The Kākā by Bernard Hickey

TL;DR: 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 were young renters.

That meant the ‘quorum’ for the election was just under 73% of the voting age population, with the vast majority of those missing voters being under the age of 40. The voting rate for the 18-24 year olds is likely to have slumped back towards 50% from over 60% in 2020. These young non-voters were also more likely to be Māori, Pasifika and recent young migrants from China, India and the Philippines.

Both enrolment and voting rates dropped compared to the 2020 election, resulting in 183,169 fewer voters than if we saw the same enrolment and voting rates as in that last election. If they had voted this time, and had voted for a particular party or parties in the same bloc, that would have changed the election result on Saturday.

If even half the missing million had voted, we would have a totally different political landscape. It wouldn’t be a gerontocracy with a democratic deficit in favour of suburban and provincial home and landowners over young renters in apartments and flats.

Elsewhere in the news this morning:

* NZ First Leader Winston Peters wants an early deal with National, including a ‘bottom line’ of a fresh Covid inquiry. NZ Herald Thomas Coughlan

* National Leader Christopher Luxon told RNZ this morning he wanted to negotiate with ACT and NZ First in a different more private way than done after previous elections, citing his experience doing M&A while in business; and,

* Oil prices jumped nearly US$5 a barrel to US$91.50 a barrel on signs Israeli forces will advance into Gaza within the next 48 hours Reuters.

Paying subscribers can see more detail below the paywall fold and hear more of my analysis in the podcast above, which is a combination of a short morning chorus from me alone this morning and a replay of yesterday’s ‘pop-up’ special Hoon webinar at 5pm with Peter Bale and Josie Pagani. I also happy to open this up with permission from paying subscribers, with 50 likes and 50 comments being the thresholds for opening it up. We usually get there.

Was there a quorum at the 2023 election?

At what point can you say there wasn’t a quorum for a collective community decision through a vote in a General Election? Many public and private governance bodies set a quora for big decisions. We don’t for our elections, but the issue of lower voter turnout, particularly among the young, worsened again in the weekend election.

The early indications are that total turnout rates for those in the 18-29 age group fell back towards 50% in the election over the weekend, having surged through 60% at the last election. That compares with total turnout rates of closer to 90% for those aged over 60.

There were 692,430 people who enrolled but didn't vote on the weekend and a further 367,608 who were eligible to vote, but did not enrol. We know that 20% of under 40s did not enrol as of Saturday, while only 1% of over 60s had not enrolled. We don’t yet have an estimate of the turnout rates by age of those who enrolled, but we do know that if there had been the same enrolment rate as 2020 (94.1% in 2020 vs 92.6% in 2023) and the same voting rate of those enrolled in 2020 (82.2% in 2020 vs 78.4% in 2023) then there would have been 183,169 more voters than the 2,811,380 who did eventually vote. The overall voting rate as a percentage of the total eligible population fell from 77.4% in 2023 to 72.6% in 2020.

In essence, there were just over 1.060 million missing voters in the election out of a total population eligible to vote of 3.871 million, meaning the ‘quorum’ was just under 73% of the population. The vast majority of those were renters under the age of 40 who were also more likely to be Māori, Pasifika and be recent young migrants from China, India and the Philippines.

Aotearoa’s democratic deficit favouring older land owners over young renters worsened in this election by more than 100,000 to at least half a million voters. We’ll find out more detail after the release of the NZ Election Study next year. It is a mail survey of voters situations, their preferences and demographics. A survey done by a survey company for the Electoral Commission is also expected. Kantar did the survey for the Commission in 2020. The Kantar survey was conducted in the six weeks after the October 17 election of 2020 and released in December of 2020.

This Electoral Commission chart belows shows the total turnouts for the previous three elections (2014, 2017 and 2020), taking into account both enrolment as a share of the eligible population and turnout of those enroled. It shows total voting rates ranging from 60% to 73% for those aged 18 to 39, and rates between 85-90% for those aged over 55 in those three previous elections. Total voting rates for the 18-24 age group sunk as low as 48% in 2014, but bounced over 60% in 2020. Surveys show those who do not vote at their first opportunity after turning 18 tend to never start voting at all.

Possible solutions through The Kākā Project lens

As part of our attempt at solutions journalism, it’s worth having a closer look at how to increase the turnout for young renters from Māori, Pasifika and Asian backgrounds. I welcome your suggestions in the comments below.

In my view, there are three obvious options for ‘nudges’, including:

* lowering the voting age from 18 to 16 and making first votes in both a council and general election part of the school curriculum as the final ‘exam’ in a compulsory civic studies course for those in their last three years of school, given there are council and general elections in two out of every three years;

* making both enrolment and voting compulsory, but with small ‘citizenship payments’ for all those who vote (possibly $100 per voter to a charity of the voters’ choice), and a larger citizenship payment (possibly $1,000 per voter) for each of the first council and general election votes, rather than a fine; and,

* ensuring both council and general elections are administered, promoted and conducted in the same way as general elections by the Electoral Commission, which means a formal day and place for voting, along with both physical and mail-in voting options for two weeks prior to election day.

I’m not a fan of moving to online voting, which is often mentioned as a way to improve youth engagement. I agree with the tech experts who say the stakes and risks of hacking or interference is too high to risk online voting. I also think a proper real-world engagement with an ‘event day’ and actual voting stations is more effective. The key thing is to make it a community event. Sausage sizzles and bouncy castles are useful things.

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

Top scoops & deep dives in Aotearoa’s political economy

Duncan Greive: Labour forgot Auckland in October of 2021. Two years on, the city made it remember The Spinoff

What drives Winston Peters’ coalition negotiations - ‘Jacinda was ready to sell her grandmother - and she did’ NZ Herald-$$$ David Fisher

TOP faces losing its third leader in three elections The Press-$$$ Sinead Gill

New Zealand’s Next Prime Minister Brings M&A Skills to Politics Bloomberg-gift

Graeme Edgeler on how the special vote count might go PublicAddress

`I should have known better’: Wellington mayor Tory Whanau reflects on her torrid year The Post-$$$ Kevin Norquay

In housing, transport and infrastructure

US Housing Crisis Fuels Hope for a Bipartisan Tax Bill Bloomberg-$$$

In climate, water and environment

Rob Stock on what is ‘fair’ compensation for owners forced from climate-threatened homes? The Post-$$$

Flood-ravaged Swamp Rd country estate in Hawkes Bay selling 'as is', with plenty of interest Stuff Colleen Hawkes

In poverty, health, wealth, income, inequality, crime & justice

Lights out for clubs as copper crime wave causes havoc - what on earth is going on? The Post-$$$ Eugene Bingham

Hamilton MPs don’t want Medical School to be a coalition casualty Waikato Times Jo Lines Mackenzie

Jarrod Gilbert: Serious post-election rethink on front-line police priorities needed NZ Herald-$$$

Genesis Energy misled customers on eligibility for 'free power shout' promotion Stuff Easther Taunton

In geopolitics

Netanyahu vows to demolish Hamas, as Israel urges Gazans south Reuters

'Reconciliation is dead': Indigenous Australians vow silence after referendum fails Reuters

Amid international crises, US Congress handcuffed by Republican feud Reuters

Diesel release valve: China poised to save West from shortages again Reuters

In global and local markets, economics and business

SkyCity says CEO Michael Ahearne to resign in March 2024 to return to Europe with family

Global markets brace for fallout as Middle East tensions rise Reuters

Ferrari to accept crypto as payment for its cars in the US Reuters

Australia fines Musk's X platform $386,000 over anti-child abuse gaps Reuters

China proposes stock stabilisation fund to lift economic confidence FT-$$$

Martin Wolf: The strange death of corporate Britain FT-gift

Quotes of the day

The one where Winston Peters had a news conference to say this…

“When we’ve decided what we’re gonna do and who we’re doing it with, we’ll let you know.” NZ First Leader Winston Peters

The ones where Christopher Luxon describes his ‘M&A’ style

“I’ve done a lot of mergers and acquisitions and I’ve done a lot of negotiations. Getting the chemistry and getting the relationship right is the platform and the foundation for actually then being able to work your way through the transactional issues.” Luxon talking to reporters yesterday, via RNZ.

“We were in a position where we did need a big reset of the party, and I’ve done a lot of turnaround jobs in my past life,” Luxon told Bloomberg before the election campaign. “And a lot of the lessons of how you lead through those periods are very transferable into this political environment.” Bloomberg-gift

The one where Luxon says this deal will be done privately

“I have watched elections in New Zealand after results and I just think out of respect, I'm trying to build a really serious, constructive, positive government, and for that to happen, I need to be able to work with those individual parties and make sure that that is confidential and private and negotiated rather than trying to do it all through a blow-by-blow out in the public domain.” Luxon talking on RNZ this morning.

Chart of the day

Who enrolled and who didn’t as of Oct 1

Maps of the day

How the planet’s water cycle is ‘spinning out of balance’

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: National (38.9% and 50 seats) won the election overnight and will now have to decide how it forms a Government with both ACT (8.98% and 11 seats) and New Zealand First (6.46% and eight seats). National didn’t win quite enough seats 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.

The details won’t be clear until the specials are counted and we find out what the baubles look like. They could include some sort of new Provincial Growth Fund and a ministerial role for Peters and Shane Jones outside Cabinet, potentially even including Peters being Foreign Minister and Racing Minister, with Jones running PGF V 2.0. Peters agreed to be Foreign Minister outside Cabinet in Labour’s final third term from 2005 to 2008 and got a super-gold card thrown in for good measure.

Labour (26.9% and 34 seats) lost badly and now faces an internal reckoning. Former leader David Cunliffe was happy to give advice last night, suggesting Labour’s centrism was the problem. I doubt the Labour caucus will like his advice.

The Green Party (10.77% and 14 seats) and Te Pāti Māori (2.61% and four electorate seats) did better than Labour and than some expected, winning seven electorate seats and 11 list seats between them, which means together they are more than half the size of Labour in Parliament. The Opportunities Party failed to win Ilam and its 46,471 party votes (2.01%) were wasted.

The final count of 567,000 special votes and the exact results of a couple of tight electorates will determine just how much negotiating power Christopher Luxon has in discussions with Winston Peters. National and ACT currently have 61 seats in a currently-121-seat Parliament, which isn’t quite enough to govern alone, and certainly not comfortably.

National could add to that 61 with a win in the Port Waikato by-election on November 25, but the history of special vote counts is that Labour and/or Green pick up one or two from National. My guess is National wins Port Waikato but loses one seat to the Greens or Labour in the specials, so would still have 61 seats in a 122-seat Parliament. That’s not enough for National-ACT to govern alone.

It is likely Luxon will try to get NZ First into some sort of supply and confidence agreement to be more comfortable, similar to the one NZ First did with Labour in 2005. NZ First is not in a strong enough position to demand major policy concessions on National’s tax cuts, but may try to keep the current ban on most foreign residents (excluding Singapore and Australia) buying land. That would create a revenue headache for National’s tax cuts.

However, National’s plans to repeal interest deductibility and tighten bright line back to two years from 10 years are likely to go through, along with the repeal of Three Waters. NZ First said in its manifesto it wanted to reinstate interest deductibility for rental property investors. Interestingly, its only comments on foreign ownership related to a ban on foreigners buying land for conversion to forestry.

There was no specific reference to blocking any attempt to lift a foreign ban on buying houses and during the election campaign Winston Peters only challenged the likely tax receipts from lifting the ban, rather than being specifically opposed to lifting the ban itself. He said he would reserve judgement until he had seen the details.

“I’m open minded, I’ll look at it… but please show us now,” Peters said on September 30 via TeAoNews

The detailed results, what it means, and what happens next

Here’s the full results from the Electoral Commission before the counting of special votes.

So what does it mean?

Now the post-mortem starts for Labour. How did it go from 50.0% and 65 seats in 2020 to 27% and 34 seats in 2023? Cabinet minister Nanaia Mahuta lost her seat and is not on the list so is out. Former Cabinet Ministers Michael Wood and Phil Twyford lost their electorate seats and were low on the list and so are out. MPs Tamati Coffey (list but standing for East Coast), Sarah Pallett (Ilam) and Anna Lorck (Tukituki) also lost their electorates and seats.

In my view, Labour lost the 2023 election in 2017 when it committed to the Budget Responsibility Rules, while also committing to 100,000 Kiwibuild homes, the Auckland CBD-Airport rail line, welfare reform and a capital gains tax review. They were incompatible and the inevitable disappointment upon failing on Kiwibuild, light rail, and welfare reform was disguised in 2020 by the initial covid success and the unpopularity of then-National leader Judith Collins. The revolt against Government over the covid restrictions in late 2021 punctured that 2020 election bubble.

Now what happens?

National and ACT will govern with Winston Peters in there somewhere and somehow, but probably outside Cabinet. My wild speculation is he is made Foreign and Racing Minister outside Cabinet and wangles some form of Provincial Growth Fund. I would love to see NZ First get the 30-year population strategy review it talks about in its manifesto, but I doubt National or ACT would want that.

National and ACT will then repeal interest deductibility, the 10-year bright line test, Three Waters, the RMA and the ‘ute tax’ in the clean car rebate scheme. It will also freeze new capital spending on housing and transport while it reviews Kāinga Ora and looks at which motorways to build. That will further slow new housing consents, at least until next year, as councils wait to know how any water, roading and housing infrastructure is paid for. Migration will ramp up even further, creating even more upwards pressure on rents from a lack of supply, and boost house prices.

The housing market will take off again, from today. I stick with my view residential land prices will rise 20% because of this result, while the emigration of New Zealand citizens and residents to Australia and elsewhere will continue apace, with ever more temporary workers to replace them.

As a bonus, I had this great chat with Henry Cooke this and will re-post his piece from this morning for subscribers to the The Kākā.

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:

* Population growth from immigration of temporary workers to replace and supplement emigrating resident workers rose to more than 2% in the last year, without nearly enough infrastructure built or planned for two decades at that level, and without any real debate just days before an election. Thursday’s email.

* National’s tax switch plan would create a direct wealth transfer from beneficiaries to landlords totalling $2 billion over four years, a CTU analysis found, including mega-landlords with over 200 rentals each getting $1.3 million each, while 350,000 beneficiaries will lose $17,000 each because of an indexation change back to prices from wages. Wednesday’s email.

* Election rules mean the death on Sunday of ACT’s candidate in the safe National electorate of Port Waikato, Neil Christensen, will force a by-election that effectively adds an MP to the 120 MP Parliament after this weekend’s general election. It is essentially and accidentally a ‘free’ MP for National, which could prove the difference in a hung result that means National-ACT doesn’t need NZ First’s support to govern. Tuesday’s email

* National’s decision to rule in potential coalition negotiations with Winston Peters led campaign chair Chris Bishop to say failed talks could lead to a re-run of the election, which Labour said showed a National win would be chaotic. Monday’s email.

* A landmark Ministry for the Environment and Stats NZ report forecast an increasing number of increasingly extreme climate events like Cyclone Gabrielle. Thursday’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 about Bernard and Lynn Grieveson’s plans to move to an island in the Hauraki Gulf.

* 5.05 pm - 5.20 pm - Bernard, Peter and Cathrine Dyer talked about the non-debate had over climate in the election, despite a record spike in temperatures globally (and locally) in September and just seven months after New Zealand’s most expensive storm. record heat globally and in Aotearoa in September, and an emergency summit held by climate scientists about Antarctica’s shrinking ice coverage (see chart of the day below).

* 5.20 pm - 5.50 pm - Bernard and Peter and Robert Patman talked about the Israel-Hamas war.

* 5.50 - 6.00 pm - Then inequality and wealth academic Max Rashbrooke joined us to talk about Wellington City Council’s deliberative democracy experiment.

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

It is being published at 7.01pm on Saturday October 14 to reduce any risks of not complying with election rules preventing publication of material that mentions candidates or policies in the election.

Articles, news and podcasts referred to during the podcast include:

* Peter mentioned an article he wrote here on election debate on talkback and an article by Robert on the election and foreign affairs.

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

Pic of the week

Other places we appeared this week

I interviewed Octopus Energy’s Head of Systems Change, Marcia Poletti, for When The Facts Change via The Spinoff about how Aotearoa could use our ripple control systems for turning hot water heaters on and off to manage electricity demand, along with sending text messages to customers to ask them to turn things off.

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

TL;DR: Population growth from immigration of temporary workers to replace and supplement emigrating local workers rose to more than 2% in the last year, without nearly enough infrastructure built or planned for two decades at that level, and without any real debate just days before an election.

Meanwhile, the last polls before Saturday’s election showed a last minute rise in support for the Labour-Green bloc at the expense of National-ACT mostly, but with the centre-right still ahead by enough to win (just), with the support of New Zealand First Leader Winston Peters.

Elsewhere in the news this morning:

* Auckland Council estimated it will have to replace 1,200 kms of water pipes at a cost of $200 million in the wake of a 13-metre sinkhole opening up in Parnell and allowing millions of litres of sewage to flow untreated into the Hauraki Gulf RNZ;

* A landmark Ministry for the Environment and Stats NZ report forecast an increasing number of increasingly extreme climate events like Cyclone Gabrielle, which caused up to $18.5 billion in un-forecast and unfunded damage to private and public assets; and,

* Upper Hutt Council, which does not charge for water, revealed it loses 52% of its water to leaks daily because of decades of underfunding, meaning it faces water shortages this summer after one of the wettest years on record, while the wider Wellington region faces $2 billion of unfunded future investment The Post-$$$.

Paying subscribers can see more detail below the paywall fold and hear more of my analysis in the podcast above. I welcome comments and ‘likes’ from paying subscribers about whether to open this up for public consumption and redistribution. I’ll open it if we get over 50 likes. Thanks to paying subscribers in advance.

Fast population growth without enough building or debate

The big news of the last 24 hours across the motu happened without much fanfare or notice, let alone any debate three days before an election about how we manage our futures.

Stats NZ reported yesterday net migration in the year to the end of August was 110,200, including emigration of 68,500 citizens and immigration of 199,500 non-New Zealand citizens. Confirmed quarterly numbers showing migration to and from Australia to the end of March show about 300 New Zealanders are leaving permanently each day, and are being replaced by about 650 mostly temporary migrants each day.

Our churn and burn economy is represented by one plane-load of New Zealanders flying out each day, who are then replaced and supplemented daily by two plane-loads of mostly temporary work visa holders, backpackers and students with work rights.

Aotearoa’s population grew by more than 2% in the last year because of record-high net migration of temporary workers, but we did it with:

* an existing $100 billion infrastructure deficit that is costing countless years of lost productivity and not-so-quietly creating tens of billions of dollars worth unaccounted-for public liabilities in climate, health, justice, health and welfare costs;

* another $100 billion of missing future investment without new congestion, pollution and water charges; and,

* a low tax and low public and private investment framework designed for less than 0.5% population growth.

‘If I don’t know or aren’t asked then it’s not a problem is it?’

Our political leaders and (let’s face it) voters accidentally-on-purpose engineered and accepted this population growth without nearly enough infrastructure and without any real debate. That’s because having the debate would force us to confront the magical thinking underpinning the assumptions currently framing our political economy, which are:

* the temporary migrants are needed to solve a temporary work shortage problem, and therefore we don’t have to build infrastructure for them, or at a high-enough rate to cope with 1.5-2.0% population growth, which is what we’ve actually had for the last two decades;

* and we’ll shortly go back to population growth of less than 0.5% a year, which means we don’t have to make a decision about how to pay for the $200 billion worth infrastructure spending and/or demand management taxes such as congestion, pollution and water charges; and,

* that allows us to continue believing that we can continue to demand income tax cuts and keep the size of Government below 30% while also not taxing capital gains on residential land and believing the audited Crown accounts fairly reflect our future climate, health, education, welfare and justice liabilities.

‘So what do you want? Hello? Are you listening?’

I regularly ask politicians at Government and council level, along with planners, financiers, builders and strategists, what level of population growth they want or think we’ll have, and therefore what we should plan and tax for. They tell me they either don’t know, can’t forecast it, or simply look at me blankly and then grin sheepishly.

They all know we should be talking openly and clearly about what this sort of sustained population growth of 1.5-2.0% should mean for our infrastructure investment, tax rates and congestion/pollution/water charges. But they feel they can’t without being accused by their opponents of putting up taxes and public debt for wasteful spending, which would ensure they can’t get re-elected or appointed.

The tragedy of the horizon is also our tragedy of the commons.

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

Top five in Aotearoa’s political economy this morning

Jenna Lynch: How National's tax plan and Winston Peters strategy have blown up in their face. Newshub

Claire Trevett: The polls should be giving the National Party the night terrors NZ Herald-$$$

The Price of Peters - $10b spending cuts in first year, $20b spending increases NZ Herald-$$$ Thomas Coughlan

National, Act and NZ First are most likely to govern, but what might that look like? NZ Herald-$$$ Derek Cheng

Only half of the RBNZ’s rate hikes have been passed on to depositers Reserve Bank of Australia speech

In housing, transport and infrastructure

Neighbour wants Kāinga Ora to help double glaze home if town houses built. The neighbour claims the two-storey Kāinga Ora building will block the sun into their "already cold” home. Local Democracy Reporting via 1News Maia Hart

How does a sinkhole get fixed? The pipe professionals solving Auckland's sinkhole situation Stuff Jonathan Killick

Parnell sinkhole, pipe failure to be examined in independent review RNZ Lucy Xia

West Auckland house earns more than $1300 a day. Developer scores $299,000 profit in just seven months with resale of New Lynn property. One Roof Catherine Smith

More than 20 MPs rent back their own homes at the taxpayer’s expense The Post-$$$ Andrea Vance

In climate, water and environment

On front line of climate change, Kapiti Council’s 6-5 vote for fossil fuel phase-out treaty The Post-$$$ Justin Wong

Use of weather derivatives surges as extreme climate events rock the globe Reuters

Australian Court Backs Coal Mine Expansions in Key Climate Case Bloomberg-$$$

In poverty, health, wealth, income and inequality

Father of teenager with cancer says travel allowance scheme a 'failure' RNZ Luka Forman

The first Rolls-Royce built just for two costs $10m-plus per seat AFR-$$$

In geopolitics

NATO to respond if Baltic Sea pipeline damage deliberate - alliance chief Reuters

Israel forms unity government as Hamas armed wing says still fighting outside Gaza Reuters

US may drop sanctions against Israeli billionaire in push for EV metals WSJ-gift

In global and local markets, economies and business

Exxon secures lead in top US oilfield with US$60 billion buy of shale rival Pioneer Reuters

OECD agrees global treaty targeting tax from digital giants FT-$$$

China Budget Revision Would Mark ‘Sea Change’ in Fiscal Strategy Bloomberg-$$$

Martin Wolf: The global economy is resilient but limping FT-gift

Chart of the day

Where GDP success equals wellbeing failure: the United States

Substack of the day

Pic of the day

Cartoon of the day

It’s the crossing of the knees that catches the mood

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: National’s tax switch plan creates a direct wealth transfer from beneficiaries to landlords totalling $2 billion over four years, CTU analysis out this morning finds, including mega-landlords with over 200 rentals each getting $1.3m. Each.

The proposed tax switch of changing interest deductibility rules and reducing the bright line test for capital gains from rental property trading in exchange for moving indexation for beneficiaries from wages to prices will see $464 million in tax benefits go to 346 landlords with over 200 rentals each, while 350,000 people on benefits will each receive $17,000 less in benefits over four years.

In my view, this fails the ‘distributionally neutral’ test set by John Key and Bill English in 2010 when they engineered their GST-hike for tax-cuts switch, albeit after Key had ruled out a GST hike in the 2008 election campaign.

Elsewhere in the news this morning:

* The Port Waikato by-election will be held on November 25, which means a hung Parliament or close election forcing extended coalition negotiations could delay the final makeup of Government until well into December;

* Christchurch’s mens prison hit its operational capacity of 700 over the weekend, forcing prisoners to be held in Police cells and forcing Corrections into “emergency planning,” Stuff reported this morning; and,

* Over 200,000 people don’t have a GP, The Post-$$$ reported this morning from data obtained under the OIA, while more than half of parents are concerned for the mental health of their children, a survey for NIB NZ in June found.

Paying subscribers can see more detail below the paywall fold and hear more of my analysis in the podcast above. I welcome comments and ‘likes’ from paying subscribers about whether to open this up for public consumption and redistribution. I’ll open it if we get over 50 likes. Thanks to paying subscribers in advance.

The wrong kind of tax switch

The great GST-hike-for-income-tax-cuts switch engineered by then-PM John Key and then-Finance Minister Bill English in 2010 has been a model over the years for both sides of politics. It seemed to thread the needle of political impossibility by ‘buying’ one type of tax hike with an equal amount of tax cuts elsewhere, while also avoiding being seen as a ‘cash splash’ that would create inflation.

Finance Minister Grant Robertson and then-Revenue Minister David Parker both referred to the ‘fair tax switch’ idea to justify their now-abandoned idea for a wealth-tax-for-income-tax switch earlier this year.

The ‘Great Tax Switch’ in 2010 was presented as fair in that the losses from the GST hike from 12.5% to 15% were presented as gains for the same (or least similar) taxpayers in the form of income tax cuts and tweaks to Working For Families. Key and English sold it as both fair and fiscally neutral, which negated any fair any tax cut stimulus would simply be offset by higher mortgage rates.

It was presented thus in their May 21, 2010 announcement at the culmination of their Tax Working Group reform process through 2009 and early 2010 (bolding mine)

The overall tax package has a broadly distributionally-neutral impact across household groups as a proportion of income. These form part of a package of changes that overall are broadly fiscally neutral. Beehive’s May 21, 2010 announcement

Clever, but not fair

This idea of a politically clever ‘fair and fiscally-neutral tax switch is at the heart of National’s proposal at this election for $14.6 billion worth of tax cuts, paid for by:

* cutting Government spending on ‘back offices’ and contractors;

* using climate funds being paid to corporates and Tesla buyers;

* removing depreciation as a tax break for commercial building owners; and,

* a new tax on foreigners buying properties worth more than $2 million.

The ‘losers’ in the switch are presented as corporate welfare types, foreign buyers and wasteful bureaucrats, while the winners are the ‘squeezed middle’ dealing with the ‘cost of living’ crisis.

But unlike the ‘Great Tax Switch of 2010, this one is not presented as distributionally neutral, either in income or wealth terms. The suggestion (only) is that it’s fair because ‘hard-working Kiwi families’ are the winners and ‘others’ are the losers, including ‘others’ seen as allies of National and the centre-right in the form of corporates, commercial property owners and foreign buyers.

But, in my view, there’s a big problem with this argument. It is deeply unfair in a way the 2010 tax switch was not.

In effect, it is a one-for-one switch in cash going from 350,000 beneficiaries who can least afford it to less than 100,000 landlords and don’t need the cash, including a quarter of that $2 billion going to less than 350 landlords.

The losers are the 350,000 beneficiaries who will miss out on about $2 billion in income over the next four years because of a type of ‘neutron bomb’ cut to benefits through a change in indexation for ‘main’ benefits from wage inflation to price inflation. The proof it is targeted at the poor, rather than is applied fairly across the board, is that recipients of NZ Superannuation will continue to get their $19 billion a year of benefits indexed to wages. Changing that would have cut benefit costs by $12 billion.

The beneficiaries of this one-for-one switch of $2 billion over four years are rental property investors through the reversal of the interest deductibility rule and winding the bright line test back from 10 years to two years.

$1.3m per mega-landlord, while disabled benefit cut by $17,000

CTU economist Craig Renney published an analysis verified by tax accountant Terry Baucher this morning that pulled together data and reports from various official sources to show:

* MBIE data from bond lodgement data in 2021 revealing that 346 landlords owned more than 200 rentals each, with around 20,000 of the 120,000 landlords who have lodged bonds owning more than 200,000 rentals;

* Which means the 346 ‘mega landlords’ would receive an average of $1.3 million each on average in tax breaks over five years, with a total of $464 million in tax breaks or almost a quarter of the total going to those 346 individuals; while,

* 350,000 beneficiaries, including 74,000 disabled beneficiaries, would receive $17,000 less in benefits over the five years due to the benefit policy.

Actually, $1.3m per landlord is an under-estimate

In reality, the amounts in tax breaks for landlords will be significantly greater because only three quarters of rentals are covered by the bond lodgement data because bonds are not lodged for some properties.

“This is just another example of National’s reverse Robin Hood tax plan. We found out only last Friday that National plans to take $2 billion off those on benefits, including disabled people, to help fund its tax cuts. Our most marginalised would suffer while rich landlords get even richer.”“National’s tax plan would overwhelmingly enrich those who already have significant assets – while harming those with the least.  National should scrap their unfair and unreliable tax plans which are balanced on the backs of the most vulnerable. They shouldn’t have to pay the price of National’s plan.” CTU Economist Craig Renney in his analysis in tables detailed below.

The analysis also excludes likely $20b in (untaxed) capital gains

This analysis also doesn’t take into account the likely increase in asset values from the change in policy. Given those 346 mega-landlords are likely to have almost 100,000 rentals between them, a 20% increase in values would likely increase their wealth by $20 billion to over $120 billion at an average value of $1m per property.

How is it distributionally neutral to increase the income of less than 500 people by over $1 million each and increase their wealth by over $200 billion while 350,000 beneficiaries become $17,000 each poorer?

It clearly isn’t. National’s ‘Big Tax Switch’ of 2023 fails the fairness test set by the mentors of Christopher Luxon (ie his Air NZ Chairman John Key) and Nicola Willis (ie her Beehive bosses John Key and Bill English).

That tax switch of 2010 also included pain for ‘natural’ National supporters in corporates both here and overseas, as detailed in this 2010 fact sheet, including:

* the removal of depreciation for commercial building owners;

* the removal of a tax loophole between the trust rate and the top income tax rate for Trust-owning families;

* the removal of R&D and depreciation tax breaks for smaller companies; and,

* a crackdown on foreign companies avoiding tax on their local units by loading them up with debt.

The one ‘gain’ for corporates and wealthy families in 2010 was a cut in the corporate tax rate to 28% from 30%. The detail around the distributional neutrality came in this graphic from the fact sheet in 2010:

The tax switch of 2023 is at least spelled out to voters in the way National’s tax switch after the 2008 election was not. But it is clearly not nearly as fair, equitable or politically sustainable, in my view.

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

In housing, transport and infrastructure

Whangārei mayor hits out at Kāinga Ora amid social housing plans 1News Susan Botting

Chris Hipkins won't rule out future help for motorists if petrol prices go wild amid Israel-Hamas conflict Newshub William Hewett

'Questions need to be asked': Calls for heads to roll at Watercare amid sewage crisis Newshub Perry Wilton

The CoreLogic Cordell Construction Cost Index (CCCI) report for the September quarter found construction cost inflation was the lowest since the final quarter of 2020, with annual inflation of 3.4% vs 10.4% a year ago.

In climate, water and environment

Climate policies key to reducing cost of living too, experts say. RNZ Eloise Gibson

In a world first, Australian’s Competition and Consumer Commission (ACCC) approved Brookfield’s A$18.7 billion takeover of Origin Energy on climate grounds, saying the benefits of extra renewable investment would more than offset the costs to competition

In geopolitics

Israel readies for ground war in Gaza WSJ-gift

Finland says 'outside activity' likely damaged gas pipeline, telecoms cable Reuters

Dovish Fed officials boost Wall Street as bond yields retreat Reuters

China Says It Drove Away Philippine Navy Ship in Disputed Sea Bloomberg-$$$

In global and local markets, economies and business

Dovish Fed officials boost Wall Street as bond yields retreat Reuters

China Mulls New Stimulus, Higher Deficit to Meet Growth Goal Bloomberg-$$$

China Says It Drove Away Philippine Navy Ship in Disputed Sea Bloomberg-$$$

Chinese Copper Tycoon Goes Missing, Believed to Be Detained by Police Bloomberg-$$$

Cartoons 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 failure of yet another pre-fabricated house builder and a legal threat against our biggest council to force more greenfields development showed how our economy and society are now just a residential land market with bits tacked on. Thursday’s email.

* A CTU analysis of National’s tax cuts finds less than 3,000 households will get the top tax cut of $252/fortnight, surprising those who believed National’s (usually) carefully worded pledges of ‘up to’ $250/fortnight of tax cuts. Friday’s email. Friday’s email.

* Goldman Sachs warned National’s tax cuts could be inflationary and force the Reserve Bank to either hike again or keep interest rates high for longer than under Labour, while Auckland Council Mayor Wayne Brown warned National’s plan to remove Auckland’s regional fuel tax would trigger even bigger council rates hikes. Wednesday’s email.

* Auckland Council decided to borrow $11 million to buy a single large residential section (with house and pool) for $12 million in Manurewa to stop houses being built on it, arguing borrowing to buy land for future generations was a good idea, having argued earlier this year it needed to sell shares in Auckland Airport to repay debt. Tuesday’s email.

* Richie Poulton, the director of the world-leading Dunedin longitudinal study showing how devastating poverty in early life is, died last weekend, lamenting with his final words the lack of focus on solving child poverty in this year’s election debates. 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 spring, Auckland’s sewerage disaster, Winston Peters’ revival, and the micro-politics of an island in the Hauraki Gulf.

* 5.05 pm - 5.20 pm - Bernard, Peter and Cathrine Dyer talked about the record heat globally and in Aotearoa in September, and an emergency summit held by climate scientists about Antarctica’s shrinking ice coverage (see chart of the day below).

* 5.20 pm - 5.40 pm - Bernard and Peter and Robert Patman talked about the supports wobbling under Ukraine in the politics of the US Congress and Germany, along with a growing debate over whether AUKUS is a good idea.

* 5.40 - 6.00 pm - Then CTU EconomistCraig Renney joined the panel to talk about his analysis of National’s tax package showing less than 3,000 households would get the top tax cut of $252/fortnight.

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

Articles, news and podcasts referred to during the podcast include:

* Bernard mentioned a paper in the NZ Medical Journal on Friday that New Zealand’s covid response saved up to 20,000 lives;

* Cathrine mentioned data showing September was the planet’s warmest September ever by the massive margin of half a degree celcius (Copernicus);

* Peter mentioned a Chris Hipkins appearance on The Rest is Politics podcast with Alastair Campbell and Rory Stewart; and,

* Peter mentioned an article in the The New Yorker about behavioural scientists into lying being accused of lying.

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 we appeared this week

I interviewed Wellington-based online marketing expert Assia Salikhova for When The Facts Change via The Spinoff about using LinkedIn to grow and protect a business.

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

TL;DR: The failure of yet another pre-fabricated house builder and a legal threat against our biggest council to force more greenfields development are two more signs, if we needed them, that our economy and society are now just a residential land market with bits tacked on.

These two latest events again demonstrate the massive skew in our tax settings in favour of housing land ownership has so changed the DNA of our political economy that nothing really changes without the removal of that skew. They also show the election debate we’re having has yet again failed to address the three elephants in our societal room:

* residential land will have to be taxed and business investment incentivised to change the land-seeking, inequality-widening and low-capital-investment biases now embedded throughout our economy, politics and society;

* our infrastructure financing and taxation systems are totally broken and inadequate at both central and governmental level, yet no politicians want to have honest conversations with each other or voters about how to fix it by increasing taxes and/or user-pays charges; and,

* the bipartisan and accidentally-on-purpose Government policy settings enabling and encouraging population growth of 1.5-2% per annum through migration of guest workers dominates our economic and societal outlook, and remains undebated and unacknowledged.

Elsewhere in the news this morning:

* Christopher Luxon overtook Chris Hipkins as preferred PM in a 1News-Verian poll, which also confirmed National will need Winston Peters’ support to govern;

* The Reserve Bank played a very straight political bat in leaving the Official Cash Rate on hold at 5.5%, albeit with a slightly less hawkish bias around hiking rates again; and,

* Global temperatures in September averaged 1.8 degrees above pre-industrial levels and were a full half a degree celcius above the previous record high for a September (see chart of the day below), which climate scientist Zeke Hausfather described on X as “absolutely gobsmackingly bananas.”

Paying subscribers can see more detail below the paywall fold and hear more of my analysis in the podcast above. I’m happy to open it up for public listening, reading and sharing once there are 50 ‘likes’ and plenty of comments from paying subscribers saying it’s ok.

How NZ Inc works & why it won’t change until land is taxed

The dominant way that house builders, land owners, land bankers and households make outsized profits and capital gains in Aotearoa-NZ is to buy more land, preferably with a big mortgage, and wait. They don’t need to build a house efficiently, or any house at all. They don’t need to build a profitable business or invest in shares in someone else’s business. It’s always, always about the business of driving up land values and using mortgage debt to increase the leveraged returns, which aren’t available from other investments.

Home owners and land bankers just need that land zoned residential, and can then wait for the leverage, time and the failure of central and local Government to build the infrastructure to cope with regular 1.5-2% population growth to deliver the rents and untaxed capital gains to make the owner far richer than they ever be from saving wages or profits.

Working in a job or profession or investing in a business or managed fund is a mug’s game, compared to the leveraged, spectacular, government-guaranteed, ongoing and tax-free capital gains on residential land. The differences in incentives between investing equity in leveraged-up land and investing equity in unable to be leveraged stocks or business investments are so vast. In other countries, capital gains on land and other asset value increases are taxed, while savings in funds that invest in businesses receive tax incentives, either on the way into the fund or in the fund itself. Savings in our investment funds are taxed throughout.

This royally skewed set of incentives is why our housing market is worth NZ$1.6 trillion, which is four times our GDP (NZ$400 billion), 10 times the value of our listed companies (NZX total market value of $160 billion), eight times larger than our total managed funds sector ($200 billion including NZ Super Fund and ACC) and 16 times larger than our only-very-marginally-incentivised household pension funds (Kiwisaver at $100 billion). For comparison, Australia’s housing market is worth the same four times GDP, but is worth four times stocks, three times and funds under management. In the United States, its housing market is worth twice GDP, once the stock market, twice funds under management and 7.5 times its comparable ‘subsidised’ household pensions market, which is known as 401k in America, rather than KiwiSaver.

This dark heart of our political economy shows up regularly in all sorts of ways, in particular the focus of investors, developers, politicians and equity-rich home owners on greenfields development of clearly-titled and mortgageable plots of land. An actual occupied house on the land is a bonus, but not necessary to be exposed to these gains.

The spectacular gains on land values mean they are the main driver of profit for developers and builders selling sections and/or house and land packages. The developer and/or builder does not need to create an efficient or large-scale system for building homes. They can happily exist on the tax-free gains from rising land values.

These financial incentives are the reason why our house-building sector largely remains a collection of small-scale family-run operations that can afford to bumble along because they can access equity in family homes or land to get them through the ups and downs of markets. Corporates are also unable to access the tax advantages and easy and cheap mortgages that owner-occupiers and rental property investors can get. It means we don’t have an efficient, large-scale house-building industry that uses pre-fabrication to lower costs and improve quality. Why invest in improving your business when you’re better off using the money to buy more land?

And that’s just the start of the perverse outcomes

The other unintended but economically and societally devastating consequences of this tax and leverage incentive imbalance include:

* New Zealand homes being built of cheaper materials and not being built to last over 100 years to reduce long-term running costs because the cost of land is so high that there is proportionally less cash available to spend on the building;

* cheaper and faster-to-decay building materials increase health, education and lost productivity costs, but are externalised to the value of the building because the costs are picked up by the taxpayer at large;

* The capital value of the building deteriorates over time, rather than increases, while the land value continually appreciates, which incentivises buyers and investors to leverage much more on the land than the building and to spend the least on making the building last and be as healthy as possible;

* Banks are much more focused on mortgage lending than business banking because the risk adjusted returns on mortgages are much higher in a market that generates vast tax-free gains for property owners;

* the focus on using surpluses from work and business profits for deposits for residential land acts to starve businesses of capital for growth and productivity;

* the focus on having a salary or wage to obtain bank approval for a mortgage reduces the willingness of younger workers to start or invest in their own businesses;

* the need for home owners to maximise their disposable regular income and the need to have mortgage rates as low as possible to service the maximum amount of debt creates a political incentive to always push for tax cuts and tax credits that increase disposable income available for servicing debt on multiple properties;

* the need for increased demand for rental properties and the desire to reduce competition for that rental property creates extra demand in the political economy for population growth from temporary migrants without the necessary infrastructure investment to enable more house building;

* the demand for tax cuts and to limit rates increases by councils creates a further perverse feedback loop that is a win-win for land owners – lower taxes and rates revolts further limit the ability of the Government and councils to pay for the underlying infrastructure needed to build more homes;

* the preference by banks for clearly delineated, freehold plots of lands to support mortgages pushes homebuyers and investors to buy stand-alone house and land packages, rather than to buy apartments, where land title is divided, possibly uncertain and a smaller portion of the value of the overall house-and-land cost;

* the immense scale of the tax-free capital gains made mean there is a lot more for the winners to lose if the incentive structures are changed, and it means those ‘on the ladder’ realise they need ever larger and more-leveraged gains to ensure they can help their own children get deposits;

* the sheer scale of the deposits now needed to ‘get on the ladder’ has created a political incentive to lobby for the use of pension funds (KiwiSaver) to bolster deposits; and,

* the preference for stand-alone and uncomplicated plots of land creates the political incentive for more greenfields land development, rather than brownfields land development, which tends to see more apartment developers, which are in turn less attractive to investors because of their relatively low exposure to land price appreciation.

Which in turn turbocharge the following feedback loops

The end results of these mismatched and imbalanced tax incentives, feedback loops and perverse outcomes include New Zealand;

* having the most expensive rents in the world relative to incomes and the highest proportion of poor renters in the highest amount of rental stress;

* having one of the lowest public infrastructure and business investment rates in the OECD because of the need for low taxes and to put surpluses from wages and profits into residential land, which starves the economy of investment in roads, transport, machinery, business innovation and intellectual property that would increase productivity and real wages;

* having one of the lowest number of total houses per 1,000 head of population in the world, along with the lowest number of new builds in the world, relative to population growth; and,

* having record-high amounts of skin infections, chest infections and diseases of poverty in the developed world because of over-crowding, poor housing quality and rent stress.

The charts that tell the story

Low housing stock and high population growth…

Plus ever-growing demands for tax cuts and low public debt…

Plus the resulting lower-than-forecast and falling infrastructure investment…

Equals slower-than-needed growth in housing supply…

On top of the resulting poor business investment…

Leads to poor productivity growth and lower real wages…

Also, increased rent stress and higher deposits drives longer work hours…

You get the picture. Rinse and repeat.

Until that fundamental incentive changes, the various attempts to tweak our way to a solution are just more fudges, nudges, kluges, deflections, dissemblings and distractions.

Chart of the day

‘In my professional opinion, this is absolutely gobsmackingly bananas’

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: Richie Poulton, the director of the world-leading Dunedin longitudinal study showing how devastating poverty in early life is, died yesterday. With his final words, he lamented the lack of debate about solving child poverty in this year’s election debate.

Elsewhere in the news today:

* Winston Peters promised to sack Jack Tame in an interview with Jack Tame;

* Chris Hipkins is likely to have to dial in his election campaign appearances this week because he caught covid;

* New Zealand’s farmers face massive Carbon Border Adjustment Mechanism (CBAM) import taxes from the EU if a National-ACT Government fails to push up the carbon price over NZ$100/tonne; and,

* National is planning to switch indexation of benefits back to price inflation from wage inflation to save $2b, but is ignoring potential savings of $12b if NZ Superannuation was also switched to price indexation.

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

Top five in our political economy this morning

‘What do we need to address most importantly? Poverty.’

Richie Poulton, the researcher behind the world-famous Dunedin longitudinal study, died yesterday at the age of 61. He is inarguably the most-qualified person to comment on the causes and effects of poverty in Aotearoa. John Campbell wrote an obituary via 1News that included Poulton’s final comments on poverty, and how it’s viewed in this election.

I asked Richie whether the study has shown if there’s one thing in childhood, perhaps above all others, that steepens the climb to a healthy and happy adult life.

“Poverty,” he said.

“What was most important about that original finding,” Richie Poulton told me, “was that you can't really undo what happens during childhood. So the experience of intense or regular poverty is long-lasting.”

Anyone familiar with Richie Poulton knows his capacity to describe the science of Dunedin’s longitudinal study in terms that are richly human. But on that August afternoon he was making it political, too.

“This is where my research enters the personal fray,” he said. “This election is not going to be focused on children in poverty, because we're bored of that. We're tired of that. We're sick of that. We've tried that, haven't we? Have we tried that?”

“Yet, what do we need to address really importantly, really importantly?” he asked, as if out beyond the waves now, looking back to a fading shore. And he answered his own question with a single word. “Poverty.” John Campbell’s obituary of Poulton via 1News

Here’s the longer piece aired last night on TVNZ’s Sunday programme.

The one where Winston Peters promises to get rid of Jack Tame

This is just plain ugly. It’s a trainwreck of an interview that piles into a car-crash in slow motion, with a bad imitation of a mafia don thrown in for bad measure as Winston Peters threatens to sack Jack Tame mid-interview.

‘Bugger’: ‘Chippy’ loses his ‘chipper’ to covid on the day voting starts

PM Chris Hipkins summed up how he felt about testing positive for covid yesterday in a social media post — “Bugger.” He’ll now isolate for five days or as soon as he tests negative, his office says. That means he’ll probably miss tomorrow night’s leaders’ debate in Christchurch hosted by The Press, the editor of which said they were looking at the logistics of possibly having Hipkins zoom in.

This was his second-to-last chance to land blows on National Leader Christopher Luxon before the election on the 14th (!). And voting starts today.

What failing to meet Paris targets and a low ETS carbon price means

Be careful what you wish for, is a lesson the likely incoming National-ACT Government should take seriously. It is going out of its way to promise fewer measures to reduce emissions and has been vague about how Aotearoa will meet its Paris Target Agreements. It has dismissed Labour’s suggestion that allowing the ETS to do all the heavy lifting by ramping up the carbon price.

But Christopher Luxon and Trade spokesman Todd McClay should have a look at what’s happening in Britain. It’s now dawning on Britain’s businesses that last week’s abandonment by UK PM Rishi Sunak of various emissions reductions measures and the nation’s zero carbon target will actually hurt them badly.

That’s because the EU’s Carbon Border Adjustment Mechanism (CBAM), which New Zealand’s exporters are also subject to through our FTA with the EU, works by taxing imports through the difference between Europe’s carbon price and the original destination of the imports.

Here’s the detail in these article, and there’s a chart below. British exporters face hefty EU carbon tax bill after Sunak weakens climate policies - FT-free

Europe’s War on Carbon Goes Global as Border Tax Comes Into Play Bloomberg-free

By the way, New Zealand’s carbon price is NZ$65/tonne (€37/tonne), which is less than half the European price currently of €85/tonne. ACT, in particular, wants to dump our adherence to Paris. Perhaps it will need to check with its farmer supporters first. RNZ

Why not apply the indexation change to all receiving benefits?

One of the features of National’s fiscal plan on Friday was the confirmation of a return to inflation indexation from wage indexation for people on the main benefits, but not New Zealand Superannuation. The measure saves $2 billion over four years. NZ Super at $19 billion per year is a vastly larger expense than benefits at $3.5 billion.

National could easily pay for its tax cuts by indexing NZ Super to inflation…just saying.

The unfairness could not be more obvious. Here’s what happened before benefits were indexed to wages, rather than inflation. It shows what happened to benefits for families with children.

Just briefly in news and deep-dives elsewhere

Top five news in Aotearoa’s political economy

Wealth tax, street level rail: Green Party unveils policy priorities, independent fiscal review 1News

Labour Govt to add 100 new public EV chargers across the country 1News

National releases 100-day action plan if elected. Labour says repealing Three Waters would drive up ratepayers' bills. 1News

ACT promises to remove the January 2 public holiday, abolish Fair Pay Agreements, and stop future increases to the minimum wage. 1News

Te Pāti Māori candidate's home invaded in 'politically motivated attack' The party said Hana Maipi-Clarke's home had been targeted three times this week, her father later confirming a fourth incident happening tonight. 1News

Top five scoops, deep-dives and interviews in Aotearoa

John Campbell: Poulton, poverty and the real way to get tough on crime. Sanction beneficiaries now and watch their children’s troubled lives unfold for decades. 1News

NZ First, ACT candidates face scrutiny over Nuremberg trials, New World Order content Newshub

Inside the election trenches, by Kevin Norquay in The Sunday Star Times-$$$

Court Theatre staff blow whistle on ‘toxic’ culture. More than 30 staff have quit since chief executive Barbara George started five years ago - the equivalent of 100% turnover. The Press-$$$ Shannon Redstall

John Key’s warning for Luxon: ‘You’re always one crying baby away from a negative story’. Fifteen years after he took his own first shot at being PM, Sir John Key has some top tips for his protege Christopher Luxon. Sunday Star Times-$$$ Adam Dudding

Housing, transport, water and infrastructure

Residents fight to stop social houses in a wealthy Auckland enclave. Homeowners of The Gardens in Manurewa say a social housing project will bring in crime from surrounding suburbs, ruining their "lifestyle". Stuff Jonathan Killick

Kainga Ora’s shared ownership scheme stops taking applications amid surge in first-home buyers Newshub Zane Small

As drought and water restrictions loom, a scrap over water meters is ramping up. Wellington’s water issues are well-publicised – uncontrollable leaks and serious questions about how the costly fix will be funded. But can the councils find common ground? The Post-$$$ Nicholas Boyack

Meters still reducing water use for Kāpiti, 10 years on When water meters were first suggested in 2012, like Wellington, the district was staring down the barrel of serious water shortages. A decade on, high water users have reduced their consumption by 70%. The Post-$$$ Janet Holborow

The woman trying to solve the ‘gnarly problem’ of council housing. Angelique Jackson almost lived in council housing, now she’s the chief executive of a new entity responsible for its 3000 tenants. The Post-$$$ Ethan Te Ora

Top five in poverty, inequality, health, wealth and income

Food Industry lobby pulling the strings? We don’t know what we don’t measure. NZ Herald-$$$ Sasha Borissenko

More Kiwis working multiple jobs to make ends meet. Kiwis are hustling harder than ever, with more than 216,000 people now working a second job to supplement their nine-to-five. Stuff Esther Taunton

Inside the front door to New Zealand’s injecting drug users. After 35 years of preventing infection, New Zealand’s globally pioneering needle exchange network is having a shake-up, after a critical review. Sunday Star Times-$$$ Nikki Macdonald

‘They feed off each other’: Fluoride politics come roaring back with a post-Covid flavour. Fluoridation has convulsed local politics for decades. But a new law and post-Covid mistrust in public health measures are likely to bring the issue back to a town near you. The Press-$$$ Charlie Mitchell

If that’s the solution, was there ever a crisis? National released its fiscal plan on Friday, and its rescue recipe was mild, to say the least. Sunday Star Times-$$$ Vernon Small

Top five climate news

Home solar systems or big solar farms, which make most sense? The Post-$$$ Tom Pullar-Strecker

Time to sound the managed retreat? Whoever forms the next government will receive a poisoned chalice in view of the increasing impacts and public awareness of climate change. The Post-$$$ K Gurunathan

Hawke's Bay, Gisborne fishing industry faces challenge as debris renders areas unfishable Newshub

Why this Australian seaweed farmer is setting his sights on Europe AFR-$$$

The shifting flows of our overheated oceans WSJ-free

Top five in geopolitics

House Speaker McCarthy faces ouster threat for avoiding shutdown Reuters

Anti-Ukraine populist, Robert Fico, wins election in Slovakia Reuters

AUKUS pact ‘is doomed to failure’ The Australian-$$$

Crackdown on shonky colleges and education agents in Australia The Australian-$$$

Top five in politics, economics, markets and business

China new home prices tick up in September, ending four-month decline, survey shows Reuters

Apple to address iPhone 15 overheating issues win iOs 17 software update WSJ-free

China Stock Investors Say Worst Yet to Come in Property Crisis Bloomberg-$$$

Weekend profile: Lina Khan, America’s top trustbuster The Economist-$$$

Does China face a lost decade? from The Economist-$$$

Top scoops and deep dives globally

Adam Tooze: Germany must invest to neutralise the far right threat FT-free

The debt-fuelled bet on US Treasuries that’s scaring regulators FT-free

The Star Witness at Sam Bankman-Fried’s Trial: His Top Deputy and Ex-Girlfriend. Caroline Ellison’s testimony has the potential to be particularly personal and raw WSJ-free

Artificial sweeteners: the health controversy that will not go away FT-free

Wolff claims credit for Rupert Murdoch’s sudden retirement AFR-$$$

Limits to Growth reports vindicated as Earth faces overshoot and collapse. The critical lesson of the Limits to Growth reports – that there is no such thing as infinite growth on a tiny, fragile, finite planet – has escaped our consciousness The Irish Times Sadhbh O'Neill

Cartoon of the day

‘We’ll only cut the benefits of parents by half. OK?’

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:

* Labour presented a climate manifesto that aimed to claim the high ground on climate action vs National, but did so at the same time NZTA/Waka Kotahi cut $50 million from funding for cycleways from the Climate Emergency Response Fund. Friday’s email.

* National and ACT unveiled policies to label and sanction beneficiaries, just as fresh research emerged showing the need for many, many more social houses to deal with a decades-long housing crisis. Wednesday’s email.

* The RBNZ looks set to rain on National-ACT’s victory parade by hiking on November 29 to cool down a housing market threatening to surge again as soon as the victory is confirmed. Tuesday’s email.

* National Leader Christopher Luxon said he would talk to NZ First Leader Winston Peters after the election if he needed to. We talked about that in last night’s Hoon.

* Labour pledged to build 6,000 more state houses, while National said it would stop with the 3,000 currently being built by Kainga Ora. More than 40,000 are needed. 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

* 5.05 pm - 5.20 pm - Bernard, Peter and Cathrine Dyer talked about an IEA report showing a 30% cut in fossil fuel use is needed in six years to keep global warming below 1.5 degrees.

* 5.20 pm - 5.40 pm - Bernard and Peter and Robert Patman talked about Ukraine’s latest strikes on Russia and the prospects for a summit between Xi Jinping and Joe Biden.

* 5.40 - 6.00 pm - Then Josie Pagani joined the panel to talk about the election, politics and the return of Winston Peters.

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 we appeared this week

I interviewed Alex Birch from XYSense on Wednesday for When The Facts Change via The Spinoff. We talked about how office life is changing after covid.

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.

Some fun things

Cartoon of the day

Ka kite

Bernard

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TL;DR: The election campaign took an ugly turn yesterday, and in completely the wrong direction. All three of the parties on track to win Government in 17 days time ramped up their policies to label and punish beneficiaries as undeserving bludgers.

Instead, they should have been proposing how to vastly increase the number of social houses in Aotearoa faster than our population is rising, and how to improve the healthiness, affordability and tenure security of our private rental stock. That’s evident in new research referred to in my interview in the podcast above with Arthur Grimes showing state house tenants are just as happy as home owners, and much happier than private tenants because private rentals are less secure, unhealthier and much too expensive.

Grimes said at least 25,000 new homes are required to catch up with past underbuilding, which has led to over 25,000 households now being on the public housing waiting list. Labour is promising to build 9,000 over the next four years, while National is promising an extra 3,000. If the social housing stock had kept up with population growth since 1991, there would be 42,000 extra homes.

Meanwhile, an extra 96,200 people just arrived in Aotearoa in the last year, with National and Labour promising to further loosen migration settings to boost the labour force competing with beneficiaries for jobs, pump up GDP, increase tax revenues and reduce Government borrowing.

Here’s Arthur’s comments on what’s required (bolding mine):

The public housing wait list is over 25,000. That's households. And most of those will involve children. And that's only the people who are in serious housing need, by definition, so that's a bare minimum. And while we've increased the number of public housing houses available in recent years, population has increased a lot over recent decades.

So it's absolutely critical that we increase the public housing stock faster than the population is increasing. And that's been a major problem in New Zealand where social housing…if it has been increasing, it's still been increasing more slowly than the population.

We haven't been building enough houses and haven't been for two decades at least. So this has been just an extraordinary problem in New Zealand of constraints on housing supply of all sorts, whether it's public housing, private housing, housing for rentals, housing for owner occupation. Successive governments and local governments have really been very, very poor in terms of ensuring the housing stock is increasing fast enough to house the population that we have and house them satisfactorily and house them at a price that they can afford, rather than being the most expensive in the OECD.

I think we've got to work out what our priorities are as a society. It's one of the most basic needs in Maslow's hierarchy of needs — shelter. And shelter is not something that you can import. You can't get it from overseas. It's something we have to provide ourselves. And so whenever we've got some kind of regulation law that's restricting our ability to increase the amount of shelter we provide, we've got to think, is what we're doing making people unable to meet their very, very basic need of shelter?

There needs to be a drastic change to the regulatory structure in terms of house building. It's extraordinary that we have protection of land for growing potatoes in favour of housing children. I just find that an extraordinary priority, that people would have that is better to grow potatoes than to house families with children. That just doesn't make any ethical sense to me.

But that's just one example. We have so many of these sorts of examples in New Zealand. And I think we've got to get our head around the idea that actually housing is just about the most basic need of anything. And we need to make sure that we have enough houses.

We have to understand that there are people who find it difficult to live in society. And that's the group in particular, for whatever reason, where public housing is absolutely critical because they're just not going to really successfully negotiate the private housing system. Arthur Grimes in the interview above.

‘Housing for the poor? Yeah…nah. Let’s label and punish them instead’

Instead, National and NZ First pledged to categorise and penalise beneficiaries on the assumption most are bludgers, and without any evidence it works to improve anything.

"Do you have any evidence that sanctions shift that dial to get people back to work?" NZ Herald journalist Derek Cheng to National Leader Christpoher Luxon. In response, Luxon said: "I think they will." HT Ben McKay via X

In fact, sanctions like this achieve the opposite, as repeated studies here and overseas show.

“Worth recalling that the latest, most comprehensive evidence shows sanctions absolutely do not get people back to work more quickly – indeed they may *slow down* that process, as well as causing misery to people and their children.” Poverty and wealth researcher Max Rashbrooke via X.

Paying subscribers can see more detail below the paywall fold and more of my analysis in the podcast above. I’ve put the paywall quite low today. If paying subscribers would like it to go wider, leave a comment below, or ‘like’ the article. I’ll take off the paywall once we have more than 50 likes.

Just briefly in the news this morning

Top five news overall