The Kākā by Bernard Hickey

TL;DR: The podcast above of the weekly ‘Hoon’ webinar for paying subscribers on Thursday night features co-hosts Bernard Hickey and Peter Bale talking about the week’s news with:

* The Kākā’s climate correspondent Cathrine Dyer on the latest science of climate tipping points and Project 2025‘s plan to banish the phrase ‘climate change’ from a Trump administration;

* Robert Patman on the latest from Gaza and the conflict(s) in the Middle East;

* Journalist Hala Jaber from Beirut on those conflicts, and,

* Civil Contractors NZ (CCNZ) CEO Alan Pollard on the association’s survey of its members showing a crisis because the new Government froze their pipelines of work.

The Hoon’s podcast version above was recorded on Thursday night during a live webinar for over 120 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:

* The RBNZ was forced to make a dramatic about-turn yesterday, cutting rates after the slowdown it wanted was turbocharged into a recession by the Government’s abrupt closure of construction pipelines for state-funded building of homes, schools, hospitals and water networks, and its slashing of thousands of public sector jobs shocked parts of the economy to a standstill.

* The forecast of a longer and deeper recession came as Civil Contractors NZ said its 2024 survey results showed the Government’s freezing of capital spending had unnecessarily caused a crisis and was driving businesses to the wall.

* A globally recognised climate activist who once served on Air NZ’s sustainability advice panel after a request from then-CEO Christopher Luxon has criticised the airline, its ‘sustainability-lite’ CEO Greg Foran and says the PM is now an “outstanding hypocrite”.

The Reserve Bank cooled out jets, and then the new Government decided to cut some of the fuel lines and dismantle the engine on approach for landing.

The Top Six things

Here’s the top six things to note in Aotearoa’s political economy around housing, climate and poverty on Thursday, August 15:

1. What happened between May & August to flip the RBNZ?

Govt’s closure of construction pipelines amplifies RBNZ’s tightening

Well, that escalated. Suddenly, the central bank is cutting rates a year ahead of its previous expectations to avoid an ugly and unnecessary recession.

Te Pūtea Matua-The Reserve Bank of New Zealand had been bearing down on the economy with a 5.5% Official Cash Rate since May last year to engineer a slowdown that would squeeze inflation back towards its 1-3% target band. Everything was going to plan for a soft(ish) landing that would avoid a sharp recession. The RBNZ expected a little bit of help from the new Government to tighten fiscal policy, but it got many more turns of the screw than everyone expected, and now Aotearoa faces a longer and deeper recession.

The Reserve Bank cooled our jets, and then the new Government decided to cut some of the fuel lines and dismantle the engine on approach for landing. Now the central bank is having to pull back on the stick earlier than it expected and push on the throttle.

Perhaps the pilot and flight engineer should work together a bit more.

The Government’s decisions from December through to May to clamp down on the pipelines for state-funded building of houses, schools, hospitals, local roads and water networks was the moment of dismantling. The Finance Minister’s orders to ministries to cut 6.5% from their Budgets for the May 30 Budget was the moment when some of the fuel lines were cut, unleashing thousands of high-paid job cuts shocking Wellington’s economy to a standstill.

But the Reserve Bank couldn’t be completely sure of that shock to construction and Government employment when it published its forecasts in its May 22 Monetary Policy Statement. Three months ago, it was still wondering if the tax cuts that arrived on July 31 would stimulate the economy and keep local inflation high. That meant it forecast GDP would rise and that it would not need to or be able to cut until late next year (yes, late 2025).

Instead, the construction sector, first home buyers, government workers and consumers saw the Budget and realised first home buyer grants had been cut, departmental capital and wages udgets would be tight for years to come and there was no opening of the capital pipelines for homes, classrooms, hospitals, local roads and local water networks.

The ‘high frequency indicators’ of card spending, PMI, PSI, business confidence, job ads and housing market activity tanked in June as the construction sector ramped up their job cuts, subbies jumped on planes to Australia and the shell-shocked bureaucrats of Wellington stopped buying both the cheese scones and flat whites. Here’s what I wrote about the economy ‘tanking’ on July 12.

Here’s how the Reserve Bank’s GDP forecasts have changed between May 2024 (dark green) and yesterday (red):

And here’s what that meant for the Reserve Bank’s OCR track between May 2024 (dark blue) and yesterday (light green):

Ironically, perhaps, the RBNZ’s May 2023 forecast appears more accurate.

Furrowed brows and perpolexed spectators

This dramatic about-face in forecasts has a few economists up in arms.

Here’s Infometrics’ Brad Olsen saying via RNZ’s Susan Edmunds the RBNZ had performed its “biggest flip-flop ever.”:

“The bank seems to have just ignored what it did in May and hope the rest of us forget - we won't.

"To be fair, it's probably the right move but the huge revision to the OCR track - a thing the Reserve Bank quite directly controls - shows how completely wrong they were in May.

"They try to explain it away a little bit by saying near-term economic indicators have change and are now on a weaker track - but it's not that much weaker. I've said before the indicators that have come in so far that they have said over time they watch have come in broadly as expected. They've completely ignored themselves."

He said it was "probably the biggest flip-flop" ever seen from the Reserve Bank.

"The bank clearly has no idea why the economy has apparently changed so much between May and August." Brad Olsen

A few economists said the Reserve Bank had gotten it wrong by still being too worried about inflation in May and issuing an overly hawkish commentary about not needing to cut rates any time soon.

Here’s BNZ’s Stephen Toplis in a note:

“There will be those who criticise the Bank for cutting so soon after a May MPS which introduced a tightening bias. We do not think this criticism is warranted. If the data moves against your expectations, then you move your stance. This is what the Bank has done.

“However, back in May we questioned the decision to adopt that tightening bias and we think that in hindsight folk will come to accept that May was a mistake, not today’s decision.” BNZ’s Stephen Toplis in a note

And ANZ’s Sharon Zollner also wondered whether May’s hawkish forecasts were a mistake.

“I think the Reserve Bank would have to acknowledge that May was a step in the wrong direction. They made some very pessimistic assumptions, which we pointed out at the time that we thought that maybe they should have more confidence that inflation was going to keep falling.

“But they were very worried about some productivity data and they had just had a significant upside surprise on the non-tradable inflation. But I think it is risky for the Reserve Bank to dismiss their OCR track in particular, because that is a very important signalling device for the market.

“So you can't sort of tell people, well, ignore what we said last time, but take what we're saying this time as gospel. You know, there has to be some sort of consistency there. So I think probably the upshot is absolutely take note to what they are saying, but always be aware that they reserve the right to change their minds as the data keeps coming in.” Sharon Zollner via the 5in5withANZ podcast

Perhaps, like the rest of us, the Reserve Bank has been surprised at just how hard and fast the Government’s capital spending freeze would give the economy a cardiac arrest. Read on.

2. ‘Why did you close the pipeline? The work has to be done’

Civil Contractors pleads for Government to reopen the pipelines of work

Horizontal infrastructure (roads, pipes etc) industry association Civil Contractors NZ (CCNZ) didn’t pull any punches or do any fudging in saying yesterday with the release of its annual survey of members that the Government had destroyed confidence about future work by freezing decisions and capital grants centrally and locally.

Here’s CCNZ CEO Alan Pollard in a statement on the survey of 226 civil construction professionals 24 May to 21 June 2024 (bolding mine):

“If we conducted the survey again today, the response would be even more dire. Right now, I am fielding daily emails from our members, who are deeply concerned that their businesses may not survive.

“I can’t stress enough the importance of a well-defined, committed, and funded pipeline of work. The government needs to act quickly to restore business confidence. Promises alone won’t get things built.

“Only a committed and adequately funded programme of work will give businesses the assurance they need to invest in the people and technology required to get infrastructure works done.” CCNZ CEO Alan Pollard in a statement

The survey found 64% reported a shortage of work was their main issue, vs 29% saying that in 2023, while 57% said they were having problems with central government and council procurement guidelines and work consents, up from 36% last year.

“The results of the first survey since the 2023 election paints a landscape of uncertainty, driven by a dramatic increase in the lack of work and a decline in confidence regarding future pipelines and revenue

“Given the amount of long-term infrastructure work projected, this is a poor time for the industry to down-size, but the current market means many companies are currently left with little choice.” Alan Pollard

3. Once upon a time…

Climate activist who once worked with Luxon at Air NZ criticises airline

Jonathon Porritt is a high-profile British-based climate activist who was once on Air NZ’s Sustainability Advisory Panel. By the by, his father was also a previous Governor General of New Zealand.

Yesterday Porritt posted on LinkedIn about his disappointment with Christopher Luxon and Air New Zealand, especially after it gave up on its emissions reductions targets for 2030 and pulled out of the Science Based Targets Initiative two weeks ago.

Here’s Porritt (bolding mine) telling the story:

“Once upon a time, a guy called Christopher Luxon, seeking a career uplift after many a long year selling detergents and mayonnaise for Unilever, became CEO of Air New Zealand. Ten years ago, seeing serious sustainability challenges ahead, he decided to set up an international Sustainability Panel. And was crazy enough to invite me to chair it.”Air New Zealand became a bit of a star in the aviation industry, as it seriously got to grips with its climate responsibilities. Mug that I am, I felt proud to be able to call it “the world's least unsustainable airline!” (All airlines remain seriously unsustainable).”In 2023, somewhat improbably, that same Christopher Luxon became Prime Minister of New Zealand – as part of a right-wing coalition including two populist, climate-denying fringe parties. All those serious sustainability challenges he’d faced into at Air New Zealand mysteriously disappeared.

Air New Zealand is majority owned by the NZ Government – and any profit it makes goes straight back into government coffers. So (CEO) Greg Foran's predecessor, Christopher Luxon, is in effect Greg Foran's boss as Prime Minister. The Air New Zealand Board members are just bit part players in this weird relationship.This was not a happy combo for Air New Zealand: a number-crunching, sustainability-lite CEO, reporting to a right-wing populist Prime Minister (sporting his newly-minted credentials as an outstanding hypocrite), with a Board intent on serving its new political masters, however ignorant they turned out to be.” Jonathon Porritt via LinkedIn.

4. Quote of the day

Mayor says council needs Govt cash to address housing crisis

“We don’t have headroom with funding – we’ve reached our maximum debt ceiling because of the water reforms. It’s frustrating from a small council’s point of view, where the needs are greater. There is a huge need for housing.

“We have pockets in our area with a deprivation level of 10, the worst. Some people are living in unsafe, cold, and old housing stock. There’s a big need in this district. We will keep badgering central government to provide some state housing so people can stay in the community they desire to be in.” Ruapehu Mayor Weston Kirton via NZ Herald

5. Chart of the day: Rockets and feathers

Wholesale rates have fallen 100 bps. 2 year fixed rates are down 50 bps’

6. Climate graphic/chart/pic of the day

Mediterranean frogs set to boil

The Kākā’s Journal of Record for Aug 15

* Economy: The Reserve Bank cut the OCR to 5.25%, saying that inflation is returning to within the Monetary Policy Committee's 1-3% target band. The Committee noted NZ's economic contraction in recent months, and said restrictive monetary policy and falling net migration may be playing a role. RNZ, Interest

* Poverty: Children’s Minister Karen Chhour said a young person who chose to opt out of the Palmerston North boot camp pilot will "not have this option" once legislation for the programme is passed.

* Economy: Parliament’s Primary Production and Finance and Expenditure Select Committees announced the terms of reference for an inquiry into banking competitiveness, including price and profitability of banking services, possible barriers to competition and lending to Māori organisations and individuals.

* Poverty: Immigration Minister Erica Stanford & Foreign Affairs Minister Winston Peters announced that the pause on accommodation cost increases for Recognised Seasonal Employer scheme workers will be lifted, and only "experienced" RSE workers will have to be paid 10% over the minimum wage. Additionally, the RSE's cap will rise by 1,250 workers to 20,750, and employers will have to pay workers an average of 30 hours a week over four weeks.

* Housing: The Environmental Protection Authority approved fast-track consenting for a Remuera retirement village. The Upload Road village will have 183 independent living units and 60 aged care units over roughly three hectares.

* Climate: The Ministry of Transport released research on heavy vehicle operators showing that only 51% have committed to reducing their carbon emissions. Truckers said barriers to zero-emissions and low-emissions vehicle uptake included high up-front purchase costs, insufficient in-house maintenance skills and equipment, and a lack of charging locations.

Finally, some fun things

Cartoon of the day: Trump and Musk warming up

Timeline-cleansing nature pic

Spring is springing

Mā te wa

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:

* Simeon Brown is pushing ahead with a congestion charging plan that centralises control in Wellington and fails to first show the benefits to drivers or offer public transport alternatives, guaranteeing an easy policy-killing ‘brand new tax’ backlash.

* Louise Upston has launched an evidence-free new toughening of benefit sanctions and plans electronic controls of half of benefit spending, just as the Reserve Bank is deliberately engineering higher unemployment to offset inflation partially caused by the Government’s own actions.

* Simeon Brown looks set to order power companies to build a new gas-fired power plant to try to control power prices, which are forcing mass layoffs and factory closures, along with pushing up inflation.

* A survey of 650 builders finds the Government’s freezing of funding for Kāinga Ora and local road and water projects has caused a collapse in builder pipelines of work that means they’re now working at barely two-thirds capacity, despite massive housing and infrastructure shortages.

The Top Six for August 13

Here’s the top things to note in Aotearoa’s political economy around housing, climate and poverty on Tuesday, August 13:

1. ‘Show us the buses and the money first’

Transport Minister launches Beehive-centric congestion charging plan

They never learn.

Market-friendly politicians and infrastructure economists always talk up the benefits of congestion charges as a ‘win-win’ way to manage demand and reduce congestion without having to build massively expensive new motorways and roads. But they usually fail to account for the massive backlash easily engineered by opposition politicians accusing the charger of a imposing a ‘brand new tax’ and not offering alternatives.

Yet that’s exactly what Transport Minister Simeon Brown did yesterday in announcing plans to legislate from later this year to allow ‘time of use’ or congestion charging. The backlash started within minutes and is already brewing around a couple of key projects in Tauranga and Whangaparāoa, where locals are already up in arms about tolls on new roads.

His comments yesterday hinted at what he had already gotten wrong:

“We need the public to see the benefits, and we need a scheme which will be enduring. If you look around the world, there's been a number of schemes designed and implemented. They've fallen apart because they haven't had that public acceptability.” Simeon Brown in his announcement.

Brown has spent the first nine months as minister defunding public transport and planning to build big new Roads of National Significance (RONS) that congestion charges are supposed to avoid and which will see charges in one city siphoned off to pay for roads in other cities under Brown’s NZTA-focused centralised approach.

The backlash was fast and shows that any effective congestion charge has to have the support of both councils and the main opposition before launching.

Here’s Labour’s Auckland issues spokesman Shanan Halbert in a statement less than two hours after Brown’s announcement.

“The National Government seems intent on increasing cost of living pressures on Aucklanders with higher vehicle registration fees, public transport fees, a future hike to fuel tax, tolls roads and congestion charging.

“International research tells us that congestion charging only works if there are viable and affordable alternatives. Labour had ensured there would be alternatives to make sure we saw the behaviour change that Auckland needs, but Minister Brown has not invested in things that get people out of cars. The congestion charges are nothing but a revenue generating exercise for the Government.” Shanan Halbert in a statement

2. Toughening sanctions that welfare experts say don’t work

Social Development Minister Louise Upston has announced tougher benefit sanctions and plans for electronic controls on half of beneficiary spending. They are driven more by political agreements with ACT on the electronic card controls and a perception that beneficiaries are lazy and not bothering to apply for jobs.

The problem there is no conclusive evidence sanctions work to increase employment rates and the cards create an infrastructure for intense monitoring of spending. In my view, it also begs the question: why wouldn’t this also be done for all beneficiaries, including those getting NZ Superannuation.

The gold card infrastructure is already in place. The hard-to-justify political difference in perceptions of course is that, somehow, a beneficiary aged 64 is lazy and needs to be forced out to work, while the same beneficiary aged 65 deserves to not only get a higher benefit, but can not work for as much as they like, as well as keep extra tax-paid earnings or (non-tax-paid) assets without punishment.

3. Is this what it means to be ‘back on track’?

EBOSS survey of 650 builders finds slump in project pipeline

The BRANZ-EBOSS biannual survey of 650 builders was published yesterday, finding a collapse in their pipelines of work in residential, infrastructure and commercial construction in the last 12 months as the new Government stopped the biggest house builder, Kāinga Ora, from building new homes, and froze capital funding for council road and pipe building plans. Here’s the key details:

4. Quote of the day

Bolding mine

“I’m so upset with the huge price increase. I barely could afford to go to the doctor before - had to save for weeks to afford an appointment. Now it seems it a service only for the very wealthy...The new government funding allocation for primary healthcare is sickening, when they can afford tax breaks for landlords,” a South Island patient quoted in this explainer on big increases in Doctors fees by Stuff’s Annemarie Quill

5. Chart of the day

‘Why can’t these beneficiaries get a job?’

6. Climate graphic/chart/pic of the day

More than a quarter of new car sales in California are now EVs

The best of the rest

Top Six scoops and breaking news for August 13

* Health Scoop: Cancer patient may die after months languishing on waitlist Newsroom’s Marc Daalder

* Electricity Scoop Government set to order power companies to build new gas-fired power plant and review entire sector The Post-$$$’s Tom Pullar-Strecker

* Science Scoop: Govt set to merge Crown Research Institutes and take ‘Innovation’ out of the Ministry for Business, Innovation & Employment (MBIE) BusinessDesk-$$$’s Dileepa Fonseka

* Health Scoop: Dunedin hospital staff report hundreds of equipment sterilisation failures a year RNZ’s Kate Green

* Inflation Scoop: Visa fee revenue more than four times Immigration NZ's forecast deficit RNZ’s Russell Palmer

* Justice Scoop: Top cop accused of lying, manipulating witnesses in controversial murder case.The Press-$$$’s Mike White

Top Six deep dives, columns and op-eds for August 13

* Politics Deep Dive: Seymour's plan for tipping millions of dollars into Pharmac - and Big Pharma RNZ’s Guyon Espiner

* Transport Deep Dive: Decisions over $830m road raise ire of community it’s meant to serve Stuff’s Erin Johnson

* Climate Deep Dive: Accepting more frequent road closures along Banks Peninsula may save ratepayers money, as the Christchurch City Council considers a plan to adapt to rising sea levels. The Press-$$$’s Sinead Gill

* Health Explainer: GP fees explained: Why some people pay three times more in same city. Stuff’s Annemarie Quill

* Health Deep Dive: GPs says the health system faces “complete collapse” within 2 years when “people will be dying who shouldn’t”. The Press-$$$ Mariné Lourens

* Column by Simon Wilson Mayor Brown makes flogging jokes while Minister Brown hints Beehive could control Auckland's transport NZ Herald-$$$

The Kākā’s Journal of Record for August 13

* Poverty: Social Development and Employment Minister Louise Upston announced a program of new sanctions for beneficiaries, including half a person's benefit being put onto a payment card usable only for a limited range of essentials. NZ Herald, Otago Daily Times, 1News

* Transport: Transport Minister Simeon Brown announced legislation to enable ‘time of use schemes’ meant to reduce traffic congestion by charging people for travel at busy times. Under the legislation, local councils will be able to propose schemes for their region, while Waka Kotahi-NZTA will lead the design of the schemes and the Government will give final approval. 1News, NZ Herald

* Climate: Regional Development Minister Shane Jones confirmed that the Regional Infrastructure Fund will contribute $101.1 million to 42 flood resilience projects across 11 regions. The projects include stopbanks and pump stations, with construction to begin this summer or sooner.

* Housing: The Environmental Protection Authority announced fast-track consenting for a Queenstown housing development and a Parnell retirement village. The Queenstown development will comprise 370 units, and the retirement village will comprise 65 units plus amenities.

* Auckland: Tātaki Auckland Unlimited's new report in collaboration with the Committee for Auckland and Deloitte compares Auckland's performance on various measures to other highly liveable cities worldwide. It finds that other cities are retaining more of their workforce and becoming more significant centres of innovation, while Auckland is being held back by its housing availability and transport infrastructure. BusinessDesk-$$$

* Housing: Architecture firm EBOSS’s 2024 survey on builder sentiment finds that two thirds of respondents report struggling with decreased demand, with smaller firms facing particularly tough conditions. Increased interest rates and material costs, along with Government project cancellations, drove the fall in demand, which EBOSS expects to persist over the next 12 months. The Press

Finally, some fun things

Cartoon of the day: Monopoly’s money

Timeline-cleansing nature pic

Standing on one leg is quite easy*

Mā te wa

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

TL;DR: My top six things to note around housing, climate and poverty in Aotearoa’s political economy on Monday, August 12:

1. Thinking differently about what matters

I attended a two-day seminar in Auckland over the weekend called Economics for Sustainable Prosperity that was run by Steven Hail, a professor at Torrens University in Australia, in which he talked about Modern Monetary Theory (MMT) and Ecological Economics. I found it enlightening and thought-provoking. Regular readers may recall this introductory interview I had with him a few weeks ago.

I’ll be delving more into the ideas and evidence around MMT, Doughnut Economics, Degrowth in the weeks and months to come in my reporting, interviews and analysis. While he was here, Steven was interviewed by Jack Tame on 1News’ Q+A programme. To get a flavour, here’s the full interview and this brief report from 1News.

In essence, MMT argues that the most important thing a Government should focus on is the best use of all the resources available to achieve what society wants in a sustainable way, rather than targeting balanced Budgets and low public debt for the sake of it. It argues the Government is not constrained by deficits and debt, but by the need to avoid over-using resources to stretch an economy into inflation or the planet into exctinction. There’s a lot more, but I’ll go into it in a series of deep dive pieces in the weeks and months to come.

2. So where did those 1,000 children go?

Associate Housing Minister Tama Potaka announced yesterday that the Government has already reduced the number of households living in motels by 32% to 2,133, including moving 540 families who had been in motels for more than 12 weeks to the top of the social housing register. He said that meant 1,000 tamariki had been moved out of motels.

He also retroactively detailed an MSD Gazette notice from July 28 that changes secondary legislation to make it much tougher for families to stay in emergency housing. That was after RNZ’s Phil Pennington reported on Friday that advocates for homeless people were saying something had changed with MSD policy.

The Government signalled a crackdown on living in motels in March, but didn’t detail the policy. This is the policy from August 26, which is aimed at reducing the numbers of households in emergency housing by 75% by 2030:

If a family stays in a motel for longer than seven nights, they would have to pay an emergency housing contribution and prove to a case manager they both needed the motel and had looked for a private rental; and,

If MSD isn’t satisfied they deserve the place, the family would be warned twice and then their emergency housing grant will be removed.

Potaka did not say where the 1,000 tamariki had ended up, saying only without detail that the Government had increased the supply of social housing.

“Ending the blight that is emergency housing will not be easy. It requires us to take bold and radical action, and that’s exactly what our Government is doing.” Tama Potaka

Pennington reported from housing advocates:

Canterbury housing advocate Kevin Murray said a woman called him on Thursday after hearing from MSD, worrying she would be evicted at the end of August.

"We've heard a few stories around that it's going to affect every person in emergency housing," Murray said.

"I wonder how they will deal with people with serious illness who are on the supported living and may not be able to meet new obligations?"

MSD referred to people engaging with a housing broker, navigator or budget or employment advisors, but Murray said the ministry had cut back on budget advisory services.

Labour Housing Spokesman Kieran McAnulty said National was motivated by saving money rather than ensuring people had a roof over their heads.

“They’re making it harder to access housing and easier to be kicked out - we’re talking about people with nowhere else to go and now anxiously waiting to find out if they still have a home. Kieran McAnulty

3. Solutions News: ‘Get gentailers to do a $30/month deal’

Amid factory shutdowns and an explosion in wholesale electricity prices, energy poverty academics and advocates are calling on the big four Gentailers to do more to help those who can’t afford power. RNZ

University of Auckland law and social policy professor Jodi Gardner told Checkpoint 300,000 people lived in 'energy hardship' - last year 40,000 people said they had gone without power, and nearly one in five people were worried about being able to afford their power bill.

Gardner would like to see New Zealand power companies set up a self-regulating model similar to one used by the UK telecommunications industry to provide affordable and reliable internet and phone services for people on low incomes for the equivalent of about $NZ30 a month.

"It was part of them recognising that to be part of society today you need to be able to get online and you need to be able to phone people. And if that can be considered a basic human right and something that everyone needs, then surely electricity and the ability to heat your home is even more of a fundamental human right.

"We have energy companies that are receiving some incredible windfall profits, and as part of their obligation to give back to society it's not much to expect them to sacrifice a small portion of that to ensure that all households have access to electricity and can heat their homes." Jodi Gardner via RNZ

4. Quote of the day

Pulp plant manager warns of economic ripple effect

“We've got a pretty integrated supply chain, and when one of the links in the supply chain and when one of the links in the chain fails it certainly ripples up and down those chains, so there's significant consequential impacts.

"I believe now they understand the scale of the problem." Pan Pac Forest Products managing director Tony Clifford told RNZ after meeting with ministers last Wednesday

5. Chart of the day: MMT-style

‘These colourful bars have to balance’

One of the core ideas of Modern Monetary Theory (MMT) is that when the Government spends money that money is then shifted into the economy and eventually ends up as a surplus or savings somewhere else. It makes sense in that a Government that is contracting its spending is very likely to contract the size of the economy, partly by forcing households and businesses to borrow. It’s related to the simple Keynesian idea of fiscal multipliers.

The one main chart cited in MMT is similar to this one via MuscialChairs14 . It shows the various surpluses and balances in an economy in any one quarter and therefore how the money shifts around by the end of the quarter. This one looks at net borrowing and lending by sector, rather than surpluses and deficits, but it’s a good proxy.

It shows that during Covid the Government borrowed heavily and that money ended up as higher supluses for non-bank businesses and households, while when the Government was a net saver from 2017 to 2019, that saw households and businesses borrow a lot more, especially from overseas. The implication is that as the Government contracts spending, it forces the load onto households and businesses, who also cut back their spending and contract the economy. That contraction and borrowing by households and businesses simply boosts the surpluses of overseas lenders and our banks.'

Here’s the narrative from Musical Chairs to explain the chart:

2017 - 2019: Households borrowing ever more to buy houses. A moderate trade deficit was driving an increase in offshore saving in NZ dollars & Govt bonds 2017 - 2019: Businesses started to borrow more from late 2017 - some investment, some stress. *Because* households & businesses were going deeper into debt during this period, the Govt was able to run a slight budget surplus. Those colourful bars have to balance.

2020-2021: Govt spent big to support the economy during COVID - and businesses & households banked the spending & paid off debt. Remember: Govt deficit spending *creates* private sector assets.

Trade deficit reduced (cheaper imports) so offshore savings accumulated slowly 2021 - 2023: Higher import prices (oil then food) kickstarted inflation in late-2021 and pushed up the trade deficit (and therefore offshore savings). RBNZ responded to inflation by pushing the economy into recess

Higher interest rates and the return of the housing lending boom helped the banks to stack up some chunky profits - pay less interest, charge more interest... kerching.

So, what happens next? Govt are telling us that they are going to reduce deficit spending? So, will we import less fuel and tech? Increase household and business debt even more? What will give? Those colourful bars have to balance. Musical Chairs14 via X

6. Climate graphic/chart/pic of the week

What the planet would look like from 9km up in 2090

The best of the rest

Top Six Scoops and Deep-Dives for August 12

* Poverty Deep Dive: Watchdogs press Oranga Tamariki on plans to cut children's service contracts RNZ’s Phil Pennington

* Migrant abuse Deep Dive: Immigration NZ warns of 'trend' duping unsuspecting migrants Many of New Zealand's migrants come from South Asia, where a Delhi-based specialist team are attempting to crack down on the "unscrupulous" third-party agents. 1News’ Corazon Miller

* Health Scoop: ‘Wage theft’: Nurses say Health NZ delaying payouts for Holidays Act breachesThe union says Health NZ has stopped paying for the consultants who were working through which staff have been short-changed. The Post-$$$’s Amelia Wade

* Water Deep Dive: When will Auckland central’s beaches be faeces-free?Watercare is facing tough questions from councillors and the community over a long-awaited upgrade to central Auckland’s sewers. The Sunday Star Times-$$$’s Jonathan Killick

* Health Deep Dive: Pathologists fear sector collapse without urgent change. Poor pay and a lack of funding for innovation is fomenting meltdown in an industry key to Kiwis’ health, experts say.The Sunday Star Times-$$$’s Sapeer Mayron

* Politics Scoop: Marae whistle-blower: Wellness QR code crafted to ‘clandestinely’ collect census dataA wellness QR code aimed at Māori was used to enter census information into a Manurewa Marae database, two new whistle-blowers claim. The Sunday Star Times-$$$’s Andrea Vance

The Kākā’s Journal of Record for August 12

* Housing: Associate Housing Minister Tama Potaka announced new obligations for people in emergency housing will come into force at the end of this month, including attending courses and engaging with support services. He reported a 32% reduction in the number of households living in motels since last December. NZ Herald, RNZ

* Councils: Local Government Minister Simeon Brown appointed former Hastings mayor Lawrence Yule as Crown Manager to the Hawke’s Bay Regional and Wairoa District Councils. Yule will oversee the delivery of flood protection measures for Wairoa. NZ Herald

* Transport: Transport Minister Simeon Brown announced new appointments to the Waka Kotahi New Zealand Transport Agency board, including former Canterbury Earthquake Recovery Authority sub-director Warwick Isaacs, Downer project director Rob Gilmore and former Nelson City Council chief executive Pat Dougherty. Board member David Smol has been reappointed a further 18 months. RNZ

* Inflation: Immigration Minister Erica Stanford announced sharply increased visa charges from October 1 across almost all international visa categories. Stanford said the fee hike reflected costs associated with visa processing, visa assessment, and running and upgrading Immigration New Zealand IT systems. RNZ

* Housing: Building and Construction Minister Chris Penk said a report by the New Zealand Chinese Building Industry Association finds construction sector productivity remains at 1985 levels, and that the time taken to build a home has increased 50% since 2013. Newsroom

* Environment: Agriculture Minister Todd McClay announced amendments to the Resource Management Act to "provide certainty" for farmers applying for discharge consents. Federated Farmers spokesperson Mark Hooper said recent High Court decisions on the RMA would have put the future of new and current discharge consents in doubt.

Finally, some fun things

Cartoon of the day

Timeline-cleansing nature pic

Spring feels close

Mā te wa

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

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

* The WHO reports a 30% increase in heat-related deaths worldwide over the past two decades with numbers set to swell (as we all swelter).

* Wait and see, says Zeke Hausfather: Climate scientists are holding out for as long as possible in the hope that global surface temperatures will self-correct to a level closer to their model paths in August.

* A story about how oil companies sold the US on a fake climate change solution, simultaneously swindling billions of dollars of taxpayer money to support the grift, is gaining ground since hearings in the US Senate wound down last month.

* As support for  ‘voluntary off-setting’ hits the skids, a replacement concept is now emerging to help corporates achieve their targets, even when they fail to sufficiently reduce their own emissions. Is it real, or just another way to greenwash?

* The call goes out to make your voice heard, with submissions on the government’s Emissions Reduction Plan (ERP) set to close on 17 August.

* The Government announced it was looking to import LNG to generate elecricity after a surge in wholesale prices that is forcing factories to close.

(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. WHO warns of ongoing surge in heat-related deaths

As athletes and spectators alike suffered through sauna-like conditions at the Paris Olympics, the UN has pointed out that heat-stress is the leading cause of climate-related deaths in the region. According to a World Health Organisation (WHO) report, there has been a 30% increase in heat-related deaths worldwide over the past two decades.

A staggering 175,000 people die from heat-related causes every year in Europe and that figure is set to soar in line with our steadily warming planet. That’s the warning from the UN World Health Organization (WHO), which said on Friday that European countries are seeing temperatures rise at around twice the global average.

[...] That message echoes the Call to Action on Extreme Heat by UN Secretary-General António Guterres, who insisted that Earth “is becoming hotter and more dangerous for everyone, everywhere”.

In some places around the world, the climate crisis is already driving temperatures up to unbearable levels, WHO noted. Estimates show that globally, approximately 489,000 heat-related deaths occurred each year between 2000 and 2019, with the European Region accounting for 36 per cent or on average more than 175,000 lives every year

Mr. Guterres’s comments came in the week that saw the three warmest days recorded on Earth in recent history, according to one of the datasets that the UN World Meteorological Organization (WMO) uses to monitor the climate.

Source: UN News

2. ‘We’ll know by August’

Meantime, climate scientist Zeke Hausfather pushes back against the dawning realisation that global temperatures have already established a new normal that is 1.5˚C above the pre-industrial level, suggesting we ‘wait and see’ what August brings.

Temperatures in the southern hemisphere (the blue line in the chart below)  were pushed up in the last two weeks of July by a warming spike in Antarctica which soared nearly 30˚C above normal.

Daily global and hemispheric temperatures in the NCEP GFS reanalysis product, including a 7-day forecast. Anomalies shown relative to a 1981-2010 baseline. Sourced from Karsten Haustein’s climate tracking site.

Hausfather suggests that this anomalous situation in Antarctica, which is generally subject to high variability, is likely to disappear, leaving August temperatures to drop slightly below last year’s.

Earlier this year NASA’s Gavin Schmidt and I separately wrote that the evolution of global temperatures in 2024 would be important to tell us if the “gobsmacking” conditions we saw in the latter half of 2023 represented a new persistent condition for the climate or more of a temporary phenomenon.

Gavin suggested that we would have a better sense by August if conditions were stabilizing or the climate was heading into “uncharted territory”.

With August almost upon us we remain in something of a liminal space. Both June and July were notably warmer than I expected earlier in the year (coming in 0.4C and 0.3C respectively above the last big El Nino year of 2016). At the same time, we have moved out of record territory, and we still expect some additional cooling influence from fading El Nino conditions and potential La Nina development.

So I think we will still have to wait and see, though if the spike in temperatures over the past few weeks persists to push August 2024 to set a new record it would be a worrying sign.

Source: The Climate Brink

The problem is that temperatures in August last year were already 1.5˚C above the pre-industrial average according to the EU’s Copernicus programme.  

A new record would be really alarming, but one would think that anything near to last year’s “gobsmacking” conditions would still represent a worrying ‘persistence’. The  requirement for a ‘new record’ to spark concern sounds like the goalposts are being shifted.

3. Eyes on fossil fuel companies’ cynical ‘solutions’ ploy

Award-winning investigative journalist, Amy Westervelt’s piece, supported by the Pulitzer Centre and published in Vox, as well as her own site Drilled at the end of July is gaining traction.

The report shows how fossil-fuel companies have been heavily marketing solutions, such as Carbon Capture and Storage (CCS) and biofuels, that they don’t really believe in themselves.

Her reporting has been closely following revelations from a three-year US House and Senate Democrat investigation into the fossil fuel industry’s role in climate disinformation.

The Intergovernmental Panel on Climate Change (IPCC) has said carbon capture might be necessary to reduce the emissions of certain “hard to abate” sectors like steel, concrete, and some chemical manufacturing, but noted that in the best-case scenario, with carbon capture technology working flawlessly and deployed at large scale, it could only account for a little over 2 percent of global carbon emissions reductions by 2030.

That hasn’t stopped major oil companies from claiming that carbon capture and storage “will be essential for helping society achieve net-zero emissions,” that they are delivering “carbon capture for American industry,” working on reducing emissions in their own businesses (also referred to as “carbon intensity”), and delivering “heavy industry with low emissions.” But internal documents obtained during the federal investigation, as well as information that industry whistleblowers shared with Drilled and Vox, reveal an industry that is decidedly more realistic about the emissions-reduction potential of carbon capture and storage technology, or CCS, than it presents publicly.

[...] While Shell’s optimistic projection envisions 10,000 large-scale CCS facilities operational by 2070, with more than 2,500 facilities by 2050, Exxon predicts somewhere between 250 and 500 facilities by 2050. Elsewhere in the scenario, Exxon also envisions that “global scale is limited” for CCS and hydrogen tech by 2050.

Exxon’s past projections were much more in line with what critics of CCS have been saying for years. The IPCC, for example, has said that even if realized at its full announced potential, CCS would only account for about 2.4 percent of the world’s carbon mitigation by 2030. In its fact sheet on CCS, the Institute for Energy Economics and Financial Analysis (IEEFA), a nonprofit, nonpartisan think tank in Ohio that produces market-based research on the energy transition, states: “It’s worth noting that not one single CCS project has ever reached its target CO2 capture rate.”

It has also been revealed that Exxon’s own carbon capture project at its LaBarge Shute Creek gas facility, often touted by the industry as one of the largest successful, working projects has been venting half of its captured emissions back into the atmosphere, after selling most of the other half to various oilfield operators for enhanced oil recovery (EOR). Just 6 million tonnes (around 3% of the captured emissions) have been permanently sequestered underground during the facility’s 35 years in operation.

Thanks to prolific lobbying and a campaign promoting “CCS enabling narratives” by fossil fuel companies, US taxpayers are now funding CCS through a tax credit that pays as much as $85 per metric ton of carbon that is sequestered and up to $60 per ton for carbon that is stored, then used for EOR, a longstanding practice that makes oil and gasfields more profitable!

The stored emissions for which the tax credit can be claimed are entirely self-reported and the Environmental Protection Agency (EPA) is not verifying how much carbon is actually being stored. Westervelt’s reporting includes, among many other startling revelations, what happens when CO2 pipes transporting captured carbon leak (you may not want to know if you enjoy sleeping at night).

The whole report is well worth reading before the industry narratives take root here in Aotearoa.

4. A new mechanism in favour, but is it more greenwashing?

In other news, The Financial Times is reporting on a new financial mechanism to ‘unleash the power of capital’ and aid companies to meet their emissions targets as carbon offsets go out of vogue.

The certificates sound a lot like carbon offsets, the controversial voluntary credits that companies buy to prove that they have helped cut emissions somewhere else, often by planting trees or distributing cleaner cooking stoves. But there is a crucial difference that avoids some of the problems that led the world’s leading arbiter of corporate climate targets to declare carbon offsets were mostly “ineffective”. The certificates are “carbon insets” — they reduce carbon in a traceable way from the relevant supply chain, rather than through some unconnected activity. [...] The US Treasury department said using insets was preferable to offsets for corporate buyers in its recent paper on voluntary carbon markets.

The example used in the FT article involves a third-party company paying to subsidise an airline’s use of biofuels, made from used oils, fats and renewable energy to make fuel, that reduces emissions by as much as 70% (such approaches have been criticised elsewhere for their lack of scalability). The biofuel is more expensive than regular aviation fuel, so airlines won’t use it without a subsidy.

This sounds a lot like a plan to have one set of unsustainable (but profitable) industries subsidise another unsustainable industry so that they can all stay afloat for as long as possible. Indeed, the FT article admits that “[s]ome environmentalists warn that they could set back the ultimate goal of curbing global warming because they remove pressure on companies and people to change their behaviour. With certificates, companies voluntarily pay more to fly rather than flying less. They also can be subject to the same fraud and abuse as offsets” before proclaiming the approach a win.

The underlying approach is ‘same, but different’ to that being trialled in Aotearoa by the Toha Network, to much better effect. Toha is focused on shifting funding to frontline communities engaged in repairing and regenerating local landscapes. Toha’s MAHI is a digital token that is used to pay for work that is verified through a system known as ‘action- or output-based funding’. The premise is considerably more promising, but still highly dependent on the integrity of the executing organisation.

While the ‘carbon inset’ concept described by FT seems, at best, an incremental improvement on carbon off-sets, a critical difference with Toha’s approach is that it doesn’t aim to provide a claimable emissions reduction for the purchasing entity. It simply enables organisations to support activities such as nature repair and restoration, land stewardship, and invasive species management in a verified and measurable way.

5. Speak up on the emissions plan

And finally, public submissions on the Government’s Emissions Reduction Plan close on 17 August 21.

Catherine Knight’s excellent opinion piece in Newsroom this week reiterates New Zealand climate scientist James Renwick’s call to make your voice heard.

We further encourage you to make your voice heard beyond the submission process, which can be a very controlled form of public feedback with no guaranteed response. Use it but go further.  It is increasingly clear that a proportionate response to climate change will not arise from governments or institutions embedded in the status quo, but from the actions of a concerned public.

6. Always going for fossil fuels first

The Government announced it was looking to import LNG to generate elecricity after a surge in wholesale prices that is forcing factories to close. We talked more about that in this week’s Hoon.

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

TL;DR: The podcast above of the weekly ‘Hoon’ webinar for paying subscribers on Thursday night features co-hosts Bernard Hickey and Peter Bale talking about the week’s news with:

* The Kākā’s climate correspondent Cathrine Dyer on this week’s explosion in wholesale electricity prices;

* Robert Patman on the latest on Ukraine’s incursion into Russia, the conflicts in Gaza and the Middle East, and on the debate about Aotearoa joining AUKUS;

* Sanjana Hattotuwa, Research Director at The Disinformation Project, on the role of disinformation in civil unrest in Bangladesh, the UK and Aotearoa, and,

* Kate Day, the co-director of Common Grace Aotearoa, who helps run EveryoneConnected, a campaign to end electricity disconnection fees and end higher prices for pre-pay electricity, on this week’s announcement from Contact that it had stopped charging such fees for non payment and on the problems in the electricity market.

The Hoon’s podcast version above was recorded on Thursday night during a live webinar for over 120 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

PS: My apologies for the late delivery of this Hoon. Life got in the way, including the most wonderful walk on Rangitoto Island with my daughter yesterday, during which we took this picture of a Tieke (Saddleback). Thanks for your patience. It was flitting around in a group of three. I’d never seen one before. This was special for me.

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

TL;DR: My top six things to note around housing, climate and poverty in Aotearoa’s political economy on Thursday, August 8 are:

1. Willis screws down Govt share of GDP even tighter

Directive to public service freezes spending at current Budget baselines

Finance Minister Nicola Willis issued a Workforce Policy Statement yesterday through the Public Service Commission that effectively stops the health, education, social development, child protection, economic, primary industries and every other ministry from increasing spending beyond current baseline levels. That means any pay increases for inflation or increased staff numbers to deal with population growth will have to be paid for by cutting costs elsewhere.

The effect is to screw down the Government’s share of GDP to below 30% even faster, assuming nominal GDP, public sector wages and the overall population keep growing, which is what Treasury is forecasting. The expectation is the same public services and benefits can be delivered for a larger economy and population, but with fewer staff per capita and less spending per capita.

The effect is to screw down the fiscal lid on the Government even tighter and put even more pressure on hospital, school, social work, Police and other staff to deliver even more with less.

“The Government has set a clear expectation that future workforce costs, including collective bargaining and pay increases, are to be funded from within existing budget baselines. Agencies are also expected to reduce spending on consultants and contractors, which has blown out in recent years, while keeping tighter control over workforce size.” Nicola Willis’ directive to public servants.

In my view, this further screwing down of the lid on the pressure cooker of our public sector will force a release of more steam in the form of staff opting to leave the country for better wages, less stress and better public services elsewhere.

2. Energy crisis erupts after investment failure

Factories close & bosses plead for intervention as power prices explode

Wholesale electricity prices have spiked to more than eight times their long-run-average prices in the last week as a perfect storm of a dry winter, gas shortages and a decade-long failure by the big four gentailers to invest in renewable electricity generation converged to slam industrial power users. Manufacturers are now describing the prices and gas shortages as an ‘energy crisis’ and have called on the Government to intervene.

Waste paper and cardboard recycler Oji closed its Penrose plant yesterday at a cost of 75 jobs, while Winstone announced on Monday it would shut its pulp and paper mill at Ohakune, putting 300 out of work.

The New Zealand Manufacturing Alliance wrote to Energy Minister Simeon Brown last week to ask for a meeting this week to discuss intervention, Oliver Lewis reported this morning for BusinessDesk-$$$.

NZ wholesale electricity price (7-day moving average)

3. Solutions: Urgently install solar, rather than import LNG

Rather than ramping up renewable investment, especially of increasingly cheap solar and batteries, Energy & Transport Minister Simeon Brown says the Government is moving urgently to import more gas and build more gas-fired electricity generation. He blamed Labour for banning new exploration offshore for gas for the shortages, although there was $2 billion spent on offshore and onshore exploration using existing permits that didn’t increase gas supplies. The state-controlled gentailers, Meridian, Genesis and Mercury, also skimped on investing in new generation through already-consented wind farms and through grid-scale solar and batteries. That was to maximise dividends to Governments of both flavours over the last decade.

The Government is now scrambling to import Liquefied Natural Gas (LNG) supplies, which would require massive investment in port infrastructure to liquefy and transport the gas. Brown spoke in the General Debate in Parliament yesterday about the crisis and called for a bipartisan approach with Labour, after accusing Labour of causing the crisis. Here’s Brown’s comments (bolding mine):

After stifling investment in the gas sector, after increasing our sovereign risk as a country, and after six long years of Megan Woods thinking she knows best, New Zealand now finds itself in an energy crunch with dry year conditions being compounded by a low supply of gas, which is critically important at this time. The high electricity prices New Zealanders are facing are deeply concerning and a direct result of those policies.

This Government is taking action to respond to this through the Gas Security Response Group and the work the Gas Industry Company is leading on this issue. The Gas Industry Company is currently leading on two critically important work streams, which we reported to Cabinet on Monday.

Firstly, the work stream on the feasibility of importing liquid natural gas, which is a lower-emissions fuel than coal, to improve gas supply in the short to medium term. I think this is a significant thing to have to be investigating as a country. This is a significant thing to be investigating as a country, because, as a country, we have been blessed with natural resources, but because of the last Government's reckless policies, we are being left in this situation.

But we must keep the lights on. We must support our industries. We must ensure New Zealand has the energy that we need, and so we're working on that. The group's also investigating how to increase investment in flexible gas-based generation to ensure there is plant available to meet our future electricity needs for flexible generation.

This Government is taking this issue incredibly seriously. We will not stand by while industry shuts down. We need to have the energy security this country needs. The reckless policies of the last Government have been thrown in the bin. What we need is a bipartisan approach where they give confidence to the sector so this investment can happen. I call on them to back this Government so we can have the energy security this country needs. Simeon Brown via Hansard

Brown made no mention of ramping up solar and battery investments, which would be much faster and cheaper to install, and would improve the resilience of the rest of the electricity sector, especially of volatile wind and hydro generation.

Oh. And by the way. It wouldn’t produce higher emissions. Brown made no mention of the climate or emissions in his comments yesterday.

4. Quote of the day

‘Please bail us out because we didn’t plan ahead to invest in renewable’

“Our challenge that we put to the Government is for the urgent development of a short-term solution to provide some industry relief while a longer-term market fix is being developed.” Mark Ross, the chief executive of the Wood Processors and Manufacturers Association of NZ, in a letter on behalf of the NZ Manufacturing Alliance via BusinessDesk-$$$ this morning.

5. Chart du jour

Our unemployment rate is rising faster

6. Climate graphic/chart/pic of the day

At 32 degrees celcius, there’s parched horses and hot water

The best of the rest

Top six scoops & breaking news elsewhere on August 8

* Council Scoop: 'Covered up': Auckland Council's $315m in 'secret' settlement payouts NZ Herald-$$$’s Lane Nichols

* Health Scoop: ‘Hundreds’ of international nurses are leaving because they can't find jobs. There are still nurse vacancies in the health system but international nurses are struggling to find work and some are leaving for Australia. Stuff’s Bridie Witton

* Poverty Investigation Senior public servants on notice over abuse in care failings Newsroom’s Laura Walters

* Poverty Scoop: Police admit winding back ‘low-risk’ calls could be fatal Newsroom’s Emma Hatton

* Retirement Scoop: Retirement villages ignored Commerce Commission warnings Newsroom-Pro-$$$’s Andrew Bevin

* Justice Scoop: End to coordinated terror response ordered within weeks Newsroom’s David Williams

Top six deep-dives & analyses elsewhere on August 8

* Poverty deep dive: Abuse survivor decries government's 'pretty contradictory' actions RNZ’s Tim Brown

* Climate deep dive: 'It will wipe out this village' - Fears about council's stopbank plan RNZ’s Alexa Cook

* Climate deep dive: 'Urgent' protection needed for coastline homes, long-awaited report finds RNZ’s Alexa Cook on the ‘Clifton to Tangoio Coastal Hazards Strategy 2120’ report

* Immigration deep dive: Actor, directors, make-up artist among record number of asylum claimants RNZ’s Gill Bonnett

* Poverty deep dive: Kiwis caring for disabled family members being pushed to the brink RNZ’s Felix Walton

* Climate deep dive: Council told to tread carefully with flood model NZ Herald’s Al Williams

Top Six Op-Eds & columns elsewhere on August 8

* Op-Ed by Dr Catherine Knight Even Thatcher realised the need for govt action on climate Newsroom

* Explainer column by Lloyd Burr Explained: Decades of tinkering with NZ’s health system Stuff

* Column by Luke Malpass NZ’s sovereign risk gas bill comes due. Years of poorly designed climate policies have helped create an energy crisis which now looks all but certain to require imported LNG to help fix The Post-$$$

* Column by Jack McDonald: Challenging the Crown long overdue. Last week Ngāpuhi created media headlines when they walked out of the National Iwi Chairs Forum (NICF) meeting with the Prime Minister in protest over the policies of his coalition Government. The Post-$$$

* NZ Herald Editorial No relief for 'squeezed middle' as rates rises gobble up tax cuts NZ Herald

* Column by Chloe Swarbrick Deny basic facts and hope for the best? Our children deserve better NZ Herald

Top six Journal of Record items on August 8

* Economy: Stats NZ reported 4.6% unemployment in the June quarter, the highest rate since March 2021, with almost half the 1% rise since last year accounted for by young people. Notes: Westpac said the unemployment rise fulfilled the RBNZ's May projection, while BNZ predicts another roughly 1% rise in unemployment over the coming 12 months. ANZ predicted the RBNZ will leave the OCR at 5.50% next week, but wouldn’t rule out a cut.

* Climate: Transpower reported lower lake levels and sharply higher wholesale power prices.

* Budget: Nicola Willis announced a new policy statement on public sector employment relations which emphasises "fiscal sustainability and performance." Government agencies will be expected to reduce spending on consultants and contractors, and link executive salaries to outcomes, among other measures. News and reports: RNZ, NZ Herald-$$$

* Oranga Tamariki: Children’s Minister Karen Chhour announced delays to renewing Oranga Tamariki contracts were the result of her asking it to evaluate hundreds of external service providers, and that there will be no reduction in frontline services. She claims Oranga Tamariki has been a "cash cow" for ineffective service providers. News and reports: 1News, The Press-$$$, NZ Herald

* Work: Unite Union criticised McDonald's new online system for co-ordinating remediation payments for current and former employees owed holiday pay it miscalculated between 2009-2020. National Secretary John Crocker said McDonald's online system automatically deduces what they claim are overpayments from the total remediation sum and some ex-franchisees were refusing to pay former workers. News and reports: 1News

* Housing: The New Zealand Initiative released research showing that central government could boost council budgets by sharing portions of tax revenue from new housing developments. The research explores several ways to structure revenue-sharing to encourage housing development and council service provision.

And finally, some fun things

Cartoon of the day

Timeline-cleansing nature pic

‘Crouch. Pause. Engage.’

Mā te wa

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

TL;DR: My top six things to note around housing, climate and poverty in Aotearoa’s political economy on Wednesday, August 7 are:

1. Willis ‘does the right thing’ (after a political backlash)

OIA trail shows nothing done on cancer drugs for Budget 2024

This is a brilliant tick tock analysis via NZ Herald-$$$ from Derek Cheng of the OIA trail on the National-ACT-NZ First Government’s strange failure to include its election cancer drug promise in Budget 2024. It turns out PM Christopher Luxon and Finance Minister Nicola Willis had decided it could wait until Budget 2025 and so nothing was done on it. Until the political backlash. Then it was done in a week because, Willis says now, ‘it was the right thing to do.’

Here’s the detail from Derek’s report last night (bolding mine):

No Cabinet paper on the policy was produced before Budget day, and most of the correspondence between ministers’ offices and Pharmac were to do with media inquiries about National’s election promise.

The Herald asked for all correspondence and official advice between Pharmac and the office of any minister regarding the pledge to fund the cancer drugs, as well as any such correspondence to and from Pharmac chief executive Sarah Fitt.

The results returned nothing in the first six weeks of the Government’s term. The first such document was on January 8 - an email with the subject line “Budget - Pharmacy - 13 Cancer Drugs” from Te Whatu Ora to Pharmac asking to set up a discussion in the next few days.

Email silence followed for two months until March 5, when two media inquiries landed after a podcast episode featuring oncologist Chris Jackson talking about the Government’s pledge. In response, Pharmac drew up a list of the status of the 13 cancer drugs - most of them were on the Options For Investment (OFI) list) – which was updated on May 24 at the request of Health Minister Shane Reti’s office.

Reti seemed much more attuned to the risk of a backlash, but seemed to hope, like Luxon and Willis that few would notice or care.

By then Reti’s office was already preparing for a possible backlash, having sought assurances from Pharmac for some lines for Prime Minister Christopher Luxon’s post-Cabinet press conference on May 20. Those lines included the Government being “fully focused” on improving cancer treatment – a standard line when there is nothing substantive to say.

This paucity of action is a stark contrast to the flurry of urgent activity after the backlash from failing to deliver on its promise, which included an open letter from 16 cancer organisations calling for “utmost urgency”.

Then all hell broke loose

A draft Cabinet paper was delivered by Thursday morning, two days after officials starting putting it together. Reti’s office asked for a separate paper the following day that included more detail on each of the treatments being purchased.

This led to a series of emails between Fitt and Johnson, with the latter commenting at one point: “I am struggling a wee bit with what more information we could provide apart from high-level generic info eg implementation phasing and timing to be worked through. We cannot provide a breakdown of cancer v non-cancer proposed expenditure due to commercial sensitivities ??….”

Two weeks later, Luxon, Reti and Seymour announced a $604m funding boost for Pharmac - brought forward from next year’s Budget - to allow the drug-buying agency to fund 26 cancer treatments and 28 other medicines.

‘It was the right thing to do,’ after the backlash

Cheng spoke to Willis yesterday about the delay. Here’s her quotes (bolding mine):

“We could have left it until May next year at the announcement of the next Budget, but we decided to bring it forward because we heard very clearly from cancer patients at the time of the Budget that they were disappointed by the timing.”

Willis had sent Reti a text the day after Budget day “because I wanted to see rapid action”.

“I knew that we needed to get an answer for New Zealanders as soon as possible. One of my reflections immediately after the Budget was [that] I want to make sure that we have a solution for that one quickly.

“We made a political decision to fund not only 26 cancer drugs but an additional 20 drugs because we decided that that was the right thing to do. And as a consequence, more than 175,000 New Zealanders will benefit.”

In my view, this is actually how Governments of both flavours operate and why campaigns, political coverage and asking the right questions in news conferences is so important. It also demonstrates both the short-termism and the poor political instincts of the PM.

Further to this, yesterday Te Whatu Ora-Health NZ backtracked on a policy on Keytruda after less than a week after it was made public. Just in case anyone thinks the Government is strategic and unresponsive to public awareness of actual policy, rather than just announced policy, then this is a good example. RNZ

2. Poll: Minors up & National/Labour down in poll

Coalition still ahead, but National at post-election low

Roy Morgan published its monthly political opinion poll results for July last night, showing National’s support down to its lowest level since the election, and both Labour and the Greens also down. However, ACT and NZ First both rose, as did Te Pāti Māori (TPM) and The Opportunities Party (TOP), which received its highest ever result in this polling series of 4.5%, up two percentage points. TPM rose two points to 6%.

All these nips and tucks meant the governing coalition of National, ACT and NZ First were on a combined 50% in July, up 0.5 of a percentage point from June, while the Opposition Labour, Green and TPM parties were on 44%, down 1.5 percentage points from a month ago. If replicated in an election, these percentages would see the Coalition govern in a 120 seat Parliament with 63 seats to the Opposition’s 57 seats.

I follow consumer confidence levels and the correlation with ‘right track, wrong track’ measures to get a sense of the overall happiness or unhappiness with the Government. Both bounced a bit in July, but remain below the highs seen in January and February.

The Government Confidence index is based at 100 where right track and wrong track measures are equalised. That means there was a net 10% of the population seeing the country on the wrong track in July, down seven points from June, but still well above pre-election levels and similar to levels seen just after Jacinda Ardern resigned as PM in January 2022 and was replaced by Chris Hipkins.

3. Solutions: Could KiwiSaver fill our social housing deficit?

The Ministry of Housing and Urban Development (HUD) yesterday asked via the Government procurement platform GETS for ideas from KiwiSaver managers, other fund managers and banks for ideas on how they could help fund the building of social houses. HUD said it had already received some suggestions and wanted a wider selection of views.

It suggests the coalition’s plan for Community Housing Providers (CHPs) to replace the extra supply now not being provided by Kāinga Ora is proving more difficult than Housing Minister Chris Bishop originally thought. HUD said: (bolding mine):

The Government announced that Budget 2024 will allocate $140 million in new funding for 1,500 new Social Housing places to be provided, but not necessarily owned, by CHPs. There is an opportunity to canvas what options are available to optimise Social Housing financing, to improve the value for money New Zealanders get for their investment.

Housing is capital-intensive, requiring large sums of money to construct an asset that lasts decades - ideally generations. Paying for the upfront cost with finance allows funding to more closely match the useful life of the asset/home. Currently the onus is on providers (CHPs) to source finance, both equity and debt. Feedback from CHPs is that getting this finance on good terms is difficult and a major barrier to their ability to grow the number of homes they can build and vulnerable people they can support.

The Government has received a number of proposals from the finance sector on how to improve Social Housing finance. Many of these proposals have merit. This RfI engagement seeks to gather more information from the market on the different issues and options.

The initial focus of this work will be on Social Housing funded through IRRS, our current funding mechanism, as there are a number of challenges and opportunities to make improvements. HUD via RFP through GETS

There isn’t much more detail, but the little out there shows that any thoughts of a flood of new social houses via CHPs that would replace the 3,000 homes a year previously supplied by Kāinga Ora is wishful thinking in the immediate future.

My understanding from talking to CHPs and banks is the banks won’t lend much to CHPs to develop and build because of uncertainty about ownership and the risks of Government subsidies being pulled. CHPs are also short of their own equity.

4. Quote of the day

Bolding mine

“After having carefully considered and weighed the witness testimony and evidence, the court reaches the following conclusion: Google is a monopolist, and it has acted as one to maintain its monopoly. It has violated Section 2 of the Sherman Act." Judge Amit Mehta in his decision US vs Google LLC

5. Chart du jour: Worthwhile viewing for KiwiSavers

6. Climate graphic/chart/pic of the day

What scientists are doing (and not doing) about climate change

This is a useful new paper out on Monday on the Climate Change Engagement of Scientists, which surveyed 9,220 climate scientists across 115 countries, including 50-100 here, on what their climate change views and actions. Most are worried and reducing flying and driving, but most aren’t and won’t advocate or protest.

The best of the rest

Top six scoops and deep-dives elsewhere in the last day

* Deep Dive: Mental health in Gisborne has the rug pulled out Amanda Gillies via Newsroom/RNZ’s The Detail

* Analysis: Not enough nurses, too many or an 'artificial glut'? RNZ’s Gill Bonnett

* Interview: Luxon tells Hosking schools can defer arts, music NZ Herald

* News: The Digital Health Association fears a $381m funding cut The Post-$$$

* Op-Ed by Maritime Union Secretary Carl Findlay: Ferry fiasco will echo for decades with private public partnership Newsroom

* Deep Dive: ‘War on cones’ rhetoric unwinnable Newsroom’s Fox Meyer

Journal of Record for Wednesday, August 7

* Economy: BNZ and Kiwibank called on the Reserve Bank to cut interest rates next week. News and reports: Interest, BNZ note

* Climate: A mass bleaching of more than 50 million sponges in Fiordland was the largest event of its kind ever recorded and is estimated to have cut the population by close to half, a Vic Uni study found. Reports: RNZ

* Work: St John’s ambulance workers voted to strike, with four-hour labour withdrawals due to take place on the 20th and 24th of August. News: RNZ

* Environment: The EPA granted fast-track consent to open a new quarry in Hawkes Bay. The decision panel said tangata whenua had concerns, but it believed the impacts could be avoided or reversed during remediation.

* Education: Te Pūkenga released its annual report showing $50 million in cost reductions, despite a shortfall in income attributed to falling domestic enrollments. International enrollments rose 86%. News: RNZ

* Economy: The Maritime Union said the cost of cancelling the already-ordered InterIslander ferries could be up to $1 billion.

And finally, some fun things

Cartoon of the day

Timeline-cleansing nature pic

‘We do have heads. They’re just very, very small.’

Mā te wa

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

TL;DR: My top six things to note around housing, climate and poverty in Aotearoa’s political economy on Tuesday, August 6 are:

1. Global markets rout to accelerate lower mortgage rates

Markets now see 100 bps of Fed buts by end of 2024

Yesterday’s 13.5% fall in Japan’s stock market was its biggest one-day fall since the 1987 crash and US stocks are down nearly 3% this morning. Global markets now expect the US Federal Reserve will have to cut its Fed Funds Rate, the base for global interest rates and our fixed mortgage rates, four times and by a total of 100 basis to a range of 4.25% to 4.5% before the end of the year. Markets fear the US economy is finally about to go into a recession and that the Fed held rates too high for too long. Sounds familiar?

There’s another quirk that’s less relevant on this side of the planet. Japanese stocks are being hit particularly hard because the Fed will be cutting at the same time as the Bank of Japan is hiking rates after finally ridding Japan of decades of deflation. That means those investors who bet the gap between Japanese (low) rates and (high) US rates remaining wide are losing their money. It’s called the ‘carry trade’, where traders borrow in yen and then convert into a currency with higher interest rates such as the US dollar or Mexican peso. This is all pushing the yen up, which is bad news for Japanese exporters and compounds the financial pain for the carry traders. There’s more explanation of that in this Bloomberg-gift article and this WSJ-gift article.

So what does it all mean for us here in Aotearoa?

I see everything and always through the lens of our housing market, given our political economy is a housing market with bits tacked on. It drives the economy and determines both the weekly disposable income and wealth of every family through rents, mortgage rates, house prices and building activity.

So the meaning of this latest slump is that fixed mortgage rates here will go down faster and further through the rest of the year. They’ve already started falling and that has already perked up activity in the housing market through July, as Barfoot and Thompson reported yesterday from Auckland with the first house sales figures for the month. Sales volumes of 902 in July were up 32.5% from June and up 24.1% from a year ago.

“Buyers were attracted by a combination of vendors being prepared to meet the market and anticipation that prices may be at their low point given recent movement in mortgage interest rates.

“Commentary around lower inflation numbers and the promise of further interest rate cuts led to an increase in confidence among buyers and we saw the re-appearance of multi-offers across the network.” Stephen Barfoot, Director of Barfoot & Thompson

So what does it all mean? More house sales and higher house prices over time. The main thing stopping more explosive growth is the just-introduced debt to income multiples, which stop very rapid lending growth to rental property investors.

2. News: Landlords not ready or able to deal with old renters

Speaking of the Housing Theory of Everything…

The Retirement Commission has published a policy brief from the results of a Perceptive survey of 709 landlords that found that most hadn’t rented to retirees and hadn’t thought about building modifications to make it easier and healthier for them to ‘age in place.’ That’s even though most landlords are in or approaching retirement themselves and the number of retirees needing to rent privately is expected to double to 600,000 by 2048. Most landlords expect the Government or the tenants themselves or their families to pick up the tab for any modifications.

Here’s the Commission’s conclusions in the brief:

The findings from this research suggest the Private Rental Sector (PRS) is unlikely to provide sufficient accessible housing to meet growing demand in this sector.

The findings also indicate there is an opportunity for the private rental sector and property management industry to recognise the importance and value of accessibility modifications, and for greater industry dialogue to occur on supporting older renters to ‘age in place’.

The research also finds that Build-to-Rent (BTR) developers are embracing Universal Design, but the BTR sector is small and currently has few offerings tailored to older tenants.

Here’s the survey results:

In my view, this survey reinforces my view that our unaffordable (for both most renters and buyers), unhealthy and vastly under-supplied (and over-demanded) housing market is the main reason for most of our economic and social ills.

Housing dominates the landscape in the looming unsustainability of both of the two key items in our social contract: universal NZ Superannuation and freely-available hospital care. NZ Super is enough to get by on if you own your own home. Deloitte forecast last month that the home ownership rate would be only 47.9% by 2048.

The combination of unhealthy and unaffordable private rentals will simply add pressure to an already overstretched aged care, hospice and hospital system because older people living in unhealthy and unmodified private rentals will be less likely to ‘age in place,’ forcing more people to spend more nights in hospital, just as the size of that age group is exploding.

NZ Superannuation and free hospital care is unsustainable without higher taxes and an an affordable and healthy housing market. That’s not what either major party nor the voting public are assuming or wanting right now.

3. Solutions: Let’s hope the state gentailers follow suit

Contact Energy announced yesterday it's dropped disconnection and reconnection fees for non-payment. It joins non-generating independents Nau Mai Rā and Toast Electric as the only companies to not charge such fees. NZ Herald

This followed an excellent campaign launched last month by Common Grace Aotearoa with a research report that called for disconnection fees to be banned and for the penalty fees for pre-pay electricity to be removed. A petition got over 9,000 signatures.

Here’s the detail found in the report, and the names of who should follow suit by removing the fees (I’m looking at you Meridian, Genesis and Mercury in particular):

Here’s Common Grace Aotearoa’s Co-Director Kate Day on the news:

“We encourage other companies to follow their leadership.

“We will continue to call on the Electricity Authority to ban these fees. We will also call on the sector to envision and work towards a future where everyone can access electricity and no one gets disconnected because they cannot afford to pay.” Kate Day

Too bloody right.

4. Quote of the day

Solar cheap at the current price, and the future price

“I’m just stunned by the wholesale rate of power. My new install costs me about 4c per kWh and the price of electricity on the wholesale market is above 80c for most of the day. The ROI on solar, exported at the wholesale rate is quite frankly remarkable,” Rewiring Aotearoa CEO Mike Casey via X

5. Good News Chart of the Day:

Kamala Harris seems to have caught a ‘Jacindamania’-like wave

6. Climate graphic/chart/pic of the day

Some more good news

The best of the rest

Top six scoops and deep-dives elsewhere

* Deep Dive: Crunching the Numbers: Kiwis spending half their household income on rent RNZ’s Checkpoint

* Interview: Doctor urges end to 'political football treatment' of healthcare RNZ

* News: Private rental sector unlikely to keep up with pensioner demand - Retirement CommissionRNZ

* Scoop: International investigation exposes China’s world-dominating fishing tactics The Listener-$$$

* News: Fraction of incorrectly paid cost-of-living support returned RNZ

* News: 'Exasperated': Tauranga kept waiting for a decision on ferries. A ferry service between Tauranga and Mt Maunganui is no closer to reality after a council-funding decision was deferred. 1News

Journal of Record for Monday, August 5

* Social welfare: Social Investment Minister Nicola Willis announced that the new Social Investment Agency is now seeking a Chief Executive. News: NZ Herald-$$$’s Thomas Coughlan

* Justice: Advocacy group Aotearoa Justice Watch released a report detailing allegations of human rights abuses by police and corrections officers it received between 2022 and 2024. Sixty-two people complained of mistreatment ranging from illegal searches, police tampering with evidence, sexual abuse, and excessive use of force resulting in severe injuries.

* Climate: IAG published the results of its seventh annual Ipsos poll taken in June, finding for the first time that less than a third of New Zealanders agree that the country’s current response to climate change is on the right track, compared to 37% last year. The vast majority of respondents also expect worse and more frequent floods and storms in the next 30 years. News and reports: Interest

* Health: Te Whatu Ora-Health NZ Commissioner Lester Levy appointed Ken Whelan and Roger Jarrold as Deputy Commissioners. Health Minister Shane Reti appointed Whelan to work with Te Whatu Ora's board as a Crown Observer in December, while Roger Jarrold has served as chief financial officer for Fletcher Construction, Downer NZ, Kordia Group Ltd, and the former Auckland DHB. News and reports: RNZ

* Economy: Westpac changed its forecast for the first RBNZ rate cut to October from November, adding it saw two 25 basis point cuts by the end of the year. Westpac's longer-term forecast remains for the OCR to fall to 4.5% in May 2025. News and reports: RNZ

* Economy: Food Safety Minister Andrew Hoggard announced that New Zealand will not adopt a shared infant formula standard with Australia, citing certain restrictions on labelling that "do not suit the New Zealand context". Instead, New Zealand will implement its own infant formula standard over the next five years. News and reports: RNZ, 1News

And finally, some fun things

Cartoon of the day

I aspire to be a coffee snob

Timeline-cleansing nature pic

‘I’m keeping an eye on you…’

Mā te wa

Bernard

PS: I am thrilled to bits with today’s nature pic.

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

TL;DR: The podcast above of the weekly ‘hoon’ webinar for paying subscribers last night features co-hosts Bernard Hickey and Peter Bale talking about revolts against the Government over austerity and disinformation by directors and staff alike at Te Whatu Ora-Health NZ, adding to the Kāinga Ora board revolt last month

They also spoke to:

* The Kākā’s climate correspondent Cathrine Dyer on a big new global study on the dangers and opportunities from Aotearoa’s surge in methane emissions from cows, along with Air NZ’s decision to pull out of a global emissions reduction compact. She referred to The Kākā’s weekly climate wrap out for all today and we talked about comments in 2011 by then PM John Key;

* Special guest Vic Crockford on housing and homelessness. Vic was the CEO at Community Housing Aotearoa (CHA) and is now the chair of the Coalition to end Women’s Homelessness, which just published this blog post on the issue. She referred to these two Listener-$$$ articles about women’s homelessness here and here; and,

* Whangārei A&E doctor Dr Gary Payinda on the health crisis.

The Hoon’s podcast version above was recorded last night during a live webinar for over 120 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