Beck, T., A. Demirgüç-Kunt, and R. Levine, 2006, an update of Beck, T., A. Demirgüç-Kunt, and R. Levine, 2000, “A New Database on Financial Development and Structure,” World Bank Economic Review 14, 597 –605.
Bollard, A., 2006, “Kiwis Like Buying Houses More Than Buying Businesses,” Talk to PricewaterhouseCoopers annual tax conference .
Bollard, A., B. Hodgetts, P. Briggs, and M. Smith, 2006, “Household Savings and Wealth in New Zealand,” Background paper prepared for presentation to the Institute of Finance Professionals New Zealand (INFINZ).
Bollard, A., D. Drage, and A. Orr, 2007, “Delivering Sound and Innovative Financial Services for New Zealand,” Background paper for an address to the Canterbury Employers’ Chamber of Commerce.
Briggs, P., 2006, “Family Trusts: Ownership, Size, and Their Impact on Measures of Wealth and Home Ownership,” RBNZ Discussion Paper No. 2006/06.
Fane, G., and M. Richardson, 2005, “Negative Gearing and Taxation of Capital Gains in Australia,” The Economic Record, Vol. 81, No. 254, pp. 249 –261.
Klyuev, V., and P. Mills, 2006, “Is Housing Wealth an “ATM”? The Relationship Between Household Wealth, Home Equity Withdrawal, and Saving Rates,” IMF Working Paper No. 06/162.
La Porta, R., F. Lopez-de-Silanes, A. Shleifer, and R. Vishny, 1997, “Legal Determinants of External Finance,” NBER Working Paper No. 5879.
La Porta, R., F. Lopez-de-Silanes, A. Shleifer, and R. Vishny, 1998, “Law and Finance,” Journal of Political Economy, Vol. 106, No. 6, pp. 1113 –1155.
Oliver, R., 2000, “Capital Gains Tax: The New Zealand Case,” paper prepared for the Fraser Institute 2000 Symposium on Capital Gains Taxation, Vancouver, Canada.
Smith, M., 2006, “What Do We Know About Equity Withdrawal by Households in New Zealand?,” Paper prepared for RBNZ workshop entitled Housing, Savings, and the Household Balance Sheet.
Prepared by Dmitriy Rozhkov (Ext. 3-9745).
The full Research Report on the Survey can be found at http://www.consumeraffairs.govt.nz/policylawresearch/research/financial-knowledge/report/index.html
RBNZ, Financial Stability Report, November 2006.
Survey results suggest that many investors consider the fees charged by managed funds excessive, too complex, and non-transparent. In addition, capital gains from equity investments by managed funds are typically taxed, while capital gains from investments by individuals are not.
OECD Revenue Statistics, 2006.
Negative gearing is defined as the “practice of allowing those who have borrowed to finance the purchase of assets to deduct from their other taxable income the excess, if any, of the resulting interest payments over the cash flows, net of other expenses, from these investments” (Fane and Richardson, 2005).
In principle, capital gains on property are considered taxable income in New Zealand if the property was acquired for the purpose of resale (Oliver, 2000). However, in practice this tax is easy to avoid, as long as the business plan shows that the acquisition is being made because of rental yield, not capital gain.
Calculations of returns on housing investments in Tables II.2 and II.3 do not take into account closing costs and fees related to a purchase and subsequent sale of a house. These costs are estimated to be less than 2 percent of the current median house price, and should not affect the results.
Most stock market investments by households are not leveraged. However, Table II.3 shows that, given the volatile nature of the stock market, leveraging equity investment at 80 percent at the prevailing lending rate is a highly risky strategy, which produces negative returns in the periods of relatively slow growth in equity prices.
The calculation in the table is a static exercise, and does not take into account the possible impact of a capital gains tax on demand for assets, and therefore on asset returns.
Initial Report on Supplementary Stabilization Instruments, February 2006.
A description of some of the projects with focus on youth education can be found at http://www.retirement.org.nz/in_schools.html.
The proposals would also harmonize the regulatory frameworks for collective investment schemes and most superannuation schemes. Consultation papers outlining proposals made under the review are available at http://www.med.govt.nz/templates/ContentTopicSummary____479.aspx.
RBNZ, Monetary Policy Statement, March 2007.