The Kākā by Bernard Hickey

TLDR & TLDL: This week the nation debated the Government’s apparent internal confusion about whether or how to end elimination next year. Everywhere, apart from Auckland, went down to level 2.5, which was too restrictive for many cafes, restaurants and events. Auckland looks set to stay in level 4 for a few more weeks, given the number of ‘mystery’ cases is stubbornly high. And house prices keep rising.

Overseas, Australia is divided between elimination states (Queensland and Western Australia) vs the ‘live with it’ states (Victoria and New South Wales), which is aiming to open up widely from mid-October when vaccination hits 70%. Also, Joe Biden mandated vaccination for over two million federal employees and companies such as Telstra and Qantas are increasingly mandating the vaccine.

In this week’s hoon webinar on Friday afternoon with over 50 particapants, Peter Bale and I talked about the ongoing lockdowns here and in Australia, the elimination debate here and Australia, Joe Biden’s problems, China looking at taking over America’s airbase at Bagram in Afghanistan, Brazil’s apparent descent into dictatorship, and other global issues. Peter produces a great weekly email briefing on geo-politics via the Spinoff (sign up here)

We also talked about housing later in the webinar, which included questions from participants. We aim to do this most Friday afternoons with a quiet chilled beverage.

From September 21, access to participate in these live webinars and the pieces below that were published Monday to Friday will only be for paying subscribers, while these weekend ‘wrap-ups’ with the podcasts will be for free for non-paying subscribers. Over 50 people joined the webinar on Friday afternoon.

I’ll be providing a special inaugural offer for all those on the currently free list. The regular cost will be $19/month or $190/year per subscriber. There will be group and corporate offers too. Watch this space and keep opening the The Kākā emails until September 21 to find the coupon to get that offer.

To get a sense of what I do for soon-to-be-paying subscribers Monday to Friday, I wrote these pieces this week:

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: Morena! The lockdowns in Auckland are far from over and the rest of Aotearoa-NZ looks set to stay at the tougher Delta Level Two restrictions until the ‘mystery cases’ stop turning up at Middlemore hospital unannounced, as another one did late yesterday.

Meanwhile, confusion reigns over the Government’s overall strategy for reopening, after PM Jacinda Ardern doubled down on the elimination strategy with exceptionally high vaccination rates, but also said that was compatible with ‘reconnecting to the world’ next year. Earlier this week Covid-19 Minister Chris Hipkins indicated that would be difficult, given MIQ restraints, breakthrough infections and the risk of more incursions.

My view: Ardern and Hipkins can’t both be right and yet the PM is continuing to push ahead with the sort of magical thinking I pointed to yesterday. Expecting to vaccinate absolutely everybody and also open up next year without more hard, long and wide lockdowns is just not possible, particularly when the PM says she doesn’t want a single preventable death.

Something’s gotta give, especially when businesses outside Auckland face many more months of level two restrictions they can’t work in and MIQ remains shut to all but the most extreme humanitarian cases for the foreseeable future. The closure of all Wellington’s Mojo cafes and Prefab yesterday, along with WOW’s cancellations has shocked a few in the capital.

The news this morning

The Ministry of Health confirmed late last night that another Covid-positive case turned up unannounced at Middlemore hospital yesterday for an unrelated condition, was tested, then discharged themselves and was later told of the positive result and is now isolating at home. (RNZ)

It is one more of the ‘mystery’ cases yet to be identified, along with 29 others and three more reported yesterday. Ministry of Health DG Ashley Bloomfield has said he wants a run of zero mystery case days before being confident about lowering alert levels.

Meanwhile, Stuff reported this morning experts saying the rest of the country will have to stay at the Level two delta until Auckland can move down from level four, and may have to stay at the heightened level of restrictions until dedicated MIQ facilities are built at Ohakea or Burnham, which may not be until well into next year.

The pain of the new limits of 50 people indoors, two metre gaps between tables and 100 people outdoors is taking a huge toll on hospitality and events businesses. Wellington’s World of Wearable Arts (WOW) festival formally cancelled its already-postponed 2021 event yesterday (Stuff), while Mojo shut all 24 of its Wellington cafes early yesterday after what it said were “disastrous” takings early in Delta Level two. (Stuff) Also, renowned Wellington eatery Prefab shut down yesterday and gave redundancy notices to all its staff (NewstalkZB).

Meanwhile, PM Jacinda Ardern doubled down on the elimination strategy and hermetically sealed borders for longer yesterday, pushing back at suggestions from Covid-19 Minister Chris Hipkins earlier in the week that the ‘reconnecting to the world’ strategy was in doubt. Also, renowned Otago University Epidemiologist Michael Baker said yesterday morning the delta outbreak had delayed any reopening for months (RNZ)

"The most obvious one is exactly what we've been talking about, that our capacity to launch new initiatives is limited.

"It's a finite capacity, and so much of it is now being taken up with this … battle against this outbreak, so that has occupied probably a couple of months of effort by the time it's finished, so that will inevitably push out any complex plans for reconnecting with other countries to a greater extent.

"That will involve, you know a trial of quarantine-free travel, which itself will be reasonably complex, but the other big change of course, is I think all the countries we're going to be connecting more with now have the Delta variant - it's absolutely dominant.

"It's taken over the world, essentially, so that just makes it that much tougher to do this." Michael Baker on RNZ’s Morning Report.

Ardern pushed back at the views of Baker and Hipkins in the 1pm presser, again committing to the hardest elimination strategy and an unidentified but very high vaccination threshold, along with reopening next year.

“I hate the idea of even one preventable death. If everyone who can be vaccinated is vaccinated, you will be saving the life of someone who can't be.” Jacinda Ardern

Here’s her comments from the presser in response to questions about any suspension of reconnecting and whether a home isolation trial was still going ahead this year. The bolding is mine.

"I think what we've always said is within this risk framework we've always got to be willing and able to adapt to the variants of concern. I think there's been an assumption that somehow our reopening plans have dramatically changed, I'd say that is not the case. We just have to build in, as I say, the impact of Delta in the way that we risk profile but we've always kept room for that.

"I've seen extra briefings come through for extra decisions to be made on that so it (the home isloation trial) is continuing ... it will call on our health resources in order to be able to deliver it successfully, and we're just mindful in a level 3 environment there's a bit more constraint there, so we'll be thinking about that as we continue to make those final decisions on timing.

"On the overall (reconnecting) timeframe no, no there isn't [any reason to delay], and in fact we're seeing our vaccination programme really speed up and the quicker we can move through that the more flexibility it does give." Jacinda Ardern at the 1pm briefing (RNZ).

In some good news, Ardern also announced the arrival this morning of 250k new Pfizer jabs bought from Spain to help build up supplies through September until big new batches arrive from Pfizer in October. She said another bigger ‘top-up’ deal would be announced within a week or so, which would allow the higher than expected vaccination bookings to proceed.

“With this supply we will be able to continue our rollout at record levels.” Ardern.

Briefly, in other Covid news this morning;

Smaller businesses around the country are calling for weekly resurgence support payments, along with wage subsidies (TVNZ)

Epidemiologists are telling overseas Kiwis desperate to come home they’ll have to wait longer and the risks of them returning before reaching ‘very high’ vaccination rates is too high (RNZ)

"In the short-to-medium-term, it's hard to see there being more options for bringing more people across the border. Unfortunately, [New Zealanders abroad] are going to have to be patient." Michael Baker on RNZ

US President Joe Biden is expected to announce at 9am NZ time today a tougher new mandatory vaccination policy for at least 2m federal employees and contractors (Reuters)

Building product manufacturers in Auckland are saying the limit of 100 staff members able to work during level four was too restrictive and would mean supply shortages continue elsewhere in the country (RNZ)

New South Wales released a ‘roadmap to freedom day’ yesterday that would see shops, cafes, restaurants, gyms and public venues reopen completely to vaccinated people as soon as the state reaches the 70% threshold, which is expected on October 18 (ABC Australia)

In the global political economy and business this morning

No ‘taper’ - The European Central Bank said early this morning it would slow its money printing and bond buying to a “moderately lower pace” later this year, but ECB president Christine Lagarde was quick to calm fears about any quick withdrawal of central bank support, saying “the lady isn’t tapering.” Margaret Thatcher would be proud.

No tantrum - European bond investors were reassured by the downplaying of talk of an outright tapering of bond buying and the ECB’s reassurance inflation would dip to 1.4% next year. The US Federal Reserve is also expected to start slowing its bond buying towards the end of the year. It is still printing US$120b a month, while the ECB is printing €80bn a month. The German 10 year bund yield fell 4 basis points to minus 0.37% and stock markets were unphased. (Reuters)

Microsoft announced it had abandoned plans to have all staff back in their US offices by October 4 because of various delta outbreaks

EasyJet rejected a US$2b takeover bid from Wizz Air (Reuters)

US jobless claims were lower than expected last week (CNBC)

Useful longer reads

A LinkedIn survey of 1,000 staff in Britain found over half of young staff (18-25) thought working from home had made it harder to make conversation at work and 84% felt ‘out of practice’ with work life. (HR News)

The melting of the ice sheets called by global warming could trigger tsunamis similar to those that swept northern England and Scandinavia 8,200 years ago with waves up to 20 metres high. (FT-$$$)

Some fun things

Ka kite ano

Have a great day

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: Morena! Today I wanted to take a closer look at the sustainability of the elimination strategy and whether there is any imminent chance of a meaningful reopening. The short version is we have to keep elimination, but we also can’t open up. We are stuck in a cage of our making, which was the right thing to do, but we also shouldn’t kid ourselves we will be able to open up much any time soon (ie 18 months to two years)

The Government is struggling to understand and decide how to tell everyone it doesn’t know how to safely dismantle ‘Fortress NZ’ any time soon. Its success in building that fortress is now hardening into a siege mentality because the circumstances here and overseas mean it can’t easily or quickly change, including:

* Firstly, vaccines aren’t stopping reinfection of others and are waning in effectiveness, meaning hopes for herd immunity are gone, unless an amazing new booster is invented;

* Secondly, our hospital system can’t cope with any form of Covid-delta outbreak bigger than the one we’re now eliminating, so we can’t realistically ‘let it rip’;

* Thirdly, there’s no easy or fast or safe way to create more MIQ spaces to increase the drip-drip-drip of spaces to become even a trickle;

* Fourthly, it unlikely there is any realistic final vaccination rate high enough to avoid overwhelming outbreaks, especially given relatively low vaccination rates and high hesitancy among the most vulnerable groups (young Māori and Pasifika);

* Fifthly, unlike in Australia and elsewhere overseas, there is broad public support for the current hard elimination strategy with a hermetically sealed border, so there is unlikely a turnaround forced by political pressure.

Standing and peering out through the bars of Fortress NZ, bewildered

In essence — and understandably — we built a cage for ourselves that is so safe that we believe we can’t open it up without the Covid cats getting in and eating all the weakest ‘budgies’ in the flock. So, we are stuck holding onto the bars, peering out, indecisive and sensibly anxious, not knowing what to do next, and hoping like hell that those circumstances outside the cage change so we can venture out safely again and allow our whanau to return.

The trouble is most of us ‘budgies’ haven’t understood that, don’t really want to know that, and have been allowed to kid ourselves that we can safely reopen the cage within a few months.

Most business owners, voters and consumers are still in the magical thinking stage of believing reopening is just a few months away, if only we can quash the latest outbreak. Or if it does take longer, believing that we can keep elimination in the meantime without repeated long, hard and widespread lockdowns, and that it can be done with some sort of much-expanded or dedicated MIQ facilities and home isolation for returnees.

None of those beliefs are true, and senior Cabinet ministers understand that, but they can’t work out how to tell us without either spooking everyone, or undermining the collective effort to quash the current outbreak. All of this is understandable, but those having to make decisions about their businesses and lives should know it so they don’t hang on to a failing strategy or business, or plan trips etc with the belief these assumptions are true.

We’ve learned this week that the key ministers believe that ‘reconnecting to the world’ is now realistically unlikely for another 18 months to two years, in part because of what has just happened in Australia, what we’ve learned from our own outbreak, and what we’re seeing with waning vaccine effectiveness in Israel and elsewhere. And we’ve learned that the borders will have to stay hermetically sealed to avoid damaging outbreaks and even more (and harder, wider and longer) lockdowns.

Where does this longer reconnecting timeframe come from?

Covid-19 Minister Chris Hipkins signalled yesterday and on Tuesday that the Skegg ‘Reconnecting to the world’ plan for allowing people into Aotearoa-NZ without quarantine has effectively been suspended because of delta and there had been a doubling-down on the elimination strategy inside Government while vaccination rates are still well below any remotely safe level.

Also, they don’t know where that safe level is and it may be impossibly high, given modelling published in the Lancet last month showed just 10 Covid incursions a day into the community would lead to nearly 6,000 hospitalisations and more than 500 deaths a year, even with a 90% vaccination rate among the most vulnerable groups.

Our hospital system in Auckland couldn’t handle that, given its stressed to the max with just the current 37 cases in hospital and six in ICU or high dependency units. (See more below in the Barbara Dreaver video documenting the struggle of one Pasifika man with Covid to get staff to take him from MIQ and put him into a scarce hospital bed).

Also, even 90%-plus vaccination rates among those vulnerable groups (particularly younger Maori and Pasifika) looks unlikely, given surprisingly high vaccine hesitancy rates and currently low vaccination rates. The most relevant stats on this are that young Maori and Pasifika people get much more of their information and entertainment from Youtube and Facebook than the broader population, which remains somewhat connected to official sources and the mainstream media. Here’s the latest stats from NZ OnAir, which show where Maori and Pasifika people aged 15-plus get their info from.

Fortress NZ is likely to stay closed until 2023 at the earliest

In my view, New Zealand’s borders are now set to remain hermetically sealed until well into 2023, given delta is now ripping through New South Wales and Victoria before they’re 50% vaccinated and ministers see no reopening of the Trans-Tasman bubble being imminent. The Government also believes it is unable to expand MIQ capacity much because of a limited number of hotel rooms with the right ventilation and a lack of staff for them.

Meanwhile, Hipkins has also said building new facilities would take too long to make a difference in the next 18 months to two years before better vaccines and a safer overseas situation would improve the outlook. My reading is the Government is coming to the view it can’t afford to open up much early next year without the unavoidable border breaches and the risk delta outbreaks that overwhelm our already-at-capacity health system. They also see strong voter support for elimination and ‘Fortress NZ’, regardless of the costs for business and the awful humanitarian and family situations that expats and people here find themselves in when separated from families.

My current reading of this is the Government will stick with elimination, very limited MIQ places and repeated long, hard and wide lockdowns until well into 2023 to prevent the inevitable border incursions becoming out-of-control oubreaks. The Government wants to buy as much time as possible in the hope of getting better vaccines that stop onward transmission by the vaccinated and breakthrough infections.

That means those hoping for extra space in MIQ or home isolation options to begin opening up early in 2022 to bring in staff or family, or to safely venture out for family, business or holiday reasons, should think again. There is no clear pathway or real expectation of that now. That moment is more like mid-to-late 2023, or even 2024. Even that is now very dependent on the creation of better vaccines and control of outbreaks overseas.

A beautiful and safe cage we can’t open, or get out of, any time soon

In short: Accidentally on purpose, New Zealand has done an extraordinary job quashing Covid three times, and looks to be on track to doing that again with this delta version of Covid (there was just one new mystery case yesterday and that mystery total is down to 25).

But that success has meant we have created a beautiful cage for ourselves that is still full of vulnerable communities that won’t be protected from hundreds of deaths, even if we get vaccination rates above 90% for them and everyone else.

That real and sensible fear means we are stuck: we can’t open the door and go outside, we can see through the bars that many others are doing things outside their cages, and we can’t widen the gaps between the bars a bit because we can’t renovate the bars and the gaps.

And the Covid cats just got smaller, faster, and more feral.

So how do we know this?

Hipkins told Parliament late on Tuesday (search for ‘surprise’ in this Hansard transcript) that delta had ‘changed the game’ for the Skegg report’s risk-based approach to opening up Fortress NZ. His comments reinforced the PM’s stronger view that elimination at all costs is the Government’s entire focus for now. Meanwhile, pandemic modeller Sean Hendy has told a select committee elimination is still weeks away. Read the full transcript of Hipkins’ exchanges with Chris Bishop and David Seymour to see what the Government currently believes between the lines. I have also included the audio in the podcast above.

Here’s some of Hipkins’ full quotes to give a sense of his thinking (the bolding is mine):

“Mr Chair, we set out some thinking—some early thinking—not long before this current lockdown, around what a future reopening might look like and how we might transition from a position where the border is not quite hermetically sealed but certainly very, very restricted compared to what it would normally be, to something where we might get a greater degree of movement across the border. We did that at the time and we set out at the time some thinking around a risk profiling exercise for different countries. It would be fair to say that Delta has actually changed some of the thinking about that even in the last few weeks.

“We were looking at a situation where you could stratify countries based on risk, and I think in the Delta environment, we actually have to consider whether, in fact, that's an appropriate thing to do, recognising that all countries, all people coming into the country at this point, have a degree of risk associated with them, and in some of the risk protection measures that we've had in place previously, like pre-departure testing potentially three days before travel, in a Delta environment where someone can be picking it up and being infectious within 24 hours—some of those things actually do need to be looked at again. Now, that all plays into a question mark about what our medium to longer term border settings will be. We haven't set out any new thinking on that. Obviously, at the moment, the focus is on responding to the current outbreak, but I think we will have to look again at some of that thinking around particularly the country-risk profiling, because I think Delta has changed the game.” Chris Hipkins in Parliament (Hansard) on Tuesday.

He also again indicated there were no plans for a dedicated MIQ facility, although the Government would not rule it out.

“At this point, when we established the MIQ facilities, the fastest way to do that was to contract existing hotels. It meant that you had rooms available very quickly, fully staffed, fully catered, and that was able to be stood up very quickly. Of course, a lot of work has gone into making sure that we drive as much risk out of those facilities as possible, but they are not purpose-built facilities. Purpose-built facilities would likely take quite a long period of time and be quite expensive to build at the scale of our current MIQ operations.

“We can operationalise about 4,500 rooms at any given time. That means there is a lot more rooms in the system than the 4,500, because you've got to allow for the fact that you can't have rooms occupied 24/7. They have to be cleaned in between use. And then the irregular nature, unfortunately, of travel in and out of the country means it's not always possible to optimise the use of those rooms—in the sense that a room might sit empty for five or six days. That doesn't mean it can be occupied by someone, because it has to be empty for the full 14-day period in order for it to be able to be booked. So there is a degree of inefficiency in the system, because it's a minimum two-week block booking, effectively, that means that you need a lot more rooms than you need in terms of operational capacity.

“The purpose-built MIQ facilities is something that we'll continue to consider. One of the big question marks, and I don't think it will come as a surprise to anyone in the House, is exactly how long we're likely to be using MIQ at the scale that we are using it at the moment. I think it is likely that we will need quarantine facilities; whether we need isolation facilities is another debate. So, at the moment, we have three hotels that we're using for quarantine—that's for people who have COVID-19. It is likely that we'll need to continue to be able to supply quarantine. The Government is looking at alternatives around isolation, and that includes the ability to isolate at home, and the extent of our willingness to do that, of course, is going to depend a lot on what happens in the next few months, around vaccination, around the overall risk of COVID-19 spreading in the community, and what that means for us as a country.

“So therefore—I know this is a roundabout way of answering the member's question—we don't have any plans on the books right now to build purpose-built facilities, but we certainly haven't taken them off the table. Part of the consideration there around that particular debate would be what we would do with those facilities in the periods when they were not required for managed isolation or quarantine. And so that's part of the conversation, too.

“I think it'd be fair to say it's not necessarily that the thinking has changed, but the thinking is changing and evolving, and it is an evolving situation that we're dealing with. I think that there are some things that we should put on the table and be upfront about. The first of which is: do we think it's viable for a prolonged period of time to continue to restrict movement at the border to the, sort of, 4,500 rooms worth of people in any given fortnight? I think the reality is it is not going to be viable to sustain that beyond the, sort of, immediate global response phase of COVID-19, which is obviously—the pandemic is still raging. So we are going to have to think about alternatives to that. Things like self-isolation are part of the question.

“Things like the elimination strategy itself and how the elimination strategy evolves, first of all in New Zealand that has a high rate of vaccination, which of course is what we're all pitching towards, but also in a world that will increasingly become more highly vaccinated over the next year, 18 months to two years. Now, we can look at some of the countries in the OECD and see high rates of vaccination there.

“Actually, they're not the ones that I worry about in terms of the spread of the virus. The virus is spreading and mutating in countries that have low vaccination rates. And actually, they are going to have quite a big impact on what happens at our border, those countries where the virus continues to spread, because what the epidemiologists and the virologists and all of the other scientists will tell us is that breakthrough infections—when it comes to vaccination—are more likely while the virus continues to spread rampantly. When we can turn that volume down globally, that is the point at which everybody becomes safer.

Hipkins was then asked about the contact tracing system and the risk of vaccine fade.

“If I could reflect very candidly about our experience from the first outbreak that we dealt with this year—or the first significant outbreak that we dealt with this year—the Valentine's Day cluster, I am much more reluctant to go down alert levels, to push hard to go down alert levels, quickly. I would rather that we give people certainty that knowing, when they're going down alert levels, they're not going to have to bounce back up again, which is what happened with that Valentine's Day cluster.” Chris Hipkins in Parliament.

It’s worth realising, given Hipkins’ comment above about countries with low vaccination rates, that India, China and the Philippines are among those with the lowest vaccination rates with good vaccines. They have been among the biggest sources of our temporary workers, students and tourists in the last decade. Those countries won’t be open to us or their residents for several years at this rate.

Longer reads, listens and watches worth your time

Chart of the day

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: The rest of New Zealand outside Auckland is breathing a qualified sigh of relief this morning as Covid-19 restrictions dropped from Level 3 to ‘Delta Two’ rules just before midnight. The mask-wearing rules indoors and the 50-person cap for inside venues remain a major constraint for hospitality and events business, for ‘business-as-usual’ office life.

Auckland is expected to stay at level four for another week at least, with its future dependent on the number of new ‘mystery cases’ dropping to zero per day. There were four un-connected cases found yesterday and there are still 24 cases under investigation where it’s not clear how they caught the virus. It could be a couple more weeks before Auckland can go down a level after a few ‘zero’ days of mystery cases.

However, despite the drama and fear around Covid-19, it’s not our biggest concern: that would be housing unaffordability.

A Consumer NZ survey of sentiment has found 81% of New Zealanders believe the housing market is over-inflated or out of control, 62% of renters feel locked out of the market and 58% of home owners say they couldn’t afford to buy their house now if they had to pay current CV.

The survey of 1,000 people online is done quarterly and is a nationally representative sample of the population. It also found 44% believed housing was the nation’s main concern, while 33% cited the cost of living and just 26% saw Covid-19 as the main concern.

Scoops and news overnight

In our political economy:

* Aotearoa-NZ is set to offer Novovax as a booster shot early next year (Stuff),

* Hopes the live events business sector could arrange a Covid insurance scheme with the Government are fading (Stuff),

* Auckland’s Eastern Busway project remains in doubt in the Government’s $24.3b transport spending plan detailed yesterday (NZ Herald)

“The Government is yet to receive advice on the efficacy of mixing vaccines and booster shots, but we’re really encouraged by the progress Novavax is making in further developing its vaccine to combat emerging variants of Covid-19.” Covid 19 Minister Chris Hipkins.

In Covid news globally:

* Israel’s caseload reported overnight was the world’s highest on a per capita basis ever reported, despite it being the first country to be more than 60% vaccinated (Fortune)

* Singapore’s case numbers are now doubling every week, forcing it to consider fresh lockdown measures. It had cautiously opened up last month after hitting 80% vaccination (BusinessTimes)

In the global and local economy, markets and business:

* Australia’s Ampol, which is bidding for Z Energy, has employed investment bankers to do due diligence to buy Meridian Energy’s A$1b worth of electricity generation and retailing assets in Australia, (AFR-$$$)

* The Reserve Bank of Australia decided late yesterday to proceed with a slight tapering of its money-printing programme from A$5b/week to A$4b/week, saying it expected the economy to rebound after the latest lockdowns. Markets mostly expected it to keep going at A$5b and the Australian dollar rose as a result (BusinessInsider)

* China reported last night its export growth was a higher-than-forecast 25.6% in August from a year ago, and up from the annual growth rate of 19.3% in July. Import growth was 33%, indicating China did better than expected in August despite Covid lockdowns (Reuters)

* UK PM Boris Johnson broke an election manifesto pledge not to raise main tax rates, announcing overnight a 1.25% tax on share dividends and a 1.25% hike in National Insurance taxes to pay for a £36b increase in health spending over three years (Guardian)

* Overnight, El Salvador became the first country in the world to start using bitcoin as its official currency , but had a few hiccups with e-wallets (Reuters)

* Yields for european corporate bonds rated as ‘junk’ (below the BBB minus threshold for investment grade) fell below 0% this morning for the first time (YahooFinance)

* Apple is expected to launch a new evolution of the iPhone at a launch event next Wednesday morning (NZ Time) night (CNET)

Signs ‘o the times news yesterday

In Covid news;

PM Jacinda Ardern said she was confident of an imminent deal to get more Pfizer doses to keep up the current vaccination rate of 80-90k a day beyond the end of next week, although she didn’t detail where they were coming from, how many and when.

Deputy PM Grant Robertson announced a relaxation of the Level 4 rules in Auckland to allow building materials companies to start manufacturing supplies again before the rest of New Zealand runs out (even more than they already have.

Here’s my take on yesterday’s big Transport plan announcement.

Chart of the day

A useful longer read

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: The Government has released a ‘holding pattern’ three-year spending plan for transport that is yet to include potentially major changes to spending on public transport, cycling and walking to achieve carbon zero by 2050. The latest $24.3b plan is 44% bigger than the last one and includes a $2b top-up loan from the Government to Waka Kotahi-NZTA. However, only a quarter of the plan is for public transport and nearly two-thirds is for maintaining roads and building new ones.

The bigger news was the use of a Crown loan to NZTA for the first time and the start of a funding review for its National Land Transport Fund that could see the introduction of congestion charges and replacements for petrol levies and road user charges for diesel vehicles that are expected to go electric.

The podcast above includes my questions and the answers of Transport Minister Michael Wood and NZTA Chair Brian Roche on funding and spending, and in particular why road spending still dominates versus public transport, cycling and walking.

My view: This doesn’t even scratch the surface of the change needed to public funding of transport to get to carbon zero by 2050, or more importantly, quickly switch away from burning petrol and diesel commuting in our cities to using buses, trains, bikes and walking. That requires mass reconfiguration of roads into busways, cycleways and walkways, along with congestion charging that ensures a ‘just transition’ of subsidised public transport and walking and cycling infrastructure paid for by richer motorists.

The Government has yet to grasp those political hot potatoes in a culture-war-ish climate of cyclists vs motorists and opposition to using petrol levies and RUCs to pay for poorer ‘other’ people to use buses and ‘take our roads away’ for cycling and walking. The vitriolic reactions to trials such as the Arthur Grey Low Traffic Area pilot in Onehunga in May, the second harbour bridge for cyclists and walkers, and the ‘Groundswell opposition to the Clean Car Rebate ‘ute tax’ scheme show little political appetite across business and the centre-right for these changes. See and hear more on that in a podcast/column I did for the Spinoff last month.

Today’s announcements confirm the Government’s politically cautious approach and the continued dominance of the road-heavy culture at NZTA, although the jury remains out until the Government releases is Emissions Reductions Plan in coming weeks to take a bigger emissions reduction contribution to the big UN conference starting in Glasgow at the beginning of November, and to respond fully to the Climate Commission’s recommendations by the end of the year. So, in theory, the Government could announce a major pivot to carbon-light transport spending and funding before the end of the year, although I doubt we’ll see anything transformative.

My current assumption is the Government won’t want to push the politically sensitive buttons of swapping road spending for buses, walking and cycling, partly by imposing new congestion charges. But it will promote the ‘billions of extra spending’ on public transport planned in the years ahead, hopeful the big numbers will show the public (who mostly don’t want real change) that the Government is headed in the ‘right’ direction. But I like surprises.

Today’s news: Govt to top up transport funding

Transport Minister Michael Wood announced the unveiling of the latest National Land Transport Plan (NLTP for 2021-24) this morning, which specifies how much money Waka Kotahi-NZTA will receive and spend over the next three years, including on public transport, walking and cycling, and roading.

The news today was the Government will loan an extra $2b to NZTA to top up funds from fuel levies and road user charges (RUCs), and funds from councils. Wood has also launched a formal review of the funding arrangements for transport. Currently there is a ‘hypothecated fund’ (the National Land Transport Fund (NLTF) that is built up with revenues from levies and RUCs and the money is dedicated or ‘hypothecated’ to building and maintaining roads, rail and public transport.

In theory, each three-year period’s revenues into the NLTF should be matched by spending on roading, buses, rail, cycling and walking. But increasing spending on public transport, cycling and walking, along with an expectation drivers will switch from petrol and diesel vehicles to electric, has put the fund under pressure.

Wood and Waka Kotahi Chair Brian Roche said the review would start next year with a public discussion paper. Wood said it would take years, rather than months, and the Government would look to continue to fill any gaps, possibly with extra loans, in the meantime. They agreed the review would look at the use of congestion charges and how to transition from levies paid per litre of petrol and the number of kms travelled on roads by diesel-powered vehicles.

This latest NTLP is up 44% from the last one, and 75% above the one before that, which was set under the previous National-led Government. However, it is likely to be changed again dramatically as the Government is in the final stages of preparing its Emissions Reduction Plan (ERP), which will form a major part of the response to the Climate Commission’s recommendations and to beef up Aotearoa-NZ’s emissions reduction commitments for the Glasgow conference at the beginning of November.

Most new spending on roads

Wood said this new NTLP did not include changes to be incorporated in the ERP. Currently, only $6b or 25% of the spending is on public transport, cycling and walking, albeit up 40% from the previous NLP.

This plan spends $3.9b on expanding highways and motorways, including the $661m Te Ahu a Turanga Manawatū Tararua Highway (Manawatu Gorge replacement) and $637m to complete the Waikato Expressway extension by filling in the ‘gap’ of 21.8km on a bypass east of Hamilton.

It also continues on with the Mt Messenger Bypass on the road between Te Kuiti and New Plymouth, a $280m project for 6km of new motorway, two new bridges and a 235m tunnel. Here’s a ‘flyover’ view of that project.

The new NTLP included $2.7b for Auckland, which was $300-$400m less than Auckland Council applied for.

The plan does include $30m over three years for “investments in infrastructure, research and programme business cases, and projects” to improve coastal shipping. There were no specifics on how that money would be spent.

Highway spending double that of emissions reducing infrastructure

The funds granted for public transport, cycling and walking were far less than that proposed by councils in their Regional Long Term Plans. Spending on state highway improvements is forecast to be almost double that on public transport, cycling and walking.

I welcome your thoughts and questions on the plan, in particular the mix of public transport, cycling and walking, vs roads, whether big new roads should still be planned or built.

For example, this plan includes $910m on new shared pathways, bike routes, walkways and pedestrian facilities, yet $6.6b is spent upgrading roads and motorways. The Government of Wales in Britain, for example, announced in June it would freeze all new road building projects to achieve its climate change aims.

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TLDR & TLDL: Morena! Fresh from announcing a shift to ‘Delta Two’ tonight outside of Auckland (see details and subscriber comments here on that), the Government is set to announce later today it has secured extra Pfizer doses to keep up a now-scorching pace of vaccinations. Australia just did such a deal and needed it desperately.

New modelling out overnight shows New South Wales is set to go over 2,000 cases a day next month and Victoria is headed for 4,000 a day. Both states will struggle to cope with more than a thousand Covid cases in ICUs by early November. The trans-Tasman bubble looks off until late next year at the earliest.

Meanwhile, there’s good news for Tiwai Pt smelter workers with a fresh rise in aluminium prices overnight to a 10 year high because of a coup in Guinea, but that’s bad news for electricity consumers elsewhere, and our hopes to stop burning a million tonnes a coal a year, because it means the smelter will likely keep using 12% of NZ’s power production for many more years.

Coming up: Watch for the Pfizer doses deal, probably at 1pm, and the Reserve Bank of Australia’s monthly money printing decision at 4.30pm our time. It is expected to keep printing A$20b a month.

My view: Our Reserve Bank has stopped printing and others still expect it to hike interest rates on Oct 6. I think they probably will, but shouldn’t, given delta is slowing GDP growth and inflation pressuresglobally and locally.

For example, the ‘Delta Two’ restrictions (a maximum of 50 people indoors and tables two metres apart) announced last night are expected to severely curtail hospitality and events until Christmas at least.

Scoops and news breaking this morning

In Covid news:

‘They’re coming’ - The Government is expected to announce later today if it has found extra Pfizer doses needed to keep up the current pace of vaccinations, which is double that planned for (Stuff)

‘They’re not coming’ - The RSE one-way bubble scheme for vineyard and orchard owners to get extra workers from Tonga, Samoa and Vanuatu was put on hold late yesterday because of restrictions on MIQ space. (Stuff)

Sydney’s painful re-opening - New South Wales published fresh modelling showing its daily case load would peak next month over 2,000 (it was 1,281 yesterday) and the numbers of Covid cases in ICU beds would increase the numbers in ICU to almost 1,000 in early November, which is above the state’s capacity of 924.

Victoria’s awful outlook - New modelling of Victoria’s outbreak found daily cases could explode to over 4,000 by the end of this month. (AFR-$$$)

Ready. Fire. Aim - Meanwhile, Premier Gladys Berejiklian announced a plan yesterday to start reopening New South Wales’ schools from October 25. Only 41% of adults in the state are now fully vaccinated. That rate is on track to hit NSW’s 70% reopening threshold on Oct 18. Nuts. (Guardian)

In our political economy:

Supply constrained - Home builders are increasingly applying price escalation clauses and dropping fixed price contracts for buyers, which will make it harder for banks to lend to buyers off the plan, Phil Pennington reported on RNZ.

In the global political economy:

Tiwai celebrates - Global aluminium prices rose again overnight to a fresh 10-year high as it became clear a coup in Guinea would restrict bauxite supply from the world’s second biggest producer after Australia. (CNBC)

Crikey…finally - Rupert Murdoch’s News Corp will end its long-standing editorial hostility towards carbon reduction policies and advocate in Australia for the world’s leading economies to hit net zero emissions by 2050 with an editorial campaign next month. (SMH)

Signs o’ the times news

Climate change - New Zealand just had its warmest winter ever. NIWA reported an average temperature of 9.8 degrees C this winter, which was 1.32 degrees above average. Seven of the 10 warmest winters have happened since 2000.

Swipe up - Tinder says New Zealand users are increasingly using the app to look for partners to buy houses (Stuff)

“Apparently it's easier to buy a house with someone else. Genuine outdoors bloke looking to settle down hopefully.” “Looking for someone to combine incomes with so we can buy a house using the Kiwibuild $180,000 couples limit.” Another joked: “Just want someone to buy a house with, nothing serious.”Another read: “Bank told me I needed to find a partner to buy a house.” Quotes from Tinder profiles.

Useful longer reads and listens

Some fun things

Have a great day

Ka Kite ano

Bernard

This is a public episode. If you'd like to discuss this with other subscribers or get access to bonus episodes, visit thekaka.substack.com/subscribe

TLDR & TLDL: Interest rates look set to stay low for even longer globally after very weak US jobs figures over the weekend quashed talk of an early end to US money printing. The Reserve Bank’s decision on Friday to propose another tightening of LVR rules from October 1 also took some heat out of calls for rate hikes here.

Meanwhile, Cabinet will decide today whether to lower the rest of New Zealand from level three restrictions to level two-point-something after lower Covid case numbers in Auckland and none infectious in the community elsewhere. That could include indoor mask wearing and keeping bars, gyms and churches closed.

Coming up: NZ Covid case numbers due at 1pm; Fresh NSW Covid modelling due at 1pm NZT; PM to reveal Cabinet decision on level changes at 4pm presser.

News this morning

In Covid news:

* There were 20 new cases in NZ on each of Saturday and Sunday, reassuring epidemiologists that the level four lockdown in Auckland is working (MoH),

* Cabinet will decide this afternoon how much more freedom people outside Auckland will get, including whether a tougher level ‘2.5’ is needed,

* Otago University’s epidemiologists said over the weekend level 2.5 should include mask-wearing indoors, limiting events to 25 indoor and 50 outdoor, and keeping closed all high-risk venues such as bars, gyms and churches.

* Almost half a million extra Pfizer doses were flown from London to Sydney last night. Australia did a deal with the UK late on Friday to be sent 4m doses.

* Britain has millions of spare doses due to expire within weeks and is swapping them for Australian doses later this year when Britain starts booster jabs (ABC),

* PM Jacinda Ardern said early last week she was likely to announce ‘within days’ how to deal with a looming shortage of doses because of strong demand. That could include an Australian style ‘swap’ and/or restricting jab bookings.

* Deputy PM Grant Robertson said yesterday he was “quite positive” about the chances of a deal for more Pfizer doses, but would not say when the deal was due.

* Premier Gladys Berejiklian is expected to reveal modelling today showing NSW’s Covid hospitalisations will get even worse over the next month, although she still plans to loosen Covid rules for the state, which had 1,485 new cases yesterday (SMH)

In the global economy:

* US data out on Saturday morning NZ time showed the world’s largest economy added just 235k jobs in August vs 1.1m in July. Economists had forecast 735k jobs growth,

* Economists said this would shift US Federal Reserve’s likely tapering its US$120b/mth of money printing out to November from September (CNBC),

* Financial markets will watch Thursday night’s meeting of the European Central Bank for signs the ECB will start tapering its €80b/mth money printing programme. Economists also see it delaying the slower printing until December (CNBC),

* The Reserve Bank of Australia is expected to decide tomorrow at 4.30pm NZT to continue its A$5b/week money printing programme after the NSW and Vic outbreaks worsened. It had previously been expected to cut it to A$4b/week. Westpac even suggested the RBA could increase the printing to A$6b/week (AFR-$$$).

In our economy:

* The Reserve Bank announced on Friday morning it wanted to tighten LVR restrictions for owner-occupiers, including first home buyers, back to 2017 levels from October 1,

* It said house prices were at higher-than-sustainable levels and it wanted to reduce the financial risks of a fall in house prices for new borrowers and banks,

* It estimated the halving of the allowable high LVR (>80% of a house’s value) lending to 10% of new lending would hit first home buyers the most, but was better than the alternative of reducing the LVR threshold to 75%,

* The bank estimated the move would reduce the number of first home borrowers by around 500 to just under 2,500, while the 75% option would reduce that number by more than 1,000 to about 1,750,

* It said the restriction would reduce the amount of house price inflation, but the effect would be only small.

Here’s the core of the Reserve Bank’s argument (the bolding is mine):

“We also note that most of the speed limit is currently allocated to first-home buyers. Therefore, a reduction in speed limit will mean that some first home buyers will need a larger deposit and may take longer to enter the property market. This would also be the case if the threshold was lowered.

“We expect both options would lead to lower house price growth by removing some marginal buyers from the market, compared to a counterfactual where the LVR restrictions are left unchanged. Because of this, over the longer term tightening the LVR settings should improve affordability for first-home buyers that do enter the market, relative to a counterfactual in which LVR restrictions remain at current levels. However, based on past experience we expect the impact on house prices to be small.” Reserve Bank analysis for proposed tightening of LVR settings.

Threads worth following

Useful longer reads

Other places I’ve written

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

In this podcast recorded on Friday night, Thomas Coughlan and I took a 'hoon' around the big events in Aotearoa-NZ’s political economy this week, including:

* the debate about our Covid elimination strategy after Victoria's capitulation this week,

* Grant Robertson's 'sustained moderation' housing inflation comments in this interview with Interest.co.nz’s Jenee Tibshraeny on Friday, and,

* what’s going wrong inside National’s caucus.

Thomas Coughlan works for the NZ Herald in the Parliamentary Press Gallery in Wellington, having previously worked in the gallery offices of Stuff and Newsroom, where we worked together in 2018 and 2019.

From September 21, access to participate in live webinars and the pieces below that were published Monday to Friday will only be for paying subscribers, while these weekend ‘wrap-ups’ with the podcasts will be for free subscribers.

I’ll be providing a special inaugural offer for all those on the currently free list. The regular cost will be $19/month or $190/year per subscriber. There will be group and corporate offers too. Watch this space and keep opening the The Kākā emails until September 21 to find the coupon to get that offer.

To get a sense of what I do Monday to Friday, I wrote these pieces this week:

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

In this podcast Peter Bale and I took a 'hoon' about the big events in geo-politics this week, including:

* what the US defeat in Afghanistan means for its allies, including us,

* whether the Covid elimination strategies are sustainable in Australia and here,

* what’s going on with President Xi Jinping’s ‘Common Prosperity’ drive and what it means for China’s big tech billionaires, and,

* and the latest on interest rates and the Reserve Bank’s tighter LVR settings here.

Peter is a colleague and friend from my Reuters and FTMarketWatch days in London back in the late 1990s and early 2000s. He has managed news rooms and news websites all over the world over the last 30 years, including for Reuters, FTMarketWatch, The Times Online, CNN Europe and MSN Europe.

Usually resident in London and Spain, he got caught in Auckland in the first lockdown and now produces a great weekly email briefing on geo-politics via the Spinoff (sign up here).

From September 21, access to participate in these live webinars and the pieces below that were published Monday to Friday will only be for paying subscribers, while these weekend ‘wrap-ups’ with the podcasts will be for free subscribers. Over 50 people joined the webinar on Friday afternoon.

I’ll be providing a special inaugural offer for all those on the currently free list. The regular cost will be $19/month or $190/year per subscriber. There will be group and corporate offers too. Watch this space and keep opening the The Kākā emails until September 21 to find the coupon to get that offer.

To get a sense of what I do Monday to Friday, I wrote these pieces this week:

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: Morena! The signs are growing that Auckland faces another four weeks with level four restrictions, despite what appears to be a peaking of new cases. Modellers point to infections still happening at level four, including 65 ‘mystery’ cases not connected through a household or clear contact to another case.

“It's possible we could see a shift out of level four in two weeks time, more likely something like three to four weeks.” Auckland University’s Sean Hendy told Thomas Coughlan in the NZ Herald

Officials and the PM are still worried about mystery cases popping up that aren’t linked to households or other clear cases. There are now 65 such cases, Henry Cooke reported this morning via Stuff.

Meanwhile, the pressure on MIQ places is growing. Andy Fyers reports via BusinessDesk-$$$ this morning local community-acquired cases are now occupying almost half of MIQ’s specialised quarantine rooms, while various moves to improve safety and set aside 500 rooms for Government allocations has reduced capacity by a quarter since March.

Expats were heartbroken and frustrated overnight about Chris Hipkins’ announcement about a freezing of new voucher allocations for weeks to come and his plea for Kiwis overseas not to come home for summer holidays. (Stuff)

My view: The pressure from businesses and expats is growing in intensity as Fortress NZ gets more ‘fortressy’ and it dawns on people the Auckland lockdowns won’t end fast, and will no doubt return for another couple of months in the next six months.

Elsewhere, MIQ slots are drying up and there appears little ability to expand the number of places because the hotels available don’t have the right format or ventilation, or enough staff.

Questions looking for answers today:

* Who is getting in through the Government’s allocation to itself of 500 rooms?

* What are the conditions for Auckland to shift from level four to level three?

* How many more mystery cases will there be today and what is the percentage of new cases caught outside households or known contacts?

* Can Queensland and Western Australia hold on to their elimination strategies in an Australian National Cabinet meeting later today?

* Would the PM relax elimination before under 12s are vaccinated, even though that isn’t approved anywhere yet?

* At what level of vaccination rate can our emergency care departments handle inevitable outbreaks?

* When will the Government green-light new permanent MIQ facilities that are custom-built for Covid, as the Australians have?

Scoops and news breaking elsewhere this morning

In covid news locally:

* A third student was found to have flown to Wellington illegally during lockdown (Stuff);

* The shirtless man with Covid who escaped from an Auckland MIQ facility yesterday had previously also breached a self-isolation order (Newshub);

* Novotel Ibis Ellerslie hotel staff have been forced to isolate last night after a woman with Covid in isolation stormed down to reception to demand food for her kids (NZ Herald);

* National proposed a points system for MIQ places and said booking bots should be banned (RNZ).

In global Covid news:

* New South Wales is scaling down its contract tracing efforts and relying on automated apps to contacts in locations of interest to notify potential covid cases, and it also loosened rules around outside exercise. (SMH);

* NSW reported 1218 new cases yesterday. Victoria, which gave up on elimination this week, reported 176 new cases;

* Queensland Premier Annastacia Palaszczuk pledged not to open up her state until under-12s had been vaccinated too - Queensland and Western Australia are now at loggerheads with the rest of Australia, sticking with their elimination strategies when the rest have given up. (Guardian);

* Almost one million people had long Covid in the UK in the four weeks to August 1, the Office for National Statistics has said;

* Italy will eventually make Covid vaccination compulsory, PM Mario Draghi said overnight (Reuters).

In the global economy:

* China announced it would create a new stock exchange in China. This extends China’s pivot to moving listings of big companies away from New York and follows President Xi Jinping’s ‘common prosperity’ edict aimed reducing inequality (NikkeiAsia);

* Initial US jobless claims fell to a new Covid-era low ahead of key Non-Farm Payroll figures for August later tonight (ABC).

In global markets:

* US stocks rose 0.4% ahead of tonight’s key US jobs data;

* Oil rose another 2.4% to US$73.38 a barrel after Opec + agreed to increase production by less-than-hope;

* Bitcoin broke back above US$50,000 after a report Twitter would allow users to tip tweeters with bitcoin;

* The NZ dollar rose 0.6% overnight to 71.1 USc.

In local business news:

* The Reserve Bank of Australia joined the Bank for International Settlements’ (BIS) ‘Project Dunbar’ to test a new form of digital currency to improve international payments. The test includes central banks from Malaysia, Singapore and South Africa, but not the Reserve Bank of New Zealand (BIS);

* National Australia Bank, which owns BNZ, is considering mandating vaccination for all its staff in Australia (The Australian);

* Nestle is believed to be in the running to buy Ziwipeak, a New Zealand pet food company said to be worth A$1b and being sold via PwC (The Australian).

In global business news:

* Apple announced overnight it would loosen strict payment rules for app developers, including Netflix and Spotify, so they could include links to their websites to allow buyers to bypass Apple’s 30% fees. It followed a probe by Japan’s Fair Trade Commission and legislation in South Korea to allow app buyers to pay developers directly, rather than through Apple or Google. Apple also relaxed a restriction on developers that stopped them from offering discounts via other channels. (YahooFinance)

* Al­ibaba promised to spend US$15.5b ‘fos­ter­ing so­cial equal­ity’. It is the latest Chinese tech behemoth to fall into line behind President Xi Jinping’s widespread policy shift towards “com­mon pros­per­ity.” (Reuters)

* A US judge approved a $4.5b compensation deal overnight that sees Purdue Pharma declare bankruptcy in a way that shields the Sackler family from prosecution. (Reuters)

Quote of the day

“You are going to have death. You have death with the flu ... 50 people every day lose their lives to heart disease. Death is horrible. So, we also need to put things into perspective. Because at the moment, there are eight million citizens who don’t have a choice of how they spend their free time, who don’t have a choice about what they can do, when they can leave their homes. That is no way to live.” NSW Premier Gladys Berjiklian yesterday.

Chart of the day

Signs o’ the times news

Useful longer reads

Some fun/ thought-provoking 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