The Kākā by Bernard Hickey

The key long stories short in Aotearoa’s political economy around housing, climate and poverty on Monday, April 28 are:

* There’s a nationwide shortage of 500 hospital beds and 200,000 people are waiting for a first specialist appointment.

* MSD has stopped work on a programme to prevent homelessness because of front-line staff shortages after budget cuts.

* Police appear to have lowered their fitness standards to recruit 500 more officers due to political pressure.

* National has broken an election promise to grant $257 million for new electric chargers, choosing instead to lend $68.5 million to investors.

* A third of New Zealanders need help getting food, a new survey shows.

* The Government has refused to agree to official advice that it review climate credits given to big industrial exporters.

There is more detail, analysis and links to documents below the paywall fold and in the podcast above for paying subscribers. If we get over 100 likes from paying subscribers, we’ll open it up for public reading, listening and sharing, although we’d love it if you subscribed to join The Kākā’s community and support making this journalism public. Students and teachers who sign up for the free version with their .ac.nz or .school.nz emails are automatically upgraded to the paid version for free. Our special offers right now are: $3/month or $30/year for under 30s & $6.50/month or $65/year for over 65s who rent.

Today’s Big Six

‘Too many people and not enough beds’

Officials have told the Government there is a nationwide shortage of 500 hospital beds, Nicholas Jones reported for Stuff yesterday.

Key bit:

The country is short of 500 hospital beds - a deficit that is piling pressure on services.

An official briefing to Health Minister Simeon Brown has revealed the hospital bed shortage, and warns “demand for acute services has outstripped hospital capacity”.

There are currently about 11,000 hospital beds across the country. Nicholas Jones for Stuff: NZ is short of 500 hospital beds

Also via Jess Roden at 1News on Saturday night: 200,000 Kiwis waiting for first specialist appointment. Access to first specialist appointments and elective procedures are among the Government's five health targets.

MSD suspends work on plan to prevent homelessness

The Ministry of Social Development (MSD) has stopped work on a plan to prevent people ending up in emergency housing because the ministry cannot cope with the workload, official documents show, as reported this morning by Lauren Crimp for RNZ.

Key bits (bolding mine):

A December MSD report to Associate Housing Minister Tama Potaka said that was partly because it was too busy with work related to changes to the Jobseeker benefit.

But Potaka said while he agreed to end the first phase of the "early interventions" work to stop people needing emergency housing, the second phase would still go ahead, and he was due to receive advice on that "shortly".

The report showed phase one involved looking at what could be improved within the MSD system to help people struggling to get into, or remain in, a stable home.

Officials said they had started the work, but were too stretched to carry on.

"We do not recommend progressing further with phase one work at this time due to insufficient frontline capacity and wider organisational pressures. MSD's frontline capacity is currently oversubscribed, and there are wider organisational pressures because of the focus on implementing initiatives to support other government targets, including the Jobseeker target," the report said. Lauren Crimp for RNZ: Part of MSD programme to prevent people ending up in emergency housing scrapped

Political interference feared as Police lower standards

The Police appeared to have lowered their fitness standards for political reasons to achieve the Government’s goal of recruiting an extra 500 officers, Michael Morrah reported this morning for NZ Herald-$.

Key bit (bolding mine):

The Herald understands the decision to allow substandard recruits into police college by way of an exemption would have been made at the top level of police.

Police sources, the Police Association and the Labour Party believe rules have been modified because of pressure from the Government to get 500 extra police by November – a policy described as a “priority” by the coalition Government when it made the announcement in May last year.

After the Herald asked whether exemptions were permitted under any circumstances, Assistant Police Commissioner Tusha Penny said police had “recently” discovered three applicants were approved to start police college without meeting requirements for the Physical Appraisal Test (PAT), which was a “clear breach” of policy. Michael Morrah for NZ Herald-$: 'Political interference': Hundreds of police applicants investigated

Electric charging funds promise broken

Transport Minister Chris Bishop yesterday announced the Government would lend up to $68.5 million in previously-allocated grant money to a new public-private loan scheme for electric charger installers. National had promised to grant $257 million to increase charger numbers from 1,400 to 10,000 by 2030.

Key bits (bolding mine):

The Government will use $68.5 million set-aside for grants for new EV charging stations, to fund the loans. The scheme will be administered by National Infrastructure Funding and Financing (NIFFCo), the successor organisation to Crown Infrastructure Partners (which delivered ultra-fast broadband). The loans would be at 0% interest over a term of 13 years.

The funding is less than what National promised on the campaign, when it said it would invest $257m.

Bishop said he had been advised by officials that more funding would be needed to hit the 10,000 target — although the amount of money required would be less than $100m.

“There will be future investment required,” he said.

He said the $257m cost of the scheme National had budgeted during the election was a “back of the envelope” calculation “based on what we were seeing at the market at the time”.

During coalition negotiations, the Act Party secured a concession that any charging network be subject to a “robust cost benefit analysis to ensure maximum benefit for government investment”. Bishop said each investment will have a cost-benefit analysis and each successful applicant must demonstrate that the benefits of the project outweigh the costs. Thomas Coughlan for NZ Herald: Government plans to build thousands of EV chargers by 2030

Watts refuses advice that free credits need review

Climate Minister Simon Watts has rejected official advice that hundreds of millions of dollars of free climate credits for NZ Steel, Methanex, Rio Tinto, and Fletcher Building should be reviewed because there’s no evidence they work to reduce emissions, Eloise Gibson reported this morning for RNZ.

Inland Revenue and Treasury told the government there was no proper evidence that yearly subsidies to some of the country's biggest carbon polluters were needed. Their recommendation for a thorough review was met with a no thanks from Minister Simon Watts.

Inland Revenue and Treasury said a review might show a cheaper scheme would achieve the object, meaning the government could re-allocate some of that money to other priorities. The subsidies were meant to be a transitional measure, running from 2010-2030, but they have been extended.

At the current rate of phaseout - of 1 percent a year, rising to 3 percent in the 2040s - the government could still be subsiding heavy emitters in 2060.

That is despite the government having a goal of being carbon neutral in 2050. Eloise Gibson for RNZ: Ministers rejected advice to review climate grants

A third of NZers need help getting food

We can produce food for 41 million, our farmers say, but a new survey shows nearly two million New Zealanders can’t afford the food, after paying for rent etc. A third of New Zealanders need help getting food, a new survey by Consumer NZ shows. It was released last week.

Key bits (bolding mine):

The survey also revealed the growing impact of rising prices on households. Thirty percent of people have needed help over the past year to get food – for example, from foodbanks, friends, family or Work and Income – based on the survey results.

The cost of living remains the highest concern for New Zealanders across all age groups and has for three years according to its Sentiment Tracker. Consumer NZ survey: Despite low confidence in government efforts, people want urgent action to lower grocery bills

The best of the rest elsewhere

My Pick ‘n’ Mix Six scoops, deep-dives and breaking news

* Poverty, justice & health deep-dive by Craig Kapitan for NZ Herald: How desperate business loan led single mum into meth syndicate’s inner circle27 Apr 07:00 PM

* Poverty deep-dive by Jenny Ling for Northern Advocate: 'People are working their hearts out': The struggle of Northland's workers

* Housing market deep-dive by Nikki Preston for One Roof: 'Change your attitude': Real estate boss's sobering advice to homeowner with no plan B

* Investigation into Destiny Church by John Campbell for 1News: ‘I’ve never encountered so much fear’

* Geopolitics news via WSJ (free) Cargo Shipments from China to U.S. Slide Toward a Standstill

* Geopolitics news via Reuters: Panic in Pakistan as India vows to cut off water supply over Kashmir

Deep-dive of the day: ‘Our (very) dirty (not so) little secret’

This deep-dive published yesterday in Stuff from Steve Kilgallon is another excellent investigation into how our migrant abuse industrial complex actually works.

Key bits (bolding mine):

“This is New Zealand’s dirty little secret,” says cleaning company boss Dominic Drumm. “How does this happen in New Zealand?”

Drumm is among several senior figures in the commercial cleaning industry to speak of their concerns about the poor treatment of workers in the highly-competitive commercial franchise cleaning industry

Talking generally about the franchised cleaning sector, not Crewcare specifically, Drumm, who owns Auckland cleaning company Westferry Services, said when franchise cleaning was done badly, it was a “filthy, filthy model”.

He directly employs his cleaners, who are covered by an industry-wide collective agreement, which means they must earn 30c an hour above minimum wage. Government institutions and some community organisations pay their cleaners the living wage ($27.80).

Franchise cleaners, even if they are a one-man band, typically form their own company and buy a franchise from a master franchisee, which in turn guarantees them a minimum amount of work. Drumm, who employs about 200 staff, said he had got into the industry believing it could be done better and with a closer focus on employee welfare, particularly of recent migrants. “These people … very often turn up on my doorstep looking for a job and they are in tears.

“You can judge a society on how you look after your most vulnerable people … those at the bottom of the socio-economic scale, we are really failing them.”

The industry’s representative body, the Building Services Contractors Inc (BSC), says it has raised the issue with ministers on both sides of the political spectrum for years, but without success.

BSC is calling for a law change to protect franchise cleaners, who are not covered by minimum wage laws, trade unions, or the Labour Inspectorate because they are technically business owners. By Steve Kilgallon for Stuff: ‘Dirty little secret’: The dark heart of the cleaning industry

Quote of the day: ‘Why consent homes in flood zones?’

"We saw when an atmospheric river like Gabrielle unleashes massive rainfall it's too much for normal drainage and flood management.

"So why are we still consenting to new builds on flood-prone land? It seems obvious we shouldn't be doing this." Auckland Mayoral Candidate Kerrin Leoni says 2,325 new builds, - 15% of all consents granted in Auckland last year, were on flood plains. Via Jessica Hopkins for RNZ: Auckland councillor wants mayor to pressure government over building consents

Number of the day: $150,320 per year

A year on from the launch of David Seymour’s Ministry for Regulation's creation, the average salary for its staff continues to top $150,000 - well above the sector-wide average of just over $100,000. New figures record an average annual salary at the agency of $150,320 across 70 permanent staff and 17 fixed-term staff, Craig McCulloch reported for RNZ.

Doc of the day: An analysis of the RMA reforms

Dr Greg Severinsen and Shay Schlaepfer have analysed the Assessment of Expert Advisory Group key points and related Cabinet recommendations for Phase 3 of the RMA reforms for the Environment Defence Society. Here’s the full analysis document.

Chart of the day: ‘We’re not in net debt at all’

Cartoon of the day: ‘Bend to my will (but not you)’

Timeline-cleansing nature pic

Ka kite ano

Bernard

This is a public episode. If you'd like to discuss this with other subscribers or get access to bonus episodes, visit thekaka.substack.com/subscribe

The podcast above of the weekly ‘Hoon’ webinar for paying subscribers on Thursday night features co-hosts Bernard Hickey & Peter Bale talking about the week’s news with regular and special guests, including:

* Cathrine Dyer on news New Zealand abstained from a vote on a global shipping levy on climate emissions and downgraded the importance of climate change in the Defence Force’s strategic aims..

* Robert Patman on the week in geopolitics and climate, including Donald Trump’s ongoing tariff shock. Bernard referred to a statement from China’s Embassy in Wellington protesting against a visit by New Zealand MPs to Taiwan.

The Hoon’s podcast version above was recorded on Thursday night during a live webinar for over 200 paying subscribers and was produced and edited by Simon Josey.

The Hoon won the silver award for best current affairs podcast in this year’s New Zealand Podcast awards.

(This is a sampler for all free subscribers and anyone else who stumbles on it. Thanks to the support of paying subscribers here, we’re able to spread my public interest journalism here about housing affordability, climate change and poverty reduction other public venues. Join the community supporting and contributing to this work with your ideas, feedback and comments, and by subscribing in full. Remember, all students and teachers who sign up for the free version with their .ac.nz and .school.nz email accounts are automatically upgraded to the paid version for free. Also, here’s a couple of special offers: $3/month or $30/year for under 30s & $6.50/month or $65/year for over 65s who rent.)

Ngā mihi nui.

Bernard

This is a public episode. If you'd like to discuss this with other subscribers or get access to bonus episodes, visit thekaka.substack.com/subscribe

Long stories shortest from our political economy on Tuesday, April 22:

* US markets slump after Donald Trump threatens the Fed’s independence.

* China warns its trading partners not to side with the US.

* Trump says some trading partners may have to choose the US or China.

* Nicola Willis says her fiscal policy will ignore the global tariff shock.

* DHL stops sending parcels worth over US$800 to the United States. Globally.

* NZ abstains on a key climate vote, while Defence lowers climate change as a risk.

(There is more detail, analysis and links to documents below the paywall fold and in the podcast above for paying subscribers. If we get over 100 likes from paying subscribers, we’ll open it up for public reading, listening and sharing, although we’d love it if you subscribed to join The Kākā’s community and support making this journalism public. Students and teachers who sign up for the free version with their .ac.nz or .school.nz emails are automatically upgraded to the paid version for free. Our special offers right now are: $3/month or $30/year for under 30s & $6.50/month or $65/year for over 65s who rent.)

Long stories short on Tuesday, April 22

* US stocks, bonds and the US dollar fell sharply again this morning after Donald Trump threatened the independence of the US Federal Reserve. (See quote and chart of the day below)

* China warned its trading partners it would retaliate against those that sided with the United States in any trade deal that comes at China’s expense, while Trump said he may want countries to choose between America and China.

* Nicola Willis has confirmed the Government will not react to Trump’s global tariff shock to the economy, other than cutting spending even harder to reach surplus.

* DHL has stopped shipping parcels with goods worth more than US$800 to the United States because of Trump’s tariffs, while shipping volumes between US and Chinese ports has slumped in recent days.

* Community Housing Providers (CHPs) say the Government’s limits on Income Related Rent Subsidies (IRRS) was stalling new developments that were ready to go.

* New Zealand has abstained from voting for a levy on shipping emissions, while Defence has also downgraded climate change as a strategic risk.

My Pick ‘n’ Mix elsewhere

* Health scoop by Jessica Roden for 1News: Nelson patients wait as heart disease becomes inoperable — cardiologist. Nelson Hospital cardiologist Dr Tammy Pegg is the ninth doctor to speak to 1News about concerns staffing levels are having on patients in the region.

* Justice scoop by Brittany Keogh for The Post-$:More than half of strangulation cases never reach court: justice system under scrutiny. Those at the coalface of family harm prevention say data indicates the problem is not being taken seriously enough.

* RBNZ Scoop by Susan Edmunds for RNZ: Reserve Bank analyst loses bid for reinstatement

* Transport deep-dive by Waikato University’s Cécile L'Hermitte via The Conversation: NZ’s over-reliance on roads for freight means natural disasters hit even harder. But there is a fix

* Climate Deep-dive by Katy Jones for Stuff: Government ‘wilfully blind’ on climate change. Climate specialists question if ministers are aware of the increasingly dire forecasts for climate change, or how much inaction will cost.

* Housing Deep-dive by Thomas Manch for Stuff: Does New Zealand still have a housing crisis? The short answer is yes. The politics have shifted, but the circumstances of housing in New Zealand haven’t yet budged. There are glimmers of hope, though.

Quote of the day: Trump vs Powell

““Preemptive Cuts” in Interest Rates are being called for by many. With Energy Costs way down, food prices (including Biden’s egg disaster!) substantially lower, and most other “things” trending down, there is virtually No Inflation. With these costs trending so nicely downward, just what I predicted they would do, there can almost be no inflation, but there can be a SLOWING of the economy unless Mr. Too Late, a major loser, lowers interest rates, NOW. Europe has already “lowered” seven times. Powell has always been “To Late,” except when it came to the Election period when he lowered in order to help Sleepy Joe Biden, later Kamala, get elected. How did that work out?” Donald Trump commenting on Fed Chair Jerome Powell last night on Truth Social last night.

Chart of the day: Selling US dollars to buy Swiss Francs

Cartoon of the day: Glug, glug, slug…

Timeline-cleansing nature pic

Ka kite ano

Bernard

This is a public episode. If you'd like to discuss this with other subscribers or get access to bonus episodes, visit thekaka.substack.com/subscribe

The podcast above of the weekly ‘Hoon’ webinar for paying subscribers on Thursday night features co-hosts Bernard Hickey & Peter Bale talking about the week’s news with regular and special guests, including:

* Cathrine Dyer on a global survey of over 3,000 economists and scientists showing a significant divide in views on green growth; and ACT leader David Seymour’s comments that the Reserve Bank’s budget cut would stop it wasting money on climate change assessment.

* Robert Patman on the week in geopolitics and climate, including Donald Trump’s ongoing tariff shock and differing opinions about China and the United States between PM Christopher Luxon and Deputy PM Winston Peters; and,

* Association of Salaried Medical Specialists (ASMS) Executive Director Sarah Dalton on this week’s historic vote by hospital doctors to strike on May 1.

The Hoon’s podcast version above was recorded on Thursday night during a live webinar for over 200 paying subscribers and was produced and edited by Simon Josey.

The Hoon won the silver award for best current affairs podcast in this year’s New Zealand Podcast awards.

Peter mentioned a rare earths article in the New York Times and an article by Tina Brown.

(This is a sampler for all free subscribers and anyone else who stumbles on it. Thanks to the support of paying subscribers here, we’re able to spread my public interest journalism here about housing affordability, climate change and poverty reduction other public venues. Join the community supporting and contributing to this work with your ideas, feedback and comments, and by subscribing in full. Remember, all students and teachers who sign up for the free version with their .ac.nz and .school.nz email accounts are automatically upgraded to the paid version for free. Also, here’s a couple of special offers: $3/month or $30/year for under 30s & $6.50/month or $65/year for over 65s who rent.)

Ngā mihi nui.

Bernard

This is a public episode. If you'd like to discuss this with other subscribers or get access to bonus episodes, visit thekaka.substack.com/subscribe

Long stories short from our political economy on Wednesday, April 16:

* Simeon Brown has attacked doctors striking for more than a 1.5% pay rise as already “well remunerated,” even though the $353,500 average salary he cites includes overtime, and hospitals can’t recruit enough doctors, who are being offered more elsewhere. Health NZ is also sacking a fifth of its HR staff.

* Public health academics have called for regulation of junk food ads, citing new research showing tamariki are exposed to twice as many junk food ads outdoors as ads for healthy food. The ads increase cases of diabetes and dental problems, adding to hospital demand, the academics also pointed out.

* Civil Defence has warned there is a 10% chance of a volcanic eruption in Auckland in the next 50 years causing $65 billion in damage. (See table below)

* China ordered its airlines to stop buying planes from Boeing overnight.

* Nick Mowbray said overnight Donald Trump’s tariffs would cost Zuru US$3 billion if it continued exporting toys and other products to the United States.

* Tourist arrivals to the US slumped 10% in March and are falling faster in early April, which is set to cost billions in lost tourism revenues. (Chart of the day below)

(There is more detail, analysis and links to documents below the paywall fold and in the podcast above for paying subscribers. If we get over 100 likes from paying subscribers, we’ll open it up for public reading, listening and sharing, although we’d love it if you subscribed to join The Kākā’s community and support making this journalism public. Students and teachers who sign up for the free version with their .ac.nz or .school.nz emails are automatically upgraded to the paid version for free. Our special offers right now are: $3/month or $30/year for under 30s & $6.50/month or $65/year for over 65s who rent.)

The big things from our political economy today

Simeon Brown attacks ‘well remunerated’ doctors

Last night Health Minister Simeon Brown lashed back at hospital doctors planning an unprecedented one day strike on May 1 over an offer for a 1.5% pay increase, saying they were already “well remunerated,” and accusing them of “walking away from patients” and “hurting patients.”

He said the strike would lead to thousands of procedures being cancelled.

“They’re well remunerated. They earn on average $343,000 as part of their total package. They have six weeks annual leave per year. They get three months paid sabbatical every six years. Ultimately we need to make sure we’re putting patients first.” Simeon Brown via 1News

Brown may frame the issue as putting patients first, but the Government’s decision to bear down on health spending growth explicitly puts debt reduction, achieving surplus and slightly lower mortgage rates ahead of health spending.

He went on to say via X:

“Striking won't shorten waitlists. Walking off the job won't fix system pressure. But it will delay care for thousands of New Zealanders who've already waited too long.” Simeon Brown said in a long thread via X

The Association of Salaried Medical Specialists (ASMS) executive director Sarah Dalton said the $343,000 figure included superannuation and overtime payments and doctors would much prefer to work their allotted hours and have extra colleagues, which they haven’t had due to hiring freezes last year. Doctors have been working without an agreement since the last one expired in August last year.

NZ kids face twice as many junk food ads as good food ads

Research from New Zealand academics published in an article in this month’s Health Promotion International journal shows children here face twice as many advertisements for junk food outdoors than for healthy food, which is making them sicker and clogging up hospitals, yet the ads aren’t regulated. Here’s an abstract (bolding mine)

“Findings demonstrated children’s exposure to unhealthy food/drink marketing is ubiquitous with clear links to dietary preference and consumption. To improve child health now and over the life course, unhealthy food/drink marketing needs to be subjected to greater restriction with enforceable legislation to protect children from exposure to unhealthy marketing, breaking the chain from exposure to ill health.

“On average, children in NZ are exposed to double the amount of unhealthy food and drink advertisements compared to healthy food and drinks in outdoor settings and it is likely this is impacting health outcomes. The most common chronic condition among children in NZ is dental cavities and recent research conducted in NZ has shown statistically significant links between dietary patterns high in refined starch and sugar (the two most common ingredients in unhealthy food and drink) and dental cavities in children. Furthermore, the incidence of type 2 diabetes in young people is on the rise, particularly for Māori, Pacific and South-Asian ethnicities.” Article by Hayleigh Frost , Lisa Te Morenga , Sally Mackay , Christina McKerchar , Victoria Egli in Health Promotion International: ‘Impact of unhealthy food/drink marketing exposure to children in New Zealand: a systematic narrative review.’

Both National and Labour have refused to regulate such advertising. Lobbyists are unregulated here. Diabetes and poor dental health are major contributors to the crises in our hospital and healthcare systems.

‘10% chance of Auckland volcanic eruption in 50 years’

Civil Defence quietly estimated in a discussion document published yesterday on emergency management legislative reform that there was a 10% risk of a volcanic eruption in Auckland over the next 50 years, which it estimated could cost between $5 billion and $65 billion. (See table below page 5 of document)

It also cited a November, 2023 briefing to its incoming minister that “modelling of well-understood scenarios suggests that over the next 50 years, there is a 97% probability that New Zealand will experience a natural hazard event that causes more than $10 billion in damage.”

Over the last 15 years, Aotearoa has suffered the 2010/11 Christchurch earthquakes ($38 billion), the 2016 Kaikoura earthquake ($5 billion) and Cyclone Gabrielle ($14.5 billion). 97% sounds about right then.

My Pick ‘n’ Mix Six for Wednesday, April 16

* Infrastructure & housing news from Hamilton via RNZ’s Nine to Noon: Property developers stuck with empty sites after council blocks development

* Good news via RNZ’s Checkpoint from Hastings: Social supermarket helping feed struggling families

* Good news via Mary Afemata for LDR/1News: Families join food scraps revolution – and share how to avoid maggots. Auckland's food scraps are helping to cut landfill waste, reduce emissions, and reuse organic material as energy and fertiliser.

* Column by Simon Wilson in NZ Herald-$: How not to fix the social housing crisis

* Geopolitics news via Reuters: At China's largest trade fair, exporters say US markets are 'frozen'

* Geopolitics investigation via Reuters: Inside North Korea’s vast operation to help Russia’s war on Ukraine

Must-read of the day

Global economics deep-dive via WSJ (Gift) How the U.S. Lost Its Place as the World’s Manufacturing Powerhouse

Key detail and chart (bolding mine):

The U.S. now exports in excess of $1 trillion-worth of services—far more than any other country. Moreover, America’s services exports are undercounted as a result of companies moving overseas the rights to intellectual property developed in the U.S.—like patents and trademarks—for tax purposes. (Ireland, a prime destination for those rights, is counted as the world’s fourth-largest services exporter.)

In new research, Hanson and Enrico Moretti find that in 1980 manufacturing accounted for 39% of the U.S. jobs where workers earned high wages (after adjusting for factors such as education). By 2021 that had dropped to 20%. Over the same period, the share of high-paying jobs in the finance, professional and legal industries jumped from 8% to 26%. WSJ (Gift) How the U.S. Lost Its Place as the World’s Manufacturing Powerhouse

Quote of the day: Health NZ to cut 338 HR roles

“These cuts make no sense when the delivery of health services is being held back by unfilled vacancies right across an extremely stretched health system.” Public Service Association national secretary Fleur Fitzsimons via RNZ

Number of the day: Seven new migrants

Seven - The number of successful applicants for the new Active Investor Plus ‘golden visa’ programme since it opened on April 1. There have been 21 new applicants and the seven successful applicants plan to invest at least $35 million here. RNZ

Chart of the day: The find out stage

Cartoons of the day: Frying pan meets fire

Timeline-cleansing nature pic

Ka kite ano.

Bernard

This is a public episode. If you'd like to discuss this with other subscribers or get access to bonus episodes, visit thekaka.substack.com/subscribe

Long stories short from our political economy on Tuesday, April 15:

* New Zealand’s economic recovery is stalling, according to business surveys, retail spending and house sales data out yesterday and this morning.

* In the teeth of recessionary headwinds, the Government is about to cut a well-loved education programme introduced by the last National Government.

* Immigration is rising again at its fastest rate in more than two years, adding to a workforce and population dealing with unemployment and homelessness.

* The focus on cheap, temporary migration was evident in a South African family being kicked out because their son had special needs.

* Westpac has halted some mortgage application processing after a surge of applications.

* Treasury is unhappy with the Government pushing ahead with $1 billion worth of roading projects that don’t make economic sense.

(There is more detail, analysis and links to documents below the paywall fold and in the podcast above for paying subscribers. If we get over 100 likes from paying subscribers, we’ll open it up for public reading, listening and sharing, although we’d love it if you subscribed to join The Kākā’s community and support making this journalism public. Students and teachers who sign up for the free version with their .ac.nz or .school.nz emails are automatically upgraded to the paid version for free. Our special offers right now are: $3/month or $30/year for under 30s & $6.50/month or $65/year for over 65s who rent.)

The six big things from our political economy today

The economic recovery is stalling

The economy is not doing what it was supposed to when PM Christopher Luxon said in January it was ‘going for growth.’

That’s clear in the BusinessNZ BNZ PSI survey results for March published yesterday, which showed a second month of contraction in the services sector, the biggest part of the economy. The companion PMI survey of manufacturers in March was published on Friday and showed only a tepid expansion, at a slower rate than the previous month.

There was also a surprise 0.8% fall in retail sales via electronic cards in March. (See charts of the day below.)

REINZ reported this morning that house sales fell a seasonally adjusted 0.3% to 7,640 in March from February nationwide, while sales volumes in Auckland fell a seasonally-adjusted 12.7% to 2.362. Seasonally adjusted prices fell 0.3% in March from February, Infometrics estimated, with prices were lower than a year ago for the eighth consecutive month.

A pro-cyclical fiscal tightening

Meanwhile, the Government is pushing on with its ever-tighter fiscal policy in the face of recessionary headwinds globally and locally, effectively enacting a pro-cyclical (ie worsening a recession) policy in conflict with the Reserve Bank, which has been conservative in its initial decision under a makeshift Governor.

RNZ reported from leaked documents yesterday the Government was considering shutting a $118 million per year education training programme that is well liked by schools and was set up with great fanfare in 2014 by the previous Government. Finance Minister Nicola Willis signalled last week the Government would double down on spending cuts to achieve a budget surplus by 2027/28.

That was in the face of Treasury has advice that Trump’s tariffs will slow global GDP growth and increase inflation, making it harder to achieve that surplus and therefore forcing even bigger cuts within Willis’ $2.4 billion per year operating allowances, most of which have already been spent in the 2025/26 year.

‘But the low-wage & low-cost migrant workers will save us’

However, the Government is pushing for growth in the population and in low-wage temporary workers to generate some nominal GDP growth, as shown in migration figures published yesterday showing a near doubling in net migration to 5,430 February from 23,70 in March.

This increased annual net migration to 32,922 from 30,932 the previous month. This was the strongest monthly balance since December 2023 and the annual increase was the first increase since October 2023.

One feature of an economy dependent on temporary worker migration for growth and low wages is the idea that temporary workers do not cost anything to maintain through the health and education systems, and do not need infrastructure investments in the form of extra housing, schooling and transport investment.

A key element of that is the policy that temporary migrants must be ejected if one of them requires support by the health system, as shown in this RNZ report about a South African declined residency because their son’s health issues are considered a burden on New Zealand's health and education systems.

‘We can’t write mortgages fast enough’

Meanwhile, the pathway to wealth remains dominated by leveraged investment in land for housing, particularly as interest rates fall and the Government looks to force the Reserve Bank to loosen capital and prudential standards to unleash another bout of credit growth to pump up asset values.

Stuff’s Michael Daly reports this morning Westpac has temporarily stopped accepting some loan applications amid increased demand for home loans.

‘But there is money for uneconomic roads & bridges’

One feature of the Government’s strategy is investment in big roads and bridges, even though Treasury and other advice is the projects are not economic, barely generating a new dollar for every dollar invested.

Another example of the advice from Treasury against the projects is evident in Oliver Lewis’ article in BusinessDesk-$ yesterday, which documented Treasury’s opposition to a $1 billion fund set up to accelerate transport projects. Treasury was given one hour’s notice of the change. Here’s the key bit:

In December, former Transport Minister Simeon Brown took a paper to Cabinet to change the scope of the $1b allocation and allow NZTA to draw down the funds for five projects: the Melling Interchange, Waikare Gorge realignment, a second Ashburton bridge, Brougham St improvements in Christchurch, and the removal of level crossings on the Auckland rail network.

Brown also sought to reallocate $78 million set aside to accelerate improvements to the Christchurch bus network to add to the $1b fund. Notably, none of the aforementioned projects, which will use up the majority of the $1.078b fund, is a Rons.

The road-building programme is still included in the Cabinet paper as a focus, but the fund has largely been repurposed to focus on at-risk projects.

“Following the development of the National Land Transport Programme (NLTP) and consultation with my colleagues, NZTA has identified priority projects with unfunded cost pressures that are at risk of not being delivered or facing significant delays,” Brown said in the Cabinet paper. Oliver Lewis’ article in BusinessDesk-$

My Pick ‘n’ Mix Six for Tuesday, April 15

* Health crisis news by Tess Brunton for RNZ: 'There is nothing here' - Wānaka woman in mental health crisis made to feel like a burden.

* Geopolitics news by Sam Sachdeva for Newsroom: Review of US travel advice due amid Trump-era detentions

* Housing crisis first-person article by AnneMarie Quill for Stuff: ‘Past my use by date’: Divorced woman sells house after 1000 job applications and only two interviews. Divorcee Rona Todd thought it would be relatively easy to find work after her marriage ended. A year later, she’s struggling to survive on benefits.

* Social media sociopathy news by Dylan Reeve for The Spinoff: The proliferation of Facebook scam ads continues, now starring Christopher Luxon. Meta is doing nothing to combat scams on its platforms, but what about the government?

* Geopolitics news by WSJ (gift link): At China’s Wholesale Hub, U.S. Orders Have Suddenly Halted. One Example: Socks.

* Geopolitics news by AP: Apple has few incentives to start making iPhones in U.S., despite Trump’s trade war with China

Chart of the day

‘Another step down’

Cartoon of the day

Timeline-cleansing nature pic

Ka kite ano.

Bernard

This is a public episode. If you'd like to discuss this with other subscribers or get access to bonus episodes, visit thekaka.substack.com/subscribe

The podcast above of the weekly ‘Hoon’ webinar for paying subscribers on Thursday night features co-hosts Bernard Hickey & Peter Bale talking about the week’s news with regular and special guests, including:

* Cathrine Dyer and Robert Patman on the week in geopolitics and climate, including Donald Trump’s shock and (partial) backflip; and,

* Health Coalition Aotearoa Chair Boyd Swinburn on the launch of Let’s Level the Playing Field, a campaign to reform lobbying.

The Hoon’s podcast version above was recorded on Thursday night during a live webinar for over 200 paying subscribers and was produced and edited by Simon Josey.

The Hoon won the silver award for best current affairs podcast in this year’s New Zealand Podcast awards.

Peter mentioned author Ayn Rand during the podcast. Here’s an article backgrounding her influence in politics today.

(This is a sampler for all free subscribers and anyone else who stumbles on it. Thanks to the support of paying subscribers here, we’re able to spread my public interest journalism here about housing affordability, climate change and poverty reduction other public venues. Join the community supporting and contributing to this work with your ideas, feedback and comments, and by subscribing in full. Remember, all students and teachers who sign up for the free version with their .ac.nz and .school.nz email accounts are automatically upgraded to the paid version for free. Also, here’s a couple of special offers: $3/month or $30/year for under 30s & $6.50/month or $65/year for over 65s who rent.)

Ngā mihi nui.

Bernard

This is a public episode. If you'd like to discuss this with other subscribers or get access to bonus episodes, visit thekaka.substack.com/subscribe

Long story shortest in Aotearoa’s political economy this morning:

Donald Trump just detonated a neutron bomb under the globalised economy, but this time the Fed isn’t cutting interest rates to rescue markets because Trump’s 1910-level tariffs will both slow US growth AND increase US inflation.

But we may benefit through high global dairy and beef prices, European wines being tariffed more than ours, and cheaper stuff from China they can’t sell elsewhere. Also, the US bond yields that partly determine our fixed mortgage rates, have fallen nearly half a percentage point in the last week, in anticipation of Fed cuts.

Elsewhere, the Government will release its second ‘quarterly action plan’ this morning, including ‘action number one’ of delivering a Budget on May 22 that will ‘boost economic growth, control Government spending and invest in infrastructure.’ The Government is actually currently reducing spending growth and reducing less in infrastructure, both of which are slowing economic growth.

Also reported by others this morning: Developers are licking their lips over Kāinga Ora’s massive housing land sell off. Compass has $210 million worth of contracts with the Government. And Auckland Transport plans to spend more on roads and less on public transport. (See more below in my Pick ’n’ Mix)

(There is more detail, analysis and links to documents below the paywall fold and in the podcast above for paying subscribers. If we get over 100 likes from paying subscribers, we’ll open it up for public reading, listening and sharing, although we’d love it if you subscribed to join The Kākā’s community and support making this journalism public. Students and teachers who sign up for the free version with their .ac.nz or .school.nz emails are automatically upgraded to the paid version for free. Our special offers right now are: $3/month or $30/year for under 30s & $6.50/month or $65/year for over 65s who rent.)

Donald Trump nukes decades of globalisation in trade

US President Donald Trump has detonated a neutron bomb under the global economy. His ‘Liberation Day’ reciprocal tariffs ranged from 10% on exports from New Zealand, Australia and the UK, to 34% for China (taking Trump’s extra tariffs this year to 54% and lifting average total tariffs on China’s imports to 76%), 46% for Vietnam, 49% for Cambodia, 29% for Norfolk Island (which is part of Australia), and 10% for the penguin-only Heard & McDonald Islands.

The rates were calculated by dividing trade surpluses with the United States by the country’s exports to the United States, and then halving that, with a 10% floor. Economists said they would fail their students for submitting that formula for tariffs in an exam, although economists also found ChatGPT suggested the formula when asked how to formulate a global tariff policy that set an even playing field for the United States.

If enacted in full, the tariffs would increase the United States’ average tariff rate from 2.5% to 22%, which would be the biggest tariff increase since Herbert Hoover’s Smoot Hawley Act of June, 1930, which worsened the Great Depression, and take them back to levels last seen in 1910. To give you an idea of the scale of the reorganisation of global supply chains needed in response, Nike produces 50% of its shoes and 28% of its clothes in Vietnam. About 40%-45% of the parts used in US-assembled cars come from overseas.

US business leaders who spent billions to get Trump elected were shocked and US stock values fell on Thursday and Friday by the most in percentage terms since March, 2020 (10.5%), and the most ever in value terms (US$6.6 trillion). It was the fourth-worst two-day fall in history, behind the October 1929 crash that led to the Great Depression (25%), the October 1987 crash (22%) and the March 2020 Covid crash (21.5%). It was bigger than the 9.5% fall that popped the Dotcom bubble of 2000.

The US Federal Reserve Chairman Jerome Powell said on Friday night the tariff shock was worse than expected and was likely to slow US economic growth, but also increase inflation, which meant the Fed would be cautious before cutting interest rates again. Investors and traders expecting another application of the ‘Fed Put’ to bail them out were dismayed.

China retaliated by imposing its own tariffs of 34% on US imports, which means components (for say an iPhone) imported from the United States will cost 34% more, and then be re-exported back to the United States with 54% added. An iPhone 16 Pro Max, with a 6.9-inch display and 1 terabyte of storage, which currently retails for US$1599, could cost nearly US$2300 (NZ$4,114), up 43%, if the tariffs were passed on to consumers.

But not everyone’s a loser. Some might win, including us.

However, the effects of the Trump tariff shock could be helpful, perversely, for some, including New Zealand’s exporters to the United States and our importers from China. Our main goods exports to the United States are meat and wine. Americans still need our lean grass-fed beef to mix with their fatty feed-lot-fed beef in their burgers because climate change has thinned their grass-fed herds.

Demand and prices are high globally in a commoditised market and New Zealand will be able to shift some around. Also, China now tariffs US beef imports, which were worth US$1.6 billion last year, at a rate of 54% and it just suspended imports from its seven largest beef suppliers in Brazil, Argentina, Uruguay and Mongolia while it investigates dumping by them (New Zealand is quietly checking to make sure we don’t get pinged too). US beef exports to China have already collapsed from 2,000 tonnes a week to 54 tonnes last week after Beijing didn’t renew the registrations of US meatpacking facilities that expired last month.

New Zealand’s wine exports will also look (relatively) cheaper than now-even-higher-priced competing wines from Europe being tariffed at a rate of 20%. Also, Trump has not put tariffs on services exports such as tourism and software-as-a-service, which will become relatively more attractive to US consumers as a result. Last year 370,000 Americans visited New Zealand for an average of 10 days each and spent about $4,745 each per trip, making the US the second largest source of tourism revenue at $1.75 billion last year (after Australia). That’s almost as much as beef exports to the United States last year.

And, luckily for us, New Zealand’s timber exports to the United States are exempt.

Quote of the day

Someone needs to disable caps lock and ! on Trump’s phone

“This would be a PERFECT time for Fed Chairman Jerome Powell to cut Interest Rates. He is always ‘late,’ but he could now change his image, and quickly. Energy prices are down, Interest Rates are down, Inflation is down, even Eggs are down 69%, and Jobs are UP, all within two months - A BIG WIN for America. CUT INTEREST RATES, JEROME, AND STOP PLAYING POLITICS!” Donald Trump on Truth Social before Powell’s speech on Friday night.

“GREAT JOB NUMBERS, FAR BETTER THAN EXPECTED. IT’S ALREADY WORKING. HANG TOUGH, WE CAN’T LOSE!!!

“TO THE MANY INVESTORS COMING INTO THE UNITED STATES AND INVESTING MASSIVE AMOUNTS OF MONEY, MY POLICIES WILL NEVER CHANGE. THIS IS A GREAT TIME TO GET RICH, RICHER THAN EVER BEFORE!” Donald Trump on Truth Social after better than expected US jobs growth numbers (from March) and the second day of a 5% slump in the S&P 500.

Number of the day

Arbitrary & pointless tariffs that create US inflation & hurt poor countries

3,500 acres (1,416 hectares) - The amount of land in the United States (in Hawaii) capable of growing cacao trees, which produces the cocoa for chocolate. Côte d'Ivoire has 11.8 million acres under cultivation and provided half of US cocoa imports in 2023 worth US$378 million. Offshoring the Ivorian chocolate industry to the US is not possible so the new 21% tariff on imports Côte d'Ivoire is pointless, other than as a tax on consumers that will increase chocolate prices.

Chart of the day

US tariffs back to the future of the Great Depression

Video of the day

Paul Krugman talks with Zachary Carter, a biographer of Keynes

The best of the rest this morning

My Pick ’n’ Mix at 6 am on Monday, April 7

* Food poverty investigation by BusinessDesk-$’s Cecile Meier: Compass gobbles up rich Govt contracts worth $210m this year

* Housing news by NZ Herald-$’s Ben Leahy: ‘Goldmine’: Developers brace for $500m state home sell-off

* Transport and climate news by NZ Herald’s Simon Wilson: AT’s new targets: More spending on roads, less on public transport and cycling

* Geopolitics news via Bloomberg (gift): Vietnam Offers to Remove Tariffs on US After Trump’s Action

* Housing and construction explainer by Stuff’s Erin Johnson What it takes to demolish a bad building. If it’s less than 4 storeys tall, it doesn’t need consent. So why is it so hard to demolish a bad building?

* Good electricity price news by BusinessDesk-$’s Ian Llewellyn: Chance of winter energy crisis reducing

* Poverty news by RNZ’s Rachel Helyer Donaldson: 'Gambling by stealth' - Iwi leaders call for halt on gambling law reform

* Environment news by RNZ’s Joe Shaw: Plastic wrap producers targeted under proposed 'Green Farms' scheme

* Good news by RNZ’s Graham Smith: 'We haven't had a power bill in five years': the Wairarapa couple living off-grid

* An interview with Shamubeel Eaqub. On RNZ’s Saturday Morning: New club of countries to emerge from Trump tariff turmoil - economist

Journal of record for the week to April 6

Politics, government, the economy & geopolitics

* Stats NZ released data on Māori business activity, reporting that the total value of earnings by employees of Māori authorities was up 15% in the December 2024 quarter compared with the December 2023 quarter. Māori authority exports were up 16% over the same period, and filled jobs for Māori authorities were up 2.4%.

* Inland Revenue began public consultation on proposals to simplify the fringe benefit tax system in order to reduce compliance costs. Under the proposals, fewer vehicles would be subject to FBT.

Poverty, health, education, justice & crime

* Cabinet agreed to enable medicines to receive Medsafe approval in less than a month if they have already been approved by at least two recognised overseas jurisdictions. Recognised countries currently include Australia, the US and UK, Canada, the EU, Singapore, and Switzerland.

* Te Whatu Ora Health New Zealand released performance data on its health targets for Q2 2024/25. Data showed reduced wait times for cancer treatment and in emergency departments, as well as improved child immunisation rates.

* Workplace Relations and Safety Minister Brooke van Velden announced that complying with WorkSafe Approved Codes of Practice (ACOPs) will be sufficient for businesses to meet their health and safety obligations.

* NZCTU President Richard Wagstaff said Brooke van Velden's changes to health and safety legislation are "driven by ACT Party ideology" and will exempt small businesses from best practice health and safety.

* The Business Leaders' Health and Safey Forum argued that Brooke van Velden's health and safety reforms focus on reducing critical risks, but won't do enough to reduce NZ's high workplace injury and fatality rates.

* ACC Minister Scott Simpson announced changes to performance monitoring and assessment processes for the ACC's Accredited Employers Programme.

Housing, transport & infrastructure

* Stats NZ reported that the number of homes consented in NZ in February was down 7.4% compared with February 2024.

* Land Information Minister Chris Penk announced that the final stage of the Government's overhaul of the Public Works Act will introduce additional compensation and incentive payments for public land acquisition, and will enable acquisition to support infrastructure recovery during states of emergency.

* In a speech commenting on the cancellation of the iRex ferry project, Deputy Prime Minister Winston Peters announced that two new Interislander ferries will enter service by Christmas 2029 and have rail decks for up to 40 rail wagons.

* Minister of Transport Chris Bishop announced that construction on a Road of Regional Significance project to improve State Highway 2 in Lower Hutt will start this year. The project will include a new interchange and bridge, improved walking and cycling infrastructure, and a relocated Melling Train Station.

Climate, environment, air, land & water

* Elecnor began work on a Waikato solar farm expected to bring electricity to roughly 35,000 homes when complete. The 182 hectare farm, a joint venture between Harmony Energy and Clarus subsidiary First Renewables, is expected to be ready to operate by late 2026.

* The Government will allocate $41.5 million from the Regional Infrastructure Fund to two projects to improve Northland's water security. Regional Development Minister Shane Jones said the Otawere and Kaipara pipelines will expand water access in Northland and open up 1600 hectares of productive land.

* A survey on ethical investment by Mindful Money and the Responsible Investment Association Australasia found roughly 75% of respondents want their KiwiSaver to be invested ethically and believe fund managers should commit to net zero emissions by 2050. Half of respondents were concerned about 'greenwashing' and other misleading claims about ethical investments.

The Kākā’s diary for the week to April 11, and beyond

Monday, April 7

* PM Christopher Luxon is expected to hold a post-Cabinet news conference at 4pm in the Beehive Theatrette.

* Health Coalition Aotearoa hosts an event on the influence of lobbying on NZ democracy at the University of Auckland from 5.30 pm.

* RBNZ releases residential mortgage statistics for March 2025, and housing market statistics for the December 2024 quarter.

Tuesday, April 8

* The New Zealand Institute of Economic Research will release its Quarterly Survey of Business Opinion for the March quarter.

* Stats NZ releases data on greenhouse gas emissions in the December 2024 quarter, as well as an 'Our Environment 2025' stats series.

* Parliament meets from 2pm. Meetings of Parliament are livestreamed on the Parliament website.

Wednesday, April 9

* RBNZ will review the OCR.

* Stats NZ releases its household labour force survey for the March 2025 quarter.

* Parliament meets from 2pm. Meetings of Parliament are livestreamed on the Parliament website.

Thursday, April 10

* The Treasury will give an online presentation on its upcoming 2025 Long-term Insights Briefing at 10.30 am.

* Stats NZ releases statistics on families, households, and housing from the 2023 Census.

* Parliament meets from 2pm. Meetings of Parliament are livestreamed on the Parliament website.

Friday, April 11

* Stats NZ releases glacier volume data, UV intensity data, and wildfire risk data to 2023.

Beyond April 11

* Apr 15 - RBNZ Chief Economist Paul Conway gives an online speech on RBNZ forecasting from 9.30 am.

* 3 June - New Zealand Media and Entertainment holds its AGM. Shareholders will vote on 10% stakeholder James Grenon's board takeover bid.

* 3 May - Australia will hold a General Election.

* 7 May - RBNZ releases its half-yearly Financial Stability Report.

* 12 - 14 May - The Environmental Defence Society hosts a conference on NZ's energy transition at the Grand Millennium Hotel in Auckland.

* 22 May - The Government releases Budget 2025.

* 17 Jun- The New Zealand Institute of International Affairs holds its 2025 conference.

* 25 - 27 June - The New Zealand Association of Economists holds its annual conference at Victoria University of Wellington's Pipitea Campus.

Many thanks to Eilish Grieveson for compiling and editing these Journals of Record items. My apologies for not putting them out yesterday. I’ll try to get them out on a Saturday this coming weekend.

Podcast or video of the day

Substack essential today

Cartoon of the day

Timeline-cleansing nature pic of the day

Ka kite ano

Bernard

This is a public episode. If you'd like to discuss this with other subscribers or get access to bonus episodes, visit thekaka.substack.com/subscribe

The podcast above of the weekly ‘Hoon’ webinar for paying subscribers on Thursday night features co-hosts Bernard Hickey & Peter Bale talking about the week’s news with regular and special guests, including:

* Cathrine Dyer and Elaine Monaghan on the week in geopolitics and climate, including Donald Trump’s tariff shock yesterday; and,

* Labour’s Disarmament and Associate Foreign Affairs Spokesman Phil Twyford on the epic changes in geopolitics in recent months.

The Hoon’s podcast version above was recorded on Thursday night during a live webinar for over 200 paying subscribers and was produced and edited by Simon Josey.

The Hoon won the silver award for best current affairs podcast in this year’s New Zealand Podcast awards.

(This is a sampler for all free subscribers and anyone else who stumbles on it. Thanks to the support of paying subscribers here, we’re able to spread my public interest journalism here about housing affordability, climate change and poverty reduction other public venues. Join the community supporting and contributing to this work with your ideas, feedback and comments, and by subscribing in full. Remember, all students and teachers who sign up for the free version with their .ac.nz and .school.nz email accounts are automatically upgraded to the paid version for free. Also, here’s a couple of special offers: $3/month or $30/year for under 30s & $6.50/month or $65/year for over 65s who rent.)

Ngā mihi nui.

Bernard

This is a public episode. If you'd like to discuss this with other subscribers or get access to bonus episodes, visit thekaka.substack.com/subscribe

Long story short: PM Christopher Luxon said in January his Government was ‘going for growth’ and he wanted New Zealanders to develop a ‘culture of yes.’ Yet his own Government is constantly saying no, or not yet, to anchor investments that would unleash real private business investment and GDP growth.

Instead, Luxon’s cabinet is choosing to reduce public borrowing at a time when investors are desperate to lend their cash piles to Governments. Businesses are becoming increasingly frustrated and said in a monthly business survey last month that central Government policy and a lack of economic growth were the two main reasons for almost half of them investing less than they were a year ago.

Banks are also uninterested in increasing lending to businesses to invest in anything other than houses, with bank lending to farmers and businesses not backed by housing land down $11 billion since Covid, while lending to home owners and landlords has risen $110 billion.

(There is more detail, analysis and links to documents below the paywall fold and in the podcast above for paying subscribers. If we get over 100 likes from paying subscribers, we’ll open it up for public reading, listening and sharing, although we’d love it if you subscribed to join The Kākā’s community and support making this journalism public. Students and teachers who sign up for the free version with their .ac.nz or .school.nz emails are automatically upgraded to the paid version for free. Our special are: $3/month or $30/year for under 30s & $6.50/month or $65/year for over 65s who rent.)

(Not) going for growth in a housing market with bits tacked on

Prime Minister Christopher Luxon talks a good game about breaking the ‘culture of no’ and ‘going for growth,’ but his own Government is regularly saying ‘talk to the hand’ whenever businesses want the Government to invest to unleash growth. Its actions show it is more focused on reducing home owners’ costs and increasing their tax-free capital gains, rather than growing real businesses and exports.

Luxon and Finance Minister Nicola Willis yesterday rejected Auckland Council’s plea for a $75 million investment to unlock $2 billion worth of America’s Cup-driven economic activity that would fill hotel rooms and get tills ringing. He framed the rejection as a tough choice to invest in roads and hospitals, rather than the America’s Cup. But his unspoken assumption that goes unchallenged daily is that the Government can’t borrow to invest because ‘there’s no money left’ or the Government is so vulnerable to an investor revolt that it needs to ‘tighten its belt.’ That’s demonstrably not true. Bond investors regularly bid for more than four times the $500 million worth of bonds being sold each week by Treasury. They are expected to swamp the Government with bids for a new bond being sold this week.

Luxon’s decision is all about choosing not to borrow to invest, rather than being forced or being stopped from borrowing. He’s making that choice because it might take a smidgen of pressure off interest rates, which he hopes will encourage private investment and economic growth. The trouble is banks aren’t increasing lending to real businesses any more. Since Covid, bank lending to real businesses (farmers and those not backed by residential property) has fallen by 10.7% to $90.3 billion, but lending to home owners and landlords has risen 31.2% to $461 billion.

Since Covid arrived in February 2020, bank lending to businesses and farms rose $10 billion to $190 billion, but that included a $24 billion rise in lending to landlords to $94 billion. Meanwhile, lending to home owners has risen by $90 billion to $367 billion. Since Covid, our banks have become mortgage banks, rather than banks for business. In effect, lending to real businesses and farmers not secured by residential property, which the Government has described as the backbone of the economy and the source of export growth, has fallen by $10.8 billion to $90.3 billion, while lending to those owning homes has risen by $110 billion to $461 billion, Reserve Bank figures show.

Reducing Government borrowing by a few billion might reduce mortgage borrowing costs by, for example, five basis points, which would save those borrowers $230 million a year. It might also contribute to a marginal increase in land values, which is not taxed. Luxon’s assumption is that fiscal restraint will encourage businesses to invest and grow the economy. That’s simply not happening, both because businesses are worried that Government’s restraint is contracting the economy and because its decisions since the election to not invest in housing, roading, hospitals and schools is removing the catalysts for private growth.

Here’s Luxon’s thinking in his own words (bolding mine):

“It would be nice to do, genuinely it would be nice to do, but we've inherited a very messy set of economic books and I think most New Zealanders would sit there and go, 'What's the choice, actually upgrading regional provincial hospitals across New Zealand or actually investing in America's Cup?' and it's pretty clear to me that actually New Zealanders want us to invest in proper infrastructure.

“We have a responsibility to be very grown-up and responsible with taxpayers' money.” Luxon talking to reporters yesterday via RNZ

The unspoken assumption is that he cannot borrow for public investments and that the economy will be better off with fiscal restraint.

‘I don’t trust those economic impact reports. Unless they’re about roads.’

Finance Minister Nicola Willis was similarly dismissive of the Auckland request and used similar framing yesterday, saying New Zealanders understood there was “no magic money tree” and the government could not pay “huge costs for everything.” Here’s more in her own words, including her doubts about the economic impacts assessed by the Auckland bid:

“We just judged that at this time those resources are better in our hospitals, our schools and the other pressing needs of New Zealanders.

“I think that those numbers are questionable... there would have to be a lot of analysis to ascertain whether that was the case, and I'm not sure that I accept that would have been the case." Willis talking to reporters yesterday via RNZ

Willis is criticising the same sort of economic impact reports by consultants that are used to justify investments in roads, in particular. Even then, the benefit to cost ratios of many of the Roads of National Significance projects are barely 1:1, rather than the many multiples for an America’s Cup bid, where $75 million of investment would lead to hundreds of millions worth of extra income taxes, GST receipts and promotional value for tourism.

Willis may not believe that these sorts of special events generate real economic growth, but those representing businesses in Auckland, and business leaders more generally, do think these sorts of investment unleash growth.

‘Um. What happened to our special events strategy?’

Here’s Heart of the City CEO Viv Beck talking yesterday (bolding mine):

“This is an event that would bring thousands of people to our waterfront and a boost in business for hotels and local businesses while it’s on.

“This was a golden opportunity to utilise purpose-built infrastructure and reap a timely economic return.

“It is frustrating that ongoing representation to Government about the need for urgency in resolving a sustainable funding mechanism for major events has not yet delivered an outcome.

“Getting this funding in place must be fast-tracked so missing out to well-funded bidders competing for other major events doesn’t become the norm.” Beck via NZ Herald.

‘Occupancy rates are soft. We need these special events’

Hoteliers heard yesterday that occupancy rates are softening, as Miriam Bell reported this morning for The Press-$.

She quoted hospitality analyst Matthew Burke, a regional director of Asia Pacfic at CoStar's hospitality analytics division, as telling an Accor conference the data showed New Zealand was one of two major countries to see occupancy and average daily rate declines in 2024. Here’s his comments (bolding mine):

“Demand continued to grow overall, but it softened out in winter before starting to grow again towards the end of the year. Not having a big event, like the Fifa Women’s World Cup the year before, made a difference.

Wellington was reflecting the effects of government cutbacks, with a big slip in midweek occupancy rates and average daily rate heavily impacted, but Christchurch’s occupancy rates were solid and looking positive going forward, he said.

“There are early signs that winter 2025 will be tough again across New Zealand, with soft demand in forward occupancy in Auckland and Wellington. But there’s a slightly better outlook for the South Island.” Burke via The Press-$.

‘Your policy of saying ‘talk to the hand’ is a big problem for us’

Hoteliers and shop owners are not the only ones concerned that the Government’s preference for reducing borrowing rather than investing was slowing the economy and leading them to invest less.

ANZ’s Business Outlook survey for March was published on Monday and showed businesses were frustrated with those Government policies and subsequently poor demand from a stuttering economy. They saw Government policy and weak consumer demand as their main reasons to invest less. Their frustration was only slightly less than it was in the last days of the Labour Government.

Frustration is building too among retailers, including many who would view themselves as natural supporters of the current Government.

Briscoe Group Managing Director Rod Duke was typically blunt in his assessment last month when talking to the NZ Herald-$ about a lack of consumer demand that had led to flat sales.

He said the Government needed to “get their a** into gear” and “actually do something” to help the economy.

Here’s Duke in his own words (bolding mine):

“The closer you get to the election, the more likely they are to be doing something seriously proactive, and I just see the back half as being significantly easier than the first half.

“I think they’re of the view that up until now they’ve been able to blame the prior Government, which is typical of a lot of governments I guess, but you know the time has just about come where you’re going to have to make your own mark.

“You’ve had enough time to study, to tighten, to understand what the books look like, and now you’ve got to put some policies into place.” Duke via NZ Herald-$

The Government might well say it is continuing spending on day-to-day items, but the real problem is a lack of investment.

‘The economy stalled because the Govt cut capital spending, not Opex’

Construction spending fell in the December quarter by the most since the Global Financial Crisis, largely due to freezes in Kāinga Ora, school classroom, hospital and local road building, due to suspensions and cuts to capital grants.

Here’s the detail via Simplicity Economist Shamubeel Eaqub on LinkedIn about how the Government’s spending restraint has mostly been around cutting capital investment since the election.

Here’s Shamubeel in his own words on the Government’s actions and inactions affecting the economy (bolding mine):

“Fiscal austerity so far has been reduced investment and not much else, because red projects were turned off by the blue team. Politics cannot be wished away, but politics should be for projects 5- or 10-years out, not the current short-term-ribbon-cutting trap.

“In the 7 months to Jan-25, government net cash spend (opex+capex-revenue) into the economy was down 41% from the previous year. [See left chart.] Rising tax revenue may surprise; they would have increased more without income tax cuts.

“Operating spending is still growing (1/4 from NZ Super!), despite announced cuts. So, tax cuts have not been offset by spending cuts and efficiencies. NZ is borrowing money to fund operations not investment, as a prudent country does. The biggest slashing has been in investment spending, which slowed sharply in the 2024 calendar year, down $2.3b or 14% from 2023. [See right chart.]

“It’s a shame, because in a recession speeding up infrastructure investment moderates the economic pain, and delivers much needed infrastructure, typically under budget and on time. (It’s also one part of unlocking NZ's stagnant productivity.)” Shamubeel Eaqub on LinkedIn

Christopher Luxon has talked about turning around the ‘culture of no’ in our economy. He should consider his own Government’s approach first.

Ka kite ano

Bernard

This is a public episode. If you'd like to discuss this with other subscribers or get access to bonus episodes, visit thekaka.substack.com/subscribe