During late summer and early Autumn Hawke's Bay has an influx of people from Pacific Island nations such as Vanuatu and Samoa who come here to work on our Orchards during the fruit picking season. They are known as RSE workers. RSE stands for Recognised Seasonal Employer.
The scheme was introduced about three years ago as a result of growers having major problems getting the labor needed to get their crops off the trees, during the short window for optimum quality for each variety.
The money they earn helps them to provide better lives for their families back home, where it might well take a year to earn the same as a months wages here. But the benefits are far from one sided.
The contribution these people are making to the Hawke's Bay economy is huge. In the years before the scheme was set up growers might be limited to two picks, then have to abandon perfectly good fruit on the trees because later maturing varieties were ready to pick. Not any more. Every salable last apple can be harvested.
Since the bulk of on orchard costs such as pruning, spraying and rates have already been paid for, the economics of growing apples improves significantly.
The extra output then creates more work for packhouses, transport shipping companies and anyone else involved in the horticultural industry.
Orchardists love them because they are here to work. They aim to take as much money home as they can so there is no unexpected absenteeism following pay day, no turning up late, just committed enthusiastic workers. Some are now returning for their 3rd season creating a growing pool of experienced workers.
Increasingly they are put up in permanent facilities such as budget motels where they are warm and dry, and where meals can be properly organised.
They pay around a $100 a week for accommodation. This income has made a huge difference to many accommodation providers at a time when our visitor industry is not doing all that well. Those providing this accommodation also describe them as top people, law abiding, polite, and a pleasure to have.
Paying for accommodation is just the start. In addition to the food they consume while living here they buy clothing, shoes and a whole range of other products to take back with them. One item that has proved very popular this season is solar cell power systems.
Each worker must be injecting a minimum of $200 a week into the Hawke's Bay economy, a total equal to at least half a million and perhaps as much as one million dollars a week, for 3 to 4 months. This has to be at least a partial explanation retail turnover statistics especially for Hastings have remained strong over the recession.
The gains don't stop with their work and the money they contribute. This money ends up with the families of these workers, without the ticket clipping deductions by officials and bureaucrats that is common with direct Government to Government aid. Help ends up where it is needed.
It is clearly a win - win – win situation. It can't get much better than that.
Tuesday, May 18, 2010
Monday, May 3, 2010
GST
Though not yet officially announced, this months budget looks likely to include an increase in GST from 12.5 to 15.0%.
It is clear we are being softened up with promises direct rates of income tax will be reduced at the same time.
Personally I feel cynical when I hear these arguments.
The same line was used in 1986 when 10% GST introduced and perhaps there was some truth in the promise because back then the maximum marginal rate introduced by Rob Muldoon was 66%. Lets hope we never get back to such incentive destroying levels, though I think Helen Clarke would have liked to have done so.
We also had to contend with sales taxes which were often around 20% for things like automotive parts and certain appliances. GST certainly removed many anomalies that existed at time. For instance the same item used for automotive uses was taxed but the same item used for something else was not.
The problem is new taxes are simply ratcheted up when ever there is a problem. Within 2 years new Finance Minister David Caygill solved his problems by increasing GST from 10% to 12.5%
In 1999 when Helen Clarke became Prime Minister the maximum marginal rate of personal tax was hiked up to 39%. No balancing reduction in GST of course. It was claimed only a small number of high earners would be affected. Nine years later a substantial number of workers found them selves on the maximum rate.
Now we are being spun the same old argument supporting a rise in GST so direct taxes can be lowered so there is an incentive for people to work, so there is less incentive for tax avoidance and so on.
One new element this time is the argument we need to be competitive with Australia who we are told might reduce direct taxes to 30% the same rate as company taxes. Australia has a maximum marginal rate of nearly 50%, plus capital gains tax so the fears seem unfounded. seems to have been forgotten. We are almost certainly loosing people to out neighbors cause of incomes, and lifestyle not taxes.
Of course the obvious question is: What is to stop some future Clarke/ Cullen type government increasing tax rates to 40% or more again? The only way to stop this happening is for a multi party commitment and that is highly unlikely.
Another argument wheeled out is how much lower our GST is than say Europe where it is around 20% .The Comparisons are always selective of course. In the USA there is no GST, just state sales taxes which are typically around 5% the mark.
In Australia GST is only 10% with exemptions for quite a few items such as non processed foods, medical expenses like doctors visits and the like. If Government is truly concerned about comparisons perhaps we should just match their GST rate.
The PM promises no one will be worse off.
Irrespective of his intentions I think there will be plenty of people who are worst off. Number one on my list is superannuates. National super is based on average wages (currently 66 percent of the net average wage) not costs so even if there is some sort of boost to super this will likely not be permanent unless super levels are set at a higher fraction of wages.
One of the most onerous effects will be the effect on peoples savings. If you have managed to put aside some reserves for major purchases unexpected expenses or retirement then on the day GST is increased the purchasing power of those savings will reduce by 2.5%.
Imagine a young family saving for a brand new house. On the day GST increases a $400 000 house suddenly jumps in price by $10 000. If they have managed to save $100 000 for their deposit then those saving will suddenly decrease in purchasing power by $2500.
It is almost a form of legalised theft.
Only way to ensure no one worse off will be a 2.5% government top up of all private savings. Let see if Prime Minister John Key believes his own rhetoric and makes sure no one is worse off by finding the money to do so.
It is clear we are being softened up with promises direct rates of income tax will be reduced at the same time.
Personally I feel cynical when I hear these arguments.
The same line was used in 1986 when 10% GST introduced and perhaps there was some truth in the promise because back then the maximum marginal rate introduced by Rob Muldoon was 66%. Lets hope we never get back to such incentive destroying levels, though I think Helen Clarke would have liked to have done so.
We also had to contend with sales taxes which were often around 20% for things like automotive parts and certain appliances. GST certainly removed many anomalies that existed at time. For instance the same item used for automotive uses was taxed but the same item used for something else was not.
The problem is new taxes are simply ratcheted up when ever there is a problem. Within 2 years new Finance Minister David Caygill solved his problems by increasing GST from 10% to 12.5%
In 1999 when Helen Clarke became Prime Minister the maximum marginal rate of personal tax was hiked up to 39%. No balancing reduction in GST of course. It was claimed only a small number of high earners would be affected. Nine years later a substantial number of workers found them selves on the maximum rate.
Now we are being spun the same old argument supporting a rise in GST so direct taxes can be lowered so there is an incentive for people to work, so there is less incentive for tax avoidance and so on.
One new element this time is the argument we need to be competitive with Australia who we are told might reduce direct taxes to 30% the same rate as company taxes. Australia has a maximum marginal rate of nearly 50%, plus capital gains tax so the fears seem unfounded. seems to have been forgotten. We are almost certainly loosing people to out neighbors cause of incomes, and lifestyle not taxes.
Of course the obvious question is: What is to stop some future Clarke/ Cullen type government increasing tax rates to 40% or more again? The only way to stop this happening is for a multi party commitment and that is highly unlikely.
Another argument wheeled out is how much lower our GST is than say Europe where it is around 20% .The Comparisons are always selective of course. In the USA there is no GST, just state sales taxes which are typically around 5% the mark.
In Australia GST is only 10% with exemptions for quite a few items such as non processed foods, medical expenses like doctors visits and the like. If Government is truly concerned about comparisons perhaps we should just match their GST rate.
The PM promises no one will be worse off.
Irrespective of his intentions I think there will be plenty of people who are worst off. Number one on my list is superannuates. National super is based on average wages (currently 66 percent of the net average wage) not costs so even if there is some sort of boost to super this will likely not be permanent unless super levels are set at a higher fraction of wages.
One of the most onerous effects will be the effect on peoples savings. If you have managed to put aside some reserves for major purchases unexpected expenses or retirement then on the day GST is increased the purchasing power of those savings will reduce by 2.5%.
Imagine a young family saving for a brand new house. On the day GST increases a $400 000 house suddenly jumps in price by $10 000. If they have managed to save $100 000 for their deposit then those saving will suddenly decrease in purchasing power by $2500.
It is almost a form of legalised theft.
Only way to ensure no one worse off will be a 2.5% government top up of all private savings. Let see if Prime Minister John Key believes his own rhetoric and makes sure no one is worse off by finding the money to do so.
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