Of Interest

After the 2014 election, Peter Dunne got a phone call from Prime Minister John Key to say National wouldn’t need the support of United Future to form a Government. 

The same call was made to the Act and Māori parties, which had also signed confidence and supply agreements after the 2011 election. 

Key invited all three parties to stay in the tent, if they wanted, but said there wouldn’t be any policy concessions or negotiations. They took the deal. 

“A bird in the hand is worth two in the bush,” Dunne said, in an interview for interest.co.nz's Of Interest podcast.

“About 10 days later, the specials came in and National had lost a couple of seats, and its outright majority, and suddenly realised they had a problem”. 

Key and his team came back to the three parties and asked to renegotiate the newly-signed confidence and supply agreements into a more substantial and specific arrangement.

Dunne, and the others, refused: “I said, no, we've got a signed piece of paper here”. 

“National, ended up in the worst of all worlds. It had supply partners they hadn't conceded anything to. All it was getting from us was confidence and supply. Everything else had to be negotiated case by case”.

“If they'd been a little less impatient, and waited till the specials they could have got better deals”.

This memory might be a factor in why National and New Zealand First have been holding out for the final vote count. The numbers might shift around in unpredictable ways. 

Once the special votes are reported, Dunne thinks a Government could form quite quickly. 

He said it was partly Christopher Luxon’s leadership style. But also because Parliament has to sit by mid-December, and the National won’t want that to happen under a caretaker government. 

The National leader’s message, that he would not provide blow-by-blow commentary on the negotiations, was more directed at Winston Peters than at the media. 

“I thought he was also sending a pretty clear warning to Act and New Zealand First: don't you either.” 

“Because, if you look at New Zealand First's track record, they like to control negotiations, they like to be the ones that sort of indicate where things are at”.

It was an “unedifying spectacle” in 1996 and 2017 when Jim Bolger and Jacinda Ardern found out they would be Prime Minister, only when Peters announced it on live television. 

“The bronze medal winner shouldn't tell the gold and silver medals who they are. I think Luxon is trying to guard against all that sort of thing happening again”. 

Listen to the rest of the interview for more insight into negotiating a coalition.

*You can find all episodes of the Of Interest podcast here.

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New Zealand's supply chains are in "a serious, if not critical condition," requiring holistic systems thinking and a long-term focus, investment and government support to become stronger and more resilient, says self proclaimed supply chain tragic Dave Christie.

Christie, who has worked in supply chain roles for the army, PwC, the Warehouse, Fonterra, Coda Group, Tainui Group Holdings developing the Ruakura Superhub, and Synergic Technologies, spoke to interest.co.nz in the latest episode of our Of Interest podcastabout NZ's supply chain issues and the Ministry of Transport's recently released Aotearoa New Zealand Freight and Supply Chain Strategy. Christie was part ofan industry reference group in the development of this strategy.

He says supply chain problems caused by the Covid-19 pandemic brought "an invisible part of business and society" out into the light, and highlighted to the Government how vulnerable NZ is to global disruptions.

"The concern I have is we feel we've come out of Covid and people are kind of going' the supply chain's resolved.' ... What happened with Covid is the tide went out and we saw these rocks, they were exposed and we started to deal with those, but we dealt with them in what I would say were very unsophisticated ways. Now the tide's rising and everyone's forgotten about the rocks below the water," Christie says.

"if I was a doctor who was diagnosing the New Zealand supply chain as my patient I would have to say the diagnosis is that we are in serious, if not critical condition."

"And perhaps staying with that human analogy and referring it to the supply chain, the heart is the beating production sector of New Zealand. And while that's performing well, I think it's actually unproductive and we've seen this multiple times through the Productivity Commission's reports. So our heart isn't beating as efficiently as it can. The arteries and veins are the networks that flow products and goods around, not just [around] New Zealand but the globe, [and] they are constrained, we've got cholesterol in there and high blood pressure," says Christie.

"We've got parts of our network where the blood doesn't flow correctly, so that's not getting to the extremities well, our nervous system, we're actually deaf, dumb and blind, we don't know where the problems are and where they're coming from so we just get smacked in the face and we're probably suffering from early onset dementia. We don't actually have the cognitive ability to learn from our mistakes and improve, so we continually make the same mistakes."

However, he says all is not lost.

"We know lots of patients who are serious and in a critical condition. [But] if they get the right care they can come out the other end better, stronger and more resilient. And I honestly believe that's potentially the future for us in New Zealand and our supply chain."

Given the investment needed, 30-year timeframes, regulatory settings and 360 degree thinking needed, there's a role for government to play, Christie adds. 

In the podcast he also talks about the need to change NZ's port structure, why NZ should have reserve stocks of critical imports, whether NZ should have a national shipping line, the role for coastal shipping and rail, why supply chain improvements really matter to small businesses, the push to decarbonise, and more.

"If we want to make a change we're going to have some tough conversations. We're going to have to change some of the settings," Christie says, adding this should always be for the greater good.

*You can find all episodes of the Of Interest podcast here.

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The Green Party’s finance (and transport) spokesperson Julie Anne Genter has an unlikely ally on a handful of policy issues: Mayor of Auckland Wayne Brown. 

Both politicians agree New Zealand needs to scale up its public transport, move more freight by rail, implement congestion charging, and build cheaper versions of big Labour projects. 

The Greens already have three former mayoral candidates (one successful) in winnable spots on their party list — could Wayne Brown make the 2026 list? Genter doesn’t think so. 

“I think that my colleague Chloe Swarbrick, MP for Auckland Central, has had to be involved in some campaigns to stop cuts to the Auckland City budget”. 

“But I do think it's great that Wayne Brown is onside with surface light rail,” she said, in an interview for the Of Interest podcast.

Genter supports light rail in Auckland but opposes Labour’s plan to build it in a tunnel under Dominion Road, which could cost roughly $15 billion. 

Surface light rail might be up to $6 billion cheaper, savings which could be used to build light rail projects in New Zealand’s other major cities. 

“We could deliver surface light rail in Auckland, Wellington, and Christchurch—as the spine of an improved public transport system that connects with bikes and buses and everything else. 

And, we can do that for less than the cost of the tunnel light rail line in Auckland, and we can do it faster with less disruption and make a bigger difference to people,” she said.

The parties which “claim to be fiscally responsible” are simultaneously promising projects that don’t stack up just because they think they will be popular with voters. 

One example of this could be Labour’s multi-tunnel Waitemata Harbour crossing, which was announced before even an indicative business case was completed.

Both Genter and her “unexpected ally” Wayne Brown think the Government should build a bridge instead. 

She said the alignment between the policy platforms was because Brown was “someone who looks at the numbers”. 

He was willing to make an evidence-based decision on what would be the best use of money and get the best outcomes, rather than just pursuing a particular transport ideology. 

The two larger parties were stuck in “a race to the bottom” making big promises for people involved in delivering these large highway projects or large tunnelling projects, or on the assumption that roads will be popular with voters. 

“I think they assume that because everyone drives, they just want more roads, whereas lots of people would like the option to not drive,” she said.

Evidence-based populism

The Green Party prides itself on being evidence-based policymakers, but it isn’t immune from the occasional tilt towards populism. 

One example (arguably) is rent control. The Greens’ manifesto pledged to limit annual rent increases to 3%, and sometimes less. 

A rental price index would be set at whichever rate was lowest: general inflation, net hourly wage growth minus one percentage point, or 3%.

The evidence in support of rent controls is mixed, at best. This literature review found they worked to lower cost increases, but also caused a “wide range of adverse effects”.

Adverse effects can include a reduction in the quantity and quality of available housing stock over time. Genter said the party’s suite of rental policies would offset the negative effects. 

“Yes, there may be examples of places where rent controls haven't worked well. But that's because they don't have the other policies that we're proposing, which is a big push on public supply”. 

The Green Party plans to build 35,000 publicly owned homes over the next five years, using long-term funding and materials contracts, as well as pre-fabrication. 

Kāinga Ora would be tasked with targeting housing affordability and maintaining a building programme that anticipates demand and adds enough homes to meet it. 

Of course, the rent controls won’t be needed if supply-side reform works in the long term. 

Genter said the 3% speed limit was necessary as a “stop-gap” measure, because governments hadn’t provided enough housing over the past few decades. 

Wealthy mandate

Labour has ruled out implementing a wealth tax if it were able to form a government after the election. This puts the Greens in a difficult position, since many of their policies are unpinned by an increase in tax revenue. 

Genter said the Green Party would push for a wealth tax in the coming Parliamentary term, even if only 15% of votes had been cast for political parties that supported the policy. 

“Well, the really puzzling thing to me is that 50% of National and Act Party voters support a wealth tax or capital gains tax. So, I don't know that people are voting on policy”.

Polling had demonstrated that there was a majority of New Zealanders who supported tax reform, but even without majority support Parliament had a responsibility to pass good laws.

“We are elected as representatives to use the power and the mandate, we have to get the best possible outcomes and I feel really confident the country would be better off as a result”.

You can listen to the full interview with Julie Anne Genter on our podcast, as well as interviews with Labour’s Grant Robertson and NZ First’s Shane Jones. 

Interest.co.nz has also asked National and Act’s finance spokespeople for an interview.

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Labour Party finance spokesperson Grant Robertson admits to overspending in one area, his own personal home sound system, but he doesn’t regret it. 

“I probably spent more money on stereo equipment than [I should’ve], but I get a great deal of joy out of it,” he said, after Interest.co.nz asked for an example.

It turns out he is something of an audiophile and a huge fan of Flying Nun Records and the Dunedin Sound which were a pop culture phenomenon in the 1980s. 

Robertson also doesn’t regret using the Crown’s borrowing power to insulate New Zealand’s economy and workers from the worst effects of the pandemic and its response.

Steering the country through the crisis and coming out the other end with a bigger economy and record employment rates was his greatest accomplishment, he said. 

More than $70 billion was spent on wage subsidies, low-interest loans for small businesses, the health response, vaccines, managed isolation, and other pandemic related things. 

This caused net debt to climb from just $5.4 billion in 2019 to about $71 billion today, or from 1.8% of gross domestic product to 18.1%. 

Despite the sharp increase, debt is forecast to remain below the 30% ceiling recommended by the Treasury. This is a ceiling for business-as-usual debt and leaves room for a crisis response. 

“You could go above but you wouldn't want to be there for very long, was Treasury's advice, essentially,” Robertson said. 

In a serious economic shock, the Government could potentially raise debt levels to 40% or 50% of GDP without threatening the financial stability of the country. 

“It's not desirable. It's not what you want to do. But in a crisis, the government will always step up … Our economy is resilient. The reason we can do that is because the underpinnings of it are strong”.

“But there's also an obligation for a Minister of Finance to make sure that we don't unnecessarily strain the economy, especially at a time when cost of borrowing is quite high”.

Duelling mandates

Borrowing costs are high because central banks around the world have been hiking interest rates to stave off a post-pandemic inflation shock. 

Inflation is incredibly unpopular with voters and it has given political momentum to a pre-existing critique of the Labour’s decision to broaden the Reserve Bank’s mandate. 

In 2019, the Government amended the central bank’s legislation to make monetary policy a committee decision and to formalise its role in supporting employment. 

This dual-mandate, price stability and full employment, has been the model used by the US Federal Reserve since 1977 and the Australian Reserve Bank since 1957. 

The National Party has promised to remove employment from the RBNZ’s mandate in its first 100 days, if elected.

Robertson said this would be a step backwards. The central bank's primary job is to keep annual inflation between 1% and 3% — but that is a fairly wide channel to swim in. 

“We also believe that when decisions are being taken about [price stability], the broader economy also needs to be borne in mind”. 

The best proxy for economic well-being was employment and so the RBNZ was told to ‘support’ the maximum sustainable level, as determined by the bank itself. 

It is also inherently linked to price stability, as inflation tends to pick up when employment is above sustainable levels and fall away when it is below those levels. 

Robertson said the dual mandate was important and could have a significant impact on monetary policy in the future, but it hadn’t done so yet. 

“Adrian Orr has made clear that in the period since the mandate changed, they wouldn't have changed an individual decision because of that,” he said. 

“There's no problem here. The Reserve Bank knows what its job is, and if the Federal Reserve can do it, and the Reserve Bank of Australia can do it, and to a certain extent, the Bank of England can do it, then I think RBNZ can do it as well”.

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The New Zealand First deputy leader and finance spokesperson Shane Jones is calling for higher growth and more productivity as a way to bring prosperity to a wider class of New Zealanders.

He adds this is the way to help Maori overcome negative social statistics, and the thicket of regulation governing business in all areas of the economy only makes things worse for everyone.

Jones adds tax relief will have to be looked at again because of the country's vulnerable economic condition. 

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The Chinese people are very concerned about their country's tense relationship with the United States and it's a factor in weak consumer confidence, says Beijing-based David Mahon.

Mahon, a New Zealander who has lived in China since 1984, is Managing Director of Mahon China Investment Management. He spoke to interest.co.nz in the latest episode of our Of Interest podcast.

Mahon says during a recent visit to a mountain village in Yunnan Province,  one of the more remote places in China, he had dinner with local officials. This highlighted worry about ongoing tensions with the US.

"All were asking me about why is it America wants a war with China. They are concerned with the tension they could sense. It worried them for their own futures, their kids, their own prosperity," Mahon says.

"If people living as remotely from the centres of power and commerce are concerned about a dynamic like that, it shows all of China is concerned. It is a factor of the low consumer confidence at the moment."

Mahon says the Chinese economy's "probably more complex than I can remember."

"There's a lack of confidence, consumers are not going back to buying and investing as they were and the Government is now struggling to reset things as far as it feels it needs it must to get demand back on track."

"China's not in the doldrums but there are a patchwork of doldrums across the country," says Mahon.

Nonetheless Mahon says by the second quarter next year "all these major concerns and these doubts about the Chinese economy will be being put to one side." And whilst there's a challenging 12 to 18 months for New Zealand dairy exports to China and Fonterra, with China sitting on more than 500,000 metric tonnes of whole milk powder in storage, there are good times ahead, which will be helped when all NZ dairy exports to China become tariff free from the start of 2024.

In the podcast Mahon also talks about China's efforts to become carbon neutral, why he thinks deflation fears are overdone, what's gong on with China's property sector, the importance of the Chinese middle class, what the Chinese Communist Party needs to do to shore up the tacit support of the people, why tax changes are needed, recent floods, and more.

*You can find all episodes of the Of Interest podcast here, including two previous ones featuring David Mahon.

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Kia ora,

Welcome to Friday’s Economy Watch where we follow the economic events and trends that affect Aotearoa/New Zealand.

I'm David Chaston and this is the international edition from Interest.co.nz.

And today we lead with news central banks in both China in the EU have been active overnight, both dovishly.

But first up, initial American US jobless claims last week came in little-changed at +220,000 so there are now 1.69 mln people on these benefits, also very little-changed. Their long-awaited labour market stress still hasn't arrived. It surely will, but has defied the gloomsters for nearly two years now. They may have a long time to wait yet before their stopped-clock position is achieved.

American retail sales rose +0.6% in August from July and easily beating forecasts of a +0.2% rise. Year-on-year these sales are up only +2.9% however which is less than inflation. But the recent rises point to good consumer spending despite high prices and borrowing costs. But part of the recent increase is due to higher fuel costs. Excluding those fuel costs, retail sales only rose +0.2% in August from July, but they were +4.3% higher than year-ago levels which bests inflation by +1.0%.

On the factory floor, producer prices rose by +0.7% in August from July, the highest level since June 2022, and higher that analysts expected of a +0.4% rise. On an annual basis however, producer price inflation reached a four-month high of +1.6%, while the core rate actually eased and to +2.2%, which interestingly was its lowest level since January 2021.

Meanwhile, neither wholesale nor retail inventories are rising, so there is no inventory stress building in this economy.

In Japan they recorded a drop in new machinery orders in July. This series does not include orders for ships or electric power systems. Including them, orders rose sharply. The decline in core orders was driven mainly by a -5.3% decrease in the manufacturing sector, while the non-manufacturing sector posted a +1.3% increase. Industries in the manufacturing sector with the sharpest falls include for petroleum & coal products where orders fell a startling -57%.

Overnight, the People's Bank of China has announced a -25 bps cut in their reserve requirement ratio for all banks, taking it to a weighted average deposit reserve ratio of 7.4%. The banks already on 5% however got no change. At the same time they doubled down on defending the yuan and the managed rate they want to see.

The ECB hiked its policy interest rates for the 10th consecutive time overnight. But it also signaled that it is likely done with its tightening policy, as inflation has started to decline. After this change, their main refinancing operations rate reached a 22-year high of 4.5%, and the deposit facility rate set a new record at 4%. According to the projections released with this policy change, average inflation is forecasted to be at 5.6% in 2023 and 3.2% in 2024, both higher than previous estimates, primarily due to higher energy costs.

In Australia, there was a bigger than expected surge in employment in August but most of it was for part-time jobs. Full time jobs grew by a tiny +2,800 while part-time jobs grew by +62,100. Their jobless rate stayed at 3.7% in August as expected but that remains a 3 month high matching July's rate. There are now 540,500 people without jobs, up +42,600 from a year ago. (For comparison, Australia has 69.5% of their employed workforce in full time jobs, its lowest level in 10 months; New Zealand has 80.0%, a level we have been at for five years and the best since the 1990s.)

And a new report out from the Australian Productivity Commission shows that almost all (95%) of workers got pay increases equal or better than productivity increases. 

Internationally, last week there was a sharp drop of more than -7% in global container freight rates. It was particularly noticeable in outbound rates from China to the EU. Meanwhile bulk cargo freight rates are on the move up.

The UST 10yr yield starts today up +5 bps at 4.29%. 

The price of gold will start today at just on US$1909/oz and down -US$1 from yesterday.

And oil prices are +$1.50 higher from yesterday at just over US$89.50/bbl in the US and back at its ten month high. The international Brent price is now over US$93/bbl.

And perhaps we should note that the price of uranium is rising fast now, approaching a decade high on rising demand.

The Kiwi dollar starts today little-changed from this time yesterday at 59.1 USc, still settled in its tight range. Against the Aussie we are softer at 91.9 AUc. Against the euro we are +½c higher at 55.6 euro cents. That all means our TWI-5 is actually little-changed at 68.7.

The bitcoin price has moved higher from this time yesterday, and is now at US$26,627, a net rise of +1.9%. Volatility over the past 24 hours has been modest at just over +/-1.3%.

You can find links to the articles mentioned today in our show notes.

You can get more news affecting the economy in New Zealand from interest.co.nz.

Kia ora. I'm David Chaston. And we will do this again on Monday.

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New Zealand ought to change its political party funding system so it encourages politicians to connect with as many ordinary New Zealanders as possible, Max Rashbrooke argues, whilst noting it's not in political parties' interests to do so meaning such a change probably won't happen anytime soon.

Rashbrooke, a senior research fellow in the school of government at Victoria University, spoke about political donations in a new episode of interest.co.nz's Of Interest podcastas the October 14 election looms. Rashbrooke, and his Victoria University colleague Lisa Marriott, last year published a report on political party funding in NZ called Money for Something.

Rashbrooke says work on the report gave the authors "a glimpse into quite a murky world" of access and influence. One where party leaders, including prime ministers, fund raisers and big money donors, are in each other's company through a socialisation network featuring big fundraising dinners and other encounters.

This enormous and informal access to party leaders is something the rest of us wouldn't hope to enjoy, he says.

"So there's an immense socialisation and during that process I think it's fairly obvious that the views and interests of the donors and the politicians are to some extent going to become aligned," Rashbrooke says.

One of five key recommendations from the report is for the introduction of state funding in the form of tax credits and democracy vouchers, plus lump sum payments to smaller parties.

Rashbrooke notes NZ already has state funding for political parties via a broadcasting allowance, and money for parties to run their parliamentary wings. The question is whether we would benefit from a small increase in that, when the public has "massive distrust" in the current system given research shows more than 70% of New Zealanders say they don't trust the way political parties are funded. 

"The thread that I think holds together all of our recommendations is that we as New Zealanders would all be better off if we shifted from a system that relies on large amounts of money from a small number of donors to a system that relies on small amounts of money from a large number of donors. You are preserving peoples' freedom to donate to a political party of their choice, but what you're doing is creating a world where political parties aren't beholden to any one donor because no one is giving them a very large amount of money. And actually they are incentivised to go out and connect with a huge range of ordinary New Zealanders, which is what we want political parties to do," Rashbrooke says.

"Whereas the current system for their funding just encourages them to spend a huge amount of time on a small number of very wealthy people."

The report recommends a version of the Canadian system where for small donations, up to about $2,000, the donor gets a tax credit for a proportion of that donation.

"So basically through those tax credits the state is subsidising people to give small amounts to political parties, but capping the subsidy at a very low level so the incentive is just for those small donations," says Rashbrooke.

"We're talking about maybe $5 million to $6 million a year, that's it. So my pitch is for probably for less than $2 per person in New Zealand, $2 per voter, we could just clean big money out of the system completely and remove the potential for influence that it brings."

In the podcast he also talks about why he doesn't think such a change is likely in the short-term, the unprecedented situation where National and ACT are getting way more money than Labour, what a donation is, who can make one, how important donations are to political parties, what we know about the people and entities that donate and what they want, whether it's possible to draw a direct line between donations and policies, whether there's an advantage for the party or parties who raise more money, and more.

*You can find all episodes of the Of Interest podcast here.

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The Commerce Commission should be looking closely at banks' overall interest margins in its market study into personal banking services, says David Cunningham.

Cunningham is CEO of Squirrel Group, a mortgage broker that also offers lending and investing products and services, and a former CEO of The Co-operative Bank and manager at Westpac New Zealand.

In the latest episode of interest.co.nz's Of Interest podcast, Cunningham talks in detail about how interest rates are set for borrowers and savers, and the key area the Commerce Commission should look as it assesses competition for deposits and home loans.

Banks ultimately manage to the overall interest margin across both sides of their balance sheet covering their lending via the likes of home loans, and borrowing via the likes of deposits, Cunningham notes.

"Banks use something called transfer pricing, where they use the wholesale [interest] rate as a benchmark and then they assess the margin above that for loans and below that for deposits. But of course those margins on loans and deposits move in and out through the interest rate cycle. They're wider on lending at the lows, narrower in lending at the highs," says Cunningham.

"I think what the Commerce Commission should be looking at is that overall margin."

He says it's "disingenuous" for a banker to say margins are low on home loans at the moment without looking at the other side of the balance sheet because margins could be high on deposits.

"Unfortunately right now we're actually having that behaviour where we've got some banks setting rates with only reference, it would seem to me, to the wholesale [interest] rates."

"The key point is margins move in and out but you've got to look at the total. And that's what I think the Commerce Commission will be looking at, that quantum of the whole pricing decision. Not just a pricing decision on an individual product in isolation," says Cunningham.

The record low 0.25% Official Cash Rate (OCR) through most of 2020-2021 followed by a rapid increase to 5.50%, has allowed banks to expand interest margins by about 20%, Cunningham says.

"It's a lift in the price of the net margin you're charging on your product of 20%, which actually most New Zealand businesses would love if they could do that as an industry. And that's an oligopoly in action, and that's what the Commerce Commission will be exploring."

In the podcast Cunningham also talks about why he doesn't believe banks' net interest margins are justifiable at the moment, what to be wary of in a high interest rate environment including break fees, the role of bank capital in driving decisions on sectors banks like lending to, secured and unsecured lending, and how interest rates are set on everything from the OCR, to the bank bill benchmark rate, swap rates, home loans, term deposits, personal loans, car loans, credit cards, business lending, rural lending and bonds, and his own role in making fixed-term mortgages more popular than floating rates.

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New Zealand's anti-money laundering (AML) regime could be simplified and improved, although care would need to be taken to avoid jeopardising our good standing in the international community, not to stop information flow to the police, and to avoid creating loopholes criminals can exploit, says leading AML lawyer Gary Hughes.

Hughes speaks about the Anti-Money Laundering and Countering Financing of Terrorism Act, which has just notched up 10 years since taking effect, in a new episode of interest.co.nz's Of Interest podcast.

The Act's impact is widely felt. This isn't surprising given the police describe businesses operating in the financial, legal, property and high value goods markets as being at the frontline for countering illicit activity, while describing themselves as the last line of defence against money laundering and terrorism financing. As an election approaches, both the National and ACT parties are making noises about lessening the AML/CFT burden on businesses, which the Ministry of Justice estimates costs NZ about $260 million a year.

Hughes, an Auckland-based barrister who chairs the AML and Sanctions Experts Committee at the International Bar Association, sees "a good deal of scope for simplifying and improving the regime," thus potentially making compliance for businesses easier. He gives the example of a code of practice around identity verification for small businesses, noting there can be too much tick box regulation and a one size fits all approach.

But he says care needs to be taken.

"You don't want to lose the benefits of good standing in the international community. We're now seen by the FATF [Financial Action Taskforce] and others as doing very well in this regard. And also you don't want to lose the information flow to the police or create loopholes that criminals are rich enough or cunning enough to exploit. So it's always a balancing act," Hughes says.

In the podcast Hughes also talks about how to measure the extent to which the Act is preventing money laundering and terrorism financing, what the impetus behind the Act was, why FATF is described as "the most powerful international body you've never heard of," how the Act is instrumental in collecting key data and evidence for police, why he thinks NZ should have one AML/CFT Act supervisor instead of three, what happens to the thousands of suspicious activity and transaction reports, whether the regime is outcomes focused enough, financial exclusion and more.

"People say it's too costly and it's a handbrake on business. And yes it is partly. But equally some of those businesses, if you look at the banking sector, are making enormous profits and have very good information that I would think why shouldn't they be forced to actually use some of that and pass on the intelligence to support the law enforcement efforts? I don't think you can take all the cream out of the economy and not offer something back," says Hughes.

*You can find all episodes of the Of Interest podcast here.

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