Christopher Luxon and Mark Mitchell. File photo. Photo: VNP / Phil Smith
Analysis - Interest deductibility for landlords becomes a hot political issue - is it help for renters or a "cash handout"? The "insulting" police pay offer puts the government in a difficult position and Prime Minister Christopher Luxon holds an uncomfortable press conference.
The announcement that landlords would be able to deduct interest on their mortgage payments when they file their tax returns was a hot political issue this week.
From 1 April they will be able to write off 80 percent and 100 percent from April 2025.
It will cost the government $2.9 billion in lost revenue over the next four years.
It amounts to a tax cut for landlords, the same way the previous government's decision to phase it out amounted to a tax hike. Landlords made a lot of noise about that at the time.
Prime Minister Christopher Luxon tried to sell it as a decision based on helping tenants because it would "put downward pressure" on rents and there would be more rentable properties on the market.
He said the government had campaigned on it "because we care about renters in New Zealand" and they would be grateful, RNZ reported.
"What has been utterly unacceptable was that there's been a $170 per week increase in rents under the previous government and they just keep going up and up and up," Luxon said, quoting a figure he has often used when berating Labour.
The media paid close attention to what might actually happen, and it didn't line up with the government's expectations.
"Landlords will not start dropping their rents because their tax burden has got lighter with the return of interest deductibility, experts say," the Herald reported.
It quoted CoreLogic chief property economist Kelvin Davidson as saying that last year it was estimated landlords were paying $5000 to $6000 more in tax because of the previous government's changes and interest rates had increased.
"That change (by the current government) in tax payments will help landlords but mortgage rates are high while rental yields are still very low, at an average of 3.2 percent nationally," he said.
"And then costs such as council rates, insurance, property management and maintenance have all gone up and will continue to do so."
He said the improved tax situation would not change a running loss to a running profit for most landlords, they would just have a smaller loss.
Opes Partners property economist Ed McKnight said recent rent rises were not solely due to the removal of interest deductibility by the previous government.
There was a strong correlation between rents and wages, as rents tended to go up when wages increased because that determined tenants' ability to pay, he said.
"There has been high inflation, wages have gone up fast, and that is reflected in rent increases. And inflation does equal cost increases for landlords too."
Property Investors Federation president Sue Harrison told Morning Report the restoration of interest deductions would hopefully increase the supply of rental properties by the "mum and dad" investors she represented.
"The person who's (supplying) that property is trying to survive themselves," she said.
An advocate for renters had a very different view.
Renters United spokesman Luke Somervell did not believe anything would change.
The savings would not be passed on to renters and would be "a cash handout for landlords".
He said they were renting out the same old houses at a greater profit every year.
"They are making record profits, rents keep going up, more people are looking for homes so I don't really see why there is any incentive for them to do that," he said.
The new policy was designed to insulate the market from risk and would encourage the "feeding frenzy" of property speculation.
"It's just going to prop up the status quo that's given us the housing crisis in the first place," he said.
Police strike back
That figure of a $2.9b cost in lost revenue was sure to be thrown back at the government, and the first to do so was Police Association president Chris Cahill.
"This week they've decided to prioritise landlords with a $3 billion tax reduction ... that's just clearly wrong in our books," he said on Checkpoint.
Police Association president Chris Cahill. Photo: RNZ / Angus Dreaver
He was speaking after the police union rejected the government's latest pay offer, saying it was worse than the one offered by the previous government.
According to Cahill officers had described it as a "kick in the guts", "farcical" and "an absolute joke", Newshub reported.
"To give you an idea, a six-year police constable will be earning $22,000 less than a six-year nurse or social worker," Cahill said.
He feedback on the offer had revealed the extreme financial pressures officers faced, including difficulty and inability to pay rent and mortgages.
Cahill said the government had "sold itself to Kiwis" with promises to get tough on crime and had introduced legislation such as the gang patch ban which would greatly increase the risks police faced.
"Yet they insult these very officers by intentionally failing to backdate the pay offer," he said.
The reports went on and on, with officers saying morale was "rock bottom" and warning of an exodus to Australia which is actively recruiting and offering salaries tens of thousands of dollars more.
Cahill called on Police Minister Mark Mitchell to front up, and he did.
Having taken the lead on the "get tough on crime" policies and talking about giving police the tools they needed to "restore law and order", Mitchell was in a difficult position.
"Everyone is feeling the pinch, we get that, we understand that, we're very sensitive to that, we're doing the best we can, and especially with this pay negotiation we are there in good faith and we are listening," he said on Morning Report.
"We've had 2000 days of a Labour government that's put us in this situation, we've had a hundred days of a National government that's working hard for all New Zealanders to try and turn that around."
Mitchell wouldn't comment on whether he felt police were being fairly paid given the pressure on them to deliver on National's campaign promises, citing the ongoing negotiations.
The details of what's on offer and why police have rejected it have been reported by RNZ, and Stuff published a report explaining how much police were paid and how it stacked up against other public sector jobs.
In their first year out of college new officers get an annual salary of $67,126.
After five years on the force, the average annual salary rises to $74,123, or $87,773 including extras.
Comparisons with nurses is difficult because their pay varies according to their roles, but the report said registered and community nurses were paid $69,566 to $99,630.
Newly recruited sailors, soldiers and aviators usually earned $51,000 a year. After finishing their training they could expect a salary of $66,000 to $77,000.
Officers in the military earned between $78,000 and $133,000 a year.
With police talking about public demonstrations, the government's problems aren't likely to go away unless a much improved pay offer is put up.
Police are prevented by law from taking industrial action, and Cahill said the restriction came with a moral responsibility for the government to show good faith, RNZ reported.
Despite the rules, officers "want to start getting in the streets", he said.
"I've never seen police officers as angry as they are now."
Luxon's crashing favourability and 'corporate jibber-jabber'
The prime minister's week didn't begin well.
Just as the government wrapped up its 100-day plan by proudly saying it had achieved all its objectives, the latest Taxpayers' Union-Curia poll showed Luxon's favourability crashing 16 points, the Herald reported.
That put his net favourability at -5 percent, well behind Labour leader Chris Hipkins' +2 percent.
Christopher Luxon at Field Days in Feilding on 14 March 2024. Photo: RNZ / Angus Dreaver
The poll captured the fallout from revelations that Luxon had claimed a $52,000 accommodation allowance while living in his own mortgage-free Wellington apartment.
Luxon at first defended his right to the allowance but about two hours later changed his mind and said he would pay back what he had received so far.
The poll showed National's support falling 2.2 points to 37.4 percent, while Labour dropped 2.6 points to 25.3 percent, its lowest-ever performance in the poll.
At his post-cabinet press conference on Monday Luxon seemed strangely subdued, with no big announcements and no accompanying minister.
"It was far and away the prime minister's least assured press conference performance," said Stuff's political editor Luke Malpass.
"He seemed tired, harried and, unusually for his premiership to date, called time on the conference after half an hour.
"The frantic 100 days and the long four-week sitting block just ended seemed to have taken its toll."
Malpass said Luxon seemed unable to give a specific explanation about why there were aspects of the interest deductibility plan that differed from proposals in the coalition agreement.
"He was also keen not to deviate from the line that this was not a policy for landlords but for renters," he said.
"It was a reminder that despite his significant political achievement of winning office, he is still a pretty inexperienced politician.
"His safe space is still corporate jibber-jabber and, when rattled, he can sometimes struggle to answer basic questions."
Chris Hipkins at Labour's annual retreat in the Wairarapa on 14 March 2024. Photo: RNZ / Samuel Rillstone
Hipkins had his share of media exposure this week at Labour's annual caucus retreat in Martinborough.
He used it to attack the government but the party faces a tough challenge of setting out its own vision, particularly on tax, RNZ reported.
Hipkins set out what is likely to become familiar rhetoric in the coming months:
"I think this current government are already doing themselves enormous damage," he said.
"New Zealanders voted for change, there's no question about that.
"But I don't think this is the change they had in mind. I don't think they had in mind more New Zealanders smoking, I don't think they had in mind more children living in poverty, I don't think they had in mind cancelling and dialling back action on climate change - but that's actually what this government are delivering."
He then talked about turning Labour into "a winning machine" offering positive alternatives, and the importance of becoming "the best prepared potential incoming government that New Zealand has ever seen".
However, as RNZ's report pointed out, one of the big questions Labour faces will undoubtedly be on tax.
It's going to be a tricky one for the party to handle.
Hipkins' decision last year not to campaign on any wealth or capital gains tax in favour of GST-free fruit and vegetables "clearly rankled some of his own MPs - many of them continuing to talk about the need for one as the campaign wore on," the RNZ report said.
"Hipkins had ruled out any wealth or capital gains tax under a government he led, but after the election left the gate open to changing the party's approach - saying in November everything was back on the table."
Labour's new finance spokesperson, Barbara Edmonds, said Hipkins had given MPs the licence to "basically develop our policy going into 2026, he said 'blank paper, let's start again'."
Senior MP Jan Tinetti said the earlier Labour could settle on a tax position, the more time it would have to sell the vision to the public.
But it would also mean leaving their proposal exposed to attacks by their opponents.
*Peter Wilson is a life member of Parliament's press gallery, who spent 22 years as NZPA's political editor and seven as parliamentary bureau chief for NZ Newswire.
