Making worst worse

First the good news: Fonterra has reported a 50% increase in its half-year profit:

Fonterra Co-operative Group Ltd today released its 2023 Interim Results which show the Co-op has delivered a half year Profit After Tax of $546 million, an earnings per share of 33 cents, and a decision to pay an interim dividend of 10 cents per share alongside a forecast Farmgate Milk Price range of $8.20 – $8.80 per kgMS.

The Co-op also upgraded its full year forecast normalised earnings from 50-70 cents per share to 55-75 cents per share and announced a proposed tax free capital return to farmer owners and unit holders of around 50 cents per share, subject to completion of the sale of its Chilean Soprole business.  . .

Now for the bad news.

In spite of the good result for our biggest company, the country recorded its worst current account deficit yet:

The annual current account deficit was $33.8 billion (8.9 percent of gross domestic product (GDP)) in the year ended 31 December 2022. This was $12.7 billion wider than in the year ended 31 December 2021 (6.0 percent of GDP), according to figures released by Stats NZ today.

This is the largest annual current account deficit to GDP ratio since the series began in March 1988. The largest prior to the COVID pandemic was 7.8 percent of GDP in December 2008, during the global financial crisis.

A current account deficit reflects that we are spending more than we are earning overseas. The size of the current account balance in relation to GDP shows its significance in the context of New Zealand’s overall economy.

The widening in the annual current account deficit was mainly due to a $10.0 billion widening of goods and services deficit and $2.7 billion widening of the income deficit. . .

This will almost certainly get worse as a result of Cyclone Gabrielle’s destruction of export crops.

And there’s more bad news:

Gross domestic product (GDP) fell 0.6 percent in the December 2022 quarter, following a 1.7 percent rise in the September 2022 quarter, according to quarterly figures released by Stats NZ today.  . . .

National’s Finance spokesperson, Nicola Willis,  says the deepening cracks in the economy are putting more people at risk of financial distress:

. . . “This result is worse than many had anticipated, with the Reserve Bank having forecast 0.7 per cent growth for the period,” Ms Willis said.

“Excluding Covid-19 lockdowns, it is the weakest quarterly growth since the Global Financial Crisis.

“A stalling economy is yet more bad news for New Zealanders already battling sky-high inflation and rapidly rising interest rates.

“Under Labour, the economy is in trouble and New Zealanders are paying the price. Workers are already suffering from badly-stretched after-tax incomes and a weakening economy means things will get worse.

“We also learnt this week that New Zealand now has its largest current account deficit since records began, meaning we are collectively living beyond our means.

“Taken together, the outlook for the New Zealand economy looks increasingly worrying: the cost of living crisis is dragging on even while interest rates climb, debts grow and businesses stall. . . 

“Today’s data confirms once again how badly our economy is travelling under Labour. The key question now is how much worse things will get.”

The worst current account gap since records began and a worse than expected GDP is a bad combination for us all.

There’s nothing to give us confidence the government has a plan that will make matters better and far too much evidence of policies that will make them worse.

Continuing to waste money on Three Waters, Auckland’s light rail project and  plans for pumped hydro at Lake Onslow in spite of a 300% increase in costs to $16 billion are just three examples of how the government will make the worst economic records yet even worse.

 

High interest rates good for savers?

Are high interest rates really good for savers?

. . . [Reserve Bank Governor Adrain Orr] diplomatically suggested if the government were minded to do some “reprioritisation” of spending (in other words, to make cuts to redistribute funds to cyclone relief) or jack up taxes to help pay for it, that would make his life easier.

That presents significant challenges for both of the major political parties, because Orr’s point is that more government borrowing and spending simply works against getting inflation under control.

More borrowing and spending fueling inflation is a point the Opposition has been making for some time.

He was also at pains to stress higher interest rates were good for savers. . . .

Are they really?

Higher interest rates provide more income from savings but when inflation is eating into the real value of the money invested, savers will still be going backwards.

Abuse of process

The continued reduction in the fuel tax will cost about  $718m . Kate MacNamara found out where the government is getting that money:

. . . Finance Minister Grant Robertson has said that the $718m was found in the Government’s ordinary course October Baseline Update, an exercise that includes identifying underspends and reallocating the funds (the Government can also cancel the funding and to that degree reduce the country’s projected debt and the extent of deficit spending).

Some of these underspends come from Covid-19 policies, Robertson confirmed, though he declined to indicate the proportion.  . . 

But leftover Covid money, originally allocated through the extraordinary Covid Response and Recovery Fund – created in 2020 to respond to the pandemic, and topped up in 2021 and early 2022 – has paid for all of the $1.3b cost of the fuel tax reduction and associated measures to date.

That giant $61.6b pot of money was officially closed on April 11, 2022, and the decision was taken to manage the cost of Covid through the standard Budget process, but underspends from the fund persist (The Herald covered a further $2.05b repurposed from the CRRF after its closure for general Government priorities here, and Robertson’s rejoinder here).

Though the emergency is over, this leftover funding has a long tail, and, what’s more, it’s beginning to look like the Minister of Finance has one too: a big, bushy one.

This is borrowed money. A prudent government, genuinely wanting to reduce inflation would not reallocate it.

Remaining from now-defunct Covid policies, and squirrelled away, are a series of fat underspends: Managed Isolation and Quarantine ($1b), the Small Business Cashflow Scheme expenditure ($425m), and Covid-19 Support Payments expenditure ($227m), as well as a further $23.56m, which The Treasury said last July was the total of combined underspends from across Education, Internal Affairs, Conservation, Agriculture, Biosecurity, Fisheries and Food Safety.

Like so many stashed nuts, these pots of money were all tapped (though in their total not exhausted) to fund the initial $350m for the first round of the fuel tax programme (March to June 2022), the $235m cost of the second round (June to August), and the $658m for the third round (August to January 2023). Incidentally, late last year that January end date was pushed out to March 31st, at which time, it was promised, the cuts would definitely be cancelled.

But then Prime Minister Jacinda Ardern resigned, Hipkins rode in on the “bread and butter” wagon to ready for an October election, and he told Robertson that more nuts were needed.

Former deputy chief economic adviser to The Treasury, Tony Burton, has called the Government’s ongoing use of the funds set aside as an emergency contingency an “abuse of process” as it is laid out in the Public Finance Act (early last year The Treasury made it clear that the fuel tax reductions did not meet the criteria of the CRRF).

“The flexibility of having a contingency is balanced by being clear about the scope of the emergency the contingency is there to deal with. It is an abuse of process to use the contingency for purposes outside the scope,” Burton said, noting that it made no difference whether the fund was closed or not.

“A household analogy would be if the bank agreed you could have an overdraft to cover the uncertain costs of repairing a roof damaged in a storm. If you found the roof cost less than the overdraft and you told the bank they had to let you use the money to fund a holiday, they would undoubtedly object [that] this was not what was agreed! Of course, [the] Government owns its own bank, so all the rules can do is force the Government to reveal when it has breached trust in this way,” Burton said.

It’s certainly been convenient for the Government to have the spare funds sloshing around. Though the fuel tax reductions policy was instituted in March 2022, before the Budget, none of the roughly $1.3m of spending to date was managed within this year’s Budget allowance. 

The accusation of an abuse of process and breach of trust is a serious one.

And while it is convenient for the government to have this money sloshing around, it is reckless of it to spend it on continued cuts to fuel taxes.

These cuts help the wealthy the most and provide least help to the poor who are most in need.

They also expose the hypocrisy in the government’s claims to be serious about climate change.

That it is abusing the process to fund this policy makes it even worse and it is unlikely to stop here.

And it’s worth remembering that if the Government had retired the unspent CRRF funds (returned them “to the centre” as The Treasury puts it) and factored this into the net debt calculation accordingly, then if it wanted to increase new spending by an equivalent amount, Robertson would have had to increase the Budget allowance or find the savings elsewhere.

Increasing the Budget allowance, which was then already set at $6b, would have invited the accusation that the Government couldn’t control spending. Actually making the necessary trade-offs and finding savings elsewhere would have required him to rein in spending.

Such fiscal discipline is now doubly unlikely as the Government looks ahead to a long electoral winter of defensive action. Its best hope is to scamper about raiding every cache of metaphorical nuts it ever hoarded and to shower them on voters.

The government keeps telling us its concerned about inflation and serious the cost of living crisis.

But its actions belie its words and show that it really has no intention of tightening its own belt.

Instead it will continue to prove that it really is, as National keeps saying, addicted to spending.

Inflation really 8.7%

The annual inflation rate was 7.2% – or was it?

. . . But the Government’s claim that “inflation has peaked” is a fragile one; it relies on one metric. Making the claim, Finance Minister Grant Robertson compared the headline consumers price index increase for the three months to December (1.4 percent) with a higher rise over the three months to September (2.2 percent).

Measured over 12 months, that same headline CPI is flat on 7.2 percent – and CPI itself contains a glaring omission. Its headline figure doesn’t include the cost of interest payments. Those are going up, and up, and up.

There’s a reason headline CPI doesn’t include interest payments – it’s intended to guide the Reserve Bank in setting interest rates, not to guide the Government in setting fiscal policy, or government agencies in setting benefits and super payments, or employers in setting wages.

But buried in box M40 on table 3.03 of one of five CPI spreadsheets this week is a number that this index is not meant to report: headline inflation with interest payments added in. 

It shows that rising mortgage rates are pushing the real cost of inflation far higher than the official headline CPI number of 7.2 percent that Statistics NZ delivered to the Reserve Bank and the Government.

The real cost to New Zealanders is 8.7 percent. That’s means the impact on the average household budget is 20 percent higher than headline CPI.

Around half of fixed rate mortgages will come up for re-pricing within the next 12 months. In many cases, borrowers will face refixing at interest rates that are 3 percentage points higher than those they are currently on.

Westpac NZ senior economist Satish Ranchhod says the combined impact of higher consumer prices and higher interest payments is going to take a big bite out of households’ purchasing power. “That will be a significant drag on spending and economic growth over the coming year,” he tells Newsroom. . . 

Three percentage points higher will mean a doubling of current rates, or more for some people.

That’s a lot of money to come out of household and business budgets that are already stretched.

Higher interest rates might on the face of it help people with investment income. But they lose too as inflation erodes the real value of their capital.

The new Prime Minister is promising to focus on the economy, but when he’s leading the government that got us into this mess, how can we have confidence he can get us out of it?

The Economic miracle

Dr Oliver Hartwich discusses an economic miracle :

In May 1945, Prime Minister Winston Churchill led Britain to victory. He was celebrated as a hero, but only two months later, the Brits elected a new Parliament and a new Prime Minister, Clement Attlee. Attlee promised to rebuild the country by taking control of the British economy, but it was a disaster. Over in West Germany, they took a different approach and managed an economic miracle. Watch Dr Oliver Hartwich, Executive Director of The New Zealand Initiative, explain why this history is relevant to New Zealand today. –

 

You can read a transcript here.

Are we aiming high enough?

Mahesh Muralidhar asks are we aiming high enough?

Bear Grylls once said there is only one word to describe New Zealand – EPIC. He’s right, we are epic, but are we aiming high enough to future-proof our country? Join Mahesh Muralidhar, Venture Capitalist, as he shares his thoughts on the importance of reinvigorating our economy, what we can do to encourage more start-ups and frontier businesses, and why they are essential for a successful New Zealand.

Submission on Ag emissions and pricing

Submissions on the government’s proposals to impose a tax on farm emissions close today.

You can submit here .

This is my submission:

• We oppose the government’s proposals for pricing agricultural emissions

1.3. The Paris Accord agrees: ”to decrease global warming through: . . .  Increasing the ability to adapt to the adverse impacts of climate change and foster climate resilience and low greenhouse gas emissions development, in a manner that does not threaten food production.”

1.4 Until there are affordable, practical and safe ways to reduce emissions any costs imposed on farmers will reduce food production and lead to job losses on farms, in businesses that service and support farmers and process their produce; and in the wider communities.

1.5 New Zealand has a well-deserved reputation for producing nutritious and safe food, efficiently with high standards of animal welfare. We have strict requirements about the use of chemicals and drugs. Any tools that reduce emissions must not have any adverse impact on stock, meat quality and nutrient value and human health.

1.6 We oppose the use of the ETS to encourage on-farm emissions reductions. Unless, and until, there are safe measures to reduce emissions it would simply be a tax on production.

1.7 We do not support the pricing of emissions until there are safe measures to reduce them. However, if one is imposed, a farm level system would be less bad than the proposed interim processor level system as a backstop.

1.8 If the government persists in imposing costs, any approach to reducing emissions must maintain the viability of New Zealand’s farming sector and rural communities.

1.9 It must not encourage practices that would lead to poor economic, environmental and social outcomes, for example large scale job losses on farms and rural communities or replacing pastoral farms with pine plantations.

1.10 It must recognise the good work that many farmers and rural communities have already done to mitigate climate change through establishing vegetation and that is fair across all sectors and New Zealand industries and communities.

1.11 The Governments proposal does not do this.

 

2 He Waka Eke Noa (HWEN) did not have universal support but the government has succeeded in uniting farmers against its proposals.

2.1 The He Wake Eke Noa approach aimed to create a mitigation package that included recognition of technologies used and progress already made, the adoption of mitigating technologies only when they had been proved safe and were readily available, recognition of the agri sector’s contribution to the economy, care for rural communities, recognition of progress against goals and recognition of our competitive position in markets.

2.2 The government’s proposal is primarily focussed on emissions pricing to achieve arbitrary targets that have no relation to what is possible, practical and proven.

2.3 The proposal is overly simplistic, would destroy rural communities and come at a huge economic cost. Taking out 20% of sheep and beef farms would cripple small rural towns and take multi millions of dollars from export earnings.

2.4 Primary industries in general and pastoral industries in particular are fundamental to New Zealand’s economic wellbeing.

2.5 They comprise more than 80 percent of New Zealand’s physical export earning and make up about 50 percent of these total export earnings. There is no other way to pay for all the imports the country needs.

2.6 New Zealand has international commitments to reduce its greenhouse-gas emissions. That does not mean that New Zealand has to be the first country to destroy its most important export-earning industries.

2.7 No other country in the world is considering going down a self-destruction path for mainstream industries that underpin that nation’s fundamental economic well-being. It is not happening and it is not going to happen elsewhere in the world.

2.8 Sabotaging farming, which the government’s proposal would do, would at best have a minimal environmental impact, at worst it will increase global emissions through carbon leakage and degrade New Zealand soil and waterways when pine plantations replace pastoral farms.

 

3 The government’s proposed emissions accounting system will add unaffordable costs to the dairy sector and have an even worse impact on the deer, sheep and beef sectors.

3.1 The assumption that tools and technologies will be available to assist with reducing or mitigating emissions is putting the green cart well in front of the scientific horses.

3.2 There are no options available now and there is a risk that some proposed tools would impact the quality of meat and milk, and possibly human health.

3.4 Professor Keith Woodford points out:

. . . The problem is that nature’s ruminant nutritional system was designed for a purpose over millions of years by trial and error. That is how evolution works. And nature does not necessarily take kindly when humans want to interfere with the basics of that ruminant system. Change part of the system and there is always a good chance that the overall system will fall apart.

One way or another, the excess hydrogen has to be removed from the rumen. Otherwise, the rumen will turn from a fermentation vat to an acid vat. The animal will not be impressed and will get very sick.

Accordingly, it is not just a case of killing the methanogens. Something else has to take over the job that the methanogens do naturally. If there was an easy solution that was energetically better than producing methane, then nature would in all likelihood have figured that out itself.

So, what are the technologies that humans have been exploring?

One of the most fascinating technologies is to feed some bromoform-releasing seaweed to ruminants. These trials have been going on both in New Zealand and overseas. The bromoforms are particularly good at killing off the methanogens, but unfortunately, they tend to also mess up other parts of the rumen system. Particularly important is the finding in a recent scientific paper that bromoforms pass from the rumen into milk.

Alas, bromoforms are a suspected carcinogen and certainly have the ability to interfere with many human processes. My own assessment is that, despite some ongoing hype, there is close to zero chance of this technology being acceptable to food-safety authorities. Indeed bromoforms, which are similar in their action to chloroform, are already widely banned in foodstuffs.

The second feed additive that has generated considerable hype is a chemical called 3-NOP. This has been developed through to early-stage commerciality by Dutch firm DSM with the trade name Bovaer.

This technology appears to be much safer than bromoforms and does reduce methane production in feedlot situations for dairy and beef cattle. However, the evidence to date is that it does not work under pastoral conditions because it needs to be evenly distributed throughout the feed. . . .

3.5 There is not yet anything that can safely reduce methane emissions in stock and there are very real questions about food safety with what is being trialled.

3.6 We must not risk our hard-earned reputation for safe food in an attempt to reduce emissions.

 

4 Relying on forestry to make the ETS work is a temporary band-aid. It does not address the carbon problem and it is creating an artificial market that incentivises planting trees on good pastoral land.

4.1 This increases the risk of fires, provides shelter for pests which threaten native species and carry diseases which could infect farm animals; takes up large amounts of water which compromises waterways and water life and would be hard to reverse.

4.2 It also takes jobs from farms and the local community and reduces export income.

4.3 The government’s approach to emissions accounting is inequitable by proposing to levy farmers for methane emissions but not give any credit for the sequestration from on-farm vegetation.

4.4 Unless farms are able to offset emission through sequestration, some will become unviable and the damaging conversion from farmland to forestry will be exacerbated.

4.5 A broader range of sequestration is critical to achieving a balance in the system that will make it work for both extensive and intensive farmers. If the government insists on levying farmers it must adopt the HWEN recommendations and recognise a broad range of vegetation categories.

4.6 The government’s excuses exluding on-farm sequestration on the basis of the complexity of measuring sequestration. That is wrong.

4.7 Hyperspectral photography using LIDAR technology is available to measure both biomass and species composition of vegetation over a large scale. This technology could be adapted to measure vegetation to account for sequestration.

4.8 If the government insists on levying farmers for emissions based on hypothetical models it must accept sequestration credits based on accepted and standardised measurement.

 

5 We oppose the Government’s proposal for taxing emissions altogether and its proposal for price setting through the Climate Change Commission.

5.1 If the government does impose costs on emissions, the agricultural sector must be represented on any body that sets prices to ensure it is fair and manageable.

5.2 The CCC’s brief to reduce GHG emissions is a conflict of interest with price setting that could risk it using agriculture to cross-subsidise a wider reduction in warming

5.3 Criteria that must be taken into account when setting the price must include equity, economic impacts and what other countries, in particular those with which we compete in exports.

5.4 Agriculture’s contribution to reducing emission must not be the expense of any of our major exporting sectors and rural communities.

 

6 We oppose linking the price of nitrous oxide to the carbon price.

6.1 Linking nitrous oxide and CO2 reduction targets doesn’t make sense if there are different targets for them.

6.2 If the nitrous oxide price is linked to the carbon price and the carbon price rises rapidly this will become a significant cost to farms and their profitability.

 

7 We have grave concerns about the impacts the government’s proposal will have on on production, income and costs on farms, rural communities and the wider economy.

7.2 During the ag-sag of the 1980s it was feared farmers would be driven from their farms in their thousands. Some did lose their land but the worst impacts were further downstream in the businesses which serviced and supplied them, schools, and provincial towns. Farmers retrenched and businesses and service providers they used to frequent had too few alternative customers and clients.

7.3 The impact the government’s emissions reduction proposal would have would be far worse for job losses and business failures.

7.4 The modelling shows that a very cautious approach needs to be taken to pricing and the government must recalculate the methane targets.

7.5 High targets require a higher price with the proposed system. No other country is planning to put a price on agricultural emissions. It is foolhardy to sabotage the agricultural sector and the whole New Zealand economy for no benefit except being able to claim a first.

7.6 The government’s claim that customers will take emissions into account and pay more for produce if the country’s agricultural emissions is unproven.

7.7 Until and unless there are affordable, practical and safe tools for reducing emissions, the country’s emissions might reduce but the emissions per animal and therefore per kilo of milk and meat won’t.

 

8 The government’s proposal will have a disproportionate impact on sheep, beef and deer farmers.

8.1 The impact will be even worse if there is not proper recognition of sequestration.

8.2 No single sector should disproportionately carry the burden of meeting New Zealand’s targets.

 

9 If a levy is imposed, if must be at a level that delivers only on the scheme’s intended purpose and not to collect excess funds or charge farmers more than absolutely necessary.

9.2 The use of any revenue collected must be under farmer control and they must have the say on how it is used for reinvesting into agriculture for example for research or supporting the uptake of technology.

 

10 We oppose the processor levy backstop.

10.1 This is inequitable because it would only be imposed on those who slaughter stock.

10.2 A processor levy would treat the best, most efficient producers the same as the worst and least efficient with no reward or incentive for improving on-farm practices.

 

It’s not just about farming

Farmers are justifiably angry about the government’s plans to tax animal emissions but it’s not just farmers who are worried about the consequences:

Fish & Game is alarmed at a recently released report which shows the pace and extent of farmland being converted to forestry in Aotearoa New Zealand.

Chief executive Corina Jordan says the scale of the land-use change, which is having a massive impact on rural communities, also has negative implications for recreational access and freshwater health.

The accelerated conversion is a result of current government policies, it will be far worse if the proposals to tax methane emissions are enacted.

The Beef & Lamb NZ (BLNZ) report details how vast tracts of farmland are being sold to carbon farming speculators, with a significant amount being bought up by offshore interests.

“Much of the land is going into permanent forestry for carbon sequestering, and this is destroying many rural communities through lost industry and jobs, and rural services and support disappearing. It is creating ghost towns,” says Jordan.

It is almost impossible for foreigners to buy farmland to farm, the hurdles for foreigners wanting to buy farmland to convert to forestry are much, much lower.

“Our anglers and hunters, and the general public, have long relied on the generosity and goodwill of the farmers who allow access to their properties to hunt, fish, swim or recreate. And many farmers are also keen anglers and hunters themselves.

“The rural hospitality they offer is part of the social fabric and culture of our country, but the amount of land we’re losing, and the rate at which it is disappearing into foreign ownership, is a real threat to that.”

Fish & Game, along with environmental NGOs, is also increasingly concerned about the impact of mass monoculture forest plantings on the environment.

“We absolutely agree there’s an urgent need to address the climate crisis, but BLNZ’s report shows the farm to forest conversion rate is far in excess of the recommendations put forward by the Climate Change Commission for the country to reach its emissions reduction targets.

“What’s more, pines take up a huge amount of water, thereby leading to less flowing into streams, rivers, and wetlands. Couple this with the acidic leachate that comes off land under exotic conifers, and an increase in some pollutants, and you’ve got catastrophic impacts on instream biology and the health of our freshwater.”

We were shown a creek in the Wairarapa which, the farmer whose land it meandered through said, never used to dry up, even in droughts until a large area of land upstream was planted in pines.

Now its water quality is degraded and it often dries up leaving water life including eels and koura to die.

Fish & Game believes government policy should actively encourage additional planting and the integration of trees – particularly natives – on farms, rather than pave the way for entire farms to be sold for conversion into exotic forestry.

“If the scale of forest carbon sinks on farms could be achieved to meet our climate change targets, then there are environmental benefits for biodiversity and freshwater health, whilst also keeping the social fabric of rural communities intact – a win all round.”

Meanwhile, with the carbon price forecast to continue to rise, more land purchases from international speculators will continue if the loopholes in our Emissions Trading Scheme and climate change policy are left unaddressed.

“A consortium of green groups recently called on the government to urgently rethink policy that is paving the way for this proliferation of exotic forests. Similarly, Fish & Game supports changes that lead to better environmental and social outcomes.

“Permanent plantation forestry has a place in helping meet New Zealand’s climate change commitments,” says Jordan. “However, more value needs to be placed on integrating indigenous trees on farm and allowing less productive parts of farms to regenerate.”

Environmental, economic and social damage is already being incurred by the misguided policy that allows productive pastoral farmland to be covered in pines.

If the government goes ahead with its plan to tax methane from cattle, deer and sheep the damage will be far greater and not just to rural land, waterways and communities.

Job losses will spread to towns and cities and the loss of export income will be devastating.

“It is not a levy, it is a tax”

National’s Selwyn MP Nicola Grigg gets it – when research, science and technology have yet to come up with the means to reduce farm emissions, the government’s proposal to charge for them is not a levy, it’s a tax:

NICOLA GRIGG (National—Selwyn): I was thinking, just earlier, after hearing Damien O’Connor’s contribution to the House followed by Meka Whaitiri’s, that we’d heard two valedictory speeches this evening, and I think I can add a third to that list. Yet another five-minute diatribe just proving nothing but what a tin ear the Ministers of this Crown have. We hear nothing but denial and defence coming out from this Government. They are so, so enthusiastic about rewriting history.

The facts of the matter are the industry, the 11 partnership groups of He Waka Eke Noa, took a proposal to the Government. The Government has come back with its response just last week. It has dumped the parts that the farming sector was prepared to sign up to. That is what the so-called “whinging and carping and griping” that Kieran McAnulty talks about is about, because, once again, this industry has been roundly ignored by this Government. And, yes, we do, on this side of the House, stand by the fact that we will not support a pricing mechanism until the science and technology is in place, otherwise it is not a levy; it is a tax. It is a tax on food while our country is in the grip of a cost of living crisis, and this Government is doing nothing but to fan the flames of that crisis.

The government keeps trying to tell us it cares about the poor and wants to help people out of poverty but either doesn’t understand, or doesn’t care, that taxing food production will push more people into poverty by increasing unemployment and food prices, and reducing export income.

Nobody on that side of the House is talking about the 20 percent of sheep and beef farms that are going to go out of business. By the Government’s own numbers, one in five sheep and beef farmers in this country will go out of business, and they have the nerve to talk about this side of the House criticising them and not supporting this proposal. We would support this proposal if it was fair and if it was equitable. We have said from the outset that the National Party does support emissions pricing for the agricultural sector if there are fair and reasonable sequestration options in place; if there is the science and technology in place. We will not stand by a proposal that puts one in five of our sheep and beef farmers out of business. We will not stand by a proposal that sees our richest industry, the industry that earns this country some money, sent offshore to high-emitting farming countries. We will not stand by it, we will not support it, and I do not apologise for calling the Government out on it.

If you don’t want to hear it from me, Mr McAnulty, maybe have a look at the latest industry rag out this week. Here we go: “Govt ‘fails fairness test’ on HWEN”. “HWEN has farmers upset over offsets”. “Sector flags ‘immediate concerns’ on HWEN”. There is no balancing of the ledger on the levy; take that from the people in the industry, Mr McAnulty. And while Ms Whaitiri crows away about the farmers inviting her on to their place, I’ll tell you what: it ain’t for tea and tinies. It is to try, in a desperate, final attempt—in the six weeks they’ve got left, it is to try and educate this Government as to what it is doing to our most productive sector. Fifteen percent of this country earns 50 percent of its revenue, and you lot over that side of the House should pay wise words to that.

Every single one of the industry groups, the 11 groups that signed up to this thing, have reacted angrily and have opposed the Government’s response to it. Once again: you took their advice back in May; perhaps you best start listening to them now. As you keep saying, they are the industry. They are the ones at the coal face. They are the ones who should know what they’re talking about. Well, they’re telling you now: this thing does not work, and the National Party wants to work with those groups and find something that will work. We are committed to reducing carbon emissions. We do agree the primary sector does need to pay its way, and it plays an important part in designing a system, designing its own process for recording and pricing those emissions. It can only happen, though, if farmers are allowed all options of sequestration. That includes shelterbelts; that includes riparian planting; that includes native bush and reserves.

A National Government would invest in driving technology. It wouldn’t just announce $300 million technology incentives and funds and just write a press release and put it out; it would actually invest. Come down to my electorate. Come and visit Lincoln Agritech and all those solutions are right there. They have been developed. They need some sort of system to commercialise them and incentivise them. I would suggest, Mr McAnulty, if you want me up in Marlborough having a look at the flood damage, come down to my electorate, take a look at the technology being developed down there, put your money where your mouth is, and start investing behind them.

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AG calls for effective public accountability

Auditor General John Ryan points to a big problem with public accountability:

I am concerned that it is often not clear to the public or Parliament what outcomes are being sought by governments, how that translates into spending, and ultimately what is being achieved with the public money the Government spends – about $150 billion last year. 

We have the government’s word it is aspirational but exactly what it wants to achieve isn’t always clear and the huge gap between what it announces and what is done shows not nearly enough is being achieved and there is far to little value for money.

In my report on the 2020/21 central government audits, I noted that it can be difficult (even with new initiatives) to track how and where new government spending is directed. Reporting is often fragmented and spread between different organisations. It is left to Parliament and the public to piece together both what has been spent and what has been achieved. In many cases, this is not possible from information reported publicly. My Office’s work on the Provincial Growth Fund and Covid-19 spending has also highlighted this. . . 

He says Environment Commissioner Simon Upton’s report gives further exmaples.

The Commissioner’s report looks at the barriers to informed debates about environmental priorities, governments’ plans for achieving them, the spending decisions made, and their consequences.

The report’s messages are important. We need to understand how government decisions relate to the long-term environmental outcomes they are pursuing. But the links between good information, research, and spending are too often tenuous, lack transparency, and focused on the short term.

The challenges the report identifies exist across nearly all areas of public spending. In 2021, my Office reported on the Government’s preparedness to implement the goals that underlie the United Nations’ 2030 Agenda for Sustainable Development. We found that although progress on some goals – such as reducing child poverty and greenhouse gas emissions – is tracked and publicly reported, there was limited information available on what the Government was seeking to achieve in other areas, and how it would go about achieving those goals and measuring progress.

Whole-of-government performance reporting that links government spending to outcomes would help focus debate on the longer-term and on some of the more intractable issues we face as a country. And, of course, help answer for the public and Parliament how well governments are playing their role in addressing them.

The Commissioner’s report provides further evidence of problems that my Office consistently identifies. In my view, a comprehensive review is needed of the arrangements that enable Parliament and the public to understand what governments are seeking to achieve, what is being spent, and what progress is being made. In exchange, this will help the public sector maintain an informed, trusting, and enduring connection with the public they ultimately are there to serve.

An outcome I think we would all support.

The Environment Commissioner asked do we know if we’re making a difference?

The Parliamentary Commissioner for the Environment, Simon Upton, is calling for improved public accountability to get better outcomes for the environment.

The Government spends over $2 billion each year on the environment.

“We need to know how our actions are affecting the environment, and whether the actions we are taking to improve the environment are working,” the Commissioner says in a report released today.

The report, Environmental reporting, research and investment: Do we know if we’re making a difference?, completes a cycle of work the Commissioner has undertaken over five years.

The report found that parliamentarians and the public cannot easily get the information they need to hold the Government to account for its environmental expenditure.

“Decision making needs to be better informed by evidence. And those decisions – and their consequences – need to be capable of scrutiny.

“It has become clear that while there are links between the environmental information we collect, the research we undertake and the money we throw at environmental problems, they are often tenuous, lacking in transparency and governed by short-termism,” the Commissioner said.

Failing to respond to environmental issues is not cost-free – it simply defers costs into the future.

Environmental costs tend to compound over time. If they continue to be ignored, the costs of remedying them will eventually become unaffordable.

The public finance system needs to demonstrate links between what is spent and what environmental reporting and research tell us, so that Members of Parliament can judge whether what we spend matches the scale of the environmental challenges we face.

The recommendations in this report are designed to ensure that the actions of the Government are focused on the most important environmental outcomes, and that the effectiveness of those actions can be assessed.

“Members of Parliament and citizens have a right to information underlying our environmental actions and their consequences so they can hold governments to account for decisions made and decisions postponed”, he said.

This final report draws on the learnings of three of the Commissioner’s prior reports and calls for:

• • foundational investments in environmental information
  • clarity about why we are prioritising certain environmental issues (and not others)
  • transparency about what environmental outcomes the Government is aiming for, what the Government plans to do to achieve them and how much it spends as part of that response
  • accountability for the results of that spending.

The report is available here.

His concerns about transparency and accountability apply to almost everything the government is doing.

It is far too easy for politicians to speak about their aspirations and much, much harder for us to understand what they want to achieve, how much it costs and what, if anything is being delivered.

The last National government set targets against which its delivery could be measured. It was also clear that the quality of spending was far more important than the quantity.

This one scrapped targets, appears to believe that more spending is better spending even when it achieves little, and its intention to be the most open and transparent is yet another promise on which it has failed to deliver.

A thief called inflation

At the Common Room Cameron Bagrie discusses the thief called inflation:

Inflation hit a 32 year high in June 2022. So what does this mean for Kiwis? How does it affect our spending and savings? What are the implications for the economy? And does anyone benefit? Former ANZ Chief Economist Cameron Bagrie shares his thoughts.

How many bureaucrats . . .

Does any child say when I grow up I want to be a bureaucrat?

Probably not for bureaucrat is more often than not regarded negatively as these answers to the question how many bureaucrats does it take to change a lightbulb  show:

* Two. One to assure everyone that everything possible is being done while the other screws the bulb into the a tap.

* Two; one to change it and one to carry out a risk assessment.

* 100. One to change the bulb and 99 to write the environmental impact report.

* Two. One to screw it in and one to screw it up.

A more serious question requiring a serious answer, is how many bureaucrats does it take to deliver on a Budget?

An additional 3,423 full-time staff and contractors are required to fulfil commitments the Government made in this year’s Budget, released on May 19.

The Treasury estimates this will see the public service workforce grow by 6 per cent.

This is more than the average annual growth rate of 4.1 per cent over the past decade, and 4.6 per cent over the past six years.

If Government ministers had all their Budget bids fulfilled, an extra 7,887 staff would’ve needed to have been hired.

The Treasury, in a report presented to Government on February 4, said demand for staff was so high because “significant reform programmes and new functions being established have created public service workloads that exceed business as usual delivery for many agencies”. . . .

That is expensive for taxpayers’ and is competing with the private sector that pays the taxes.

However, the Treasury, in a February 25 briefing, warned hiring 3,423 staff when the labour market is as tight as it is, will still create competition, which is “likely to contribute to wage inflationary pressures”, including higher consultancy costs.

However, the Treasury, in a February 25 briefing, warned hiring 3,423 staff when the labour market is as tight as it is, will still create competition, which is “likely to contribute to wage inflationary pressures”, including higher consultancy costs. . . 

The public service had already grown exponentially since 2017 and this is yet another example of the government fueling inflation, and reinforces the high cost of its centralisation agenda.

National Finance spokeswoman Nicola Willis supported the Treasury’s suggestion to have a “workforce constraint” but said it should only be for “back office” roles, including policy, human resources and communications staff.

“There is a widespread view that the Government’s insatiable appetite for hiring new officials has added to current worker shortages, making it hard for many businesses and community organisations to retain and recruit staff as they’re forced to compete with a taxpayer-funded Government recruitment drive,” Willis said.

“The danger here is that the Government is so busy hiring staff for its own pet projects that businesses miss out.”

Ballooning staff numbers aren’t just in Ministries, Michael Reddell has noticed an expanding empire at the Reserve bank:

. . . But what really caught my eye was the “Growth of RBNZ” request/answers, where the requester had asked for breakdowns of staff numbers over the last 10 years. They didn’t really need to go back that far – all the 200 FTE growth in staff numbers has occurred since Orr took office (up from 255 then to 454 on 30 June 2022) but it was interesting nonetheless. One gets a very clear sense of the bloat. Here for example

That’s a very steep increase and more concerning is that many of the new employees are in communications.

The Bank’s functions haven’t changed but – like too many public agencies – the number of “communications” staff has increased hugely

An OIA I’d lodged a couple of years ago (and written about here) gives a bit more background on that function (although numbers have grown more since).

We know there has been senior management bloat – a whole new lawyer of second tier appointees (Assistant Governors) most of whom seem to have little subject expertise to offer)

On the other hand, there are the Bank’s core economics functions. Until very recently, monetary policy was by statute the primary function of the Bank. That has changed (reasonably enough) but it is still a key core function. But here are staff numbers in the Economics Department

. . . Orr has long had something of a reputation as an empire-builder, and in his first four years at the Bank that seems to have been amply warranted again. This is scarce taxpayers’ money and yet Orr (facilitated by the Minister and the Board) flings it round with gay abandon……without even the consolation of better quality research, analysis, policy design, let alone policy outcomes. But it has been a windfall for HR people and former journalists.

Nicola Willis has also noticed the expanding empire:

Despite a huge increase in the Reserve Bank budget and runaway inflation, the Bank has massively increased its central office communications functions while failing to bolster its core economics function, says National’s Finance Spokesperson Nicola Willis.

“Data released to National under the Official Information Act shows worrying trends in where the Reserve Bank is focusing its money and resources.

“Total staff numbers at the Bank have exploded from 255 in June 2018 to 454 in June 2022. 

“Despite this hiring spree, the core economics function of the Bank is receiving less money this year than it did in 2013.

“The number of economics staff employed by the bank is now lower as a proportion of total staff than at any time on record. In 2013, 34 economic staff were employed by the Bank, whereas today that number is 32.

“The Reserve Bank has instead more than tripled the number of communications staff, up from six in 2013 to 20 today. Similarly, the number of staff in the HR team has leapt from five in 2017 to 24 today, while staff in the Governor’s office has increased from six in 2017 to 21 today.

This is a bit like a hospital cutting medical staff or a school reducing the number of teachers and replacing them with HR and PR people.

“New Zealanders are suffering from the double whammy of rapidly rising prices and interest rates climbing more steeply than at any time in 30 years. These issues should be the Reserve Bank’s focus. I’ll bet taxpayers would prefer their money being spent on economics advice rather than spin and corporate PR.

“These staff numbers raise serious questions about the Reserve Bank’s priorities in the midst of a cost of living crisis. New Zealanders have a right to expect the Reserve Bank will be focusing its resources on the best advice possible for getting inflation under control. 

“National repeats our call for an independent public inquiry into decisions made by the Bank since March 2020. 

“Inflation has exceeded the Bank’s target for more than a year, and by the Bank’s admission won’t be under control until at least March 2024. There must be an examination of how we got here and accountability for any failures.”

Perhaps it’s time to be asking how many communications staff does it take to explain why the Reserve Bank has missed its inflation target so badly? and how expensive will it be to correct that?

Bureaucrats are a necessary, and useful, part of good government but the steep increase in their number, especially in communication roles, and such poor delivery on government policies in so many areas is proof that, just like so much of this government’s spending, more isn’t always better.

Public support spending cuts

Yesterday’s increase in the official cash rate (OCR) was expected and unwelcome::

In a massive blow to homeowners, out-of-control inflation has pushed the Reserve Bank into once again hiking the Official Cash Rate by a dramatic 50 basis points, National’s Finance Spokesperson Nicola Willis says.

“Today’s statement is yet more bad news for New Zealanders, confirming inflation is set to stay higher for longer, growth will be lower and interest rates will have to be hiked even higher to bring things under control.

“The cost of living crisis is hitting everyone across the country and it’s not going away anytime soon. Runaway prices are crushing household budgets. Rapidly rising interest rates are crushing mortgage-holders. Today’s statement confirms both these things are set to persist for many months ahead.

“Concerningly, today’s forecasts from the Reserve Bank suggest inflation now won’t return below 3 per cent until the middle of 2024 and won’t get back to its target midpoint until 2025.

“Instead of throwing up their hands and blaming international factors, the Government needs to take action to bring inflation under control. Broken immigration settings and runaway spending are choking off supply while overheating demand – a recipe for more inflation.

“The Reserve Bank acknowledged ‘labour shortages are a major constraint on business activity’, but the Government is still failing to fix our broken immigration settings. Businesses and consumers will continue to be squeezed by widespread skills shortages until that changes.

“The Government should adopt National’s five point plan to fight inflation – return the Reserve Bank to a single focus on price stability, reduce costs on businesses, remove bottlenecks in the economy, rein in government spending, and prioritise tax relief for workers.”

Labour MPs are always critical of National’s calls to rein in government spending, but the policy has public support:

The Taxpayers’ Union says that cuts to Government spending are a far better way to deal with the inflation crisis than the Reserve Bank of New Zealand hiking the Official Cash Rate – and the public agree. Kiwi voters understand the drivers behind inflation and the latest Taxpayers’ Union Curia Poll demonstrates that they want cuts to Government spending.

Responding to today’s OCR announcement, Taxpayers’ Union Executive Director Jordan Williams said:

“As part of this month’s Taxpayers’ Union-Curia poll, we asked New Zealanders if the Government should be increasing, decreasing, or maintaining spending levels in response to high inflation. The most popular response – 45% of respondents – was that Government should decrease spending.”

“Only 12% of respondents thought increasing spending was the right idea and 27% said spending should be kept the same.”

“Next time Labour MPs try to troll National Party leader Christopher Luxon with claims he will ‘cut spending’ Mr Luxon should say he will. This poll shows that it is precisely what most voters want him to do!”

“We also asked about tax cuts and 59% of voters support a temporary 10% reduction in overall income tax for all families to help with the increased cost of living.”

“As Grant Robertson recently acknowledged, tax relief is less inflationary than Government spending. Swapping out Government spending to leave more money in taxpayers’ pockets would both help with the costs of living and ease the pressure on inflation.”

“Something that the Beehive should take note of is that Labour voters are the most in favour of a temporary package for across-the-board tax relief!” 

The results for the August Taxpayers’ Union Curia Poll can be found here – https://www.taxpayers.org.nz/inflation_polling

This government has demonstrated time and time again that more spending doesn’t always result in better outcomes.

Time and time again they’ve shown that they are not good managers of other people’s money.

The TU poll shows the public understand that and favour being able to keep more of their own money.

 

KiwiSpray

Nicola Willis had a name for the government’s bungled cost of living payment in her speech to National’s conference – KiwiSpray.

That could be applied to far too many of Labour’s policies that show they don’t understand that spending more is very different from doing more effectively.

There were plenty of other gems in her speech:

. . . And thank you to our Leader, Christopher Luxon, for driving that mission. For uniting our team, for growing our support, for bringing his immense work ethic, integrity and enthusiasm to the leadership of our Party.

I’ve so enjoyed getting to know Chris better these past few months, seeing his deep care for people, his commitment to get the best out of every player in the team, his depth of knowledge and his global perspective. His pride in New Zealand and his optimism for what we can achieve.

Together, we’re going to turn this country around.

Our first task is to win an election, that’s true, but our ultimate task is to take New Zealand forward.

Now more than ever, New Zealand needs a National Government with a positive vision for the future.

Because as resilient and tenacious as we Kiwis are, and as great as this country of ours is, there’s no denying how tough things have become.

New Zealand is facing the most challenging economic conditions many of you will have experienced in your lifetime.

The cost of living crisis is making everything more expensive.
Prices are growing faster than wages, meaning your pay gets you less this month than it did the month before.

Interest rates are climbing fast, rents have exploded, and mortgage payments are costing more.

Businesses can’t find workers, so they’re letting down customers, compromising quality and giving up on growth ambitions.

The hotel I stayed in at the weekend had a sign at reception explaining they didn’t have enough staff to service rooms every day.

The people covering the vacancies feel exhausted, like the small business owner I spoke to recently who’d worked 152 days in a row without a break, like the nurses in our hospital doubling down on overtime and the farmers who can’t remember the last time they did less than a ten-hour day.

With Labour in Government many hardworking people can’t see a way out of these tough economic times. They are despondent about the future and fear it’s only going to get worse.

My message today is simple: National has a better way. We will get the economy working for you once more.

The Cost of Living Crisis: How did we get here?

To get out of our economic malaise we must first understand how we got in it.

Yes, COVID-19 has a lot to answer for.

And yes, New Zealand wasn’t the only country that responded to the pandemic with large amounts of borrowing, spending and money-printing.

But let’s be clear: New Zealand did a lot more of it than most. While all countries put their foot on the accelerator to some extent, our Government put its pedal to the metal.

New Zealand’s COVID-19 spend-up, relative to the size of our economy, was second to only one other country: the United States.

Meanwhile, our Reserve Bank’s monetary response to COVID was the fifth largest in the world, relative to the size of our economy.

We simultaneously had our Finance Minister pumping the accelerator while our Reserve Bank reached for over-drive.

No car can drive that fast without a moment of reckoning, and no economy can either.

Today, we are living with the consequences: Prices are rising faster than they have in 32 years, inflation has got a grip on our economy and its eating a hole in every pocket.

Reality bites. Inflation, like a debt collector in the night, is extracting a price from all of us.

National, along with every other Party in Parliament, is calling for an independent inquiry into the economic response to COVID-19. Labour says no.

I simply say this: Those who ignore the lessons of history are doomed to repeat their mistakes.

The Cost of Living Crisis

Labour’s first approach to managing the cost of living crisis was denial. Now its magical thinking.

Instead of presenting a plan to restore productive growth to our economy and to address the underlying drivers of inflation, it has dialled up its spending, choked access to new workers, and lurched from one temporary band-aid policy to another.

Its signature move, the ‘cost-of-living payment’ has been a spectacular failure, resulting in taxpayer dollars going to ex-pats in London, French backpackers and dead people.
It’s so bad I think it’s earned itself a nickname: I’m going to call it KiwiSpray.

It’s like KiwiBuild only instead of being 99,000 houses short, it’s 800,000 payments short.

National on the other hand has a sensible, common-sense plan to beat inflation.

We will bring an end to Labour’s failed policies of high-taxing, big spending, big Government, with no accountability for failure and no focus on results.

We will restore careful economic management to this country so that prices stop rising so fast, Kiwis can get ahead and businesses can grow.

• We will reduce the tax burden on New Zealanders.
• We will restore discipline to Government spending
• We will reduce the regulation and costs imposed by Government
• We will ensure New Zealand has the workers needed to deliver services and grow businesses
• We will return the Reserve Bank to a single mandate

Tax

I want to make a few comments about why tax reduction is important to us.

As our first Leader Adam Hamilton said when National was founded: “[National stands] for a reduction of taxation so that enterprise may be encouraged, industries established and living costs reduced.”

National wants to leave as much spending power as possible in the hands of those earning the money. We want New Zealanders to keep more of their pay so that they can save for that first house, invest in that start-up, expand that small business, hire that new worker, take the kids to the movies or have the security of money put aside for a rainy day.

This highlights an important difference between National and Labour – one trusts us with our own money, the other thinks it knows how to spend our money better than we do.

Labour on the other hand believes bigger Government is the solution to every problem. Despite failing to deliver time and time again, they think things will miraculously get better if only they could spend more of your money. Like a gambler at the track, they throw good money after bad, and take no accountability for the results.

The result is that Government is now collecting $41 billion more a year in tax than when Labour first came to office.

It’s gone too far, and National will ensure a fairer deal.

• We will scrap the Auckland Regional Fuel Tax. It’s hurting Aucklanders every time they fill up at the pump. It has to go.
• We will scrap Labour’s plans for an Auckland Light Rail Tax.
• We will scrap the Ute-Tax. It’s nothing but a punishment to farmers and tradies and you deserve better.
• National will scrap the 39 per cent top tax rate. It’s an envy tax.
• National will scrap the 10 year Brightline test extension. It’s a capital gains tax by stealth. Labour didn’t campaign on it, didn’t have a mandate for it, and did it anyway.
• National will scrap the rent-hiking Tenant Tax. We will bring back interest deductibility for rental properties.

National will also deal to Labour’s stealth tax: inflation-driven bracket-creep.

Inflation has helped fund Labour’s tax and spend binge.

You see, when inflation increases, people’s wages go up on paper. In theory you may be earning more, but in reality the pay rise isn’t helping much because prices are gobbling it up. You’re probably going backwards.

But the IRD doesn’t care. It just sees a higher pay rate, and if you find yourself in a higher tax bracket, you get taxed at the higher rate.

National will index tax thresholds to inflation. We detailed our plan for doing this in March. We will deliver those tax reductions in our first term of Government. It’s our commitment to you.

You can expect to hear more from us on tax reduction next year. Our vision is to go further still.

National is committed to providing as much tax relief to working New Zealanders as we responsibly can.

Labour on Tax

Labour meanwhile is busy designing new taxes.

The Finance Minister, Grant Robertson, is quietly setting up a new unit in the ACC for his latest pet project, a social insurance scheme. He has a plan to pay for it too – a Jobs Tax. That’s right, the Finance Minister is planning a new tax on every single employer and every single employee.

National will scrap Labour’s Jobs Tax.

The Revenue Minister, David Parker, is also up to mischief.

Like many of his Labour colleagues, he fantasises about a capital gains tax.

He’s created his own new unit at the IRD. Sometimes referred to as the “Piketty Unit” after his idol, the socialist economist and wealth-tax advocate Thomas Piketty. The Piketty unit is working at pace, collecting data about New Zealanders assets and incomes, their taxes and business arrangements.

It’s not clear exactly what this will lead to but I do know this:

More tax is in Labour’s DNA, and they’re dreaming up new ways to take it.

Mark my words, Labour will put a capital gains tax back on the table. The name may change, it might be in disguise, but it’s coming.

Disciplined Government Spending

The more Labour spends, the more tax it needs.

And Labour is on a spending spree.

In December, the Government forecast it would spend $120 billion in the 2023 financial year.

Then the Budget rolled around and Labour just couldn’t bring itself to stick to its spending limit.

Instead of spending $120 billion this year, its spending $127 billion. That’s 70 per cent more per year than when it first came to office.

Ask yourself this: Are you spending 70 per cent more today than you were five years ago? I doubt it. Well, the Government is. Are they getting 70 per cent better results? Of course they aren’t.

They’re simply addicted to spending.

National will bring discipline to spending by stopping Labour’s worst projects, reducing backroom bureaucracy, eliminating waste and driving better results from existing Budgets.

Let me give you some examples of poor projects that Labour has been splashing the cash on.

-Three Waters Reform: Labour’s Three Waters plan to do a mega-merger of council owned water assets is undemocratic state centralisation at its worst. It also comes with a $3 billion price tag. National will repeal and replace Three Waters.
– The TVNZ-RNZ Merger: Labour has inexplicably decided to embark on a mega-merger of the two state broadcasters. It comes with a $370 million price tag. National opposes it.
– Labour have also ploughed $200 million into the creation of Te Pukenga, the mega-merger of New Zealand’s polytechnics and institutes of technology. National opposes it.

National will not pour billions of dollars into centralisation and bureaucracy.

National will instead focus on doing the basics better.

We value the vital role Government spending plays in delivering essential public services: providing healthcare and education, ensuring support for the vulnerable, keeping our communities safe, building and maintaining the physical and social infrastructure we all rely on.

That’s why National has committed to increasing health and education spending every year we are in office, matching increases to the rate of inflation at a minimum, but allowing also for population growth and other pressures.

But we know spending more will not in itself deliver better results. If it were that easy, then why is Labour overseeing an explosion in truancy, declining literacy achievement, and a health system in crisis?

National will set public service targets for the better health and education services New Zealanders deserve, drive better delivery, and demand accountability for results.

We will push for more value from every buck. We will ask every Minister to examine spending in their agencies line-by-line with a focus on eliminating waste.

Just as households are having to carefully evaluate their budgets to cope with rising costs, so too should public agencies.

National is wary of the insatiable appetite Government has for growing itself.

We will stop the explosive growth in the backroom bureaucracy and move more resources to the frontline, away from Departments and into communities.

National won’t tolerate a New Zealand where inter-generational poverty is normalised, where Government Departments service misery but repeatedly fail to solve it and where good intentions are seen as a substitute for good results.

National will revive Sir Bill English’s social investment work. We will use his social investment approach to solve our deepest social problems, getting Government agencies out of the way, investing not for narrow outputs tomorrow but for long-term impact, measuring results and changing lives.

We are determined to do better for the New Zealanders whose lives are complex, but whose potential is great. Social investment’s time has come.

National will stop the tide of Government costs and regulations.

As Sidney Holland, National’s first Prime Minister said in 1943 “National believes in individual freedom, a competitive economy, and the minimum of bureaucratic intervention, restriction and regulation”, “ less red tape”.

Our vision is to reduce red tape to ensure Kiwi firms can spend less time and money on compliance and form-filling and more time innovating and growing.

We will restore the right of employers and employees to negotiate freely and not to be bound by new compulsory, nationwide, sector-wide collective agreements.

The 1970s have called and they want their policy back. So-called Fair Pay Agreements have no place in 2022, and no future under National.

There’s nothing fair about the imposition of pay and conditions nationwide.

National will ensure New Zealand has the workers needed to deliver services and grow businesses

We will stop Labour’s experiment of seeing what happens when you starve an economy of migrant workers. We know what happens – fruit rots on the vines, hotel sheets go unchanged, manufacturers cancel orders, exporters leave value on the table and new customers go elsewhere: all for lack of people to do the job.

National will fix our immigration service. We will take it from the bureaucratic Police Force its become and turn it into the Recruitment Agency New Zealand needs it to be.

Finally, National will return the Reserve Bank to economic orthodoxy with a singular mandate to manage inflation

Ladies and gentlemen, the commitments I have outlined to you this morning will ensure our economy works better for you and all New Zealanders.

National is ambitious for this country, and our sights are raised high, so you can be sure we will work relentlessly on the long-time drivers of economic growth:

• unlocking the potential of our people through better education;
• delivering growth-enhancing infrastructure; including the infrastructure New Zealand will need to adapt to climate change
• attracting new sources of capital;
• embracing science and technology, including to reduce greenhouse gas emissions and
• growing our connections with the world;

Conclusion

National has what it take to get this economy off its knees. We can bring hope back to every Kiwi slogging it out day after day, paying the bills, not asking for favours but desperate for a fair go; some reward for your efforts.

We hear the pleas of struggling Kiwis and we say: National has your back.

We won’t sit back and let inflation fleece you every time you open your wallet.

We will back you to get ahead, we will back your family with the better public services you deserve and we will back New Zealand businesses with the freedom and workers you need to succeed.

As Sidney Holland once said: the essence of the National Party philosophy is “fewer restrictions and greater opportunities”, “greater freedom to follow one’s own star”.

National will lift New Zealanders sights to those stars once more. We’ll get the country moving in the right direction again.

Ladies and gentlemen, it’s time to bring some aspiration back to New Zealand. With Christopher Luxon as our Leader, and the people in this room as our support, come next year’s election, that is exactly what National will do.

Last night’s poll showed the country is ready for change and National is working to ensure it’s change for the better.

Welfare that works

Christopher Luxon’s speech to the National Party conference yesterday included a firm stand on one standard of democracy, equal voting rights and no co-governance of public services and policy on welfare that works:

The video you just saw told a little about my life before politics. It also gave you a glimpse of the three most important people in my life: Amanda, who you met yesterday, and our children William and Olivia.

The lives of all children, and the circumstances in which they raise their own families, will be shaped by the decisions political leaders are taking right now.

My vision is for a more confident, positive, ambitious and aspirational New Zealand than we know today.

A country with a government that backs those who want to get ahead, manages a more productive economy, respects taxpayers, and actually gets things done.

I envisage a society built on New Zealanders’ rights and responsibilities to each other, and to our country.

A New Zealand where young people go overseas to act on a bigger stage, not to escape the cost of living and lack of opportunities here at home.

A country with welfare and education initiatives that help people flourish.

A country that meets its emission reduction targets.

A country that holds on to its ethos of fairness, including to the generations that follow ours. A country that fosters social mobility, and that encourages government, businesses and communities to work together.

I want New Zealanders who can’t support themselves to know they will always be looked after.

For everyone else, taking personal responsibility, and being proud of it, should be part of what it means to be a New Zealander.

That point was missed by several commentators. There is a difference between people who are unable to support themselves and those who are unwilling to support themselves. The former will always need support, the latter might need temporary support but have the responsibility to support themselves.

Don’t we all want to live in a New Zealand that embraces diversity and multi-culturalism, recognises the Treaty, acknowledges Auckland as the biggest Pasifika city in the world, welcomes needed migrants, but that first and foremost serves the common cause of all New Zealanders.

A country that emphasizes what unites us, instead of what divides us. A country that says absolutely, explicitly, that there is one standard of democracy, equal voting rights and no co-governance of public services.

That’s the New Zealand I want to live in.

Under Labour

However, Labour’s view is for a dependent society where big government squeezes out business and community initiatives.

Labour MPs wouldn’t have a clue how it feels to be responsible for a business whose employees’ jobs depend on that business succeeding.

I know that feeling. I’ve borne that sense of responsibility.

And I say to the Government, let businesses compete.

Stop piling on extra costs, like Fair Pay Agreements dreamed up to appease Labour’s union backers.

Make New Zealand open to the world, engaged and confident in its ability to find solutions.

New Zealanders don’t need the Government to tell them to be kind.

We need the Government to tell us when we’ll get an appointment at the hospital.

We need the Government to keep us safe from gangs and street violence.

We need the Government to get kids back to school.

Being in government isn’t about telling people that you care.

Saying you care, while taking no meaningful action, is empty.

Caring means identifying the problem, devising a solution and getting things done.

That’s what a National Government that I lead, will do.

And it’s what a Labour Government led by Jacinda Ardern, demonstrably cannot do.

Labour has shown time after time that it cannot deliver the things New Zealanders want and need.

From hospital waiting lists to being able to afford a first home. From parents desperate to get mental health support for their kids, to an increasing number of people living in cars and the thirteen hundred more children living in poverty since Labour came to office – the very things that Jacinda Ardern campaigned on are all worse.

Instead of devising solutions, Labour announces working groups.

Maybe they report back. Maybe they don’t. The general sense of Labour being overwhelmed by the burden of office, does not change.

Instead of solving problems, ministers put Band Aids on top of Band Aids.

The Government made up the cost-of-living payment to cover its own mismanagement of the economy which has seen inflation overtake wage growth every quarter for the past two years.

And then they so mismanaged delivery of the payment, that your taxes are being given to investment bankers in London, French backpackers, and dead people.

Labour cannot deliver anything.

They conflate spending more with doing more, when those are two very different things.

Labour doesn’t understand the difference between the quantity of spending and the quality.

Since Labour came into office, 50,000 more people are dependent on the Jobseeker benefit than when National was in office five years ago. It’s a Government failure that I’m going to talk more about in a minute.

That would be bad enough at any time, it’s inexplicable when so many employers are desperate for staff.

Since Labour came into office, there are four times as many people living in cars, four times as many on the state house waiting list, and 4,000 kids in motels – at a cost of a million dollars a day.

The Government is spending $5 billion more a year on education, but now only 46 per cent of our children are attending school regularly.

These are economic and social failures under Jacinda Ardern’s watch, yet she never holds herself or her ministers accountable for them.

It’s shameful.

It’s not only shameful it comes witha very high cost that we will be paying for years, possibly decades.

Government Spending

A massive increase in government borrowing and spending over the last few years has overheated the economy and super-charged the cost of living crisis.

This year, the Government will spend $51 billion more than National did only five years ago.

That equates to about $25,000 per household of additional new spending this year alone.

This year’s Budget included by far the most new spending of any Budget in New Zealand’s history, and it was delivered when the economy was already overheated and inflation was rising.

Grant Robertson is addicted to spending. He was overspending long before anyone had even heard of Covid. He has missed every new spending limit he has set for himself over five Budgets.

So, it’s not surprising that, as Nicola said yesterday, to pay for all this spending during Covid, New Zealand has borrowed more than any OECD country, apart from the United States.

You couldn’t run a household or business like this, and you shouldn’t run a country like it either.

None of those doing this spending have run a business and their reckless spending is a result of that.

If you think of the economy like a car, then the Government and Reserve Bank have been squashed together in the driver’s seat, pushing the accelerator flat to the floor. Now, like some terrified passenger realising the car’s going too fast, the Bank’s pressing down hard on the brake. The car’s got the wobbles and there’s a very strong likelihood it’s going to crash.

The impact of this hair-raising mismanagement of the economy is that homeowners, some who bought during the record house prices reached under Labour, are lying awake at night fearing that the next interest rate rise will be the one that forces them to sell up, likely at a huge loss.

Worst of all, for all this government spending, nothing is being achieved.

Economic Management

It can be different. I know it can.

The last National government came into office in 2008 inheriting a set of Treasury forecasts showing deficits stretching out for a decade.

In fact, every incoming National Government since 1960 has inherited an economic mess from Labour. In 1975. In 1990. In 2008.

We certainly know what to expect in 2023.

But the last National government got the country’s books back in order very quickly.
Its Ministers managed public spending with the same care that people manage their own household’s budget.

And did it by reducing backroom waste without cutting frontline services.

The contrast between National and Labour’s approach to economic management could not be starker.

National knows how to turn things around.

We have a five-point plan to beat inflation, and another five-point plan to make New Zealand wealthier so Kiwis don’t have to work for an hour to earn what an Australian earns in 45 minutes. National’s plans will be implemented by a capable administration that holds itself accountable.

National will not only lift New Zealand’s economic performance, it will restore New Zealand’s confidence too.

Bureaucracies & Centralisation

Labour believes in an over-bearing State that thinks people need to be told what to do and how to do it. They believe in centralisation and control.

Just look at the mega-mergers of our polytechs, health system and Three Waters. It’s always the same story. Labour thinks that Wellington knows best, and better than the rest of New Zealand. They’ve spent more money, hired 14,000 more bureaucrats, and got worse results.

Only Labour could spend so much to achieve so little.

I reject that approach.

National believes those closest to the problems should be closest to the answers. That’s why we back community-led solutions. For example, the Covid vaccine roll-out showed that bureaucrats in Wellington don’t always know best how to reach people. Just ask the Maōri organisations who had to take the Government to court so they could get people vaccinated.

National also believes in personal responsibility. We back Kiwis to make the best decisions for themselves, their families and whānau.

Welfare

I want to come back to welfare because New Zealand is rightly proud of its history of supporting people through adversity and a government I lead will build on that legacy.

In fact, we will do more, using the social investment model that Sir Bill English introduced. It uses long-term data to work out where and when targeted actions should occur to change the course of a person’s life – and taxpayers’ liability – for the better.

That is so much more effective than this government’s spray and walk away approach.

National wants all New Zealanders to be able to pursue their aspirations. A good education, followed by a job, is the best and usually the only long-term path to achieving this.

When it comes to welfare, every New Zealand government, Labour or National, will always support those who permanently cannot work and those who are temporarily unable to work.

Making the point again that too many commentators have missed. national agrees with the need for support for people who can never work and those who are temporarily unable to work.

But when it comes to those who can work, Labour and National’s approaches differ.

Having a job in early adulthood sets you up for success throughout your working life. Conversely, if you’re on a benefit before you turn 20, across your lifetime you’re likely to spend 12 years on welfare.

I know people are worried about this. I was talking to a mum in Wellington whose son has been absent from school for so long that he’s been unenrolled, and now he’s going to go on the benefit and she’s worried sick about what his future will look like.

She’s right to be worried.

Welfare dependency pushes people further away from the rungs of social mobility. It locks them out of the opportunities, sense of purpose and social connections that jobs provide.

Benefit dependency not only harms the person trapped on a benefit, but it also can harm the children who grow up in benefit-dependent households. And under Labour, there are more of them. There are now one in five children in New Zealand growing up in a household that depends on welfare. One In Five.

That comes at a high social and financial cost.

As a nation, we all bear the costs when welfare becomes not a safety net to catch people if they fall, but a drag net that pulls the vulnerable in.

I will not be a Prime Minister who allows young people’s lives to be going to waste when there is something more that could be done to propel them along a more fulfilling life path.

I will not be a Prime Minister who thinks it’s okay that the numbers of young people who are able to work, but who instead are on a Jobseeker benefit, is growing during a period of almost full employment.

I will not be a Prime Minister who thinks that work is punishment and that it’s kinder to people to prioritise their entitlement to a benefit over their responsibility to work if they can.

Right now, with businesses crying out for workers, there are 50,000 more New Zealanders on a Jobseeker benefit than there were under National.

As you know, their benefits come from the taxes paid by other New Zealanders who would gratefully have kept that money, if they hadn’t had to pay it in tax.

Every measure of dependency on the Jobseeker benefit has increased under Labour.
Disturbingly, 34,000 under-25 year olds are on it – a 49 per cent increase under Labour’s watch.

Worse still, the number of young people who’ve been receiving the Jobseeker benefit for a year or longer has almost doubled.

That’s right. The number of under 25s who’ve been on the Jobseeker benefit for more than 12 months has just about doubled – in a time of acute labour shortages.

This doesn’t make sense to anyone.

It’s not a sign of a Government that cares. It’s a sign that this Government talks itself up but doesn’t know how to deliver. It’s a sign that this Government has no ambition for the people who most need help. And it’s a sign the Government is abandoning young New Zealanders.

But National cares. National cares deeply. A Government I lead will do more to steer young people away from a life of isolation and dependence on welfare, and towards a life of independence and participation through work.

National thinks that if you’re young and you can work, you should. And if you can’t find a job, you need encouragement to keep taking active steps till you get one.

Some young people have barriers to employment like, say, not having a driver’s licence, or having an addiction.

Whether they are simple or complex, the earlier problems are identified and tackled, the sooner they can be addressed.

What we’ll do

So, today I’m announcing a new approach to getting young people at risk of long-term welfare dependency into work.

The increasing numbers of young people on welfare shows that the Ministry of Social Development is not giving them priority.

A National Government will not keep funding failure by government departments. If government departments can’t deliver, we’ll find someone else who can. So, in this case, we will bring community providers into the mix, redirecting some funding from the Ministry of Social Development, and getting community providers to do the job instead.

We’ll contract them to provide under 25 year olds, who’ve been on a benefit for three months or more, with a dedicated job coach to help them get into work.

Young jobseekers will get more support, with a proper assessment of their barriers, and an individual job plan to address those barriers, and find a job.

If we don’t do that, they’ll be on and off welfare for years.

A Government I lead won’t waste human potential and we won’t give up on people who could and should be contributing.

Currently people are not, as standard practice, required to have a plan to obtain employment until they’ve spent 12 months on a benefit. That is far too late.

And you don’t have to have a case manager, though you can call an 0800 number if you want one. That is far too casual.

Under a National Government, if you’re young and on the Jobseeker benefit for longer than three months, whether or not you ask for it, you’ll be getting help.

The very clear expectation is that your responsibility is to find a job and become independent. I know that there are many parents, just like that mother in Wellington, who don’t want welfare to be the easy option for their kids that it is today.

Unfortunately, the course for many young people is that they find a job, work for only days or weeks before quitting or failing, and going back on the benefit.

So National will offer a $1,000 bonus to a person who is under 25, has been on the benefit for 12 months or longer, and who then starts work and stays off the benefit for the next 12 consecutive months. In other words, they have successfully broken their welfare dependency.

On the other hand, those who blatantly do not follow their agreed plan – meaning they don’t turn up for courses, don’t apply for jobs or don’t engage with their jobs coach – will face sanctions.

Under Labour, the use of sanctions has fallen dramatically, so perhaps it’s no surprise there’s been a big increase in the numbers on a Jobseeker benefit, and in how long they stay on it.
If Labour thinks it’s being kind to set young people up for a lifetime of dependency, even when there are jobs they could be doing, National doesn’t.

National’s approach will be about people’s potential to contribute, not just their entitlements. That’s what a society built on rights and responsibilities is all about.

Any changes need to be fair to jobseekers, and fair to taxpayers. I believe this policy has that balance right.

In summary, I have messages for three groups of people.

First, to young people trying to find a job: That is a hard place to be and, if there was a National Government, you’d get more support and encouragement from your own job coach.

Second, to young people who don’t want to work: You might have a free ride under Labour, but under National, it ends.

Third, to taxpayers: National is on your side.

Fellow National Party members, this is a great country and all of us are so, so lucky to live here.

But under Labour, New Zealanders can see and sense that we’re heading in the wrong direction. Today, we feel insecure about things we once assumed were solid. Things we’ve taken for granted now seem uncertain.

I sense it. I see it. And that’s why I came to Parliament. What I’ve seen in the short time I’ve been in politics only motivates me more to win the next election so that a National Government can take New Zealand forward.

The election is going to be incredibly tight. Labour knows we’re back and they’re under threat. They’re trying to spin, deflect and distract from their own inability to deliver.
New Zealand needs a turnaround. And a National Government I lead will deliver it.

Only National can provide the hope that things can be different. Only National can deliver the prosperity New Zealand deserves. Only National can build the strong economy New Zealand needs.

National Party members, my enduring promise to you all is that, under my leadership, National will be the government that New Zealand needs, and National will take New Zealand forward.

Thank you all – let’s get to work. Let’s go and make it happen!

The all carrot-no-stick approach to welfare that Labour has adopted has had the inevitable result of increasing welfare dependence.

National’s plan has plenty of carrot to help young people get into work and stay there.

It also has some stick to apply to those who could work but won’t.

National accepts the government has a responsibility to help people through welfare but it also accepts that those who can work have a responsibility to do so and that there must be consequences for those who can but won’t.

This is good policy and also good politics.

After all how could anyone with both a wise head and good heart think this government’s policy of encouraging welfare dependency in young people who could work if given some help is the right thing to do?

Luxury beliefs hurt poor

One of the surprising results from the recent Australian election was the support for teal candidates.

These are the blue-greens, generally well-off people who stood on an environmental platform.

They are not attracted to the red green parties with their hard left agenda but they are concerned about the environment.

However, are their policy wish-lists affordable, effective and practical, or could their agenda be an example of what Rob Henderson calls  luxury beliefs that have become status symbols?:

 . . Throughout my experiences traveling along the class ladder, I made a discovery:

Luxury beliefs have, to a large extent, replaced luxury goods.  

Luxury beliefs are ideas and opinions that confer status on the upper class, while often inflicting costs on the lower classes. . .

He quotes Thorstein Veblen who observed that in the 19th century a good way to size up people’s means was by whether or not they could afford luxury goods and leisure activities.

In Veblen’s day, people exhibited their status with delicate and restrictive clothing like tuxedos, top hats, and evening gowns, or by partaking in time-consuming activities like golf or beagling.

These goods and leisurely activities could only be purchased or performed by people who did not work as manual laborers and could spend their time and money learning something with no practical utility. . . 

French sociologist Pierre Bourdieu Echoed this theory:

In his body of work, Bourdieu described how “distance from necessity” characterized the affluent classes. In fact, Bourdieu coined the term “cultural capital.”

Once our basic physical and material needs are met, people can then spend more time cultivating what Bourdieu called the “dispositions of mind and body” in the form of intricate and expensive tastes and habits that the upper classes use to obtain distinction. . . 

Attempting to attain distinction from the masses isn’t confined to humans, for example the peacock’s tale.

Animals do this physically.

And affluent humans often do it economically and culturally, with their status symbols.

A difference, though, is that human signals often trickle to the rest of society, which weakens the power of the signal. Once a signal is adopted by the masses, the affluent abandon it.  . . 

The yearning for distinction is the key motive here.

And in order to convert economic capital into cultural capital, it must be publicly visible.

But distinction encompasses not only clothing or food or rituals. It also extends to ideas and beliefs and causes.   . . 

It’s not just what people wear or do, but what they believe.

In the past, people displayed their membership in the upper class with their material accoutrements.

But today, because material goods have become a noisier signal of one’s social position and economic resources, the affluent have decoupled social status from goods, and re-attached it to beliefs. . . 

These beliefs are often costly which the affluent can afford, but the less well off can not.

By now you probably know the answer to the question I asked at the beginning: what do top hats have in common with defunding the police?

Well, who was the most likely to support the fashionable defund the police cause in 2020 and 2021?

A survey from YouGov found that Americans in the highest income category were by far the most supportive of defunding the police.

They can afford to hold this position, because they already live in safe, often gated communities. And they can afford to hire private security.

In the same way that a vulnerable gazelle can’t afford to engage in stotting because it would put them in increased danger, a vulnerable poor person in a crime-ridden neighborhood can’t afford to support defunding the police. . . 

What do luxury beliefs achieve?

The chief purpose of luxury beliefs is to indicate evidence of the believer’s social class and education.

Members of the luxury belief class promote these ideas because it advances their social standing and because they know that the adoption of these policies or beliefs will cost them less than others.

Advocating for defunding the police or promoting the belief we are not responsible for our actions are good ways of advertising membership of the elite.

Why are affluent people more susceptible to luxury beliefs? They can afford it. And they care the most about status.

In short, luxury beliefs are the new status symbols.  

They are honest indicators of one’s social position, one’s level of wealth, where one was educated, and how much leisure time they have to adopt these fashionable beliefs.

And just as many luxury goods often start with the rich but eventually become available to everyone, so it is with luxury beliefs.

But unlike luxury goods, luxury beliefs can have long term detrimental effects for the poor and working class. However costly these beliefs are for the rich, they often inflict even greater costs on everyone else.

This comes back to those teal candidates.

A lot of environmental policies are put forward, and supported, by people who are wealthier and a lot of those policies make life more expensive.

That’s not a problem for those who can afford to pay more for food, fuel and power.

They have surplus money for more efficient vehicles, and heating their homes and, although they might support the concept of public transport, they are less likely to need it.

They don’t have to buy on price and can afford to pay more if the consequences of their beliefs are more expensive.

But that’s not the case for poorer people. Given the state of the economy and financial pressures on households it’s not just those on low incomes who would be hurt if environmental policies impose higher costs.

With inflation a lot of people on what used to be good incomes are struggling.

And if you’re constantly worried about feeding your family, paying your mortgage or rent, keeping your home warm, and getting where you need to go, pay-more-to-save-the-planet policies are luxuries you can’t afford.

It’s not just individuals and households,  whole countries are being hurt by luxury beliefs as Europe turns back to coal and gas but tells eveloping African nations to go greener

. . .Gas for me but not for thee, as rich countries would have it, is more than just bad optics. It’s bad policy: Putting the West’s energy security first while trying to force Africans to prioritize limiting emissions is counterproductive in reaching economic, geostrategic, and even climate goals. . . 

Bjorn Lomborg has a far better way to help the planet without destabilising the world and that’s with the research and technology to make green fuels cheaper:

For three decades, climate campaigners have fought to make fossil fuels so expensive people would be forced to abandon them. Their dream is becoming reality: energy prices are spiralling out of control and will soon get even worse. Yet we are no closer to solving climate change.

They’ve put the dark green cart before the economic, scientific and technical horses.

There are two reasons why the climate-policy approach of trying to push consumers and businesses away from fossil fuels with price spikes is causing substantial pain with little climate pay-off.

First, solar and wind are still capable of meeting only a fraction of global electricity needs. Even with huge subsidies and political support, solar and wind delivered just nine per cent of global electricity in 2020. Heating, transport and vital industrial processes account for much more energy use than electricity. This means solar and wind deliver just 1.8 per cent of global energy supply. And electricity is the easiest of these components to decarbonize: we haven’t yet made meaningful progress greening the remaining four fifths of global energy.

Second, even in the rich world it is clear that few people are willing to pay the phenomenal price of achieving net-zero carbon emissions. Soaring prices are hiking energy poverty in industrialized economies, and prices are set to climb even further. Germany is on track to spend more than half a trillion dollars on climate policies by 2025, yet has only managed to reduce fossil fuel dependency from 84 per cent in 2000 to 77 per cent today. McKinsey estimates that getting to zero carbon will cost Europe 5.3 per cent of its GDP in low-emission assets every year, or for Germany more than $200 billion annually. That is more than Germany spends annually on education, police, courts and prisons combined.

That’s luxury beliefs prioritising climate policies in spite of the cost.

Policy-makers in western countries can’t continue to push expensive policies without a backlash. As energy prices soar, risks grow of resentment and strife, as France saw with the “yellow vest” protest movement.

For the poorest billions, rising energy prices are even more serious because they block the pathway out of poverty and make fertilizer unaffordable for farmers, imperiling food production. The well-off in rich countries might be able to withstand the pain of some climate policies, but emerging economies like India or low-income countries in Africa cannot afford to sacrifice poverty eradication and economic development to tackle climate change.

And green energy’s failings are why carbon emissions are still increasing. Last year saw the highest global emissions ever. This year they’re likely to be higher again. Climate policy is clearly broken. By forcing up the price of fossil fuels, policy-makers have put the cart before the horse. Instead, we need to make green energy much cheaper and more effective.

Humanity has relied on innovation to fix other big challenges. We didn’t solve air pollution by forcing everyone to stop driving, but by inventing the catalytic converter that drastically lowers pollution. We didn’t slash hunger by telling everyone to eat less, but through the Green Revolution that enabled farmers to produce much more food.

We need a green energy revolution that enables more and less expensive generation in both financial and environmental terms.

Researchers for the Copenhagen Consensus, including three Nobel laureate economists, have shown that the most effective climate policy possible is to increase green R&D spending five-fold to $100 billion per year. This would still be much less than the $755 billion the world spent just last year on current often ineffective green technology.

That saving would get better environmental outcomes than the unaffordable and ineffective policy of trying to reduce the use of fossil fuels without the widespread availability of inexpensive and reliable alternatives.

We don’t know where the breakthroughs will happen. They could come in nuclear energy, which can provide reliable power around-the-clock, unlike the intermittency of solar or wind, but remains much more expensive than fossil fuels. With more R&D, “fourth-generation” nuclear could end up providing much cheaper, safer power. But we need to look for breakthroughs across all areas of energy technology, from cheaper solar and wind with massive and very cheap storage, to CO₂ extraction, fusion, second-generation biofuels and many other potential solutions.

Climate change will not be solved by making fossil energy unaffordable but by innovating down the price of green technologies so everyone will be able to switch.

Far too much agitation, and policy, on climate change has come from the left and that’s resulted in poor environmental outcomes at far too high economic and social costs.

Those Australian teal MPs are right to reject the red-green agenda. But if they are to make a positive difference they must put aside any luxury beliefs and advocate for replacing the current expensive and ineffective policies with less costly and more effective funding for green R&D.

Where Sri Lanka goes . .

There is a tragedy unfolding in Sri Lanka and Damien Grant warns we’re following in its footsteps:

. . .Today the country is a failed state. It is a remarkable transformation in such a short time. What went wrong?

Let’s start with Gotabaya Rajapaksa, a former general who won the civil war against the Tamil Tigers amid allegations of unsavoury military practices. He was elected president in November 2019 and appointed his brother as prime minister, which was only fair, as the same brother had appointed him as defence minister when he was president.

The president and his brothers (there was more than one in cabinet) set about to revitalise the economy.

They cut taxes aggressively, which, frankly, I am okay with. VAT, equivalent to our GST, was cut from 15 to 8%. Many other reductions followed.

Thing is, if you cut taxes it is prudent to also cut spending. The Rajapaksa administration did the opposite. 

I’m a fan of tax cuts too, but cuts aren’t affordable unless spending is cut too.

They turned to the bond market to cover the shortfall, only to find no-one was that keen to lend to a country on a collision course with fiscal reality.

No problem, though. The Rajapaksas would just print the needed cash.

There was a small technical difficulty. The previous government had, somewhat churlishly, passed a law putting the control of the central bank outside the control of the Minister of Finance, who, at this time happened to be the president’s brother.

Family is important, and what is the use of political office if you can’t swing a few jobs for the relatives?

The law was changed in 2020 and the central bank lost its independence. The money printing began. . . 

Nepotism and money printing, why does that sound familiar?

Modern monetary theory, the economic equivalent of homeopathy, was being adopted everywhere. Uncle Sam was printing money, so was the EU, why not Sri Lanka?

The next problem was the reluctance by those selling goods into Sri Lanka to be paid in Sri Lankan rupees. As well as petrol, one of the most critical imports for Sri Lanka was chemical fertiliser for the agricultural economy: tea for export and rice for domestic consumption.

The Rajapaksa family were not deterred. Claiming that he was worried about a rise in kidney disease caused by chemical fertiliser, a dubious and possibly bogus claim, the president made a virtue signal out of necessity and declared his country would be going organic.

He established a taskforce to create sustainable solutions to climate change. Everyone loves taskforces.

People who like planning to plan might like task forces. Those of us who want improved results prefer effective implementation of good policy.

He was embraced by the environmental elites and had the added benefit of not having to find foreign currency to pay for expensive imported chemical fertiliser.

Sri Lanka earned a stellar ESG (Environmental, Social and Governance) score from the World Economic Forum, making them a stand-out in this metric of idiocy.

Great. Except you cannot eat platitudes and Facebook likes.

The move to organics had predictable results. Production sank precipitously. Food, it appears, comes from farmers and not supermarkets. When output falls, prices rise. . .

It’s frightening how many people, especially those of a dark green persuasion, can’t join the dots between higher costs and less production and less and more expensive food.

By late 2021 things were desperate. The organic mandate was scrapped, but the damage was done. There were no stockpiles of chemical fertiliser and no cash with which to buy any. The country ran out of petrol and couldn’t afford to import food to replace the failed domestic crops.

Three quarters of its population has been forced to reduce their food intake. Inflation is out of control. The government has ceased to function. The president fled to the Maldives. 

Covid, and a terrorist bombing hit tourism which added to Sri Lanka’s problems.

Sri Lanka has not been following some fringe radical economic and environmental plan. They have been following what today is considered mainstream and uncontroversial in the monetary, fiscal and environmental sphere.

The only difference is in the speed of implementation. The end point will be the same.

Like New Zealand, Sri Lanka pursued policies because they were popular amongst the cultural elites. It didn’t matter that they were idiotic, doomed to fail and destined to create misery.

What matters isn’t if a policy will work, but the intentions of the person implementing it.

Sadly meaning well is not a reliable prescription for ending well.

We all know our prime minister is empathetic, caring, and wishes us all the very best, and for many voters that is enough. Until the consequences bite and they can’t pay the mortgage, inflation destroys their real wage and eventually employers begin to fail.

We are not better than Sri Lanka. There is nothing that gives New Zealand the freedom to ignore reality and not pay the price.

We start with a far higher economic base, which gives us more time to change course, but if we continue to implement the same policies we will enjoy the same outcome.

We’ve been printing far too much money, we’ve already got the highest increase in inflation in a generation and there is increasingly loud agitation for policies that would reduce food production.

We can learn from Sri Lanka’s mistakes, curb undisciplined spending and implement environmental policies that are based on science and don’t come at a high social and economic cost.

Or where Sri Lanka goes, we’ll go too.

7.3% and climbing

Inflation is now at its highest point since 1990:

The consumers price index increased 7.3 percent in the June 2022 quarter compared with the June 2021 quarter, Stats NZ said today.

The 7.3 percent increase follows an annual increase of 6.9 percent in the March 2022 quarter, the previous largest annual movement since a 7.6 percent increase in the June 1990 quarter that occurred shortly after the introduction of Reserve Bank of New Zealand Act 1989. The Act came into effect in February 1990 to target the high inflation from the previous decade and maintain stability in the general level of prices over the medium term. . . 

The last time inflation was this high in NZ the Berlin Wall was coming down, Home Alone was top of the Box Office, and @nzlabour MP @NaisiChen hadn’t even been born. pic.twitter.com/ZvcJWHMgXz

— New Zealand Taxpayers' Union (@TaxpayersUnion) July 17, 2022

That’s the highest inflation rate in a generation:

Today’s inflation figure of 7.3% demonstrates again just how far out of control Grant Robertson and Labour Government spending is.

The Finance Minister cannot continue to bury his head in the sand while costs increase at an alarming rate. He must take urgent action to provide tax relief for New Zealand’s taxpayers and halt all unnecessary spending.

“The last time inflation was this high in New Zealand the Berlin Wall was coming down, Home Alone was top of the Box Office, and Labour MP Naisi Chen hadn’t even been born,” New Zealand Taxpayers’ Union Executive Director Jordan Williams says.

“Grant Robertson was correct during his press conference yesterday when he noted that tax relief is not inflationary and that is why he should move immediately to leave more of Kiwis’ hard earned cash in their bank accounts to alleviate the immense pressures households are under.

“The way things are going Grant Robertson’s Wikipedia Page is going to be one long list of fiscal and economic failures. His legacy and New Zealand taxpayers should not have to suffer like this. Minister Robertson simply needs to bite the bullet and rein in his spending. Big expensive announcements might feel good on the podium, but they are hitting Kiwis in the pocket.”

The New Zealand Taxpayers’ Union urges Grant Robertson to urgently adjust tax brackets and index them to shift automatically to counter the effects of rising costs.

This  doesn’t compare well with our trading partners:

. . So the NZ inflation rate is higher than 10 of our top 15 trading partners and lower than five of them.

Inflation has an international component to it, but the fact we have higher inflation than many of our trading partners is because of our domestic decisions. Non-tradeable inflation is 6.3% – more than double the maximum target of 3%. . .

The government’s line is to blame the increase on global factors.

That has some impact but that doesn’t explain the pace of growth in non-tradables :

. . . The ANZ acknowledged that, as expected, tradables (ie mostly imported) inflation rose to 8.7% y/y (8.5% previously), pushed higher by surging petrol prices in the wake of the war in Ukraine.

But its analysis further said:

“More concerning is the increased strength in non-tradables (ie mostly domestic) inflation, which increased to 6.3% – ahead of the RBNZ’s forecast for a fall to 5.7% and our expectation of 6.0%.

“Domestically driven inflation tends to stick around a lot longer than the imported variety, and as such, the mix of inflation pressures revealed today demands a more aggressive RBNZ response.”

Similarly, an analysis from Westpac said:

“Non-tradable (domestic) prices were up 1.4% in the June quarter and have risen by 6.3% over the past year. That is the fastest annual pace of non-tradables inflation since records began in 2000.

“The RBNZ pays particular attention to non-tradables inflation, and it is currently running at around twice the pace we’ve seen over the past two decades.”

If the government can’t, or won’t, accept that domestic inflation is a problem and that its undisciplined approach to spending is a major cause of that, what hope is there of it doing anything to address it?

With domestic inflation hitting an all-time high, the Government needs to make urgent changes to stop Kiwis going backwards says National’s finance spokesperson Nicola Willis. . . .

“Today’s data shows what any Kiwi family can confirm – rising prices are smashing household budgets. With every sector of the economy straining under cost pressures, there’s nowhere to hide from Labour’s cost of living crisis.

“Domestic – or non-tradable – inflation is at its highest level since the series began in 2000. Inflation is getting a firm grip on our economy.

“Labour keeps blaming international events like the war in Ukraine but refuses to take responsibility for their policy failures at home.

“We have been calling on the Government to present a plan to fight inflation for months. Spending more and announcing temporary measures won’t cut it. Spending billions to fight runaway inflation just puts more fuel on the fire, pushing up inflation and interest rates.

“Treasury explicitly told Grant Robertson that, ‘a large portion of New Zealand’s inflation at present is being driven by strong domestic demand’ and that his high levels of spending are making the situation worse. Instead of listening to this advice, he ignored it. Kiwis are paying the price.

“A real plan would focus on strengthening the productive economy and unlocking the bottlenecks in the economy that are worsening inflation, including fixing failed immigration settings and stopping adding costs to business.

“It’s not as if this problem has crept up on them. Inflation has now been outside the Reserve Bank’s target range for 15 months running. If the Government doesn’t start taking it seriously the risk is that it could be here for many more months to come.

“Lurching from crisis to press conference with knee-jerk responses isn’t good enough. Kiwis deserve a Government that can present a plan on the economy that enables everyone to get ahead, instead of relying on temporary band-aid payments and gimmicky policy making.

“The Government should adopt National’s five-point plan to fight inflation and strengthen our economy – return the Reserve Bank to a single focus on price stability, reduce costs on business, remove bottlenecks in the economy, restore discipline to Government spending, and prioritise tax relief for workers.” 

Inflation increasing at this rate is bad. Worse still, if the government is not going to accept it’s contributing to it, have a plan to address it – and implement the plan – it own’t just be 7.3% but 7.3% and climbing.

Record rate rise

The Reserve Bank has set a new record – raising the cash rate by 50 basis points three times in a row:

Today’s increase in the Official Cash Rate and new food price data show the cost of living crisis is getting worse, National’s Finance Spokesperson Nicola Willis says.

“Inflation under this Labour Government is so out of control that the Reserve Bank is having to increase interest rates faster than at any previous time in New Zealand’s history. This is the first time ever that the Bank has increased the Official Cash Rate by 50 basis points three times in a row.

That’s not a record the bank can be proud of.

“This dramatic tightening means anyone due to re-fix their mortgage in the coming months will get hammered by rapidly rising borrowing costs. Under Labour, a family with a 80% mortgage on an average priced home will pay nearly $350 more per week in interest payments today than when Labour came to office. 

“Adding to the stress for families, Statistics New Zealand food price data out today shows grocery prices up 7.6 per cent compared with a year ago. Milk now costs 10.4 per cent more than last year, yoghurt 14.4 per cent more and potato crisps are up 11 per cent.  

We can all live without crisps but dairy products are important ingredients in a healthy diet.

The price increase will be partly due to the high farmgate milk price, but they’re also due to inflation’s impact on fuel, energy and other inputs, as well as the inflationary impact of steep minimum wage increases.

“Wage growth is not keeping up with rapidly rising prices meaning Kiwis are going backwards under Labour, with the cost of living crisis set to bite deeper.

I used to have a reasonable idea of what I’d be paying at the supermarket checkout. Now it’s always more than I expect and seeing people leave something’s behind at the checkout because they can’t afford them is happening more often.

“Labour has no plan to do its bit to address the domestic drivers of inflation. Instead its economic mismanagement has made the cost of living crisis worse.

“Documents I have obtained show Treasury warned the Finance Minister in March that if he further ramped-up government spending that would worsen inflation and drive up interest rates. Instead of heeding this advice the Finance Minister launched a record spend-up in the May Budget.

The record spend-up would be bad enough if it was on necessities, but far too much of it is not.

“The Government’s addiction to spending and its unwillingness to fix immigration settings are making things worse for struggling Kiwis, putting more pressure on inflation and interest rates.

“The Government should adopt National’s five point plan to fight inflation – return the Reserve Bank to a single focus on price stability, reduce costs on business, remove bottlenecks in the economy, restore discipline to  government spending, and prioritise tax relief for workers.”

Our Reserve Bank used to be a model for the world, now the governor seems to spend far more time and energy on te ao Māori – a Māori world view than what ought to be his focus – reining in inflation.

From rock star to rocky

It hasn’t taken long for the New Zealand economy to sink from rock star to rocky:

Paul Bloxham, HSBC’s chief economist, once described New Zealand as a “rockstar economy”.

That was back in January 2014.

Today, there is nothing “rockstar” left about the New Zealand economy, unless you have Ozzy Osbourne in mind.

For more than three decades, the Swiss Institute for Management and Development (IMD) has compiled annual rankings of competitiveness for 63 of the world’s most important countries. It makes for sobering reading for New Zealanders.

Back in 2017, New Zealand ranked #16 – ahead of Australia at #21.

Five years on, New Zealand has fallen to #31, while Australia is now ranked #19. . . 

And the reason? It’s the economy.

Over the past few years, we have plunged in economic performance, falling from 22nd to 47th place. Government efficiency has also deteriorated markedly from 7th to 17th place.

That’s not a record for this government to feel proud of. And it gets worse.

Altogether, the IMD’s ranking comprises 25 subcategories. In eight of them, New Zealand finds itself in the bottom half of all countries. And these are the categories that really matter: domestic economy, international trade and investment, inflation, productivity and efficiency, attitudes and values, and technological infrastructure.

The IMD noted New Zealand going in the wrong direction on subsidies, inflation, tourism, brain drain, public finances, skilled labour, competent senior managers, and central bank policy.

As shocking as it is to see the IMD’s assessment, if we are honest, none of this should surprise us.

We know that our public finances are not in good shape.

We have observed the erratic behaviour of the Reserve Bank.

We are watching the onset of a new brain drain to Australia and the rest of the world.

We have seen how Covid has decimated our once thriving tourism industry.

And we feel the effect of inflation every time we fill our cars or do the weekly shopping.

Where the IMD’s competitiveness ranking holds up an external mirror to us, Westpac’s Consumer Confidence Survey, released this week, shows that Kiwis also understand how dire our economic situation has become.

Consumer confidence in New Zealand now stands at the lowest level since that survey began in 1988. And, perhaps most damningly, for the first time, a majority has a negative 5-year outlook on the economy.

These are not just signs of a small downturn. These are signs of a former rockstar in a policy-induced coma.

Economic performance isn’t just about the economy for the economy’s sake. It’s about the ability to fund the infrastructure, services and technology we need, it’s about the ability for people to afford what they need to live a good life; it’s about confidence that the future will be better that attracts inward migration and investment and stops the outward flow.

It’s not just the economy that’s going in the wrong direction, there’s been a slump in livable city status for Auckland and Wellington:

New Zealand’s reign of trump is over as Wellington and Auckland have nosedived in the latest world’s most livable cities ranking survey.

The 2022 Economist Intelligence Unit’s (EIU) Global Liveability Index, released on Thursday, saw two of New Zealand’s biggest cities receive massive drops in the rankings.

Wellington had the biggest drop in the rankings, going from four down to 50 while Auckland also plummeted down the rankings from one to 34.

The index ranks 172 global cities for their urban quality of life out of 100, based on an assessment of their education, healthcare, culture and environment, stability and infrastructure. . . 

Vienna, was number one with 99.1

Auckland rated 89.2 and Wellington 85.7 which aren’t really bad, but will make it harder to attract the workers we need.

Covid can take some of the blame, but it’s not a uniquely New Zealand problem and it’s an indictment on the government.

Remember its Wellbeing Budget?

These rankings show that can be filed in the failure bin along with KiwiBuild, climate change improvements and all the other announcements that haven’t led to delivery.