The Kākā by Bernard Hickey

As part of The Kākā Project of 2026 for 2050 (TKP 26/50) and When The Facts Change ,I interviewed Octopus Energy Zero Bills Technical Director Nigel Banks from the UK about this week's launch in New Zealand of a partnership with Classic Homes to build new homes in Auckland with enough solar panels and batteries that can sell enough power back into the grid that the homeowner doesn’t have to pay a power bill for at least five years.

The British-based new retailer Octopus Energy has developed a software platform called Kraken, which they also license to other retailers, that buys and sells electricity generated from solar panels on homes and other buildings and stored in batteries. Octopus work with the home builders to ensure the new homes are properly insulated and heated to optimise for zero bills. It has accredited over 1,000 homes from builders in the UK such as Lloyds Living, SNG and Clarion Housing Group and is aiming for over 100,000 zero bills homes by 2030.

Octopus arranges the supply in bulk of the cheapest panels and batteries for the builders to buy and then include in the purchase price of the home. The homeowner owns the panels and batteries and then agrees the ‘zero bills’ contract with Octopus Energy.

(This article and interview is being made available to all subscribers immediately and in full as part of ‘Gravy Day Fortnight,’ which is our pre-Christmas promotional period. We welcome new subscribers to support this kind of public interest journalism about housing, climate and poverty being made for and available for the public, regardless of means.)

The key points from the interview:

* Octopus Energy was founded in the UK nine years ago by entrepreneur Greg Jackson with the aim of using technology with open electricity trading markets to lower bills and improve service along with being profitable enough to grow.

* Octopus also now generates electricity and operates in another 17 countries, including New Zealand. It has over 10,000 workers and generates revenues of nine billion pounds per year.

* Banks says solar panel prices have fallen 90% over the last 10 years, including a halving of costs in the last year. He says China is producing more than four million solar panels a day.

* British home buyers are able use a 4.5% mortgage rate on a 25-year mortgage to borrow 10,000 to 15,000 pounds to buy the panels and batteries for a two to three bedroom and save 1,500 to 2,000 pounds per year. Over 25 years, the 30,000 to 50,000 pounds saved dwarf the initial costs.

* Banks says landlords were able to charge an extra 30 to 50 pounds a week in rent to cover the cost of the panels and batteries.

Key quotes:

“The majority of the cost is now the installation, the labor, the accreditation, the permitting and the paperwork that goes with that. In a new home, you can do that in a much more effective and cost effective way.” Nigel Banks.

“The energy bill is your second biggest outgoing after your mortgage. When you do your mortgage calculation to work out how much money you can borrow, if you've got guaranteed zero energy bills, you could put that money towards your mortgage payments and be able to borrow the extra capital.” Nigel Banks

“The economics actually of installing some of this equipment is some of the best investments you can make from a financial return perspective, if you can get that initial cost to a sensible level.” Nigel Banks

“Five years ago, lot of this didn't make financial sense. Now, with the cost of that equipment coming down, if you can get that delivered cost effectively to your home, then the finances really do make sense.” Nigel Banks

“Your point about sort of perpetual energy machine — we have one in the sky that's there every day — the sun. We've got this now fantastically cost-effective way of converting that light energy into electricity and storing it in a very cost-effective way. Solar and battery are one of the most cost-effective interventions to lower bills and address poverty or fuel poverty in a home there is now.” Nigel Banks

“The challenge in New Zealand is partly how to do that, and scale that up so it's cost effectively delivered. And that's around getting good supply chains and getting going. But new build housing is a fantastic route to market because you've already got all the people you need on site — electricians and roofers.” Nigel Banks

“This is the standard that all new homes around the world could or should be being built to. And it's economically viable now. Five years ago, it probably wasn't. But in a year or two's time, it's going to get better as the costs continue to fall, particularly on batteries.” Nigel Banks.

In my view

The economics to justify this sort of ‘zero bills’ approach is now do-able with the 4-5% interest rate that a bank can provide through a mortgage over 25 years, or a Government can fund through bond issues at 4%. Banks have tended to want faster payback periods and rates have been higher than 4-5% until now.

The question is how fast and how wide any Government would want ‘zero bills’ houses to go. It could just leave it to the market, but that has so far struggled in New Zealand where independent retailers have been unable to secure enough affordable supply from the wholesale market and buyers and banks are yet to grasp the long-term economics.

There’s also no compulsion for builders and buyers to do it this way and banks prefer the loans to be paid back within a couple of years, rather than just be added to the 25-year loan.

One other handicap is that home buyers of new homes are often forced to skimp on the capital cost of the new home, having paid proportionally more for the land. The leveraged, risk-adjusted and after-tax benefits from land price inflation are way above those for the capital values of the home itself, so it makes sense to overload on land costs, rather than build costs.

For short-term ‘buy and flick’ owners, they also find it hard to justify frontloading the extra $30,000 to $40,000 in costs to the build costs. The collapse of SolarZero may also spook many buyers.

The bigger final issue is the much higher installation costs and risks for retrofitting Aotearoa’s existing 2 million homes, which is where the biggest benefits lie, especially the homes rented out, where the bill payer has no ability to invest in the capital cost for the panels and batteries. Landlords more attuned to the leveraged and tax-free gains on land are less interested in ‘over-capitalising’ any new build for rentals, simply because of the short-term and land-focused nature of their investment.

Ultimately, accelerating the solar panel and battery revolution to enable large scale and fast growth of the sorts of independent tech-focused competitors to the gentailers will require some form of financing and building standards intervention.

Also: the best way to change the incentives on investing land versus housing is to remove the tax advantage on leveraged investment in land over pension savings that are invested in real businesses.

The Kākā Project of 2026 for 2050 would propose a low annual tax on the value of all residential zoned land, with the rate escalating for second, third etc homes, and land that is unbuilt on. That revenue could be collected and distributed to the Government and councils build and run the water, housing and public transport infrastructure needed to build these sorts of low-cost and low emissions homes.

The Government’s own balance sheet could be used to finance the retrofitting of solar and batteries on all its own homes, let alone new homes. The Reserve Bank could also regulate to encourage lending for such low-emissions investments, which are likely to reduce the risks of default and ultimately reduce the Crown’s national emissions liabilities.

I welcome your suggestions, challenges and suggestions for further questions, interviews and policy ideas in the comments below.

Chapters in the video above

* 00:00 Introduction to Octopus Energy

* 05:33 Optimizing Energy Consumption for Consumers

* 10:48 Addressing Capital Costs for Solar and Batteries

* 16:24 The Future of Home Energy Solutions

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

It’s that time of the year when we offer 50% off for a year to new subscribers for the next fortnight until December 21, which is ‘Gravy Day’. It’s our version of a Christmas/Black Monday/Cyber Monday/Singles Day/Boxing Day offer. We call it the ‘Gravy Day Fortnight’

New subscribers can claim the offer here. That means a full subscription to The Kākā costs $9.50 a month or $95 per year for the first year, and then reverts to the regular price of $19 a month or $190 a year after a year.

A reminder that we also have special all-year-round offers for full subscriptions for:

* all under-30s at $3 a month or $30 a year forever; and,

* those over-65s who rent at $65 a year for life.

Also a reminder that we will upgrade anyone on a free subscription to a full paid subscription for free if they’re a student, a teacher, work for a university or polytech, or are on a main benefit. Students and teachers are automatically upgraded for free when they register with their ‘.ac.nz’ or ‘.school.nz’ email addresses. For beneficiaries, just write ‘gravy’ in as your second name when you sign up to the free email and we’ll upgrade you automatically.

We also automatically upgrade any free subscribers who work for advocacy groups or political parties or media organisations. We’ll do that automatically by reading your email address relating to your organisation or employer.

I’m trying out opening everything up to all

To mark this ‘Gravy Day Fortnight’ event and to give everyone a clear idea of what your subscription supports, I’ll be doing video interviews with newsmakers and experts daily about solutions to Aotearoa’s problems in housing, climate and poverty for the next 14 days and publishing them in full to all via The Kākā on substack and via YouTube. It will mean I’ll be producing fewer and less detailed Dawn Chorus compilations of curated daily news. It’s an experiment and I welcome feedback.

As an experiment, I’ll also open up everything for everyone in full for these 14 days to see if it increases readership and revenues. I’ve always been sceptic about having completely free access while also asking for a regular contribution, but others doing public interest journalism have found some success asking for subscriptions with a promise to give it all away to the public, even those who can’t pay.

Subscriptions to The Kākā have flattened out and then fallen a little this year for the first time since we turned the paywall on in September 2021. That’s partly due to a couple of publishing hiatuses during the year when I took a mid-winter break and then took some time off when my Mum passed away.

It may also be because of cost-of-living pressures, or because I have been opening up more articles lately after getting over 100 likes. I’m not sure. I have a hunch there is support from paying subscribers to open up all articles and podcasts as long as it is in the public interest. We’ll see. A surge in revenues may convince me to go permanently open.

The fall in revenues we’ve seen, along with an increase in costs, has forced us to tighten our belts a bit, including stopping our weekly climate wrap. We’re very lucky that Cathrine Dyer is able to volunteer to come onto the Hoon to talk about climate regularly, but we can’t afford the weekly wraps anymore.

Wishing you all a safe and happy run-up to Christmas. We appreciate all the support of all subscribers.

Ngā mihi nui

Bernard

The Kākā by Bernard Hickey is a reader-supported publication. To receive new posts and support my work, consider becoming a free or paid subscriber.

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:

* Cathrine Dyer on Trade and Agriculture Minister Todd McClay saying New Zealand would not buy emissions credits overseas, effectively admitting we’ll renege on our Paris commitments. (RNZ)

* Robert Patman on the Israel vs Gaza/Iran/Lebanon and Ukraine/Nato vs Russia/North Korea conflicts, Donald Trump’s transition and whether New Zealand joins AUKUS, including Labour’s pledge to pull out if National takes New Zealand in.

* Special guest Troy Baisden, the Co-President of the NZ Association of Scientists, on the Government’s shock decision on Wednesday to completely stop funding pure science research in humanities and social sciences via the Marsden fund.

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

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

Morena. Long stories short in Aotearoa’s political economy for Thursday, December 5:

* The Government halved spending on ‘blue-sky’ research by completely removing social sciences and humanities funding, arguing only research in physics, chemistry, maths, engineering and biomedical sciences would help the economy.

* The latest Government spending cuts take the numbers of Government-funded science job losses to well over 500 this year, adding to the over 200 residents who emigrate each day to other OECD countries, where the average for Research & Development spending of around 3% of GDP is more twice that of New Zealand.

* Stats NZ has reported the numbers of people living in severe housing deprivation rose to 112,496 of 2.3% of the population in the census last year from 99,462 or 2.1% in 2018, with 18,761 either sleeping rough or in tents, boarding houses or marae, up 62% from 11,574 five years ago.

(I have decided to open this one up for full public reading, listening and sharing immediately, given the public interest involved. Thanks in advance to our paying subscribers who support this work in the public interest. Subscribe to join our effort)

Chart du jour: A churn and burn economy

The Kākā’s Journal of Record for Thursday, December 5

* Housing: Stats NZ reported that at least 112,496 NZers were severely housing-deprived in 2023, up from 99,462 in 2018. The grouping includes people without shelter, in temporary accommodation, temporarily sharing someone else's house, or in uninhabitable housing.

* Climate: A Government-commissioned independent review determined biogenic methane reduction targets for NZ that would satisfy Paris Agreement warming goals. The Green Party argued lowering NZ's methane reduction targets would unfairly shift the burden for reducing greenhouse gases away from agriculture and onto other sectors.

* Health: The Labour Party accused Te Whatu Ora Health NZ of exaggerating its deficit in order to justify job cuts, citing that the Auditor-General was made aware of discrepancies in the agency's accounts. In response, Health Commissioner Lester Levy sought an apology from Labour's health spokesperson Dr. Ayesha Verall, saying there was "no reason" for Te Whatu Ora to want to “cook the books".

* Jobs: Under proposed changes to the Employment Relations Act announced by Workplace Relations and Safety Minister Brooke van Velden, employees wouldn’t receive any compensation in personal grievance cases when their employer can show they either engaged in misconduct or contributed to the situation giving rise to the case. NZCTU President Rachel Mackintosh called the proposals part of a "sustained series of attacks" on workers' rights by the Government.

* Climate & environment: Agriculture and Forestry Minister Todd McClay and Climate Change Minister Simon Watts announced new limits to farm to forestry conversions entering the Emissions Trading Scheme meant to "protect food production for farmers”. The changes, coming into force from October 2025, include a ban on forestry on flat, productive farmland.

* Climate: ANZ reported increased sales of NZ carbon units at the Government's auction today, with over 4 million units sold out of 11.126 available. ANZ expects forestry to be the main source of units from 2025, despite the government's upcoming ban on converting certain classes of farmland to forestry.

Cartoon of the day: It’s a priorities thing.

Timeline-cleansing nature pic of the day

Mā te wā

Bernard Hickey

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

Morena. Long stories short on Wednesday, December 4, with more detail and analysis in the podcast above:

* Health Minister Shane Reti says spending cuts will continue for an extra year into 2027 because of a delay in Health NZ achieving a ‘surplus’.

* Finance Minister Nicola Willis can’t supply a select committee with evidence austerity works to grow economies.

* The actual evidence via the OECD, IMF and World Bank shows budget cutting doesn’t work to grow economies, instead reducing GDP, especially when the tightening is done during a recession when monetary policy is tight.

* Three opinion polls published over the last week show the Governing National-ACT-NZ First coalition lead over the Labour-Green-Te Pāti Māori Opposition bloc has evaporatedas the recession grinds on and concerns about health escalate.

Charts du Jour

IMF research showing Willis’ strategy increases debt-to-GDP

Roy Morgan’s NZ poll showing Govt honeymoon is over

The Kākā’s Journal of Record for Wednesday December 4

* Housing and population: Stats NZ released in-depth 2023 Census data on families, households, location, socioeconomic metrics, and housing via the Aotearoa Data Explorer. Findings include that 55,779 households always experienced significant problems with mould in 2023, as compared to 64,386 in 2018.

* Transport: Control of regional transport policy and planning will be returned from Auckland Transport to Auckland Council under significant Auckland travel reforms announced by Transport Minister Simeon Brown & Auckland Mayor Wayne Brown. The Government will create a new Auckland Regional Transport Committee to develop a 30-year plan for Auckland. NZ Herald

* Health: Te Whatu Ora Health NZ's newly-released statement of performance indicated budget cuts will continue until 2027, including more voluntary redundancies. Health Minister Dr. Shane Reti said Te Whatu Ora was "making encouraging process" towards lowering its “deficit.” 1News

* Electricity: Electricity retailers will not be able to disconnect customers with medical power needs under new Electricity Authority consumer protection obligations coming into effect from 2025. Under the obligations, electricity retailers will also need to ensure any fees or charges are "reasonable".

* Climate: A global study including NIWA scientists found that warmer temperatures reduce the ability of wetlands to store carbon. The researchers buried teabags in wetlands across 28 countries and collected them at different time intervals, with better-preserved teabags indicating the wetland’s better ability to store carbon.

* Privacy: The Privacy Commissioner reported a record high 1003 complaints were submitted last financial year. Privacy Commissioner Michael Webster said many complaints focused on agencies being "unwilling or unable" to meet their Privacy Act obligations by giving people access to information held by the agencies.

Cartoon du Jour: ‘We’re just not that into him’

Timeline-cleansing nature pic of the day

Mā te Wā

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

Mōrena. Chris Bishop unveiled his major infrastructure funding and financing plan yesterday that made clear borrowing with public debt to build infrastructure would be a last resort, with private funds and user pays the main tools to both limit the amount built and pay for it.

In my view, that’s unsustainable and unnecessary, given our $100 billion-plus infrastructure deficit, still-rapid population growth and huge structural, local and global demand for New Zealand Government bonds, rather than the debt crisis portrayed by the Government, which I talk about this more in the podcast above.

Elsewhere in the news this morning:

* A new Stuff poll out overnight shows National-NZ First-ACT in a virtual dead-heat with Labour-Green-Te Pāti Māori and Christopher Luxon has fallen behind Chris Hipkins in the preferred PM rankings, with Jacinda Ardern again the most popular politician in the country (see more in charts of the day below).

* The poll also shows cost-of-living concerns are the biggest for voters, with health rising fast into second place, while Government debt is right at the bottom of the list of concerns, despite the Government making it the number one priority.

* Up to 700 people in the Lower Waihao area between Timaru and Oamaru can’t drink their tap water this morning after Taumata Arowai-The Water Services Authority said nitrate levels were above 50 mg/l in their water supplies, making it unsafe to drink, especially for babies.

Charts du Jour - Jacinda popular. Again.

Debt not a worry, despite Govt’s (misplaced) fears

The Kākā’s Journal of Record for Tuesday, December 3

* Jobs & poverty: Social Development & Employment Minister Louise Upston announced that Ministry of Social Development case managers will develop individualised plans with up to 70,000 beneficiaries to get them employed. Beneficiaries who don't fulfill actions agreed on with their case manager will face sanctions via the new Traffic Light System.

* Infrastructure: The Government released guidelines for private sector entities looking to propose infrastructure public-private partnerships. The guidelines specify that infrastructure proposals should be in the public interest and provide good value for money; private sector entities must also demonstrate why are the only party able to deliver the proposal's outcome.

* Education & poverty: A Ministry of Education-commissioned review of the Government's Healthy School Lunches program found that teachers reported improved outcomes for students, and whānau reported less stress from food bills. The review found the program also grew local catering businesses and provided employment opportunities for older people. RNZ

* Housing: Stats NZ reported that home consents were down 6.9% in October 2024 compared with October 2023. Multi-unit house consents were down 18% compared with October 2023, whereas stand-alone house consents were up 8.6%.

* Migration & poverty: The Employment Relations Authority fined a company that supplied labour to the Bay of Plenty kiwifruit industry $100,000 for underpaying temporary visa holders. The Labour Inspector said Asad Horticulture Limited's record keeping breaches were "systemic"; the company's sole director has paid the affected employees over $45,000 in arrears.

* Migration & poverty: Partners and spouses of migrants working higher-skilled roles on an Accredited Employer Work Visa will now be eligible for open work rights, Immigration Minister Erica Stanford announced. Stanford said partners of AEVW holders in lower-skilled roles will also gain open work rights if their partner is on a "pathway to residency."

Cartoon du Jour: ‘Help’

Timeline-cleansing nature pic

Mā te wā

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

Good morning. Labour appears to be leaning back towards a Capital Gains Tax and away from a wealth tax. Meanwhile, Christopher Luxon says his Government is relearning the economic lessons learned in the early 1990s.

Labour leaning back towards Capital Gains Tax

Labour held its annual conference in Christchurch over the weekend and voted to continue on with policy work on a Capital Gains Tax and a Wealth Tax, but close watchers are seeing preference developing in Labour’s Policy Council in favour of a Capital Gains Tax.

Here’s Vernon Small in his Sunday Star Times-$$$ column:

Since opening the door to a wealth tax or a CGT as part of 2026 policy, Hipkins has been careful not to back either definitively. But any signals he has given point to a CGT. The parliamentary caucus and the weight of the 11 affiliated unions are thought to lean that way too.

The document put to the conference by Labour’s policy council keeps both options alive for further work. It says Labour will implement a capital gains tax on assets or net-wealth tax on wealth above a reasonable threshold. Both options exclude the family home.

That takes the final decision away from the membership and into the hands of the policy council. A widely-held view (including by this commentator) that the council will back a wealth tax appears to be in doubt.

The conference faced a range of amendments that would variously give CGT the edge. But there is another from a well-organised group within the party calling themselves “Win the Wealth Tax”.

This group organised a standing-room-only meeting on the first evening of the conference that pondered a wealth tax alongside other progressive policies.

Their proposed amendment would see Labour back a wealth tax while investigating a CGT only as a “complementary measure”. It envisaged a 1.5 per cent tax on net wealth above $5 million per individual, excluding the family home.

They argued detailed design work for a wealth tax had already been done by Treasury and Inland Revenue as part of the 2023 proposal, and that the politics are “explicitly clear” by taxing the wealthiest 1 per cent to support everyone else.

But the amendment was defeated by about 55 to 45 per cent on the conference floor.

Certainly, CGT is better understood locally and more widely used in other countries. But the simplicity of a wealth tax affecting only the top 1 per cent is an easier sell than the exclusions, inclusions and fine print of a CGT. Vernon Small via SST-$$$

Here’s Hipkins’ full speech to the conference (22 mins onwards), in which he said Labour would (not) join AUKUS, and his news conference afterwards (1:11 onwards), in which he appeared to confirm a Labour Government would pull New Zealand out of AUKUS if National had committed to it in Government.

Luxon learning lessons that are 35 years old

PM Christopher Luxon was quizzed in depth on yesterday’s Q+A by Jack Tame (full video below) about the sagging economic outlook in the last year, in particular New Zealand’s worse performance than other countries with the same inflation dynamics. Luxon blamed Labour and said this (bolding mine):

“Essentially what we're dealing with is relearning some economic laws around spending and inflation and interest rates and growth and unemployment. We've made some good progress around the cost of living, getting inflation back down, getting interest rates down. We've got good levels of consumer confidence, the highest it's been in three years, high levels of business confidence, the highest in a decade.” Christopher Luxon in the Q+A interview with Jack Tame below.

Challenged on why New Zealand was performing poorly with the same inflation dynamics as others, Luxon said:

“What I’s just to say to you is: we've kind of forgotten the laws of economics I'd say that we learned 35 years ago and we've taken good economic management for granted. When you increase spending by 84%, when you drive up inflation domestically, you have to then take interest rates up. When you take interest rates up, you've put the economy into recession, and when the economy is in recession it leads to unemployment.

“That's why we've always said if you actually care about working New Zealanders you actually are fiscal conservatives you actually run the economy well because the pain is ultimately unemployment and that's what we've actually been seeing.

“The last 3 to 6 months is the lagged effect of that. If you're a business that's hung in there with high inflation, high interest rates, suppressed demand, the last thing you're left with is is actually laying workers off and we've seen some of that this year so that's why we're working our way through those five components (Government spending, inflation, interest rates, unemployment, growth) but you've got to work through them sequentially so you get the show going.”

“You have to take your medicine. You actually have to work through the economy and that's what we're doing. You get spending under control as we have been doing. We haven't thrown the economy into austerity. We've got a very balanced approach to that.” Luxon.

In my view, Luxon is pointing to the Ruth Richardson ‘lessons’ from 1990-93 when she slashed spending dramatically and worsened unemployment to 11% at the same time as Don Brash was running high interest rates to get rid of inflation. Prime Minister Jim Bolger sacked Richardson in 1993 when it became clear the medicine was making the patient sicker.

The ‘austerity medicine’ economic lesson has been proven repeatedly over the last 35 years to have failed to restart economic growth.

Luxon is also plain wrong when he says his Government is not pursuing an austerity approach. Treasury advised the Government months ago that its fiscal track would generate the biggest real per-capita cuts in New Zealand’s economic history, bigger even than under Richardson.

The Kākā’s Journal of record for Monday, December 2

* Housing & health: A five-year evaluation of the Healthy Homes Initiative found that every dollar spent by Te Whatu Ora on the program was associated with $5.07 in health savings over the following five years, including via an 18.6% decrease in all-cause hospitalisations among program participants. Health Minister Dr. Shane Reti said the Government is “committed” to the program, which he called a positive example of a social investment approach. RNZ

* Infrastructure: Minister for Infrastructure Chris Bishop announced the opening of National Infrastructure Funding and Financing Limited (NIFFCo), a new infrastructure agency focused on developing public private partnerships. Bishop said NIFFCo was "repurposed" from Crown Infrastructure Partners, which was set up in 2009 to manage the national rollout of ultra-fast broadband.

* Economy & politics: In a speech to the Labour Party Conference 2024, Labour Leader Chris Hipkins accused the Government of cancelling “almost all action” on climate change and exacerbating the cost-of-living crisis via "trickle-down economics". National's Finance Spokesperson Nicola Willis claimed in response that Labour increased public spending by 80%, and said National would not implement a capital gains tax or a wealth tax.

* Foreign policy: Labour Leader Chris Hipkins said that, in order to maintain NZ's foreign policy independence and nuclear-free status, NZ would not join AUKUS under Labour. Hipkins said Labour is "deeply concerned" by what he called the Government's efforts to get closer to the US. 1News

* Health & politics: Labour Leader Chris Hipkins promised that a Labour Government would build the new Dunedin Hospital "as it was committed to prior to election 2023." In September this year, the Government decided to either down-scale the new hospital, or cancel the project and retro-fit the existing hospital instead. Otago Daily Times

* Vaping and equity: The Public Health Communication Centre noted that the number of NZers over age 15 who vape daily increased from 3.5% in 2019/20 to 11.1% in 2023/4, with people living in the most deprived neighborhoods more than twice as likely to vape daily than those in the least deprived. The PHCC said the proportion of young people vaping suggests the increase is significantly due to people who have never smoked taking up vaping.

Cartoon du jour: ‘Careful what you reach for’

Timeline-cleansing nature pic

Mā te wā

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

Summary

In this conversation, Paul Conway, the Chief Economist for the Reserve Bank of New Zealand, discusses the recent cuts to the official cash rate and the underlying economic factors influencing these decisions.

He explains the dynamics of inflation in New Zealand, the impact of administered prices, and the role of government policies in shaping inflationary trends. Conway also reflects on the effectiveness of inflation targeting and explores potential alternatives to this approach.

Takeaways

* The Reserve Bank cut the official cash rate by 50 basis points due to easing inflation pressures.

* Headline inflation is at the midpoint of the target range, allowing for rate cuts.

* Imported deflation is contributing to lower headline inflation numbers.

* Non-tradable inflation remains a concern, still above the target band.

* Administered prices and lack of competition contribute to domestic inflation.

* Government fiscal policies have played a role in reducing inflation.

* Inflation targeting has been effective despite recent challenges.

* There is a need to consider alternatives to traditional inflation targeting.

* The purchasing power of the dollar has been affected by inflation.

* Deflation poses significant challenges for monetary policy.

Chapters

00:00 Reserve Bank's Recent Rate Cuts

05:42 The Impact of Domestic Inflation

11:12 The Role of Fiscal Policy

16:29 Exploring Alternatives to Inflation Targeting

In interests of getting this interview recorded on Friday afternoon out in a timely fashion, I’ve published this as recorded. The full transcript is accessible with the video.

This has been published to all and is available to all to watch and share. I’d recommend listening and watching in its entirety to get the nuances.

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:

* Robert Patman on the Israel vs Gaza/Iran/Lebanon, Ukraine/Nato vs Russia/North Korea and whether NZ joins AUKUS;

* Special guest Community Housing Aotearoa CEO Paul Gilberd talking about the Community Housing Provider (CHiPs) sector’s hopes for a Government guarantee to unleash thousands of new homes with fund from KiwiSaver and pension funds here.

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

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

(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.)

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

Kia ora. Long stories short, here’s my top things to note in Aotearoa’s political economy around housing, climate and poverty on Thursday, November 28:

* The News: The Reserve Bank cut the OCR 50 bps to 4.25% yesterday and Adrian Orr signalled another 50 bps cut to 3.75% on February 19. He told me he was concerned about administered inflation by the Government, including through bus and train fare hikes and electricity price increases.

* Scoop du jour: Lloyd Burr interviews Covid Royal Commission Chair Tony Blakely for Stuff.

* Deep-dives du jour: Tim Brown looks in depth at whether Westport can be moved (RNZ).

* Solutions news: The Government is investing $82 million into 12 Maori housing providers to build 198 affordable homes. Stuff

* Editorial Opinion du jour: Chris Slane nails Casey Costello in this cartoon.

(There is more detail, analysis and links to documents below the paywall fold and in the podcast above for paying subscribers. Normally, if we get over 100 likes we’ll open it up for public reading, listening and sharing, but I’ve decided to open this up from the start due to the public interest involved.)

The News: RBNZ loosening as Govt tightening

RBNZ eyes another 50 bps as fiscal policy bears down on GDP

I was struck yesterday during the Reserve Bank’s monetary policy news conference in Wellington by just how quickly the bank’s forecasts and tone have changed this year, the first under the new Government.

As recently as May, the day before the Budget, the Reserve Bank projected it would not have to cut the OCR to where it is this morning (4.25%) until November of 2026. Mere months later, we’re already there, two years ahead of schedule, with another 50 basis point cut to 3.75% expected on February 19. Back on May 22 of this year, the Reserve Bank forecast the OCR would not get there until early 2027.

So what changed?

The intensity and scale of the Government’s real and per-capita cuts to current and future spending and investment on public housing, hospitals, public health, transport, welfare and education surprised many voters and workers through 2024. Now it’s dawning on many in business and the wider economy just how much the Government’s austerity programme is dragging on consumer spending and employment. The Government is tightening hard in the middle of a recession.

Treasury has warned of the most severe budget tightening in real and per-capita terms in our history if Nicola Willis carries through on her pledge to achieve a surplus in 2027/28 and bend public debt and the size of Government back down towards and then under 30% of GDP respectively, from 34% and over 40% respectively. A cut of 4 percentage points of GDP means real cuts of over $20 billion a year by the end of the forecast period, relative to a steady state.

A quick trip around the rest of the day’s headlines should remind business owners and spenders just how much more cutting of Government jobs and spending is to come, including:

* News yesterday of 1,500 job cuts by Te Whatu Ora-Health NZ, albeit including 300 still-vacant roles; RNZ

* Waka Kotahi-NZTA telling councils of public transport funding cuts that in Wellington’s case would require fare increases of 70%; RNZ

* SolarZero collapsing and sacking 160 workers; and,

* Whangārei Whanganui Council sacking 21 staff as it tries find $2 million of savings, thanks partly to cuts in expected funds from central Government. RNZ

The flood of bad news around job cuts, shop closures and higher public services costs with more to come is weighing on spending and investment, despite apparently stronger business and consumer confidence. There is a growing disconnect between election-related surges in confidence and actual spending and investment.

Retail spending per capital has crashed to 2016 levels and is still falling.

The Reserve Bank itself showed just how lopsided the economy has become towards the housing market and how much of the rest of it is suffering, including these charts showing homeownership and rental services and Government were the only generators of production GDP growth over the first nine months of 2024:

PM Christopher Luxon celebrated the rate cut yesterday and said the economy was on the “right path.” Here’s his comments via RNZ (bolding mine):

"Many Kiwis are already seeing relief with mortgage rates falling, allowing their budgets to stretch a little bit further and giving families an extra dose of confidence heading into Christmas," he said.

"We can't fix all of New Zealand's economic challenges overnight, and we know that many families and many businesses are still doing it tough. The economy is coming out of a very deep and protracted recession that has put immense pressure on household finances and also businesses' bottom lines.

"With inflation now within the target range and another OCR cut welcomed today, the outlook is positive, and we are on the right path. I feel 12 months into this job, more positive about the future for New Zealand than at any point. We have a fantastic future ahead of us." Christopher Luxon yesterday via RNZ

By prioritising mortgage rate reduction and tax cuts over employment and GDP growth, the Government has delivered for home owners and landlords. Its job cuts, administered price increases and public services reductions have hit renters hardest.

A longer recession is a feature of Government policy. Not a bug.

Deep-dives du jour: What infrastructure shortages mean

Housing feature: Why this part of Auckland might get no new houses for seven years. A $500 million project to improve wastewater infrastructure could see the council decline or pause new resource consents. Stuff’s Caroline Williams

Watercare head of wastewater planning Andrew Deutschle said wastewater connections would be paused and Auckland Council asked to decline or put on hold any new building consent applications should the treatment plant reach capacity before the upgrade is completed.

Asked what this would mean for houses unable to connect, Deutschle said a pause on building consents meant there wouldn’t be any newly-built houses sat unoccupied, waiting for a wastewater connection before people can move in.

Nick Rowe, of Nick Rowe Architecture based in Stanmore Bay, said not allowing new connections for seven years could “cripple” the local construction industry.

“In an industry that has already been hit hard by the economic downturn, many local businesses may struggle to survive.”

He questioned why property owners and developers were paying “exorbitant” infrastructure growth charges (IGCs) — fees to cover costs associated with extra demand on the water network — while allowing the network to “get to a point where it can no longer do what it needs to”.

“Subdivisions have been approved and IGCs collected, however at this stage it appears that these new sites may not be able to connect to the network.” Via Stuff

Climate feature: Can an entire town be moved? RNZ’s Tim Brown

Honorable mentions

Urbanisation feature: From graffiti removal to zero waste LDR’s Mary Afemata via RNZ

Covid explainer: NZ's Covid response reviewed: What the Royal Commission has found so farA long-awaited report from the Royal Commission of Inquiry into NZ's Covid-19 pandemic response is being delivered to the Government today. 1News’ Anna Murray

Editorial Opinion du Jour: ‘Lucky she didn’t use Chat-GPT?’

Here’s the document obtained under the OIA referred to above:

The Kākā’s Journal of Record for Thursday, November 28

* Economy: The Reserve Bank cut the Official Cash Rate by 50 basis points to 4.25%, and said it would lower the OCR again early next year if economic conditions continue to meet its projections. It said it expects economic growth to recover during 2025, while employment growth is projected to remain weak until mid-2025. RNZ

* Housing & poverty: The number of households in emergency housing motels fell from 3,141 in December 2023 to 993 in October 2024, Associate Housing Minister Tama Potaka announced. 786 households moved from emergency housing into social housing via the Priority One pathway introduced in April; Potaka didn't clarify outcomes for the other 1362 households that left emergency housing. RNZ

* Housing & poverty: Associate Housing Minister Tama Potaka announced $82 million to fund 12 Māori housing providers to build 198 houses in areas with shortages of quality affordable rental housing. Rent for the houses will be capped at 80% of market rent for their location.

* Health & jobs: The Government plans to cut 1500 public health roles, including 47% of roles from Te Whatu Ora's Data & Digital group, which manages outdated IT systems, and 24% of roles from the National Public Health Service, which promotes vaccination, prepares for emergencies, and delivers smoking cessation support. The Public Service Association said the IT cuts will prevent Te Whatu Ora from proceeding with planned upgrades; the Digital Health Association said the cuts could result in “significant disruptions”.

* Economy: Stats NZ said its upcoming release of GDP statistics for the September 2024 quarter will be updated to include new data sources and changes to its seasonal adjustment methodology. Stats NZ said the more detailed data will improve its understanding of economic activity over the period.

* Transport: Bus and train fares are expected to increase nationwide due to Waka Kotahi NZTA, in accordance with ministerial expectations, asking local councils and transport authorities to increase their private share of public transport expenditure. Greater Wellington Regional Council transport chairperson Thomas Nash said 71% fare increases would be needed next year to meet the new revenue targets.

Timeline-cleansing (?) nature pic of the day:

Ka kite ano

Bernard

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