The Kākā by Bernard Hickey

TLDR & TLDL: Russian President Vladimir Putin ordered troops into the Donbas region of eastern Ukraine this morning in a massive breach of international law that risks escalating a smaller pro-Russian rebellion into the biggest war in Europe since 1945.

We held a ‘popup’ webinar this afternoon for paid subscribers with Peter Bale, a former Reuters correspondent and editor in Eastern Europe, and University of Otago Professor Robert Patman. An audio recording of the discussion is available for all in podcast form above.

Putin formally recognised two breakaway territories in the Donbas region of eastern Ukraine — the Donetsk People's Republic and Luhansk People's Republic (DPR and LPR) — in an extraordinary televised speech this morning that mocked Ukraine’s independence and was dismissive of the west.

He then ordered Russian troops across the border into Donetsk and Luhansk in direct contravention of international law and accords negotiated eight years ago.

Over the 30 minutes, we talked about:

* the scale of the breach of international law;

* the initial reaction of the United States to only sanction trade and investment with the two regions, rather than Russia generally;

* the initial response on global financial markets, including oil prices rising 4% to US$97.35, S&P Futures falling 2% and the Nasdaq falling 2.7%;

* the chances Putin may stick with invading only Donetsk and Luhansk, rather than all of the Ukraine, which is bigger than France and could bog Russia down in a long-running Afghanistan-style insurgency;

* the initial reaction of Foreign Minister Nanaia Mahuta (see full text below);

* China’s initial backing away of support for Russia, given it’s much greater exposure global trading and financial systems; and,

* why the system of international laws and trade agreements is so important to middle and smaller powers such as Aotearoa-NZ.

Reaction from Nanaia Mahuta this afternoon:

“New Zealand has consistently voiced our support for the sovereignty and territorial integrity of Ukraine. There is no basis under international law for the recognition of the self-proclaimed “Donetsk People’s Republic” and “Luhansk People’s Republic”.

“Recognition by Russia further undermines Ukraine’s sovereignty and territorial integrity, erodes efforts towards a resolution of the conflict and is a violation of international law.

“We are concerned that this is a calculated act by President Putin to create a pretext for invasion, which would be a clear act of aggression.

“We again call for urgent diplomatic efforts to find a peaceful resolution.” Nanaia Mahuta.

In summary:

* there is a real risk of an escalation that destabilises security and trade arrangements in Europe at least in a way not seen since the creation of much greater trade and financial interdependencies over the last 30 years;

* China’s initial reaction distancing itself from Russia is positive, given it reduces the risk of some wider shifting of alliances pitting the west, including Aotearoa-NZ and its traditional allies, against China, our largest trading partner, and fellow nuclear power Russia;

* an escalation increases the potential for Russia to cut off gas supplies to Germany (which gets 60% of its gas from Russia) and for disruptions to Russia’s oil exports; and,

* the conflict also increases the risk of oil prices rising well above US$100/bbl, which would add pressure to global inflationary impulses and push our own petrol prices well above NZ$3/litre.

Ka kite ano

Bernard

PS: This was our first experiment of doing a ‘popup’ hoon webinar for paid subscribers on the day of a big news event. We had over 90 participants on the webinar and a great question and answer session. Many thanks to all those involved.

We’ll do that again. I welcome suggestions for potential topics and guest experts.

I’ll look to do one tomorrow after the Reserve Bank’s first Monetary Policy Statement of the year due at 2pm, and after a 3pm news conference. Would 4.30pm suit for 30 mins? Suggested guests?

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 & TLDL: Bernard Hickey talks in the podcast above with fellow Press Gallery wonks Thomas Coughlan and Luke Malpass about the week’s events in the political economy, including:

* the second week of anti-mandate and anti-vax protestors surrounding Parliament with vehicle blockades, tents and portaloos;

* Aotearoa-NZ’s move into phase II of our omicron response as case numbers surge over 1,000 a day and businesses scramble to be designated as essential to get their hands on RATs;

* the polls showing Labour’s lead over National narrowing; and,

* how inflation and cost of living issues are elbowing their way onto the political landscape.

This is a weekly sampler email for all free and paid subscribers. We welcome new paid subscribers, who can join our community to comment and be part of the conversation via the ‘hoon’ webinars and my weekly Ask Me Anything comment thread. Paid subscribers get full access to all the daily emails and podcasts, and support the sort of explanatory, accountability and solutions journalism we do about housing unaffordability, climate change inaction and child poverty reduction.

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 & TLDL: This week anti-mandate protests around Parliament dug in for the long haul, Russia manoeuvered to invade Ukraine, the Government prepared to loosen new restrictions on mortgage lending as house prices fell for a second month, the nation moved to ‘phase II’ of its omicron plan and Aotearoa-NZ is a week away from reopening its border — a bit.

In the podcast above of our weekly live ‘hoon’ (the plural for Kākā) webinar with over 100 paid subscribers, I talked with Peter Bale and special guest Professor Robert Patman of Otago University about:

* the growing protests around Parliament;

* why Russia is likely to invade Ukraine and what might happen next;

* what it means for Aotearoa NZ; and, of course,

* what happens next with the housing market and interest rates.

This is our weekly sampler email for all free and paid subscribers. We welcome new paid subscribers, who can join our community to comment and be part of the conversation via the ‘hoon’ webinars and my weekly Ask Me Anything comment thread. Paid subscribers get full access to all the daily emails and podcasts, and support the sort of explanatory, accountability and solutions journalism we do about housing unaffordability, climate change inaction and child poverty reduction.

Five things to note

1. The protestors dug in

The anti-mandate and anti-just-about-everything-else protest camp around Parliament blockaded off even more of the streets and parks around the nation’s seat of Government while the Police tried to chew their fingernails through their masks.

As of this morning, the Police are refusing to remove the cars and utes or enforce the law of trespass on Parliament’s grounds, agueing it might prompt violence. My view is the Police should enforce the laws with the lowest touch possible, including setting up cordons around the protest to prevent entry and re-entry, which would squeeze it out of existence.

2. Russia is set to invade Ukraine

Peter and I had a great chat with Professor Robert Patman from the University of Otago in our weekly hoon (in podcast form above) about why Vladimir Putin is pushing so hard and Eastern Europe is so fearful of an expansive Russia.

3. Turning the credit taps back on

David Clark reaffirmed this week the Government was working on regulatory tweaks to the CCCFA to allow the banks to resume normal service lending into the housing market, which has fallen 2.7% in the two months since the CCCFA kicked in.

4. Fletcher made hay while the inflation sun shone

5. Opening up as omicron peaks

Aotearoa-NZ is set to welcome home expats from Australia next Monday for them to home isolate for seven days. Australia (except for Western Australia) will open this Monday for everyone to isolate for just a day or two until they have a negative RAT. New South Wales and Victoria also announced the end of most of their Covid restrictions around venue capacity and indoor events.

Scoops and news of note

Useful longer weekend reads

Chart of the week

The Craic

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 & TLDL: House prices have fallen for two consecutive months and are now 2.7% below their November peak, setting up a challenge for a Government wanting affordability without a crash. Should it now tweak new consumer credit regulation to restart the flow of credit into the market?

That would allow it to honour its defacto promise to median voters not to let their main financial asset fall in value. That easing of credit regulations is my current base case of what happens.

The jury is almost about to return with a verdict: a rescue of sorts is required and will be delivered in short order.

Commerce Minister David Clark has already indicated he wants he fast regulatory changes like those suggested by bankers he met two weeks ago to the Dec 1 CCCFA rules that have tied up mortgage loan approvers in knots. Real estate agents are certainly worried the flow of credit has dried up and is slowing the market, but they are hopeful it will restart soon to enable an autumnal surge of first home buyer and investor buying. See more on that below the paywall fold, including how home-owning voters, rather than renters, actually don’t want house prices to fall. At all.

Porirua house price index down 6.5% in two months

The Real Estate Institute published its January sales volume and price figures yesterday, which showed the New Zealand House Price Index (HPI) down 1.5% in the month and down 2.7% from its peak in November.

Some of the previously most-fevered markets have come off the boil more aggressively. Porirua’s house price index was down 3.2% in January and is now down 6.5% from November and 7.0% from October. Auckland City is down 6.0% from its November peak and fell 3.1% in January from December.

Here’s the detail from the REINZ from its House Price Index report.

The Real Estate Institute’s CEO Jen Baird cited the Dec 1 start of the CCCFA in the slowdown, which saw the number of sales in January down 28.6% from January 2021 and the lowest for any one month in 11 years, excluding April of 2020 during the first Covid lockdown.

“Feedback from agents across the country suggests a decrease in the number of first home buyers and investors in the market, noting quieter auction rooms and open homes.

“Many point to access to finance, exacerbated by changes introduced in December to the Credit Contracts and Consumer Finance Act (CCCFA) — currently under review, as having a major impact.

“This is a sentiment echoed in a survey conducted at the end of January by economist Tony Alexander in collaboration with REINZ, which noted that the predominant concern for buyers is no longer availability of stock but rather financing.

“While hard evidence is lacking in terms of the impact of the CCCFA, data from Centrix, a New Zealand credit reporting agency, found the percentage of home loan applications that were approved dropped from 39% in October to 30% after December. The longer-term impact will be seen in the numbers of buyers in the market in coming months.” REINZ CEO Jen Baird

Banks and mortgage brokers are also pushing for tweaks to the CCCFA to relieve them of what they call prescriptive rules for checking affordability, which they have blamed for a higher rejection rate of loan applications.

Don’t worry. The tap is set to to be turned back on

Commerce Minister David Clark is clearly moving to relieve the restrictions on mortgage approvals. Last week he rejected a proposal from National for a legislative carve-out of the banks, but instead suggested smaller regulatory tweaks were likely to be faster and were what banks wanted.

“Quite aside from the time it would take to draft new regulations, and consult with the banks and other lenders, the approach you propose would result in undue delay to consumer benefit from possible tweaks that could be made to regulations and guidance in the nearer term.

“Based on my meetings with the banks last week, I detect little enthusiasm for an entirely new set of rules for banks, and other regulated lenders.”

“Banks have suggested small tweaks that could be made to ensure the purposes of the legislation are best met.” David Clark quoted in Stuff by Rob Stock.

A Government Guaranteed housing market

PM Jacinda Ardern last week repeated comments from late 2020 and late 2021 that she didn’t want the housing market to crash, renewing the effective guarantee for home owners that house prices will only be allowed to ratchet up — never down.

The motivations are clear. Median voters who decide elections are mostly home owners and are regularly focus-grouped by Labour’s pollster Talbot Mills. We learned yesterday via this Henry Cooke article in Stuff that Talbot Mills asked voters earlier this month, including the 58% of the electorally representative sample that are home owners, whether they wanted to see their house prices fall.

The specific poll question for home owners was (bold mine): “Would you like to see your house price fall?” The poll found 62% didn’t want prices to drop, while 18% wanted them to fall a little, and 7.0% wanted a serious fall in prices.

This appears to contrast with the results of a 1News/Colmar Brunton poll taken in January, which showed 47% of all respondents wanted house prices to fall a lot, while 29% said they wanted prices to fall “a little”, and only 18% did not want a fall. The poll did not break out what homeowners and renters thought, and whether they had different views.

However, the poll results aren’t so different under closer inspection. Assuming 58% of poll respondents are home owners and 42% are renters, then the 47% wanting a big fall is in line with the combination of the 42% who are renters and the few home owners who do want big falls. The wording of the question in the Colmar Brunton poll was also different, being (bolding mine): “Would you like to the see the price of housing in New Zealand fall?”

That is a more passive framing, which may have allowed some to think the market generally could or should fall, but not their houses specifically.

‘Sure. They can fall. Just not for me. Or now.’

This is another case of the magical thinking that politicians are also guilty of falling back on.

Everyone wants to see housing affordability improve and emissions reduce, but just not for them and not now. The pain has to be borne by someone else, whoever that is.

Another example is a Auckland Transport poll taken in May last year (and reported on in January by Stuff) showing 78% of Aucklanders supported immediate change to reduce emissions and 59% thought it would affect their lifestyle. However, just 43% said they were reducing or considering reducing their driving. Only 37% believed private vehicles contributed most to global warming and 45% saw trucks as the main culprit.

Auckland Council agreed last year to reduce carbon emissions from transport by 64% or 3.1m tonnes from its 2016 levels of 4.9m tonnes to 1.8m tonnes by 2030, and to halve overall climate emissions to 5.4m tonnes by 2030. The most recent regional statistics on climate emissions showed Auckland’s total emissions were 11.2m tonnes in calendar 2019, up from 2016’s total of 10.8m tonnes, including transport emissions being unchanged at around 4.9m tonnes. Car usage would have to fall at least 40% over the next eight years to achieve the 1.8m tonne target.

Yet Auckland Council and the Government have effectively cut real and per-capita public transport spending over the last six years, including the Auckland Council’s decision during Covid to cut transport and climate spending rather than let its credit rating fall from AA. For example, Auckland Transport delayed a shift to electric buses and both AT and NZTA decided not to proceed with reconfiguring various roads in Auckland for cycling and walking in the wake of the Arthur Grey Low Traffic Area pilot project’s early closure last year. (See more on that here from me at The Spinoff)

Real housing and climate action outside the ‘Overton Window’

This essential reluctance of median voters to understand and act is why the Government (and the Opposition) are not acting to improve housing affordability or reduce climate emissions. They know median voters say they want those things, but not for themselves, and not now. Neither of the two main parties are willing to move out beyond the bleeding edge of a very sharp Overton Window

It means that centrist politicians tend to be ‘fast followers’ whenever public opinion moves, rather than leaders of public opinions with new ideas or policy proposals. Typically, those ideas are generated out of academia or thinktanks. Our universities have largely given up that role and we only have one established and substantial policy thinktank, which is the business-funded NZ Initiative.

How can that window be opened or renovated?

I see my role as testing the edges of the window and giving it a nudge here and there, or at least calling out the magical thinking of both voters and politicians who say they believe or are pursuing action on issues such as housing affordability, climate change and child poverty when the results on the ground and maths show they are not.

One of the axioms of modern politics is that being seen to want something to change is often enough for voters who actually don’t want the inconvenience or pain of change of pain for themselves personally. Politicians know this and see it in the results of polling about the views of the broad middle.

The magical thinking of politicians at any one time is in many ways just the miror image of median voters. But it can change over time, albeit usually very slowly. The only times this window of discussion can move in big ways is in the wake of substantial economic or political shocks.

What’s in the window now?

Up until the early 1980s, the broad middle of New Zealand’s voters accepted the large role of Government, high taxes and limited choice in goods and services, especially from overseas. It was also socially conservative. That changed dramatically in the late 1980s and has only crept in various directions ever since.

The broad current consensus now is that low and relatively flat income taxes that restrict the size of Government to about 30% of GDP are what median voters want, and that proper wealth or capital gains taxes would unravel the financial futures they now take for granted, which are based on realising capital gains from their own home(s) over time to supplement the adequate (for owners) Universal Basic Income of the NZ Superannuation, which is set at 2/3rds of the average weekly wage for a couple from the age of 65.

The areas currently ‘verboten’ for real discussion outside the Overton Window now include:

* No extension of the retirement age beyond 65;

* No means testing of NZ Superannuation or change in the 2/3rds of average wage indexation;

* No capital gains tax or wealth tax;

* A permanent bias in core Crown debt to return to 20-30% of GDP in the immediate aftermath of any crisis that increased that debt;

* No reduction in Council credit ratings because of a rise in debt to income above 270-300%;

* No increase in income or other taxes unless revenues are hypothecated (directly connected) to a fund providing a specific service (NZTA’s Land Transport Fund, ACC, Income Insurance);

* No increase Government spending unless it is effectively revenue neutral (Emissions Trading Scheme to pay for climate action); and,

* No suggestion of further privatisations of Crown or council assets.

The point of my mentioning the polling above and the Government’s current policy rhetoric and actions is to show that this ‘window’ has not moved much over the last 30 years. If anything, the 2011, 2014 and 2017 election defeats for a capital gains tax have hardened that window in place.

It is now like one of those sash windows in a suburban villa where the sash cords have been cut and the window frames have been painted over. The window is immovable.

The most effective ways for politicians to paint another layer over the window frame is to promise to resign if they ever even mention the issue again. It worked for John Key on NZ Superannuation and has for Jacinda Ardern on Capital Gains Taxes. It also worked for Labour and the Greens in 2017 when they committed to no new taxes and to keep the size of Government around 30%, with a reduction of net debt to GDP into the 20-30% window.

I do not see any signs of that changing with the current parties or personnel in or around Parliament. Activists outside of Parliament are the only agents chipping away at the paint. I see my role, in part, to shake the frames occasionally to see if it is moving, or could move.

Useful longer reads

Chart of the day

Thread of the day

Profundities, spookies and curiosities

The Craic

Some fun things

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 & TLDL: In this week’s ‘Hoon of Wonks’, I talked with Interest.co.nz’s political reporter Jenee Tibshraeny in the Parliamentary Press Gallery about the week’s events in the political economy, including:

* Michael Wood’s announcement of a 6% increase in the minimum wage to $21.20 from April 1, which was in line with current inflation, but less than the average 6.7% seen over the last four years;

* whether and how the Reserve Bank might unwind its $58b of government bond purchases as it tightens monetary policy; and,

* the anti-vaxx and anti-mandate protests that have dominated the debate around the first week of the Parliamentary year.

This is a weekly feature of The Kākā, where I take a ‘hoon’ (the way to describe a group of Kākā) with one or more of the Parliamentary Press Gallery’s reporters and editors with a particular focus on the economy, and fiscal and monetary policy. We are all based in the Press Gallery and will often record these hoons there. We’re the hoon of wonks. This was recorded mid-afternoon on Friday Feb 11.

Aside from myself, this group of includes:

* Thomas Coughlan, who I’ve worked with at Newsroom in the Parliamentary Press Gallery and who has worked as a reporter and columnist at Stuff as well;

* Luke Malpass, who is Stuff’s Political Editor and previously worked as the Australian Financial Review’s Editorial Page Editor; and,

* Jenee Tibshraeny, who is Interest.co.nz’s political reporter in the Press Gallery.

I welcome the questions and comments of paid subscribers below about this hoon and ahead of next week’s hoon. In particular, we welcome suggestions for topics of interest and questions for ministers and the opposition.

(This weekly hoon will be regularly open to all subscribers and the public given the public interest and issues involved. I welcome you all as full paid subscribers to support this type of accountability, explanatory and solutions journalism on the climate inaction, housing unaffordability and child poverty crises. Full paid subscribers can comment and get full access to all my emails and podcasts, along with invites to subscriber-only webinars and ‘Ask Me Anything’ threads.)

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

TLDL & TLDL: This week anti-vax protestors tried to storm Parliament and failed, but have managed to bully and harass teachers and parents into not running mass vaccination clinics as the school year starts.

Elsewhere, Fletcher Building stopped taking new orders for Gib plasterboard and will ration it out from July, America’s inflation was higher than expected and bumped wholesale interest rates higher, and most countries ordered their citizens to leave Ukraine because they expected an imminent Russian invasion, which some oil traders think would push the oil price up another 30% to US$120/bbl.

In Friday’s weekly ‘hoon’ with Peter Bale and myself (it’s in podcast form above) we talked about the protests and what might happen in Ukraine. We also welcomed in special guest Nicola Willis (from 30min in) to talk about Labour’s housing performance and National’s own housing affordability ambitions and proposals. She wouldn’t say she wanted house prices to fall because she said it wasn’t the role of politicians to predict prices, but said she understood others who wanted prices to fall and committed National to lowering the house price to income multiple, although would not say what to.

Five things to note

1. Anti-everything convoy comes to Parliament

About 1,000 anti-vax, anti-mandate, anti-1080, anti Three Waters, anti-Jacinda, anti-5G and pro-Trump protestors parked their cars and trucks around Parliament’s grounds and set up camp on the lawns in front of the steps of Parliament and the entry to the Beehive.

I wrote a column about it after discovering anti-vaxxers had bullied and harassed teachers into not setting up vaccination clinics to help accelerate the vaccination of 5-12 year olds as they start the new school year.

2. Intense stress and inflation in building materials

Fletcher Building’s Winstone Wallboards, which has 94% of the plasterboard market, announced it wouldn’t take or process orders for Gib from July, and would instead ration it out in an unspecified way.

In Friday’s Dawn Chorus, I did a podcast about the role of duopolists in New Zealand’s inflation problems.

This chart shows the building materials price index, with the shaded area since Covid.

3. RBNZ and Fed may bring their bazookas

US CPI inflation hit a 40-year high of 7.5% in January, which was higher than expected and lifted expectations the US Federal Reserve will hike 50 basis points when it starts hiking on March 16.

The Reserve Bank published its survey of 33 economists and business leaders on Friday showing higher inflation expectations. There are also growing expectations our central bank will hike 50 basis points, rather than 25 basis points, in its next decision next Wednesday (Feb 23).

4. Ardern defends affordability thoughts and prayers

PM Jacinda Ardern defended the Government’s housing record, but remains of the view that affordability can be improved to some unspecified level without a house price crash.

5. Small, fast tweaks to CCCFA are coming

This week Nicola Willis proposed carving bank mortgage lending out of the CCCFA rules on assessing affordability, which David Clark rejected. But the Commerce Minister said he was likely to proceed with smaller and faster regulatory tweaks the banks wanted. We talk about that in the podcast above.

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 & TLDL: Yesterday I watched protestors threaten to kill politicians and journalists as they spat at onlookers. Others reported they thew eggs and bullied a student wearing a face mask who was walking past on her way to school.

Then they tried to break into Parliament to lynch a Prime Minister they accuse of murdering children. They are still camped in Parliament’s grounds, although in the last hour Police have started pulling them away one by one into detention.

Why are the great and the good, the politicians and the Police, have all been so tolerant and relaxed about a phenomenon of hyper-amplified and hysterical misinformation that I argue is now actually an existential threat to our national security and health? We should act now and I have a few suggestions below.

(I have opened this article and podcast up for both paid and free subscribers to receive as an email and to share here as an article, given the public interest involved.)

This phenomenon is a threat to our national security

I’ve covered all sorts of street protests in my 35 years of journalism and none of them have been as ugly, vituperative and just plain bonkers as the ones that crawled and blockaded their way to Parliament over the last two days.

They flew Trump flags, spouted Qanon conspiracy theories about global elites running child trafficking rings and demanded ‘freedom’ to spread a deadly disease and paralyse a health system that is barely able to deal with the illnesses of the other 96% of their fellow adults citizens who chose to get vaccinated and wear masks in public. They threw eggs at students for wearing masks. (NewstalkZB)

They demanded their ‘right’ to opt out of the social contract we have as a society to try to look after those around us in exchange for protection from bigger threats and for a modicum of stability under democratically agreed laws to get on with our lives in peace, health and safety. It is the social contract any family and society enters into. We pay taxes and vote for governments and laws with the understanding we’ll be protected from external and internal threats to life and liberty.

That’s the deal, and yesterday and Tuesday they broke it repeatedly, aggressively, violently and without any sense of empathy for those trying to go about their daily lives and jobs. And without consequence. Protestors happily sat and blocked traffic and pedestrians for hours on end. They harassed and abused others without a police officer in sight on Tuesday. By Wednesday, the Police in their high viz vests were there, but only after loud and repeated threats of a plan to ‘storm’ Parliament. Even yesterday, the Police were playing ‘rock, paper, scissors’ with protestors on the front line. Some kind soul even arranged for portaloos for the protestors to do their own personal business in peace.

Why are the great and the good so chilled?

So why are politicians and the Police so tolerant and accepting of what I argue is actually a phenomenon and movement (albeit chaotic and incoherent) that has become an existential threat to our national security and health?

This may seem a strange thing to say, and it’s certainly not in step with the sort of tired and resigned frustration that our Government, Opposition, Police and civil society are displaying at the moment.

There is a collective almost-stunned feeling that cracking down on these people is not the ‘kiwi’ way to deal with protestors. Police were barely visible on Tuesday. No MP left Parliament or the Beehive to meet them or accept any petitions, which is almost unheard of, given the regular and peaceful gatherings on the lawns out the front. The collective sigh was one of ‘ignore them and they’ll go away’.

The official response, if that’s what it could be called, is to just wait for this ‘misguided, sad and pathetic’ bunch of holdouts to fade away into the background once the worst of the pandemic fades into a ‘business-as-usual’ pandemic. From the top down, the messages and actions are the lightest touch possible. Restraint and repeated attempts to ‘engage’ are current modus operandii across Government and most of the media. No one has called them ‘deplorables’ and few anywhere near power have demanded any sort of crackdown with mass arrests or punishments. They’ll just ‘go away’ in their own time is the thinking, and they’re not really dangerous or in any way likely to change anything serious.

‘This too will pass.’ Really?

PM Jacinda Ardern is the target of the most egregious, vituperative and frankly insane accusations in placard, chant and online message form across Facebook, Twitter and in the comment sections of Stuff, NZ Herald and TradeMe. Yet she has turned the other cheek again and again in an admirable display of restraint and tolerance. She regularly exposes herself to torrents of hatred in her Facebook Live sessions in a way that no other PM would (and has) done.

Only once has the torrent overwhelmed her. In early December, a clearly exhausted Ardern couldn’t let yet another comment pass from someone saying they were ‘over you, over your mandates’ without a pained rebuttal:

"Um, Amanda. Sorry you're over me. But you don't have to stay on my Facebook Live if I'm bothering you. I'm sure there are many other things you could do with your time if you find this irritating." PM Jacinda Ardern in a Facebook Live on Dec 9 (NZ Herald).

Tipping her head to one side, she exudes as much empathy that is left after four years of crises to plead with them one more time to do the right thing and get vaccinated for the sake of their whanau and community.

Asked about for yet another message to the protestors and the rest of us on Tuesday, she said (bolding mine):

“The first thing I’d say to the vast majority of New Zealanders who have made sacrifices, who have gone out and been vaccinated, is thank you, and that this too will pass.” PM Jacinda Ardern in her post-cabinet news conference on Feb 8 (Beehive transcript).

Our heads are in the sand of the high road

Taking the high road is admirable in most cases and something any successful mainstream politician learns to do with grace and forbearance. But sometimes it’s actually dangerous to ‘let it slide’. Not responding encourages some to test the boundaries even more, and for the most extreme to act on some wildest accusations and threats.

Turning the other cheek was what British civil society did during and after Brexit, and what US civil society did before and during Trump’s nomination, election and attempted coup on Jan 6. It was as if no one thought the worst could happen. That this rag tag rabble of incoherent grievances would go away once it was clear they couldn’t get their hands on the usual levers of political power. After all, it worked with the Occupy and Arab Spring sit-ins and protest movements. Once the initial enthusiasm was spent and there were new things scrolling through their facebook and twitter feeds, these groups faded away.

It’s only now dawning on many that this was a mistake that has cost both countries millions of lives, years of economic growth and potentially could destroy the oldest democracies in the world. Firstly, those fundamental grievances about losing livelihoods and futures through 30 years of welfare-choking economic reforms and globalisation needed to be redressed. Secondly, the assumptions about the societal, political and legal norms being enough to protect health and stability were tragically wrong.

British MPs have been murdered. The Capitol was stormed. Protestors and police died. Trump’s supporters tried to mount a coup, and were not that far away from achieving it. The United States is far from out of the woods, and neither is Britain.

But we’re different. Aren’t we?

Aotearoa-NZ’s modern history of political protest and democratic activity has been largely peaceful and eventually progressive. Aside from the Springbok tour clashes and the riots on waterfronts before and after the first and second world wars, our political movements have not disrupted national security in any immediate or existential sense.

But that was before we all had smart phones in our hands.

Now, a significant portion of the population get most of their information and have most of their public debates in toxic online landscapes of extreme misinformation, disinformation and hyper-emotional shouting matches. These debates are often purely performative demonstrations of tribal fealty and rarely become genuine attempts to understand and come to some new joint position.

This is no accident. The algorythms developed by Facebook and Google’s Youtubes are designed to amplify the most ‘engaging’ comments, news and videos. These the ones that attract the most likes and shares. The most hate and love. The most extreme positions. It has only taken a decade since the widespread distribution and adoption of smart phones for the public debates of most western countries to become ever more extreme and just plain stupid.

Apparently normal, functional people who would seem rational colleagues and family members appear to slide down holes into extreme and plainly wrong views about politics, health, technology and science. It is a collective descent into madness, that often goes in tandem with and can worsen mental illness.

So why do we tolerate and enable these algorithmic amplifiers of poison?

New Zealand’s civic society has made no serious attempt to understand or regulate these algorithmic rivers and sprinklers of hatred and misinformation. Other democratic, western countries are stumbling around trying to regulate and control the social media platforms and the algorithms. We have done nothing.

If anything, sadly, it has been enabled by both sides of politics here. They have enthusiastically adopted facebook’s hypodermic needles of information flow direct to voters and free of the usual gatekeepers in the mainstream media. The Government has made Facebook Live a semi-official tool to distribute official information and engage with the public. Government departments employ hundreds of social media specialists and spend tens of millions of dollars on Facebook and Google advertising services. On occasion, the Government has even partnered with them on technology investment projects. There has been no serious attempt to try to control the spread of this misinformation and the use of these platforms to organise threats to our national security.

Even after the Christchurch Attacks, little has been done to protect our national security and health. Initially, the PM rightly condemned Facebook and Google for enabling and allowing a domestic terrorist to amplify the terror attack on their platforms. But that was as far as it went. The Christchurch Call has dissolved into a Davos-style talkfest for world leaders and tech execs to shoot the breeze and avoid regulation or any meaningful change whatsoever.

We are not immune. At all.

I have watched dumbstruck over the last five years as extremists have harassed and attacked journalists and public figures personally and viciously, including those I work with. I’ve seen death threats delivered to homes by mail. I’ve watched camera operators being spat at and shoved. I’ve seen nooses paraded in front of Parliament.

This has to stop and we have to take it seriously. Others are starting to.

The Department of Internal Affairs commissioned a report last year from the London-based Institute for Strategic Dialogue and CASM Technology on the online activities of extremists with a demonstrable link to New Zealand, as well as the digital platforms connecting New Zealand to an international extremist ecosystem.

Here’s what it found (bolding mine):

Exploring far-right, Islamist and far-left extremism as well as the growing grey area between conspiracy theories and extremism online, the research draws on data from social media sites including Facebook, YouTube and Twitter, a range of ‘alt tech’ platforms, including Parler, Gab and Telegram, alongside data from stand-alone extremist websites and forums, with over 600,000 posts collected from over 300 extremist accounts from New Zealand.

Our research sheds light on how extremism manifests online in New Zealand, the platforms where it spreads and key differences in how each are used. We look at the scale of mobilisation in both absolute terms – compared to mainstream social media use – and in contrast to extremism in other contexts around the world.

We analyse how the Internet allows New Zealand extremists to be influenced in ways that are profoundly international, whilst remaining rooted in domestic contexts. We also show how extremism online relates to phenomena such as hate speech, disinformation and conspiracy theories. '

Focusing on data gathered from 2020, our research also looks at how offline events impact online extremist activity, from the captive audiences provided by Covid-19 lockdowns to increased polarisation around elections in New Zealand and the United States.

Overall, our research shows that New Zealand is not an exception to broader international extremism trends. A concentrated but engaged core of online activists in New Zealand are intimately plugged into international extremist subcultures which draw New Zealanders away from the protective factors around them – such as a long history of liberal values and strong institutions – and surround them with the polarising grievances raging on the other side of the world. To a lesser extent, international extremist subcultures are also plugged into New Zealand and discuss the people, places and issues of the country at some volume, especially the Christchurch attack itself.

There are real world consequences happening right now

I have sat on my hands too for the last two years, expecting the temperature to cool naturally and for the ‘kiwi’ way to resume. I was jolted out of my complacency for the final time on Tuesday in the middle of the post-Cabinet news conference when it dawned on me the Government had decided not to use schools as mass vaccination sites because of the danger of violent attacks on teachers, students and vaccinators at the schools. This has not been reported widely and I don’t understand why.

Here’s Education and Covid-19 Minister Chris Hipkins talking in that news conference when asked about why schools weren’t being used as mass vaccination sites to accelerate the vaccination rollout (bolding mine):

“There is no question there are strong levels of support for tamariki to be vaccinate, but there is also some concern that schools can and have become the targets of some pretty aggressive and, in some cases, very nasty anti-vax sentiment. And so we have to just tread that line very carefully, and that has been a recurring theme in that conversation. So I think schools will want to be involved. They want to be supported but they don’t want to find themselves targeted.” Chris Hipkins in the news conference (Beehive transcript)

So these protestors, who have regularly harassed vaccinators and in some cases falsely booked appointments to stop others being vaccinated (RNZ), have forced the Government to avoid using a way that could accelerate the vaccination programme, save countless lives and avoid the sort of societally damaging lockdowns and restrictions we have endured for two years.

No more. This has to stop. This type of ‘protest’ is actually a threat to our national security and health and should be treated as such. It is not just an inconvenience or even a tragic case of mass hysteria. It is costing us lives. It could threaten our democracy, as it has in other countries. That may seem extreme, but that’s what the good and great said to those in Britain and America in 2016 before the election of Trump and Brexit. Now look at the results. Millions are dead needlessly. The world’s biggest democracy almost collapsed into a mad dictatorship.

The Parliamentary democracy we are directly descended from is now run by a man who refuses to resign in the face of public contempt, even though he is a serial liar who treated lockdown laws as things for him to announce and ignore, and for other people to obey. Boris Johnson announced overnight he planned to remove mask wearing rules because his back bench MPs thought it would be a good idea.

So what should we do?

We should investigate regulating the algorithmic tools to stop hyper-amplifying misinformation into the news feeds of the four million New Zealanders who spend hours a day scrolling through social media.

We should take threats of violence aimed at journalists, politicians, vaccinators and scientists seriously. It is illegal to make those threats. People should be prosecuted and imprisoned.

We should not let protestors attack, bully, abuse, spit at and shove bystanders around. We should not let protestors block off roads for days on end. An awful lot of parking tickets should be issued and vehicles towed away.

This has to stop.

Finally, here’s an insight into the uneasy and unsustainable place we’re in. It’s a tweet from a former colleague who is now in the Press Gallery and has been the subject of repeated and vitriolic attacks.

Part of me wants to celebrate the ‘kiwi-ness of it’, but the other part of me is deepful fearful for the safety of good people.

(I have opened up this article to all of the public to read in full and share. I’m able to do this sort of accountability and explanatory journalism on the politics and economics of our housing, poverty and climate crises because over 1,400 people have become paid subscribers to The Kākā. I’d love you to join as a full subscriber, which enables you to comment below and gives you access to all my daily emails, and access to my weekly webinars and chat threads. Come and join us.)

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 & TLDL: PM Jacinda Ardern has rejected the suggestion her Government has given up on meaningfully improving housing affordability for buyers and renters. Yesterday in her opening Parliamentary statement of the Government’s ambitions for the year she again said the Government wanted to improve affordability and was ‘pulling all the levers’ to do that.

But again the PM would not indicate what success would look like, or when the Government could be judged on its progress (or lack of it). I take a deeper look below the paywall fold at the PM’s statements yesterday on housing and which levers aren’t being pulled.

Elsewhere in the news this morning:

* Chloe Swarbrick has called for a select committee inquiry into the Govt’s economic response to covid (NZ Herald);

* one of NZ’s big three fuel retailers, BP, reported a US$12.1b profit globally last year, and rejected growing calls in Britain for a windfall tax on oil majors (Guardian); and,

* Transmission Gully’s road-building JV is tearing up large sections of the 27km motorway from Porirua to the Kapiti Coast and replacing badly laid seal as Waka Kotahi continues to refuse to say when the two-years-overdue road will open. (DomPost)

Later today, I’ll be covering the second Parliamentary day of the year and writing more on the causes of inflation and the real-world effects of anti-vaccine protests on our national economic and health security. I welcome comments and suggestions for questions from paid subscribers below.

(I have now opened up this article to all of the public to read in full and share. I’m able to do this sort of accountability and explanatory journalism on housing, poverty and climate because over 1,400 people have become paid subscribers to The Kākā. I’d love you to join as a full subscriber, which enables you to comment below and gives you access to all my daily emails, and access to my weekly webinars and chat threads. Come and join us and see what’s below the paywall fold.)

Show us what success looks like

The PM issued a series of defences of the Government’s housing policies and progress yesterday in the first full day of political debate for the year. Her comments came in the wake of various reports showing house value inflation accelerating to a fresh record high average of over $1m nationwide, and OECD criticism of the Government’s performance on housing affordability for renters and first home buyers.

Firstly, Ardern appeared on TVNZ’s Breafast show for her first weekly interview of the political year there, and then she issued her opening statement to Parliament on the Government’s plans this year.

Here’s the key exchange on housing (bolding mine):

Asked by host Jenny-May Clarkson about what had happened to the Government’s promise of making housing affordable, Ardern said: “That hasn’t changed. That has absolutely not changed …

“We have made progress. We are not giving up. We continue to do everything that we can, pull every lever we have, whether it’s changes to tax rules, whether its supporting councils with more infrastructure in the ground, creating progressive home ownership, creating transitional housing, supporting our social services … and building more public houses than seen in the last 20 years. We are doing all of that because we need to do everything we can if we’re going to change this market.”

Ardern said the Government had limited the number of rent increases renters experienced in a year, stating it was “making an tangible difference”. 

She said under Labour there had also been changes to letting fee rules and that more than 8000 places had been created in public housing, which was a “big jump” on the net decrease which existed. 

Ardern said the Government had also tried to even up the playing field in the housing market, bringing in a bright-line test and interest deductibility, which was having a “significant impact”. 

“I don’t think either of us would argue that we don’t want a situation where home ownership slips out of the reach of New Zealanders. I see it as something that is core to us. It gives financial stability to people, it gives them anchor to a community. This is absolutely an ambition we have but today’s first home buyers, once they are in the market, we want to ensure we don’t have a housing crash,” she said. 

“Everything that we are doing we have to constantly make sure we are reaching those affordability goals for people but that we also don’t see a situation where people’s number one asset loses its value in a crash.”

Ardern concluded: “We will try everything, Jenny-May, to make it easier for whānau to get into homes.” TVNZ Breakfast

There are so many problems with the PM’s stance that it’s worth breaking them down.

Firstly, there is an inherent contradiction in the PM’s desire to never have prices fall much, and to also achieve affordability (whatever the PM thinks it is — she has never told us what she thinks success looks like).

The magical thinking of affordability without a crash

The horse has bolted so far now that it’s actually not possible to achieve any reasonable level of affordability any time in the next decade or two without a housing crash, or even just holding prices stable. The PM’s comments at the end of 2020 that she wanted house price inflation to moderate to around 5% a year from the current 27% a year make that even more impossible.

The simple maths of house prices rising more than 50% since 2019 to a price-to-income multiple of over 11 nation-wide means that prices would have to fall 5% each year for three consecutive years before that multiple returned to the eight seen when Ardern first campaigned for election in 2017 with the argument that prices were already at ‘crisis’ levels and affordability needed to improve. (By the way, John Key also described them at crisis levels in 2007 when they first headed over seven and when most analysts saw four or five as a reasonable level of affordability to target.)

If a multiple of eight in 2017 was a ‘crisis’, what is 11 now? A ‘catastrophe’?

The OECD dismantled the PM’s implied argument (and that of the Opposition) that affordability can be achieved for current generations without a house price crash in its country survey last week with this one chart.

The PM’s stated preference for a five percent annual housing inflation rate makes affordability worse over the coming decade, not better. Even a 15% fall over three years would simply return affordability to ‘crisis’ levels. A fall of 40%-plus would be needed to get affordability down to reasonable levels around five any time in the next decade. (By the way, our banks and economy would handle that fall without much trouble, according to the Reserve Bank’s most recent bank system stress test last year.)'

By pledging to improve affordability while also not having a crash that would hurt the most recent first home buyers, she is essentially saying that she does not understand the maths, or does, but hopes we don’t notice it.

Is 11 affordable? Or 8? Or 5? Or 3?

Secondly, if we are to hold the Government accountable and if the machinery of Government is to have something to aim at, then the PM needs to tell us where she wants affordability to go. Assuming a ‘crisis’ level of eight is too high, then what is it. She has also failed to say what an affordable level of rental affordability is, even though she herself has set targets for child poverty reduction, which are very specific about income levels and items of deprivation.

Despite hundreds of pages of policy statements and Urban Development Plans and various major legislative interventions, this Government has never said what an affordable housing level should be, either for buying or renting. Since dropping its 100,000 KiwiBuild target, the Government has been loathe to set hard numbers on its aims around housing.

The previous Government’s Housing Minister Nick Smith briefly talked about a house price to income multiple of four as something worth targeting. It was even included in instructions to councils when assessing whether to assign the ‘Special Housing Area’ designation (remember those?). The Auckland Council’s (then) Chief Economist Chris Parker proposed targeting of a multiple of five by 2030, arguing that only a level below three could be seen as truly affordable. Parker is now a principal adviser at Treasury.

To give everyone an idea of just how out of whack our affordability levels are for both buyers and renters, here’s the OECD’s measures of our affordability vs the rest of the world.

The closest any arm of the Government has come to suggesting a reasonable level of rental affordability was a passing mention by officials in a policy statement on housing and urban development last year that wrote (bolding mine):

“Aotearoa New Zealand households spend the largest proportion of their disposable income on housing costs in the OECD. According to The Better Life Index 2020, our households spend on average 26% of their gross adjusted disposable income on housing, compared to the OECD average of 20%. Our unaffordable housing is resulting in too many people in housing stress or experiencing homelessness. In addition, the homes we do have often are not meeting our needs.”

“Tenants in public housing generally pay an income‐related rent of 25% of their income. This is considered affordable for public housing tenants. In contrast, some double‐income families with a mortgage may be able to support a higher proportion of housing costs relative to income.

“A common benchmark used internationally considers that housing that costs more than 30 per cent of income is unaffordable. However, banks will often lend to borrowers where mortgage servicing costs are greater than 30% of the borrower’s income.” Ministry of Housing and Urban Development officials in this policy.

Repeated questions to the PM and Housing Minister Megan Woods from me and others have failed to get them to either agree with those benchmarks or say the Government would ever target them.

You’re not actually pulling all the levers

Thirdly, the PM continues to repeat that the Government is pulling all the levers, when even her own policy decisions shows it is not. If ‘all the levers’ were being pulled, the Government would be:

* taxing wealth or capital gains in some form, as is done in virtually every other comparable country and as she proposed early in the 2017 election campaign, before saying two years later she would never tax capital gains in her political lifetime and ruling out a wealth tax in the 2020 election;

* building many, many more than the 10,700 state houses either built or planned to be built between 2017 and 2022, given a shortage of affordable-type homes (not the McMansions, massive townhouses and luxury apartments being delivered via private developers) most see well over 50,000;

* funding a lot more transport and housing infrastructure at council level;

* giving capital grants to housing providers to unleash much more social housing from the ‘third sector’; and,

* seriously considering some form of rent controls.

Ultimately, the Government’s guiding light is its adherence to the Public Finance Act’s indication that net debt must always trend back towards 20% of GDP, which means it cannot use its balance sheet to properly address the massive underinvestment in infrastructure in the last 30 years. That has limited its capital spending plans to less than half the infrastructure deficit estimated by the Infrastructure Commission - and that’s before any further population growth. It has also stopped the Government from providing capital grants to community housing groups.

It has also repeatedly ruled out rent controls and there has not been a single infrastructure funding deal done, despite the Act being passed two years ago. This failure was mentioned by the OECD this week.

In summary, the PM’s insistence that the Government still cares about affordability may be true in an emotional sense, but is not true in any real, believable, accountable or meaningful sense.

A question for subscribers: Do you want this opened to the public so it can be shared? Please like or comment if you do.

Scoops and notable news elsewhere

Useful longer reads

Chart of the day

Spookies, curiousities and profundities

Thread of the day

The Craic

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 & TLDL: Parliament resumes this week as the Government’s handling of omicron and the future of MIQ reaches a crucial moment. On Friday afternoon I talked with NZ Herald political reporter and columnist Thomas Coughlan about the beginning of the year in Aotearoa-NZ’s political economy.

We talked about:

* National’s caucus retreat in Queenstown;

* Christopher Luxon’s initial decisions to commit to National’s previous policies on extending the retirement age;

* Luxon’s initial use of a corporate style of leadership;

* the sharp rise in PM Jacinda Ardern’s unfavourability ratings;

* the rise in inflation as a political issue and the role of duopoly-driven price increases;

* the unmooring of political connections among younger cohorts of voters; and,

* the prospects for the first week of Parliament.

Every week when Parliament is sitting I’ll record one of these ‘hoons’ (the way to describe a group of Kākā) with one or more of the Parliamentary Press Gallery’s reporters and editors with a particular focus on the economy, and fiscal and monetary policy. We are all based in the Press Gallery and will often record these hoons there. We’re the hoon of wonks.

This group of wonks includes:

* Thomas Coughlan, who I’ve worked with at Newsroom in the Parliamentary Press Gallery and who has worked as a reporter and columnist at Stuff as well;

* Luke Malpass, who is Stuff’s Political Editor and previously worked as the Australian Financial Review’s Editorial Page Editor; and,

* Jenee Tibshraeny, who is Interest.co.nz’s political reporter in the Press Gallery.

I welcome the questions and comments of paid subscribers below about this hoon and ahead of next week’s hoon. In particular, we welcome suggestions for topics of interest and questions for ministers and the opposition.

This weekly hoon will be regularly open to all subscribers and the public given the public interest and issues involved. I welcome you all as full paid subscribers to support this type of accountability, explanatory and solutions journalism on the climate inaction, housing unaffordability and child poverty crises. Full paid subscribers can comment and get full access to all my emails and podcasts, along with invites to subscriber-only webinars and ‘Ask Me Anything’ threads.’

Thank you for reading The Kākā by Bernard Hickey. This post is public so feel free to share it.

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 & TLDL: This week we welcomed Rodney Jones onto the weekly ‘hoon’ as a special guest to talk about omicron modelling, whether inflation is here to stay, and how the global asset boom might end if central banks don’t bail everyone out again.

The hour-long discussion between Peter Bale, Rodney and myself is in the podcast above for all, including Rodney on his latest cautious (yet encouraging) modelling suggesting a peak of around 1,000 omicron cases and four hospitalisations a day by Feb 17.

Elsewhere, the five things to note this week included:

* the Government’s announcement of an accelerated loosening of migration shackles to ease labour shortages and suppress wage inflation;

* a toughening of the PM’s determination to open the borders over the next six months, come what may, as polls showed a softening of support for Labour and the PM in particular;

* a joint Government, BusinessNZ and CTU proposal for a $3.5b income insurance scheme that would help older, salaried workers the most if they lost their jobs or got sick;

* more signs housing inflation remains stubbornly high, and another defence of high house prices by a Government that doesn’t believe most voters want them to fall; and

* a hardening of interest rate hike expectations globally as Europe and Australia joined the Britain, the US and New Zealand in worrying more about inflation.

See much more below the subscribe button.

In the week ahead, I’ll be covering the resumption of Parliament for the year, along with household living cost indices for the December quarter on Thursday and a fresh Reserve Bank inflation expectations survey on Friday.

This is my weekly summary sampler email for both free and paid subscribers, but I’d love you all to become full paid subscribers and join the community here fully. Paid subscribers get access to all my daily emails and podcasts, and are able to comment and join the webinars and ‘Ask Me Anything’ sessions on Fridays at midday. This community of paid subscribers supports my type of accountability, explanatory and solutions journalism on Aotearoa-NZ’s triple crises of housing unaffordability, child poverty and climate inaction.

Five things to note this week

1. The shackles on bringing in migrant workers loosened a bit

Amid the noise on the plan to reopen the border to New Zealanders, the Government also slipped in a faster and wider reopening for migrant workers that could see an extra 70,000 lower-paid workers enter the country over the next year to fill wage-inflating worker shortages threatening supply chains and the health system.

Here’s the details in my piece from the news conference in Auckland after the PM’s speech.

2. The PM laid out a plan to open the borders, come what may

After an intense couple of weeks of criticism about the family-splitting and business-stifling pain of strict MIQ limits, PM Jacinda Ardern announced a staggered reopening over the next six months that could see Australian tourists able to fly in by June or July for the ski-season, possibly even after a day or two of isolation.

Ardern was repeatedly pressed on whether this plan would stick in the face of a surging omicron outbreak. She pointed to the high and rising vaccination and booster rates as protection, and appeared much less willing to use the border as a prophylactic against Covid forever more. She played down the role of recent polls showing the Opposition catching the Labour-Green alliance and her own personal popularity falling.

3. A $3.5b income insurance plan was laid out

Grant Robertson, BusinessNZ CEO Kirk Hope and CTU President Richard Wagstaff presented their proposal for an income insurance scheme designed to strengthen the social safety net and prevent longer-term unemployment and skills ‘scarring’ in the event of a recession.

The $3.5b a year scheme would see workers and employers each pay levies of 1.39% of incomes to cover six months joblessness at 80% of salary. It’s not clear yet how contractors, freelancers and the self-employed will be covered, and of course, the already-long-term unemployed and those doing unpaid work at home aren’t covered.

The risk is it becomes yet another way to funnel money from poorer and younger renters, and especially women out of paid full time work, to fund lucrative benefits to older white home-owning men on high salaries getting laid off or sick late in their work lives. Critics also worry it will create a two-tiered welfare system that further embeds and deepens the wealth and income inequality gap that has exploded under Covid.

Here’s more detail from my report this week:

4. Housing inflation remains stubbornly high

CoreLogic reported an acceleration in the monthly rate of house value inflation in January this week, despite all the talk a credit crunch, higher interest rates and higher listings were already dragging prices down.

Elsewhere, a poll showed nearly 80% of voters wanted house prices to fall “a lot” (47%) or “a little” (29%). I asked Grant Robertson about that. He didn’t think home owners really wanted their own prices to fall and again refused to say he wanted prices to fall to achieve affordability. He said first home buyers priced out of the market would have to wait a while for an affordability problem created over decades to be solved.

Here’s a deeper look at that exchange:

5. Interest rate hike expectations hardened globally

This week high inflation figures in Germany, very strong US jobs growth and a series of central bank statements emphasised a hardening of interest rate hike expectations globally. The European Central Bank and the Reserve Bank of Australia both pivoted towards more hawkish views on inflation, admitting they may have to hike interest rates later this year.

The ECB and RBA have both shifted towards the stances adopted since November by the US Federal Reserve, the Bank of England and the Reserve Bank of New Zealand in first warning of rate hikes and then starting them. The Bank of England hiked for a second time this week and the RBNZ is expected to hike for a third time in just over three weeks time, possibly by 50 basis points to 1.25%.

The Fed is expected to hike for the first time on March 16, with a small but growing market expectation that it could start with a bazooka-sized 50 basis point jump in the Fed Funds Rate (the US version of our Official Cash Rate) to a range of 0.5-0.75%.

So what?: The next couple of months could be very ugly on global stock and bond markets. The decades-long assumption about low and ever-falling interest rates pumping up asset values is being challenged. We’ve already seen US tech stocks drop (briefly) into correction territory (deemed to be a fall of 10%) so far this year. Some sort of market-wide slump or crash is more possible, which could derail the global economic recovery and force central banks to intervene again.

The key questions are whether inflation stays high, and whether central banks are really serious about getting it back down to about 2%, even if it means sparking a financial crisis and a halving of asset values. My current base case is they’ll blink, or more importantly, a slump will kill off the inflation pressures, which would allow the central banks to stop tightening, or even ease again.

Chart of the week

This from the OECD’s survey of NZ published this week is its riposte to the magical thinking that Labour and National have adopted that housing affordability will solve itself with moderate or no house price inflation.

Number of the week

76% - This is the total percentage of voters in a 1News/Kantar poll released this week that said they wanted house prices to fall a lot or a little. There were 47% of voters in this week’s 1News/Kantarwho said they wanted house prices to fall “a lot”. A further 29% wanted prices to fall “a little,” while only 18% wanted no fall.

Quote of the week

A tweet doing the rounds after Boris Johnson’s latest performances.

A fun thing

Ka kite

Have a great longer weekend

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