The Kākā by Bernard Hickey

TL;DR: Net migration hit a record high 128,900 in the year to October, which the new Government has decided is “unsustainable” and requires a review of settings to ensure it is “balanced” with the economy’s skills needs and infrastructure capacity.

However, new PM Christopher Luxon has stopped short of a full strategic review of our immigration policies, suggesting tweaks in the short term would be enough and that more formal targets were not either possible or desirable. His views this week were contrast with his calls in September and May this year for looser settings to bring in more workers at lower wages.

News elsewhere this morning:

* The Climate Commission last night released its latest advice to the new Government on meeting legislated emissions reductions budgets, recommending an acceleration of measures to reduce industrial, transport and farming emissions in a way that saves $2 billion by 2040, including by redesigning the Emissions Trading Scheme to stop giving freebies to industrial exporters and pricing farm emissions; RNZ Eloise Gibson, NZ Herald Jamie Morton, Stuff Olivia Wannan & Newsroom Marc Daalder

* Parliament went into urgency last night to force through the Reserve Bank of New Zealand (Economic Objective) Amendment Bill, the Fair Pay Agreements Act Repeal Bill and the Land Transport (Clean Vehicle Discount Scheme Repeal) Amendment Bill to repeal various measures before Christmas without fresh regulatory or economic assessments; and,

* Talks at COP 28 are dragging into overtime this morning, although it appears a battle to get oil and gas producing countries to commit to slashing fossil fuel use has failed, with the ‘phasing out or phasing down’ phrase replaced by ‘reducing emissions’ in a draft final statement.

Usually at this point in the edition, there’s a paywall that only paying subscribers can see below and hear more detail and analysis in the podcast above. But we’d love you to join the community of paying subscribers, who can read and comment on everything inside the paywall all the time and get access to our weekly ‘Hoon’ webinar on the news of the week on Thursday’s at 5pm here via YouTubeLive for an hour. The 50%-off offer is open to new subscribers until December 21. I also invite paying subscribers to again vote in our poll below on whether we should open up all our articles immediately to everyone until Gravy Day.

And here’s a repeat of our special, special offer for under 30s.

National now says it wants tighter migration settings

Just as fresh figures arrive to confirm record-high inflows and outflows of temporary workers and citizens respectively in the year to the end of October, the new Government has decided to reverse its pre-election preference for looser migration settings.

Hard on the heels of an Australian decision on Monday to halve its migrant intake, PM Christopher Luxon told his post-Cabinet news conference that annual net migration of over 118,000 for the year to September was “unsustainable” and he had asked Immigration Minister Erica Stanford to review those settings to find a better “balance” with unmet skills shortages and infrastructure.

However, he has stopped short of nominating a ‘sweet spot’ for migration levels.

Here’s his key comments (bolding mine):

“We’ve gone through a period where we had the borders shut down. We had very restrictive immigration that was actually too tight, and too choked for too long. Then it was released very, very quickly, with not enough checks and balances in place, and, as a result, we’ve ended up with 118,000 net migration.

“Now, we want immigration to this country. We want the best and the brightest to be able to come here. We want skilled workers to come here, but we’ve got to make sure that that is linked up to an economic agenda where we have genuine skill shortages. All we’re asking for in the conversations the Immigration Minister will be having with Immigration New Zealand are about making sure that we actually have some rigour in the application of inviting migrants into this country.” PM Christopher Luxon via the transcript of his post-cabinet news conference.

This exchange illustrated the lack of detail or longer-term view in this change of position, Again, the bolding is mine:

Media Question: Both the Infrastructure and the Productivity Commissions have previously asked to the long-term population plan, saying that migration’s hard to predict; it’s hard to plan for, basically. I know you share that frustration. You say the settings have been swapping around—we had not enough; now we have too much. Would you be interested in creating a long-term population plan that actually sets targets and potentially even caps on migration? Is that something you’d look into?

PM Luxon: It's often a really attractive place to go to, to actually put a number on it and what is the ideal level of net migration. But, actually, no Government has been able to do that or can realistically do that, because with our economic cycles being quite variable, the skill shortages that we need—it’s a very dynamic sort of set up.

All I’m foreshadowing to you is that, actually, the current levels of 118,000 net migration are not sustainable for New Zealand in the long term. We have to work harder at getting people off welfare into work and using the 60,000 people that actually want to work, and should be working, working, and we should make sure that migration is very, very tightly linked to our economic agenda and, actually, the vacancies that we have and the gaps that we have, and then we should be out in the world very aggressively and positively attracting that talent to choose to come to New Zealand; not go to Canada or not go to Australia as a result.

“So, I appreciate it. All I’m saying is you’ve got to triangulate ultimately a level of migration with a level of infrastructure support and development as well as, obviously, the economic agenda.

‘This is now. That was then.’

The change in view and tone is remarkable in just a few months.

Here’s Luxon announcing National’s policy of increasing the working holiday age to 35 from 30 and allowing migrants to re-apply for these visas three times. working on September 7th, which was the last month of that year to September with the net migration of 118,000:

"Migration does have huge tax benefits for us. It does have economic multiplier effects." Luxon via Newshub in this article titled: “National vows to boost immigration to help New Zealand economy.”

“We will also scrap the median wage requirements and let businesses and sectors like tourism attract the staff they need at rates that reflect their skills and experience." Luxon via Crux

All of those policies are aimed at increasing numbers of lower-skilled migrant workers on temporary work visas.

Luxon was also keen on increasing migrant worker numbers in April in this piece on Newshub titled: Luxon says migrants will be key to filling critical staff shortages. 

"We are a party that really believes in immigration. We think that migrants have a huge value and a lot of contribution to make to New Zealand.

"Across all sectors of New Zealand we are short of workers at the moment. We have sent a message to the world that we are fundamentally closed for business. If you're a migrant coming to New Zealand, you might be a nurse or a doctor, there is currently no pathway to residency. 

"If we want to attract the best we have to be the best in terms of an immigration system and an Immigration New Zealand response and we're not at the moment." 

"We've got to do a much better job of making a much more competitive offer for working travellers… that want to come here and work in kiwifruit [picking] or tourism. We should be out there promoting New Zealand. 

"We need to waive the fees, we need to extend the age, if you've been here once you can come back a second or third time. The same thing needs to happen, if you think about our healthcare workforce we haven't been approving those people and actually getting them here." Luxon via Newshub on April 13.

Stanford was similarly bullish about encouraging more migrant workers to come in this August 19, 2022 statement:

“Wednesday’s Monetary Policy Statement from the Reserve Bank confirmed that labour shortages are the worst they have been in 50 years. It said that the inflationary consequences of labour shortages are even worse than in May when the border was largely closed.

“This is a damning indictment of the Labour Government’s failure to deliver the critical workers needed. Kiwis will feel the brunt of this failure, with higher prices forecasted to persist for longer. 

“Labour’s immigration policies have been a disaster. Just five per cent of the 20,000 workers promised in March have arrived, and only 442 Accredited Employer Work Visa applications have been submitted in five weeks despite Immigration New Zealand forecasting 3,500 per month. 

“This Labour Government has turned New Zealand into an undesirable destination for migrants. Why would a skilled migrant choose New Zealand in 2022 compared to what Australia can offer?

The Government’s immigration policies have been a total disaster, and Kiwis are paying the price. Labour shortages will drag on for longer, putting more pressure on businesses and stoking inflation across the economy.” Stanford statement on August 19, 2022

Stanford was quoted yesterday as asking officials for ways to tighten settings.

“Immigration NZ has been doing a lot recently because of the issues around migrant exploitation, so they've already pulled a lot of levers.

“But there are a couple more things that I've asked for them to provide advice on where I think they could do more.” Stanford via The Post-$$$

After the deluge

Net migration has been slowing somewhat in recent months, but the annual figures have been getting larger, due to revisions higher for previous months.

Stats NZ reported yesterday there were a record-high 245,600 migrant arrivals in the year to the end of October, up 165% on the previous year and more than double the average for the years from 2002 to 2019. There were 116,700 migrant departures, up 26% on the previous year. That left net migration of 128,900, also a record high.

There was also a record-high net migration gain of 173,400 non-New Zealand citizens, more than double the previous record and triple the average from 2002 to 2019.

The net migration loss of 44,500 New Zealand citizens in the October 2023 year was also a new annual record, just beating the 44,400 lost in the February 2012 year. It was almost double the 25,200 average from 2002 to 2014 and ten times the average loss from 2015 to 2019

.

There have been 24 consecutive months of net migration losses of New Zealand citizens to October 2023, amounting to 67,000. This followed 27 months of net migration gains of New Zealand citizens totalling 32,100. About half of the net losses of New Zealand citizens are to Australia.

So what should National be doing?

A proper migration review would take a long-term view about population growth. Currently, the planning arms of Government use Stats NZ’s projections to 2073, which are for net migration averaging 25,000 each year to generate 0.5% population growth.

In reality, we have overshot Stats NZ’s forecasts for 20 years, largely because settings have been loosened repeatedly by both Labour and National to juice GDP growth and budget surpluses for tactical reasons. But five or six tactical actions have turned into a long-term accidentally-on-purpose strategy of population growth of 1.5% to 2.0% per annum, but without the infrastructure investment or the clear permission of voters.

Luxon’s tactical review doesn’t address this lead for a longer-term and joined-up approach on population growth and infrastructure. Remembering that 1.5% to 2.0% per annum growth for the next 50 years would mean New Zealand’s population would grow to 17 million to 20 million by 2100.

A proper review and debate would force both major parties and voters to own up to a fast population growth strategy that matched up with much higher investment, debt and congestion charges to pay for much, much more infrastructure.

That’s the bottom line here. Choosing not to have the debate allows both major parties and median voters to continue their self-delusions that they can have it all: fast population and nominal GDP growth that generates fast-rising land prices, low public debt, lower wage growth and lower mortgage rates, but without the higher taxes, congestion and water charges and higher public debt that comes with much, much more investment.

It is the definition of magical thinking.

Cheers

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: It started with pomp, pageantry and a speech from the throne laying out the new National-ACT-NZ First Government’s plan to turn back much of the legislative clock to 2017 and beyond.

It ended with PM Christopher Luxon accusing former PM Chris Hipkins of being an arsonist and then Hipkins branding Luxon’s Government as having the most shambolic start in our political history. The first claim isn’t true and the second isn’t relevant. None of it mattered.

None of this noise from the gears grinding into action in our core institution of democracy and governance for the next three years had any signal. Our core problems were not addressed. Real solutions were not put forward. All our leaders did was proclaim and shout at each other and past each other into a void where the debate should be about fixing our housing affordability, climate change and poverty crises.

In The Kākā Project’s spirit of covering these issues and suggesting solutions, today’s edition steps back to detail these core problems and puts forward some solutions for debate, including:

* a multi-party agreement of a infrastructure funding and building strategy to cater for an agreed population growth strategy to 2100 of 1.5-2% per year, the same rate as we’ve had for the last 20 years; and,

* a multi-party agreement to create independent crown agencies to achieve affordable zero-carbon housing and transport (40% of disposable income) for all by 2040, with that population growth strategy.

We have opened this edition up fully and immediately to celebrate the arrival soon of ‘Gravy Day’ on the 21st of December, which will be our final publication day of the year. It’s also the day when this special 50% off offer for the first year for new subscribers expires. The podcast above was recorded last Thursday.

Usually at this point in the edition, there’s a paywall that only paying subscribers can see below and hear more detail and analysis in the podcast above. But we’d love you join the community of paying subscribers, who can read and comment on everything inside the paywall all the time and get access to our weekly ‘Hoon’ webinar on the news of the week on Thursday’s at 5pm here via YouTubeLive for an hour. The 50%-off offer is open to new subscribers until December 21. I also invite paying subscribers to vote in our poll below on whether we should open up all our articles immediately to everyone until Gravy Day.

And here’s a repeat of our special, special offer for under 30s.

So much noise and so little signal

Last week, the machinery of our new 54th Parliament and the new National-ACT-NZ First fired up to start detailing plans, repealing legislation and restarting Parliamentary debates.

Just as in the election campaign, the real issues weighing on both the present and future of Aotearoa-New Zealand were not addressed in any meaningful way that acknowledged by the scale of the problems and proposed real solutions, including that we have:

* the least affordable rents in the OECD, with almost 60% of renters in the bottom quintile of income paying more than 40% of disposable income in rent;

* stagnant productivity growth per hour worked that is at least 30% behind that of our nearest neighbour, which is also easiest outlet for frustrated young renters wanting to start families, as shown by record high migration of residents to Australia;

* a $200 billion infrastructure deficit after 30 years of underinvestment and population growth of 1.5-2% when less than 0.5% population growth was forecast, let alone planned for; and,

* we have barely started electrifying our transport and industrial sectors in a way that would allow us to meet the international commitments both main parties have signed up to and would lock our exporters out of global trade if we failed to meet them.

Those failures are enabled by parties, policies and voters in the median of the spectrum who agreed in a defacto way:

* a (non) population and (non) infrastructure policy that simply assumes in a self-delusionary way without debate that the 1.5%-2% population growth rate of the last 20 years is only a short-term thing that will stop as soon as temporary labour gaps are filled by locals and the 230,000 people here on temporary work visas are sent home;

* a tax system that does not tax capital gains, wealth or inheritances, especially the $600 billion of unarned capital gains from the value of residential land over the last 20 years, but does heavily tax wage and salary incomes, corporate profits, pension fund savings and consumption in a way that means our homes are worth 10 times our stock market and eight times our retirement savings (whereas Australia’s homes are worth four times its stocks and three times its savings, and US homes are worth the same as its stock market and twice its retirement savings);

* a bi-partisan fiscal strategy that prioritises balanced budgets and low public debt and overall tax ratios to GDP of less than 30%, when other OECD peers have ratios closer to 50%; and,

* a bi-partisan approach to climate policy that assumes in a self-delusionary way that the Government can meet its international committments by spending up to $24 billion on international carbon credits.

These policies mean:

* there are nearly 8,000 people living in emergency housing of motels, caravans and relocatables, including nearly 4,000 children;

* nearly 600,000 people are dependent on food banks in part or whole to have enough food for themselves and their children to eat;

* over 250,000 or over 66% of people on benefits have a debt to MSD for over-payments, benefit advances and emergency assistance grants averaging $4,000 per beneficiary and debt of $3.5 billion owed to MSD, IRD and Justice; and,

* nominal GDP growth is growing fast because the problems outlined above are masked by record-high net migration of temporary workers to suppress wage inflation and inflate rent and land price inflation in a way that generates ever-growing and tax-free gains on values of residential land.

The Kākā Project’s Briefing to Incoming Ministers

This is the briefing that no one inside the ministries will write or deliver to the newly sworn-in coalition Government in the coming days because the election debates and the winning parties’ manifestos either didn’t talk about the issues it addresses, or ruled out the best solutions.

Fair enough. The officials are no doubt nervous before a job-slashing mini budget on December 20, but we have nothing to lose by saying the quiet things out loud. The Kākā Project is all about addressing the big and awkward problems and suggesting solutions that might work in the long run for all, even if they are difficult for those protecting their versions of the status quo right now. Luckily, I’m unelectable and unappointable. So here goes…

Before they launch into a frenzy of repealing and dealing, PM-elect Christopher Luxon and his deputies David Seymour and Winston Peters should stop, take some deep breaths and address the biggest problems in front of Aotearoa for the long term.

They are:

* an investment-lite, infrastructure-lite and housing-lite economy that is growing its population much faster than it can handle without busting a few gaskets and throwing off thousands more New Zealanders to live and work in Australia every month;

* a housing market and set of infrastructure funding, tax rules and assumed property rights that make our housing costs the most expensive and stressful in the world for both renters and potential first-home-buyers without their own Banks of Mum and Dad; and,

* an accidentally-on-purpose population-non-policy that is completely out-of-whack with the current combination of tax policies, NZ Super and health entitlement assumptions and Government debt policies that are are seen as untouchable and therefore undebateable by National and Labour.

The coalition should take a fresh look at their own manifestos and look at doing the following;

* agreeing a population growth strategy and infrastructure funding plan that distributes the benefits of high population growth (1.5-2% per year) much more clearly and fairly to local councils to fund their shares of water, transport and housing infrastructure;

* reducing housing and transport costs for those in the lowest income quintile to less than 40% of disposable income, reducing the chances of them getting into debt and allowing the removal of $4 billion a year of subsidies for housing;

* that means massive building of affordable homes by Government, NGOs, Build-to-Rent funds and everyone else; and

* meanwhile, MSD debts should be wiped and not built up again.

I’d also propose:

* the eventual phase out of accommodation supplements, working for families payments and other MSD payments in favour of a simple Universal Basic Income of 66% of the median wage for all residents under 30, to match the UBI for those over the age of 65, once housing and transport is affordable at no more than 40% of disposable income; and,

* stopping burning oil and gas as fast as possible as part of a just transition to gross zero emissions from housing and transport by 2050, and to halve them by 2030.

A true emergency response, in my view, would include:

* stopping imports of petrol and diesel cars and utes from a set date, such as 2030;

* offering incentives for people to replace their cars and utes with electric vehicles, buggies, bikes and scooters, potentially involving some sort of voucher-for-electric vehicle scheme to hand in clunkers;

* reconfiguring main urban roads urgently to replace road-side car parks with cycle, scooter and walkways, as well as rapidly upscaling electric bus fleets to increase bus route frequency and coverage at low cost ($1 tickets);

* state-subsidised charger networks throughout towns, cities and rural areas that provide $1 charges for cars etc, fueled by state-funded solar panels and batteries on roofs and carparks surrounding those charging stations;

* state-funded rollouts of roof-top panels and batteries for any household, farm or business who wants them, with surplus electricity sold back into the grid by the panels’ owners (either Government or individuals) at current wholesale prices;

* the state-funded building up of electric rail networks to shift freight and long-haul passenger traffic out of trucks and planes, again with low and subsidised rates for freight companies and passengers; and,

* moving the funding of road repairs and public transport to a weight and fuel-burning levy system that front-loads the costs onto heavier petrol and diesel vehicles and subsidises light electric vehicles, with the eventual aim of paying for roads and public transport subsidies through road-user and congestion charges.

The Kākā Project’s big idea to change incentives and pay for the changes

The Kākā Project’s main idea is a 0.5% annual tax on the value of residential zoned land, with multiples for unoccupied land and houses, to fund housing, water, transport, health and education infrastructure to drive the cost of housing down to 30% of disposable income for the bottom quintile of earners by 2050, along with infrastructure and public housing investment to drive the cost of transport down to 10% of disposable income by then.

The other core aim is to halve gross transport and housing emissions by 2030 and remove them completely by 2050.

So in this situation, the various fudges and kluges designed to get around the no-go area of taxing capital gains or wealth would be dropped and replaced by the residential value land tax. So that would include:

* removing the interest deductibility policy, which really messes with the purity of taxation settings;

* reinstating depreciation as a valid expense for both residential and commercial property owners;

* removing the ‘bright line’ test for capital gains for rental property owners, given they’ll already be paying the broad-based and low-rate residential land value tax and not having a capital gains tax is a good thing to encourage business value creation;

* removing all council consenting fees and development contributions for new homes and other infrastructure projects;

* replacing the current benefit, accommodation supplement, Working For Families and NZ Superannuation systems with a simple UBI for all those under the age of 30 and over the age of 65;

* making all education (including preschool) publicly funded, along with all healthcare and dental care;

* bringing in a progressive income tax system that exempts all individual income below $35,000 and ramps up to 50% for those earning more than four times the median wage;

* allowing the non-taxation of retirement savings while in their funds, but taxing income normally on the way into and out of the funds, as is the case often overseas; and,

* reducing GST to 10%, while keeping it on all current items, and bringing in financial products such as mortgages, bank fees and life insurance.

I welcome feedback, challenges, suggestions for improvements, unintended consequences and problems in the comments below. Only paying subscribers can comment.

Poll of the day for paying subscribers to The Kākā

Quote of the day

On Casey Costello being given responsibility for anti-smoking

“Unbelievable! Having a pro-tobacco health minister in charge of tobacco control. She is more of an anti-health minister by opposing SF (smoke-free) laws and wanting to allow oral tobacco in NZ! She chaired the taxpayers union which receives tobacco $$. How much did Act and NZ First get?” Public Health academic and activist Boyd Swinburn on the appointment of NZ First MP Casey Costello as Associate Minister of Health being delegated responsibility for anti-smoking efforts.

Comment of the day in The Kākā community

‘They f**ked around, and now they’re finding out’

“As Chris Slane highlights in his cartoon, this is a feature not a bug. Inflation doesn't affect everyone the same way: For the wealthy and powerful, it gives them cover to hide all manner of sins of tax obstruction, lobbying and, of course, price rises; high interest rises protect the wealth of those who can afford to live outside of debt.

“Our naive insistence on "change" at all costs has walked us right into this idiocy, and the best defence the centre voters seem to have for their vote now is "Give them a chance - Labour were no better!"... Protests like yesterday's are so important to ensure this new government understands its leash is far shorter than the centrists who fell for their slimy mistruths seem prepared to give them.“ Tim in yesterday’s Chorus

Timeline-cleansing nature pic of the day

Ka kite ano

Bernard

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

TL;DR: The five 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:

* New Finance Minister Nicola Willis set herself a very high bar for retaining confidence in her rhetoric by accusing Labour of “economic vandalism” in handing over a set of books ridden with ‘hidden’ “fiscal cliffs” worth billions, but without detail. That will come on December 20. Tuesday’s email

* The 3.5 km City Rail Link (CRL) tunnel under Auckland’s CBD has cost $1.5 billion per km, according to a global study, which is 50% more than equivalent US city rail costs, three times the cost of city rail in Australia and nine times more than it costs to build in Finland, Portugal and Spain. Monday’s morning email

* Just when most of the rest of the world’s inflation rates are falling, Aotearoa-New Zealand faces high inflation and mortgage rates for longer next year as record high net migration, rising rents and council rate hikes tolerated and provoked by the new National-ACT-NZ First Government’s policies inflate housing costs for all. Wednesday’s morning email.

* Te Pūtea Matua (RBNZ) Governor Adrian Orr Reserve Bank Governor Adrian Orr warned high net migration and profit-led inflation were factors in the bank’s hawkish stance. Tuesday’s Top 10

* Watercare’s CEO warning Aucklanders’ charges will triple, unless the new Government agrees to its bailout plan. Monday’s Top 10

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 plans for summer, consumption and living in caves.

* 5.10 pm - 5.20 pm - Bernard, Peter and Cathrine Dyer talked about the sunlight exposing the b******t at the COP conference and the failure of the Government’s ETS auction this week; and,

* 5.20 pm - 6:00 pm - Peter, Bernard, Robert Patman and Stuff Pou Tiaki Matua Carmen Parahi talked about the hikoi protests against the new Government’s moves to unwind Te Tiriti and Te Reo Māori progress. Also, see Cartoon of the week below.

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. We have a couple of special offers on at the moment.

Items mentioned on The Hoon

During the Hoon we discussed various articles on The Kākā and elsewhere including Cathrine’s weekly climate news roundup, which includes a discussion with me. I also referred to a Parliamentary debate yesterday about Gaza.

Other places I appeared this week

I talked to University of Otago Māori Public Health Researcher Andrew Waa for When The Facts Change via The Spinoff about his analysis of the 2022 smoke free changes, and the true costs of reversing those changes. To replace $700 million a year of revenues lost from a foreign buyers tax, the new Government is choosing policies that will keep more people smoking for longer, costing thousands of lives per year and at least $10 billion is extra health costs and lost working hours.

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.

Chart of the week

2023 was the warmest year in history. There’s still a month to go.

Video of the week

What 2 degrees C above pre-industrial levels means for the planet’s ice

Cartoon of the week

Some cartoons don’t need a headline or caption

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 hygiene effects of direct sunshine are making some inroads, perhaps for the very first time, on the normalised ‘deficit of ecological integrity’ at the UN’s annual climate summit.

Elsewhere in climate news this week:

* Climate communications expert Ketan Joshi provided an excoriating break-down and analysis of the truth-revealing exchange between ex-Irish President Mary Robinson and COP28 President Ahmed Al Jaber

* Record breaking emissions are reported by the WMO and the The Global Carbon Project, highlighting the massive emissions gap revealed by the first five-yearly Paris Agreement Stock-take.

* The Climate Trace Initiative, co-founded by none other than Al ‘Inconvenient Truth’ Gore, used the COP28 event to dump a tonne of data from its satellite tracking and AI software, potentially pinpointing just where the lies are being told.

* The immediate risk of being ‘outed’ prompts a round of new commitments to methane reduction. In particular, the US makes immediate moves to try and protect its narrative of natural gas as a ‘bridging fuel’.

* The ‘climate action = living in caves’ trope suffers a setback as researchers point out that eliminating extreme poverty in the world would have only a marginal impact on GHG emissions.

A note from Bernard: We’re proud at The Kākā that our climate correspondent Cathrine Dyer can produce a weekly wrap of the key climate news and developments for all subscribers to The Kākā, both paying and non-paying. Becoming a full subscriber helps us produce this sort of detail and analysis for all to read in front of the paywall. We’re committed to ensuring all of Cathrine’s work here is available to all. Here’s our special introductory offer for a year that’s available until the end of Gravy Day on December 21, our last day of publication for 2023.

We also have a great offer for under 30s.

Bring me sunshine…

All in all, it’s been a hell of a week for lovers of the golden rays and their ability to cut-through the seemingly never-ending stream of you-know-what at COP 28 in Dubai.

You have no doubt heard about the revealing moment that occurred at one of the COP 28 events last week, during a conversation between ex-Ireland President and former UN Special Envoy for Climate Change Mary Robinson and current COP President Ahmed Al Jaber.

Robinson asked Al Jaber a series of very simple, direct and highly pertinent questions and he responded with a high-octane public meltdown, sprinkled with misogyny and fueled by too much of his own carbon Kool-aid. Ignition was but a single mundane query away. These were the questions everybody else had been asking about this COP, but nobody had thought to put them to the man at the centre of it all.

Ketan Joshi’s analysis of each part of the exchange is here. Stretch your facial muscles in advance to avoid an injury from all the wincing.

Al Jaber: “We can always play with words here. You are a good politician, and you know how to use words better than I do. I’m a businessman, I am centered around delivery and actions”

Robinson and Al Jaber were debating using “fast track” or “urgent” to describe action to stop burning fossil fuels. Al Jaber insinuates that businessmen are rational and focused on outcomes and performance, suggesting that Robinson is trained at deception. It’s a weird one, because Robinson has a point: “fast track” is a phrase I see get used to describe a delivery option for my light bulbs, not for dealing with an immediate and gut-wrenching physical threat to my existence.

The tone, though, is set pretty clearly: a bitter, acidic overreaction to a factual statement, but framed explicitly as if a reproachful insult is clear-headed and rational.

‘I am the man in charge’

The bit where Al Jaber drops “I am the man in charge” into the middle of a session about women in climate action is priceless.

Despite Al Jaber’s  failure to utter a single truthful statement it somehow managed to be the most honest public display of ‘truthiness’ we never expected to see at a global climate talk-fest.

This was the best thing to come out of COP28. The hygiene from direct sunlight is the one thing most likely to lead to organisations and countries actually meeting some of the pledges they make at COP 28.

Greenhouse gases at record highs

The World Meteorological Society (WMO) announced last month that CO2 concentrations in the atmosphere were a full 50% above the pre-industrial era for the first time, that they are continuing to grow in 2023 and that there is no sign of them stopping. The other two main greenhouse gases (GHGs), methane and nitrous oxide, saw record growth between 2021 and 2022. The Global Carbon Project has also just reported that fossil CO2 emissions reached a record high in 2023

The first global stocktake of the Paris Agreement targets found that current national commitments fall short by 20.3 to 23.9 gigatonnes of CO2 equivalent compared to the levels required to limit warming to 1.5˚C by 2030. That target represents a 43% cut in emissions compared to 2019. It’s not just that global emissions haven’t declined sufficiently. So far, they haven’t declined at all. Rather than almost halving emissions in the six years before 2030, the most we can hope for now is a halt in their relentless upward trajectory.

You’ll never believe what happened next

As if that wasn’t bad enough, satellite tracking data is now showing that many countries and organisations are not providing accurate figures, with some countries failing to provide updates at all for the global stocktake. The Climate Trace initiative, co-founded by Al Gore,  have used the COP28 setting to release data showing exactly where the biggest GHG emissions increases have come from.

According to this Guardian report, based on the data release, the largest emissions increases have come from electricity generation in China and India, and oil and gas production in the US.

“Climate Trace uses satellite images and AI software to pinpoint the sources of emissions with a high degree of accuracy around the world, and has uncovered discrepancies between countries’ and companies’ reporting of emissions and their actual behaviour.”

If you wondered why there was a sudden rush to commit to reductions in methane emissions from fossil fuels at COP28, it might have something to do with what this satellite data is capable of showing. Studies in the US over the past few years have suggested that methane leaks from natural gas pipelines are underestimated by the EPA by as much as 60%, putting at risk the claim that it could be used as a ‘bridging fuel’ in the shift away from coal. That would be a major challenge to a key American fossil narrative. The Climate Trace organisation is bringing online new satellite technologies that can pinpoint exactly where and how much leakage is occurring. It is also pinpointing the proliferation of routine methane flaring occurring globally at oil and gas production plants, despite previous voluntary agreements to reduce it. In other words, the satellite data has the power to cut right through the b******t narratives that pepper COP conversations.

When the data shines a light on the self-reporters

While many environmental NGOs are pointing out that voluntary pledges are insufficient and have failed to deliver results in the past, it is reasonable to suggest that this time might be different. This time, accountability will not rest solely on self-reported data from the leakers themselves. This time, sunlight from satellite data will be in the hands of the masses. Everybody and anybody can view the data, which is presented in a beautifully user-friendly format right here, and use it to hold feet to flames.

You might see all of this information as an overwhelming amount of bad news. But there is a bright side to this deluge of reality. COP28 is going to go down as the year of the truth bomb and the site of an epic clash between trackers and laggards.

The trope of ‘living in caves’ emerges blinking into the sunlight

Here’s another welcome bit of sunlight. Let’s circle back to Al Jaber’s revelatory rant in which he said “Please help me show me the roadmap for a phase of the fossil fuel that will allow that will allow for sustainable socioeconomic development. Unless you want to take the world back into caves?” As Ketan Joshi points out “Climate action = ‘living in caves’ is another long-running trope of deniers and fossil advocates”.

In fact, this newly released study has found that eliminating extreme poverty in the world would have only a marginal effect on global GHGs, raising emissions by less than 5% by 2050 and that this number can be reduced by a factor of 10 if climate-smart approaches to growth, which aim to reduce inequality and use improved technologies, are introduced. This reinforces the claim that efforts to reduce poverty are not in conflict with the urgency of addressing climate change. Rather, a failure to address poverty, both within and between countries, is a structural impediment to climate action.

If we are going to base the future liveability of the planet on a voluntary agreement organised by a notoriously toothless global institution, that puts a fossil baron in charge of progress, there is really only one thing that can get between us and catastrophe. There’s a very good reason why interrogations always take place under the harsh glare of a well-directed spotlight.

In other news this week,

Scientists are warning that the world is on the verge of at least five catastrophic tipping points that can create feedback loops which then set off a domino effect. According to The Guardian’s coverage of the new Global Tipping Points Report, which was produced by an international team of 200 researchers:

“The researchers said the systems were so tightly linked they could not rule out “tipping cascades”. If the Greenland ice sheet disintegrates, for instance, it could lead to an abrupt shift in the Atlantic Meridional Overturning Circulation, an important current that delivers most of the heat to the gulf stream. That, in turn, can intensify the El Niño southern oscillation, one of the most powerful weather patterns on the planet.”

In addition to the 5 thresholds already at risk, three more could be reached in the 2030s if the world heats 1.5˚C above pre-industrial temperatures.

Climate Action Tracker this week updated its warming projections  for the end of the century based on 2030 NDC targets to 2.5˚C, adding 0.1˚C to the projection, claiming that there has been NO improvement since the Glasgow COP two years ago, despite government promises and a year in which every continent has experienced extreme weather events related to climate impacts.

Aotearoa New Zealand also experienced a little bit of the white hot glare of sudden sunlight, winning a ‘fossil of the day’ award from the Climate Action Network for its U-turn on new oil and gas exploration. They said:

“Did New Zealand not read the road signs to COP28??? No u-turns on the way to a healthy planet. 

New Zealand had been saying all the right things, listening to Indigenous voices, and championing a global phase-out of fossil fuels. But with a new government in the driver’s seat, they seem to have swerved off course and are undermining the Indigenous People-led struggle by announcing plans to reopen Aotearoa waters to oil and gas exploration. In doing so, they have the dishonour of winning the first ‘Fossil of the Day’ award at COP28.” 

The Climate Change Commission delivers advice to the government every five years on how to achieve its next Emissions Reduction Plan. The second emissions budget for the years 2026-2030 has already been set, but the Commission delivered its advice on how to get there to the new Climate Change Minister, Simon Watts, last week. That advice is due to be made public in the next week or so. Given what we already know about the new Government’s policy approach to climate change, this is looking to be a very interesting interaction! Will the government take the Climate Change Commission’s advice and if not, how do they intend to make good on the budget?

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: Just when most of the rest of the world’s inflation rates are falling, Aotearoa-New Zealand faces high inflation and mortgage rates for longer next year as record high net migration, rising rents and council rate hikes tolerated and provoked by the new National-ACT-NZ First Government’s policies inflate housing costs for all.

Elected to lower the cost of living, the coalition’s policies are actually unleashing a wave of new Government and council fees, rent hikes, council rates increases and domestic inflation that will keep mortgage rates and housing costs higher for longer for all.

Councils and Government departments starved of funds by the Beehive, are preparing to increase their rates, fees and charges through 2024 and into 2025, just as the effects of record-high net migration over the last 18 months and earlier tax breaks for landlords ripple through into higher rents, house prices and demand-push domestic inflation.

The rest of the world is already seeing deflation in some prices and markets expect official rate cuts next year in ways that are already taking pressure off their mortgage rates. Meanwhile, Te Pūtea Matua (The Reserve Bank) has this week repeated and reinforced its warnings that it may have to hike its Official Cash Rate as soon as February 28 because of persistent domestic inflation, driven by high migration, rising Government and council fees, rates and charges, and a lack of competition that has pumped up profit in some sectors. (See more below the fold)

Elsewhere in the news overnight:

* The OECD released overnight its once-every-five-years PISA results on educational achievement, including results for Aotearoa showing another worsening in maths performance, but an improvement in the performance gap between the poorest students and richest students for maths (see chart below); and,

* Global climate emissions were projected overnight to rise 1.1% in 2023, more than double the average growth rate over the last decade and now 6% more than 2015, the year 196 countries agreed in Paris that emissions should peak in 2025 and fall 43% by 2030 to try to keep temperatures from warming more than 1.5 degrees above pre-industrial levels (see chart below).

Paying subscribers can see and hear more detail and analysis in the podcast above and below the paywall threshold here.

Rents, rates, fees and charges inflating the outlook

They may have unintended inflationary consequences, but they’re nationwide consequences none-the-less of a new coalition Government pushing the effects of its own tight budgets and investment freezes down to councils and departmental heads. A likely further loosening of migration settings will amplify the inflationary effects on housing costs.

Jammed up against debt limits and budgetary sinking lids, these local officials and bureaucrats are being given permission or ordered to impose new and higher local user-charges and rates that effectively substitute for tax increases centrally.

A wave of these new and higher fees, rates and charges will ripple out over the economy in the next 18 months as mayors, councillors, heads of department and price-setters for utilities such as gas, electricity, water and parking ramp up the charges.

Council rates increase announcements have cascaded through the high-growth cities Auckland (13.75%), Wellington (17.8%), Christchurch (18%), Tauranga (9.4%), Hamilton (25.5%) and Queenstown (14.5%) in recent weeks and all have signalled double-digit percentage rates increases in future years, along with ramping up parking and consenting fees, and calling for congestion charges for major roads and motorways. Transpower announced two weeks ago it had asked permission to increase its charges by 39.5% in the 2025/26 year to pay for grid upgrade investments.

Here’s the latest example via RNZ:

A number of councils are proposing massive double-digit rate rises as part of their long-term plan discussions. Mayors are warning that residents across the country are likely to face the same pain, with the alternative being significant cuts to essential services. They are calling on the new government to start fixing a "broken" funding model for councils.

Hamilton City Council has proposed a 25.5% rate hike for the 2024-2025 financial year, as part of its draft long-term plan.

Mayor Paula Southgate said the increase, which the council estimates is an extra $722 a year for the median ratepayer, would be tough for many people. 

“We know that New Zealand is going through a cost-of-living crisis at the moment, so we know they are already hurting But I would think most mayors would agree we don’t want to run our city or our place backwards into the ground.”

Southgate said the council was grappling with rising interest rates, inflation, and looming water infrastructure costs, like many councils across the country. RNZ

The new Government will this launch a frenzy of regulatory and legislative repealing and uncertainty in the next two weeks that has left councils no choice but to hike rates, while some Government departments are rolling out big fee increases to offset budget tightenings.

Yesterday, RBNZ Governor Adrian Orr again warned markets and borrowers not to expect early rate cuts, and said a rate hike remained on the table because of domestic inflation pressures from high net migration, profit-led inflation and the potential for an inflation boost from tax cuts, which are being accelerated and may be backdated for landlords.

"This is the challenge for monetary policy, we have to lean against that desire to tuck a little price increase in behind generalised inflation hoping no one notices.” Adrian Orr via Interest.co.nz

Meanwhile, overseas, inflation is falling fast and expectations are growing on rate cuts next year. Our central bank does not see rate cuts until well into 2025. US goods prices are already falling and US average mortgage rates have fallen from 7.8% to 7.2% in the last month.

Charts of the day

NZ’s educational performance keeps worsening, along with OECD

How the world is failing to achieve the Paris Agreement targets

Actually, NZ’s ‘stressed middle’ of mortgaged owners aren’t too stressed

Video of the day

Just a snapshot of our broken housing market (with bits tacked on)

Cartoons of the day

We’ve been a great audience

‘Can I offer you some oil and/or gas’

We have been warned

Timeline-cleansing nature pic of the day

Ka kite ano

Bernard

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

TL;DR: New Finance Minister Nicola Willis has set herself a very high bar for retaining confidence in her rhetoric by accusing Labour of “economic vandalism” in handing over a set of books ridden with ‘hidden’ “fiscal cliffs” worth billions, but without detail.

Her first and last opportunity to ‘show us the money’ will be on December 20 (the last Wednesday before Christmas) when she releases her first ‘mini’ Budget with Treasury’s Half Yearly Economic and Fiscal Update (HYEFU).

Former Finance Minister Grant Robertson is ready to pounce on any signs Willis over-hyped her claims without backing, and to contest her suggestion the Public Finance Act will need to be rewritten.

The short answer to whether Labour misled the nation is that we’ll find out properly on December 20, and so far there is no smoking gun.

Elsewhere in the news:

* New Workplace Relations Minister Brooke van Velden is already ignoring Treasury advice to Cabinet on how the repeal of the Fair Work Act would hurt women, Māori, Pasifika and young people, papers leaked to Newshub’s Amelia Wade last night showed;

* Labour’s new Revenue spokesperson, Deborah Russell, told Newshub’s Jamie Ensor yesterday it might be time for Labour to look seriously at a Capital Gains Tax (again) because a wealth tax would be too complicated to explain; and,

* New Transport Minister Simeon Brown’s first order to his ministry was to start using English names first in communications. 1News

Paying subscribers can see and hear more detail and analysis in the podcast above and below the paywall threshold here.

A day of reckoning is coming for Willis or Robertson

Finance Minister Nicola Willis has ramped up the political stakes for her December 20 mini-Budget and ‘big reveal’ of the books she inherited from Grant Robertson by accusing Labour of leaving ‘massive fiscal cliffs’ worth billions she wasn’t aware of.

Willis made the unsubstantiated claims in more detail at yesterday’s post-Cabinet news conference. (See her full comments from 2:07 onwards)

Here’s her key accusations in text form (bolding mine):

“I'm concerned by the scale of the financial challenges left to us by the outgoing government. I am still receiving advice on both the number of those challenges: their size and the options available to the incoming government.

“The challenges fall into two broad categories. The first are risks that were referred to in the pre-election update, but the true scale and urgency of which was not made clear for a range of reasons, including commercial sensitivity, some of these risks are now upon us and they are much larger than had been suggested.

“Second, I have been surprised by the sheer number of government policy programs for which funding is due to expire as the government chose to fund those programs on a short-term basis only. In some cases this practice is extremely disingenuous. This is because it makes the books look better in future years, even though it is highly unlikely ministers genuinely intended to stop funding those programs.

“It is remarkable to me for example that the outgoing government left a massive fiscal cliff for Pharmac funding. Did they really intend to withdraw funding for listed medicines and if not, why didn't they account for that in their pre-election update? I have asked Treasury to advise me of how many times this approach has been used and therefore how much funding we will need to find to continue essential programs left short changed by the outgoing government.

“The preliminary advice is that this sum is likely to approach many billions of dollars over the forecast period. I will have more to say about how we will approach these risks and how and what decisions we will make about them I will also have more to say about what amendments may be required to the Public Finance Act.

“This is in order to ensure that future governments are more upfront about the these choices.” Nicola Willis in Monday’s post-cabinet news conference above.” Willis in the post-Cabinet news conference.

Challenged on whether she was accusing Robertson of breaking the law, she said:

“Right now I'm accusing it of upholding the letter of the law, but not necessarily its spirit, because I think what they did was they found clever workarounds to make the books look better than they really are.

“It is absolutely permissible for a government to only short-term fund a program. That is allowed, but where you know that you will have to go back to fund it in future budgets, then actually you should just be funding it for the long-term. Pharmac is example. School lunches are another.

“I knew about those before the election. What's surprised me is how many more of those there are and I think it would have been helpful…pre-election to have collected in one place a list of all of the programs the government had chosen to short-term fund, with an explanation of why because in many cases when I'm asking that question of why haven't they funded that into the future, there is no good answer.

“I've been saying for quite some time that these were people who were reckless with the taxpayer dollar. They committed economic vandalism. They've left the country in a very bad financial and economic sttate and what I'm saying today is that also extends to the way they left the books.” Nicola Willis

‘She should have read the Budget properly’

Robertson described Willis comments last night as a “desperate diversion from somebody who can't make their tax package add up. He said the list asked for by Willis was not needed.

"It already exists, it's called the Budget. We put it out every year. And all of those things are in here," he said, holding up a copy. "How can we be hiding something that's literally in this document?"

"I inherited a number of time-limited pieces of funding and what you do at each Budget is you go back and you look and say 'Well are we going to extend that? Are we going to baseline it? Are we going to look at another way of doing it? This is literally the job that Nicola Willis has signed up for and she seems to think it's some kind of scandal."

"Nicola Willis seemed to suggest that particular example she gave today (cybersecurity funding) was, quote: 'Buried in the estimates'. It's on page 89 of a 154-page document. It is not buried.

"If she couldn't make it to page 89 of the Budget I'm really, really concerned at what kind of finance minister she'll make." Robertson via RNZ

He said funding could be time-limited for a variety of reasons.

"When it comes to the school lunch programme, that was a Covid initiative initially, it's been carried on as the cost of living crisis has continued and it's shown its worth - both parties decided in their fiscal plans to extend that out.

"We wanted to align Pharmac with the overall health funding, so we did the two years of health funding and now we're moving into a three-year health funding phase - again, both parties acknowledged that and made the decision that we would spend some of the new operating allowance into the future to fund that.

"There was time limited funding for that education cybersecurity initiative, that's because we were making sure that at each stage of that project, we knew it was working and because we were looking for a more efficient way of delivering those services across government." Grant Robertson.

So he said and she said, but who’s right?

In my view, Nicola Willis has thrown a lot of hyperbole thrown around about “massive fiscal cliffs” and “billions of dollars” and has raised the stakes sky high. There will be an intense focus on December the 20th to see whether that hyperbole is backed up by true surprises.

Grant Robertson will be ready and willing to point to the lines in the Budget where things were disclosed and that this is going to be a point of contention early on in the Government.

In the past, these accusations of ‘we opened the hood and we had no idea what was in there’, were backed up by some often big shocks. But they were really before the 1989 Public Finance Act and the 2004 Fiscal Responsibility Act.

I would be incredibly surprised if Treasury decided under pressure from Grant Robertson to not disclose things. The short answer is we’ll find out properly on December 20 and so far there is no smoking gun.

There are some contingent liabilities that should be in there

However, this debate does raise some good questions about what the scale of contingent liabilities are, in particular, and whether or not they should be booked.

I've argued that, for example, the up to $23 billion worth of carbon credits that will need to be bought to meet our Paris targets should be included in the contingent liabilities. Others could argue many other coming costs are not in there that perhaps should be. That would help any future government, let alone voters.

So there’s a big fight brewing here on fiscal disclosure, which we can't really judge the accuracy of, or who's going over the top, until December the 20th.

Quote of the day

The head of COP 28 says the quiet part out loud

The head of COP 28, Adnoc (UAE’s state oil and gas giant) CEO Sultan Al Jabar, was challenged in a panel discussion yesterday by former Irish President and former UN Special Envoy on Climate Change Mary Robinson about why Adnoc and others weren’t phasing out fossil fuels more aggressively, as The Guardian’s Damian Carrington and Ben Stockton reported.

Robinson said: “We’re in an absolute crisis that is hurting women and children more than anyone … and it’s because we have not yet committed to phasing out fossil fuel. That is the one decision that Cop28 can take and in many ways, because you’re head of Adnoc, you could actually take it with more credibility.”

Al Jaber said: “I accepted to come to this meeting to have a sober and mature conversation. I’m not in any way signing up to any discussion that is alarmist. There is no science out there, or no scenario out there, that says that the phase-out of fossil fuel is what’s going to achieve 1.5C.”

Robinson challenged him further, saying: “I read that your company is investing in a lot more fossil fuel in the future.” Al Jaber responded: “You’re reading your own media, which is biased and wrong. I am telling you I am the man in charge.”

Al Jaber then said: “Please help me, show me the roadmap for a phase-out of fossil fuel that will allow for sustainable socioeconomic development, unless you want to take the world back into caves.”

“I don’t think [you] will be able to help solve the climate problem by pointing fingers or contributing to the polarisation and the divide that is already happening in the world. Show me the solutions. Stop the pointing of fingers. Stop it,” Al Jaber said.

Comment of the day

The problem with blaming victims

“Lucy O'Hagan's comment about how we just know how to get stuff is so pertinent and familiar. It extends beyond Health to so many other areas where government funding or support is available but so many people don't know how to go about it. Tax benefits (particularly WFF), Educational Grants/Scholarships etc, MSD support.

“So often you hear Politicians saying, "yeah but we support all these people already". The reality is that so many people in need, lack the knowledge on how to go about getting this funding or, too often, are scared to deal with government departments because of previous poor experience/outcomes or suspicion of how the government might treat them in the future.” Grant in yesterday’s Top 10

Chart of the day

Actually, the black market in tobacco is getting smaller, not bigger

Video of the day

One of the myriad effects of climate change

Cartoon of the day

‘This Government could damage your health’

Timeline-cleansing nature pic of the day

Ka kite ano

Bernard

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

TL;DR: The five 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:

* Christopher Luxon, David Seymour and Winston Peters signed coalition-forming agreements, announced a ministerial list, were sworn in, held their first Cabinet meetings and released a 100-day plan with 49 to-do items; See Friday’s email

* National, ACT and NZ First agreed to drop National’s plan for a foreign buyers tax and adopt ACT’s plan for faster tax cuts for landlords, to be paid for by dropping a Working For Families tax cut and reversing anti-smoking measures which, if successful in reducing the number of people smoking, would have cost up to $1 billion a year in lost tobacco tax revenues; See Monday’s email

* Public health experts accused the new Government with choosing to sacrifice thousands of (more often) Māori and Pacifika lives and impose an extra $5.3 billion in extra public health costs for the sake of faster tax cuts for landlords; See Monday’s email

* Building consents kept falling and councils put on hold plans for new water and transport infrastructure that would underpin new house building because of the new Government’s plans to abandon Three Waters and review funding for Waka Kotahi and Kainga Ora; and, See Wednesday’s email

* The Reserve Bank surprised markets and economists by warning it could raise interest rates again early next year because of higher housing costs from record-high migration and a lack of new homes, and the stimulatory effects of the new Government’s tax cuts. See Thursday’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 the new Government and its plans;

* 5.10 pm - 5.20 pm - Bernard, Peter and Cathrine Dyer talked about the COP conference just starting and the latest climate research; and,

* 5.20 pm - 6:03 pm - Peter, Bernard, Robert Patman and Josie Pagani talked about the death of Henry Kissinger yesterday, the new Government’s plans and Winston Peters accusing journalists with taking bribes from the Public Interest Journalism Fund.

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.

Items mentioned on The Hoon

During the Hoon we discussed various articles on The Kākā and elsewhere including:

Other places I appeared this week

I talked to Kiwibank Chief Economist Jarrod Kerr for When The Facts Change via The Spinoff about the Reserve Bank’s hawkish decision this week and when interest rates might start falling.

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.

Cartoon of the week

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 newly sworn-in Cabinet will today consider how to quickly unwind anti-smoking changes legislated at the end of last year in order to save hundreds of millions of dollars a year in tobacco taxes so it can go ahead with its income tax cuts.

But the cost to the taxpayers and citizens in purely financial terms, let alone the estimated loss of 580,000 Health Adjusted Life Years (HALYs), is set to surpass $10 billion. For every dollar in tax cuts delivered to landlords and salary earners by pushing tobacco taxes back up, Treasury has estimated health and lost productivity costs of up to 20 dollars.

Finance Minister Nicola Willis has also been named as Social Investment Minister, tasked with targeted investments to reduce the long term costs to taxpayers of welfare, health, education and justice costs. The single biggest and fastest piece of social investment she could do in her first day in office would be to not reverse the smokefree laws. Treasury estimated in 2021 that the changes in smoking laws and regulations designed to slash smoking rates would create $5.25 billion in health savings over time and $5.88 billion in extra income from productivity benefits. Reversing those changes would reimpose those costs.

Paying subscribers can see and hear more detail and analysis in the podcast above and below the paywall threshold here. They are welcome to ask me to open this one up, given it fits the public interest journalism mission of the Kaka, which paying subscribers fund. I’ll open it up once we get over 50 likes.

First, do no harm

The Smokefree Environments and Regulated Products (Smoked Tobacco) Amendment Act 2022 was passed at the end of last year as a world-leading set of interventions to achieve a target set by the-then National-led Government of being smoke free by 2025. More than a third of young Māori women still smoke and the shift to banning sales for those born in 2009, slashing the number of sales outlets and cutting nicotine levels was forecast to dramatically reduce smoking rates. The details of the changes are detailed by the Ministry of Health here

Treasury estimated in its Regulatory Impact Assessment (RIA) to then-Health Minister Ayesha Verrall that the proposed changes would:

* save 580,000 Health Adjusted Life Years (HALYs) using a 3% discount rate and 2.21 million years when not using a discount rate;

* Cut public health costs by $5.25 billion when using a 3% discount rate and $15.5 billion without a discount rate; and,

* Add $5.88 billion in productivity benefits from 25-65 year olds over time using a 3% discount rate and $16.2 billion without a discount rate.

“While not all impacts can be costed at this time, those that can suggest that the costs will be significantly outweighed by the benefits. The resultant savings in health spending and income gain from increased productivity are estimated to far outstrip the reduced revenue from excise tax.” Treasury in July 2021 RIA

‘An unconscionable blow to the health and wellbeing of all NZers’

National Māori Public Health Organisation, Hāpai Te Hauora, yesterday called on the new Government not to go ahead with the reversal of the changes, saying the reversal was “an unconscionable blow to the health and wellbeing of all New Zealanders.”

“Our communities have spoken out unequivocally against the control that tobacco companies have over their wellbeing and the future of their whānau. This action disregards these community voices in order to raise revenue to pay for tax cuts for Aotearoa’s most wealthy. Rescinding denicotinisation requirements in tobacco and reducing the constraints on retail outlets, seemingly favour economic interests over the lives of whānau. The juxtaposition of these two points underscores a tension within the coalition's priorities, one ostensibly driven by community well-being and the other, regrettably, prioritising industry interests over public health.” Hāpai Te Hauora statement

Quote of the day

Winston wants less te reo on TVNZ, RNZ & says journos took bribes

Asked how quickly he expected government departments or agencies to remove Te Reo, he replied: "Well we will see the speed in which TVNZ and RNZ, which are taxpayer-owned, understand this new message."  

When it was put to Peters that they are independent, Peters said he had "never seen evidence" of that over the past three years.  

He also incorrectly claimed the Government had bribed the media through the Public Interest Journalism Fund.  

"You cannot defend $55 million of bribery. You cannot defend $55 million of bribery. Get it very clear," said Peters.  Via Newshub

If I accused the Right Honorable Winston Peters of taking bribes he would sue me. He seems more relaxed about accusations going the other way.

Chart of the day

What an ‘explosion’ of public sector spending actually looks like

Video of the day

Essential analysis and messages from Dr James Hansen

Cartoon of the day

The croc is on the loose now

Nature pic of the day

A happy time of the year

Ka kite and

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: COP28 kicks off on November 30 and up for negotiation are issues like the role of fossil fuels in the energy transition, contributions to climate financing and the role of people and nature in achieving the Paris Agreement targets.

So, what signs of progress should we be watching out for at this year’s conference?

* China and US agree to triple global growth in renewables in order to hasten the energy transition. But growing renewables and transitioning away from fossil fuels are not the same thing and attempts to characterise them as such are misleading.

* Overshooting 1.5 and 2˚C in warming is part of the plan and has been for years, so why panic now? You can see the plan for yourself in this great application of the IPCC’s scenarios at World in Data.

* Climate financing is key to the success of COP28, but it is paralysed by poor economic modelling of climate impacts.

* Coverage of Oxfam’s annual climate inequality report highlights how inequality has become a structural impediment to climate action.

As the countdown to COP28 begins, we thought it was a good moment to preview the goals of the conference and consider how to understand progress toward them.

This is Cathrine Dyer’s weekly wrap of climate news. It is available for all paying and non-paying subscribers as part of The Kākā’s public interest journalism mandate on housing, climate and poverty in Aotearoa. Become a full subscriber to support this week and be able to comment and get access to subscriber-only content and events. The podcast above includes a chat between Bernard Hickey and Cathrine Dyer about this weekly news wrap on climate issues.

The four main goals for COP28, as set out by COP President Sultan Ahmed Jaber are:

* to fast track the transition away from fossil fuels;

* to transform climate finance;

* to focus on the role of people and nature; and,

* to ensure inclusivity for all participants.

I’ve come up with four signs for assessing how serious the COP 28 negotiators are about addressing the first three of those conference goals and put one big issue on watch.

Will the transition away from fossil fuels be fast enough?

Fast tracking the transition away from fossil fuels is the first of four conference themes at COP28.

The recent agreement between China and US was seen as key to this goal, but if you read the small print, you will have seen that neither party has actually agreed to phase out fossil fuels by a single iota. They have agreed to work on tripling global renewable energy capacity by 2030, which is good. However, it is misleading to characterise growth in renewables as a transition.

They may just be additions to global energy throughput, which needs to grow every year to support economic growth. Not one fossil fuel producing country has committed to reducing its fossil fuel production, according to the Production Gap report. While that remains the case, the predicted timing for a peak in global fossil fuel demand could be put at risk by oversupply and elongate the planet-heating post-peak tail. In truth, a full transition to renewable energy is a lot harder than it might seem, and probably impossible without demand-side strategies to constrain energy and material throughput. 

A failure to fully address the hurdles to a true energy transition at this conference or any other, is an indication that countries are not yet serious about it. An actual commitment to phase-down fossil fuel production, at least in line with waning demand predictions, would be a positive sign of progress. An announcement that the transition away from fossil fuels is occurring without any agreement in place to reduce fossil fuel production is your first sign that progress is illusory.

You may be wondering why we are still talking about the 1.5˚C target at COP28 when it is likely to be already baked in. What you may not know is that overshooting 1.5˚C (and 2.0˚C as well, for that matter) is part of the grand master plan – it’s one of those plans that is so cunning, you could pin a tail on it and call it a weasel.

The Intergovernmental Panel on Climate Change (IPCC) has created a set of possible future scenarios known as Shared Socioeconomic Pathways (SSPs) that underpin the UN’s climate work. Every one of the SSPs that achieves a global surface temperature below 2˚C by the year 2100 first overshoots the target, then removes emissions from the atmosphere in the back half of the century using carbon dioxide removal technologies (CDRs), also sometimes referred to as negative emissions technologies (NETs). You can very easily see this for yourself by exploring the SSPs using this great application from ‘World in Data’.

The technology being used as a placeholder in the models right now is known as BECCS or Bioenergy with Carbon Capture and Storage. The feasibility of BECCS at scale is highly contested and it would certainly compete with food crops for land. Bioenergy or food doesn’t seem like much of a contest, but if saving the planet requires a little death by starvation and you’re good with that, I will organise the sign-up sheet for volunteers!

Some scientists have pointed to the limitations of CDR technologies in general and have called for the IPCC to have at least one pathway that maps a course in which 2˚C is achievable, without resorting to CDR. This can be done, but only if the model is not constrained by a requirement to consistently achieve year-on-year economic growth in the future.

Degrowth is currently considered to be so politically unpalatable that such a scenario is not even being explored (unlike the BECCS starvation plan). We must instead have faith in the Gods of technology and the infallibility of humankind to do what has so far proved impossible at scale. You might find it odd that so many scientists have been involved in developing a plan with so great a reliance on faith, but they are very much constrained by the politics of the UN, which dictate that we must have economic growth. The solution set is pruned to fit.

To reiterate, the reason we are still talking about the 1.5˚C target is because the plan is to whizz past it, then scramble back to it, by employing speculative emissions removal technologies. This has been the plan for many years, at least since the Paris agreement was signed.

While it’s not exactly a secret, they are just now figuring out a way to tell the world at large that there’s no reason to panic as the targets go whizzing by. The whizzing is part of the plan. But here comes the cunning part. No matter what is agreed at COP28, they will still be able to claim that staying below 2.0˚C and near to 1.5˚C is possible. We’ll just need more removals later on. And when they do make that claim at COP28, you will know that the tail has just been successfully pinned on the weasel again. That is your second sign.

Will there be enough climate finance?

Climate finance is key to the success of COP28, but probably impossible to achieve at the necessary scale as long as climate economics is so very, very broken. The best way to illustrate that brokenness is to go back to those SSPs for another look. Tick the baseline scenarios for SSP1-5. Toggle between two metrics – GDP and temperature. What you will see is that the higher the temperature goes, the more GDP there is.

At a temperature of 5˚C in 2100, global GDP in SSP5 vastly exceeds all other pathways, landing on the surreal figure of 1 quadrillion dollars! This is the burn, baby, burn all the fossil fuels path (we have, thankfully, already bent the curve below this scenario).

Most climate scientists will tell you that a modern industrial society, like the one we have today, is not consistent with 4˚C of warming (just to be clear, they are saying society would collapse before then) but the economic modelling says that the hotter the world gets from burning fossil fuels, the wealthier we will be, at every step on every one of those SSP scenarios. For context, 4˚C is about the amount of warming that it took to shift the world out of the last ice age and into the current more temperate climate in which agriculture and industrial society evolved.

Will the models adjust to make financing transition more viable?

It’s bonkers, of course. There is something very, very wrong with the economic modelling. Most people in the financial and economic worlds that work with these models know that there is something wrong here, but it’s really hard to backtrack, especially since one of the key figures behind the models, William Nordhaus, got a Nobel Prize in economics in 2018, for his contribution to climate modelling. Plus, all of our economic stability testing for climate impacts are based on these dodgy models and we’re not overly keen to acknowledge the cracks in case doing so opens them right up. Bit of a snafu that has morphed into a conundrum, old chap.

As long as the models predict that GDP will get higher, along with the temperature, it’s going to remain very difficult to stir up sufficient climate financing to prevent it or to assist global South countries to adapt to it. The logic, as modelled and presented, very clearly says that we will be better off if we don’t invest a whole lot to mitigate climate change, and there will always be more money in the future for adaptation.

Whatever the announcements at the end of COP28, it won’t be nearly enough, and you can bet your boots that it never will be, at least until they fix the economic modelling, and the true economic consequences of climate change are revealed. That is your third sign that things aren’t going in the right direction, at the right pace.

Will the transition be truly equitable?

Equity and the Sustainable Development Goals (SDGs) are key leverage points for achieving climate targets but are only rhetorically and episodically attended to by leaders. Not a single one of the 2030 SDG goals is on track.

Oxfam released their annual Climate Inequality report this week, highlighting that the richest 1% emit as much carbon pollution as two-thirds of humanity. As highlighted in this excellent Guardian piece, inequality has become a structural impediment to climate action.

Most policy efforts to address climate change within countries, attempt to make it more acceptable by spreading the costs across the total population. This approach is inequitable for the poorest, who have contributed least to the problem. As the costs grow, the likelihood that populations will continue to accept inequitable policy treatment, without protest, declines. At the same time, the rich have more power and capacity to resist having the true costs of their lifestyle choices imposed on them. This contributes to growing within-country inequality.

The idea that equity is optional still permeates the atmosphere at UN COP gatherings. But you should understand these two things. 1) Sustainability is not just a nice to have. If something is unsustainable, it must end. Even if it’s your life – if it can’t be sustained, it is over. 2) If you leave a single person or group without a sustainable livelihood, they will actively undermine everybody else’s. Nobody is going to volunteer to go away and quietly die so that the rich can keep their baubles. Because there are actual biophysical limits to growth, the rich will need to attend to the needs of the poor if there is to be any chance of avoiding a catastrophic outcome.

Failure to make a serious plan to address the SDG gap at this COP is a clear signal that the rich are reinforcing their claims on ecological space, at the expense of the rest. That is the fourth sign.

We discussed Article 6 in last week’s column. The final rulebook for Article 6.4 has been published in draft form with the goal of having countries sign off on it at the conference. The attempt to bring nature-based solutions into the global carbon trading market is another issue to watch.

Historically, the advent of markets has tended to result in land-grabs and the exclusion and/or exploitation of local and indigenous communities, even when the rules forbid it. As we noted last week, this process has already kicked off in anticipation of the market opening.

At the moment, carbon trading under Article 6.4 will require sellers to direct 5% of the proceeds to the UN authority responsible for governing the market. This does not seem sufficient to run a bureaucracy and safeguard the rights of all people subject to the market forces that will be unleashed by article 6.4, particularly given the weak enforcement power of UN agencies. Many global NGOs have plans to participate in the market, so opposition may be muted. This looks to be a ‘done deal’ and so I’m giving it observation status.

There are many futures that are still possible to contemplate for the planet, but a lot of them are truly horrible and the best ones remain unpalatable for the powerful.

UN Climate COPs are increasingly farcical, but somehow I would still rather have the possibilities they offer than the alternative, which is an absence of possibility. There are good people, doing excellent work on the edges and that is meaningful, if not sufficient. That’s undoubtedly the most any of us can hope to achieve as individuals. I hope they hang in there until the social tipping point clears a path for transformational change!

In other climate news this week

A new report from WSP and the Helen Clark Foundation emphasises that for adaptation efforts to be credible and durable, they must be built on meaningful community engagement. Their recommendations to government include honouring the spirit of partnership in Te Tiriti and adopting innovative approaches to participation and deliberative democracy.

November 17 was the first time that global surface temperatures exceeded +2˚C above the pre-industrial average according to the European Commission’s Copernicus Climate Change Service. It will likely prove to be transitory, rather than the sustained breach required to surpass Paris Agreement targets, but it is a very discomforting way station on the track and is being visited well ahead of schedule.

REDD-Monitor is reporting on an agreement by the World Bank to investigate accusations of evictions, killings and human rights abuses by its REGROW project, which aims to almost double the size of the Ruaha National Park in Tanzania. Anuradha Mittal, Executive Director of the Oakland Institute told The Guardian that,

“The REGROW project is not about protecting wildlife or conservation, instead the bank is financing an oppressive and violent economic growth model based on boosting tourism revenues.”

The establishment and expansion of conservation parks and protected areas is a contested project in which authorities make determinations about who or what activities are to be allowed within park boundaries, often without consulting the people whose lives and livelihoods are located there. A crucial question that is rarely considered is what nature is really being protected from and whether the objective is best achieved by a ‘nature without people’ or a ‘nature without markets’ model.

And lastly, this story on Australia’s ABC News is eye-opening. Global mining giant Glencore plans to remove carbon dioxide emissions from one of its coal-burning power stations, liquefy them, then inject them into an aquifer in Queensland that is connected to the Great Artesian Basin. They claim it will have no effect on the groundwater that supplies 180,000 households, as well as agricultural interests in the region. Not all experts agree, according to the ABC report,

“Hydrogeologist Ned Hamer said once the corrosive fluid was injected it would quickly cause a 10,000-fold increase in groundwater acidity, which would dissolve the aquifer rock and result in the mobilisation of heavy metals towards other existing water users.

"Those metals include arsenic and lead and other heavy metals that make the water unsuitable for any use, particularly those uses that are occurring at the moment, such as for livestock," he said.”

This has put agriculturalists and environmentalists on the same side, at least for a while, in opposing the plan.

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TL;DR: The five 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:

* National Leader Christopher Luxon announced last night he had agreed policies and ministerial roles with ACT Leader David Seymour and NZ First Leader Winston Peters yesterday, with final signoffs from party boards expected last night, before a signing and the release of policy details this morning, and the naming of a ministerial lineup this afternoon;

* Westpac last night cut its two-year fixed mortgage rate by 10 basis points to 6.99%, passing on some of a 50 basis point slump in wholesale rates in the last month and responding to growing pressure from those pointing to rising bank profit margins; See Wednesday’s email and chart below;

* MBIE said it had stopped considering a damning experts report on energy poverty because of the change of Government; See Tuesday’s email;

* Talks to form a Government dragged into a sixth week with no immediate end in sight, thanks to NZ First’s opposition to a foreign buyers’ tax and ACT’s drive, supported by NZ First, for a referendum on the Treaty of Waitangi; and, See Monday’s email

* Global temperatures rose 2.07 degrees above Pre-Industrial levels on November 17, the first day the planet has been that hot for at least 25,000 years. See chart below.

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 just-announced announcement there would be announcements today of the new coalition Government’s policies and ministry.

* 5.10 pm - 5.20 pm - Bernard, Peter and Cathrine Dyer talked about the upcoming COP conference and the latest climate records

* 5.20 pm - 5.58 pm - Peter, Bernard, Robert Patman and Josie Pagani talked about the new Government’s tasks, the (only-just-started) ceasefire in Gaza and the rise of Trumpy populist leaders in Argentina and the Netherlands.

* 5.58 - 6 pm - Bernard and Peter talked briefly about OpenAI and Peter found a skateboarding dog.

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.

Charts of the week

Bank profit margins are rising

Temperatures rose 2 degrees over pre-industrial levels last Friday

Other places I appeared this week

I talked to Rewiring Aotearoa CEO Mike Casey for When The Facts Change via The Spinoff about how to electrify Aotearoa properly.

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.

Cartoon of the week

Ka kite

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