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Capital gains tax no cure for house prices

-Press release

Tuesday 19th June 2007

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Imposing a capital gains tax on housing has not stopped rapid price rises elsewhere and won't work here either in the present circumstances, says the Employers and Manufacturers Association (Northern).

"House prices have increased rapidly throughout the western world except where the supply of new houses has met or exceeded demand, as in many parts of the US," Thompson said.

"Neither can big wage increases help catch up with demand as the Council of Trade Unions is suggesting. All that would do is boost inflation and interest rates.

"Demand exceeding supply is the main driver of house price rises, exacerbated by local government land bank practices and their excessive charges.

"But CTU economist Peter Conway is right in pointing out the minority of people in the unionised workforce have not enjoyed the same level of wage increases as others in the private sector who have a direct employer - employee relationship.

The main reason for that is probably that the private sector unionised workforce is largely in industries where profit margins and value added productivity are lower.

"The answer to the housing situation is to build more of them to better meet demand, but to do that while maintaining quality, New Zealand is most in need of more skilled trades' people, who are also in demand to meet our growing infrastructure deficit which is negatively impacting on New Zealand's economic performance."

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