarity of policy from National’s new lead Christopher Luxon coupled with the opening of borders and what appears to be, an end in sight for Covid restrictions, in my view may shorten the pause and will in-fact result in an increase in optimism for all categories of buyers (but particularly investors) AND those in business in general.

Polls are clearly indicating a tip to the Right. The absolute key requirement for investment and commitment to investment in any country (or ex-pats returning along with skilled migrants to this country) is that of certainty of government policy.

Even if people don’t agree with government policy, if they know the general theme, they will invest (or not) if they can rely on the rules being predictable and supportive of business and investment. Businesses may still invest even if they don’t like the policies because they have been able to make a rational business decision based on predictability and a belief in the country having a stable, pragmatic government (i.e. they understand the rules).

The challenge over recent years is that rules keep changing and they haven’t been business friendly - they don’t, in any way, support ongoing investment and reward for risk. In fact they punish it because if income increases, the taxation on that income takes a greater proportion of that benefit associated from taking greater risks.

So, the reason I think this weeks announcement from Christopher Luxon is so important is because (and this shouldn’t be construed as representing my political views) I think many would acknowledge that it’s highly likely we will have a change of government or at least a change of the balance in the election toward the end of next year. My view is that this is the belief of those in business and of a large part of the population in general.

Given there is strong belief that a change of Government will eventuate, people will start having more confidence around property again - both investment and owner-occupied. Along with more business friendly policy, people will generally feel positive that more money will be available from changes to the tax regime and in turn, that will result in increased confidence to invest/keep moving forward.

The summary being that for those that believe that the property market will have a prolonged slump may well be mis-guided. I think the clarity and commitment (on record) from National this week will see some confidence return for Investors in particular.