The Kākā by Bernard Hickey

Kia ora. Long stories short, here’s my top things to note in Aotearoa’s political economy around housing, climate and poverty on Wednesday, November 27:

* The News: Housing and Infrastructure Minister Chris Bishop disappointed Community Housing Providers (CHiPs) yesterday by pouring cold water on the idea of Government guarantees for CHiPs’ borrowing from KiwiSaver managers and by proposing more leasing of social homes, which CHiPs don’t want.

* Scoop du jour: Michael Morrah reveals this morning the Government has built a secret radioactive waste facility near Palmerston North via NZ Herald/Youtube

* Deep-dive du jour: Fox Meyer and Laura Walters report in depth this morning via Newsroom from official advice documents about the lack of evidence behind the Government’s decisions in its first year in office.

* Solutions news: SolarZero was put into liquidation last night. RNZ

* Editorial Opinion du jour: Sharon Murdoch’s cartoon on fossils finding fossils.

(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: Bishop soft-pedals on guarantee for CHiPs

Bishop says wants level playing field, but reluctant to guarantee CHiPs

Housing and Infrastructure Minister Chris Bishop disappointed Community Housing Providers (CHiPs) yesterday in a speech to the Community Housing Aotearoa (CHA) conference by pouring cold water on the idea of Government guarantees for CHiPs’ borrowing from KiwiSaver managers and by proposing more leasing of social homes, which CHiPs don’t want.

Here’s Bishop’s full comments below on the guarantee idea, which Community Finance called for on Monday night. He was clearly downplaying any action soon, despite saying he wanted urgent action to build more social houses and put CHiPs on a level playing field with Kāinga Ora. Here’s Bishop’s comments (bolding mine):

I am pleased to announce that the Government is committed to exploring a credit enhancement intervention for CHPs, so that they can access suitable debt.

Over the next three to four months, the Government will consider a range of options to support CHPs’ access to debt on terms reflective of their real risk and circumstance.

These options include, but are not limited to: providing direct lending or guarantees to CHPs; establishing a Crown intermediary to provide financing efficiencies, or providing lending or guarantees to a private lender.

CHPs having access to financing that is not unnecessarily restrictive gives them a stronger economic case for building more social houses and goes some way to levelling the playing field with Kāinga Ora.

The days of the state preferring its own entity are over.

But – I will be blunt – this work will take time, and there are many details to comb through. I have requested that the Treasury, with support from the Ministry of Housing and Urban Development, report back to me early next year with details on a fulsome credit enhancement proposal for consideration next year.

Depending on what that looks like, it also may take some time to implement.

I’m being realistic about timelines, because I don’t want you to wait for the Crown and put a break on the fantastic momentum that we want the CHP sector to continue. Bishop in a speech to the Community Housing Aotearoa (CHA) conference in Auckland yesterday.

The timeframes here suggest a guarantee won’t be possible until 2026 at the earliest.

CHA CEO Paul Gilberd repeated the sector’s preference for social homes to be owned by either CHiPs or Kāinga Ora when commenting to RNZ after the speech, arguing there was a risk that at the end of a lease, developers could sell the homes, removing them from the social housing pool.

"We would love for that new supply to be held and retained and recycled forever within the charitable community housing sector, or within Māoridom, or by the agency of the government, Kāinga Ora," he said.

But the community housing sector had to accept the government was tightening its belt, meaning they had to "learn to do more with less", said Gilberd.

"That's the challenge that we've been set, and I suppose my reticence here is just simply that it's going to be difficult," he said. Via RNZ

‘What are you waiting for?’

Labour Housing Spokesman Kieran McAnulty said Bishop’s speech “should have been titled ‘we want you to build houses, but we refuse to spend money so you’re on your own’.”

“Chris Bishop is all talk when it comes to housing. It was hoped that in his speech there would’ve been government support for desperately needed public housing.

“Instead, there was no commitment to build any more public homes, no further support for the community housing providers and no increases to Income Related Rent Subsidies.

“Everyone was hoping the government would at least announce it would guarantee loans for the newly established community housing funding agency to make them cheaper. But again, no commitment from the Minister.” Kieran McAnulty in a statement.

Editorial Opinion du jour: Fossils finding fossils

The Kākā’s Journal of Record for Wednesday, November 27

* Housing: Housing and Associate Finance Minister Chris Bishop announced changes to the way Community Housing Providers deliver social housing, including removing termination for convenience clauses for new housing contracts and increased use of leasing to provide housing. The Labour Party said the changes didn't include any commitment to build more public homes or increase income-related rent subsidies.

* Health & poverty: University of Canterbury research found that children who move from well-off areas into more deprived neighbourhoods were three times more likely to suffer from depression as teenagers. A separate study identified several factors, including family socioeconomic status, associated with more frequent household moves.

* Housing & poverty: A Public Health Communication Centre briefing found LGBT+ NZers are disproportionately affected by housing instability. The PHCC noted Government does not collect data on compliance with Healthy Homes Standards and assessments, putting the onus on tenants to report non-compliance.

* Health: Health Minister Dr. Shane Reti announced the shifting of $30 million in funding for Te Whatu Ora Health New Zealand to hire 50 new senior doctors and nurses. The New Zealand Nurses Organisation said the funding is "reallocated money from within existing budgets”, and insufficient to fix nurse shortages. RNZ

* Environment & courts: The Court of Appeal rejected J Swap Contractors' bid to expand its subsidiary Kaimai Properties' andesite quarry into protected Waikato land. QEII Trust CEO Dan Coup said J Swap brought four cases to court over the past eight years challenging the QEII covenant preventing mining on its land.

* Housing & poverty: A report by the New Zealand Council of Christian Social Services found older people struggled to get emergency and public housing. The report urged the Government to develop a comprehensive plan.

Timeline-cleansing nature pic of the day: Flapping its wings

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

Kia ora. Long stories short, here’s my top things to note in Aotearoa’s political economy around housing, climate and poverty on Tuesday, November 26:

* The News: Non-profit lender Community Finance has launched a Community Housing Funding Agency to connect pension fund investors with Community Housing Providers (CHiPs) and accelerate non-state social home building. Launched last night with a private guarantee backed by philanthropists such as Stephen Tindall, Brendan Lindsay and Rowan Simpson, the new agency has called on the Government to provide a targeted guarantee to ‘supercharge’ lending to CHiPs to build thousands of homes, similar to that used by LGFA for councils and used overseas for non-Government social housing.

* Scoop du jour: More than 70 vacant flats in Auckland Council's pensioner villages will be refurbished and rented out after sitting empty for years, some almost in ruin, Amy Williams reports this morning for RNZ.

* Deep-dive du jour: Rachel Thomas has written a first anniversary analysis of the health system’s crisis because of the Government’s focus on debt reduction in The Post.

* Solutions news: Miriam Bell also writes about the launch of an LGFA for CHiPs via The Post.

* Editorial Opinion du jour: Diana Crossan & Malcolm Rands have written an Op-Ed in The Post about why a Capital Gains Tax won’t be enough.

(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: ‘Guarantee us to build thousands of homes’

CHiPs funder calls on Govt to guarantee billions to build social homes

Non-profit Community Finance has launched a Community Housing Funding Agency (CHFA) to connect the $300 billion managed by New Zealand pension fund investors with Community Housing Providers (CHiPs) in order to accelerate non-state social home building.

Launched last night in Wellington with a private guarantee backed by philanthropists such as Stephen Tindall, Brendan Lindsay and Rowan Simpson, the new agency has also called on the Government to provide a targeted Crown guarantee to ‘supercharge’ lending to CHiPs to build thousands of social homes. Similar guarantees are provided in the UK, Ireland, the United States and Australia to enable the building of significantly higher proportions of affordable homes.

Community Finance CEO James Palmer called on an audience that included Finance Minister Nicola Willis, Tindall, former PM Bill English and Labour housing spokesperson Kieran McAnulty for the Government to get involved to create a type of Local Government Funding Agency (LGFA) for CHiPs. LGFA borrows on behalf of councils with a Crown guarantee to dramatically lower borrowing costs and make it easier for fund managers to buy council bonds. The idea would be for the Government to provide a guarantee for the bonds issued by the CHFA, enabling much bigger bond issues to pension funds that require large lines of tradeable bonds with high credit ratings.

“While this is a big step, it is in line with Community Finance’s purpose and commitment as a social enterprise and will make it easier for a targeted public guarantee to follow in the future, as proven in Australia,” Palmer said.

“If we genuinely want to supercharge community housing in our country, this can be a defining moment in our history, when we truly bring together the best of philanthropy, impact investors, fund managers, charities and Government,” he said.

Community Finance has already arranged $165 million worth of borrowing for CHiPs, including the Salvation Army, connecting investments from the likes of Simplicity KiwiSaver, Westpac KiwiSaver and Harbour Asset Management in bonds used to build affordable homes.

Palmer pointed to the example of Housing Australia, which was launched in mid-2018 and has since lent over A$4.1 billion to Australian CHiPs to build 18,800 new homes and save A$740 million in interest costs.

He explained how the Crown guarantee could work:

A Government guarantee of the CHFA bonds would be a remote, contingent liability. While it would be noted in the Government’s budget, it would not have to carry a direct cost, as it would be improbable that it would be called upon. This makes sense when there have been no failures in this sector in New Zealand (as expected with the long-term Government funding) and reflects how they are treated by many other countries.

The Australian research which highlighted this approach to public finance accounting standards further noted, “Justification for the use of guarantees is often framed in terms of cost savings to government, as the provision of direct funds decline. Notable is the near zero default rate amongst the European social housing guarantees reviewed, and their minimal impact on government accounts.”

Palmer released a paper describing the model here:

Infrastructure and Housing Minister Chris Bishop is scheduled to talk to the Community Housing Association’s conference in Auckland later today.

Scoops du jour:

Housing: Half of Auckland council's pensioner flats vacant for years RNZ’s Amy Williams

Housing: ASB closes door to many preapprovals from mortgage advisers for rest of year RNZ’s Susan Edmunds

Health: Some referred to hospital 'five or six times' before being accepted, patient says RNZ’s Ruth Hill

Deep-dive du jour:

Analysis: Health hurts in a Government obsessed with debt. No toast, but more tobacco are the hallmarks of a chaotic year in health and a Government hamstrung by austerity and the coalition it’s in bed with. The Post’s Rachel Thomas

Solutions news

Housing: Impact investors hope to unlock as much as $500m for social housing. A new private sector social housing funding agency has been set up to better tackle New Zealand’s dire shortage of affordable housing. The Post’s Miriam Bell

Editorial Opinion du jour:

Diana Crossan & Malcolm Rands Op-Ed in The Post: The case for tax reform, and why a capital gains tax won’t be enough. Our current tax policies have accompanied a poorly performing economy with overpriced housing. Why would we keep doing more of the same?

The Kākā’s Journal of Record for Tuesday, November 26

* Economy: Stats NZ's retail trade data for the September 2024 quarter showed core retail sales were down 1.7% compared with the September 2023 quarter, and total retail sales were down 2.8%. Retail NZ CEO Carolyn Young said the data matches its recent survey's finding that 70% of respondents failed to meet sales targets for the quarter.

* Crime & poverty: A new 24/7 police station would be established in central Auckland as part of the Government's broader move to increase the "funding, power, and tools" of frontline police, Minister of Police Mark Mitchell and Minister of Justice Paul Goldsmith announced. The Federal Street station would open to the public in mid-2025. RNZ

* Construction & environment: A report by waste and resource recovery peak body WasteMINZ argued that expanded polystyrene (EPS) should be classified as a contaminant under the Resource Management Act. The authors argued EPS is detrimental to both human health and marine and freshwater ecosystems, and could be replaced with safer alternatives.

* Climate: University of Colorado and NIWA research found microbes in wetlands, landfills, and livestock digestive tracts were responsible for large spikes in methane emissions since 2020. NIWA scientist Peter Sperlich said particularly high methane emissions coincided with the 2020-23 La Niña event, which led to wetter conditions in methane source regions.

* Poverty & health: A report by the Helen Clark Foundation found obesity now surpasses smoking as NZ's leading death & disability risk factor, and argued that the majority of NZers support stricter regulation on unhealthy food and restrictions on advertising. It recommended introducing a sugar tax, removing sugary drinks in schools, and ensuring healthy meals in hospitals.

* Climate: The Conversation presented COP29 with a report on a Pacific climate adaptation study arguing that the World Bank and IMF, in their role as key climate finance institutions, are loading Pacific countries with unsustainable levels of sovereign debt, with private contractors the "real beneficiaries." The report found 72% of funds for adaptation and mitigation was in the form of loans.

Cartoon du jour: Snake charmer?

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:

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

* Special guest Helen Clark on the issues above, plus dramas in the UN, the hikoi this week, the media and politics and her own experience with Foreshore & Seabed.

* Special guest Susan St John on the letter from 15 economists calling on the Government to suspend its austerity programme, and whether the NZ Super Fund should have to pay tax.

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.

(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 Friday, November 22:

* The news overnight: Russia fires a very long range non-nuclear ballistic missile into Ukraine for the first time overnight. Matt Gaetz drops his bid to be US Attorney General. The US DoJ tells Google to sell Chrome and look at selling Android to improve competition. A Cook Strait ferry decision is due in three weeks. Wellington Airport plans to invest $500 million to bring in long-haul flights. David Seymour criticises National’s plan for Waikato University Medical School.

* The lead: On the same day economists told the Government its budget cuts were hurting the economy, Treasury warned the recession was worsening and widening the Budget deficit. Chris Bishop said Nicola Willis would ignore the economists’ views, although he also said he wouldn’t be a slave to getting a surplus.

* Scoop du jour: To save money now and avoid a credit rating downgrade, Wellington City Council is looking at delaying social housing maintenance for eight years. The Post’s Harriet Laughton

* Deep-dive du jour: Karina Cooper reports this morning for the Northern Advocate on an epidemic of loneliness among the elderly in Northland.

* Solutions news: Companies Act reforms going through Parliament should include environmental and social considerations in corporate governance, say University of Auckland experts. RNZ

* Editorial Opinion du jour: Matthew Hooton writes in his NZ Herald-$$$ column this morning that PM Christopher Luxon is “completely out of his depth”.

(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 in this case I’ve pre-emptively opened it up, given the public interest in the The Lead.)

The News @ 7.30 am

* ACT Leader David Seymour has opened a split in the coalition over the future of National’s promise to build a new medical school at Waikato University. He criticised the plan heavily in documents reported on by RNZ’s Phil Pennington, NZ Herald-$$$’s Thomas Coughlan and the ODT-$$$’s Tim Scott.

* Russia fired an intermediate range ballistic missile (without a nuclear warhead) into Ukraine for the first time overnight. Reuters

* Matt Gaetz dropped out overnight as Donald Trump’s nominee for Attorney General after a new allegation about his relations with a 17-year-old emerged. Reuters

* The US Department of Justice told Google overnight to sell Chrome and look at selling Android to improve competition. Reuters

* The International Criminal Court issued arrest warrants overnight for Benjamin Netanyahu, Israel’s former Defence Minister and a (somehow still alive) Hamas leader. Reuters

* Winston Peters said yesterday a Cook Strait ferry decision was due in three weeks (Dec 11). The Post/NZ Herald

* Wellington Airport yesterday proposed investing $500 million to bring in long-haul flights from San Francisco, Tokyo and Hong Kong, including new technology to make the runway safer for bigger planes. The Post’s Tom Hunt/ NZ Herald-$$$’s Grant Bradley

The Lead: When cuts beget cuts

Treasury’s Chief Economist Dominick Stephens warned yesterday the recession was worsening to be deeper than the one seen in the Global Financial Crisis and widening the Budget deficit. His comments echoed those of a group of 15 economists who yesterday called for a suspension to Government spending cuts, saying they weren’t needed and were creating a negative feedback loop of economic contraction.

Stephens couldn’t have been clearer:

Economic growth has proved slower than anticipated. Weaker economic growth means a smaller economy and less tax revenue, increasing the challenge for the Government in balancing its books. Treasury’s Chief Economist Dominick Stephens in a speech to the Chartered Accountants Australia and New Zealand (CAANZ) Annual Tax Conference.

Responding to the letter from the economists and questions about Treasury’s warning, Chris Bishop said Nicola Willis would ignore the economists’ views because many were connected to the Labour, although he also said he wouldn’t be a slave to getting a surplus.

“We’re not going to be a slave to a surplus,” Bishop told the Herald when asked to comment on the Treasury warning the economy is proving to be weaker than expected.

“We are committed to getting the Government books back in order, but fixating on a particular date or a particular time is the wrong way to go about it,” Bishop said.

“What’s important is the fiscal track in the medium to long term.” Bishop via NZ Herald-$$$’s Thomas Coughlan

Did the tax cuts for the wealthy reduce spending & GST?

Stephens went into more depth in his speech about the slowdown, noting in particular weaker-than-expected GST receipts, which would be consistent with tax cuts meaning more income was going to those on higher incomes and less likely to spend all their income. Here’s Stephens’ comments (bolding mine):

The latest data suggests that economic activity has been weaker than anticipated in Treasury’s Budget 2024 forecasts, hinting at trend productivity growth having slowed even further than assumed at Budget.

The Treasury has long been forecasting an economic downturn, and this has come to pass. Since the September quarter of 2022, per capita GDP has fallen by 4.6%, making this a larger per-capita recession than the Global Financial Crisis of 2008-2010 .

The Treasury forecasts have also long anticipated a recovery. As interest rates fall, we expect household spending and business activity to lift. Businesses appear to share our expectation – the latest NZIER Quarterly Survey of Business Opinion (QSBO) showed that firms’ expectations for future trading activity have improved markedly.

However, recent data has suggested that the economic downturn has been deeper, and the recovery may begin later, than the Treasury forecast at Budget 2024.

At the same time as this weaker economic activity, we have seen growth in hours worked fall only slightly. This suggests that trend productivity growth may have been even weaker than anticipated in our Budget forecasts. Of course, one should always read real-time data with caution, but this presents further downside risk to the Treasury’s economic growth and tax revenue forecasts.

Quite separately from the economic outlook, there has been a second reason that the Treasury has been revising its revenue forecasts lower. Tax revenue has proven lower than expected given the state of the economy in recent economic and fiscal updates. Recent monthly data has shown that tax revenue overall has been close to the Treasury’s Budget forecast, but the detail reveals that GST collections have been surprisingly low relative to underlying economic activity. If this trend continues, there could be further downside risks to the Treasury’s revenue forecasts. Dominick Stephens in a speech

Scoop du jour: Airport tech before housing maintenance

To save money now and avoid an embarrassing (but not expensive) credit rating downgrade, Wellington City Council is looking at delaying social housing maintenance for eight years, The Post’s Harriet Laughton reports this morning.

Coincidentally, Wellington Airport announced plans for $500 million of investment in technology and marketing to bring long-haul flights to the capital. The Council owns 34% of the Airport and would have to contribute if new capital was needed.

Here’s the detail in Harriet’s article (bolding mine):

The overall savings from the recommended off-setting of the social housing upgrades would be $61.3 million. It would feed into the $500m council needs to make up to address its under-insurance gap, and create a disaster fund.

The council currently houses more than 3000 tenants across 1900 homes through housing provider Te Toi Mahana.

The deferred upgrades included work like seismic strengthening, insulation, ventilation, fencing, lighting and upgrades of kitchens, storage and laundry facilities. It was work council was legally liable to undertake as part of its signed Deed of Grant with the Government, which the Government funded $220m for back in 2007.

The criteria was for council to remain a social housing provider until at least 2037, and upgrade its housing portfolio to modern standards. The Post’s Harriet Laughton

Perhaps not coincidentally, the $61.3 million is about a third of the proportional contribution from the Council towards the Airport investment upgrade.

However, Mayor Tory Whanau wants to avoid the housing maintenance delay.

The deferral is on a list of capital programmes council staff recommended be cut, reduced or deferred ahead of next Thursday’s long-term plan vote.

Wellington mayor Tory Whanau said it was ultimately up to councillors to decide where the savings come from, but she intended to put up an amendment to have the recommendation removed.

“This will mean tenants can get the safe, dry homes they deserve.”

Social housing is one of the “non-negotiables” Whanau underlined as her priorities to not be cut after the sale of the council’s airport shares fell through.

The vote on the cost savings is next Thursday.

Deep-dive du jour: Elderly loneliness

Karina Cooper reports this morning for the Northern Advocate on an epidemic of loneliness among the elderly in Northland, which is closely connected to high poverty levels. A sample:

A woman in her 90s who had not left her home in three years. Another pensioner who went three weeks without seeing anyone. These are just some of the experiences of Northland’s lonely seniors.

According to Age Concern, loneliness among people 65 and over is at epidemic levels. A study commissioned by the charitable organisation’s Auckland branch found 59% of people surveyed had felt lonely or socially isolated – 30% of whom experienced those feelings often or always.

Moebus said it was a familiar story across the region. A lot of the time older people moved north to be with family, only to have whānau leave the area. Medical problems, lack of transport and age prevented older Northlanders from connecting with others.

Victoria University professor emeritus Dr Philip Morrison, an expert in loneliness across ages, said there was a strong relationship between loneliness and income.

“Loneliness rises as income falls.”

That’s a concern for Northland, given an NZIER report released this year showed the region’s median income at $378 per week in 2023 was the lowest in New Zealand. The Northern Advocate’s Karina Cooper

Solutions news:

Companies Act reforms going through Parliament should include environmental and social considerations in corporate governance, say University of Auckland experts. RNZ

Column du jour: ‘PM out of his depth’

Matthew Hooton writes in his NZ Herald-$$$ column this morning that PM Christopher Luxon is “completely out of his depth.” A sample (bolding mine):

Like Ricky Gervais’ David Brent, Christopher Luxon has an unfounded sense of his own personal charm, while also running down his colleagues behind their backs.

His lack of understanding of the National Party means he fails to appreciate that everything he says about another MP soon gets back to them.

However, Luxon’s lack of understanding of New Zealand, partly but not solely because he lived abroad from 1995 to 2011, is more serious.

Hooton makes a good point about how Luxon was away during the difficult debates over Foreshore and Seabed and Don Brash’s Orewa, and the healing that followed.

The principles of the Treaty of Waitangi, which had been clearly defined by the Court of Appeal and Privy Council a quarter-century earlier, were deeply embodied in the law and practice.

There was a rough bipartisan consensus over climate change policy.

Across all these policy areas, Luxon seems to have no appreciation of how difficult progress had been, nor how fragile, especially for a small, isolated, agrarian economy.

That may not have mattered, except Luxon appeared to demonstrate little if any curiosity about the country he wanted to lead. The casual observer might conclude that he considered that if he didn’t already know something, it wasn’t worth bothering with.

His record at Air New Zealand was mixed. He failed to forge a strong network even in the Auckland business community, let alone more broadly.

Hooton also makes a good point about Luxon’s lack of a credible strategy.

Luxon’s language is often derided as business-speak, but no genuine businessperson uses so much corporate twaddle. His language more resembles a cheap self-help book.

Extraordinarily, he communicates even less substantively in the media and in person than the lamentable Dame Jacinda Ardern.

Worse, if Luxon genuinely believes New Zealand’s long-term fiscal and health crises can be resolved through much-needed cost-cutting in Wellington alone, then he is as innumerate as he seems illiterate.

Arguably, Clark and Key had the knowledge, intelligence and personal attributes to chart a middle path between China and the US, but Luxon shows no sign of it.

Neither Xi Jinping nor Donald Trump is likely to be remotely influenced by a clutch of the shoulder, a Luxon grin and trite sloganeering, except negatively.

Yet the Treaty of Waitangi and race relations are the areas where Luxon’s lack of history, understanding and foresight threaten the greatest harm.

Luxon can’t say he wasn’t warned, including by every living National Party Prime Minister and more broadly, that his handling of Act’s Treaty Principles Bill was wrong-headed, and could benefit only Act and Te Pāti Māori, while severely damaging both New Zealand’s social cohesion and National’s electoral interests. Matthew Hooton via his NZ Herald-$$$ column.

The Kākā’s Journal of Record for Friday, November 22

* Infrastructure & councils: Cabinet invited all regions to propose Regional Deals between central and local government, with the goal of finalising the first deal by December 2025. Local Government Minister Simeon Brown said he expected councils to produce "practical and focused" proposals for key infrastructure, including housing and roads. The Press

* Housing & infrastructure: A Bill to extend the remediation deadline for earthquake prone buildings by four years passed its third reading, Building & Construction Minister Chris Penk announced. The Government has also appointed an independent chair and advisory group to provide advice on making earthquake building settings "fairer" and "more sensible". The Post

* Economy & politics: The Treasury is likely to downgrade its upcoming economic and fiscal forecasts, Chief Economic Advisor Dominick Stephens said in a speech, citing evidence of a "sustained productivity slowdown". Stephens said the 4.7% fall in per-capita GDP since the 2022 September quarter mad this recession larger per-capita than the Global Financial Crisis. BusinessDesk

* Poverty: Child Poverty Reduction Minister Louise Upston released the Government's 2024-2027 Child & Youth Strategy. The Green Party said the new strategy removed food insecurity and mould and damp in houses from its list of child poverty indicators targeted for reduction efforts, and has removed child mental wellbeing as a priority focus. RNZ

* Climate: The Labour Party noted that NZ fell seven places on the annual Climate Change Performance Index, an independent research project monitoring countries' climate change mitigation efforts. Denmark ranks highest among the 67 countries included and Iran and Saudi Arabia rank the lowest. NZ now ranks 41st. Newsroom

* Electricity: Powerswitch manager Paul Fuge said although the average monthly power bill will increase by $10 due to the Commerce Commission's move to increase Transpower's revenue limits, the exact price increase will vary between different parts of the country to up to $25. Fuge said sustained high wholesale electricity prices are also likely to result in further power bill increases.

Cartoon du jour: Labels through the generations

Timeline-cleansing nature pic of the day: Blooming red

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

I spoke to former Productivity Chair Ganesh R Ahirao Nana this morning about the letter he and a group of other economists sent to PM Christopher Luxon to urge the Government to urgently suspend cuts to spending and investment for the sake of the economy, struggling businesses and the wellbeing of vulnerable workers, many of whom are giving up and emigrating.

Heres the article I sent to all subscribers earlier this morning as part of my daily Dawn Chorus email newsletter and podcast for paying subscribers. Here’s the article Ganesh wrote on his substack and here’s the full letter itself.

This is a summary of our conversation above and there is a transcript with the video.

Summary

In our conversation, Ganesh Nana discusses the pressing economic issues facing New Zealand, particularly the government's focus on fiscal policy at the expense of addressing external debt and investing in infrastructure. He emphasizes the need for a shift in focus towards export growth and the importance of investing in the economy to avoid hollowing out key sectors. The conversation highlights the urgency of creating a long-term vision for New Zealand's economic future, moving away from austerity measures and towards sustainable growth.

Takeaways

* The focus on government debt overshadows the critical issue of external debt.

* Investment in infrastructure is essential for economic growth.

* Doubling exports requires a significant shift in strategy and investment.

* Austerity measures can lead to long-term economic hollowing out.

* The government must prioritise a vision for the future of New Zealand.

* Export growth has been primarily volume-based rather than value-based.

* Leadership and investment are crucial for transitioning to a value-based economy.

* The current government focus is detrimental to long-term economic prosperity.

* A lack of vision contributes to the emigration of skilled workers.

* Sustainable economic growth requires a collaborative approach among stakeholders.

Chapters

00:00 Introduction to Economic Concerns

02:52 The Importance of External Debt

05:53 Investment vs. Austerity: The Call for Infrastructure

09:08 The Risk of Hollowing Out the Economy

10:24 The Future Vision for New Zealand

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 21:

* The news at 7.30 am: Ukraine fired British-made Storm Shadow missiles into Russia for the first time overnight (Guardian). COP29 is nearly finished without a deal on climate finance (Reuters). LGFA raised its borrowing limit for councils to 350% of revenue from 280% after the Government increased its overdraft limit for LGFA (LGFA, Beehive). NZ’s biggest pulp & paper mill at Kinleith is ending paper production and laying off 230 workers (Oji).

* The lead: A group of economists, including former Treasury Chief Economist Girol Karacaoglu and former Productivity Commissioners Ganesh Nana and Bill Rosenberg, published a letter to PM Christopher Luxon this morning calling for an immediate suspension of budget cuts to avoid further worsening a recession they say is hollowing out businesses and conflicts with the Government’s goal of doubling exports.

* Scoop du jour: A Southland GP says he’s forced to sedate dementia patients with anti-psychotic drugs because of a shortage of publicly-funded dementia beds in regional areas, The Post’s Rachel Thomas reports this morning.

* Deep-dive du jour: An award-winning disability advocate, Jonathan Mosen, told RNZ’s Nine to Noon yesterday he’s leaving New Zealand, saying it is the worst country in the Western world in which to be blind.

* Solutions news: A food rescue charity that reduces CO2 emissions, volunteers controlling pests weeds and farmers restore waterways were recognised at the Taranaki Regional Council Environmental Awards. RNZ

* Editorial Opinion du jour: Auckland University economics professor and former Reserve Bank economist Robert MacCulloch wrote a scathing Op-Ed in today’s NZ Herald-$$$ about Nicola Willis’ performance as Finance Minister, saying she was missing in action on monopoly-busting, tax, social investment and savings reforms, and was presiding over an ever-lengthening recession that was worsening the Budget deficit.

(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 in this case I’ve pre-emptively opened it up, given the public interest in the The Lead.)

2. The Lead: Economists call for end to Budget cuts

A group of economists, including former Treasury Chief Economist and former Productivity Commissioners, published a letter to PM Christopher Luxon this morning calling for an immediate suspension of budget cuts to avoid further worsening a recession they say is hollowing out businesses and conflicts with the Government’s goal of doubling exports.

They argued fiscal policy was needlessly worsening the recession, saying there was no clear rationale for projected budget cuts and little consideration about the short-term effects. They wrote:

For example, your Government’s cancellation of key infrastructure projects and sinking-lid cuts to the public service are powerful contributors to the current severe and prolonged recession. This is substantially worsening the contractionary effects on the economy of the Reserve Bank’s use of the Official Cash Rate to contain inflation.

It is important to recognise that even prior to cutting back expenditure, government consumption spending was close to 20% of GDP. This covered spending on health, education, defence, administration, justice, transport, and culture. In addition, deferrals and reductions in projected infrastructure spending has further reduced employment and intensified the economic recession.

There is ample evidence that government spending, including the necessary infrastructure and allied networks, has for many years fallen well short of that required for population growth and demographic changes. The Infrastructure Commission has stated that New Zealand has a $104 billion infrastructure gap at present – and that this picture will significantly worsen given current spending projections.

These accumulating shortfalls put the nation in a poor position to improve its long-run economic resilience and to prepare for future challenges. If nothing is changed now, this under-funding simply passes the burden of adjustments, and investment spending, to future generations.

Failure to correct this course will lead to higher economic scarring, with the costs borne by those with the least ability to pay, as has been demonstrated repeatedly in New Zealand’s history. It will also undermine the resilience of the private sector – particularly exporters – and will continue to constrain the capability of firms to scale up. Economists letter to PM Christopher Luxon

They argued a focus on government debt ignored the impacts on private sector debt and external debt and also lacked a clear rationale.

Irrespective of the debt measure adopted, international comparisons of government debt in comparison to GDP remain in New Zealand’s favour. Credit rating agencies continue to view the government’s debt situation without concern. Bluntly, there is no government (or public) debt crisis in New Zealand.

The New Zealand economy’s ongoing problem is private sector debt. Importantly, private sector debt is being driven upwards by your Government’s fiscal policy in pursuit of surpluses for itself and its aim of rapidly reducing public debt.

Standard economics shows the relationship between public and private sector financial balances. When total domestic saving (both public and private) is insufficient for domestic investment (both private and public), the gap needs to be filled by drawing on foreign funds. The overall current account (or external) deficit is a measure of this gap and requires overseas borrowing or asset sales to foreigners to finance such a deficit. With the banks acting as intermediaries, the resulting increase in liabilities is reflected on both the private and public sectors’ balance sheets.

These connections – in particular, between the Government’s fiscal stance, the size of the current account deficit, and the consequent size of the nation’s external debt – are glaringly missing in documents describing the economic impact of fiscal policy. There is little explanation of how fiscal policy focussed on reducing government spending would reduce New Zealand’s external deficit and total external debt. Consequently, fiscal policy is adding to the vulnerability of economic activity and exposing New Zealand to inevitable global shocks.

They also pointed out the Government’s cuts risked a long-lasting hollowing-out of business.

There appear to be further spending reductions accelerating at this stage of the economic cycle. The negative impact risks undermining retail, hospitality, home improvement sectors, and challenges the heart of rural economies and communities across the nation. Prolonging the current cyclical downturn in this manner means that these costs result from a policy choice, rather than being an economic outcome.

In addition, increasingly worrying is the harm imposed on those households on low or casual wage income or dependent on benefits. The erosion of the already low psychological and financial reserves of the poorest will be hard – and socially and fiscally costly – to repair.

The economists pointed to workers voting against the policy with their feet.

We note that the consequent erosion of the tax base will also impair the government’s balance sheet. This long-lasting harm is further evident in the increasing numbers of trained and skilled New Zealanders migrating abroad in search of hope. This is creating skills shortages across the country, particularly in health and education.

The loss of this capacity and capability – in terms of workforce skills, knowledge and expertise alongside investor/owner appetite for equipment, machinery, technology upgrades and expansions – becomes increasingly permanent the longer the downturn is prolonged.

This form of hollowing-out is currently clearly visible in the construction sector, where once again the boom-bust cycle is seeing harm that will impact on the development of the sector for years to come and further undermine critical efforts to expand the housing stock. This will (again) be likely reflected with future infrastructure and housing developments experiencing difficulties in attracting sub-contractors back to the building and construction sector.

They argued the Government’s fiscal policy of trying to get public debt and the size of Government both under 30% of GDP also conflicted with its aim of doubling the value of exports over the next decade

There is a direct conflict between the current fiscal policy stance and the aspirational export goal. New Zealand’s historical reliance on volume-driven commodity growth and mainly low-value exports requires significant structural shifts for the returns from exports to be doubled. Without investment in key infrastructure, resilience building, business capacity and capability, human capital, and entrepreneurial endeavour, the necessary structural shifts will not occur. The current fiscal policy settings undermine the required investments to facilitate such shifts.

They called for an urgent suspension of spending cuts and further delays in infrastructure funding, along with “a clear economic rationale for fiscal policy” in next year’s Budget. Here’s the full PDF of the letter attached.

My view: I agree with everything in the letter.

Scoop du jour: ‘I have to drug them as there’s no beds’

A Southland GP says he’s being forced to sedate dementia patients with anti-psychotic drugs because of a shortage of publicly-funded dementia beds in regional areas, The Post’s Rachel Thomas reports this morning.

Dr Daniel Allan made the comments to Parliament’s Health Committee on Wednesday. Allan was a psychogeriatrician ‒ a psychiatrist for elderly people ‒ who worked around the South Island but mostly in remote peripheral areas, and spoke to the committee remotely from Southland.

“This happens around New Zealand, but I feel that this is happening more frequently in these places compared to the more well-resourced areas.

“I, as a clinician, have to use sedation, deliberate sedation, using anti-psychotic medication for people with dementia in these rural locations, because I have no other alternative out here.”

Honorable mentions

Justice: Police research adds to evidence against gang patch ban Newsroom’s Laura Walters

Health: Govt rejects Auckland and Otago Unis’ doctor proposal ODT-$$$

Housing: High hopes, no new homes yet: NZ Super Fund, Classic partnership NZ Herald-$$$’s Anne Gibson

4. Deep-dive du jour: Leaving in frustration

An award-winning disability advocate, Jonathan Mosen, told RNZ’s Nine to Noon yesterday he’s leaving New Zealand, saying it is the worst country in the Western world in which to be blind.

Instead of world leading technologies he pointed to new Eftpos machines that had been allowed with flat touchscreens, leaving blind people to have to hand over their card and pin and trust no one round was eavesdropping.

Or audio descriptions for television programmes that weren't available in on demand services, despite that being the increasing way people were accessing television.

"The irony is that it's harder for me to find out what's going on in New Zealand than it is to find out what's going on in other parts of the world because, in particular the New Zealand Herald app has serious accessibility problems, it's really hard to read articles in the Herald, I'm quite willing for them to take my money but the iOS app is in an appalling state. Stuff is a little bit better but not by much." Jonathan Mosen, told RNZ’s Nine to Noon

5. Solutions news:

A food rescue charity that reduces CO2 emissions, volunteers controlling pests weeds and farmers restore waterways were recognised at the Taranaki Regional Council Environmental Awards yesterday. RNZ

6. Editorial, Op-Ed or column du jour:

Auckland University economics professor and former Reserve Bank economist Robert MacCulloch wrote a scathing Op-Ed in today’s NZ Herald-$$$ about Nicola Willis’ performance in her first year as Finance Minister, saying she was:

* missing in action on monopoly-busting;

* doing little real tax, social investment and savings reforms; and,

* was presiding over an ever-lengthening recession that was worsening the Budget deficit.

Here’s a sample:

The fiscal deficit will worsen under the current Government, unless the economy starts to rapidly pick up. The trimming of civil servants, whilst necessary, is not on a scale that will greatly shift the dial.

Willis has done little to address the ageing population trend, which is starting to blow out the deficits. I once handed National MPs a fully-costed plan showing how to avert that problem many years ago, written with a former Finance Minister. They ignored it.

On housing, once the propaganda is stripped away, National’s reforms offer less of an increase in supply than was going to happen under the bi-partisan accord that the party signed up to with Labour years ago. Under that agreement, up to three homes of three storeys could be built on most urban sites, without need for resource consent.

National’s new plans do less. They offer fewer agglomeration benefits, since the emphasis is more on building out into green fields, rather than up. Building out will be more expensive, requiring more infrastructure. Robert MacCulloch in an Op-Ed in the NZ Herald-$$$

Honorable mentions

Op-Ed: Wellington intervention looks like a first resort, not the last Lianne Dalziel in Newsroom.

Analysis: Four key questions following Te Hīkoi mō Te Tiriti Stuff’s Glenn McConnell

Op-Ed Open your wallet for the Foodstuffs merger appeal fund Ernie Newman in The Press

The Kākā’s Journal of Record for Thursday, November 21

* Infrastructure & councils: The Treasury and the Local Government Funding Agency agreed to increase the LGFA's borrowing capacity in order to ensure funding for critical water infrastructure.

* Infrastructure: The Government’s second Quarterly Investment Report found 83% of Government investments are delivering to budget, and 54% are delivering to original timeframes. A Cabinet paper on the report, commenting on the predominance of transport spending, said “tradeoffs” between transport and "needed investment in other areas" may be required. BusinessDesk

* Electricity & living costs: Commerce Commissioner Vhari McWha said the Commission's decision to increase revenue limits for Transpower and local lines companies will increase the average household's monthly electricity bill by roughly $10 from 1 April 2025.

* Migration: A Member's Bill by Green MP Teanau Tuiono to reverse a Muldoon Government Act denying certain Samoan people pathways to NZ citizenship passed its third reading and will become law. Muldoon's 1982 law nullified the right of Samoans born between 1924 and 1948 to gain NZ citizenship as British subjects. the new law allows these Samoans to apply for citizenship. RNZ

* Oji Fibre Solutions announced its decision to permanently shut down paper production at Tokoroa’s Kinleith Mill in June 2025, estimating roughly 230 jobs will be lost. E tū union negotiator Joe Gallagher said OFS cited high power and log prices for the decision, and asked the company to engage economists on creating a business case for the mill. RNZ

* Economy & regions: Infometrics' Quarterly Economic Monitor for September showed a 0.3% and 0.4% year-on-year fall in provincial and rural economic activity respectively, and an almost 17% annual fall in residential consent numbers.

Cartoon du jour: Politics = priorities + choices

Timeline-cleansing nature pic of the day: Big breakfast

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

Kia ora. Long stories short, here’s my top things to note in Aotearoa’s political economy around housing, climate and poverty on Wednesday, November 20:

* The lead: The official annual Health Survey found sharp rises in food poverty, GP waiting times, mental health issues and obesity in deprived areas since 2022/23.

* In my view: Worsening and debilitating food, housing & energy poverty are the nation’s scourges, not public debt or red tape. GDP growth alone won’t fix them.

* Scoop: An advisory group picked 36 mines for the Fast-track list in one three-hour meeting, The Post’s Tom Pullar-Strecker reports this morning.

* Deep-dive: Aaron Smale has written a compelling North & South feature on the intergenerational effects of solitary confinement.

* Solutions: Tom Blessen’s episode of The Detail on Newsroom/RNZ today about migrant exploitation is essential listening.

* Editorial Opinion: The usually far-from-liberal ODT-$$$ published a scathing editorial this morning about the PM’s ‘Pointless and Polarising politics.”

(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 we’ll open it up for public reading, listening and sharing.)

1. The Lead: Poverty worsens in Health Survey

Aotearoa’s fundamental problems are writ large in the official annual Health Survey released yesterday. Here’s the key details from the survey of 9719 adults and 3062 children, via RNZ:

* One in four children (27.0 percent) lived in households where food ran out often or sometimes, up from 21.3 percent in 2022/23

* 10.7 percent of adults had an unmet need for professional help for their emotions, stress, mental health or substance use in 2023/24 - more than double the rate of 4.9 percent in 2016/17

* One in 11 adults (9.1 percent) and 8.2 percent of children aged 2-14 years ate the recommended amount of vegetables

* Fewer than half of adults (46.6 percent) met physical activity guidelines, ie at least 2.5 hours of moderate-intensity activity in the past week - down from 50.9 percent five years ago

* One in three adults (1.5 million) classified as obese, rising to nearly half of those living in the most deprived neighbourhoods

* Nearly half of adults (44.9 percent) reported unmet need for dental care due to cost. Rates were worse for Māori, Pacific, disabled, people living in the most deprived neighbourhoods and those aged 25-54 years

* One in four adults (25.7 percent) and one in five children (18.5 percent) reported that "time taken to get an appointment was too long" as a barrier to visiting the GP in the 12 months prior to the 2023/24 survey. This is higher than the previous year (21.2 percent for adults and 14.8 percent for children). In 2021/22, the figure was 11.6 percent.

2. In my view: More GDP growth is not nearly enough

Health Minister Shane Reti released the survey yesterday with a reiteration of the Government’s fundamental strategy: grow the economy. Here’s his comments (bolding mine):

“We want people to be able to access primary care, so they’re not having to visit Emergency Departments in the first place, and we can reduce pressure on our hospital system.

“Equally as important, especially when it comes to affording a visit to the doctor or improving food insecurity for kids, is our Government’s commitment to grow the broader economy. We want to make it easier for New Zealanders to cope with cost of living challenges. Our efforts to drive down inflation will also have an impact here.

“Today’s survey findings again reinforce strongly the priorities in our Government Policy Statement on Health: Access, Timeliness, Quality, Workforce, Infrastructure.  Access and timeliness are paramount in healthcare.” Health Minister Shane Reti in a statement.

Unfortunately, the cognitive dissonance drowns out his comments. The Government’s actual priority is reducing public debt and reducing the size of Government to less than 30% in both cases. That has meant freezing capital spending, planning to cut $1.5 billion in health spending and launching the most severe fiscal tightening in real-per-capita terms in our history.

The irony is the Government’s true north star of debt reduction is actually worsening the ongoing recession in per-capita GDP as cutbacks in capital spending and staff create a negative feedback loop for the rest of the economy.

The tragedy is that reducing poverty is not going to be result of improved GDP growth, it would actually be the source of new economic growth by increasing productivity, output, confidence, wellbeing and the population, as fewer New Zealanders leave.

Reducing poverty requires public investment in health, housing, education, public transport and infrastructure used by the private sector. That requires the exact opposite of what the Government is trying to do. It requires the Crown to use its balance sheet to borrow to invest.

3. Scoop du jour: ‘Quick. Let’s mine it.’

An advisory group picked 36 mines for the Government’s Fast-track list in one meeting lasting less than three hours, The Post’s Tom Pullar-Strecker reports this morning. A sample:

Minutes of meetings of the Fast-track Projects Advisory Group, released to The Post under the Official Information Act, also show the government-appointed group made preliminary decisions on another 161 fast-track applications at two meetings in July lasting a total of only 10 hours.

That was despite chairperson David Tapsell arriving two hours late to the first of those meetings, due to a plane delay.

Honorable mention

Politics: Powered-up Regulatory Standards Bill removes role of courts Newsroom’s Jonathan Milne

4. Deep-dive du jour: Torturing with isolation

Aaron Smale has written a compelling North & South feature on the inter-generational effects of solitary confinement. A sample:

The Department of Social Welfare stepped in and took Shane from his parents. If the premise of the state’s intervention was to make his life better, it failed.

“I got to Epuni Boys Home, at the age of nine. You strip, you shower. I can remember having kerosene poured on my hair and wearing a grey uniform. And they threw me into a cell. Even though I didn’t have a good mother and a good father, I spent all weekend crying out for them.”

The use of solitary confinement as a common practice goes back at least to the 18th century as a replacement for capital punishment and torture as a public spectacle in Britain and Europe. The practice had a religious logic, in that it was thought solitary seclusion would give prisoners time to reflect on their sins and change their behaviour. But it was quickly found to be its own kind of torture, a psychological one. If the core of being a human being is a relational, sensory creature living in space and time, solitary confinement attacks that core. It often destroys it.

5. Solutions news: What to do about migrant exploitation

Tom Blessen’s episode of The Detail on Newsroom/RNZ today about migrant exploitation is essential listening. A sample:

Sudesh Jhunjhunwala, CEO of Sudima Hotels and Hind Management, is one person helping to pick up the pieces of broken promises.

“To me that’s causing human misery .. it’s like you are taking part in slavery, and anyone who sees that and keeps quiet, I think you are equally complicit,” he says.

He experienced first-hand the dark side of such schemes when, as the manager of two hotels he was offered $10,000 (per letter) to write job letters of work promises.

“I was so upset that this person would even think of calling me up for something like that,” he says.

He has employed three exploited migrants as chefs or other hotel workers, including chef Sujith Gaha, who tells The Detail that migrants should be aware of their rights.

Jhunjhunwala is one of the senior business leaders in the Indian community in New Zealand who wants to see change happen when it comes to migrant worker exploitation. He emphasises the importance of stable immigration policies to curb migrant exploitation.

Migration: The Kiwi business leader giving exploited migrants a second chance Newsroom/RNZ’s The Detail

6. Editorial, Op-Ed or column du jour:

The usually far-from-liberal ODT-$$$ published a scathing editorial this morning about PM Christopher Luxon’s decision to “put his own Prime Ministerial desires ahead of the good of New Zealand and New Zealanders in giving this bill tacit initial support.” A sample:

By allowing the Bill to gain enough support to pass its first reading in the House last week, the absent on the day Mr Luxon helped drive a wedge between Maori and the Crown, and started undoing decades of good work to bring people together. His frequent, patronising but meant-to-be soothing comments that National MPs would not vote for it beyond the first reading have become rather tiresome in light of both the damage it has done, and the wasted expense and energy it has generated, to date.

If Mr Luxon had shown more backbone with Mr Seymour in the coalition talks last year it would have saved a great deal of unnecessary anxiety and stopped goodwill going down the drain. ODT-$$$ editorial

The Kākā’s Journal of Record for Wednesday, November 20

* Te Tiriti & politics: The Police thanked the roughly 42,000 attendants of the Hīkoi mō te Tiriti for conducting their movements "smoothly and safely". Over 260,000 people have signed an ActionStation petition urging the Government to scrap the Treaty Principles Bill, the largest the site has yet hosted. RNZ

* Economy & food: Foodstuffs North and South Island said they would appeal the Commerce Commission's decision to deny their planned merger, claiming the merger would allow the co-ops to "streamline operations" and "reduce overheads." The Commission is concerned a merger would lead to reduced profit margins for suppliers and thereby reduced supplier investment and innovation.

* Health: The 2023/24 New Zealand Health Survey was released, covering a range of health measures such as smoking, drinking, and activity levels.

* Security & politics: Legislation to criminalise foreign interference, including the creation of a new offence for people knowingly working against NZ interests to the benefit of a foreign power, passed its first reading in Parliament today. Minister of Justice Paul Goldsmith said the Bill equips NZ against ongoing interference attempts by "some foreign states". 1News

* Governance & politics: Regulation Minister David Seymour said the proposed Regulatory Standards Bill, now open for consultation, intends to "bring the same level of discipline" to existing and future regulation that the Public Finance Act brings to public spending.

* Health & poverty: The latest New Zealand Health Survey showed Māori daily smoking rates dropped from 28% in 2018 to 14.7% in 2023, in what ASH Action For Smokefree 2025 board member Fay Selby-Law called an "almost unprecedented" drop among global demographic groups. Associate Health Minister Casey Costello announced she would take proposals for a harm reduction-focused regime for nicotine to Cabinet "early next year".

Cartoon du jour: Sunshine out of the sunshine

Timeline-cleansing nature pic of the day: A sunny tree

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

Kia ora. Long stories short, here’s my top things to note in Aotearoa’s political economy around housing, climate and poverty on Monday, November 18:

* The News: PM Christopher Luxon met President Xi Jinping for the first time over the weekend on the fringes of the APEC summit in Peru and said Xi had warned him against joining AUKUS, but Luxon said Xi’s view on any trade impacts ‘wasn’t a consideration’ in the decision. RNZ

* In my view: Former PM Jenny Shipley speaks for many in the National party worried that David Seymour’s Treaty Principles Bill now before Parliament risks ‘inviting civil war.’ RNZ

* Scoop: Health NZ’s abrupt cancellation of a major IT upgrade to save money meant just one of its 15 service improvements planned was completed, RNZ’s Phil Pennington reports for RNZ from official documents.

* Deep-dive: Budget cuts are deepening the damage from existing injustices and poverty, The Sunday Star Times’ Sapeer Mayron reports.

* Solutions: A bowel cancer screening programme in Northland picks up 89 cases. RNZ

* Editorial Opinion: Helmut Modlik describes what the Treaty Principles bill would do to our constitutional arrangements.

(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 we’ll open it up for public reading, listening and sharing.)

1. The News: Xi warns Luxon over Aukus

PM Christopher Luxon met President Xi Jinping for the first time in Peru on the fringes of APEC over the weekend. Luxon said Xi expressed concern about New Zealand joining AUKUS, but the PM said any effects on trade with NZ’s largest trading partner ‘was not a consideration’

Trade & security: Xi tells Luxon China is a partner, not a threat during face-to-face meeting RNZ’s Jo Moir

News elsewhere:

Housing: Number of emergency housing applications denied rises RNZ’s Susan Edmunds

2. In my view: A National Party grandee speaks

In my view, there’s clearly some very concerned senior figures in the National Party ahead of the arrival of 30,000 protestors at Parliament in Tuesday’s Hikoi, including Chris Finlayson last week and Jenny Shipley in an interview on RNZ’s Saturday morning.

Here’s the gist of her comments:

“The voice of Māori, that reminds us that this was an agreement, a contract - and you do not rip up a contract and then just say, 'Well, I'm happy to rewrite it on my terms, but you don't count.'

"I would raise my voice. I'm proud that the National Party has said they will not be supporting this, because you cannot speak out of both sides of your mouth.

"And I think any voice that's raised, and there are many people - pākeha and Māori who are not necessarily on this hikoi - who believe that a relationship is something you keep working at. You don't just throw it in the bin and then try and rewrite it as it suits you." Former National PM Jenny Shipley via RNZ

But her most pointed comments were around the rising chances of conflict:

Dame Jenny said past attempts to codify Treaty principles in law had failed.

"While there have been principles leaked into individual statutes, we have never attempted to - in a formal sense - put principles in or over top of the Treaty as a collective. And I caution New Zealand - the minute you put the Treaty into a political framework in its totality, you are inviting civil war.

"I would fight against it. Māori have every reason to fight against it.

"This is a relationship we committed to where we would try and find a way to govern forward. We would respect each other's land and interests rights, and we would try and be citizens together - and actually, we are making outstanding progress, and this sort of malicious,politically motivated, fundraising-motivated attempt to politicise the Treaty in a new way should raise people's voices, because it is not in New Zealand's immediate interest.

"And you people should be careful what they wish for. If people polarise, we will finish up in a dangerous position. The Treaty is a gift to us to invite us to work together. And look, we've been highly successful in doing that, despite the odd ruction on the way." Jenny Shipley via RNZ

3. Scoop du jour: Saving money now will cost more later

Health: Revealed: Impact of hospitals forced to give back millions for tech upgrades RNZ’s Phil Pennington

Honorable mentions

Justice & poverty: The mistakes, inaccuracies and unchecked claims that led to Oranga Tamariki permanently uplifting a child from her grandmother RNZ’s Anusha Bradley

Politics & budget cuts: Minister told hybrid working, job cuts were affecting Crown leases. In the months before Nicola Willis ordered a review of hybrid working arrangements for public servants, she was told the Government was struggling to find tenants for its leases. Publicly, she blamed the effect on local businesses. The Press’ Kelly Dennett

Health & budget cuts: Health NZ costs for contractors and consultants soar by more than $80m over last year NewstalkZB’s Sophie Trigger

Jobs & migration: Australian state luring Kiwi ECE teachers with $55,000 incentives NewstalkZB’s Shannon Johnstone

Housing & infrastructure: No new high school in Halswell for up to 50 years. Residents in Christchurch’s most populous suburb are concerned two high schools are expected to accommodate rapidly growing school rolls, after the Government revealed it would build schools “just in time” or only once they were needed. Comment below. The Press’ Sophie Lapsley

4. Deep-dive du jour: Cuts now = big costs later

Injustice & poverty: Kids in prison, families at risk: The impact of deep social service cuts. Crystal Kainamu was ‘always in trouble’ before she started boxing. Now, the group that helped her is among hundreds that have lost government funding. The Sunday Star Times’ Sapeer Mayron

Honorable mentions:

Trade & politics: Xi tells Luxon China is a partner, not a threat during face-to-face meeting RNZ’s Jo Moir

Social investment: The price of doing good - what is ImpactLab's impact? Maria English speaks to Q+A about how her firm measures the social impact of charity work. 1News

Climate: Westport faces raising flood defences, managed retreat scenarios. The coastal town has flooded repeatedly in recent years, with climate change causing concerns that floods are only going to get worse. 1News

5. Solutions news: Spending now = less costs later

Health: 'Every single one ... a win': Programme picks up 89 Northland bowel cancer cases RNZ’s Peter de Graaf

Media: Call for Local Democracy Reporting scheme to be expanded amid newspaper cuts RNZ

Climate & electricity: Wind farm mooted for Waitaki. A company has plans for a 130 megawatt wind farm, split across two country stations on Kurow Hill. The Press’ Yashas Srinivasa

6. Editorial, Op-Ed or column du jour: A bonfire in Parliament

Ngati Toa CEO Helmut Modlik argues in the Sunday Star Times: The Treaty Principles Bill would burn down NZ’s constitutional origins. The biggest problem for Act’s Bill is it ignores the right to self-determination guaranteed to Māori tribes

Honorable mention:

Column by Claire Trevett in NZ Herald-$$$: National gets spooked as David Seymour plays a blinder on Treaty Principles Bill

The Kākā’s Journal of Record for Monday, November 18

* Electricity & climate & poverty: The Government announced its review of the electricity market would look into investment and access to capital, market rules and competition. Associate Energy Minister Shane Jones said regulatory settings must ensure the gentailers put New Zealanders' interests first. NZ Herald

* Transport: Transport Minister Simeon Brown announced Fulton Hogan would start building the SH1 Papakura to Drury project early next year. Brown said the road expansion will serve up to 40,000 new homes in Pukekohe, Drury, Paerata, and Takanini over the next 30 years.

* Economy & manufacturing: BNZ and BusinessNZ PMI survey data showed NZ's manufacturing sector has been contracting for 20 consecutive months, with activity dropping to its lowest level since July. BNZ economist Doug Steel said businesses’ improved expectations had been let down by current conditions.

* Trade & economy: NZ signed the Agreement on Climate Change, Trade and Sustainability with Costa, Rica, Iceland, and Switzerland, a trade deal to remove tariffs on 300 substainable goods, reduce or remove fossil fuel subsidies, and institute voluntary eco-labelling guidelines. Trade and Agriculture Minister Todd McClay said the removal of tariffs on 45 wood and wool products will benefit NZ exporters. RNZ

* Conservation: Te Papa Atawhai the Department of Conservation called for feedback on proposed modifications to NZ's conservation system, including charging for access to some areas and "reducing red tape" to facilitate access to conservation land for tourist businesses and researchers. Forest and Bird said it was concerned some of the proposals could lead to the sale of conservation land; the Environmental Defence Society said the charging system needs to be affordable for NZers. RNZ

* Infrastructure: Infrastructure Minister Chris Bishop appointed Taumata Arowai chair Raveen Jaduram as Chair of the New Zealand Infrastructure Commission Board. Jaduram was previously Chief Executive of Watercare Services, and managing director of Australian private water company Murrumbidgee Irrigation.

Cartoon du jour: T&Cs

Timeline-cleansing nature pic of the day: Sailing away

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, here’s the top six news items of note in climate news for Aotearoa this week, and a discussion above between Bernard Hickey and The Kākā’s climate correspondent Cathrine Dyer:

* Are our institutions capable of bending, not breaking, in the face of accelerating climate risk? Climate risk is systemically underestimated in the climate scenarios that are used by central banks, including the Reserve Bank of New Zealand, to test the stability of the financial system. The latest update to scenarios from the Network for Greening the Financial System (NGFS) forecast much higher economic losses from climate change, but is it enough?

* Net-Zero requires a ‘like-for-like framework’ in which only permanent storage can reverse the climate impact of fossil carbon emissions, says Zeke Hausfather. The realisation that planting trees cannot  compensate for fossil fuel emissions is beginning to dawn.

* The Helen Clark Foundation released a report warning that 10,000 houses are set to become uninsurable in Aotearoa as climate risk grows, suggesting that the country “is just one major disaster away from insurance retreat becoming a much more complex problem that it already is”.

* Australia has given the go ahead to another mammoth fossil fuel emitting gas project. Western Australia’s Labour Government has announced plans to ditch state emissions reduction requirements in order to clear the path.

* UN Chief António Guterres opens COP29 with another headline grabbing quote, opining that “[t]his year has been a masterclass in human destruction.”

* The Chart of the Week focuses on the source of debates about responsibility at COPs - current versus historic emissions of key countries.

(See more detail and analysis below, and in the video and podcast above. Cathrine Dyer’s journalism on climate and the environment is available free to all paying and non-paying subscribers to The Kākā and the public. It is made possible by subscribers signing up to the paid tier to ensure this sort of public interest journalism is fully available in public to read, listen to and share. Cathrine wrote the wrap. Bernard edited it. Lynn copy-edited and illustrated it.)

1. Underestimating the risk of financial collapse

One of the most important equations in economic modelling of climate change is the damage function. The damage function determines the economic losses associated with additional warming.

This week, the Network for Greening the Financial System (NGFS) released updated climate scenarios, with a new, much higher damage function.

If you have heard the terms ‘orderly’, ‘disorderly’, ‘too little too late’ or ‘hot house world’ used to describe possible transitions, then they are likely referring to scenarios developed by the NGFS.

The NGFS is a network of central banks that was established following the Paris Agreement with the aim of improving the global management of climate risk and to try to mobilise finance to support the transition to a sustainable economy. The Reserve Bank of New Zealand is part of the network, and uses climate scenarios developed by the NGFS to test the stability of the financial and banking system in Aotearoa.

The damage functions used in economic modelling in general, and the NGFS climate scenarios in particular, have been criticised for systemically underestimating risk. The importance of this is difficult to over-emphasise. The global financial system is tightly interconnected and proved to be frighteningly fragile during the global financial crisis (GFC) in 2007-2008. A lot of work has gone in to trying to build more stability and resilience into the system since then. Part of that effort involves the regular testing of stability in the face of climate damage using the NGFS climate scenarios.

Governments have proven reluctant to act on the increasingly strong advice of climate scientists, relying heavily instead on economist’s projections of the impact of climate change on the economy. If those projections underestimate economic damages, then they are unlikely to enact policy that is proportionate to the true scale of the risk. There are other factors that lead governments to underreact to climate change, but the prospect of limited economic losses provides a highly significant contribution. Any update to the most commonly used damage functions is meaningful. Despite underpinning the global response to climate change, its influence is largely invisible to most people. This single mathematical function lies at the heart of a profound disconnect between climate scientists and economists.

The analysis performed by the NGFS considered a range of estimates from the literature, landing on one of the higher estimates from Kotz (2024), who forecast mean economic losses of 33% of GDP by 2100, in the absence of further climate action (19% losses for each 1˚C of incremental global temperature increase), the red line in the chart below.

A report last year from the Institute and Faculty of Actuaries (IFoA) and the University of Exeter was critical of the way that damage functions are calculated. They were concerned that climate tipping points, amongst other anticipated extreme climate impacts were not being included in projections..

One of the authors of that study, Sandy Trusk, was quoted in the Guardian, responding to the new NGFS scenarios.

“This is a massive one-third hit from physical damage on GDP. It has increased more than five times, from about 6% to 33%.

“But while this is a much more severe damage risk, it is by no means comprehensive. The analogy I would use is a model of the Titanic where you can see the iceberg, but the modelling fails to recognise that there are not enough lifeboats on board, or that the cold water is a threat to human life. So this report is still systemically underestimating the risk.” The Guardian

Rather than making incremental improvements to projected economic damages based on historic experience, the IFoA report recommended listening to climate scientists when they say that a stable modern civilisation is incompatible with temperatures above 4˚C. They recommend using a log damage function that assumes 100% GDP loss at a certain level of warming, say 6˚C, 5˚C or 4˚C, saying that even 3˚C may be extremely challenging to adapt to. Those damage functions would look like the chart below. If you were to tip the blue quadratic line upwards so that it passed through 33% damages at 3˚C, you would have a representation of the latest NGFS damage function compared to where they sat before.

The NGFS report acknowledges that the future economic outlook may be significantly worse than their damage function suggests,

“It cannot be excluded that the economic effects of climate change might turn out to be even more severe than visualised under the NGFS scenarios, for instance, if certain tipping points are reached,” the report said.

“Thus, users should also take into account the tail risks of climate change, along with other risks such as nature-related ones, which are not necessarily captured by these scenarios.” The Guardian

The problem is that most of the decision-makers using information gleaned from climate scenario analyses are unlikely to be paying attention to the uncounted risks, simply because they are uncounted. After all, the damage function is meant to represent the risk of damage, and policymakers respond to numbers, not caveats.

The systemic underestimation of economic risk is directly related to systemic policy under-reactions by governments, increasing the chances of those unaccounted-for tail risks actually occurring. One argument for continuing to underestimate the economic damages of climate change is the possibility that an accurate understanding of the risks by investors would simply bring forward the date of a financial collapse. The ability of our financial and democratic institutions to bend, not break, in the face of true climate risk so far remains untested.

2. Planting trees can’t remove fossil carbon emissions from atmosphere

The realisation is beginning to dawn  that temporary carbon sinks, from planting forests for instance, cannot off-set ongoing fossil fuel emissions.

At best, says climate scientist Zeke Hausfather, they can help to minimise peak temperatures and counterbalance land use emissions. Net-Zero requires a ‘like-for-life framework’ in which only permanent storage can reverse the climate impact of fossil carbon emissions, according to his recently co-authored publication in Nature.

“Here we see that only permanent storage fully reverses the climate impact of a pulse of CO2 emissions over a 500-year timeframe. Notably, there is no significant cooling of the climate that occurs after the emissions pulse, suggesting that we cannot use temporary climate removal to buy time until the climate cools back down (similar to how geoengineering would not actually solve the problem).

This reinforces the finding (by many of the climate scientists behind the idea of net-zero emissions) in Allen et al 2022 that “durable, climate-neutral net zero strategies require like-for-like balancing of anthropogenic greenhouse gas sources and sinks in terms of both origin (biogenic versus geological) and gas lifetime” and that “the requirement that any continued generation of fossil CO2, whether or not it is emitted to the atmosphere, must be balanced by geological CO2 sequestration or equally permanent disposal.” The Climate Brink

This aligns with a 2022 suggestion from New Zealand’s Parliamentary Commissioner for the Environment, Simon Upton, that forestry sinks should only be applied to off-setting biogenic agricultural emissions, although his calculations suggest that only a fraction of the warming from agriculture could be offset that way in Aotearoa, even with extensive planting.

The fly in the ointment is another dawning realisation – that permanent geological storage solutions (carbon capture and storage) are not delivering on expectations and may never scale quickly enough to be of much use.

3. New insurance retreat study suggests the Government act now

Another study, this time from the Helen Clark Foundation warns that 10,000 properties could become uninsurable as climate risk grows. This reinforces finding from insurance retreat modelling published in an article earlier this year (Storey et al., 2024).

“The report is also urging policymakers to cease "inappropriate" development in flood zones, flood-prone areas, and coastal locales that are set to become uninsurable in the coming decades.

Government intervention is also being called for, including the development of a residential flood insurance scheme, similar to arrangements seen in the UK and France.

"Such a scheme, depending on its design, could aim to fill any of several different potential future 'protection gaps'," the report said.

This could include homes that are unable to access private insurance but were still within a risk threshold, homes in areas where insurance has been withdrawn because of risk, and homes that are facing a future process of planned relocation, and require cover in the interim.”

The country, they say “is just one major disaster away from insurance retreat becoming a much more complex problem that it already is”.

4. Australia approves another mammoth emissions-emitting project

Western Australia’s state government has announced it plans to abolish state-emissions reduction requirements, clearing the path for one of the country’s largest emitters, a Woodside gas production plant, to continue operating for another fifty years.

“Scientists have warned the proposal to extend the life of the North West Shelf gas processing plant on the Burrup Peninsula in the country’s remote north-west is linked to the development of at least three major gas fields and could ultimately result in billions of tonnes of climate pollution being released into the atmosphere.

The WA Environment Protection Authority recommended in 2022 that the state approve a 50-year extension for the plant, which is run by the oil and gas company Woodside, as long as it progressively reduced its operating emissions. It could do that by making cuts onsite or paying for carbon offsets.

More than 750 organisations and individuals lodged appeals against the recommendation – a record for the state – citing its contribution to the climate crisis and potential damage to Indigenous rock art. The WA appeals convenor has been considering the objections since mid 2022.

But the WA government last month announced it would change rules so that the EPA would no longer regulate emissions from development proposals that released significant climate pollution.” The Guardian

The decision highlights the inadequacy of Australia’s ‘safeguard mechanism’ that requires the country’s 215 largest industrial emitters to cut their emissions intensity by 4.9% a year until 2030.

5. A masterclass in human destruction

COP29 has kicked off, with another great quote from UN chief António Guterres to mark the moment. “This year has been a masterclass in human destruction”, he told attendees at the summit.

“Families running for their lives before the next hurricane strikes; workers and pilgrims collapsing in insufferable heat; floods tearing through communities and tearing down infrastructure; children going to bed hungry as droughts ravage crops,” he said. “All these disasters, and more, are being supercharged by human-made climate change.” The Guardian

In response, the UK has confirmed its commitment to an 81% reduction in emissions by 2035 compared with 1990 levels, with new policies likely to be needed to encourage a switch to public and active transport, and from gas heating to electric pumps.

UK leadership will not make up for the abyss created by Trump’s election in the US. Also likely to be missing from the summit is strong leadership from the EU who are about to miss the deadline for NDC commitments amidst internal dissent about the European Commission’s recommendation for a 90% emissions reduction target for 2040, with the 2035 target to be derived by drawing a straight line between that and the current 2030 target.

“Some countries feel that the bloc is doing enough and it’s time for other countries to step up, as the EU now accounts for only 6 percent of global emissions. (The bloc is responsible for 12 percent of carbon dioxide released since the pre-industrial era.)

“We don’t give ourselves enough credit,” said the Polish official, who was granted anonymity to speak freely. “We are leading by example, and it’s an excellent example.” 

“The EU has already done a lot for climate,” a senior climate negotiator from another EU country said. “My government even thinks Europe is doing too much.”  Politico

Meantime, the President of COP29’s host country, Azerbaijan, has described oil and gas as a “gift from God”, as the country’s negotiators were filmed seizing opportunities during conference discussions to secure gas deals. The country plans to expand gas production by up to a third this decade.

6. Chart of the week: The G20 under the spotlight at COP29

Arguments over who is responsible for climate warming, and who should contribute most to climate financing, particularly for loss and damage in developing countries, often focus on historic versus current emissions.

Source: Politico

Ka kite ano

Bernard and Cathrine

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:

* The Kākā’s climate correspondent Cathrine Dyer on the latest climate news, including from COP29 this week;

* Robert Patman on the US Presidential elections, Israel vs Gaza/Iran/Lebanon, Ukraine/Nato vs Russia/North Korea and whether NZ now joins AUKUS.

* Special guest Elaine Monaghan on Donald Trump’s win in the US Presidential elections. She is a professor of practice in journalism at Indiana University in Bloomington, and contributed to Reuters coverage of Ukraine, having long been a Reuters correspondent in Moscow, Kyiv and Washington. She was also a correspondent for The Times in Washington and co-authored the 2006 book On the Brink: An Insider's Account of How the White House Compromised American Intelligence.

* Special guest David Tong, Global Industry Campaign Manager at Oil Change International, speaking from COP29 in Baku.

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.

(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