The Kākā by Bernard Hickey

TLDR: The Labour Government has significantly loosened its migration settings in an effort to dampen wage inflation pressures ahead of the summer tourism season and reclaim ground lost in opinion polls last summer.

But it has yet to ‘go nuclear’ and throw open the doors to guaranteed and/or faster pathways to residence for many more categories of lower paid workers on temporary work visas. That is still possible if the wage inflation and political pressures remain intense going into the election late next year.

Aotearoa-NZ is also having to battle much harder for workers and students to choose us over Australia or Britain or Canada, who are also loosening their settings in desperate attempts to fill open positions and take the edge off wage inflation.

Paid subscribers can see more detail and analysis on the loosening of migration settings below the paywall fold and in the podcast above.

Labour relents after just three months

Under intense pressure from employers wanting lower-wage workers to fill staffing gaps for the summer, the Labour Government has loosened the migration settings to try to ease inflation pressures and knock out one of the Opposition’s main prongs of attack.

Just three months after releasing a tough new immigration ‘rebalance’ aimed at lifting wages for those working on temporary work visas to the median wage of $27.76/hour, the Immigration Minister Michael Wood yesterday announced an easing of the settings and cut the wage rules for years for the aged care, construction, meat processing, seafood and adventure tourism sectors. He also doubled the cap for working-holidaymakers, who can work for anything above the minimum wage, and extended visas for backpackers already here.

I wrote in my August 1 Dawn Chorus that Labour was set to pull the migration lever to remove some of the wage inflation pressure and try to claw back National’s lead in the opinion polls.

“Labour may choose before the next winter’s flu season to pull hard on the migration lever to scuttle National’s continued calls before the election. It no longer has rising house prices, suppressed wages and surplus labour as reasons to keep the controls tight. National has already promised to loosen the taps as soon as it’s elected. That means looser migration settings are likely, sooner or later.” My August 1 Dawn Chorus.

Low wage sectors given years of reprieve

And so it has come to pass

Wood made the announcement yesterday afternoon at Sky City to emphasise the help it wanted to give the tourism and leisure sectors ahead of the summer.

The key details of the changes as laid out in this MBIE document, included:

* a doubling of Working Holiday Scheme cap for 2022/23 to allow an extra 12,000 working holiday makers to enter;

* the working holiday-makers visa of people already here or about to arrive and that are set to expire between 26 August 2022 and 31 May 2023 will be extended for 6 months;

* those who held working holiday-maker visas for 2020, 2021 and 2022, but couldn’t come because of Covid, will be automatically issued visas so they can come between October 1 and January 31 and work for 12 months; and,

* the extension to exemptions for the median wage rule ($27.76/hour) for workers coming under the new Accredited Employer Work Visa for two to three years.

The industries exempted, their exemptions and the discounted wages are as follows:

* the aged care sector extended for two years at $26.16/hour, with ‘level 4’ workers provided a two-year pathway to residence;

* the construction sector extended for two years at $25.00/hour;

* the meat processing sector extended for two years at $24/hour;

* the onshore seafood processing sector extended for three years at $24/hour, with updates each year to maintain it at 86% of median wage;

* the offshore seafood industry extended at minimum wage plus $3/hour for three years, although rising by rising $1/year until hitting median in October 2025; and,

* another feature of the announcement was a plan to replace the current caps with a new Pacific worker programme from 2024, similar to the RSE scheme. This would represent a major increase in the scale of the RSE scheme.

Michael Wood’s framing of the rebalanced rebalancing

Wood said the immigration rebalance was always designed to be flexible to deal with changes in scenarios.

“As the world recovers from COVID-19, labour shortages continue to be a persistent ongoing global symptom.

“Our immigration rebalance was designed during the pandemic and included the flexibility to respond to scenarios, such as the global labour shortage we now face. These measures are about providing immediate relief to those businesses hardest hit by the global worker shortage.

“We have listened to the concerns of these sectors, and worked with them to take practicable steps to unlock additional labour, we know these measures will help fill skills gaps, as businesses work towards more productive and resilient ways of operating.” Immigration Minister Michael Wood in the announcement.

Today’s deeper dive

My daughter and I are fascinated by the story of Alan Turing, the British (and gay) mathematician who cracked the Enigma code and did a lot of the work that led to the creation of modern computers. He also dreamed up the Turing test of whether a computer was intelligent.

This piece by Will Dowd on his Substack The Lunar Dispatch is sad and beautiful all over again and revealed things about Turing I did not know.

Some 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: The five signals I picked out from the noise this week were:

* Reserve Bank Governor Adrian Orr’s second term is hanging in the balance as he scrambles to drag inflation down and have some sort of outside review before March;

* A call from the Human Rights Commissioner for a rent freeze and an increase in the accommodation supplement exposed again the Government’s lack of a housing affordability target to hold it accountable;

* Fresh emissions reductions commitments without funded investment plans from the Auckland and Wellington City Councils exposed again the performative nature and magical thinking behind central and local Government climate pledges;

* China eased monetary policy after surprisingly weak factory output and consumer spending figures for July, adding to the recessionary forces building in the global economy that are expected to drag inflation lower later this year.

* China increased subsidies for coal-fired power stations to offset lower hydro-power output caused by climate-change-driven droughts, showing how hard it is for even the last democratic emitters to avoid short term-thinking to solve a long term problem.

I co-hosted our weekly live ‘hoon’ webinar for over 100 paying subscribers with Peter Bale at 5pm on Friday night to talk about these events of the week and others with special guest Raf Manji, who is the leader of The Opportunities Party. The audio from the webinar is in the podcast above for all subscribers immediately as part of this weekly summary and sampler of the week’s news and my work this week on The Kaka.

In particular, we talked about

* The Reserve Bank’s rate hike and the challenges it faces reassuring politicians and voters that it needs to remain independent;

* the threat to local democracy from the slate of Voices For Freedom candidates in this year’s council elections;

* the risks of a new Chernobyl-style nuclear catastrophe at the Zaporizhzhia power plant in Ukraine;

* TOP’s proposal for a residential land value tax.

A reminder to free subscribers reading here that we have a special $30 a year deal for under 30s and anyone on a benefit. We also have a new special $65 a year deal for over 65s who are renting and reliant on NZ Superannuation. Any students, teachers and staff who signs up to the free tier with a .school.nz or .ac.nz email address will also be comped up to the full paid tier for free.

This week’s five signals from the noise

Adrian Orr refused to say if he wanted a second term

The Reserve Bank hiked the Official Cash Rate by 50 basis points to 3.0% as expected on Wednesday and forecast it would raise it to around 4.0% by the end of the year. That didn’t surprise anyone in financial markets or change fixed mortgage rates.

The hottest questions at the news conference with the quarterly August Monetary Policy Statement were around the criticism of the Reserve Bank’s performance and whether Governor Adrian Orr wanted a second term. His current five-year term expires at the end of March and a second-term would potentially see him having to serve under a Government run by National and ACT, both of whom have been sharply critical of the bank and Orr.

Orr refused to say whether he wanted a second term, even though Finance Minister Grant Robertson has expressed confidence in him and has said he is working with the Reserve Bank board on the details of the reappointment. National has called for an independent inquiry into the bank’s performance before any decision on Orr’s reappointment.

Orr used the news conference to frame an ongoing Reserve Bank-commissioned review of the central bank’s operation of monetary policy as enough of a review. In particular, he pointed to a part of the review being done by independent overseas experts, former Reserve Bank of Australia monetary policy board member (2001-2011) Warwick McKibbin and former Bank of Canada Deputy Governor Larry Schembri (2013-2022). Here’s my fuller report and analysis in Thursday’s Dawn Chorus.

Where’s the affordability target?

Human Rights Commissioner Paul Hunt called this week for a new rent freeze and an increase in the Accommodation Supplement. Housing Minister Megan Woods responded with a list of the Government’s actions to increase housing supply and reduce demand from rental property investors.

I focused in Wednesday’s Dawn Chorus on why the Government’s failure to identify a house-owning and rental affordability target (something like three times income for owning and 30% of disposable income for renting) makes that list a pointless exercise because its impact cannot be measured or the Government held accountable.

Who do they think they’re kidding?

Auckland Council agreed this week to a Transport Emissions Reduction Pathway that reduces climate emissions by 64% by 2030. The plan requires:

* a 10-fold increase in walking, cycling and scooter use;

* a six-fold increase in bus, ferry and train use;

* EVs to be responsible for 32% of total vehicle kilometres travelled by 2030; and,

* reductions in freight emissions of 45% by 2030, aviation emissions reductions of 50% by 2030 and shipping emissions reduction of 50% by 2030.

Two things are required to make this work: congestion charging and an awful lot of new central Government funding, neither of which have been agreed. These are easy things for an outgoing Mayor and a bunch of councillors to say with a couple of months left on their term.

China’s economy is slowing fast, which will help reduce inflation

China’s central bank eased monetary policy unexpectedly this week after the world’s second largest economy reported factory production fell and consumer spending growth was weaker than expected because of Covid lockdowns and cooling demand for exports.

Along with easing economic growth in the United States and Europe, China’s slowdown is taking pressure off inflation and encouraging financial markets to think the US Federal Reserve will have to start cutting interest rates next year. The Fed is not saying that though, potentially creating a dangerous gap between market expectations and central bank actions.

China lifts coal subsidies to offset climate-caused cuts in hydro-power

I wrote in Friday’s Dawn Chorus about China’s decision to increase subsidies for coal-fired power plants to help them cope with electricity shortages because of a drought in China’s south-western province of Sichuan.

China is doing what most of the world is doing right now in the face of intense short term financial and climate pain. It is turning to the short-term tools it has to deal with the short-term pain, even though it knows it will make the long-term problem of climate change worse in the long-term. Politicians, even the ones in undemocratic dictatorships, are afraid of the short-term consequences of unhappy voters and citizens having to cope with short-term pain.

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: All around the world and here in Aotearoa-NZ, politicians and voters are choosing short-term pain-reduction tax cuts and subsidies to deal with the effects of climate change. Often that means encouraging the very burning of coal, petrol and diesel that is making climate change worse.

Last night China announced new subsidies for coal-fired power plants to help them cope with electricity shortages because of a drought. Our ‘temporary’ fuel tax cuts to reduce the pain of higher petrol prices, which will be an inevitable result of climate-emissions reduction measures, look set to be in place for years.

Paid subscribers can see more analysis and detail below the paywall fold and in the podcast above about how our political and financial ‘lizard brains’ are dominating any ‘slow thinking’ efforts to solve a long term problem. Paid subscribers will also get invites today to our weekly Ask Me Anthing session and our weekly ‘hoon’ live webinar at 5pm. The webinar link is below the fun things.

In geo-politics, the global economy, business and markets

When the heat is on

King coal wins again - Here’s one of those sign o’ the times stories that tells you a lot about the predicament we’re in and how difficult it will be to get ourselves out of it. China, the world’s biggest climate emitter, announced overnight it would increase subsidies for coal-fired electricity generators because a drought in China’s south-western Sichuan province (pop’n 80m) has starved its hydro-electric dams of water. FT-$$$

So what? - China is doing what most of the world is doing right now in the face of intense short term financial and climate pain. It is turning to the short-term tools it has to deal with the short-term pain, even though it knows it will make the long-term problem of climate change worse in the long-term. Politicians, even the ones in undemocratic dictatorships, are afraid of the short-term consequences of unhappy voters and citizens having to cope with short-term pain.

The bottom line - Aotearoa-NZ is not that different. Our Government cut fuel taxes 25c/litre ‘temporarily’ in March and most think that subsidy will last at least until the next election. Dealing with climate change will require long-term pain (or at least change) to deal with the planet’s biggest long-term problem, yet our collective decision-making emphasises the short term. Our lizard brains are winning in the battle with our thinking brains at the moment.

In Aotearoa-NZ’s political economy, business and markets

He said, she said and much ado about not much. So far.

Sharma drama escalates - Suspended Labour MP for Hamilton West, Gaurav Sharma, accused PM Jacinda Ardern of lying and orchestrating a cover-up last night in an interview with Newshub, although he gave little evidence to back that up.

“On Tuesday the Caucus suspended Gaurav on the basis of repeated breaches of trust. This latest example of releasing and misrepresenting conversations with his colleagues reinforces that decision and will be discussed by caucus.” Ardern’s spokesperson in a statement.

So what? - This is still largely a ‘beltway’ story that is distracting the Press Gallery and the Labour caucus, but if Sharma’s accusations dislodge some more political debris for the PM, it may drag further on her personal popularity, which is already at its lowest ebb. It might slightly increase the currently remote chance Ardern hands over the PM role to Grant Robertson late this year or early next year, which could disrupt the current polling suggesting a National/ACT win next year.

The bottom line - It’s worth ignoring it, unless the PM is clearly proven to have misled the public or knows something much more damaging than is currently out in public. So far, it looks more of a sideshow than the main gig. I’ll keep an eye on it so you don’t have to, until you do.

Quote of the day

“I felt like I was being cooked.” A Chinese resident on Weibo, commenting on problems getting electricity for air conditioners.

Today’s must read

Does the Fed really have the market’s back?

‘Don’t worry. There’s always a bailout’ - This Akane Otani article in WSJ overnight captures the current disconnect in global markets perfectly. The world’s most important central bank wants the markets to think it’s serious about getting inflation back down again by hiking short term interest rates until the pips squeak.

A lot of investors think the Fed will rescue them eventually with lower interest rates and money printing because that’s what it’s done for a couple of decades. Stocks have bounced 17% from their lows in June, even though inflation is still painfully high and the Fed hasn’t actually given to too many hints it will go easy on investors this time around.

The Federal Reserve says it is going to keep raising interest rates. Wall Street thinks it’s bluffing. This could spell trouble for both of them. Akane Otani article in WSJ

So what? - If the Fed is not ‘bluffing’ or inflation doesn’t cooperate with the view it will solve itself then financial markets are headed for some almighty disruptions. Ironically, that sort of cataclysmic event might just force the Fed’s hand. It has its own lizard brain problem when a financial market disruption risks turning into a financial stability issue.

My view - There’s always a bailout. There was never a true political reckoning for what happened in the GFC in the United States, the UK and Europe, when central banks and Governments bailed out banks and asset owners to keep them whole. There is a moral hazard problem woven into the DNA of global capitalism now.

Chart of the day

Bizarrely, Turkey cut its OCR last night to fight inflation…

Some fun things

Ka kite ano

Bernard

PS: Here’s the link for paying subscribers to jump onto the weekly hoon webinar with myself and Peter Bale at 5pm for an hour. Also watch out for my invite to the weekly Ask Me Anything session from midday to 1pm today.

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: Housing Minister Megan Woods has responded to the Human Rights Commission’s call for a new rent freeze and a higher accommodation supplement by relaying on the Labour Government’s regularly-updated list of housing market actions in response.

But it’s missing one crucial ingredient that undermines the power of that list every time it is updated. The Government has repeatedly refused and neglected to put up a target or measure of success in its quest to improve housing affordability for renters and buyers. Without that, the list appears more performative than real.

Paid subscribers can see more analysis and detail below the paywall fold and in the podcast above, which also includes an interview I did yesterday with the Human Rights Commission’s Housing Inquiry Manager Vee Blackwood. There’s also poll below for paid subscribers to say whether they want this one opened up for the public to view and share immediately.

The usual suspects and still no mastermind

Yesterday’s call from the Human Rights Commissioner for a new temporary rent freeze and an increase in the Accommodation Supplement was a significant intervention that demanded a Government response, which dutifully came.

Housing Minister Megan Woods said she had written in response to the Commissioner, Paul Hunt, and also wanted to meet him to explain the Government’s list of actions to improve housing supply and reduce landlord demand.

"Since we came into Government we have taken steps to address some of the worst practices in the rental market, including ending 'no cause' terminations, ensuring our rental homes are warm and dry, limiting rent increases to one per year, and improving the rights of tenants at the Tenancy Tribunal.”

"We also have a significant amount of work underway to increase the supply of new houses and remove incentives for speculators, to deliver a more sustainable housing market.

"All the data we have shows that boosting housing supply is the single biggest thing we can do to keep rents down, and that in markets with strong housing growth, rent growth is consistently lower than markets with less supply." Housing Minister Megan Woods in an emailed statement quoted via Newshub.

Woods also pointed to the Government's $3.8 billion housing acceleration fund, an affordable housing fund, and tax exemptions for build-to-rent landlords.

"As for the families doing it tough right now there's no easy fix, with cost of living increases hitting people all over the world, but we're taking a range of measures to ease the pressure and to make a difference."

"Since the day we came into Government, we've worked hard to lift wages and reduce cost pressures on Kiwis, and we will continue to do so." Megan Woods.

The missing link

The problem here is that the Government has repeatedly refused to say or allow officials to suggest what success would look like, and therefore measure both the progress or the scale of the expected progress of all the actions above.

The HRC rightly points to 30% of disposable income as the threshold for rent payments beyond which housing becomes unaffordable. Almost half of renters pay more than 30% of their disposable income on rent and Aotearoa-NZ has the highest proportion in the OECD of low-income renters paying more than 40% of their income on rent.

Previous Governments have variously referred to house price to income ratios of three or four as something to aim for, while 25% of disposable income is currently used as the threshold for social housing income-related rent subsidies, which are currently granted via Kāinga Ora and to Community Housing Providers.

But this Government has refused to set a target for house price-to-income multiples, which by various measures are well over eight and often closer to ten in more expensive markets. Auckland Council once set five as its housing ownership affordability target. The previous National Government once suggested a multiple of four when setting measures of success for councils.

What should success look like?

My view is that 30% of disposable income should be the defined threshold beyond which housing costs are seen as unaffordable. No one should be paying more than that, yet more than half of our lowest-income quintile are currently paying more than 40% of disposable income on rent.

The Government set very clear and defined measures to target child poverty reduction. It should do the same for housing. It has been reluctant to repeat what it sees as the mistake of setting a 100,000 target for KiwiBuild before its election in 2017.

The bottom line - Without a measure of success and progress, the Government’s response lacks heft or credibility.

Elsewhere in the news this morning:

In geo-politics, the global economy, business and markets

House-building slump - The US Census Bureau reported overnight that housing starts fell 9.6% in July from June to an annualised rate of 1.46m, which was 11.9% below the rate in July 2021 and below the 1.54mn consensus forecast by economists. It was also the lowest rate for housing starts since February 2021

So what? - House-building is at the bleeding edge of activity in the world’s largest economy and is most sensitive to a doubling of 30-year mortgage rates this year and demand destruction from higher construction costs. A weaker than expected result increased expectations that the United States is headed for recession later this year or earlier next year.

The bottom line - That in turn is depressing expectations for inflation and wholesale interest rates, and keeps the pressure down on Aotearoa-NZ’s fixed mortgage rates, despite the well-flagged 50 point hike in the Official Cash Rate by the Reserve Bank that is expected at 2pm today.

Just briefly

* US Seventh Fleet commander Vice Admiral Karl Thomas said overnight America should ‘contest’ China’s flying of ballistic missiles over Taiwan. BBC

* Production at U.S. factories increased more than expected in July. Reuters

* Premier Li Keqiang said overnight China would step up macro-economic policy support for the economy, which pushed up Chinese stocks. He gave no details. Reuters

* Germany will keep open three of its nuclear power plants to offset losses of Russian gas-fired electricity, reversing a 20-year policy of planning to close them for safety and environmental reasons, the Wall Street Journal reported.

In Aotearoa-NZ’s political economy, business and markets

The Australian-$$$ reports this morning New Zealand-based brokerage Jarden is investigating complaints of staff harassment, without giving details of whether it was here or in Australia, where Jarden has launched a big expansion over the last couple of years.

The NZ Herald-$$$ reported law firm Morrison Kent had completed an independent review of its culture after complaints about diversity and keeping the wage subsidy despite billing more hours during Covid, but will not release it.

Today’s must-read

A fun thing

Ka kite ano

Bernard Hickey

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: Be careful what you wish for is the lesson from a new poll out overnight that shows more National voters oppose Christopher Luxon’s plan to remove the 39c income tax than support it.

Luxon’s attack on what he describes as the Labour Government’s fiscal profligacy and ‘addiction to spending’ as the cause of inflation may be boomeranging back into his tax cut policy. Even National voters are questioning how any tax cuts by a National Government would improve the Budget deficit and reduce inflation, especially when most of the benefit goes to those who are now much better off (around $600b for home owners) since the outbreak of Covid and would spend some of it, or leverage it up into a rebounding housing market in late 2023 and early 2024.

Paid subscribers can see more detail and analysis of the poll result below the paywall fold and in the podcast above.

A tax cut policy that is boomeranging

A 1News/Kantar poll out last night showed that two in three eligible voters do not support National’s plan to cut the 39c top rate of tax for those earning over $180,000, with just 25% supporting it and 10% saying they don’t know or didn’t answer.

Amongst National Party supporters, 49% opposed the tax cut plan and 41% approved it. Those groups of eligible voters who are more likely than average (25%) to support National’s plan to cut the top rate of tax included:

* National Party supporters (41%)

* Those with a household income of more than $150,000 (36%)

* Men 35-54 (33%)

* Aucklanders (32%).

Those groups of eligible voters who were more likely than average (65%) to oppose National’s plan to cut the top rate of tax included:

* Green Party supporters (90%)

* Labour Party supporters (81%)

* Wellingtonians (77%)

* Women aged 55+ (76%)

* Those with a household income of between $30,001 and $70,000 (75%).

So what? - This poll suggests National’s attacks on what it calls Labour’s ‘fiscal profligacy and ‘addiction to spending’ may be creating some cognitive dissonance among those potential National voters wondering if tax cuts that will go mostly to those already $600b richer under Covid will actually reduce the Budget deficit and remove inflationary pressures.

The bottom line - The assumption that Opposition leader Christopher Luxon’s policy released soon after his November 11 election to the National leadership was responsible for National’s surge in the polls over the summer may be wide of the mark. National has yet to release a fully costed Budget policy that includes both the taxation and spending side of the accounts. Releasing one without the details of the other is causing some angst and confusion, even among its own supporters.

Elsewhere in the news overnight and this morning

In geo-politics, the global economy, business and markets

More oil deflation - Oil prices fell 5% overnight after data yesterday afternoon (see Monday’s Dusk Chorus for more) showed China’s factories slowed more than expected and its consumers slowed spending because of repeated Covid lockdowns, a property development crash and weaker demand for exports from the United States and Europe, which appear headed for recession. Brent crude dropped 5% to $93.16 per barrel. Reuters

Shanghai Ikea panic - Videos emerged overnight showing chaotic scenes and panic-stricken shoppers at an Ikea store in Shanghai trying to get out of the building after child there was reported to have tested positive for Covid after returning from Tibet, where heavy lockdowns are in place. Videos show the guards closing the doors, but a crowd forced them open to escape. BBC

China beef ban fears - The AFR-$$$ reported this morning that Australian and New Zealand beef exporters were on high alert after reports that China may temporarily suspend all meat imports from Australia and New Zealand due to concerns about foot and mouth disease, and potentially as diplomatic punishment in the wake of tensions over Taiwan.

Where’s the beef? - Australian and New Zealand exporters scrambled through Monday to hunt down details after a Chinese beef industry website, World Meat Imports Report, said Beijing was immediately suspending customs clearance and cargo release for all Australian and New Zealand agricultural commodities. Initial checks suggested crossed wires, but exporters are continuing to confirm no changes with buyers.

US confidence slides - US homebuilder confidence slumped more than expected in August as unaffordable prices, construction cost inflation and higher interest rates hammered demand. The National Association of Home Builders’ housing market index for August was published overnight and dropped 6 points to 49, which was below economists’ forecasts for about 55. This was the first fall below the expansion/contraction threshold of 50 since May 2020.

Another deflationary surprise - The New York Federal Reserve survey of manufacturers registered minus 31.3 for August from + 11.1 the previous month. Economists had forecast a result of about + 5. This was the second largest monthly fall for the index on record. The US 10 year Treasury yield fell eight basis points to 2.77% as traders baked in expectations that slowing economic growth will remove inflationary pressures in the world’s biggest economy.

Just briefly

BlackRock in A$1b-plus battery play in Australia AFR-$$$

In Aotearoa-NZ’s political economy

Yeah. Nah - A 1News/Kantar poll published last night found more than two-thirds of voters overall did not support National’s plan to remove the new 39c tax rate. (See more detail and analysis below)

Plea for help - The Human Rights Commission has called for an immediate freeze on rents and an increase in the accommodation supplement to help those hit hardest during Covid by the cost of living crisis. Stuff

“We’re very concerned that some students, low-income or single-wage families are having to make trade-offs between the right to adequate food and the right to a decent home.” Human Rights Commissioner Paul Hunt via Stuff

Quotes of the day

China’s economy is in deep trouble

“China’s growth in (the second half) will be significantly hindered by its zero-Covid strategy, the downward spiral of the property markets and a likely slowdown of export growth. Beijing’s policy support could be too little, too late and too inefficient.” Ting Lu, Nomura’s chief China economist via FT-$$$

“China is definitely in a very desperate situation. The problem now is no effective demand. If you don’t allow people to come out and consume , there is no demand.” Xingdong Chen, chief China economist at BNP Paribas via FT-$$$.

“Usually the Chinese economy has been an important pillar in supporting the global economy. This time, the US and Europe are showing signs of slowing and possibly moving into a recession but the backdrop — China — isn’t there to support the global economy,” Aneeka Gupta, director of macroeconomic research at WisdomTree via FT-$$$

Numbers of the day

Red states

25% - A quarter of the United States’ land mass, which is home to more than 100mn people, faces temperatures of more than 52 degrees celsius within 30 years, according to a forecast released by the First Street Foundation overnight. The number of counties in this extreme heat belt will rise from 50 now in Texas and California to over 1,000 by 2053 right across the middle-to-lower parts of the lower 48 states.

Knowing what’s real wealth and what isn’t

A$80m - A 26-year-old cryptocurrency casino founder in Melbourne who paid almost A$40m for a mansion in Toorak in March has bought another home in Toorak for A$80m at 29-31 St George’s Rd (Street view below). AFR-$$$

Chart of the day

Investors are very confident inflation futures will not equal the past

Today’s must-read

Measuring productivity? Or mouse-jiggling? - This deeply reported piece in the New York Times shows how many companies are increasingly using productivity measuring AI tools post-Covid to force people to stay at their screeens or be on-call as much as possible and for as long as possible. This example of a pastor working for a non-profit hospice shows the unintended consequences.

“This is going to sound terrible, but every now and again I would do what I thought of as ‘spiritual care drive-bys’” to rack up points. If a patient was sleeping, “I could just talk to the nurse and say, ‘Are there any concerns?’ It counted as a visit because I laid eyes.” Reverend Heather Thonvold in this New York Times deep dive on The Rise of the Productivity Score

Some 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: The Arctic is warming four times faster than we previously thought. That ramps up the pressure to reduce emissions fastest in the next seven years to 2030, rather than backloading it into the final years of 2030-50.

That’s especially important for Aotearoa-NZ because so much of our emissions come from cattle and sheep, which are much more potent in the short term than the long term, and should be measured as such. Also, our politicians have put most of the political weight into reductions in the back half of the next 30 years.

Paid subscribers can see more detail and analysis below the paywall fold and in the podcast above.

Why 2030 is more important than 2050

A couple of bits and pieces of climate news and an excellent explainer on methane caught my eye over the weekend that reminded me of the need to focus on 2030, rather than 2050, in the debates over climate change action.

Firstly, a new study emerged late on Friday confirming the arctic is warming four times faster than the rest of the planet.

A new study, just out yesterday in the journal Communications Earth & Environment, is the latest to weigh in. It finds that the Arctic Circle — the area located above 66.5 degrees latitude — has warmed by more than 5 degrees Fahrenheit since 1979.

In all, the study concludes, the Arctic has warmed at about four times the global average rate over the last 43 years. Scientific American

Secondly, this FT-$$$ piece about a looming clash between the UN’s ‘Race to Zero’ body and the Mark Carney and Michael Bloomberg-chaired ‘Glasgow Financial Alliance For Net Zero’ over banning coal investments (GFANZ is vague) reinforced to me the need to be much more aggressive in emissions reduction.

This is particularly relevant for Aotearoa-NZ because our most potent emissions in the short run are methane emissions from cattle and sheep. The Carbon Zero Act’s focus on 2050 has been convenient for our farming sector because it back-loads a lot of the effort into the last two decades. That’s also convenient for politicians, including the current Government, because it pushes many of the hardest decisions out to others.

Our politicians today, including Transport Minister Michael Wood, can say in a plausibly deniable way that ‘we’re on track’ for net zero for 2050, largely because most of the big reductions are forecast out in those 2030 to 2050 decades, when the biggest work actually needs to be done in the next seven and a half years.

This explainer on methane from the always excellent Wellington-based science writer Melanie Newfield via her free Substack The Turnstone (I suscribe to it and recommend you do too) also emphasises the need for speed.

Methane makes up 44% of our contribution to global warming, about the same as our carbon dioxide emissions. However, that figure is based on a Global Warming Potential calculated over a period of 100 years, which is perhaps misleading when we are trying to get our emissions to “net zero[1]” by 2050. Remember, if we calculate our methane emissions over a 20 year time scale, as some scientists suggest we should, methane is not 25 times worse for the atmosphere than carbon dioxide – it’s 80 times worse. After all, 2050 is not much more than 20 years away.

So, where does New Zealand’s methane come from? More than 80% comes from cattle and sheep agriculture. Melanie Newfield’s The Turnstone

So far, our farming sector has avoided being included in the Emissions Trading Scheme and has successfully used He Waka Eke Noa to fend off actual action into the vague and convenient future.

I’ll focus more in the coming months on the ‘need for speed’ and what that looks like. I welcome suggestions from paid subscribers in the comments below.

Elsewhere in the news this morning here and overseas:

Poking the dragon again - Five more junior members of the US Congress arrived in Taiwan overnight, re-ramping up the tension with Taiwan after Nancy Pelosi’s visit the previous week. Reuters

Distressing democracy - Anti-vaxx group Voices For Freedom has called on its 100,000 members to make Aotearoa-NZ “ungovernable” and is targeting elections of council candidates in October’s elections. Stuff

Expect 50 basis points - The Reserve Bank of New Zealand is widely expected to hike its Official Cash Rate by 50 basis points to 3.0% at 2pm this Wednesday when it releases its next quarterly Monetary Policy Statement. However, banks have been trimming their main promotional fixed mortgage rates to below 5% in recent weeks as financial markets increasingly see the heat going out of the global economy and allowing central banks to stop hiking once they get near 4% later this year.

Number of the day

US$48.4b - The state-controlled oil producer Saudi Aramco reported a record profit the 90 days to June 30 of US$48.4b, up 90% from a year ago as it took advantage of the surge in oil prices to over US$100/barrel over the last year. Reuters

Some 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: The five signals I picked out from the noise this week were:

* China only rattled its sabres in the Taiwan Strait;

* There was no inflation in the United States in July;

* House prices are bottoming out in Auckland City and Wellington City;

* Christopher Luxon failed his first candidate selection test; and,

* An Auditor General’s report exposed Three Waters’ democratic deficit.

I co-hosted our weekly live ‘hoon’ webinar for over 100 paying subscribers with Peter Bale at 5pm last night to talk about these events of the week and others with special guests University of Victoria Foreign Affairs Associate Professor Jason Young to talk about. The audio from the webinar is in the podcast above for all subscribers immediately as part of this weekly summary and sampler of the week’s news and my work this week on The Kaka. It usually goes out every Saturday morning for your weekend reading and listening pleasure.

In particular, we talked about

* a proposed select committee inquiry into the Government’s financial response to Covid and how Labour’s rejection of it shows the weaknesses of our limited democratic protections;

* the Government’s Reshaping Streets proposal to encourage the swapping of cars for walking and cycling, which National has called a ‘war against cars’; and,

* China’s angry (but so far not destructive) military response to Nancy Pelosi’s visit to Taiwan, and the intensifying conflict in Ukraine.

This is my weekly summary and sampler of the news of the week on The Kākā for both free and paid subscribers. The public interest journalism I do daily on housing unaffordability, climate change inaction and poverty reduction is possible with the support of paid subscribers. Join our community by subscribing in full.

A reminder to free subscribers reading here that we have a special $30 a year deal for under 30s and anyone on a benefit. We also have a new special $65 a year deal for over 65s who are renting and reliant on NZ Superannuation. Any students, teachers and staff who signs up to the free tier with a .school.nz or .ac.nz email address will also be comped up to the full paid tier for free.

This week’s five signals from the noise

Luckily, China only rattled its sabres in the Taiwan Strait

China reacted angrily to last week’s visit to Taiwan by US Speaker of the House of Representatives, Nancy Pelosi, by staging its most intense series of drills, test missile firings and naval manoeuvres in the Taiwan Strait in almost 30 years. Chinese fighter jets, bombers and warships repeatedly crossed the median line between China and Taiwan and probed its defences. China also fired ballistic missiles over Taiwan and into the seas near Japan.

But the United States was careful not to send its carrier group nearby into the Taiwan Strait and, somehow, these drills and counter-drills passed by without any accidents or actual clashes. We all dodged a big bullet. China declared the exercises over this week, avoiding the prospect of a full blockade of shipping or air traffic in this key pathway for much of the world’s shipping.

Aotearoa-NZ also managed to avoid further inflaming China by calling only for diplomatic moves to de-escalate tensions. Our public comments were less openly supportive of Pelosi’s move and Taiwan than Australia’s. China’s diplomats said this had set back efforts to warm relations with Australia’s new Labor Government, which had initially improved since its election in May.

“I think my personal understanding is that once Taiwan is reunited, coming back to the motherland, there might be a process for the people in Taiwan to have a correct understanding of China about the motherland.” China’s ambassador to Australia, Xiao Qian, speaking at the National Press Club in Canberra, where he said there was no room for China to compromise on Taiwan and suggested re-education for Taiwan’s people after reunification. The Guardian

There was no inflation in July in the United States

The Consumer Price Index in the world’s biggest economy was flat in the month of July and the annual US inflation rate fell to 8.5% from 9.1% in June. This data released on Wednesday night was lower than expected and sparked rallies on stock and bond markets as investors hoped it meant the pain of higher interest rates would be not need to be quite so painful.

This was a big deal in the global economy and reinforced the hopes of those in ‘Team Transition’, including me, that global inflationary pressures have peaked and central banks won’t have to hike short term interest rates too much to get inflation back down to around 2% in the next couple of years.

I wrote in depth about this in Thursday’s Dawn Chorus, which included my podcast version that talked through the underlying reasons why disinflationary forces would eventually overwhelm the inflationary spikes of 2021 and 2022.

House prices are bottoming out in Auckland City and Wellington City

The Real Estate Institute of New Zealand (REINZ) published its sales data for July on Thursday, which was reported more broadly as showing a housing market in virtual free-fall mode. The slightly panicky tone of the coverage elsewhere suggested the figures were just the beginning of a slide that could turn uglier.

Actually, I think they showed the beginning of the end of a 15-20% fall in house prices nationally this year from their peaks in October and November of last year. Prices have begun bottoming out in the ‘bleeding edges’ of the market in central Auckland and Wellington. Prices in Auckland City are now down 17.2% from their November peak and Wellington City prices are now down 18.8% from their October peak, although they bounced 2.4% in July from June. Wellington City’s peak-to-trough fall was 20.1%. The rest of the country is still catching up.

Interest rates have stopped rising, migration is restarting and many investors are becoming more hopeful of a change of Government late next year, which would see interest serviceability, ring-fencing and bright-line taxes repealed, along with a softening of expensive rules forcing landlords to make homes warmer. I wrote in depth in Friday’s Dawn Chorus about why we’re likely to see a rebound from late 2023.

Christopher Luxon’s failed his first candidate selection test

Late on Monday afternoon Kirsty Johnston reported via Stuff that new National MP for Tauranga, Sam Uffindell, violently assaulted a fellow Kings College boarding school student in 1999. The former banker had apologised to the victim last year before standing in the by-election to replace Simon Bridges in the safe seat. Uffindell also told the selection committee about the assault and apology, but the committee including then President Peter Goodfellow, new President Sylvia Young and senior MP Todd Barclay, chose not to tell National’s delegates selecting the candidate or Luxon. Barclay told staffers in Luxon’s office, but they didn’t tell Luxon, Luxon said.

Luxon initially defended Uffindell to the hilt as a ‘changed man’ all through interviews and standups on Tuesday, until new allegations of bullying and flat-trashing emerged that evening via RNZ. Luxon then suspended Uffindell via email at 11.21 and set up a two-week inquiry by QC Maria Dew.

I wrote in Tuesday’s Dawn Chorus about Christopher Luxon’s failure to choose a good candidate at his first attempt under reformed selection rules, and the problems he now has with the National Party outside Parliament, given Peter Goodfellow remains a board member and Sylvia Young was Goodfellow’s pick and now President.

"I'm very confident we'll get a great candidate in Tauranga - we've got a great local organisation, and they'll have a great selection I'm sure." Christopher Luxon on March 24 rolling out a new selection process called 'National 101' to get better candidates for Parliament.

“He’s going to bring something really different to our caucus and some diversity to it in that in that he’s really well educated, he’s had a local and international finance background, he’s a local agribusiness owner, and he’s a very committed family man from Tauranga who can advocate well for those local issues, so that’s what we wanted, so I’m really excited about what he’s going to be able to bring to our party.” Luxon describes Uffindell when asked about a lack of diversity in candidate selection by Waatea News on May 2.

“Sam is a good candidate and is a high integrity person and he's got good character.” Luxon at 10.20am on Tuesday after learning about the first revelations about Uffindell’s violent assault in 1999 and admitting being a bully as a young man, as well as his decision not to reveal it to voters, delegates or Luxon.

"We've had an MP involved in completely unacceptable and unlawful behaviour.” Luxon at 11.20pm on Tuesday in a statement suspending Uffindell after new allegations emerged.

The Auditor General exposed Three Waters’ democratic deficit

Auditor General John Ryan lobbed his submission on the Water Services Entities Bill into the Parliamentary Select Committee process on Monday, including unusually sharp criticism of the Three Waters reforms.

Ryan skewered the lack of accountability that Three Waters is creating in its attempt to solve Aotearoa-NZ’s existential infrastructure funding blockage. The too-clever-for-its-own-good nature of Three Waters finally caught up with it and sank its teeth into its own rear.

I wrote in Tuesday’s Dawn Chorus about how the Labour Government’s attempt with Three Waters’ to quietly solve Aotearoa-NZ’s fundamental infrastructure financing problem had backfired, largely because not being crystal clear about the need for higher taxes and debts had allowed others to insert co-governance into the vacuum left by that vagueness.

“I am concerned about whether these mechanisms will be sufficient, individually or collectively, to enable comprehensive and effective public scrutiny and accountability.” John Ryan in the submission.

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: House prices in the bleeding edge suburbs of Auckland City and Wellington City are about to trough out around 15-20% below their late 2021 peaks. They and the rest of the country’s housing markets are set for strong rebounds from late 2023 if, as markets and opinion polls currently suggest, mortgage rates are falling and there’s a National-ACT Government by then.

That rebound will likely be super-powered by the repeal within the first 100 days of the new Government of various new taxes on landlords, a freeze on housing infrastructure and transport investment and an unleashing of migration-driven population growth that softens inflation, drives down Budget deficits and sucks mortgage rates ever lower.

Our economy is already a housing market with bits tacked on and has been for 20 years. The market’s ups, downs and ups again from 2020 to 2025 are set to extend that maxim to being: Aotearoa-NZ’s entire society and future is a housing market with bits tacked on.

House prices set for late 2023 rebound after 15-20% fall

Are we there yet? - The REINZ reported yesterday its House Price Index (HPI) for Aotearoa-NZ fell 1.4% in July from June and was 2.9% down from a year ago. That meant prices nationally have fallen 10.9% from their peak in November last year. Prices in Auckland City are now down 17.2% from their November peak and Wellington City prices are now down 18.8% from their October peak, although they bounced 2.4% in July from June. Wellington City’s peak-to-trough fall was 20.1%.

So what? - The Reserve Bank and most economists have forecast falls from peak to trough of around 15% by the end of this year, with the most pessimistic seeing falls of around 20%. These figures suggest we’re about two-thirds of the way through that fall, with a bit more than that to go in places outside of Auckland and Wellington.

But there are tentative signs of a plateauing out in the bleeding edge areas such as Auckland City and Wellington City. Interest rates have stopped rising, migration is restarting and many investors are becoming more hopeful of a change of Government late next year, which would see interest serviceability, ring-fencing and bright-line taxes repealed, along with a softening of expensive rules forcing landlords to make homes warmer.

The bottom line - First home buyers wondering if they should wait for prices to keep falling back to their pre-Covid levels should stop wondering. It won’t happen. Home owners look set to retain at least half of the 45% gains they saw in their house values between March 2020 and November 2021. Cooling inflation, falling fixed mortgage rates and the now-likely reversal of the tax hikes on landlords mean waiting for prices to fall much further is risky.

In my view, house prices will bounce strongly again in the final months of 2023 and return to their 2021 peaks within a year or two from there. In my view, anyone who wants to buy their first home to live in and can financially manage it, should be very careful before choosing to ‘wait for prices to fall further’. Those who feared missing out in early 2020 when the Reserve Bank removed LVRs and printed $55b were right to panic. That FOMO may have been temporarily been replaced by FOOP (Fear of Over Paying), but FOMO will always trump FOOP in the long run.

Our society is hardwired to drive house prices to infinity and beyond. Let me go a bit deeper on this.

What’s really driving our housing market

This is not financial advice. Just the facts of life in our political economy.

I have a rule of thumb I tell every young renter I see. It’s not financial advice. Everyone’s situation is different. It’s my long-held opinion on the political economy of house prices in Aotearoa-NZ in the long run. That is:

* always, always buy a house to live in as soon as you can to ensure you have stability and control over your future, especially if you’re thinking of starting a family;

* do whatever it takes to get a deposit and the biggest possible mortgage your bank will let you have to get on the ladder so you too can get the leveraged and tax-free capital gains that median voting home owners depend on for their financial futures and to support their current lifestyles and small businesses;

* don’t wait for the ‘grown-ups’ to fix the supply shortages or change the tax rules to improve affordability, or for the ‘markets’ to restore sanity to housing affordability; and,

* don’t believe politicians or central bankers who say the authorities have the situation under control or suggest things will improve in a short enough time for you to sensibly afford a house for something like three to five times income, as was the case 20 years ago (see the house price to income multiple chart below), because prices would have to halve from current prices within a year or two to achieve that.

Why won’t the market return to a 2000s-type equlibrium?

That is not going to happen because neither the Government (of whichever flavour) nor the Reserve Bank would allow that. Also, the extra housing supply coming onto the market now would dry up immediately. The Government would get kicked out by the home-owning and mostly older median voters living in the outer suburbs of the big cities and in the smaller cities and towns of provincial Aotearoa-NZ.

Their voting rates are almost twice those of young renters in inner city areas in general elections, and more than three times their rates in council elections, which in many ways are more important because they determine the extent of the housing supply response. This ejection of any Government allowing house prices to fall at double-digit rates is what we’re likely to see next year, and it’s why National is promising to repeal the various taxes trying to make rental property investing less attractive.

So what happens now?

As the Reserve Bank wants and has forecast, house prices will settle another five percentage points lower nationally through the rest of the year, and may have already troughed in Auckland and Wellington.

If, as financial markets are now indicating, inflation is now under control and interest rates keep falling, there is a growing chance of a strong bounce-back in house prices from the day after a change of Government in the final three months of next year, fueled by lower mortgage rates, a rapid increase in migration and a freeze of new housing infrastructure investment through councils, NZTA and Kāinga Ora’s build programme.

That new National-ACT Government will then repeal the property taxes, release migration restrictions and slash Government investment spending to ensure interest rates stay low, or even fall further.

Everything in our political economy drives everyone (politicians, bankers, central bankers, real estate agents, mortgage brokers and newspaper editors) to protect the leveraged tax-free gains of median voters who own their own homes, and often more than one home.

Aotearoa-NZ is a broken housing market with bits tacked on

That’s because those median voters’ financial and familial futures, let alone their feelings of self-worth and ‘tribal’ identification, are totally bound up in whether and where they own the house they live in, and how quickly they can then leverage up those tax-free and leveraged gains in equity to ensure they can continue to save more money from their houses than their jobs or businesses, many of which are also dependent on those gains.

They feel they need to keep this housing market elevated and preferably continuing to rise at the rates of the last 20 years to ensure a comfortable retirement for themselves, and even more importantly, enough equity to help their own children into their own homes.

There is no alternative that wouldn’t wreck those plans and force a change of life trajectory, career, investment approach and lifestyle.

I’ve said for more than a decade Aotearoa-NZ’s economy is just a housing market with bits tacked on. But the $500b-plus surge in house and land values through the first 18 months of Covid has strengthened that situation.

We also now have a society, a workforce, a political system, a financial system and a demographic trajectory for lifespans and population size that is dominated by our housing market. We vote to keep house prices and rents high. We vote to keep public investment low and population growth from migration high. We lend to profit from those investment preferences, and not to real businesses. We run our Government finances to protect the status quo of low infrastructure investment that keeps housing supply squeezed and ensures interest rates are the lowest they can be.

About half our kids are growing up in private rentals, with about a half of those in financially and physically stressed households where they bounce from one cold, moldy and ruinously expensive rental to another just-as-debilitating rental or emergency housing situation. This 25% cohort of kids bounce from school to school, hospital A&E to hospital A&E, and eventually ‘graduate’ into the workforce, often without the educations, life skills, familial support or physical health to be settled, productive and healthy members of society.

Surely there must be a way out?

In my view, the only ways the situation above might change is if:

* those median voters that determine general election results and that dominate council election results change their minds about wealth taxes to redistribute some of their unearned and leveraged capital gains into building infrastructure for housing and public transport investments that massively improve affordability and achieve our emissions reduction goals; and,

* there’s a substantial increase in political engagement and voter participation among young renters, especially those from Māori, Pasifika and first generation migrant backgrounds in Auckland, Wellington and Christchurch.

Both of these are unlikely any time in the next decade or two, in my view. Both National and Labour are committed to the 30/30 principle that blocks new wealth taxes or an increase in infrastructure investment.

So what should young renters do?

In my non-financial and non-specific advice for people wanting to put down roots and start a family, it makes sense to:

* save, beg, borrow, marry and schmooze your way to a deposit with the help of family, friends, Lotto, Bitcoin and anything you find down the back of the couch;

* do whatever it takes to get the biggest loan you can from a bank to buy the biggest bit of residential land you can, even if it’s connected to an apartment or townhouse of some kind;

* campaign, vote and argue with median voters (especially parents) to tax themselves and increase investment to change the situation above, at least until the very moment you get yourself on the ladder, and then your incentives flip to wanting ever-lower interest rates, housing supply restrictions and no tax on leveraged capital gains on land value appreciation.

For those without the time or inclination or belief that this is possible, the best hope of building a stable and prosperous future is immediately buy a one-way ticket to Australia and hope Prime Minister Jacinda Ardern is able to convince Australian Prime Minister Anthony Albanese to follow through on his promise to announce solid pathways to full Australian citizenship for New Zealanders in Australia.

For those looking for leverage in debates with homeowning family members and bosses upset about your migration plans, suggest to them that they make those tax and investment changes or they’ll have to watch their grandkids grow up on social media and via fleeting visits, or also move to the lucky burny country.

But whatever you do, don’t kid yourself or believe others who say that you can afford to wait for prices to come back to meet you some time in the next few years.

Charts of the day

Number of the day

47 - The median numbers of day to sell a property across Aotearoa-NZ, up 16 days from July 2021.

Quote of the day

“The urgency seen in the market from mid to late-2021 has fallen off, the combination of increased stock taking the pressure off and buyers waiting to see if prices will decrease further.” REINZ CEO Jen Baird

Elsewhere in the news overseas this morning

Deflationary trends - Average US petrol prices fell overnight to US$3.99/gallon (NZ$1.70/litre) for the first time since Russia’s invasion of Ukraine overnight, adding fresh ammunition to ‘Team Transitory’s’ calls for more cautious central bank rate hikes. US stocks rose another third of a percent this morning, taking the Nasdaq’s bounce from its trough earlier in the year to 20%. Reuters

Lower producer prices - US producer prices fell 0.5% in July from June, which was the first monthly fall since April 2020 and meant annual inflation was 9.8%, which was down from June’s annual rate of 11.3% and lower than economists’ forecasts for about 10.4%. US jobless claims also rose this week to 262,000, the highest since November and another sign of a slowing of the world’s largest economy that reduces inflation pressures. Reuters

But European power pain - European electricity prices jumped another 5% overnight to fresh record highs of €452.50 per megawatt hour, which is five times higher than it was a year ago. Russia’s decision to squeeze its supplies to Germany to 20% of usual levels through Nordstream 1, plus a heatwave, low wind speeds and a drought that is stopping coal barges travelling down the Rhine, are driving the power prices higher.

So what? - The world’s two largest economic trading zones, North America and the Eurozone plus the UK, are both headed towards recession and their inflationary pressures are receding thanks to the demand destruction of earlier this year that is now dragging down on commodity prices and easing pressure in supply chains. It’s why banks here kept cutting (yes cutting) their fixed mortgage rates.

Some fun things

Ka kite ano

Bernard

PS: Here’s the link for paying subscribers to join the live ‘hoon’ webinar at 5pm.

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: Inflation pressures in the world’s dominant economy eased more than expected in July, which has increased hope that central banks won’t have to hike short term interest rates too much, which in turn would lead to soft landings globally.

US inflation data out overnight showed the annual rate fell to 8.5% in July from a 40-year high of 9.1% in June, with prices actually flat overall in July from June. US stock and bond markets surged this morning on growing hopes that central banks won’t have to tighten monetary policy quite as aggressively as once expected, allowing the world’s largest economies to have softer landings with only mild or no recessions.

Paid subscribers can see more analysis, charts and detail below the paywall and in the podcast above.

Inflation is peaking (yes I wrote it out loud)

It’s been a while since I’ve reaffirmed my membership of ‘Team Transitory’ in seeing high inflation as a temporary phenomena that will recede without the need for extended and painfully high short-term interest rates from central banks. But regular readers and commenters will know I never handed in my membership card, although it has been an uncomfortable position to hold for many a month this year.

Today, I’m happy to brandish the ticket again and say things are looking much better for Team Transitory in the wake of last night’s inflation data from the United States and China, the world’s two largest economies, and after recent slumps in commodity, shipping, computer chip and most asset prices (see charts below). The chill winds of disinflationary pressures are blowing again around the global economy, as they have for almost all of the last 30 years.

Just like any Warriors supporter, I think ‘my’ team will win in the end. That’s because the underlying forces of disinflation have not gone away. If anything, they have intensified in many places. Those main forces include:

* Savings gluts - rising inequality driving more and more cash into passive and low-risk investments that are not recycled into job-and-productivity creating investments in infrastructure;

* Flights to safety - climate change and political instability slowing economic growth, worsening the savings gluts and adding to the feedback loops worsening inequality;

* Services deflation - an extension of the evaporation of services industries (health, education, finance) into the globalised cloud run by tech giants able to both reduce prices for consumers and pressure down wages for workers;

* Depowered labour - the continuation of weak labour power because of a multi-decade and systemically driven reduction in union penetration and worker rights, along with a further deepening of outsourcing and contracting out, both online and on the ground;

* Labour migration - Covid slowed the growing flows of temporary (and permanent) migrant workers from low cost climate-and-war hit areas such as Africa, the Middle East and central Europe to richer countries with ageing workforces, but they are resuming to meet insatiable demand from employers needing cheap labour to keep growing in the absence of productivity investments;

* Globalisation is surviving - There’s been plenty of talk that de-globalisation, on-shoring and ‘friend-shoring’ will unwind the deflationary effects of China’s embedding in globalised supply chains, but despite the noise after Russia’s excision from the global economy, that has yet to actually happen, largely because China and globalised companies doesn’t want deglobalisation when push comes to shove;

* Cheaper energy - the eventual switch to renewable electricity globally will reduce and stabilise transport and other costs because solar and power costs are ultimately cheaper and less volatile than fossil fuel costs, largely because supply is local and not dependent on unstable producers such as Saudi Arabia, Russia, Iran and Veneuzuela; and,

* Cheaper basic food - the use of genetic modification has only just begun to improve the efficiency of food production, along with shifting grains production away from emissions-heavy animal feed, will see basic food costs subside (although don’t expect cheap cheese, meat or fish).

Some temporary members of Team Transitory

The central banks themselves were in Team Transitory until late last year. The Reserve Bank of New Zealand jumped out earliest, stopping QE last July and hiking for the first time in October. The US Federal Reserve did not leave the club until December. The Reserve Bank of Australia stuck to its transitory guns until its first rate hike in May. The European Central Bank only hiked for the first time last month. The Bank of Japan has yet to abandon its ‘Team Transitory’ stance of printing money to keep interest rates low.

Some investors and traders in Government bonds got a bit nervous earlier this year as US inflation headed towards July’s peak of 9.1%, but inflation expectations measured in the differences between regular bond yields and inflation-adjusted bond yields have never shown the ‘smart money’ thinking inflation was getting out of control.

Cash gluts keep starving economies of real investment

Some argue those low bond yields are distorted by savings gluts and inequality as the richest and oldest owners of assets are more interested in capital protection than capital growth, but even if they are, it becomes a type of self-fulfilling prophecy. Cash parked in low-interest-rate bank accounts and Government bonds is unlikely to be invested in physical and social infrastructure that would unleash the type of strong real worker income growth and demand growth created by the massive state and corporate investments in the developed world from the 1940s to 1980s.

Those investments were driven mostly by fear of communism and the perceived need to invest in defence, soldiers’ skills and basic infrastructure for war fighting. They were funded by relatively high tax rates and a consensus that investing for future generations was a better choice than consumption now. The end of the Cold War (and history), along with victories for low-tax and small-government campaigning political forces, slowed those often-state-backed investments in productivity-enhancing infrastructure, training and worker welfare.

This Martin Sandbu piece in FT-$$$ tells the story of the multi-decade investment drought well. Here’s the investment comparison for Aotearoa-NZ vs the World and China, which has avoided the problem of politically-inspired investment droughts.

The caveats?

It’s always helpful to have a few life preservers around when you set out for a quick trip across the forecasting Atlantic in winter. Here’s mine:

* Warmageddon - All bets are off if China invades Taiwan or a war starts accidentally in the Taiwan St;

* DeTrumpification - All bets are off in the very unlikely event that the political forces needling and funding the Trumpified political forces in developed economies go away and come back with a more enlightened view that raising taxes, sharing wealth and investing cash is better in the long-run than lowering taxes, concentrating wealth (in their hands) and hoarding cash; and,

* Climatastrophageddon - All bets are off if climate change accelerates much faster than even the most gloomy forecasts and sparks the sort of destabilising wars and the destruction of the globalisation of labour and services that removes those inflationary pressures.

But is inflation actually about to fall?

Oh yes. Here’s a collection of the latest data points and charts showing what’s happened to US CPI inflation, commodity prices, shipping rates and chip prices in the last couple of months.

Elsewhere in the news overnight and this morning

In geo-politics, the global economy, business, investing and markets

A flat July - The US Bureau of Labor Statistics reported overnight that a 7.7% fall in gasoline prices helped offset higher rents and food prices in July, meaning the ‘all items’ index of prices was flat for the month.

Soft landing celebration - The S&P 500 was up 1.9% and the Nasdaq was up 2.6% at 7am NZT as traders lowered their expectations for ‘peak’ US short term interest rates later this year to around 3.4% from 3.6% previously. CNBC

Rate peaks trimmed - Expectations of a 75 basis point rise in the Fed Funds rate next month also fell. The US 10 year Treasury yield initially fell as much as four basis points, but bounced in late trade to be flat at 2.79%. The US 2 year Treasury yield, which is a proxy for Fed Funds rate expectations over the next couple of years, fell 12 basis points to 3.16%. CNBC

Oil back on - The southern branch of the Druzhba pipeline pumping 250,000 barrels of Russian oil through Ukraine to Hungary was turned back on overnight after transit fees were paid to get around financial sanctions on Russia. That helped keep Brent Crude oil prices down around US$97/barrel overnight. Reuters

Chinese inflation weak - China’s consumer price and producer price inflation rose at a slower pace than expected in July as more Covid-19 lockdowns squashed consumer demand. CPI inflation was 2.7% for July from a year ago, which was below economists’ expectations for around 2.9%. Monthly inflation of 0.5% met expectations. Producer price inflation was 4.2% for the year, below expectations for 4.5% and at a 17-month low. Reuters

China’s drills finish - China’s People’s Liberation Army announced overnight it had finished its training drills in and around Taiwan, but would continue regular patrols. The move eases tensions between China and the United States somewhat in the wake of Nancy Pelosi’s visit to Taiwan last week. BBC

Here in Aotearoa-NZ’s political economy, business and markets

Uffindell’s bra hook - The ODT reported this morning on how Tauranga MP Sam Uffindell’s student flat in Dunedin was notorious in 2005 for being a haven for vermin and disease by health inspectors, and prominently displayed a coat hook with women’s underwear hanging from it.

Almost the last to know - National Leader Christopher Luxon said yesterday staff in his office were told months ago about the allegations surrounding Uffindell’s expulsion from Kings College because of his violent assault on a fellow boarder, but had mistakenly neglected to tell him. RNZ The list of those in the National Party (and it seems a few in the Labour Party) who knew about Uffindell but did not tell Luxon includes:

* then-National President Peter Goodfellow;

* current National President and HR expert Sylvia Wood;

* current senior National Caucus member Todd McClay;

* six other members of the candidate selection committee;

* several members of Luxon’s office; and,

* a Labour supporter who tweeted to Labour MPs Jan Tinetti and Marja Lubeck on June 9 that “someone needs to ask Sam about his King's college days and why he was asked to leave,” Politik-$$$ reported this morning.

Lush vs Shadbolt - Talk-show host, documentary maker and Invercargill City Councillor Marcus Lush announced overnight he would challenge Tim Shadbolt to become Mayor. Elsewhere, councils are concerned by the low numbers of candidates putting themselves forward before tomorrow’s close of nominations. Stuff

In the balance - An online poll of over 1,000 voters by Horizon Research found Labour and the Greens could still form a Government with Te Pāti Māori. Stuff

Work trumps study? - Tourism Minister Stuart Nash has suggested universities change their calendars so students can work in February and March. Stuff

A fun thing

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: Learning on the job is hard for anyone, especially in a role seen as the toughest job in politics.

Opposition Leader Christopher Luxon learned a few lessons yesterday in failing to immediately suspend Tauranga MP Sam Uffindell. One of those lessons is that bad news sometimes needs to asked for, even demanded.

The CEO-turned-politician has shown again he lacks some of the fine political motor skills and instincts of his mentor John Key. Luxon’s predecessor as business-leader-turned-aspiring-PM was much more ruthless in dealing with recalcitrant MPs as leader, and had a trader’s instinct for when to cut his losses and throw a problem under the bus.

Luxon will have to acquire those particular set of skills and grow that Key-like nous if he is to preserve his current poll lead over Labour over the next 15 months or so until the election. He will also have to do more house-cleaning inside National’s caucus and inside National’s organisation beyond Parliament. Or risk being run down by the bus again.

Paid subscribers can see more detail and analysis on Luxon’s leadership below the paywall fold and in the podcast above. I’ll be looking out for REINZ house sales data for July due after 9am.

Elsewhere in the news overnight and this morning here and overseas:

Goneburger before lunchtime - National Leader Christopher Luxon stood down new Tauranga MP Sam Uffindell late last night after RNZ reported new allegations of bullying and violence from Uffindell’s student flatting days. Luxon had backed Uffindell to the hilt earlier in the day.

Blocking manoevres - Taiwan warned overnight that China was using extended military drills to control the Taiwan Strait, in effect blocking one of the world’s most important shipping lanes. FT-$$$ Reuters

Chips are down - Phone and PC chip-maker Micron warned overnight of slowing demand, driving its shares down 6% and dragging the Nasdaq down 1%. The warning adds to similar forecasts from fellow chipmakers Nvidia and AMD last week that reinforce fears of a looming US recession and weakening global consumer demand. Reuters

Falling from sky - Allbirds shares fell 19% after the Kiwi-founded sneaker maker also warned of lower profits and job losses because of a slowdown in US consumer demand and problems in China. Marketwatch

Tourism lockdowns - Beijing launched mass Covid testing, closed venues and cancelled events in the tourist hubs of Tibet and Hainan after finding over 400 cases. It extends fears China’s economy will struggle to grow this year, adding to recessionary forces in the US and Europe. Reuters

Tap turned off - Brent crude prices jumped US$2/barrel to near US$98/barrel overnight after Ukraine turned off oil flows from Russia to central Europe through the Druzhba pipeline carrying 250,000 barrels a day to Slovakia, Hungary and the Czech Republic. Russia’s Rosneft blamed Ukraine’s inability to accept payments under the sanctions regime. Reuters

‘Turn it up’ - Transpower warned electricity generators late yesterday they needed to increase output in anticipation of a potential shortage of 200 MW on Friday morning.

Errors of judgment and instinct

Of course there would be more than one incident, and there was. And it was even uglier than could have been guessed yesterday afternoon when Christopher Luxon appeared to go all-in to give Sam Uffindell another chance, believing his assurances that ‘that (criminally violent assault) was it’ and he was a ‘changed man.’

It wasn’t (the only incident) and he wasn’t (a changed man).

Let’s rewind a minute or two.

Red flags? There were a few…

Kirsty Johnston’s astonishing report in Stuff on Monday afternoon should have triggered the suspension of the new Tauranga MP, less than a week after the former investment banker talked in his maiden speech about holding people accountable and dealing with dysfunctional youth. The agreed detail was devastating enough. Uffindell beat a kid, possibly with wooden bed leg, until the child was badly bruised.

Uffindell immediately acknowledged he had been a ‘bully and a mean person’ and the beating would have passed the threshold as a criminal assault. And there was more than enough doubt about Uffindell’s contrition and its effects to set most political spidey senses tingling and demand a cautionary suspension.

Instead, Luxon took Uffindell at his word and went all in to back him in front of a barrage of cameras, lights and questions, even though:

* Uffindell had not told his leader about the incident, but did tell National’s candidate selection committee;

* the selection committee, which included fellow senior caucus member Todd McClay, had not told him nor the voting electorate delegates (let alone Tauranga voters) about the incident;

* then-President Peter Goodfellow (who is still on National’s board for another year) knew about it and had not told Luxon, even though Goodfellow had presided over a string of bad candidate selections and public implosions (see the long list below); and,

* Luxon knew Uffindell had decided not to detail the Kings College incident when asked by the Bay of Plenty Times about his suspension from St Paul’s Collegiate (three days for bunking off school).

What Luxon should have done

To start with, Luxon should have been crawling all over the selection process for the by-election earlier this year. This was the first election on his watch. He knew it was being supervised by Goodfellow, who had been roundly criticised both publicly and privately for presiding over the selection of a succession of young, entitled, error-prone, tone deaf, shifty and arrogant candidates who imploded within a term or two under the spotlight.

As any Crown Prosecutor will explain, it’s the questions you ask, and the ones that go unasked, that matter. Asking the right questions to nail down the risks and understand the true lay of the land is an essential skill of any leader and anyone in governance, let alone one operating in the white heat of public life and auditioning to be Prime Minister. Asking the right questions is a sign of knowledge and skill. Proactively delivering bad news to your boss and the public is a sign of character. Knowing who won’t proactively deliver bad news and then asking them the right probing set of questions is a sign of all three traits.

Most people in positions of corporate power know there are few places to hide within a company, but that not everything comes to light immediately. It will eventually end up in the numbers and it’s fair to believe the reports to the executive committee from the underlings. But there’s often time and private space to find the booby traps in all the nooks and crannies before they blow up in everyone’s face.

But even in those reports and meetings with direct reports, it’s also fair to assume there will be embarrassments and unsaid things that need to be teased out and sometimes pried out of those reports and underlings. Any director on one of these boards or executives on a management committee will (or should) know that people like to tell the boss what they want to hear, and leave the ugly bits out.

Anyone in HR long enough to see a few debacles, will know to check with more than just the referees suggested by the candidate.

What were the minesweepers doing?

What on earth were Peter Goodfellow and Todd McClay thinking by not telling Luxon about this potential wrecking ball sitting on the back benches? That it would be ok as long as no one knew?

This is the fundamental problem. Goodfellow and McClay thought it was a small enough problem and were credulous enough of Uffindell’s explanation that they thought it would not surface. They thought Uffindell would and should get away with it.

Either if they didn’t think a criminally violent assault disqualified someone from being an MP, or they hadn’t gotten to the bottom of the incident itself, they should have known people don’t get kicked out of Kings College for a bit of pushing and shoving, not now and not 23 years ago.

And most importantly, Luxon either completely trusted Goodfellow and McClay enough not to ask them the hard questions, or didn’t feel strong enough to do it. Both are problems.

Just one question. Does he have any skeletons?

Just one question of Goodfellow and/or McLay (let alone Uffindell himself before the election) would have been enough to find the landmine before stepping on it with eight cameras watching. The question to Goodfellow/McClay about Uffindell should have been: Does he have any skeletons in his closet? But that went unasked, and therefore unanswered.

I and others asked Luxon repeatedly yesterday why he thought it was ok to leave Uffindell in place when he knew Uffindell had committed a criminally violent assault, had not told his leader about it, and had allowed the issue to remain secret even after being questioned about a tangential incident by the Bay of Plenty Times. How could he allow the election result to stand when neither National’s own delegates nor the good voters of Tauranga knew about this issue.

Surely those were enough red flags around judgment and record that required a new MP to be stood down? ‘No’ was the answer repeatedly. Luxon said he believed Uffindell was a changed man and deserved a second chance.

Exposed within one more news cycle

Within hours, RNZ's Morning Report approached Luxon and Uffindell last night with allegations from a flatmate in Dunedin in 2003 that Uffindell was a violent, bullying and destructive abuser of drug and alcohol in his university years. RNZ

So this:

"This evening my office became aware of very concerning accusations made to RNZ about behaviour shown by Mr Uffindell toward a female flatmate in 2003 while at university.

"Mr Uffindell disputes the allegations and in the interests of natural justice, an independent investigation will now be undertaken to determine the facts. While this process is underway, Mr Uffindell will be stood down from caucus.

“The investigation will be conducted by Maria Dew QC and I expect it to take two weeks. However, as these allegations have only come to me in the last few hours, the finer details of the investigation, including the terms of reference, are yet to be confirmed and will be finalised over the next couple of days.” Luxon in a statement emailed to media at 11.21pm.

Uffindell issued his own statement one minute later.

"When I was a student at Otago I enjoyed a student lifestyle, which included drinking and, at times, smoking marijuana.

"While in second year a number of flatmates fell out – and two of the flatmates left midway through the year. I reject any accusation that I engaged in behaviour that was intimidatory or bullying. This simply did not happen.” Uffindell in an emailed statement at 11.22pm.

The unnamed woman told RNZ Uffindell bullied her during their second year at Otago University and would trash their student flat after alcohol and drug abuse. She eventually moved out after having to lock herself in her bedroom to avoid a drunken Uffindell on the rampage one night.

Here are the quotes via RNZ. The bolding is mine.

"This was intimidation. This was bullying. I didn't feel safe.

"He was smashing on my door and yelling obscenities and basically telling me to get out - 'hit the road, fatty'

"I ended up climbing out of my bedroom window and ran to a friend's house to stay the night. I feared for my safety. I was scared." Uffindell’s flatmate.

The woman's father confirmed the details to RNZ, saying:

"The flat itself was completely trashed. There wasn't a stick of furniture left. There was no crockery left. There were no handles left on anything. It had all been broken." The flatmate’s father.

The woman said Uffindell had never apologised and his pattern of behaviour revealed his character.

"Listening to his maiden speech in Parliament, he talks about lack of accountability and a sense of impunity - I think that's so hypocritical.” Uffindell’s flatmate.

Suspended 10 hours too late.

This is now a problem for Luxon, who stood and backed Uffindell under repeated questioning for 15 minutes yesterday just before 2pm. Luxon can’t argue he didn’t know there was a problem. At 2pm yesterday he should have known this was a problem and suspended Uffindell pending an investigation.

I was just shocked that Luxon backed Uffindell so definitely yesterday afternoon when he had been personally misled by omission at least by at least three of the people involved, including and especially Uffindell.

I had expected the suspension before the 6pm news. Instead, he appeared to back Uffindell for long enough for half the country to think Luxon could not see what as plain as day in front of the rest of us.

One more sign that Luxon is no Key

I’ve felt from early on that Christopher Luxon is no John Key, despite a few obvious parallels and the oh-so-desperate longing of National supporters for a return to the days of stability and success under Key.

The obvious first impressions are that they could be peas in a pod. Both achieved high positions and eventually ultimate leadership in large international businesses. Both have an engaging and open nature to the public. They have a ready smile and a matey-ness that appeals both on television and in person. Both exude an energy and confidence that says ‘we’re positive for the country, we can get things done and we’re not political extremists or hacks.’ And, of course, they shared a board. Key was chair a director of Air NZ when Luxon was CEO.

But there are some differences that I think are already hurting Luxon’s chances of ‘doing a John Key’ and winning next year’s election. They may not be enough on their own to stop Luxon leading National and ACT back into power, especially given their current strength in polls and the leaching popularity of the PM, but they are there. Also the Government will not passively wait for the Opposition leader to do himself in. An increasingly more possible (but still not probable) change of Labour leadership before the election would change a lot of equations.

Keep an eye on the Labour leadership

Deputy PM Grant Robertson would be the obvious successor and has already demonstrated his own particular set of skills in needling Luxon and highlighting a mounting (but not fatal) number of micro-gaffes.

Here’s a good example from the general debate in Parliament two weeks ago (via Hansard) bolding mine:

“Former Labour leader Mike Moore used to joke that, if you can fake authenticity, you've got it made. Sadly, Christopher Luxon didn't realise it was a joke; he took it as an instruction. I've got bad news for the Leader of the Opposition: Kiwis can sniff that out a mile away. That's why, when someone says abortion is tantamount to murder and then decides to soothe your fears by saying nothing will change, that person drops 5 percent in the preferred PM ratings. When he says that he will increase health spending by at least inflation each year, Kiwis remember what actually happened when National were last in Government, when the value of health spending went backwards. But that lack of authenticity reached new heights yesterday. It was obvious that, for whatever reason, Christopher Luxon wanted New Zealanders to think he was in Te Puke and not Hawaii. And it is true; they are easily confused.

“Mr Luxon and I are both children of the 1970s and 1980s, that golden era when New Zealand had two TV channels and a ratio of sheep to people to make anyone scared. We grew up with TV shows set in exotic locations: Magnum, P.I., Hawaii Five-O, Close to Home. All these shows made rural Bay of Plenty look marvellous—no wonder Mr Luxon dreamt of holidays on the sun-drenched beaches of State Highway 33. In the morning yesterday, when confronted with his mysterious time and hemisphere bending, Mr Luxon finally said what his social media posts did not: "I went to Hawaii in July, as I tend to do." I'm not exactly sure how relatable that is. In July, I tend to remember that I haven't cleaned the guttering out and that's why there's a massive waterfall going down my property, but each to their own.

“The sad thing for the National Party is that this latest outbreak of "foot in mouth" is not the first of the brief but memorable tenure of the National leader. Just to run through a few highlights: "Abortion is tantamount to murder.", "Low-income people are bottom feeders.", "Let's get rid of Labour Day.", "Sam Uffindell is bringing what's missing from the National caucus: intellect.", and "New Zealanders have gone soft." The last few weeks have been a study in what is, and what is not, leadership. Leadership is not what we have seen from Mr Luxon, going overseas and telling an audience at a right-wing think tank what he thinks they want to hear and slagging off your own country. Leadership is what the Prime Minister, Jacinda Ardern, showed over the recess, getting out there signing free-trade agreements, leading business delegations, and getting the first positive movement in decades on the rights of New Zealanders in Australia. The contrast could not be clearer.” Grant Robertson in Parliamentary debate

Not the same same

Luxon was a successful leader in corporate life, but as a manager within large non-public hierarchies of corporate servants, rather than on a foreign exchange trading floor filled with volatile people and forces that were all too human and vague. Key demonstrated a ruthlessless, a nimbleness and a jovial charm that seemed to generate success and the loyalty of those he trusted and hadn’t already exited. Key was usually quick to sniff out and eliminate weakness, poor performance and poor character. The National PM from 2008 to 2016 did not hesitate to trust his instincts once he felt he had enough information.

Key axed Pansy Wong within two days of hearing in 2011 of her travel entitlement irregularities. Aaron 'don't you know who I am' Gilmore lasted less than a day after it emerged he had been less than clear in his explanation of wrongdoing to Key in 2013.

Key was also ruthless in removing Kate Wilkinson and Phil Heatley as Cabinet ministers because they had not performed in National's first term from 2008-2011.

Watch for an early Goodfellow departure

Luxon should also be insisting on the immediate resignation of Goodfellow as a National Party board director.

Goodfellow was President when Uffindell was selected and stepped aside as President only last weekend after a series of poor candidate selections in recent years, including Todd Barclay (2014-2017), Jami-Lee Ross (2011-2020), Todd Muller (2014-22), Andrew Falloon (2017-2020), Hamish Walker (2017-2020), Jian Yang (2011-2020), Aaron Gilmore (2013-13) and Upper Harbour candidate Jake Bezzant (2020). Due diligence did not discover issues with bullying, sexual harassment, mental illness, sending pornographic images, leaking private data, training Chinese spies, being entitled and allegedly impersonating an ex-girlfriend online, respectively.

An example of not reading the room

This picture below on its own should have set Luxon’s alarm bells ringing. It was supplied by National’s campaign committee to media to celebrate the naming of a shortlist for candidate selection. Luxon had already been challenged about National’s lack of diversity in its selections at the 2020 election.

Uffindell went on to win, although the 60 National delegates in Tauranga who voted for him did not know what the selection committee did about Uffindell’s apparently one-off and forgiveable incident.

Even then, Luxon pushed back at the challenges about diversity.

Asked by Waatea News on May 2 about the diversity issue with Uffindell’s candidacy, Luxon said (bolding mine):

“He’s going to bring something really different to our caucus and some diversity to it in that in that he’s really well educated, he’s had a local and international finance background, he’s a local agribusiness owner, and he’s a very committed family man from Tauranga who can advocate well for those local issues, so that’s what we wanted, so I’m really excited about what he’s going to be able to bring to our party.” Luxon on Waatea News on May 2.

That hasn’t aged well, and neither has Luxon at this point, although (as said above) it may not be fatal, especially if Labour does not change much in the next year.

Some 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