The Kākā by Bernard Hickey

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:

* Vacuums formed in Government where there would usually be decisions by ministers and the Cabinet about ongoing issues. Public servants are now having to second-guess what they think potential ministers might want, going from their manifestos; Friday’s Chorus

* A record-high net 44,730 New Zealand citizens left the country permanently in the year to the end of September, Stats NZ reported this week. They were more than replaced by an also-record-high net 163,570 non-citizens arriving permamently, but mostly on temporary work visas; Thursday’s Chorus

* Auckland Council agreed to push for the new (unformed) National-led Government to legislate congestion charging on Auckland’s motorways from 2026 to replace the fuel tax National has promised to remove; Wednesday’s Chorus

* Restlessness about the lack of a new Government grew this week as PM-elect Christopher Luxon was forced to miss APEC, while delays to decisions about transport and infrastructure are increasingly frustrating for businesses, councils and other decision-makers; and, Tuesday’s Chorus;

* Labour quietly changed the rules for welfare and tax debt owed by beneficiaries to make forgiveness and interest-free loans easier in July, but National may not keep the changes. The changes reinforce the need for this $3.5 billion of debt to be wiped, given over 70% of beneficiary households with children owe an average of over $4,000 each to MSD, IRD and the courts, while also suffering housing, energy and food poverty. Monday’s Chorus.

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

In this week’s podcast above of the weekly ‘Hoon’ webinar for paying subscribers at 5pm on Friday night (changing to 5pm Thursday night from November 23):

* 5.00 pm - 5.10 pm - Bernard Hickey and Peter Bale opened the show with a discussion about The Hoon’s shift to Thursday at 5pm from November 23 (next week) and the lack of a new Government.

* 5.10 pm - 5.20 pm - Bernard, Peter and Cathrine Dyer talked about Pacific countries’ calls on the yet-to-be-sworn-in National-led Government not to restart oil and gas exploration, the Parliamentary Commissioner for the Environment’s report from NIWA on the  2,240 million tonnes of organic carbon stored in marine sediments within New Zealand’s Economic Exclusion Zone (EEZ), and the restart of climate talks between China and the United States.

* 5.20 pm - 5.58 pm - Peter, Bernard, Robert Patman and Josie Pagani talked about the Pacific Islands Forum, the idea of a Schengen-style common trading and employment zone for the Pacific with Australia and New Zealand, the Israel-Hamas war and the meeting of Presidents Xi Jinping and Joe Biden just before the APEC leaders’ meeting in San Francisco this week.

* 5.58 - 6 pm - Bernard and Peter talk painfully about the return of David Cameron to British politics as an unelected Foreign Secretary for an unelected PM (see more on that in Pic of the day 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.

Chart of the week

Our churn and burn economy

Other places I appeared this week

I talked to Kiwibank CEO Steve Jurkovich for When The Facts Change via The Spinoff about the outlook for the housing market, Kiwibank and the prospects for Debt to Income multiple controls.

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.

Pic of the week

David Cameron returns, to keep Guardian cartoonist Steve Bell busy

Cartoon of the week

‘Move along now, nothing to see here…’

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

TL;DR: An unholy scramble for control of African forests is emerging in the run-up to COP28, where final negotiations on international offsets (Article 6 of the Paris Agreement) will take place. The cost of New Zealand’s emissions gap may depend on the availability of cheap offsets from emerging markets. (See more detail below)

Elsewhere in climate news this week:

* The road to climate hell will be travelled in electric vehicles according to a report out this week that shows global progress toward 2030 targets across a range of sectoral indicators are all off-track with one exception — the sale of EVs in the passenger vehicle market; and,

* On a brighter note, an editorial in journal AGU Advance suggests that a social tipping point toward climate action could be achieved a lot sooner if the decreasing costs of climate action and the increasing costs of climate damages were properly accounted for.

An ugly rush to buy carbon credits for African forests

A scramble for control of African forests has emerged in the run-up to COP28, where final negotiations on Article 6 of the Paris Agreement, governing the use of international transfers of mitigation outcomes (ITMOs), are to take place. The rush to capture and control carbon credits by managing tens of millions of acres of forests across Africa is being led by a prominent Dubai Sheik (and member of the Dubai royal family) and his company Blue Carbon, set-up just a year ago.

The rush to control African forests is driven by estimates that  global carbon credit trade, currently worth $2bn a year, could grow as high as $1tn over the next 15 years, as a result of Article 6.

African nations have been keen to see benefits from carbon credits since the rulebook for Article 6 was approved at COP26. The African Carbon Markets Initiative (ACMI) was launched at the following COP27 with the aim of producing 300 million carbon credits annually by 2030, and where Kenyan president William Ruto described carbon credits as his country’s “next significant export”. The biggest challenge for Africa is overcoming concerns about verification and validation of carbon credits. This is where third party management of the process comes in.

Can we trust these credits?

Blue Carbon has so far signed MOUs (Memorandums of Understanding) with governments in Liberia, Tanzania, Zambia, Zimbabwe and Kenya. The Zimbabwe deal alone covers almost a fifth of the country’s landmass and is worth US$1.5 billion in funding for forest protection and rehabilitation. Liberians are protesting the deal struck with their government, citing a lack of free and informed prior consent by local communities whose land rights could be breached in a deal violating multiple laws, according to environmental groups.

Carbon credit negotiations are also suspected to be behind recent evictions of indigenous communities in Kenya. The Kenyan government claims it is evicting illegal settlers and logging camps, while local communities are forced into lengthy and costly international court proceedings to defend their land rights – and this is before the market has even opened. There is a significant history of land grabbing and verification issues surrounding forest projects under the UN REDD+ framework (Reducing Emissions from Deforestation and forest Degradation, and other activities including conservation of forest carbon stocks, sustainable forestry management and enhancement of forest carbon stocks).

REDD-Monitor tracks some of these issues here. Article 6 allows offsets from a range of Nature-based Solutions (NbS), including REDD+ projects, marking their first entry into global compliance markets. Blue Carbon plans to sell credits to governments to help them meet their Paris Agreement targets, although it is unclear how the company will qualify under the regime given their complete lack of forestry management experience.

Even the UN’s use of these credits is under scrutiny

This paves the way for some high stakes negotiations in Dubai, where Blue Carbon is hoping to influence proceedings, according to REDD-Monitor. If you are feeling confident about the UN’s ability to monitor and regulate carbon markets, you should listen to this Planet: Critical podcast episode in which Rachel Donald interviews journalist Jacob Goldberg about the year he spent investigating the UN’s claim to be a ‘climate neutral’ organisation.

The legitimacy and availability of tradeable mitigation outcomes is a matter of concern for Aotearoa New Zealand, given the country intends to meet a sizeable chunk of its 2030 targets through international purchases. The gap between planned emissions reductions and the country’s NDC  has been variously estimated at anything from $3.3 to $30bn and has been growing of late. 

How much New Zealand ends up paying depends on the cost per unit, according to several scenarios explored by Treasury, and reported by Dan Brunskill at Interest.co.nz, back in April this year:

“The International Energy Association (IEA) has estimated a carbon price for emerging economies at about $41 per tonne, which would mean a cost to NZ of between $3.3 billion and $4.2 billion. On the other end of the sale, the IEA also estimated a price of $227 per tonne for advanced economies in a scenario of “advanced global climate action”. 

This would translate into a cost of between $18.3 billion and $23.7 billion.” 

The only thing on track is sales of electric cars

That said, even in established markets, carbon credits are going cheap right now according to The State of Climate Action 2023 which suggests that a x10 price acceleration is required.

That report, released this week, looked at progress toward 2030 targets by global sector and found all but one indicator was off-track. The single on-track indicator measured the proportion of EVs sold in passenger car markets.

We’re not the only ones falling behind

Claims that reneging on its 2030 NDC targets would make New Zealand a pariah may be overstated as well. It turns out that a slew of other countries are falling behind. According to Climate Action Tracker and recent announcements the US, EU, UK, Australia and Canada are all tracking behind their 2030 NDC pledges. China is one of the few large countries that is on-track to meet its 2030 targets with their emissions looking to head into structural decline as early as next year according to the Helsinki-based Centre for Research on Energy and Clean Air (CREA).

Briefly, in other climate news this week

Close to a tipping point? - In an editorial for the journal AGU Advances, David Schimel and Charles Miller argue that “realizing that wealth at risk may exceed the cost of mitigation could drive a tipping point in human behavior”. They point to the declining costs of green energy against the increasing cost estimates for climate impacts to suggest that the cost assumptions behind current climate policy urgently need to be updated.

Carbon stores on our sea floors - A new report from NIWA, commissioned by the Parliamentary Commissioner for the Environment, found high levels of organic carbon stored in marine sediment in New Zealand waters – as much as 1% of the global total. These stocks play a vital role in regulating climate change by storing carbon for thousands to millions of years but are at risk of being released by human activities such as bottom trawling, seabed mining, dredging and anchoring.  

We ain’t seen nuthin’ yet - If you think 3˚C is not too scary of a global temperature increase, Andrew Dessler at The Climate Brink would like you to know that “3°C is 60% of the temperature change that transitioned us from an ice age into an interglacial. 3°C will literally reformat the surface of the Earth.” He has some scary plots to prove it here.

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:

* A new official report quietly buried by the Labour Government in its final months in power identifies over 300,000 people are now living in housing and energy poverty so severe that they are unable to afford the power needed to stay warm in winter, have warm showers or cook their own food; Friday’s email

* European Union scientists estimated that 2023 was on track to be the hottest in 125,000 years, with October a full 0.4 degrees celcius warmer than the previous record; Thursday’s email

* PM Chris Hipkins was voted back in as Labour leader by his caucus after he told them he wanted a ‘clean slate’ on the issue of a wealth tax for the party to take into the next election. But can Hipkins, who ruled out a wealth tax “under a Government that I lead” credibly argue to an electorate, let alone his own caucus, that he is committed to such a tax? Wednesday’s email

* Tech entrepreneur Derek Handley launched a new first home buyers’ index showing they would need a $1 million deposit within 20 years if the last 20 years of increases house price, wage inflation and term deposit interest rates continued on at similar rates. He was launching a non-bank to help first home buyers save faster and get on the ladder faster by putting money into riskier deposits and assets returning more, and taking on fellow equity investors as a type of new ‘Bank of Mum and Dad’; and, Tuesday’s email

* Councillors and mayors in our two fastest growing cities pulled the plug on a National-ACT plan to build ‘out’ rather than ‘up’ by rejecting plans for more sprawling ‘greenfields’ developments, but they have also dialled back on up-zoning needed to add enough ‘brownfields’ homes for an extra 110,000 people per year. Monday’s email.

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

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

* 5.00 pm - 5.10 pm - Bernard Hickey and Peter Bale opened the show with a discussion about the targeting of journalists in Gaza.

* 5.10 pm - 5.20 pm - Bernard, Peter and Cathrine Dyer talked about Fonterra’s announcement of a scope 3 emissions reduction target of 30% and a UN Environment Programme report estimating Governments would produce more than double the emissions required to keep global warming below 1.5 degrees Celsius.

* 5.20 pm - 5.45 pm - Peter, Bernard Robert Patman talked about the Israel-Hamas war and the Pacific Islands Forum.

* 5.45 - 6 pm - Bernard and Dr Sea Rotmann talked about the Energy Hardship Experts Panel report released this week.

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.

Chart of the week

Other places I appeared this week

I talked to Derek Handley for When The Facts Change via The Spinoff about his non-bank for first home buyers called Aera.

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

Not for long

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

This is a free preview of a paid episode. To hear more, visit thekaka.substack.com

TL;DR: Opponents of wealth taxes and housing and energy market reforms often complain those reform…

TL;DR: With two months still to go, European Union scientists declared overnight that 2023 is on track to be the hottest in 125,000 years, with October a full 0.4 degrees celcius warmer than the previous record.

That’s the equivalent of someone breaking Usain Bolt’s record for the 100 metres of 9.58 seconds by half a second. The warming of oceans is also making it one of the wettest on record for rainfall on land, including the wettest ever for Auckland by a large margin, as these charts show.

So why isn’t this front page news or leading the 6pm bulletins?

Here’s the details for any news editors reading this, via Reuters

Paying subscribers can see more detail below the paywall fold and hear more of my analysis in the podcast above. I’ve included more above the fold today because it’s of public interest and this fits with the public journalism ethos backed by subscribers, who I thank in advance.

Links to news, views, papers, reports, data et al elsewhere

Top scoops & deep dives in Aotearoa’s political economy & globally

The ‘policy bonfire’, a jeopardised climate target, and the mathematical change that fixed it The Press Charlie Mitchell

Housing, transport, education, infrastructure & population

NZ Post buying major parcel competitor - A bookshop manager has already complained to the Commerce Commission that NZ Post buying PBT Couriers would damage the quality of the courier network Newsroom Andrew Bevin

Climate, water, energy & environment

How shipping more US natural gas to Europe helped fuel CO2 pollution Reuters

2023 set to be hottest year on record, EU scientists say Reuters

How are people supposed to rebuild Paradise, California, when nobody can afford home insurance? AP News Janie Har

Poverty, inequality, health, wealth, income, education, crime & justice

Blind, solo mum desperate for Pharmac to fund life-changing medicine so she can see her kids Newshub Patrick Gower and Amanda Gillies

Children driven to school breathe in health-hurting pollutants, research finds Stuff Olivia Wannan

Geopolitics

Thousands of civilians flee north Gaza as Israeli troops and Hamas fighters battle Reuters

Economy, business & markets globally and locally

China authorities ask Ping An to take controlling stake in Country Garden, sources say Reuters

Wall St edges higher as investors digest central bank comments Reuters

Coming up

Half a billion on a hall and a courtyard - Wellington City councillors are considering spending another $240 million on repairs to Te Ngākau Civic Square, just two weeks after committing $330m to fix the Town Hall, which is also part of the square. They’ll debate that later today at a Long Term Planning meeting. The Spinoff Joel MacManus

Charts of the day

No wonder the most-sold vehicle in the United States is the F150

And that minutes/gallon measure ignores efficiency gains

Map/Chart combo of the day

Warmer oceans mean more moisture in the atmosphere

Here’s NIWA Meteorologist Ben Noll with detail on the map above and the chart below:

You have probably heard about October 2023 being the warmest October on record by a wide margin, but what about atmospheric moisture?

A warmer world is a moister world and that's evidenced by a weather variable called "total column water" or "precipitable water", the total moisture amount in a column of air, from the ground all the way up to the top of the atmosphere.

In October 2023, total column water was above normal across 67% of the planet, shaded blue on this map. Higher atmospheric moisture content loads the dice toward extreme rainfall events Ben Noll via X

Off the charts

Cartoon 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:

* The Electoral Commission declared the final election results after counting special votes, including National (48) losing two election-night electorate seats to Labour (34), Te Pāti Māori (6) winning two more electorate seats from Labour (6), the Greens winning one more list seat (15), and ACT (11) and NZ First (8) unchanged;

* the final results mean National-ACT on 59 (soon to be 60 after National wins Port Waikato) won’t have the required 62 seats needed to have a majority in the 123 seat Parliament, so will need the support of NZ First leader Winston Peters, as have four coalition Governments over the last 26 years;

* US long-term interest rates fell sharply in the last 48 hours after the US Federal Reserve appeared to indicate it could stop hiking interest rates, which will take some pressure off mortgage rates here;

* The Reserve Bank warned in its Financial Stability Report of more financial stress among younger borrowers who took out big mortgages from 2020 to 2022, but said bad debts and forced sales remain very low, reinforcing that the most stress for households is among Aotearoa’s hundreds of thousands of mostly young poor renters, who are the most stressed in the world (Thurday’s Chorus); and,

* National appears set to push councils to move their water assets off their balance sheets in a very similar way to Labour’s Three Waters plan, just without the co-governance and as much compulsion, but still with the flawed idea that somehow off-balance-sheet borrowing is actually better for taxpayers and ratepayers in the long run than facing up to the fact that higher taxes, charges and public debt are needed to fund fast population growth (Wednesday’s Chorus).

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

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

* 5.00 pm - 5.10 pm - Bernard Hickey and Peter Bale opened the show with a discussion about the election result and why might happen next with interest rates and house prices.

* 5.10 pm - 5.20 pm - Bernard, Peter and Cathrine Dyer talked about a new paper from James Hansen warning that warming could exceed 1.5 C by the end of the 2020s and 2 C by 2050, and Treasury’s advice that emissions credits needed to bought overseas to achieve our Paris targets could cost up to $26 billion, but are not included as a liability in the Crown accounts. Wednesday’s Chorus.

* 5.20 pm - 6 pm - Josie Pagani and Robert Patman talked about the Israel-Hamas war and the election results.

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.

Chart of the week

Not what we need when our population grew by 110,000 last year

Other places I appeared this week

I interviewed former Z Energy CEO Mike Bennetts for When The Facts Change via The Spinoff about his new book on leadership.

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.

Cartoons of the week

Kings and Queens

The MMP Frankenstein

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

TL;DR: Our poorest young renters remain the most stressed in the world, despite high-profile reports that young home owners face rising mortgage stress. Defaults and forced sales are near record lows and overall mortgage stress is still well below levels from 2008.

Here’s the rest of my 6 things at 6 am with more analysis and detail in my Dawn Chorus podcast above with the best background native bird noises;

* The Reserve Bank warned in its Financial Stability Report yesterday of more financial stress among younger borrowers who took out big mortgages from 2020 to 2022, but says bad debts and forced sales remain very low, reinforcing that the most stress for households is among Aotearoa’s hundreds of thousands of mostly young poor renters, who are the most stressed in the world;

* Employment fell and unemployment jumped more than expected in the September quarter to 3.9% from 3.6% in the June quarter, Stats NZ reported yesterday, raising a few hopes the Reserve Bank may be able to avoid another rate hike in late February;

* Child poverty reduction advocates are frustrated there is currently no official measure for child homicides, The Post-$$$’s Tom Hunt reports this morning, after an internal document was leaked from Oranga Tamariki and published in Stuff Jehan Casinader on Tuesday showing there had been 57 child murders since its creation in 2017;

* An independent Commissioner has rejected plans to turn lifestyle blocks at Ohoka north of Christchurch into an 850-section housing development, saying it did not want to “change the character of the small rural village,” the Press-$$$ reports this morning;

* The Hastings District Council has been warned in an official report that an extreme risk of blowouts in land buyout costs beyond the current $185 million from Cyclone Gabrielle, Marty Sharpe reports in Stuff this morning; and,

* More controversy is looming over the Foreshore and Seabed Act with Audrey Young reporting for the NZ Herald last night that Government-in-waiting has been called on to amend the law following a landmark ruling in the Court of Appeal, which is expected to lower the test for iwi to be awarded customary title in coastal areas.

Paying subscribers can see more detail below the paywall fold and hear more of my analysis in the podcast above.

Chart of the day

Finally, some big projects with lower costs

Cartoon of the day

The revelations from the UK’s covid inquiry are something else

Dumb joke of the day

Ka kite ano

Bernard

PS: I’m trying to keep these shorter to get them out earlier.

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 key news in Aotearoa’s political economy today includes:

* National appears set to push councils to move their water assets off their balance sheets in a very similar way to Labour’s Three Waters plan, just without the co-governance and as much compulsion, but still with the flawed idea that somehow off-balance-sheet borrowing is actually better for taxpayers and ratepayers in the long run than facing up to the fact that higher taxes, charges and public debt are needed to fund fast population growth;

* Failed online supermarket operator Supie has named Fonterra, Tatua, SC Johnson and Mars as suppliers who refused to use the wholesale supermarkets regime designed to allow competitors access at the same reasonable prices as the duopoly of Woolworths and Foodstuffs, proving yet again that finger-wagging at monopoly power is pointless, and shows the last three years of prevaricating over structural separation or a forced partial sale was wasted;

* Officials warned the Labour Government in September that Aotearoa is set to miss its Paris target commitments by 114 megatonnes of emissions by 2030, which would have to be met by buying international emissions credits at a cost of up to $26 billion, yet none of this is included in Treasury’s contingent liabilities in the Budget;

* Business confidence about the wider economy exploded back to 2017 levels after National won the election on October 14, although businesses’ confidence about their own activity improved too, just not by as much, which shows again how dependent on who’s in power the wider measure is, while the own-activity measure is more closely aligned with GDP growth;

* Building approval numbers show there were 17,079 homes consented in the year to June 30 this year, while over the same period Stats NZ estimates Auckland’s population rose by 48,000, which means Auckland’s housing shortage clearly got worse, given many of those consents are replacing homes that were bowled; and,

* The number of patients waiting to see a specialist longer than they should rose 46% in the last year to 51,274, Te Whatu Ora data shows, indicating severe stress is growing in a hospital system labouring under a sinking lid vs population growth and health cost inflation for three decades, as is necessary to keep core Government taxation under 30% of GDP.

Paying subscribers can see more detail below the paywall fold and hear more of my analysis in the podcast above.

‘I don’t care, just get the pipes off their balance sheets’

National and ACT campaigned before last month’s election to repeal Labour’s Three Waters legislation, but likely Infrastructure Minister Chris Bishop is now shaping up to keep much of the financial architecture underpinning Labour’s reforms.

That is leading National and voters down the same politically complicated and misguided route as Labour — towards higher public charges and higher debt that is actually taxpayer debt, even if ministers, mayors, councillors, ratepayers and voters pretend otherwise. And it’s all because we believe we can have clean water, high population growth, low taxes and low debt. All at once. Keep reading to find out what I think that’s impossible, but first the news.

Bishop told Newsroom’s Jonathan Milne in an article published yesterday he also wanted councils who couldn’t afford infrastructure to shift them off their balance sheets into new vehicles that are able to borrow.

He draws a contrast with the example of Wellington Water, where six councils have set up a regional organisation but retained ownership of the assets, debts and revenues.

"I don’t care what it is called but I want the assets off the councils and into a new organisation, with the quality and price regulation in our model," Bishop tells Newsroom.

"Wellington Water exists now and they pretend it’s a council-controlled organisation, but Hutt Council owns its pipes, Upper Hutt owns its pipes, etc." 

Allowing new council controlled organisations to borrow on their own behalf doesn’t necessarily mean that National just sticks with the three Three Waters organisations set up under the existing legislation. Jonathan writes National is looking at three options to replace Three Waters.

National has allowed itself more than just the 100 days to draft replacement legislation, by challenging councils to deliver a plan for how they will transition their water services to a new model that meets water quality and infrastructure investment rules, while being financially sustainable in the long-term.

There are three that broadly fit within the policy principles upon which National campaigned:

* a framework designed by economic consultants Castalia on behalf of Communities 4 Local Democracy;

* a finessed version developed by Malcolm Alexander and a technical working group commissioned by the Taxpayers' Union; and,

* a regional model championed by five Hawkes Bay councils.

All three return the decision on the new structure to local authorities; all three propose a degree of regional collaboration to best-use local expertise and achieve economies of scale; and all three contemplate placing assets in the ownership of council-controlled organisations.

So why take the assets off council (and Crown) balance sheets?

This begs the question of why take the assets off balance sheets, but leave them in council ownership, given the biggest credit ratings agency, Standard and Poor’s, sees these separate bodies as pseudo council assets anyway, and then consolidate the degt and assets into credit ratings. Standard & Poor’s only keeps them separate when the ownership is completely separate from councils.

Jonathan writes that councils could achieve what they want by going with another ratings agency, Fitch, because S&P is suggesting National’s approach of separation of assets without giving up council ownership would be pointless from a ratings point of view.

There's an argument that councils could loosen the borrow constraints simply to switching to another agency like Fitch, which does not necessarily consolidate all subsidiary debt up to the council that owns the crown-controlled organisations.

Fitch declines to comment for this article, while New Zealand is between governments, but S&P Global Ratings analyst Martin Foo is willing to discuss the different meanings and impacts of balance sheet separation.

He says part of the confusion is that the 'balance sheet separation' and 'financial separation' mean different things to different stakeholders.

"The former Labour government wanted its proposed water services entities to be sufficiently independent from their council owners that they could borrow heavily, in their own names, without impinging on council credit quality," he explains.

"Accountants may have their own definition of balance sheet separation. But from a credit rating perspective, our measurement of a council’s 'tax-supported debt' will include the debts of any related entities (including council-controlled organisations) where we see a very high likelihood that the council will provide support in case of need."

In other words, if they get in trouble, creditors expect the council will bail them out; water services are too big to be allowed to fail. As examples, S&P already consolidates council-owned holding companies like Christchurch City Holdings and WRC Holdings, and wholly-owned council-controlled organisations like New Plymouth Airport and Auckland's Watercare, in the financial metrics of their parent councils.

"Even in cases where we don’t consolidate related entities, we may still treat such entities as contingent liabilities of councils. And, if such contingent liabilities become large enough or their risk of materialisation becomes great enough, we may reflect this through a negative qualitative adjustment to our credit assessment."

So what’s the point? Really.

S&P’s Foo is quoted in a way that suggests the National approach may be pointless anyway (bolding mine):

On his initial reading of alternative proposals from Communities 4 Local Democracy and the Taxpayers’ Union, Foo says S&P might view a proposed water council-controlled organisation (whether owned by one or more councils) where there is a high degree of political control or ownership, alongside a high level of indebtedness, as weighing on the credit quality of its parent council or councils.

So structurally separating the organisation from the council doesn't give either a get-out-of-jail-free card; each may still be constrained by the other's borrowing. That's why, for instance, Watercare is warning that Auckland's water charges may have to double – because the parent council is so indebted that Watercare can't borrow to upgrade assets like the aged sewers that have collapsed in Freemans Bay and Parnell.

On the flipside, Foo says, even if a water organisation could theoretically be established in a way that restricts control, ownership, or financial support from parent councils, it’s unlikely to be able to borrow as cheaply as councils, and nor would it have access to borrowing from the Local Government Funding Agency. That's because the agency, by design, can lend only to local councils or to council organisations that are "explicitly backstopped" by local councils, in the form of a guarantee or uncalled capital.

"Together, these points highlight a fundamental tension at the heart of the reforms," Foo says. "An entity is unlikely to borrow on terms as competitive as the government (central or local) can, unless, well, it’s part of the government – or at least backstopped by the government. It is difficult to disentangle ownership of water-related assets from ownership of water-related debts."

The crux of the problem

So we’re right back where we started. Policitians and voters want to have their cake and eat it. They want low taxes, low debt and low-to-no water charges, but they want the water assets that give them clean water and allow more houses. They want to retain control, but not have to pay to build or maintain the assets. That’s all possible if you don’t repair your pipes as they age and your population doesn’t grow. This magical thinking works as long as there’s no stress on your infrastructure, the pipes don’t corrode, and you can push off the inevitable failures and leaks into the future. It also works if you’re comfortable with ever-rising land prices when the failure to invest in new infrastructure happens at the same time as the population is growing fast. Voters in local elections, who are overwhelmingly land owners, are fine with those spectacular rises in land prices, until the pipes start bursting. Then politicians and voters can blame previous politicians. Or someone else. Anyone else. Just not themselves.

The belief was that the magical thinking could be sustained by ‘taking the assets off balance sheets’, which implies someone else, the private sector, will pay for the assets by lending to the entities, and not expect either ownership rights, or a Government bailout, when things go wrong. But those bond investors have seen this movie before. They know that when it all goes wrong the Government or Councils will be forced by ratepayers voters to take back the assets, or will stop the higher charges needed to fund the debt. Either way, private investors are expected to take a hit on either the debt or the equity. They don’t want that, so they demand (through the ratings agencies) a government guarantee of some sort.

Hence, they are getting a Government-guaranteed bond that pays a higher interest rate than an actual vanilla Government bond. Their argument is there’s an element of uncertainty about the guarantee to justify the premium, but we all know that is a sort of strategic ambiguity that dissolves in a crisis. So why not just use a vanilla Government bond to start with? Because then that would increase net debt and mortgage rates in a way that median voters would not like.

An impossible trinity: low tax, low debt AND high population growth

And here we are at the same place Labour found itself. It wants high population growth with low Government debt and low taxes/charges. This does not compute. Choosing two of the three could make sense, including these combinations:

* less than 0.5% population growth with taxes and charges less than 30% of GDP and net debt of less than 30% of GDP;

* 1.5-2% population growth with higher taxes and charges (eg 35%) and still low debt (eg less than 30% of GDP); or,

* 1.5-2% population growth with taxes/charges less than 30% of GDP, but net debt over 60% of GDP.

Instead, both National and Labour (and by implication the median voters who decide elections), have chosen and/or target an unsustainable trinity of:

* high population growth of 1.5-2% for the last 20 years;

* low public spending and low taxes (including no taxation of capital gains) of less than 30% of GDP for 30 years; and,

* low public debt of less than 20% of gross debt until covid and less than 30% of net debt after covid.

How we keep kidding ourselves with this magical thinking

This is only sustainable if voters and politicians are happy to:

* tolerate water quality that keeps making them sick and means they can’t swim at their beaches and rivers;

* tolerate residential land prices that block another generation of renters from building stable and affordable futures for their own families through home ownership; and,

* pretend there are no alternatives for renters and potential migrants to go to (ie Australia does not exist.)

At the moment politicians and voters are pretending that our population growth is going to go back to 0.5% next year, as soon as we’ve temporarily solved a labour shortage and the 200,000 temporary workers have gone home. The assumption is they don’t need a place to live or a motorway to drive in or a hospital to use until they are residents. It is assumed temporary workers can live…somewhere…and that they won’t get sick or need welfare. We discovered what that meant during covid. Unemployed temporary migrants literally became (and often still are) homeless and literally ran out of food.

We can’t have it all. We have to choose.

I would choose a publicly agreed and planned-for high population growth rate of 2% per annum, which allows for recruitment of migrant workers as residents, and chooses to use higher congestion/water/parking/emissions charges and taxes to both manage demand and service the higher debt needed to sustain the infrastructure. That would mean higher mortgage rates, higher vanilla public debt levels and lower land values, especially if one of the higher debt elements was a capital gains or residential land tax.

It would mean a Government and tax level of at least 35% of GDP and net public debt of up to 60% of GDP, including some form of wealth, capital gains or residential land tax. It would mean lower land values, more affordable rents and first homes, and meeting our emissions reduction targets.

That would also mean 20 million people living in Aotearoa by 2100. It would mean five million on the Auckland isthmus and North Shore, and a further 10 million in South Auckland and the Waikato.

That appears shocking and unbelievable to most right now, but it’s actually where we’re headed with the population growth rates we’re currently pursuing in an accidentally-on-purpose way. It’s also a level of growth we’ll have little choice but to accept because 100 million wealthy families in North and South Asia will want to live in Aotearoa as a climate haven.

At the moment we are all kidding ourselves that we can magically have it all, or that we can pretend we can until it is someone else’s responsibility to deal with it. It is the ultimate in irresponsibility, selfishness and self-delusion. It’s quite human, but it’s not sustainable for humans and the planet in the long run.

So it turns out finger-wagging doesn’t dissolve duopolies…

The Commerce Commission’s first suggestion to the Labour Government for solving our supermarket duopoly problem was a structural separation or breakup whereby the duopoly was effectively legislated and regulated out of existence to create a third player out of the bits carved off the big two. After a vigorous lobbying campaign, that was watered down in the final version of the Commerce Commission’s Market Study recommendations into a code of conduct and a stern talking to about being nicer to competitors and suppliers.

The most substantial outcome of the inquiry was Foodstuffs and Countdown/Woolworths volunteering to stop applying covenants on their land titles and leases blocking new competition, which was so egregiously anti-competitive that stopping would be the least they could do. The rest of the formal response was the creation of a Grocery Commission to monitor the duopoly behaviour and apply moral suasion through stern tellings off. Essentially, asking the duopoly to stop being duopolistic.

Surprise, surprise, but the finger wagging didn’t work. On the same day Supie was put into administration, the first Grocery Commissioner Pierre van Heerden released his ‘Top 3 on his ‘Fix-it’ list,’ including speaking to suppliers at the Food and Grocery Council’s annual conference in Sydney next week with a “simple message” (bolding mine):

“…that to be a trusted and favourite brand in the grocery sector, they have a responsibility to co-operate with the grocery regime and play fair in the system. Consumers expect this of them, as their brands are built on consumer trust.”

“RGRs (Regulated Grocery Retailers) are now required to sell wholesale groceries to retail competitors, enabling alternative retailers to access more products at better prices, and better compete in the sector – whether that be using wholesalers or purchasing direct from the supplier.”

“We are aware that a number of influential suppliers appear to be opting out of the RGRs’ wholesale offers and insisting on supplying direct to smaller retailers but at much higher prices, which is having a negative impact on retail competition.” .

Really? A regulator asked nicely and was ignored? I’m shocked! Shocked.

We found out yesterday who the scallywags were.

Mr Muscle and Twix outmuscle the finger wagger

Supie founder Sarah Balle told Newsroom’s Jonathan Milne that Fonterra, Tatua, SC Johnson (Raid, Mr Muscle and Pledge) and Mars (Whiskas, Twix and Dolmio) had opted out of the system.

Balle also said it was nigh-on impossible for independent retailers to get new direct deals with these companies – meaning they could neither source these key consumer brands via the supermarket wholesale mechanism, nor directly.

She said opening up wholesale via the supermarkets sounded like a good idea but had been another failure because major suppliers like Fonterra, one of New Zealand’s biggest companies, had opted out. "It's disappointing, given they should be doing what they can to help Kiwis. Helping the duopoly doesn’t count in my eyes!"

Van Heerden, who has just taken up the new role of Grocery commissioner at the Commerce Commission, said he had been talking with Balle about Supie's difficulties with suppliers. 

"One of my points today is making sure that suppliers do their part, that they don't opt out of the wholesale supply network in order to supply their product direct at a higher price."

This is how New Zealand works:

* powerful interests take the piss;

* consumers complain and eventually politicians join in;

* a study is launched and eventually some sort of voluntary persuasive approach is taken;

* powerful interests take the piss in the quietest way possible, while using their resources to lobby, dissemble, distract, deny, distract and destroy any substantive action;

* those interests operate a series of revolving doors to employ and contract politicians, political operatives and bureaucrats;

* the public gets so frustrated that legislation is tabled and the interests are able to water down the measures taken through the Parliamentary process; then,

* they hope to delay, deny, distract and dissemble long enough for ‘their’ side to get in and do the same all over again.

We’ve seen it time and again in fuel retailing, electricity, banking, insurance, building materials and groceries.

Incoming Finance Minister Nicola Willis said yesterday she also wanted a third competitor, but did not say how that would be facilitated by the Government, given it would require regulatory or commercial intervention, legislation, funding and commitment. The last National Government avoided taking direct or coercive action against monopolies and anti-competitive behaviour. Labour tried to toughen the environment for those with dominant market power, but was eventually blunted and co-opted too. It could be argued it paid for that inaction on monopoly power with its own life when the monopolists took advantage of an inflationary environment to force through even higher profit margins, which extended the inflationary surge into an election year.

The strategy of deny, delay, distract, dissemble and divide has worked.

Our climate liability is growing, but isn’t being accounted for

A Treasury analysis of the potential costs of the Crown having to buy emissions credits to meet its Paris agreement commitments was released in September and shows the cost to taxpayers could blow out to $25.948 billion by 2030, if as expected with current policies, there is a shortfall of 114.12 megatonnes of emissions reductions at a price of up to NZ$243/tonne.

This is not included in the Crown Accounts as a contingent liability. If it was, a Government would be obliged to try to reduce it, or have to explain to taxpayers why they’re spending more on emissions credits overseas than it spends on health in a year.

The other option would be to renege on the Paris agreement, which ACT has advocated, and then see New Zealand’s FTA with Europe cancelled arbitrarily.

Chart of the day

The one where businesses see the economy as better under National

Cartoon of the day

Devastating

Ka kite ano

Bernard

PS: My apologies for the lateness and volume today. I hope it’s worth it. I took a bit more time to lay out the impossible trinity.

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 key news in Aotearoa’s political economy today includes:

* Non-profit Kiwisaver fund Simplicity is launching a fund to snare up to 5% of the $235 billion market for household savings in banks to raise the $12 billion needed to build up to 25,000 affordable homes in build-to-rent projects and via community housing providers (Hear my interview above with Simplicity CEO Sam Stubbs and Community Finance CEO James Palmer);

* Decades of under-funding and staff losses to Australia mean half of heart surgeries are now overdue, with 69% overdue in the Waikato regions and specialists considering asking Te Whatu Ora to pay to fly patients to Australia;

* Over 150 multi-bedroom homes around Martinborough are now offered for up to $2,000 a night via Airbnb, prompting a proposal for a local bed tax on Airbnb properties to put those homes back into the long-term rental market;

* Dozens of homes in Lower Hutt slated for re-development are lying unoccupied for years because of Healthy Homes rules, a property manager says;

* The cost of building Christchurch’s 50 metre-long swimming pool has blown out to $696 million or $14 million per metre, leading to the contractor CPG demanding the Government pay it up to $453 million to deliver it four years late and 12 years after the project was originally agreed; and,

* Climate change and hotter sea temperatures caused a small storm to escalate unexpectedly into Hurricane Otis, which generated 265km-per-hour winds that destroyed Acapulco last Wednesday at a cost of 27 lives and US$15 billion.

Paying subscribers can see more detail below the paywall fold and hear more of my analysis in the podcast above.

Simplicity takes on banks to build 25k homes

There’s a common set of assumptions in Aotearoa’s political economy that there isn’t enough money around to solve our housing supply shortage. That’s because people believe there’s both not enough local savings, and our housebuilders don’t have the scale or the efficient systems to build tens of thousands of homes affordably.

It’s worth challenging those assumptions, particularly in the light of today’s announcement by Kiwisaver provider and build-to-rent builder and manager Simplicity.

Firstly, the assumption about a domestic funding ‘shortage’ should be challenged, thanks to the growth of both household term deposits in banks in recent years, and the growth of Kiwisaver and other pension funds. Households now have $236 billion in deposit accounts in banks, up from $47.6 billion in September 2003. Non-financial local companies also have a further $111.05 billion in bank deposit accounts, up from $75.8 billion in December 2016, according to the latest RBNZ figures (C50).

There are also $267 billion of funds under management in New Zealand as of the end of June, RBNZ figures (T40, T43)). That total includes $100b of KiwiSaver funds, of which $57 billion is invested overseas, and is up from $57.6 billion 20 years ago. There is a savings pool of $584 billion controlled by domestic households and non-bank managers that could be invested in house-building. Most of that ($346 billion in mortgages) is currently lent on by banks to owner-occupiers and landlords and is mortgaged against land worth over $1 trillion. That helps generates over $6 billion a year in bank profits, most of which is repatriated over time to the owners of the big four Australian-owned banks.

The view that private housebuilders build too few homes and the wrong type of homes is also being changed by the growth of Build-To-Rent operators such as Simplicity. It has developed a model for building medium-density homes for about half the cost per square metre of Kāinga Ora and other developers by using standardised techniques designed for maximum productivity. It then rents them out at market rents to make a long-run bond-like return.

Until now, the major constraint was funding to pump into the system, largely because bank lending and Government borrowing was not available to the likes of Simplicity and other Build-To-Rent operators.

Simplicity announced today that it had opened a Homes and Income Investment Fund to accept investments of over $1,000 to lend on to community housing providers and first home buyers to build 25,000 affordable homes over time. It will offer a margin above current bank term deposit rates and retain 40% in cash to ensure savers can withdraw their money at any time.

Simplicity CEO Sam Stubbs estimates that the fund could finance the building of 10,000 homes through build-to-rent projects managed by Simplicity Living, 10,000 low-cost homes for its members through mortgages and 5,000 homes through Community Housing Providers (CHPs). He estimates it would need about 5% of the current base of household term deposits of $236 billion to build the homes, suggesting a total funding requirement of $12 billion, for a cost of about $480,000 per home.

Hear a full interview above with Stubbs and Community Finance CEO James Palmer. The transcript is available above too. Here are other reports on the announcement, which are paywalled. The Post-$$$ Rob Stock NZ Herald-$$$ Anne Gibson

Links to news, views, papers, reports, data et al elsewhere

Top scoops & deep dives in Aotearoa’s political economy & globally

Late breaking news: Online grocery business Supie has gone out of business after being placed in voluntary administration. RNZ

What an underfunded and under-staffed health system looks like: Half of heart surgery patients are overdue their cardiac surgery, with delays at Auckland, Waikato, Wellington, Christchurch, Dunedin hospitals. At Waikato Hospital, 69 per cent of patients were overdue their surgery. NZ Herald-$$$ Nicholas Jones

The cyclist-hating Lord of Ngātīmoti: What happens when a mega-wealthy celebrity buys large chunks of a small community and starts throwing his weight around? Stuff’s Tony Wall and Amy Ridout reported over the weekend about how British reality TV star Noel Edmonds is not making friends and influencing many people in a small town near Nelson after buying $30 million of property.

A believer in “positive energy”, Edmonds set up a network of online community radio stations during the Covid crisis called Positivity Radio, including stations dedicated to wellness and calm as well as music designed to help plants grow.

Election data reveals that at the Ngātīmoti School polling booth this election, conspiracy theorist Liz Gunn’s NZ Loyal gained the highest party vote.

Most people Stuff spoke to wanted to remain anonymous because they still have to live alongside Edmonds.

“He’s got this attitude... about how he’s improved the place and made it amazing - it was already amazing,” one woman says.

“I just feel like he’s a coloniser and... he’s come in like the Lord of the Manor.”

Tony and Amy reported part two yesterday in an article titled: 'You're the enemy': Noel Edmonds' cycleway rant and a meeting of conspiracy theorists Stuff Tony Wall and Amy Ridout

Cycle trail manager Belinda Crisp explained the trust contracted to the council, to manage and develop the Great Taste Trail, an established cycleway and tourist attraction.

At mention of the council, Edmonds bristled.

“When he heard that, he said, ‘you’re the servant and I’m the ratepayer, so I’m the master’,” Crisp says.

The servant-master line is one Edmonds has trotted out several times before during disputes with councils and Government agencies here and in the UK. In a case known as Blobbygate, he won a $2m lawsuit against the Lancaster City Council over the failure of a Mr Blobby theme park.

But Crisp didn’t work for the council. She told Edmonds how proud she was of the project, and pointed out that it could bring thousands of cyclists to his business every year.

“He started saying how dangerous [the cycle trail] was, there had been no consultation with the community, the entire community was up in arms,” she says.

“He accused us of wasting ratepayer money when businesses in Motueka are going under. I tried to stop the conversation.

“I couldn’t believe what I was hearing. He stood up and pointed at us both, ‘you two need your heads cut off and your brains replaced’.”

The cafe was full of cyclists at the time, Crisp says, and they started leaving as the confrontation played out.

Stuff has obtained a phone recording of the end of the meeting, which captures part of Edmonds’ rant. He can be heard saying: “All hell’s gonna break loose, right. And while you, still, have this attitude you are not welcome here. Don't even think about having a coffee, having a slice… you are our enemies.”

He raised his voice: “You are our enemies. You have to be defeated otherwise you’re gonna bring down this wonderful country. Yes you are, because you’re so proud. Anyway, good luck with it. As we say in Britain, ‘on yer bike’.”

New Zealand’s dire need for more social housing: A shortage of social and affordable homes is at the heart of the country’s housing crisis, and more needs to be done to address the problem, experts say. The Post-$$$ Miriam Bell

Ockham Residential co-founder Mark Todd says kudos should be given to the outgoing government for recognising what the under-investment in social housing meant, and attempting to address it.

“So a bouquet for that, but a brick bat to them for setting up Kāinga Ora to do it. Despite the best intentions of many of its staff, it has been a failure in terms of delivery.

“The housing it has developed has been twice the cost of that built by the private sector, built twice as slowly, and executed poorly, due to lack of experience.”

Gilberd and Eaqub favour inclusionary zoning, although Todd is opposed to it as he sees it as a tax for developers.

Here’s how relentless lobbying delayed a major recycling policy BusinessDesk-$$$ Cecile Meier

Meng Foon's illegal seawall raises environmental concerns RNZ Matthew Rosenberg

In housing, transport, infrastructure and population

Empty houses: A Lower Hutt property manager says homes slated for re-development are being left empty for years because of the Healthy Homes rules The Post-$$$ Piers Fuller

Homes on sites slated for development are lying vacant or being demolished because it’s too expensive to get Healthy Homes certification in the mean time.

There are exemptions to allow new tenants to live in homes without certification for up to 12 months. However, development plans often take years, and people living in worse conditions such as emergency housing would instead happily put up with an uninsulated house, a Lower Hutt property manager argues.

More empty houses: A proposal to introduce a targeted charge for Airbnb operators in South Wairarapa is proving contentious for the region RNZ Sue Teodoro

Lisa Cornelissen co-owns the Martinborough Top 10 Holiday Park on land leased from the council. She told the hearings committee the facility had more than 40 sites for tents, vans and caravans, and 20 accommodation units.

She had searched on Airbnb for the Martinborough area and found 156 whole houses advertised within five kilometres of Martinborough, with 128 of those within two kilometres. The nightly fee ranged from $125 to $2,500 a night. The owners of many of these properties are seeking financial gain, she said.

"This is not sleepouts, this is whole houses. Of those houses, 99 of them have three bedrooms or more, 115 are advertised for $250 or more a night excluding servicing and cleaning fees, 40 are $400 or more a night," Cornelissen said.

"What these facts represent is not good old kiwi bach culture. This is not lending your holiday house to your friends and family for a nominal sum to cover co. Airbnb is without doubt the biggest visitor accommodation seller in Martinborough," she said.

"They are getting a premium by taking them out of the long-term rental market."

The problem with big projects: The High Court has ordered Christchurch pool contractor CPB to keep building amidst ‘astronomical blow-out’ in costs from $217 million to $696 million, which is more than the Te Kaha stadium. CPB had just wanted to down tools on the fixed-price project. Rau Paenga, the Government’s new ‘Ministry of Works’ infrastructure contracting firm that morphed out of Otākāro, applied for the order. The Press-$$$ Liz McDonald and Martin van Beynen

CPB wants damages of $49 million for cost overruns, $139m for unpaid estimated liabilities to subcontractors to July 31, 2023 and further damages of $265m. It demands Rau Paenga agree to adjust the contract price, grant a time extension to May 26, 2025 and to withdraw a default notice issued on September 1.

Here come the foreign buyers: Trade Me Property has seen overseas interest ramping up since the election compared to the six weeks prior to the election. Sales director Gavin Lloyd said inquiries from buyers in the United States were up 10% and in Australia that figure rose by 4%. The percentage of listings on Trade Me over $2m had increased from 6.7% to 10.4%. The Post-$$$ Piers Fuller and Liz McDonald

Employers pull out the stops for migrants Stuff Amanda Cropp

There’s a new White House plan to create affordable housing: convert empty office buildings Bloomberg-$$$

Poverty, inequality, income, wealth, health, crime, justice & tax

What 30 years of poverty creation has created: ‘Not a ripple’: Questions mount as advocates ask, why are children still being killed? The Press-$$$ Piers Fuller

Lesley Max, founder and board chair of Great Potentials Foundation said cases like Ru’s were "New Zealand's shame".

"This is one in a succession of cases of tragic deaths of infants -- absolutely defenceless infants," Max said.

Thank you very much for your kind donation – but what’s your money doing? Adam Dudding has taken a deep dive via The Post-$$$ into Impact Labs, the social services data analysis startup set up by Bill English and Maria English.

What 30 years of Justice system stress has created: The Criminal Cases Review Commission has been flooded with applications for conviction reviews at almost double the forecast level and may be under-funded. The Post-$$$ Benn Bathgate

Climate, water and environment

What 30 years of council underfunding and heritage rules have created: It’s reported Wellington City Council’s finances face ‘Open heart surgery’ after Town Hall blow out, including possible cuts to cycleways and parks. The Post-$$$ Tom Hunt

PR more valuable than delivery: Wellington Water is advertising a communications role with a starting salary higher than a city council chairperson or a fourth-year doctor working a 60-hour week. The $122,000 to $172,000 communications and engagement team lead role was posted on Wednesday, a day after economic analysts warned the Wellington City Council could be looking at a $1 billion long-term budget blow out. The posting went live on the day the council voted on pushing the budget to quake-strengthen the town hall by another $147m to $329m. The Post-$$$ Tom Hunt

A long wait: Cyclone recovery cash deal signed, buyouts begin in Hawke's Bay RNZ Lauren Crimp

The $203.5 million in the agreement allocated to flood protection would focus on solutions for Category 2 properties, said Hawke's Bay Regional Council asset group manager Chris Dolley. But it could be a long wait.

"Although the co-sharing agreement is signed, we still need to develop delivery plans to be approved by the government to access the funds, and the process and timing for this is to be determined," he said.

"The funding will be primarily directed to flood mitigation solutions in Category 2 locations, upgrades to repaired stopbanks and replacement of three pump stations." RNZ Lauren Crimp

Kāinga Ora remains tight-lipped on fate of water-damaged properties as homeless tenants struggle without contents insuruance. RNZ Rayssa Almeida

15% of MPs from 6% of the economy: 18 out of 121 parliamentarians will have some kind of farming or agricultural background. 1News’ Q+A

For New Zealand’s Maori communities, climate change is already hurting. Washington Post-gift Rachel Pannett

Acapulco ravaged by looting after Hurricane Otis Reuters

Columns

Vernon Small: Luxon’s 100 days of action could turn into 100 days of frustration The Post-$$$

Hannah McQueen: Less than 30 minutes after Labour conceded, I started fielding messages from clients saying they were ready to focus on growing wealth, and in many instances, this meant buying an investment property. The Post-$$$

Solutions and hope

University student start-up to slash construction waste The Post-$$$ Miriam Bell

Plan for large South Otago wind farm RNZ

In geopolitics

Israel wages ground campaign in Gaza, communications blackout eases Reuters

US, China agree to work toward an expected Biden-Xi summit Reuters

Chinese party delegation visits Solomon Islands, Chinese state media reports Reuters

Philippines Drops China Railway Deals, Seeks Other Funders Bloomberg-$$$

Canada Plans College Crackdown Amid Foreign Student Troubles Bloomberg-$$$

Australia’s ACCC targets big tech’s AI power The Australian-gift Jared Lynch

In global and local markets, economics and business

Oil prices up 3% on worries about Middle East supplies Reuters

Leaked Jarden accounts shows Australian red ink swamping Kiwi biz AFR-$$$

Italy to raise taxes for flat owners doing multiple short-term rentals Reuters

Wars Push Up Demand for Weapons, Sparking Fears of Shortages WSJ-$$$

Cartoon 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:

* National won last weekend’s election and has started talks to form a Government with both ACT and New Zealand First, although they’ll only start in earnest after the November 3 declaration of the final makeup of Parliament after the counting of special votes. National didn’t win quite enough seats on election night to govern comfortably alone with ACT so will have to so something with Winston Peters, even if it is peripheral, outside Cabinet and includes a few baubles such as the Foreign Ministry and a new version of the Provincial Growth Fund. Sunday’s email.

* Rents are so stressful for working poor and beneficiaries that it is forcing 600,000 people to have to use food banks regularly, up more than third since Covid, the NZ Food Network said on Thursday. Yet there were 214,749 new temporary work visas issued in the 12 months to the end of September and our population grew 105,900 in the year to June, with most of those migrant arrivals trying to settle on arrival in Auckland, where rents rose 9.4% and only 18,003 building consents were issued last year, down 16% on a year ago. Friday’s email.

* Agents and brokers reported rental property investors surged back into the market in the days since National’s election win, confident of more advantageous tax rules and hopeful interest rates won’t rise because of lower inflation and less Government borrowing. Wednesday’s email.

* National’s appointment of a foreign minister is shaping up as a key decision in Government-forming negotiations, and not just as a way to get Winston Peters to agree to a confidence and supply deal. Our Five Eyes partners are uneasy about the relatively more pro-China views of National’s Foreign Affairs spokesman Gerry Brownlee and have preferred Peters in the past, given his track record of championing the ‘Pacific Pivot’ now seen as a key strategy in the contest between the United States and China. Tuesday’s email.

* Electoral Commission figures show there were just over 1.060 million missing voters in the election out of a total eligible population of 3.871 million, with enrolment data and surveys showing most of that missing 27% of voters were young renters from Maori, Pasifika and recent young immigrant backgrounds. Monday’s email.

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

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

* 5.00 pm - 5.05 pm - Bernard Hickey and Peter Bale opened the show with a discussion about the election and the Israel-Hamas war.

* 5.05 pm - 5.20 pm - Bernard, Peter and Cathrine Dyer talked about a new paper on Greenland’s ice sheet melting, new bans on cruise ships in Europe, and how to measure methane’s impact on the climate.

* 5.20 pm - 5.55 pm - Bernard, Peter, Josie Pagani and Robert Patman talked about the Israel-Hamas war, politics and benefits of localism in Government.

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

The articles and interviews we talked about on The Hoon included:

* a new paper in Nature forecasting Greenland’s melting will accelerate abruptly if the average global temperature rises above pre-industrial level by as little as as 1.7 degrees to 2.3 degrees;

* An interview on the Rest is Politics podcast between Rory Stewart and Israeli historian Yuval Noah Hariri about the war in Gaza and Israel; and,

* Josie’s column in The Post-$$$ yesterday on the need for public sector transformation.

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.

Chart of the week

What happens when I move to a place…plus climate change

Other places we appeared this week

I interviewed Giacomo Caleffi from Copenhagen Infrastructure Partners for When The Facts Change via The Spinoff about its plans to build a 1GW windfarm offshore in South Taranaki with the NZ Superannuation Fund.

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

RIP Tony Husband

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