Fascinating. Thank you for sharing those thoughts and insights.
I liked your analogy - it is absolutely clear that the 1980s reforms were basically identical to those implemented in Australia, just 20 years later and done in a hell of a rush because NZ was in a desperate state.
Yes, TINA reared her head, but my take is that this was late, and well overdue. NZ spent the 1970s doing 2 things:
1. hoping that the UK would not foresake us, and would allow us back in
2. looking for things, anything, that could create a platform for wealth creation in the future.
I think history is going to look more kindly than we did on the big energy projects, and the desire for NZ to develop Korean style Chaebol companies.
History will understand, but judge harshly the SMPs, the generations of labour misdirected, the State Trading enterprises, and the she'll be right featherbedding of every aspect government touched.
Our academic friends have done themselves no favours at all, and continue to peddle myths that bear no resemblance to the world that NZers actually inhabited - which is why they were shut out of the debate, and remain shut out. They have nothing of value to contribute. Prebble, Waring, Rogers, Douglas, and Birch plus a few others are the real heroes that established the rapidly diminishing platform on which we stand....
Great article. The extraction before 1984 was public servants feathering their own beds. NZ was an awful place to live if you were operating in market conditions and didn’t work for the Government or were protected by the government. 1984 was liberating for me and NZ became a vibrant place to live with much opportunity. I was just about to immigrate before the reforms came. But stayed because of them. Unfortunately they didn’t go far enough and we had to stop for a cup of tea.
Tony, how much of our gdp is wealth extracted from our nations productivity? We are a nation exploited under neoliberalism. Not only that, we are a nation economically suffocated by leaders who appear more like liquidators. The past may not have been perfect, but at least it was sovereign. https://open.substack.com/pub/tadhgstopford/p/the-lies-of-willis-pt-3?r=59s119&utm_medium=ios
The short answer to your question is none because GDP is a marginalist concept so theories of exploitation - that use labour theories of value - are misapplied (To be more precise: GDP has a dollar value. That’s what distinguishes it from input/output analysis. The dollar value of GDP comes from prices that are either based on market price or imputed based on shadow prices calculated using marginalist theories. That does not map to a labour theory of value.)
My guess is you are using an implicit model of “productive” and “unproductive” labour. In the natural language that works well - Graeber on “bullshit jobs”, Smith and Ricardo on people working for the state and landlords - but it quickly breaks down for any real economic policy. e.g. the task of financial markets - managing risks, providing a mechanism for large exchanges, funding pensions, etc - is needed. Some of what is done is undoubtedly rent extraction. But that’s just as true of university lecturers, HR managers and medicine. People extracting rents get away with it because some part of what they do is not rent extraction and it is hard at a task by task level to distinguish which is which. It can be mitigated but not eliminated. A labour value theory does not help us do mitigation.
Hi Tony, isn’t the example of housing being taken out of the consumer price index in (97? 99?) an example of neoliberal wealth extraction? Enabling an invisible 300% plus increase in inflation, fuelled by Australian credit creation / compound interest profiteering?
Also, re financial markets. I call BS. Credit creation should be largely treated as a public utility.
Have you heard of ‘economic tribulation’ by V Vickers? An armaments heir, Bank of England director, and one of many clear sighted economists to understand the fatal flaw of private monopolies having cartel power over credit creation in an economy
The reality that Adrian Orr and Iain Rennie would control NZ credit institutions - the reality of making them "public utilities" - is the knock down argument against that approach.
No it’s not. You know what ‘window guidance’ is, and how it built the Japanese miracle? You’re familiar with Alexander Hamilton and Fredrick Liszt, and how their work built industrial capitalism?
Thank you for alerting me to the fact that Stats NZ has updated its explanation of how it measures the price of realestate since the last time I looked.
So I ran the new explanation passed my research team, and it came up with what I expected, the continued exclusion of the price of land is the key flaw:
Stats NZ’s revised housing cost methodology for the CPI does not accurately capture real estate inflation in a way that would restrain private banks from generating abnormal profits through excessive mortgage credit creation. Let’s cut through the noise.
The key problem: Real estate inflation is still largely excluded from CPI
Stats NZ has stuck to the net acquisitions approach, meaning:
CPI includes only the price of newly built houses (excluding land).
CPI excludes existing house sales, which make up the overwhelming majority of housing market activity.
Mortgage interest payments are excluded from CPI (to avoid policy circularity), though they are in the HLPIs.
That means most of the explosive price growth in existing homes—driven by speculative demand and fuelled by private bank credit—is still invisible to the CPI, the index the Reserve Bank uses to set interest rates.
Why this matters for private bank profits:
Banks create mortgage credit, which is not constrained by deposits but by demand and collateral value.
When house prices rise due to speculative demand, banks can lend more, creating a feedback loop.
Because CPI excludes most of this price growth, monetary policy underreacts.
Result: cheap credit flows into housing, bank loan books balloon, and banks rake in profits—while the CPI says “not much inflation here.”
The spin:
Some commentators now claim that by using new house prices, Stats NZ is "better" reflecting housing inflation in CPI. But that’s lipstick on a data pig:
New builds are a small fraction of housing transactions.
Excluding land costs ignores the largest speculative component.
Most of the housing boom—where prices triple in a decade—is still statistically invisible.
The real fix?
If policymakers want to restrain excessive private bank credit creation:
1. Include a proper house price index in CPI, not just new builds minus land.
2. Regulate credit allocation—limit lending to speculative property.
3. Adopt Treasury-centric money issuance to shift incentives away from property inflation and debt peonage.
Bottom line:
Stats NZ has polished the housing CPI methodology, but it’s still structurally blind to the financialisation of housing. Until real estate inflation is counted where it matters, private banks will keep making windfall profits off the public’s debt—and CPI will keep saying, “Nothing to see here.”
So while they technically include “housing costs”, they exclude the primary driver of housing unaffordability: land + speculative price inflation + debt servicing costs.
⸻
2. Implications: What This Actually Means
A. The CPI Excludes the Real Cost of Access to Housing
Stats NZ measures the cost of building new dwellings — but not buying a house. Since land is a major and often dominant component of house prices, this omission renders the CPI housing component functionally misleading.
Consider this:
• The median house price in NZ has gone from ~$160,000 in 1997 to over $900,000 today.
• This explosion is driven overwhelmingly by land value speculation and cheap debt, not timber and nails.
Excluding land is like measuring food prices by tracking flour but ignoring bread.
⸻
B. Inflation is Understated, and Real Wages Overstated
If housing inflation is systematically excluded or underweighted, then:
• CPI looks low,
• Wages indexed to CPI rise slowly,
• Pensions and benefits lag behind actual living costs,
• Real hardship is masked behind “low inflation” headlines.
This is statistical gaslighting.
⸻
C. Monetary Policy is Distorted
The Reserve Bank relies on CPI to make decisions about interest rates.
If CPI excludes housing cost realities:
• Interest rates stay lower than they should,
• More credit flows into property,
• House prices inflate further,
• RBNZ declares success — while fuelling the fire.
This is the feedback loop of inflationary denial.
⸻
D. Housing Becomes a Speculative Asset, Not a Human Right
By failing to count housing properly, we create a:
• Phantom CPI,
• Overheated housing market,
• Rentier economy,
• Class divide between asset-owners and asset-excluded.
It’s data laundering for wealth extraction.
⸻
3. Third-Order Thinking: What Flows from This?
• Legitimacy Crisis: When the official stats don’t match lived experience, the public loses trust — not just in inflation data, but in institutions.
• Policy Paralysis: Governments rely on CPI to decide what they can “afford.” If CPI is wrong, so is everything downstream: health funding, tax brackets, infrastructure priorities.
• Moral Bankruptcy: When truth is bent to serve capital and suppress justice, policy becomes pathology.
⸻
4. Phronesis: What Would Wisdom Demand?
• Reinstate mortgage costs or land price indexes into CPI, or publish a parallel Cost of Living Index (COLI) that includes housing access costs in full.
• Stop pretending housing is a commodity like shampoo — it is a social foundation and must be treated as such in economic measurement.
• Educate the public on what CPI really measures — and more importantly, what it doesn’t.
Because measurement is meaning. And if we measure badly, we govern blindly.
⸻
Conclusion: A House Divided
Housing is not properly included in New Zealand’s CPI. It is partially represented, in a way that distorts reality, comforts speculators, and burdens ordinary people.
This isn’t a technical issue. It’s a political one.
We are ruled by bad statistics.
And until that changes, we will remain a wealthy nation that cannot afford to house its own children.
The primary use of CPI in government is the setting of interest rates, which are set to control inflation. CPI covers the cost of houses themselves which proxies the cost of housing. Interest costs are captured by the household living-costs price indexes (HLPI) which measures the costs faced by consumers in the measured time period. (see earlier link). You will have to ask media outlets why they choose to give this measure less weight. There are other measures of cost, including work by income distribution (https://www.stats.govt.nz/news/housing-costs-continue-to-put-pressure-on-households-in-year-to-june-2024/).
Fascinating. Thank you for sharing those thoughts and insights.
I liked your analogy - it is absolutely clear that the 1980s reforms were basically identical to those implemented in Australia, just 20 years later and done in a hell of a rush because NZ was in a desperate state.
Yes, TINA reared her head, but my take is that this was late, and well overdue. NZ spent the 1970s doing 2 things:
1. hoping that the UK would not foresake us, and would allow us back in
2. looking for things, anything, that could create a platform for wealth creation in the future.
I think history is going to look more kindly than we did on the big energy projects, and the desire for NZ to develop Korean style Chaebol companies.
History will understand, but judge harshly the SMPs, the generations of labour misdirected, the State Trading enterprises, and the she'll be right featherbedding of every aspect government touched.
Our academic friends have done themselves no favours at all, and continue to peddle myths that bear no resemblance to the world that NZers actually inhabited - which is why they were shut out of the debate, and remain shut out. They have nothing of value to contribute. Prebble, Waring, Rogers, Douglas, and Birch plus a few others are the real heroes that established the rapidly diminishing platform on which we stand....
Great article. The extraction before 1984 was public servants feathering their own beds. NZ was an awful place to live if you were operating in market conditions and didn’t work for the Government or were protected by the government. 1984 was liberating for me and NZ became a vibrant place to live with much opportunity. I was just about to immigrate before the reforms came. But stayed because of them. Unfortunately they didn’t go far enough and we had to stop for a cup of tea.
Tony, how much of our gdp is wealth extracted from our nations productivity? We are a nation exploited under neoliberalism. Not only that, we are a nation economically suffocated by leaders who appear more like liquidators. The past may not have been perfect, but at least it was sovereign. https://open.substack.com/pub/tadhgstopford/p/the-lies-of-willis-pt-3?r=59s119&utm_medium=ios
The short answer to your question is none because GDP is a marginalist concept so theories of exploitation - that use labour theories of value - are misapplied (To be more precise: GDP has a dollar value. That’s what distinguishes it from input/output analysis. The dollar value of GDP comes from prices that are either based on market price or imputed based on shadow prices calculated using marginalist theories. That does not map to a labour theory of value.)
My guess is you are using an implicit model of “productive” and “unproductive” labour. In the natural language that works well - Graeber on “bullshit jobs”, Smith and Ricardo on people working for the state and landlords - but it quickly breaks down for any real economic policy. e.g. the task of financial markets - managing risks, providing a mechanism for large exchanges, funding pensions, etc - is needed. Some of what is done is undoubtedly rent extraction. But that’s just as true of university lecturers, HR managers and medicine. People extracting rents get away with it because some part of what they do is not rent extraction and it is hard at a task by task level to distinguish which is which. It can be mitigated but not eliminated. A labour value theory does not help us do mitigation.
Hi Tony, isn’t the example of housing being taken out of the consumer price index in (97? 99?) an example of neoliberal wealth extraction? Enabling an invisible 300% plus increase in inflation, fuelled by Australian credit creation / compound interest profiteering?
Also, re financial markets. I call BS. Credit creation should be largely treated as a public utility.
Have you heard of ‘economic tribulation’ by V Vickers? An armaments heir, Bank of England director, and one of many clear sighted economists to understand the fatal flaw of private monopolies having cartel power over credit creation in an economy
https://archive.org/details/in.ernet.dli.2015.13534/mode/1up
That is why the Brit’s freaked out about germanies ‘superior’ public banking system prior to ww1 & ww2.
It’s how Japan achieved its post war miracle.
That’s how Nz developed 1936-1984.
That’s how China has become the world’s manufacturing superpower.
Whereas we appear to be falling into failure, that prostiticians tell us is success.
What’s the Orwell quote? The parties final command was to ignore the evidence before their eyes?
The reality that Adrian Orr and Iain Rennie would control NZ credit institutions - the reality of making them "public utilities" - is the knock down argument against that approach.
No it’s not. You know what ‘window guidance’ is, and how it built the Japanese miracle? You’re familiar with Alexander Hamilton and Fredrick Liszt, and how their work built industrial capitalism?
Are you paid by nzi to take these positions Tony?
But housing costs are included in CPI. This is how SNZ does it:
https://www.stats.govt.nz/methods/how-housing-costs-are-measured-in-consumer-price-indexes-at-stats-nz/
HI Tony,
Thank you for alerting me to the fact that Stats NZ has updated its explanation of how it measures the price of realestate since the last time I looked.
So I ran the new explanation passed my research team, and it came up with what I expected, the continued exclusion of the price of land is the key flaw:
Stats NZ’s revised housing cost methodology for the CPI does not accurately capture real estate inflation in a way that would restrain private banks from generating abnormal profits through excessive mortgage credit creation. Let’s cut through the noise.
The key problem: Real estate inflation is still largely excluded from CPI
Stats NZ has stuck to the net acquisitions approach, meaning:
CPI includes only the price of newly built houses (excluding land).
CPI excludes existing house sales, which make up the overwhelming majority of housing market activity.
Mortgage interest payments are excluded from CPI (to avoid policy circularity), though they are in the HLPIs.
That means most of the explosive price growth in existing homes—driven by speculative demand and fuelled by private bank credit—is still invisible to the CPI, the index the Reserve Bank uses to set interest rates.
Why this matters for private bank profits:
Banks create mortgage credit, which is not constrained by deposits but by demand and collateral value.
When house prices rise due to speculative demand, banks can lend more, creating a feedback loop.
Because CPI excludes most of this price growth, monetary policy underreacts.
Result: cheap credit flows into housing, bank loan books balloon, and banks rake in profits—while the CPI says “not much inflation here.”
The spin:
Some commentators now claim that by using new house prices, Stats NZ is "better" reflecting housing inflation in CPI. But that’s lipstick on a data pig:
New builds are a small fraction of housing transactions.
Excluding land costs ignores the largest speculative component.
Most of the housing boom—where prices triple in a decade—is still statistically invisible.
The real fix?
If policymakers want to restrain excessive private bank credit creation:
1. Include a proper house price index in CPI, not just new builds minus land.
2. Regulate credit allocation—limit lending to speculative property.
3. Adopt Treasury-centric money issuance to shift incentives away from property inflation and debt peonage.
Bottom line:
Stats NZ has polished the housing CPI methodology, but it’s still structurally blind to the financialisation of housing. Until real estate inflation is counted where it matters, private banks will keep making windfall profits off the public’s debt—and CPI will keep saying, “Nothing to see here.”
Crucially missing:
• Land prices,
• Mortgage interest payments (since 1999),
• House price inflation itself.
So while they technically include “housing costs”, they exclude the primary driver of housing unaffordability: land + speculative price inflation + debt servicing costs.
⸻
2. Implications: What This Actually Means
A. The CPI Excludes the Real Cost of Access to Housing
Stats NZ measures the cost of building new dwellings — but not buying a house. Since land is a major and often dominant component of house prices, this omission renders the CPI housing component functionally misleading.
Consider this:
• The median house price in NZ has gone from ~$160,000 in 1997 to over $900,000 today.
• This explosion is driven overwhelmingly by land value speculation and cheap debt, not timber and nails.
Excluding land is like measuring food prices by tracking flour but ignoring bread.
⸻
B. Inflation is Understated, and Real Wages Overstated
If housing inflation is systematically excluded or underweighted, then:
• CPI looks low,
• Wages indexed to CPI rise slowly,
• Pensions and benefits lag behind actual living costs,
• Real hardship is masked behind “low inflation” headlines.
This is statistical gaslighting.
⸻
C. Monetary Policy is Distorted
The Reserve Bank relies on CPI to make decisions about interest rates.
If CPI excludes housing cost realities:
• Interest rates stay lower than they should,
• More credit flows into property,
• House prices inflate further,
• RBNZ declares success — while fuelling the fire.
This is the feedback loop of inflationary denial.
⸻
D. Housing Becomes a Speculative Asset, Not a Human Right
By failing to count housing properly, we create a:
• Phantom CPI,
• Overheated housing market,
• Rentier economy,
• Class divide between asset-owners and asset-excluded.
It’s data laundering for wealth extraction.
⸻
3. Third-Order Thinking: What Flows from This?
• Legitimacy Crisis: When the official stats don’t match lived experience, the public loses trust — not just in inflation data, but in institutions.
• Policy Paralysis: Governments rely on CPI to decide what they can “afford.” If CPI is wrong, so is everything downstream: health funding, tax brackets, infrastructure priorities.
• Moral Bankruptcy: When truth is bent to serve capital and suppress justice, policy becomes pathology.
⸻
4. Phronesis: What Would Wisdom Demand?
• Reinstate mortgage costs or land price indexes into CPI, or publish a parallel Cost of Living Index (COLI) that includes housing access costs in full.
• Stop pretending housing is a commodity like shampoo — it is a social foundation and must be treated as such in economic measurement.
• Educate the public on what CPI really measures — and more importantly, what it doesn’t.
Because measurement is meaning. And if we measure badly, we govern blindly.
⸻
Conclusion: A House Divided
Housing is not properly included in New Zealand’s CPI. It is partially represented, in a way that distorts reality, comforts speculators, and burdens ordinary people.
This isn’t a technical issue. It’s a political one.
We are ruled by bad statistics.
And until that changes, we will remain a wealthy nation that cannot afford to house its own children.
The primary use of CPI in government is the setting of interest rates, which are set to control inflation. CPI covers the cost of houses themselves which proxies the cost of housing. Interest costs are captured by the household living-costs price indexes (HLPI) which measures the costs faced by consumers in the measured time period. (see earlier link). You will have to ask media outlets why they choose to give this measure less weight. There are other measures of cost, including work by income distribution (https://www.stats.govt.nz/news/housing-costs-continue-to-put-pressure-on-households-in-year-to-june-2024/).
I feel like you are being obtuse, at best. Check your rates bill. The value of the house is the lowest value of the property
Have you read the Stats NZ links? They explain in detail how and why they measure what they measure. My rates bill is considerably less informative.