The Kākā by Bernard Hickey

TL;DR: The Government is now being engulfed in a firestorm of protest over its decision not to fund 13 cancer treatments in this year’s Budget, breaking a clear election promise that will cost the lives of people who changed their votes to National on the basis of that promise.

An open letter today from 15 cancer charities to PM Christopher Luxon is politically devastating.

Meanwhile, there are more cases reported this morning of ‘penny wise and pound foolish’ decisions by the Government to freeze or block funding for water infrastructure and public transport infrastructure that will dramatically slow the building of new homes, in direct opposition to the Government’s avowed ‘going for housing growth policy.’

(Paying subscribers can see and hear more detail and analysis below the paywall fold and in the podcast above. We’ll open up the full article for public reading, listening and sharing if we get over 100 likes to indicate approval from paying subscribers. Update: achievement unlocked!)

Six things of note this morning

1. Cancer charities lash National on broken promise

A firestorm of protest is engulfing the Government this morning over its Budget 2024 to break its promise to fund 13 cancer treatment drugs from July 1 from the proceeds from reimposing the $5 prescription fees, which is still going ahead.

This morning 15 cancer charities published an open letter to PM Christopher Luxon eviscerating the broken promise. Here’s a sample (bolding mine):

"Cancer patients and advocates sat in disbelief when the budget was announced. We have now learnt that those 13 medicines may not be funded for at least a year. Patients don’t have a year to wait and will sadly have to look at all the heartbreaking scenarios your party wanted to put an end to. Bowel cancer patients have already been waiting for 22 years, the last time a new medicine was funded to treat them.

“We know many New Zealanders voted for you because you stated you would fund the new cancer medicines. They are devastated that you have not honoured this commitment of all the commitments you made. Unlike other promises, lives will be lost if these medicines are not funded."

Patient Voice Aotearoa, Breast Cancer Foundation, Cancer Society, Breast Cancer Aotearoa Coalition, Leukemia and Blood Cancer New Zealand, Lung Foundation New Zealand, Melanoma New Zealand, Bowel Cancer New Zealand, Prostate Cancer Foundation New Zealand, Gut Cancer Foundation New Zealand, Brain Tumour Support New Zealand, Head and Neck Cancer Support Network New Zealand, Ovarian Cancer Foundation New Zealand, Myeloma New Zealand, and Talk Peach in open letter.

2. Costs explode as Health crisis reaches critical moment(s)

The crisis in the Health system is now at that point where dealing with the immediate shortfalls is costing much more than simply solving the problems themselves. It's the result of decades of health underfunding in real and per-capita terms in order to keep a lid on the overall size of Government at or below 30% of GDP.

This morning, The Post-$$$'s Rachel Thomas reports Te Whatu Ora-Health NZ is now spending $5,600 a day on temporary doctors to keep the Kenepuru Accident and Medical Clinic open in Porirua. Some detail and a chart below:

It’s understood the centre’s overnight service is staffed almost entirely by casual doctors following staff resignations last year. This service has since been at risk of being replaced with a virtual health service.

Monthly figures spent on doctors since January 2023 have fluctuated but average just under $170,000 a month — more than any resident doctor, or two second-year nurses earn in a year.

Also in the category of our health system effectively paying a ‘poverty premium': The ODT-$$$'s Fiona Ellis reports Southern Health is now outsourcing up to a third of its knee operations to private providers.

3. Penny wise and pound foolish on Public Transport too

The Government's preference for spending on roads in Auckland is hitting Christchurch hard and education funding cuts are about to his school bus runs in Canterbury.

Oliver Lewis reports for BusinessDesk-$$$ this morning that $78 million committed to bus improvements under Labour, but not finally signed off, is being delayed indefinitely under National. This particularly perverse outcome seems obvious:

Councillor Sara Templeton said housing minister Chris Bishop had instructed the city council to proceed with a plan change enabling greater housing density, but transport funding was needed alongside this to plan for growth.

“The lack of transport funding for one of the fastest growing urban areas in the country is short-sighted and will leave our infrastructure inadequate for predicted future growth,” she said.

“There is significant transport funding available across the country, and the choice to fund public and active transport in Ōtautahi would bring much better value for government and the economy than many of the other projects tagged for funding.”

Also, The Press-$$$'s Keiller Macduff reports this morning almost a dozen Canterbury school bus routes are under review or have already been defunded as part of a Ministry of Education plan to cut school routes where public transport is available. The Government has set a target of increasing school attendance, but this would reduce it an increase living costs for poorer families.

And, Tina Law reports for The Press-$$$ this morning that Christchurch has allocated no money to fluoridate its water supply, and neither has the Government, despite Shane Reti saying he's concerned about the health effects. Again, this appears a decision that will cost taxpayers more overall in the long run through dental problems leading to hospital admissions, lower productivity et al.

4. Parliamentary committee going rogue with bank probe

Parliament’s Primary Production Committee looks set to launch a formal inquiry into rural banking, Rob Stock reports this morning for The Post-$$$, quoting ACT MP and committee chair Mark Cameron accusing banks of arrogance and hubris. Here’s the quotes:

“Across the Parliamentary divide there was universal agreement that the banks appear to have a degree of hubris, or self-congratulation,” Cameron said.

There was “an arrogance we felt the banks were offering”, he said.

Cameron said: “It’s clearly evident that as a committee we came away quite disenfranchised by the banking fraternity, and I think that mirrors what our constituency up and down rural New Zealand is telling us.”

Here’s the real story: banks have backed away from farm lending because it requires more capital, more intense staff management and faces risks from environmental regulation. They’re now much more focused on mortgage lending, which requires less capital under Basle III rules and effectively has a Government guarantee, as evidenced by Reserve Bank and Government intervention to stop home values falling during the GFC and Covid.

The end result? This chart shows what’s happening.

In my view, we have a housing market with bits tacked on for an economy. Fonterra’s decision last month to dump its overseas brands to return capital to farmers, facing demands to repay bank debt, was another example, as is yesterday’s news from Synlait that more than half its farmer-suppliers want their capital back.

5. ‘Fast-track would legalise killing of endangered species’

Various official advisers have warned the Government about the dangers of the Fast-track approvals bill, including that it gives three ministers the legal power to kill endangered species, Tom Hunt reported this morning for The Post-$$$ from advice documents released at the beginning of Budget week.

Three government ministers are set to get the power that would allow them to approve the killing of tūi, toroa, tuatara and more, newly released documents about fast-track consenting regime reveal.

Regional Development Minister Shane Jones was in December addressing Parliament about mining in stewardship land in the Department of Conservation estate, when he said, “if there is a mining opportunity and it's impeded by a blind frog, goodbye, Freddy”.

Newly released Ministry for the Environment advice on the Fast Track Approvals Bill shows that the new proposed powers granted to the New Zealand First MP, as well as National MPs Chris Bishop and Simeon Brown, are far more wide-reaching.

The changes mean powers under the Wildlife Act, to grant permission to hold, catch alive, handle, release, “and in some cases kill” absolutely protected wildlife, will be overridden by fast-track consenting – which the three MPs have power to approve.

The protest march scheduled for this Saturday in Auckland could be large.

6. ‘Go for growth, but we won’t fund for the pipes or buses’

In more news of short-term thinking and funding causing perverse effects, RNZ's Melanie Early reported this morning that new housing developments in Warkworth have stalled because of a lack of water infrastructure.

New housing developments in Auckland's Warkworth will be unable to be built or lived in until a new wastewater treatment facility is built.

The wastewater treatment plant on the Mahurangi River, which services the area, is nearing capacity.

While Auckland Council is still issuing resource consents to developers, no wastewater connections can be made to properties south of the river until the new facility in Snells Beach is completed.

The facility was due to be finished by mid-to-late 2025, but for developments north of the river, it could be years before homes could be lived in as a new Northwest growth pipeline needed to be made and this was still in planning stages, WaterCare said.

Climate chart of the day

Cartoons of the day

What were they thinking!

What were they thinking!W@*?

What were they thinking??!XX**!

This year’s Christmas window

Timeline-cleansing nature pic

‘Who you looking at?’

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:

* A year of record-breaking surface temperatures has spawned a month of global extreme weather chaos in May, including howler monkeys falling dead from trees in Mexico during a ferocious heatwave that is also threatening to run Mexico City dry of water

* Meantime, Brazil has more water than it can handle as biblical-scale floods displace more than half a million people in the state of Rio Grande do Sul.

* Tornado-spawning thunderstorms killed 21 people, destroyed hundreds of buildings and disrupted Memorial Day weekend traffic in the US. The so-called‘kitty cat’ storms (as opposed to ‘nat cat’ for nationally catastrophic storms) have sent the insurance industry reeling at the accumulated scale of losses.

* North India has been suffering through an intense heat wave that experts say has surpassed 50˚C on the heat index (the apparent or experienced temperature) due to high levels of humidity. Hospitals in Delhi have been forced to set up special facilities to treat the increasing numbers of patients experiencing heat-related illnesses.

* And then there was the devastating landslide in Papua New Guinea that buried an entire village, part of a series of landslides driven primarily by the country’s unique geography. However, experts warn that climate change, particularly in the form of intensified rainfall events, can overwhelm the landscape’s ability to cope and contribute to landslides.

* Climate change could be producing more diarrhoea-causing cryptosporidium outbreaks in Aotearoa, according to a new study from the University of Otago.

(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.)

Monkey fall from trees, water runs short in brutal heatwave

What follows a year in which average surface temperatures exceed the pre-industrial average by more than 1.5˚C, adding energy equivalent to four Hiroshima bombs (or Hiros) per second to Earth’s climate system? That massive pulse of energy, amplified by the effects of El Niño will take some time to dissipate.

In May alone we have seen extreme weather events unleash chaos in multiple locations around the world. Howler monkeys were falling from trees in Mexico, dead from heatstroke and dehydration as they suffered under a brutal heatwave that has killed at least 26 people since March.

“Wildlife biologist Gilberto Pozo counted about 83 of the animals dead or dying on the ground under trees. The die-off started around 5 May and hit its peak over the weekend.

“They were falling out of the trees like apples,” Pozo said. “They were in a state of severe dehydration, and they died within a matter of minutes.” Already weakened, Pozo says the falls from dozens of yards (meters) up inflict additional damage that often finishes the monkeys off.

Pozo attributes the deaths to a “synergy” of factors, including high heat, drought, forest fires and logging that deprives the monkeys of water, shade and the fruit they eat.

“This is a sentinel species,” Pozo said, referring to the canary-in-a-coalmine effect where one species can say a lot about an ecosystem. “It is telling us something about what is happening with climate change.” The Guardian

The effects of climate-driven drought, heatwave and low precipitation are combining with Mexico City’s long-running infrastructure problems to create a crisis in which the sprawling metropolis could run out of water entirely within weeks.  The water crisis has become a bone of contention in the country’s upcoming presidential election

“In a Sunday debate between Claudia Sheinbaum of Mexico’s governing Morena party, and Xóchitl Gálvez, who represents an opposition coalition, Gálvez blamed the water issues on the inaction of Sheinbaum’s party. Sheinbaum, an environmental scientist who co-authored the 2007 Nobel Prize-winning Intergovernmental Panel on Climate Change report, is the former mayor of Mexico City.” The Washington Post

Meantime, Brazil has more water than it can handle, with epic, biblical-scale floods displacing more than half a million people.  Concerns are mounting that conditions could spawn a health crisis as the displaced gather in temporary shelters ill-equipped for the scale of the disaster.

“More than 580,000 people have been displaced, with almost 70,000 of them depending on shelters, according to a state government report. A total of 2.3 million people have been affected by the torrential rain and floods.

City, state and federal governments are working to provide assistance, but the authorities estimate that the situation will take months or even years to return to normal. More than 90% of Rio Grande do Sul’s 497 municipalities have been affected, with 418 declaring a state of emergency or disaster.” The Guardian

Tornado season becomes even deadlier

‘Tornado-spawning thunderstorms’ have killed at least 21 people and destroyed hundreds of buildings across four US states, disrupting Memorial Day weekend travel plans for millions. At least 30 million people were under severe thunderstorm advisories in New Jersey, New York and Pennsylvania on Memorial Day this week as the storms headed Northwest from Arkansas, Texas, Kentucky and Oklahoma.

Just last week, the BBC warned that climate change was altering the behaviour of tornado season, in terms of both location and duration. Establishing the link between fleeting weather events like tornadoes and climate change is more complex than for other weather events like hurricanes and heatwaves, but there most certainly is a connection they report:

"We expect that the number of days in any given year that are favourable for tornadoes… are going to increase in the future and specifically increase earlier in the season," Victor Gensini, associate professor of meteorology at Northern Illinois University, tells the BBC.

Across the US's southern Plains states like Oklahoma and Kansas, "what might have been May and April as your peak months are now March, April, and May or even February", Gensini says. He notes that there hasn't been an uptick in strong tornadoes – tornadoes at EF4 ratings and higher – over the last 50 years, but where they occur has been changing.

States notorious for tornadoes such as Texas, Oklahoma and Kansas are actually seeing a decrease in tornadoes while states like Tennessee, Georgia and Arkansas as well as upper Midwest states like Minnesota, Illinois and Iowa are seeing an increase.

"We have way more people living in the mid-south and east of the Mississippi River than we do in the Great Plains," Gensini says. The higher population densities of the states seeing an increase in storms means that they have the potential to do more damage.” BBC

The billowing cost of homeowners insurance is becoming the most prominent symptom of climate change in the US, as the recurring damage from so-called ‘kitty cat’ storms in heartland US join the effects of hurricanes in Florida and Louisiana, and fires in California.

“These so-called “severe-convective storms” are large and powerful thunderstorms that form and disappear within a few hours or days, often spinning off hailstorms and tornadoes as they shoot across the flat expanses of the central United States. The insurance industry refers to these storms as “secondary perils” – the other term of art is “kitty cats”, a reference to their being smaller than big natural catastrophes, or “nat cats”.

But the damage from these secondary perils has begun to add up. Losses from severe convective storms increased by about 9% every year between 1989 and 2022, according to the insurance firm Aon. Last year these storms caused more than $50bn in insured losses combined – about as much as 2022’s huge Hurricane Ian. No single storm event caused more than a few billion dollars of damage, but together they were more expensive than most big disasters. The scale of loss sent the insurance industry reeling.

“As insurers, our job is to predict risk,” said Matt Junge, who oversees property coverage in the US for the global insurance giant Swiss Re. “What we’ve missed is that it wasn’t a big event that had a big impact, it was a bunch of small surprise events that just added up. There’s this kind of this reset where we’re saying, ‘OK, we really have to get a handle on this.’” The Guardian

Heatwaves and landslides now, food insecurity to grow

North India has also been suffering through an intense heatwave in which temperatures have approached 50˚C at times.  

“Several regions are facing water and electricity shortages due to spikes in power consumption. On Wednesday, Delhi's peak power demand reached 8,000MW, the highest in the history of the Indian capital. Delhi is experiencing a brutal heat spell, with temperatures hovering around 45-46C through this week.

Weather experts say that the heat index - or the apparent or experienced temperature - has crossed 50C because of the high levels of humidity.

Hospitals in the city have set up special facilities to treat patients experiencing heat-related illnesses, which are also on the rise.” BBC

And then there was the catastrophic landslide in Papua New Guinea (PNG) that buried an entire village of up to 2000 people. PNG is extremely landslide prone and has a long history of such disasters, that often fail to make headlines elsewhere. The latest event follows a series of smaller, but still deadly landslides in recent months in which scores of people were buried alive.

These events are primarily driven by the country’s mountainous and deeply weathered terrain, combined with a tropical climate that frequently delivers heavy rain and storms. The country also sits in an active seismic zone on the border of two tectonic plates in the Pacific’s  ‘Ring of Fire’. Deforestation from mining can also play a part. And then, on top of all of that, there is climate change – itself exacerbated by deforestation. ABC News Australia spoke to  Professor Dave Petley, vice-chancellor of the University of Hull in the United Kingdom, and a globally recognised expert on landslides.

“Professor Petley says climate change has a particularly pronounced effect on landslide activity because it results in more eclectic weather systems, with sudden changes in conditions overwhelming the landscape's ability to cope.

"Slopes are particularly sensitive to short-duration, high-intensity rainfall events," he says.

"You can go back to first principles — imagine a landscape evolves to deal with the most intense rainfall it experiences.

"If you increase that intensity, you're taking the landscape into an environment it's never experienced, and it will respond. And a landslide is the inevitable response. ABC News Australia

Climate-related disasters have always occurred, it’s true, but this understanding of the world can veil the scale of change that has occurred in recent years and the mounting toll on both the human and physical environments. Whilst insurance premiums are currently figuring large as a symptom in some developed countries, the next global broadside may come from food insecurity, linked directly to climate change through the loss of agricultural production (which rarely fares well in a context of weather chaos), or indirectly, as a contributor to conflict and economic shocks.

The number of people suffering from food insecurity has grown every year since 2019, according to the 2024 Global Report on Food Crises. In 2023 almost 282 million people in 59 countries suffered acute food insecurity that required urgent food and livelihood assistance (24 million more than the previous year).

Doomsday glacier update and other climate news

In other climate related news this week:

* Satellites have revealed water intruding miles below the Thwaites Glacier, otherwise known as the Doomsday Glacier because of its potentially dire impacts on sea level rise.

“As the salty, relatively warm ocean water meets the ice, it’s causing “vigorous melting” underneath the glacier and could mean global sea level rise projections are being underestimated, according to the study published Monday in the Proceedings of the National Academy of Sciences [...]

Thwaites, which already contributes 4% to global sea level rise, holds enough ice to raise sea levels by more than 2 feet. But because it also acts as a natural dam to the surrounding ice in West Antarctica, scientists have estimated its complete collapse could ultimately lead to around 10 feet of sea level rise — a catastrophe for the world’s coastal communities.” CNN

Combined with another recent study on the loss of Antarctic sea-ice cover, this news supports the claim that a long-lived regime change has occurred at Antarctica, with profound global impacts. The loss of sea-ice cover and its associated loss of albedo (in which white snow reflects heat back into space, whereas dark, open water absorbs it) creates a heat feedback effect, ultimately hastening global heating. Inside Climate News

* A ‘catastrophic’ global decline in migratory fish populations has seen their number drop by more than 80% since 1970s. A recent study  warns that dams, mining, pollution and humans diverting water are destroying river ecosystems”

“They form the basis for the diets and livelihoods of millions of people globally. Many rivers, however, are no longer flowing freely due to the construction of dams and other barriers, which block species’ migrations. There are an estimated 1.2m barriers across European rivers.

Other causes of decline include pollution from urban and industrial wastewater, and runoff from roads and farming. Climate breakdown is also changing habitats and the availability of freshwater. Unsustainable fishing is another threat.

Herman Wanningen, founder of the World Fish Migration Foundation, one of the organisations involved in the study, said: “The catastrophic decline in migratory fish populations is a deafening wake-up call for the world. We must act now to save these keystone species and their rivers.

“Migratory fish are central to the cultures of many Indigenous peoples, nourish millions of people across the globe, and sustain a vast web of species and ecosystems. We cannot continue to let them slip silently away.” The Guardian

* A landmark international case has found states have legal obligations to reduce emissions under the Law of the Seas.

“The tribunal found "anthropogenic greenhouse gas (GHG) emissions into the atmosphere" do count as pollution of the marine environment, and State parties to the UN Convention on the Law of the Sea (UNCLOS) "have the specific obligations to take all necessary measures to prevent, reduce and control marine pollution from anthropogenic GHG emissions".

They also need to "endeavour to harmonise their policies in this connection".

The tribunal's finding was released this week, in response to a query from the Commission of Small Island States on Climate Change and International Law in December 2022.” RNZ

* Social networks play a big role in influencing perceptions about climate change risk according to a new study.

* Yale climate connections looks at the enduring influence of ‘The Day After Tomorrow’ movie, twenty years after it was released. The films ‘unusual’ take on the effect of a collapsing AMOC sparked climate conversations that had both positive and negative implications, according to experts.

* Some states in the US are aiming to use climate attribution science to hold the fossil fuel industry to account for damages associated with their emissions.

* Climate protestors are facing increasing suppression in Europe, with arrests escalating in France and new charges being trialled in Germany this month. The escalating pushback from authorities may or may not be related to the expanding body of evidence proving their effectiveness.

* Finally, climate change could be producing more diarrhoea-causing cryptosporidium outbreaks in Aotearoa, according to a new study from the University of Otago.

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 features co-hosts Bernard Hickey and Peter Bale talking with:

* The Kākā’s climate correspondent Cathrine Dyer about extreme heat in India and Mexico and the prospects climate migration to Aotearoa-NZ;

* CTU Chief Economist Craig Renney and Good IDEAs founder Max Rashbrooke about Budget 2024; and

* Community Housing Aotearoa (CHA) Deputy CEO Chris Glaudel about Kāinga Ora and social housing.

The six things that mattered in Aotearoa’s political economy that we wrote and spoke about via The Kākā and elsewhere in the last week included:

* Housing, Climate, Poverty and Economy: The new National-ACT-NZ First Government unveiled its first Budget on Thursday, deciding to go ahead with long-promised tax cuts despite a weaker economy that is forcing $68.3 billion of net new borrowing by mid-2028. The income tax cuts cost $14.7 billion over four years and debt will rise by $12 billion more than Treasury forecast in December. Willis argued the tax cuts were ‘fully-funded’ by spending cuts and tax increases, and therefore it was not borrowing to pay for tax cuts. That would be true if the economic forecasts had not changed between the election and the Budget, but they have in a way that means there’s less money to spare. See and hear my full analysis in the podcast above, in Friday’s email and Friday’s podcast here featuring a discussion with Ganesh R Ahirao…

There’s also this discussion with Toby Manhire in a Budget Special ‘co-pro’ with Gone by Lunchtime for my weekly When The Facts Change podcast:

* Housing: Kāinga Ora’s board released the feedback it gave in April on Bill English’s review of the state-owned house-builder and landlord, criticising his comments about KO’s financial sustainability and performance as variously ill-informed, wrong and/or based on anecdotes, as also reported by Newsroom’s Tim Murphy. Newshub’s Jenna Lynch reported on Tuesday that Chris Bishop arranged for English to lead the ‘independent’ review in a series of text messages. See more analysis from me in Tuesday’s email and in comments I made on The Detail broadcast on RNZ and Newsroom on Thursday, and also listenable here directly.

* Housing and Economy: The Reserve Bank confirmed plans to limit mortgage lending for loans worth six and seven times the income of owner-occupiers and landlords respectively from July 1. These DTI limits won’t reduce lending much now because lending at those multiples is currently low, but will stop most high DTI lending growth in future as interest rates fall. It affects landlords more than first home buyers because loan to value limits are the main restraint on their borrowing. LVR limits were also loosened a bit from July 1 to offset any effects of the new DTI limits. See more analysis from me in Wednesday’s email.

* Housing and Economy: Key leaders in housing and infrastructure construction sent a joint letter to the Government pleading for more project certainty and warning its funding freezes for councils, water reform and transport projects had significantly damaged confidence and risked driving staff overseas,  Newsroom’s Fox Meyer reported on Tuesday. See more analysis in Tuesday’s email.

* Cost of living: The Commerce Commission announced its draft decisions on regulated electricity transmission costs for the next five years. It decided the nationwide transmission and local lines distribution costs will rise 48% in the next five years to a combined $17.8 billion. These costs make up 37.5% of power bills and mean that monthly bills will rise around $15 from July 1, 2025, followed by $5/month hikes in each of the following four years. See Thursday’s email.

* Poverty: The Fairer Futures advocacy group and the Disabled Persons Assembly published a report titled A Thousand Cuts that estimated a disabled person could already be up to $256 per fortnight or $5,742 a year worse off because of the Government’s changes to disability support, bus subsidies, benefit indexation, the minimum wage and prescription charges. See more detail in Thursday’s email.

What we talked about on ‘The Hoon’ on Thursday night

In this week’s ‘Hoon’ webinar for paying subscribers at 5pm on Thursday night:

* 5:00 pm - 5:10 pm: Bernard Hickey and Peter Bale opened the show with a discussion about the Budget and some international news. Peter referred to a Rest is Politics episode featuring Kwasi Kwarteng and this Haaretz article about Gaza

* 5:10 - 5:25 pm: Peter and Bernard spoke with The Kaka’s climate correspondent Cathrine Dyer about extreme temperatures in India (52.3 degrees celcius) and Mexico and the prospects for Aotearoa-NZ to become a climate refuge.

* 5:25 - 5:35 pm: Peter and Bernard talked with Craig Renney about the Budget. He referred to the chart below in Chart of the week from the Budget (Page 52).

* 5:35 - 5:45 pm: Peter and Robert talked with Max Rashbrooke about the Budget and his launch with others of a new thinktank, the Institute for Democratic and Economic Analysis, which has its own substack Good IDEAs.

* 5.55 - 6:00 pm: Peter and Bernard spoke with Community Housing Aotearoa Deputy CEO Chris Glaudel about Kāinga Ora and social housing.

* The ‘skateboarding dog’ story this week referred to this video of a man with a suspended driver’s license joining a court appearance about his unlicensed driving via a Zoom call. While driving in his car.

The Hoon’s podcast version above was produced by Simon Josey. Regular guest Robert Patman was off launching his new book New Zealand's Foreign Policy under the Jacinda Ardern Government: Facing the Challenge of a Disrupted World. It is available now via Amazon on Kindle and in hardback form from June 15.

(This is a sampler for all free subscribers. Thanks to the support of paying subscribers here, I’m 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.)

Other things I did elsewhere

We produced an episode of When The Facts Change via The Spinoff, including this discussion with Toby Manhire. We also produce the 5 in 5 with ANZ daily podcast and Substack for ANZ Institutional in Australia, free to all via Spotify. Apple and YouTube

Chart of the week: National’s debt track above Labour’s

Ngā mihi nui.

Bernard

PS: This week we produced 10 daily podcasts averaging about 10 minutes each, three weekly podcasts of around 30 minutes each, ten daily emails averaging over 1,000 words per email, a weekly diary, and I appeared in The Detail podcast. That’s nearly four hours of podcasts, 10,000 words of news and analysis, all edited and sent to your inboxes. I also participated in a CPAG post-Budget analysis panel discussion in Auckland yesterday. We hope that’s value for money and we’d love you to subscribe.

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: Finance Minister Nicola Willis has delivered her first Budget, deciding to go ahead with long-promised tax cuts despite a weaker economy that is forcing the new Government to borrow a net extra $68.3 billion by mid-2028.

The income tax cuts are costing $14.7 billion over four years. Net debt will rise by 68.3 billion to over $220.7 billion over that period, which is $12 billion more than Treasury forecast in December. Willis argued the tax cuts were ‘fully-funded’ by spending cuts and a bunch of little fees and tax increases, and therefore she was not borrowing to pay for tax cuts. That would be true if the economic forecasts had not changed between the election and the Budget, but they have in a way there’s less money to spare.

The Government chose a mix of policies in the current economic environment that will increase net debt by at least $12 billion more than would otherwise have been the case. ‘Fully-funded’ is dancing not-so-daintily on the head of a fiscal pin.

The new Government also promised not to increase inflation pressures with its tax cuts and spending. That assertion can also be challenged, given a slightly larger fiscal stimulus is expected this year, before bigger contractions follow in the next three years. Some economists said the tax cuts and some early capital expenditure may add a little to the inflationary pressures the Reserve Bank is dealing with this year. Most said Budget 2024 was unlikely to force interest rates any higher, but may further delay mortgage rate relief into next year.

‘Fully-funded’ is dancing not-so-daintily on the head of a fiscal pin.

Meanwhile, costs of living and direct inflationary pressure will be elevated by decisions in Budget 2024 to:

* re-impose a $5 prescription charge on most adults;

* nearly triple the visitor conservation and tourism levy to $100 per visit;

* increasing waste disposal levies by an average of $5 per household per year and $45 per new house to raise an extra $175 million over four years;

* increase the interest rate for students loan recipients overseas and late-paying local students by one percentage point to 4.8%; and,

* re-introducing tuition fees for first-year students and increasing overall fees by 6%.

That comes on top of fee increases and Government decisions previously announced that increase the fees and charges portion of CPI inflation directly or indirectly through;

* removing subsidies for bus fares;

* imposing road user chargers for electric car owners;

* increasing car registration costs by 50% to $93.50 by 2026;

* planned fuel excise increases totalling 22c per litre from 2027 to 2030; and,

* widespread double-digit rates increases that councils have blamed on Government funding shortfalls.

The Reserve Bank pointed out last month that ‘administered services’ inflation, which includes rates and Government fees and charges, was 8.8% in the March quarter from a year ago, making up more than a third of the non-tradables inflation that is stopping the Reserve Bank from cutting interest rates. Fees and charges inflation so far under National has doubled to 2.0% per quarter from the Labour Government’s run-rate from late 2017 to late 2023 of 1.0% per quarter.

In summary, in my view, the Government’s actions since its election and in this Budget have increased inflationary pressures and have contributed to the Reserve Bank not cutting interest rates. The immediate big freeze in funding and grants for house-building, school-building and rail-building, along with sacking 5,000 public servants, has also slowed economic growth in a way that has added to the Government’s net debt track.

So far, the Government has increased the cost of living and increased Government debt while suspending the nation’s water, housing and public infrastructure building pipeline. All in the name of delivering tax cuts for wage earners and landlords that will barely offset the extra costs imposed on many since its election.

Some poorer and younger taxpayers and students who rent are already significantly worse off after paying higher bus fares and higher rents. Soon, they will also face paying higher student fees, prescription fees and a myriad of little fees and charges designed to offload Government costs back onto taxpayers individually.

(Paying subscribers can see and hear more detail and analysis below the paywall fold. The podcast above is a recording of a ‘pop-up’ Hoon discussion I had with Ganesh R Ahirao last night and is available for all. We’ll open up the full article for public reading, listening and sharing if we get over 100 likes to indicate approval from paying subscribers.Update: Achievement unlocked!)

Six things to note in Budget 2024

1. Cutting $14.7b of taxes while also borrowing $12b more

National campaigned with a promise to cut taxes in a way that would not increase Government borrowing nor increase inflation because those cuts would be offset by spending cuts and a few little revenue increases. Finance Minister Nicola Willis argued yesterday she achieved that, but the raw figures detailed in the Budget show both a $12 billion increase in the debt track, relative to the forecast in December, and a slightly more inflationary Budget in the coming 2024/25 year than was forecast in December.

She blamed the weaker economic outlook inherited from Labour for the deterioration in the debt track, but much of that deterioration has come in the first 200 days of the coalition Government, as shown by first a surge in business and consumer confidence in November and December upon the Government’s election, but then a slump from January through May as businesses started feeling the effects of the funding freezes and job cuts. Construction sector bosses pleaded with Chris Bishop last month to unfreeze the pipeline and give them some certainty.

Here’s the table released yesterday NZ Debt Management Office in Treasury showing the increased borrowing:

Here’s is a table and chart via ANZ showing the bond issuance over the longer term and in the short term:

Here’s a Westpac chart showing the different debt tracks forecast before and after the Budget, showing the Budget has slowed the fall in the debt track towards the Government’s target.

2. Extending high interest rates for even longer

The Government was elected on a promise to deliver cost of living relief by both reducing consumer price inflation and therefore allowing the Reserve Bank to cut interest rates earlier than it would have under Labour. Instead, the Reserve Bank has extended its forecasts for keeping the Official Cash Rate at 16-year highs well into next year, citing high domestic inflation caused partly by extra Government fees and charges and the risks of stimulation to spending from the Government.

Economists said the Budget may have added a bit more inflationary pressure in the short term, although the Reserve Bank is likely to look through that.

“On balance, we’d characterise the fiscal policy reshuffle as being marginally inflationary in the near term (given the timing of tax cuts), but disinflationary over the medium term (as capex tends to have a smaller multiplier impact than opex). Whether the RBNZ sees it that way is yet to be seen.” ANZ Senior Economist Miles Workman in a research note last night.

“Given current pressures on inflation, the RBNZ is likely to regard the reprofiling of the fiscal impulse as unhelpful (particularly in the current year), although we doubt this will be a game changer.” Westpac Senior Economist Darren Gibbs in a note last night.

Here’s the chart showing the differences in the fiscal stimuluses to the economy between December and yesterday’s Budget:

3. ‘Those future cuts are unsustainable’

One standout feature of Treasury’s Budget Economic and Fiscal Update (BEFU) document was a box on page 37 titled: Pressures on future Budget operating allowances.

In it, Treasury essentially called b******t on the Government’s decision to cut its operating allowances in the out years (2025/26, 2026/27 and 2027/28) to $2.4 billion in each of those years from $3.2 billion in 2024/25, saying that would barely cover inflation in the main spending areas, leaving little room for error.

Treasury says it best:

“Although inflation is forecast to decline, based on high-level analysis, it is estimated that departments’ baseline expenses could need to increase by around $2.5 billion in the 2025/26 year to maintain the existing level of services. This analysis does not take into consideration additional demand pressures on services (eg, demographic changes), spending on new policies, or the crystallisation of specific fiscal risks or contingent liabilities. Some of the Budget 2025 and Budget 2026 allowances have been pre-committed to cover a significant part of this such as health sector cost pressures. However, this limits the flexibility to trade-off across sectors in future Budgets.

“The high-level analysis indicates that the future budget allowances are unlikely to be sufficient to cover future cost pressures on existing services. This means any shortfall and spending on new initiatives will need to be offset by expenditure savings, reprioritisation or revenue raising policy changes for each of the next three Budgets for the Government to manage within the signalled budget allowances. This will involve difficult choices and trade-offs for the Government which are likely to become harder over time.

“If the Government is unable to achieve the level of savings or revenue raising policy changes required, there would either be less funding available for new initiatives or cost pressures or, all else being equal, there will be direct impact to the fiscal indicators, which could impact on the Government meeting its short-term fiscal objectives.” Treasury’s Budget Economic and Fiscal Update (BEFU) document. Page 37 box titled: Pressures on future Budget operating allowances.

4. Promises made, promises kept and promises broken

The Budget acted as a natural book end to assess which promises were made, kept and broken by the National-ACT-NZ First coalition.

Here’s my tally of news and positions adopted before and in the Budget for promises made by National and kept:

* Income tax threshold changes were broadly in line with National’s promise, although the start date of July 31 was a month later than promised;

* In-work tax credit increased by $25 a week;

* Independent earners tax credit upper threshold lifted from $48,000 to $70,000; and,

* Restoration of interest deductibility and the brightline test for landlords.

National’s broken promises and unexpected surprises:

* Repeal of Smoke-free legislation and other moves to reduce smoking;

* Cancellation of first home buyers’ grant;

* Delaying funding of 13 cancer treatment drugs indefinitely;

* Increased student fees and interest costs on student loans;

* Breaking of promise to lift the Working For Families abatement threshold from $42,700 to $50,000 in coalition talks;

* Increasing fuel excise levies by 22c/litre from 2027-30

* Introducing road user charges for electric cars;

* Increasing car registration charges by 50%; and,

* Increasing waste management levies.

5. The collateral damage

The Budget included a range of unexpected spending cuts and office closures, including:

* The closure of the Consumer Advocacy Council;

* A $60 million cut in funding for Māori housing and rangatahi transitional housing;

* A $38 million cut in funding for the Community Renewable Energy Fund over four years;

* Funding cuts of $178 million in funding cuts for the Energy Efficiency and Conservation Authority (EECA), which will force the end of Warmer Kiwi Homes subsidies for hot water heaters, energy-efficiency measures, an LED lighting scheme, and community-focused outreach for hard-to-reach households.

The ambulance at the bottom of the cliff

The Budget included $600,000 to investigate buying a tug to tow broken-down ferries back from the middle of Cook Strait.

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: The new Government’s first Budget due today at 2:00 pm is focused on delivering ‘cost of living relief’ in the form of income tax cuts for middle income families, but many of the coalition’s actions have already pumped up costs and lowered incomes, especially for the poor and disabled.

This Budget will include tax cuts and an expected $10-15 billion increase in borrowing to up to $167 billion, which the Government will try to blame on a weak economic inheritance from Labour. However, the Government’s actions since November have frozen large parts of the economy in a state of suspended animation, which was clear in a business confidence survey yesterday showing a depressed outlook for construction and retail spending.

(Paying subscribers can see and hear more detail and analysis below the paywall fold and in the Dawn Chorus podcast above. We’ll open it up for public reading, listening and sharing if we get over 100 likes. Update: Achievement unlocked!)

Here’s my top six ‘pick ‘n’ mix’ of links to news, analysis and opinion articles, announcements, official reports, reviews and research in the last day or so to 7:06 am on Thursday, May 30:

1: Power transmission costs to rise 48% in five years

Cost of living: The Commerce Commission yesterday announced its draft decisions on regulated electricity transmission costs for the next five years. It decided the nationwide transmission and local lines companies distribution costs in power bills would have to rise 48% in the next five years to a combined $17.8 billion over that period. These costs make up a combined 37.5% of power bills.

The Commission cited extra investment to repair the grid, deal with population growth and prepare for the electrification needed for reach carbon zero. But it said most of the extra costs came from inflation in construction and maintenance costs and higher interest rates, which are accounted for in the Commission’s regulated returns on investment calculations.

Here’s the Commission’s graphics showing the initial regulated increases for each lines network, the break-down of these costs as a part of total power bills, and the respective shares of the total cost increases. They’re within a very useful explainer of the decision by the Commission.

In my view, this 9.8% increase each year for the next five years, which is five times the mid-point of the Reserve Bank’s inflation target band, is a defacto tax increase to pay for past under-investment in our state-built and (mostly) state-owned electricity grid and lines networks. It’s also caused by high interest rates themselves, which were applied to reduce inflation. This is one of those feedback loops where tight monetary policy causes inflation, along with higher Government and council fees and charges to reduce budget deficits partially caused by higher interest costs.

This is another example of past decisions to push investment and repair costs off into the future coming home to roost, all at once. Some of it is being physically forced by the climate punishing carbon emitters for past emissions with more extreme weather events that are causing higher costs now.

2. We’ll find out today how big the income tax cuts will be

Tax: We’ll all be watching at 2:00 pm today when Finance Minister Nicola Willis releases her first Budget, which she has promised will include the details of changes to income tax thresholds and rates promised in more broad terms before the election. National promised a family with children on an average income of $120,000 a year would be up to $250 a week better off, including lower childcare costs, while a childless couple on the average income would be up to $100 a week better off.

National removed the election-promise tax calculator from its website earlier this week, which will make it harder to compare the before and after. An official tax calculator will go up after 2:00 pm, but National’s full pre-election ‘Back Pocket Boost’ document with the tables showing promised benefits is below.

I’ll be looking out for the following:

* Whether the tax threshold changes deliver the $8.985 billion promised over four years;

* Whether the $5 prescription charges are re-introduced as promised;

* Whether the funding for cancer drugs is delivered in full immediately, as promised;

* Whether the changes in the Budget deliver a fiscal stimulus or contraction;

* How much extra the Goverment will have to borrow (currently bank economists are forecasting a $10-15 billion increase); and,

* Details of a new Infrastructure Funding Agency, including the capital contributed by the Government and its likely total fund raising.

I’m planning a ‘pop-up’ Hoon webinar on the Budget from 4:30 pm to 5:00 pm with former BERL Chief Economist and Productivity Commission Chair Ganesh Nana, just before the regular weekly Hoon.

3. Disabled already up to $5,742/year worse off - report

Poverty: The Fairer Futures advocacy group and the Disabled Persons Assembly published a report yesterday titled A Thousand Cuts that estimated a disabled person could already be up to $256 per fortnight or $5,742 a year worse off because of the Government’s changes to disability support, public transport subsidies, benefit indexation, the minimum wage and promised prescription charges.

The range of scenarios for different households with disabled people in different situations is mapped out on page 12 of the report. I’ve attached the full report below.

4. An extra 752k in 10 years when 400k was expected

Population: Stats NZ released the first results of Census 2023 yesterday, showing an extra 751,875 people now live in Aotearoa-NZ, vs Census 2013. Stats NZ’s medium projection for population growth just before the 2013 census was for around 400,000 extra people and that we would not get to our current population until around

This first table includes the projections from Stats NZ just over 10 years ago, including central projections that the population has exceeded three years ahead of schedule.

How many we thought we’d have

What we actually got

The systematic under-forecasting of population growth since 1990

5. Quote of the day

Sweating assets

“This council is kicking the can down the road.” Christchurch City Council Councillor Sara Templeton in a debate about the Council funding just 500 of the 800 water network repair projects identified as needed doing in its Long Term Plan. Via The Press-$$$

6. Numbers of the day

27% - Christchurch City Council’s current water leakage rate of 26% means it loses 38 million litres a day, enough to fill 15 Olympic-sized swimming pools. Council staff plan to reduce the leakage rate to 20% by 2030, although international best practice is to have no more than 8% leakage.

Charts of the day

An extending recession

A closer view

Timeline-cleansing nature pic of the day

Nature is healing

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: The National-ACT-NZ First Coalition Government won last year’s election with a pledge to ‘get things done’ and ‘get New Zealand back on track,’ while also reducing inflation in living costs. But the exact opposite has happened because it:

* abruptly cancelled and suspended billions worth of transport and school building projects;

* urgently repealed water industry and RMA reforms without replacements;

* loudly-proclaimed it would slash Government spending and public service jobs to pay for income tax reductions, mostly for rental property investors; and,

* cut funding for councils and increased Government fees and charges, actually pushing up domestic services inflation and keeping mortgage rates high until well into 2025. (See details, charts etc below the paywall fold)

For example, just this morning:

* it emerged house-building and infrastructure industry leaders begged Infrastructure, Housing and RMA Reform Minister Chris Bishop last month for project-pipeline certainty and warned of a 2009/10-style exodus of skilled staff overseas because of the abrupt funding and reform freezes; (See full letter below the paywall fold)

* doctors are warning parts of the health system, including cancer services in the middle of the North Island and radiology services, are near collapse because of intensifying funding restrictions after decades of sinking-lid policies on real per-capita public health funding;

* it emerged the 51%-state-owned Air New Zealand, which the Government has pushed for more dividends and allowed to operate a domestic monopoly in the regions, has quietly doubled its fees for overweight and oversized baggage domestically and hiked domestic baggage fees around 30% in recent days; and,

* despite warnings of a looming shortage of almost 1,000 doctors, National is being blocked from building a new medical school by its coalition partner ACT.

(Paying subscribers can see and hear more detail and analysis below the paywall fold and in the Dawn Chorus podcast above. We’ll open it up for public reading, listening and sharing if we get over 100 likes. Update: achievement unlocked!)

Here’s my top six ‘pick ‘n’ mix’ of links to news, analysis and opinion articles, announcements, official reports, reviews and research in the last day or two to 9:06 am on Tuesday, May 28:

1: ‘Please give us certainty’

Economy: Key leaders in housing and infrastructure construction have sent a joint letter to the Government pleading for more project certainty and warning its funding freezes for councils, water reform and transport projects had significantly damaged confidence and risked driving key staff overseas, Newsroom’s Fox Meyer reported this morning.

The abrupt cancellation of transport projects and the urgent repeal of water and RMA reforms without replacements has devastated private sector confidence in any long-term infrastructure pipeline. This is turn is destroying any prospect of arresting or reversing the 35% fall in building consents seen in the last year. (Here is the letter in PDF form)

2: ‘We’re on the brink’

Health: Doctors fear Te Whatu Ora’s cancer treatment services in the middle of the North Island are on the brink of collapse because budget cuts were stopping hiring of long-needed senior doctors, Rowan Quinn reported for RNZ yesterday.

These reports come despite repeated assurances from the Government on the eve of a tax-cutting Budget that spending reductions would not affect frontline services. They also reinforce how stressed the system is after decades of sinking-lid policies designed to compress the size of Government under 30% of GDP, despite the pressures of ageing and healthcare costs rising faster than GDP. (See more below from Radiologists on burnt out staff in quotes of the day below)

3: The problem with anecdata

Housing: Documents released under the OIA yesterday show Kāinga Ora’s board strongly contested the conclusions of Bill English’s review last month, rejecting outright his conclusion of ‘financial unsustainablity’ and saying much of the report was based on anecdotes, rather than full discussions with Kāinga Ora. NZ Herald Julia Gabel. (Here’s the full board response in OIA document form)

4: Or just no data at all

Climate Scoop: Foreign Minister Winston Peters did not seek advice on impact of coal policy on Aotearoa-NZ’s climate agreements, NZ Herald’s Demelza Jackson reported this morning. This pattern of substantial decisions likely to increase emissions being taken without impact assessments for climate and trade agreements is reckless, in my view.

5: A tax by another name

Cost of living: Air New Zealand doubles excess baggage prices and hikes regular baggage fees around 30%. Fee hike came into force on May 23 and was revealed through an industry update to travel agents, The Press-$$$’ Emma Stanford reported this morning.

This is another example of a state-controlled company with market power hiking prices in a way that elevates domestic services inflation, which in turn is forcing Te Pūtea Matua-Reserve Bank of New Zealand to hold interest rates high for longer. In my view, it should reinforce calls for a market study of domestic air travel. (See more in charts of the day below)

6: New medical school on hold

Health: Aotearoa-NZ is short of almost 500 GPs, with the shortage set to double within a decade, the Government has been advised. It was told New Zealand “will struggle to train or bring in enough international medical graduates to meet this demand,” The Press-$$$’ Louisa  Steyl reported this morning.

Meanwhile, Politik-$$$’s Richard Harman reported this morning that Waikato University had pulled its tender for a new medical school from GETS after complaints from ACT, which specified in its coalition agreement with National that the project would only be investigated through a business case process, rather than approved. (Here is the GETS cancellation notice)

The best of the rest

Housing, Transport and Climate

Housing analysis: Rent stress as accommodation supplement stagnant RNZ Lauren Crimp

Housing: Foodbanks, scurvy warning - fed-up students seek end to unpaid work while training RNZ Jimmy Ellingham

Transport: Wellington City Council ramps up bus lane monitoring, raking in $3000 a day. The Post-$$$ Julie Jacobson

Housing & climate: Wellington pipe backlog 406km and growing. The Post-$$$ Tom Hunt

Transport: From zero to $2.50/hr parking for motorcyclists in Wellington. $20 to park a motorcycle in the central city for a day. The Post-$$$ Rachel Thomas

Transport: Auckland Transport backtracks on K Rd bus lanes, operating hours cut back amid $100k fines per week NZ Herald Raphael Franks

Climate Deep-dive: 'Who is in and who is out?': Tensions over Westport flood scheme RNZ Local Democracy Reporter Brendon McMahon

Health, Poverty & Population

Health: ‘Lost faith in the public health system’: Woman with severe heart disease resorts to private healthcare. Stuff Shilpy Aurora

Poverty: Disability cuts devastate sector. Worries and fears are relayed to Labour MPs as restrictions on flexible funding hit disabled hard. Stuff Alecia Rousseau

Deep-dive: Inside a $2 billion pay-equity debacle NZ Herald-$$$ Audrey Young

Migration Scoop: Why aren't you pregnant, INZ asks 52-year-old woman. Minister asks Immigration for ‘please explain’, and department apologises after ‘disgusting and offensive’ letter questioning a couple’s relationship. Stuff Steve Kilgallon

Migration: Air Vanuatu collapse strands seasonal workers in Marlborough. “The summer boys just want to go home and see their families.” Stuff Andy Brew

Politics, Government & Te Tiriti

Politics Scoop: ACC CEO flies business class for $32k Europe work trip amid 390 proposed job cuts NZ Herald Adam Pearse

Politics Scoop: Pharmac minister David Seymour met new Act MP’s former drug company employer NZ Herald-$$$ David Fisher

Politics Scoop: Govt moves to replace or repeal Treaty principles clauses from laws. The coalition's plans to replace all references to the Treaty principles in legislation are now underway, new documents show. 1News Te Aniwa Hurihanganui

Economy Scoop: Tech failure led to more than 100,000 unnecessary census visits Newsroom David Williams

Quotes of the day

‘We won’t let them eat cake’

“We have uncovered a layer cake of government initiatives - many of which we had never heard of before - which were absorbing tens of millions if not hundreds of millions of dollars.” Finance Minister Nicola Willis warning yesterday of more spending cuts. Via Stuff

A cake eater pushes back

"The truth of the matter is that we are not training enough radiation oncologists to meet current, or future, service demand or to replace those practitioners who plan to retire, and urgent investment is required to fix this problem.

"We are keen to work closely with the New Zealand government to sustainable increase the number of trainee radiation oncologists and develop strategies to keep radiation oncologists in the country."

"However, putting out endless fires is not a cause for celebration and it does come at a price. The 2020 survey by the Association of Salaried Medical Specialists showed radiation oncology as the speciality with the highest burn out scores." Royal Australian and New Zealand College of Radiologists President Professor John Slavotinek via RNZ this morning.

Charts of the day

A trend that’s not friendly

Another unfriendly trend

Inflation driven by Govt housing, budget-cutting and migration policy

Cartoon of the day

Perspective

Timeline-cleansing nature pic of the day

Bush coral

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:

* Private industry’s failure to set and maintain course toward sufficient emissions reduction goals provide a backdrop to Microsoft’s recent announcement that it exceeded its emissions reduction goals by more than 30% in 2023 and fully intends to do more of the things that caused the massive overshoot.

* Both the Corporate Climate Responsibility Monitor and Green Central Banking suggest that private voluntary actions aren’t working, and that government policy is required to bring financial and commercial efforts into alignment with Paris Agreement goals.

* The International Foundation for Valuing Impacts (IFVI)  suggests ‘constructive obligations’ by companies to emissions reductions need to be addressed via improved accounting practices. The International Accounting Standards Board agrees with them, while experts in New Zealand contend that this approach should apply to public finances as well.

* The potential impact for Aotearoa-New Zealand of failing to meet ‘constructive obligations’ are highlighted by this new report from The Aotearoa Circle and Chapman Tripp.

* More broadly, complacency about the economic and financial damages that will result from climate change and biodiversity loss are creating risk bubbles throughout the global economy and bear a large share of responsibility for the slow pace of the transition. Two recent reports have started introducing some reality to economic climate modelling. While the financial system must vastly improve its understanding of climate impacts, a big question mark hangs over the whole idea financial disclosures will make a difference. Just how much reality can the global financial system bear without collapsing?

* The shocking injuries this week to 20 passengers and the death (by heart attack) of one person on a Singapore Airlines flight that encountered severe turbulence over the Irrawaddy Basin in Myanmar are another data point in signs climate change is increasing turbulence at high altitudes used by commercial jet liners, as Bloomberg (gift) and The Conversation referred to this week.

(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.)

Voluntary targets and initiatives completely insufficient

Microsoft has announced it exceeded its emissions reduction targets by more than 30% in 2023. The rise in their Scope 3 emissions (indirect emissions in their supply chain) relate primarily to the construction of more data centres used for cloud computing and to deliver their developing AI services. In response, Microsoft plans to build more data centres, claiming that they will be more efficient, use more renewable energy and will help to produce technological breakthroughs. As Euronews reports:

“As well as greening its energy supplies, Microsoft is working to improve efficiency in its data centres. It says AI will play an important role in helping to increase accountability and achieve technology breakthroughs - which it hopes will extend to developing greener steel, concrete and fuels, as well as reducing water usage.”

That Microsoft is transparent about its failure to meet its own net-zero goals is creditable, but the response to that failure is worrying.

It is offering up a set of false solutions, heavily buttressed by baseless technological optimism. According to the Jevons Paradox, technological progress that increases efficiency can lead to an overall rise in resource use as reduced pricing resulting from efficiency gains stimulates demand.

While Microsoft intends to source its increasing energy demands from renewable sources, the world is already struggling to increase renewable energy supply faster than the overall increase in demand for  energy. It is worth bearing in mind that it is not a renewable energy transition unless the growth in renewable energy replaces, rather than supplements fossil energy. Thus, Microsoft’s increasing energy demand could stall or slow the overall energy transition, irrespective of where it sources its own energy. Microsoft is also utilising carbon capture and storage technology in its plans to reduce net emissions.

According to the recently released Corporate Climate Responsibility Monitor 2024, Microsoft is not alone in its failure to put together a feasible plan for achieving zero carbon targets. While the report found a slight improvement in companies’ targets, they still fall well short of the emissions reductions required by UN agreements, and most are ambiguous, commit to only limited emissions reductions and are at risk of backsliding under proposed rule changes related to the use of carbon credits.

“Another concerning trend highlighted in the report is companies’ reliance on false solutions to reduce emissions, which diverts attention from the necessary level of action implied in their net-zero or carbon neutrality pledges. [...] Examples of false solutions include carbon capture and storage in the power sector, excessive reliance on temporary carbon dioxide sequestration in the agriculture sector and the use of unsustainable bioenergy instead of renewable electricity in the fashion sector, according to the report.”

Overall, the report found the none of the 51 companies covered had climate strategies that could be considered ‘high integrity’.

Another study by net Zero Tracker (an independent data consortium including Oxford University) found that while half of the world’s 2,000 largest listed companies had a net-zero by 2050 target, just 4% of them met the criteria outlined by the U.N.’s Race to Zero campaign.

Both the Corporate Climate Responsibility Monitor and this report from Green Central Banking suggest voluntary targets in the banking and other commercial sectors are proving completely insufficient and that government policy is required to force them into alignment with Paris Agreement goals. According to Green Central Banking’s report:

“This evidence supports recent efforts by governments to improve the credibility of net zero commitments. More broadly, it suggests that voluntary private-sector initiatives may have relatively little impact on decarbonization.”

Calls for accounting overhaul on climate obligations

The International Foundation for Valuing Impacts (IFVI) says the accounting treatment of investments to reduce carbon emissions, as costs on companies’ balance sheets, while the failure to reduce emissions are treated as externalities, is “illogical and just feels like bad accounting”. What they describe as ‘upside down incentives’ are they claim, the “true root cause of the systemic inability to tackle the climate and biodiversity crises”.

They say that companies’ stated commitments to reducing emissions create expectations that their targets will actually be met, and these should be recognised on their books as ‘constructive obligations’. This approach is known as Impact Accounting. The IFVI suggests the treatment of constructive obligations be made a required issue for independent board governance that demands the creation of an impact analysis for the company and its investors as a first step. The international Accounting Standards Board agrees with them, deciding recently that corporate targets could create direct financial consequences on companies’ balance sheets.

“The decision makes two key clarifications. First, that a climate target does not have to be legally enforceable to matter: even an entirely voluntary target can create a financial obligation if the company is sufficiently committed to its delivery (that is, there can be a ‘constructive obligation’ in accounting-speak).

Second, when use of carbon credits is part of meeting a target (offsetting a company’s excess annual emissions), the cost of those credits should be financially provisioned for, as a liability, when the emissions occur each year.”

According to experts Rob Morrison and Dr Christina Hood in this Newsroom article, that obscure accounting decision has implications for Aotearoa-New Zealand’s public accounting of climate commitments as well. They suggest that the growing gap in the country’s international climate commitments, which must be met through the purchase of offshore carbon credits, represents a constructive obligation that should be recorded in Treasury’s accounts.

According to Treasury estimates, that current obligation could amount to as much as NZ$9 billion dollars, depending on how it is met. One key reason for keeping track of that obligation is that government policy-making (or policy dismantling, as the case may be) across multiple sectors can either ameliorate that gap or tear it right open. It is a substantial problem that these obligations are currently invisible to the public, because they are treated by Treasury as if they are voluntary payments and not obligations.

Just how problematic that treatment could prove to be is the subject of another recent report, this time from The Aotearoa Circle and Chapman Tripp. This report explores the potentially serious impacts that failing to fulfil those ‘constructive obligations’ could have on New Zealand’s export markets by way of increasing financial disclosure regimes and border adjustment processes in other countries. Our climate commitments represent ‘constructive obligations’ precisely because these damaging impacts would materialise if we didn’t meet them. They are not merely ‘voluntary’ payments that could be avoided without consequence should the government elect to resile from them.

Risk bubbles abound, but complacency rules

Complacency about the true costs of neglecting to invest in climate mitigation or biodiversity loss abounds in the financial system and is creating enormous risk bubbles that threaten the stability of the entire system. Yet another example is contained in this recent report from University College London’s (UCL) Institute for Innovation and Public Purpose.

The report attempts to improve the understanding of the risks to the global economy and financial system that would be caused by the crossing of ecological thresholds or tipping points.

The enormous potential scale of economic losses is currently poorly understood, and requires a precautionary approach, according to the report writers, if governments are to maintain price and financial stability. The consequences of crossing tipping points are barely (if at all) considered in current economic climate modelling, yet multiple tipping points are expected to be crossed under current pathways which anticipate warming of 2.5 to 3.0˚C by 2100.

This report falls directly on top of another recent publication suggesting that climate damages in current economic modelling are underestimated by as much as 600%. In both cases, the report writers suggest that true costs are likely to be even higher than is currently understood.

This poses a question as to whether the current financial system is even capable of sustaining the size of adjustment that would be necessary for it to be treating the risks associated with climate damage and biodiversity loss in a way that is close to realistic.

To the extent that it does not, or cannot, then the course of future global economic development will remain littered with enormous risk bubbles around every corner, continuously threatening the stability of the system.

Some Substack recommendations

In other news, I recently discovered Henry Cooke’s substack Museum Street. This discussion about the future of the Ministry for the Environment (MfE) makes for interesting reading, as does this riveting piece from last year, where MfE disagreed with the Ministry for Primary Industries’(MPIs) conclusion that climate change would make Aotearoa New Zealand richer! Also on substack, Adam Tooze over on Chartbook has a good look at the progress of the global energy transition, which is essentially the same thing as looking at the progress of China’s energy transition.

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 features co-hosts Bernard Hickey and Peter Bale talking about this week’s Kainga Ora and first home loan news, along with regular guest Robert Patman on China’s warning to New Zealand and special guests Michael J Field on the riots in New Caledonia and Giorgi Lomsadze on the escalating protests in Georgia against Russian influence.

The six things that mattered in Aotearoa’s political economy that we wrote and spoke about via The Kākā and elsewhere for paying subscribers in the last week included:

* Housing: The Government extended its freeze on new housebuilding by Kainga Ora into next year after releasing a report on the state house builder and manager by former National PM and Housing Minister Bill English that said its rapid expansion over the last five years was financially unsustainable. Housing Minister Chris Bishop also announced the cancellation of first home buyers’ grants to save $245 million over four years, of which $140 million would be used to fund 1,500 new social housing places by Community Housing Providers (CHPs) and to help pay for tax cuts for landlords. See Thursday’s email.

* Economy: The Reserve Bank held the Official Cash Rate at 5.5% as expected, but extended out its forecast for a first cut by three months to August 2025 after also increasing its forecast for inflation. The central bank blamed sticky domestic services inflation, mostly from rents, council rates and Government fees and charges, and insurance premiums, which tighter monetary policy is unlikely to influence much. The announcement dampened hopes for mortgage rate cuts this year and questions the Government’s decision to freeze funding for councils in a way that forced them to hike rates dramatically, as well as various decisions to impose new fees and charges on motorists, migrants and importers. See Thursday’s email and Wednesday’s email.

* Geopolitics: China’s ambassador to New Zealand, Wang Xiaolong, told PM Christopher Luxon at the annual China-NZ Business Summit in Auckland this week that relations between China and New Zealand were at a ‘critical juncture’ because of New Zealand’s consideration of joining Aukus II, which the ambassador said directly supported the nuclear-powered Aukus I. He said Aukus was targeting China and New Zealand joining Aukus II would mean we were ‘taking sides.’ Luxon said he didn’t think joining Aukus II would hurt New Zealand’s trade with China much, and that New Zealand wanted to diversify its trade in a strategy he described as: ‘China and…’. The risk for New Zealand is diversification will be difficult when any trade agreement with India would have to exclude dairy and meat exports, and our recently signed EU and UK trade agreements include clauses forcing New Zealand to abide by its Paris emissions reductions commitments, which the current Government has challenged with a series of emissions-increasing decisions on EVs, motorway building, railway cancellations and farming rules. (See more in the podcast above)

* Climate: The massive offshore wind project backed by the NZ Super Fund has told ministers in a briefing it can't operate off the Taranaki Coast if seabed mining is allowed to go ahead. It said the dredging of 10m of sands was incompatible with building turbine platforms and running power cables to shore. It was based on this study released in March. See Tuesday’s email.

* Climate: Energy Minister Shane Jones announced a strategy of mining more coal and precious minerals on Department of Conservation-controlled land and other areas to double such exports by 2035. The announcement did not mention climate once and the strategy did not detail if any climate emissions analysis had been done. EU and UK farmers will find this interesting.

* Economy: Global funds management behemoth BlackRock said it thought central bank rate hikes designed to tame inflation actually worsened inflation because higher interest rates give savers more money from their savings accounts, which they then spend and pump up demand and prices. See more in my interview with Kiwibank Chief Economist Jarrod Kerr for my weekly When The Facts Change podcast via The Spinoff titled: An interest rate bludgeoning.

What we talked about on ‘The Hoon’ on Thursday night

In this week’s podcast above of the weekly ‘Hoon’ webinar for paying subscribers at 5pm on Thursday night:

* 5:00 pm - 5:10 pm: Bernard Hickey and Peter Bale opened the show with a discussion about the Government’s release of Bill English’s report into Kainga Ora and its decision to scrap first home buyer grants in favour of adding 1,500 social housing places and helping to pay for tax cuts for landlords.

* 5:10 - 5:20: Peter and Bernard spoke with The Kaka’s climate correspondent Cathrine Dyer about Microsoft’s revelation this week that its heavier use of AI is increasing its climate emissions, and signs climate change is increasing mid-air turbulence for high-flying passenger jets.

* 5:20 - 5:35 pm: Peter and Bernard talked with Robert Patman about a tough speech this week by China’s Ambassador to New Zealand, Wang Xiaolong, warning PM Christopher Luxon not to join Aukus II.

* 5:35 - 5:50 pm: Peter and Robert talked with veteran Pacific issues journalist (and substacker) Michael J Field about this week’s riots in New Caledonia.

* 5.50 - 6:00 pm: Peter and Robert spoke with Georgian journalist Giorgi Lomsadze from Tblisi on the escalating protests in Georgia against Russian influence.

The Hoon’s podcast version above was produced by Simon Josey.

(This is a sampler for all free subscribers. Thanks to the support of paying subscribers here, I’m able to spread the work from my public interest journalism here about housing affordability, climate change and poverty reduction around in other public venues. I’d love you to join the community supporting and contributing to this work with your ideas, feedback and comments.)

Other things I did elsewhere

I produced an episode of When The Facts Change via The Spinoff, including this interview with Kiwibank Chief Economist Jarrod Kerr from Wednesday afternoon. We talked about the bluntness of the Reserve Bank’s main monetary policy tool and a developing view that high interest rates actually increase inflation, rather than decrease inflation.

We also produce this 5 in 5 with ANZ daily podcast and Substack for ANZ Institutional in Australia, which you can sign up to via Spotify and Apple and Youtube for free.

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

TL;DR: The Government released the long-awaited Bill English-led review of Kāinga Ora yesterday, but delayed key decisions on its build plan and how to help community housing providers (CHPs) build or buy homes with capital grants, house transfers rent subsidies until next year.

That leaves the building sector, developers and social housing providers in limbo for longer, and further delays the desperately needed increase in housing supply to deal with the extra 220,000 people living in Aotearoa in the last two years. Building consents per 1,000 residents have fallen by a third to 6.7 over the last two years.

(Paying subscribers can see more detail and analysis below the paywall fold and in the podcast above. We’ll open it up for public reading, listening and sharing if we get over 100 likes)

Here’s my top six ‘pick ‘n’ mix’ of links to news, analysis and opinion articles, announcements, official reports, reviews and research in the last 24 hours or so to 8:47am on Tuesday, May 21:

* Housing - The Government released Bill English's report on Kāinga Ora and announced the appointment of a new chair, former Spark and Auckland Airport boss Simon Moutter. But key details on what would happen to Kāinga Ora's build programme, how exactly Community Housing Providers (CHPs) could get some of the capital and rent subsidies that were going to Kāinga Ora were absent. Housing Minister Chris Bishop said he now expected a 'turnaround plan' by the end of the year.

* The Government has essentially kicked the hardest decisions down the road to very late this year, or even next year. That leaves the entire construction sector and the community housing sector in limbo, which risks extending the current recession-like period of suspended animation for the economy. The key decisions needed are: who will have access to income related rent subsidies; how much they might increase (if at all), how many net new houses Kāinga Ora and others will build; and, in particular, how Kāinga Ora will deal with a huge bow wave of rebuilds needed as much of the current housing stock reaches the safe, warm and dry end of its life.

* Tax Justice Aotearoa releasing results this morning from a poll of 1,000 voters it commissioned showing they don't want tax cuts if they're paid for by massive cuts in public spending and services.

* An analysis of the Fast-track Approvals Bill by the Ministry for the Environment and released by Treasury yesterday argues decisions should be taken by expert panels, rather than ministers, who do not have the skills and would would need costly extra advice of their own.

* The massive offshore wind project backed by the NZ Super Fund has told ministers in a briefing it can't operate off the Taranaki Coast if seabed mining is allowed to go ahead. It said the dredging of 10m of sands was incompatible with building turbine platforms and running power cables to shore. It was based on this study released in March.

* The International Court of Justice in The Hague shocked global politics overnight by asking for arrest warrants for Israeli Prime Minister Benjamin Netanyahu, his defence chief and three Hamas leaders over alleged war crimes. ICC prosecutor Karim Khan said he had reasonable grounds to believe that the five men "bear criminal responsibility" for alleged war crimes and crimes against humanity. Reuters

Quotes of the day

Baskets of scorpions?

“Almost every week that goes by, we turn over a new leaf ... and discover a nasty little scorpion running around with a nasty little surprise for the government.” Housing Minister Chris Bishop in a news conference Full conference video.

Buckets of money?

“It's like they've only just realised it costs money to build houses.” Labour Housing Spokesperson Kieran McAnulty via 1News.

Chart of the day

Cartoon of the day

Nibbling away

Timeline-cleansing nature pic of the day

Our shadows

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: The podcast above of the weekly ‘hoon’ webinar for subscribers features co-hosts Bernard Hickey and Peter Bale , along with regular guest Robert Patman and special guest former PM Helen Clark on Aukus II and much more. We also spoke with Ngāti Toa CEO Helmut Modlik about why his iwi opposes the Fast-track Approval bill.

The six things that mattered in Aotearoa’s political economy that we wrote and spoke about via The Kākā and elsewhere for paying subscribers in the last week included:

* Housing & climate - Opposition to the Government’s Fast-track approvals bill mounted in submissions to the Environment Committee this week. Helen Clark warned in the podcast above of the dangers of placing so much power in the hands of the executive. Helmut Modlik warned of a repeat of the top-down damaging of the long-term prospects of Ngāti Toa and the land around Porirua, just as happened with mass house-building in the 1950s and 1960s.

* Infrastructure - The pressure on Council finances from Government funding freezes and a fundamentally borked system of infrastructure financing for fast population growth is becoming so intense it is forcing them to sell assets sales and force unsustainable dividends, as evidenced by a shock resignation of Christchurch’s asset management company and intense debates in Auckland and Wellington about selling airport shares. See more in Thursday’s email.

* Economy - Aotearoa’s biggest and last-best-hope of being a global business, Fonterra, announced plans yesterday to sell its global consumer brands businesses and 17 of its remaining factories overseas, including brands such as Anchor, Anmum, Anlene, Fernleaf, Mainland and Kapiti. The assets up for sale employ capital of $3.4 billion and generating $190 million or 20% of its earnings in the first half of the year. I spoke in this week’s Hoon above about how this represented the final victory for the housing market in its quest to focus spare capital on investing in land appreciation for tax-free capital gains, rather than real businesses and assets that increase real wages and real business wealth.

* Population - Stats NZ reported this week a record-high 52,496 New Zealand citizens left the country permanently in the year to the end of March. That equates to about one full A320 leaving each weekday, with just over half of those citizens going to live in Australia. They were replaced by people on temporary work and student visas (with work rights) from India, the Philippines and China, in that order. See Wednesday’s email.

* Environment - ECan reported this week more than half of the wells monitored in its annual survey last year showed nitrate levels were likely to be increasing, with water from 35 of the 349 wells having nitrate levels above the maximum acceptable value for human health. South Canterbury has the highest incidence of bowel cancer in New Zealand. See Wednesday’s email.

* Economy - Surveys this week showed the economy is settling into a state of suspended animation as the Government’s funding freezes and job cuts chill confidence and combine with stubbornly high interest rates to extend the recession of late 2023 through the rest of the year. See Tuesday’s email

What we talked about on ‘The Hoon’ on Thursday night

In this week’s podcast above of the weekly ‘Hoon’ webinar for paying subscribers at 5pm on Thursday night:

* 5:00 pm - 5:10 pm - Bernard Hickey and Peter Bale opened the show with a discussion about Fonterra’s decision to sell its global brands and give up on its global value-added ambitions.

* 5:10 - 5:40 - Peter and Bernard talked with Robert Patman and Helen Clark about whether Aotearoa should join Aukus II and how the new Government was performing.

* 5:40 - 6:00 pm - Peter and Bernard talked with Ngāti Toa CEO Helmut Modlik about why his iwi opposes the Fast-track Approval bill, as he detailed in this Op-ed via The Spinoff.

The Hoon’s podcast version above was produced by Simon Josey.

(This is a sampler for all free subscribers. Thanks to the support of paying subscribers here, I’m able to spread the work from my public interest journalism here about housing affordability, climate change and poverty reduction around in other public venues. I’d love you to join the community supporting and contributing to this work with your ideas, feedback and comments.)

Other things I did elsewhere

I produced an episode of When The Facts Change via The Spinoff, including this interview with Transpower’s GM of Grid Mark Ryall about the Redclyffe substation near Napier. It is Aotearoa’s climate canary. Where it goes, we go.

It was flooded during Cyclone Gabrielle and turning it off turned off the power for much of Hawkes Bay and Taitawhiti. Transpower fixed it, but has had to make a big call: should it rebuild it where it is now, next to a stream? Or move it up a hill? The choice tells us a lot about how to think about our climate future.

We also produce this 5 in 5 with ANZ daily podcast and Substack for ANZ Institutional in Australia, which you can sign up to via Spotify and Apple and Youtube for free.

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