National's tax plan has come under scathing attack from a group of economists who've modelled their foreign buyers' levy and found, at best, they are $450 million a year short of what they need.
The foreign buyers' tax is a key plank of the National Party’s promise to provide tax cuts. But National is still refusing to accept they have a problem.
"Oh no our tax plan is rock solid," said leader Christopher Luxon.
But Luxon’s refusing to release the "rock-solid" modelling behind his assumption National will pull in $740 million a year from taxing overseas buyers of luxury homes.
"We've looked at our numbers very closely, we’ve had it independently reviewed," he said.
In the absence of any modelling from National, a group of three economists has done it for them.
Michael Reddell, a former Reserve Bank analyst and hardly sympathetic to the left, said there's a massive hole.
"The bottom line was you just get nowhere near their numbers on any plausible assumptions."
Corelogic's Nick Goodall also said it was difficult to see how National's numbers are plausible.
Along with Sam Warburton, they modelled three scenarios. Remember National needs to raise - on average - $740 million a year.
The most generous scenario - which assumed a growth in housing stock and sales - found the policy would generate nearly $290 million a year, leaving National about $450 million short. Their most likely scenario was it making $212.7m - that leaves a $527m hole.
Luxon said there were 4000 houses sold to foreigners before the ban, with National's plan assuming less than 1600 need to be sold to make up the revenue.
But National's based their numbers on 1700 house sales per year.
The economists' best-case scenario picked it would really be more like 708, 514 of which would be houses priced over $2 million and 194 homes that would otherwise sell for under $2 million but overseas buyers would pay more than market value for.
National's finance spokesperson Nicola Willis said it was the party's view the economists' modelling is "flawed".
Asked if he knew his stuff, Reddell said: "Well I spent 30 years at the Reserve Bank, a couple years at Treasury.
So, does Willis know her numbers better than him?
"I am confident in our numbers, I think the assumptions he has made are flawed," she said.
Reddell said "very few people have ever seriously picked holes in my numbers or analysis".
Labour's finance spokesperson Grant Robertson said he thought National's credibility was "in tatters".
But Nationals digging in, saying it's just those economists' opinion.
Goodall said if National had criticisms, the economists were happy to release "the full model to tell us what part of the assumptions we’ve made are incorrect and ideally compare it right next to their model to see where the differences might be".
Instead of releasing the papers, Willis took aim at the three independent economists - essentially accusing them of colluding with Labour.
"I predicted that Labour would try and say our policies didn't add up," she said.
Robertson categorically denied that.
Reddell said it appeared National's preferred option was "to bluster and deny and hope the news moves on".
If National can’t find enough money, it leaves them three options: Borrow more, cancel the tax cuts or find some more public service cuts.
Asked what she was going to cut, Willis said: "We are confident we are going to deliver our tax plan in the way that we have set out."
Robertson said the plan "doesn't add up".
National is quickly discovering not many think their foreign buyers' numbers are as awesome as they do.
Jenna Lynch Analysis
How much pressure does this put on National?
Well enough that Nicola Willis recited by rote her modelling on Thursday.
While she’s not releasing the papers, she told us what they did which was look at sales before the foreign buyers ban, saw that overseas buyers tended to purchase in higher priced markets like in Queenstown, projected how many homes they thought would sell once the tax is in place, allowed for less demand because of the tax being a deterrent and excluded Australians and Singaporean buyers because they’d be excluded from the tax.
Castalia – the outfit that reviewed Nationals tax plan - also put out a statement saying they still back the plan and don’t agree with the assumptions made by these three economists about the likely number of homes that’ll sell.
But the question marks over this policy are multiplying by the day.
We’re not talking tiddlywinks. This is $500 million a year, $2 billion in total, National might not have to pay for its tax cuts.
