The Kākā by Bernard Hickey

TLDR: This is how politics works in the real world: outrage erupts over the prospect of fuel taxes being used to build cycle paths, so that plan is dumped within 12 hours, and ‘Ford Ranger Man’ wins again.

New PM Chris Hipkins jumped in yesterday to overturn a Ministry of Transport strategy to prioritise transport spending around climate emissions reduction over the next three years, rather than road repairs and building new roads.

That came after the NZ Herald led yesterday with the detail of the inevitable prioritisation in the proposed strategy of spending fuel tax and road user charge revenues on public transport, cycling and walking, rather than repairing roads and building new ones.

The eruption of outrage online, on talkback radio and from Opposition politicians about the ‘war on cars’ and that ‘cycling isn’t how ordinary Kiwis get around’ was just as inevitable.

Transport Minister Michael Wood and Hipkins were in full backpedal mode by the end of the day. It felt like an action replay of Wood’s plan for a new cycling and walking bridge over the Auckland Harbour bridge. It was also practically gone by lunchtime once it was framed as ‘instead of’ a new bridge or tunnel for cars.

I include more detail, reaction and analysis below the paywall fold for paying subscribers and in the podcast above. I have made an early decision to open this one up to the public early.

Elsewhere in the news this morning

* Chris Hipkins was much less concerned last night and this morning about political comments from ACC and Pharmac Chairman Steve Maharey in newspaper columns than the LinkedIn comments that got Rob Campbell sacked;

* Hipkins said of Maharey’s more contrite approach: “I don’t ask for perfection but where there has been a breach of the code or where there has been a perception of a breach of a code, I think if somebody is open to receiving feedback on that and open to changing as a result of that, I think that’s all we can ask of them.”; NZ Herald

* The Insurance Council estimated Auckland’s Feb 26 floods and Cyclone Gabrielle would generate claims of over $1 billion, while Watercare estimated damages at over $250 million;

* The land under Christchurch’s new $317 million sports stadium has sunk another metre, delaying construction by at least another five months; The Press

* The AA+-ratied Wellington City Council has decided not to fund $8 million worth of requests for funds from Wellington Water to fix broken pipes, preferring not to either increase rates in a way that upset ratepayers or increased borrowing in a way that forced a credit rating downgrade; The DomPost

* The AA-rated Auckland Council’s Eke Panuku development arm and its Tātaki Unlimited regional development arm have confirmed job cuts are already starting as part of the spending cuts planned to reduce a $295 million budget ‘deficit’ caused by covid and the floods, which officials decided could not be funded with borrowing because…no good reason…as S&P reaffirmed Auckland’s rating six months ago and described the council’s finances as improving; and, NZ Herald

* Private equity firm TPG Capital staged an on-market raid last night to buy 10% of the shares in Australian-based funeral home owner InvoCare, which is also Aotearoa’s largest funeral home owner, with 50 homes that conducted 7,628 funerals, the AFR-$$$ Street Talk column reported this morning.

Ford Ranger Man runs over Michael Wood. Again.

Here’s an article to send to all your relatives and friends who marched in the school climate strike protests on Friday. They may have felt heard, or at least that they might have nudged the political consensus a little. Not so fast.

‘Ford Ranger Man’ always wins because both Labour and National believe that the key swinging median voters are home-owning, ute-driving, boat-owning families in the outer suburbs of our biggest cities and provincial towns who have no time for taking the kids to netball practice in cargo e-bikes. See more from me on ‘Ford Ranger Man’ here from last month.

Here’s some examples of the new culture war rhetoric (bolding mine) that erupted yesterday after Michael Wood was reported on the front page of the NZ Herald to be considering using fuel taxes to build cycleways rather than repair roads, and may even increase the taxes overall.

Seymour opposing Wood’s modeshift comments

“In the meantime the people who are trying to get their kids from hockey to the doctor, while picking something up from the dairy on the way home find life becoming increasingly difficult as parking disappears and roads degrade.

“It is at odds with the Government’s own policy as well. Remember how the Government made tradies driving utes subsidise new Teslas? As unfair as that policy is, it is even more pointless when the low emissions vehicles Labour is trying to coax people into also can’t find a park. People will probably need a 4WD to handle New Zealand’s declining roads.” ACT Leader David Seymour on Transport Minister Michael Wood’s comments on modeshift via NZ Herald.

Simeon Brown declaring war on the war on cars

“Labour is going to steal the money New Zealanders pay via petrol taxes to fix potholes and maintain the roads and instead use that money for cycleways, despite only 1 per cent of people travelling to work on a bike, according to the 2018 census, compared with over 70 per cent travelling to work in a vehicle.

“This is unacceptable and proves that Labour is more focused on its ideological approach to transport, rather than building the infrastructure that New Zealanders need.  

“A National Government will immediately halt this policy and rewrite the Government Policy Statement on Transport. We will restore the primary purpose of the National Land Transport Fund which is to build and maintain the roading network and we will prioritise reducing congestion and travel time to ensure Kiwis can get around more easily.” National Transport Spokesman Simeon Brown.

By the post-Cabinet news conference at 4pm, Hipkins was asserting his ‘bread and butter’ approach on climate change, saying the storms had changed the game so the Government had to focus first on repairing roads. Here’s excerpts from the transcript: (bolding mine)

Hipkins on whether Wood’s comments were the Government’s

Michael Wood was speaking, of course, to the draft that was previously released. That’s generally what Ministers do until there’s been a change in that. I think there will be a change.

Hipkins on whether fuel taxes would rise

You will see that my track record here has been to reduce taxes on fuel, particularly at a time when fuel prices are otherwise higher than they have been previously. I don’t intend to increase them at a time when we are actually trying to decrease them.

Hipkins on whether more resilient (stronger) roads were now a priority over reducing emissions:

I think you’ll see resilience and the resilience in the transport network being a much, much bigger priority now. It was in the previous priorities, but I think you’ll find it’ll be front and centre of the final policy statement when it’s released

Hipkins on whether climate change would still be the top priority:

Media: Prime Minister, so the emergency situation aside, will climate still be the top priority?

PM: Climate change is informing all of the Government’s decisions across a whole range of policy areas, and of course it will inform our decisions in transport as well.

Media: Will it be the top priority?

PM: Like I said, resilience is going to be probably the top priority, but Cabinet hasn’t made those decisions yet.

Here’s more of the full exchange on this prioritisation issue if there’s any doubt on Hipkins’ direction.

Media: Are you scared—is this Government afraid, you know, of the political repercussions of putting climate so high up on that priority list?

PM: Look, all Governments have to deal with the reality that’s right in front of them, and one of the realities that’s right in front of us is that we have a transport network that has shown to be wanting at a time when we’re faced with a major catastrophe, and we have to put that front and centre of our decisions around transport planning and transport funding.

Media: Is climate change going to be front and centre on your transport planning and building?

PM: It’ll still be in there but, as I’ve said, resilience is going to be right at the top of the priority list.

Resilience is the code word for repairing roads with fuel taxes and road user charges, rather than building many more cycleways, walkways and busways.

The short-term political pain wins again over the longer-term political, economic and environmental benefits of mode shift.

Scoops and enlightening deep dives

Lincoln Tan reported for the NZ Herald last night that 26,000 applicants for the covid recovery residency visa were still waiting for approval, in part because many Chinese applicants were subject to national security checks that one agent described as ‘racial profiling.’

Debbie Jamieson reported for Stuff this morning that tonight’s census looks set to miss people staying in Airbnbs.

The Pentagon is worried Chinese-made cranes in western ports could be used for sabotage or spying, the WSJ reported last night. Ports of Auckland imported three new giant cranes from Shanghai in 2018.

Quotes of the day

‘The central banks will have to blink,’ says Roubini

“Central banks are in a debt trap and cannot keep increasing interest rates. There’s so much debt in the system that if they raise rates enough to fight inflation there will be a real hard landing that leads to severe debt defaults.

“There would be economic and financial crashes. So central banks will have to wimp out.” New York University Professor Nouriel Roubini talking to the AFR-$$$’s John Kehoe.

The ECB boss is not planning on blinking

“Inflation is a monster that we need to knock on the head.” ECB President Christine Lagarde in an interview published on Monday in Spain’s El Corro via FT-$$$

Milestones and Movers

Chorus announced that former 2degrees CEO Mark Aue will become Chorus’ CFO from April 11.

Profundities, curiosities, spookies and feel-goods

Fun things

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

TLDR: This week’s news in geo-politics and the political economy covered on The Kākā included:

* National released its plan to repeal Three Waters and push the responsibility, the bill and the blame for building infrastructure back down to councils, with Christopher Luxon pledging the plan would not increase rates, although he acknowledged councils may lift water charges; Monday’s email and podcast

* Christchurch City Council finally agreed a district plan that included some elements of the Government’s bi-partisan ‘Townhouse nation’ housing densification rules, but councillors took out more than a third of the expected new housing supply with a special ‘sunlight access’ clause and limiting densification in areas with poor bus services. Meanwhile, Auckland Council agreed to ask the Government for a delay of the rules (see more below); Thursday’s email and podcast

* Rob Campbell was sacked as chair of Te Whatu Ora and the Environmental Protection Agency after he criticised National’s Three Waters policy in a LinkedIn comment that ministers said breached impartiality guidelines for civil servants, although Campbell said his sacking was more to do with the Government’s discomfort with his very public support for co-governance; Friday’s email and podcast

* Chief Justice Helen Winkelmann and Parliamentary Commissioner for the Environment, Simon Upton, wrote scathing submissions about the two new bills designed to replace the Resource Management Act (RMA), describing them as overly complex, vague and vulnerable to a flood of litigation after being passed through Parliament in their current form; and, Friday’s email and podcast

* The Reserve Bank’s Chief Economist Paul Conway said he supported the idea of a market study of banks by the Commerce Commission to find out more about whether rising profit margins are a source of inflation. Monday’s interview and podcast with Paul Conway.

What we talked about on the ‘hoon’

In this week’s podcast above of the weekly ‘hoon’ webinar for paying subscribers at 5pm on Friday night, I talked with co-host Peter Bale and special guest Robert Patman about:

* Friday’s climate strike marches and actions by students;

* the debates about whether the United States is responsible for the Nordstream explosions;

* whether covid escaped from a lab in Wuhan;

* the latest on the United States’ warning it would sanction China if it supplied weapons to Russia for its war in Ukraine;

* the latest signs Britain is about to join the CPTPP after finally doing a deal to resolve its disputes over the Northern Ireland trade border with the EU; and,

* the revelations in court documents about Rupert Murdoch's decision not to stop Fox News commentators from repeating lies about the use of Dominion voting machines to 'steal' the 2020 Presidential elections.

Other places I appeared this week

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 produced my weekly When the Facts Change podcast for The Spinoff on how rising corporate profit margins are fuelling a profit-price spiral here and overseas.

I talked with Jesse Mulligan on RNZ’s Afternoons programme on Wednesday about banks launching a new mortgage war through 4.99% deals with brokers.

I also talked with Jane Patterson for RNZ’s Focus on Politics about National’s Three Waters proposals. It’s not online yet, but I’ll update this later in the day when it arrives on RNZ’s website.

Longer reads and listens for the weekend

Here’s a few useful longer reads, scoops and podcasts for paying subscribers for the weekend.

Fun things

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

TLDR: I interviewed Reserve Bank Chief Economist Paul Conway soon after the central bank announced it had decided to go ahead with a 50 basis point hike in the Official Cash Rate to 4.75%, as expected, but also after some had called for a pause to assess the damage from Gabrielle. The full interview is available for all in the podcast above.

Conway detailed the Reserve Bank’s initial forecasts that Gabrielle would increase CPI inflation by 0.3% in each of the next two quarters and increase GDP by around 1% in the coming years.

We talked about:

* the nature of one-off shocks that the Reserve Bank can look through, including Gabrielle’s short term effects;

* whether there is just as much of a risk of profit-price spirals in Aotearoa as there is of wage-price spirals (spoiler alert: the data on profits isn’t good enough to say…yet);

* how the wages are negotiated now vs the last time inflation was signficantly above 2% for an extended period in the 1970s and 1980s (spoiler alert: unions had more power to agree big and fast pay increases back then); and,

* how the way the Government funds its Gabrielle spending will work with (or against) the Reserve Bank’s efforts to slow inflationary pressures in the economy.

We also talked about the special topics in the Monetary Policy Statement (pages 28-34), which showed how non-tradables inflation is becoming increasingly connected to international inflation, and just what is happening with wage inflation in different sectors.

This was the most interesting chart in the MPS in my view.

It begs the question about just how much the Reserve Bank can change the course of inflation here when both the tradables and non-tradables inflation is at least correlated with international inflation pressures.

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

TLDR: National has confirmed it will repeal Three Waters legislation and disestablish the four new water entities set up under the Labour Government’s reforms.

National would replace them with a new water regulator and the hope councils will voluntarily charge for water and create their own larger entities able to borrow in their own right to pay for infrastructure.

In effect, National wants to push the political pain of applying water charges and extra borrowing down to council level, but create a new centralised bureaucracy that tries to force local government to plan and invest properly without ‘overcharging’ for water. The end result is denials, delays, deflections and dissembling by local and central Government politicians that means not enough infrastructure is built for way too many people, without voters being able to pin the blame on any one politician at any one time. That’s little different from Labour’s ‘plan’.

National announced its policy on Sunday and Local Government Spokesman Simon Watts pledged in this Q+A interview that council rates would not increase relative to the Three Waters plans or the status quo. National made no commitment to increase central Government funding for water and said central Government would instead use a new regulator in the Commerce Commission to assess whether councils were adequately planning for and funding their networks to cater for growth.

In my view, National’s approach retains many of the magical thought processes of the current Labour Government ‘plan’ for the local water and transport infrastructure needed to cope with the fastest population growth in the developed world. Effectively, there is no ‘plan’ or even an acknowledgement of how fast our population could or should grow, or a realistic assessment of the existing deficits, the future needs or the real requirements to fund that infrastructure through charges, taxes and Crown debt.

Labour’s Three Waters policy suffers from many of the same flaws. It pushes those politically difficult decisions about charges into non-elected bodies designed to borrow from ‘structurally-separated’ balance sheets that create the impression the debt is not the responsibility of either taxpayers or ratepayers. Neither is true, and the fiction is a non-fiction from the point of view of ratings agencies and bond investors. They see the central Government as ultimately guaranteeing the debt anyway and are happy to charge a hefty premium of around 50 basis points to allow politicians to say the debt is not on any public balance sheet. Over time, that represents billions of dollars in extra cost to protect a political fudge that ratings agencies and bond investors see right through anyway.

The irony of the ‘balance sheet separation’ idea is that it was designed in an era when both parties aligned with a gross debt ceiling that excluded such vehicles from their calculations. Since then, the Labour Government has adopted a ‘net debt’ ceiling that includes these state-backed vehicles anyway. That’s the reason why last year the Government quietly decided to wind up Kainga Ora’s own ‘off-balance-sheet’ vehicle’ late last year and resume borrowing via the Crown’s vanilla borrowing programme. That is the most efficient and simple and liquid way to fund public infrastructure.

The ‘plan’ from both sides of politics is to:

* not acknowledge the likely scale of the population growth and the need for repairs and new infrastructure to provide enough housing, clean water and necessary emissions reductions;

* not address the scale of costs that have to be born both publicly and through demand-management-style water and congestion charges to effectively cater for growth; and,

* to deflect all the inevitable political pain of water charges and higher debt all down to existing councils while also applying centralised control through an at-arms-length bureaucracy that allows central Government politicians to claim councils are being policed.

This bi-partisan magical thinking will inevitably mean the status quo of under-investment and constant pleas to limit rates growth will ensure nowhere near enough capacity for population growth is built.

That suits both main parties and most median voters because it means they get continued low taxes and rates (or at least lower than needed to fund the necessary infrastructure), and continued housing shortages that can be weaponised in ever-rising residential land prices once fast population growth and falling interest rates are added back into the mix.

‘We can have it all. Until we can’t. And I’ll be gone by then’

The guts of all this is that both National and Labour do not want to increase taxes or debt to fund the infrastructure growth that will be needed for the population growth they will both unleash with high-migration population policies that go unacknowledged and unplanned.

From a home-owner point of view, it is a beautifully magical accident of bipartisanship. They keep rates and taxes low to ensure low interest rates and insufficient residential land supply, which in turn generates more leveraged and untaxed gains in residential land values.

From the point of view of renters the maintenance of the status quo leaves little choice but to embrace the hope they can marry into land wealth or try to create their own by living in the remotest towns and cities, or get a good offer to live and work in Australia, particularly once Australia grants them full residency rights.

From the point of view of those employers who want to keep their local (renting) employees here, they will have to continually churn their workforces with temporary workers from overseas. Like everyone else, these business owners and those employees hiring staff into companies they don’t own will know the easiest way to get ahead personally is to funnel their savings into leveraged residential land.

The end result is a low productivity, low wage, low infrastructure, low tax and low interest rate economy set up for the main purpose in the financial and social lives of median-voting home-owners: to make leveraged and untaxed gains on residential land values.

So how does this story end?

Nothing really changes until both parties (and median voters) address the elephants in the room of:

* not taxing gains in owner-occupied land values;

* not charging enough for use of public roads and water infrastructure; and,

* not having high-enough taxes and public debt to fund 1-2% per year population growth.

Continuing to think that somehow Aotearoa can keep growing its population quickly while at the same time improving water quality and reducing climate emissions without changing this economic ‘model’ of low taxes and low investment (in anything other than residential land) is to simply keep thinking magically.

The failure of the model only becomes apparent when:

* the children of these median-voting home owners overwhelm their parents with pleas for deposits to buy their own homes;

* these home-owning median voters become grandparents who have to watch their own grandkids grow up via WhatsApp and occasional flying visits to Australia and other higher-wage economies (covid permitting); or,

* those at the bottom of the pile who do not have the skills or resources to emigrate become increasingly expensive and difficult for the home owners to live with.

That’s because, for now, the health, education and justice systems are ultimately paid for by those mugs who still pay PAYE income taxes and GST, rather than structuring their earnings and wealth into mostly untaxed assets.

In my view, the model only becomes politically unsustainable once the pain of

* watching grandkids grow up overseas; and,

* paying taxes for high health, justice and education costs of renting kids;

overcomes the pain of

* choosing instead to have higher taxes, congestion and water charges and higher public debt; and,

* slightly higher interest rates and lower land values.

Everything always comes back to our failure to tax gains on residential land values. Without addressing it, Aotearoa cannot move forward. It can only slide even more into widening inequality and the erosion of our social cohesion.

Ka kite ano

Bernard

PS: I’ve made this one completely public from the start to get it out there into the public discussion. I can do this due to the support of paying subscribers.

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

TLDR: This week, the clean up after cyclone Gabrielle forced the Government into a last-minute rewrite of its pre-election Budget 2023 set for May 18, but the Reserve Bank warned it against spending with extra tax or less spending to ensure the rebuild doesn’t generate more inflation in an economy straining at full capacity.

Finance Minister Grant Robertson wouldn’t rule out a cyclone tax of some sort to pay for potentially billions of dollars of repairing and rebuilding in Te Tairāwhiti, Hawkes Bay and Northland. The Opposition pushed back hard against a ‘flood tax’ and said the Government should instead borrow and spend more carefully.

Elsewhere, the United States warned China against supplying arms to Russia for its war in Ukraine, threatening financial and other sanctions against our largest trading partner. Also, President Vladimir Putin suspended Russia’s involvement in the last nuclear weapons testing and proliferation treaty with the United States.

In the global and local economy, stronger-than-expected factory, jobs and consumer spending data in the United States and Europe forced traders and investors to increase their expectations for peak interest rates being set by the US Federal Reserve and the European Central Bank.

Our Reserve Bank (Te Pūtea Matua) stuck to its inflation-fighting guns by putting up the Official Cash Rate by 50 basis points, as expected, to 4.75%, and by keeping its forecast for a peak of 5.5% within a few months. It saw Gabrielle putting up prices by around 0.6% this year, and lifting GDP by around 1% over a few years.

Fixed mortgage rates were mostly unmoved this week because they’re already priced in expected rises in rates, but more than half of mortgages are expected to roll off fixed rates of 2-3% to refix at 5-6% over the rest of 2023, which the Reserve Bank said would increase average mortgage costs for those with mortgages from 9% of disposable income to 22% of disposable. About 30% of renters pay more than 40% of their disposable income in rent.

In this week’s podcast above of the weekly ‘hoon’ webinar for paying subscribers at 5pm on Friday night, I talked with co-host Peter Bale about the economic and Gabrielle action, while he talked with Robert Patman about the first anniversary of Russia’s invasion of Ukraine.

Other places I appeared this week

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 spoke with David Hall, the climate policy director at Toha about the political economy problems of climate change policy for When the Facts Change, my weekly podcast via The Spinoff.

I also appeared this weekend on The Nation on TV3 to talk about the fiscal and monetary policy implications of Gabrielle and the Reserve Bank’s latest moves.

Longer reads and listens for the weekend

Here’s a few useful longer reads, scoops and podcasts for paying subscribers for the weekend.

TLDR: The Government announced the beginning of its Gabrielle emergency response last night, pledging an initial $300 million to help repair roads, bridges, communications and to bolster small businesses.

But PM Chris Hipkins’ new Cabinet has yet to address its restated ambition of ‘building back better’ and more resiliently, which the Opposition has also pledged to do. Today I take a closer look below at what a true climate emergency response would look like, if it was shorn of the usual financial and political limits, which are much less solid that most would think or are used to.

I have opened this email and podcast up to all paying and free subscribers immediately for reading, listening and sharing immediately because of the public interest and the help I got last night from readers last night with suggestions. Many thanks in advance to paying subscribers for supporting this public interest journalism I do about climate, housing and poverty. Their subscriptions allow me to do it for the public either immediately or after a delay. We’d love you to join us.

Elsewhere in news breaking overnight and this morning:

* US President Joe Biden staged a surprise visit to Kyiv overnight on the eve of the first anniversary of Russia’s invasion of Ukraine, pledging in a speech before walking about the city with President Vlodomyr Zelensky that the United States would support Ukraine “for as long as it takes.”;

* UN inspectors found Iran had enriched uranium to 84% purity, which is much nearer to the 90% level seen as weapons-grade than previously thought or agreed, the WSJ reported last night;

* Education Jan Tinetti this morning announced the creation of 82 new truancy officers at a cost of $74 million to to improve school attendance rates; 1News

* Te Whatu Ora ordered pharmacies to stop charging the $5 co-payment for prescriptions for four weeks in Hawkes Bay, Tairāwhiti-Gisborne and Northland to help customers affected by Gabrielle, a pharmacist told me;

* Wellington City Council has set up a housing trust to run its council houses, in the hope (yet to be confirmed) that the Government would grant it income related rent subsidies, similar to the ones the previous National Government granted housing trusts set up for Auckland and Christchurch councils, Justin Wong reports for The Dominion Post this morning;

* Tina Law reports for The Press this morning that work on a number of cycleways could be delayed so Christchurch City Council can spend $34 million in “climate emergency” money from the Government; and,

* The Greater Wellington Regional Council is set to increase bus fares by as much as 10% later this week, Finlay Dunseath reports for the The Dominion Post this morning.

Seriously. In the week after Gabrielle, two of our biggest councils are considering stopping building cycleways and increasing the cost of using buses to save money.

What a true climate emergency response could look like

The Government has started its Gabrielle rebuild with the announcement of an initial $300m of emergency relief funds to repair key roads and help small businesses, but says it wants to ‘build back better’ and in a more resilient way.

So what should that look like, if it was done in a bi-partisan way that did not strangle itself with limits on tax and net debt as a share of the economy? Or wasn’t subject to self-imposed political ‘third rails’ around ‘ute taxes’, ‘the war on cars’ and backlashes against densification?

As both the Government and the Opposition has said, the Crown can afford a rebuild, even with the current relatively low net debt limit of 30% of GDP and the unwritten but just-as-real bi-partisan understanding that taxes should be around 30% of GDP in the long run. Currently, net debt is around 21% of GDP and forecast to drop under 15% in the next four years, which means there is $60 billion of borrowing headroom. A bi-partisan agreement to rebuild better could remove those ‘third rails’.

So if Aotearoa treated Gabrielle as the moment we really started our climate emergency response, what could/would/should that look like. I asked the following question via Twitter yesterday afternoon and got over 100 replies as of 6.30am this morning. Have a click through to read in full, including the various discussions to the responses. I’d also love suggestions below today in comments from paying subscribers.

The white board session for the climate emergency generation

Without any deeper analysis or assessment yet, here’s the suggestions for a climate emergency response to both reduce climate emissions and adapt to climate change:

* Making public transport free for all;

* Investing in converting some road lanes to walkways and cycleways very quickly;

* Stopping tunnel-heavy rail line plans in Auckland and Wellington because of the cost and large up-front climate emissions from the construction process and delays in shifting transport from roads to rail;

* Building dual cycleways/walkways on sea walls around coastlines;

* Building more, faster and double-tracked electrified commuter and freight railways from Whangarei to Invercargill;

* Restoration of wetlands and native forests;

* A new inter-island DC cable;

* Subsidies for e-bikes, e-buggies, scooters and electric cars and utes;

* Convert all Landcorp land back to native forests;

* Focus city developments on 15-minute city concepts that plan for ‘spongey’ city developments such as rebuilt wetlands, ponds, permeable roads and paths and water retention tanks;

* Remove RMA completely for cities and remove all consenting fees with funding for councils from central Government;

* Offer massive subsidies to put solar panels and batteries on north-facing residential, commercial, industrial and farm building roofs to produce micro-grids for resilience and extra renewable generating capacity;

* Renewable waste-burning electricity generation to replace coal burned at Huntly;

* Stop free on-street parking;

* Plan for fast population growth to 30 million people by 2100 through migration to provide labour for rebuilding and investing in infrastructure, given over 100 million wealthy people in South Asia, South East Asia and the Pacific will want to migrate to climate change havens such as South-East Australia, Tasmania and Aotearoa;

* Build a network of nuclear power plants;

* Switch from dairying to regenerative agriculture growing hemp and oats;

* Pay land owners compensation in managed retreats;

* Create a Green Ministry of Works;

* Shift truck fleet from diesel to renewable hydrogen;

* Create Starlink hubs in every town;

* Pay grants for home owners to collect 1,000 litres of water on their own properties;

* Double the navy, airforce and army capacity for airlifts and emergency help after climate disasters;

* Close Tiwai Point to free up renewable electricity for electrifying the economy at lower power prices; and,

* Undergrounding all power and telecommunications cables.

That’s a starter for ten and in the coming weeks and months I’ll dig deeper into as many as I can to look at the costs, benefits and various political, physical and (any) financial constraints.

I welcome further suggestions in the comments below.

Quote of the day

‘Ich bin ein Kyiv-er’

“You remind us that freedom is priceless. It’s worth fighting for, for as long as it takes. And that’s how long we’re going to be with you Mr President. For as long as it takes.” US President Joe Biden speaking in Kyiv overnight. CNN

Charts of the day

How covid increased the death rate in 2022

Stats NZ released birth, death and migration data yesterday for 2022 which showed Aotearoa’s crude death rate rose to 7.5 per 1,000 people in calendar 2022 from 6.8 in 2021 and an average in the four years pre-covid of 6.7 per 1,000. Total deaths rose 10.4% or 3,642 to 38,574 last year. Manatū Hauora (Ministry of Health) estimated 2,400 deaths were attributable to covid last year.

Our climate is changing

This chart from Waikato University climate scientist Dr Luke Harrington tells the story of Gabrielle, in the context of previous two-day deluges in Northland, Coromandel and Hawkes Bay (Tairāwhiti data is not available yet). The rain that fell in those two days was almost three times the monthly average for those regions.

Other useful longer reads and listens

Profundities, curiosities, spookies and feel-goods

Fun things

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

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

TLDR: This week, Cyclone Gabrielle wrecked the Hawkes Bay, Gisborne and parts of Coromandel and Northland, killing at least 10 people, cutting off power to 225,000 homes and making 10,000 homeless in what appears to be Aotearoa’s biggest natural disaster since the Christchurch Earthquakes of 2011 and our worst climate catastrophe ever.

Repairing the damage and building back more climate-resilient infrastructure will cost taxpayers, ratepayers, insurers and residents billions of dollars over many years to come. Gabrielle’s destruction exposed Aotearoa’s need to invest heavily adapt to climate change, as well as reduce emissions. It has triggered a debate about how, where and whether to rebuild the infrastructure to cope with these events, which are becoming more frequent and intense because of climate change.

In Friday night’s ‘hoon’ webinar for paying subscribers in recorded podcast above, I and co-host Peter Bale spoke with Kiwibank Chief Economist Jarrod Kerr about his call for the Reserve Bank (Te Pūtea Matua) to consider not hiking the Official Cash Rate this coming Wednesday by 50 basis points, as had been widely expected before Gabrielle.

We also spoke with Dr Michael Baker from the new Public Health Communication Centre about the centre’s latest paper on the need for long-term thinking – Especially for preventing catastrophic risks. We talked about how democracies often struggle to overcome their biases towards short-term thinking, and failures to prepare for long-term risks, unless in times of crisis.

I also produced a podcast for The Spinoff this week where I spoke to ClimateSigma’s Belinda Storey about the finances of climate retreat.

Charts of the week

Longer weekend reading and listening

Here’s a few links longer reads and listens for paying subscribers for the weekend.

TLDR: So what would it take to shock Aotearoa’s voters and politicians into taking more substantial action to reduce climate emissions and prepare for climate change? You’d think our most expensive weather catastrophe in history might do the trick. Or even two of them inside three weeks? Yeah…nah.

A poll taken after the January 27 storms in Auckland found less than half of voters in Auckland and elsewhere up and down the motu thought they and various Governments should do more to combat climate change. This is consistent with other polls taken in the last three years, which show New Zealanders are less likely than in most other countries to want actions that would change our carbon-and-methane-emitting lifestyles.

We call ourselves ‘100% Pure’ and believe we’re greener and cleaner than most, but we’re actually less likely to vote for policies or take actual climate action ourselves than we think we would, and less than most others overseas. So, in today’s email and podcast, I take a closer look at:

* how and why is Aotearoa’s political economy so climate-policy-averse?;

* what could be done to change that?; and,

* whether the cyclones of 2023 be the crises that shock us into more action?

The detail and analysis below the paywall fold and in the podcast above is for paying subscribers. They support the public interest journalism I do daily here on the political economy problems causing housing unaffordability and limiting climate change action and poverty reduction in Aotearoa. I’m asking them below in a poll if they’d like it opened up later today for public reading, listening and sharing. We love you to join us by subscribing.

Will Gabrielle be our nuclear-free moment for climate change?

It’s still early on Monday morning, but Cyclone Gabrielle looks set to be one of Aotearoa’s most damaging storms ever, if not the most damaging, and worse than our previous record, which was set at over $1 billion than three weeks ago.

So surely these events might change some of the political thinking around climate change action, both for politicians and voters? Not a skerrick so far, and that’s completely consistent with Aotearoa’s recent history of talking a much better game on climate change action than actually walking it.

PR firm Anthem published late on Friday the results of a poll of over 1,000 New Zealanders by Talbot Mills in the week after the January 27 storms. The poll found just 43% of New Zealanders and 48% of Aucklanders wanted to take quicker and more drastic action to reduce emissions. It found 23% of those surveyed nationwide wanted to reduce or slow emissions reduction, with 21% of Aucklanders wanting less action.

Just 33% of New Zealanders thought it “fair enough to restrict the use of cars and limit personal vehicle access in Auckland to help reduce carbon emissions,” while the same amount nationwide thought it unfair. The balance shifted in Auckland to 38% saying it was unfair to restrict vehicle use and 31% saying it was fair.

A more nuanced reading of the poll’s other questions finds Aucklanders would like to do more, but feel not enough was being done to improve alternatives for travel such as public transport, or simply did not believe it was possible to carry out their daily lives without using cars and car parks close to shops, schools and work.

When does reality disrupt the magic in our thinking?

In essence, New Zealanders generally, and Aucklanders in particular, believe we want more climate emissions reduction action, but not by us individually, not any time soon, and not in ways that would force them to either change their current life patterns or pay for others to do it. We have adopted the magical thinking promoted by politicians of both sides for at least the last 20 years that we can keep our current lifestyle and not have to either pay more taxes or charges, but still reduce emissions. This magical thinking, whether adopted consciously and deliberately, or through osmosis and sub-consciously, can keep working for as long as no-one they listen to calls b******t on it and/or reality doesn’t intervene in an obvious way to disprove it.

On the face of it, the January 27 floods in Auckland and Cyclone Gabrielle should be one of these moments when the scales fall from the eyes of those who have either deliberately or by omission turned a blind eye to the issue.

The poll above appears to show we’re nowhere near giving up our magical thinking, although the same questions hadn’t been asked before the storm. It’s possible the sentiment is less magical than it used to be, although still concerningly magical.

We think way more magically than the rest of the world

So it’s useful to look at how our views have changed over time, relative to ourselves and to other countries facing the same issues.

PR and communications firm Ipsos conducts a monthly ‘Global Advisor Survey’ in 30 countries that looks at views on public issues including climate change. It surveys over 1,000 people in New Zealand and its most recent survey in on climate change early last year found New Zealanders were:

* the most concerned about climate change in the world;

* more optimistic about making significant improvements than most countries; and,

* more confident than those in most other countries that their Government had a clear plan.

However, it also found we were:

* among the least likely to take action that made a difference;

* among the most likely to think recycling and using less package is the most effective thing to combat climate change, even though it is one of the least effective means; and,

* among the least likely to change our travel habits to low emission methods, even though it is the most effective means of reducing emissions.

Likelihood of changing daily travel

In essence, New Zealanders think we’re doing enough, we’re doing better than most and we’re doing the right things. In actuality, we’re doing much less than enough, we’re doing worse than other countries and we’re doing mostly the wrong things.

We are the biggest magical thinkers on the planet.

So why so much magical thinking? And how to change it?

There’s a saying that all politics is local, which is often true, but these days most politics is actually performative. That means our politicians say loudly and often that they’re doing good things and that their voters are therefore doing good things. Voters will believe that as long as no-one points out that it is not true when they’re paying attention. It’s also because often voters don’t want to know the uncomfortable truth, especially when the alternative implication is having to make difficult, painful and expensive change, often that involves one powerful and dominant group giving up resources to groups or ‘others’ they don’t feel deserve those resources or collective help.

We may not be experts at taking effective climate change action, but we are experts at thinking and saying we are, largely because we keep electing people who talk like they’re taking action and no one is forcefully calling them out in public.

Our magical ‘nuclear-free’ moments

In my view, three of our largest political parties and their leaders can take the credit/blame for the performative nature of our climate change debate and actions over the last 20 years. Former Labour PM Jacinda Ardern made a big deal of declaring climate change was her generation’s ‘nuclear-free’ moment in the 2017 election campaign and by declaring a ‘climate emergency’ in Parliament in late 2020.

In reality, her Government and the one led over the last six weeks by her successor Chris Hipkins, has:

* committed to spending $2.1 billion on cutting petrol taxes in a way that will increase carbon emissions by at least 84,000 tonnes;

* limited the extent and ambition of its climate policies by specifying they be fiscally neutral, meaning policies such as the emissions trading system (ETS) and clean car rebate are small, complicated and ineffective;

* gone slow on public transport investment and subsidies, also largely because they are funded by a fiscally-neutral fund built up by motorists believing it should be focused totalling on repairing and building roads and motorways, rather than paying for trains and buses for others to use;

* allowed the three electricity gentailers the Government controls to keep prices very high to pay big dividends, rather than invest in new renewable generation;

* agreed to extend ETS exemptions repeatedly for the biggest emitters in industry and agriculture;

* decided against ETS changes and bio-fuels mandates in recent months because they would have increased petrol and diesel prices slightly; and,

* failed to get Government departments to move to electric vehicles and boilers at any great scale.

Ardern’s predecessors, Bill English and John Key, also professed to want to be doing more to reduce emissions, but gutted the effectiveness of the ETS and allowed the mass purchasing of fraudulent carbon credits overseas.

The Green-washing of Labour’s nuclear-free non-moments

The failures of climate policies from 2008 to 2017 were pointed out loudly and often by the Labour and Green Parties when in Opposition, which increased the electoral potency of Ardern’s ‘nuclear-free moment’ appeal in her campaign-opening speech in August 2017.

The Opposition has been quiet on these failures since 2017 and the Green Party’s protests by MPs outside of the Government have not been heard, in large part because its co-leader James Shaw is also the Climate Change Minister and has been forced regularly into defending the inaction.

Rather than calling out the performative nature of the ‘nuclear-free’ moment policy inaction, the Greens ended up Green-washing Labour’s policies.

So how could it be done differently?

The IMF published a detailed paper over the weekend on how to improve the effectiveness of climate policies, based on a YouGov survey of 30,000 people in 30 countries, sadly not including Aotearoa.

It’s core findings:

Our survey shows that providing even small amounts of information on policy efficacy and benefits—including co-benefits, such as improved air quality and better health—can engender greater support. This support, however, may be short-lived if policy tradeoffs are not made explicit, highlighting the importance of ensuring the public understands the relative costs and benefits of available policy options.

Some of the most economically efficient policies, such as carbon pricing based on the content of fuels or their emissions, often face political resistance. Importantly, the survey highlights that climate concern alone doesn’t translate into broad support for carbon pricing policies such as carbon taxes or emissions trading systems.

Carbon pricing is more acceptable when presented along with information about the impact of climate change, how pricing works, and options for using the revenue it generates. Notably, people are more supportive of the policy if the revenues it generates are used to shield economically vulnerable groups from the adverse impact of climate policies.

Subsidizing green investments finds large support across all countries, while opponents often cite concerns about corruption and policy ineffectiveness even as proponents can sometimes fail to recognize the costs associated with these policies for the public budget. This suggests that public spending and investment efficiency matters in enhancing support for greening the economy.

In essence, carrots work better than sticks and leaders have to use some of their political capital explaining and arguing for the changes.

The IMF recommendations:

* educate the public about the causes and consequences of climate change and the costs of inaction;

* talk about the costs of inaction, such as pollution, and the benefits of addressing these, like improvements for air quality, health, and protection of low-income households;

* emphasize that the policies work, so the trade-offs are worth it; and

* underscore the shared spirit of solidarity and need for strong climate policies in a broad range of economies

In our context, this would mean prime ministers, mayors and other party leaders arguing in favour of policies that reduce emissions, using political and physical capital to subsidise climate actions, and pointing out the other health and social benefits of a just transition.

Here’s hoping for a bit more acting and a lot less performing.

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

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

TLDR: The Labour Government cleared its decks this week of some unpopular policies ahead of the election and has tried to make employers happier, which may extend new PM Chris Hipkins’ early-2023 polling honeymoon.

One of the unloved policies biffed overboard was a proposed merger of TVNZ and RNZ. Hipkins also stopped work on a social insurance scheme the Opposition has painted as a new tax on workers and employers, partly to offset the perceived pain of a 7.1% rise in the minimum wage starting on April 1.

Elsewhere, there was great news from Christchurch of a big new solar farm with more to come, and the battle of wills is heating up between global investors wanting lower interest rates and central bankers warning of higher interest rates to beat inflation.

In this week’s recording above of our ‘Hoon’ webinar for paying subscribers at 5pm last night, I joined co-host Peter Bale to talk with regular guest University of Otago Professor Robert Patman about the week in geo-politics, former NZ Herald Editor-in-chief Gavin Ellis about the death of the TVNZ-RNZ merger, and Auckland City Councillor Josephine Bartley about the Jan 27 flood fallout, including a renewed NIMBY campaign against housing intensification.

The big five things this week

This week’s key news events in Aotearoa’s political economy, geo-politics and the global economy were:

* Decks cleared - PM Chris Hipkins clearing the Labour Government’s decks of distracting and (some) unpopular policies to make it easier to attack National’s plans to govern after the October 14 election; Tuesday’s email

* Ratepayers revolted - NIMBY land-owners and their councillors in Auckland and Christchurch pushed back even harder against housing intensification directives from the Beehive, using Auckland’s flood damage to argue (wrongly) that new houses caused the flooding; Friday’s email

* Penny-pinching exposed - University of Otago public health researchers recommended dropping the $5 prescription fee, publishing a study showing sick people avoided expensive hospital visits when they didn’t have to pay, which would easily compensate for lost revenues; Wednesday’s email

* Fed fightback - Central bankers warned traders and investors again they may be underestimating how high they would have to lift interest rates to control inflation, deepening a ‘markets vs Fed’ clash that could end in dramatic falls in asset values (or not); and,

* Lightbulb moment - Lightsource, an Australian-based solar power joint venture with BP, teamed up with Contact Energy and Christchurch Airport to announce they would build Aotearoa’s first grid-scale solar farm next to the airport, with plans for more solar farms across the motu using Lightsource’s $2.9 billion cashpile.

This is my weekly free sampler email for all free and paying subscribers. We’d love you all to jump up the paid tier, which gives subscribers the right to comment and gives earlier and deeper access to my emails and podcasts with public interest journalism about housing affordability, climate change and poverty reduction. Paying subscribers support me doing this journalism in the public interest and then spreading it publicly.

Chart pack of the week

NZ retail spending was better than expected in January

NZ manufacturing activity bounced into expansion territory in January

Minimum wage rise slows to nil in real terms

Map of the week

Where MetService sees Cyclone Gabrielle by Tuesday morning

My weekend reading and listening for sharing

Here’s my longer reading and listening for the weekend for sharing with paying subscribers below the paywall fold. I also welcome their suggestions for others in the comments below.

TLDR: He’s done it. New PM Chris Hipkins has ‘cleared the decks’ of all manner of flotsam and jetsam to make the Labour Government’s ship go faster and have a clearer field of fire for targeting National when the election campaign starts in earnest shortly after the May Budget.

Hipkins announced his new ministry had decided at its first substantial Cabinet meeting this afternoon to ditch all manner of loose items and policy debris that could trip up Labour in its quest to win a third term by focusing voters’ attention on the Opposition’s policies, rather than the Government’s own record.

The widely-flagged changes included:

* ending work this term on a social insurance scheme that would have forced employers and employees to each pay 1.39% of income in premiums for an unemployment and illness insurance scheme to be administered by ACC;

* suspending plans for a biofuels mandate aimed at reducing climate emissions up to 10 million tonnes by 2035, but that would have increased fuel prices;

* ending plans for a TVNZ-RNZ merger (on which $23 million has already been spent on consultants), but with plans for around $10 million or 20% in extra funding for RNZ, and unspecified funding for NZ on Air;

* ending work this term on hate speech legislation;

* unspecified changes over an unspecified period to Three Waters; and, 

* increasing the minimum wage in line with CPI inflation (7%) or $1.50 per hour to $22.70/hour from April 1, which means no real increase in the minimum wage (the previous five increases under Labour averaged twice the CPI inflation rate).

A longer honeymoon bounce in the polls?

The perfectly-executed change of captain from Jacinda Ardern to Hipkins over the last three weeks and his no-nonsense ‘bread and butter’ approach has already delivered the Government a honeymoon bump in the polls. This latest tidying of the deck looks set to extend that honeymoon some more, largely because it removes any lingering fear of higher petrol prices, a stealth ‘tax increase’ for employers and workers and (for now) might quieten the noise about ‘co-governance’.

"We are looking to remove distractions, or things that while they may be worthy are not the highest priority at the moment." Chris Hipkins speaking at his post-cabinet news conference.

The next question is whether the Government’s supporters hold their ranks straight, or whether the various ditching of favourite policies fosters any mutinous thoughts. So far, Hipkins has been careful to soothe some of the potentially most fevered brows (the Māori caucus) with continued cabinet posts (Nanaia Mahuta) and higher rankings (Willie Jackson and Kiri Allan).

The focus now returns to National and what its policies look like when they’re unveiled around the Budget.

So how low can they both crawl now?

Now that Labour has adopted a low target strategy, National will have to decide whether it takes more risks with policies that could prove targets for scare campaigns, including health, education and transport spending cuts, and the funding of tax cuts generally.

National will also have to reassure voters it won’t adopt ACT’s more extreme policies, largely because ACT will only go with National in a tight result, rendering it just as impotent as the Greens, who will only ever go with Labour.

We will see how low the two main parties can go to avoid the cannonballs and musket shots of scare campaigns they’ll be firing across those decks at each other.

There will be quite a lot of political crawling about said decks, along with lot of noise and smoke.

Meanwhile, neither party is addressing the economy’s core problems or opportunities, because doing so creates the risks of being seen to upset the status quo, which various interest groups have learned how to protect, defend and enhance in this risk-averse political environment.

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