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.

Food inflation 6.8%


StatsNZ confirms what everyone who eats  knows:

The annual rate of food price inflation increased between April 2022 and May 2022, Stats NZ said today.

Food prices were 6.8 percent higher in May 2022 compared with May 2021, up from an increase of 6.4 percent in April 2022 compared with April 2021.

In May 2022, the annual increase was due to rises across all the broad food categories we measure: 

  • grocery food prices increased 7.4 percent
  • restaurant meals and ready-to-eat food prices increased 6.0 percent
  • fruit and vegetable prices increased 10 percent
  • meat, poultry, and fish prices increased 7.0 percent
  • non-alcoholic beverage prices increased 2.7 percent.

Grocery food was the largest contributor to this movement, with increasing prices for restaurant meals and ready-to-eat food providing the second largest contribution.

“Average prices for grocery food items like yoghurt, milk, and cheese were all notably higher than they were in May 2021,” consumer prices manager Katrina Dewbery said. . . 

The price of dairy products doesn’t always mirror the farmgate milk price, but record payouts from dairy companies will sooner or later lead to higher prices for milk and milk products.

With milk swaps for this season at more than $10 and the cost of fertiliser, fuel and labour increasing there’s very little likelihood that prices for dairy products will be decreasing soon.

Nor is there any hope of imminent relief for the cost of living crisis:

Kiwi families keep going backwards with food prices continuing to rise rapidly, National’s Finance spokesperson Nicola Willis says.

“Latest numbers from Stats NZ show food prices climbed 6.8 per cent higher over the past year, accelerating beyond the 6.4 per cent rate seen the month prior, with grocery prices now rising at their highest level in a decade.

“These rapidly rising prices are part of the wider inflation tsunami hitting our economy, with hard-working Kiwis left swamped in its wake, as their wages rise slower than prices.

The temporary reduction in fuel tax and extra $27 a week for some have already been more than swallowed up by rising prices for basic necessities.

“While Labour likes to put this all down to pricing decisions made by supermarkets, the truth is New Zealand’s inflation problem is far more widespread.

“Restaurant prices are rising at their highest rate since 2009, with ready-to eat food prices rising 6 percent in the year to date, as inflation gets a grip beyond supermarket shelves.

“Grant Robertson has no plan to tackle inflation. The Government has instead poured more fuel on the fire with more government spending, pushing up interest rates and worsening the cost of living crisis.

“The Government should adopt National’s five point plan to fight inflation – refocus the Reserve Bank on price stability, stop adding unnecessary costs to businesses and employers, reduce the bottlenecks that are holding back growth, including addressing labour shortages, restore discipline to Government spending and inflation-adjust tax brackets to increase Kiwis’ disposable incomes.

“This week many families will bypass the yoghurt in their weekly shop, put off by the sky-high cost. It’s time the Government stopped blaming the war in Ukraine, stepped up and delivered a plan to fight inflation.

Inflation isn’t solely and New Zealand problem and higher prices of imports is a contributing factor, but the government can’t control that.

It can and must control it’s own spending and require the Reserve Bank to do what it’s supposed to do – keep inflation between one and three percent.

Takers or makers


This is a government of takers.

They took away our freedom and while the first Covid-19 lockdown was excusable, subsequent ones that were due to the delay in the vaccination rollout were not.

Matthew Hooton writes of the cost of last year’s extended Auckland lockdown:

. . .Then, in late August, our still largely unvaccinated population was hit by Delta. Prime Minister Jacinda Ardern had no choice but to order what became the long lockdown of 2021/22. It contributed to yesterday’s Budget Economic and Fiscal Update (BEFU) estimating Robertson will end up spending $128.4b to get us through 2021/22.

That’s $13.7b more, or over $7000 for each of New Zealand’s estimated 1.9 million households. The “good news” is that Robertson expects to collect an extra $10.6b in tax this financial year compared with the forecast a year ago, or around $5500 more per household.

Inflation is one reason why, fuelled by both monetary and fiscal stimulus being needed for much longer than if we had been vaccinated before Delta arrived.

That, of course, is only the start of the cost. In Auckland in particular, the preventable lockdown also drove more family businesses broke, ruined a second school year for tens of thousands of students and worsened already fragile mental health.

Yet no one in the Beehive or the bureaucracy has even apologised for the failure to begin our mass vaccination programme six months earlier. . . 

The late rollout also took some of the freedoms we were promised over summer, people without vaccine passes were barred from a lot of places, numbers were restricted for weddings, funerals and other events; and we were all still supposed to sign in.

And let’s not forget taking the freedom to come and go from New Zealand that grounded so many Kiwis overseas, kept others here,  locked out families and friends, is still keeping some migrant families apart and restricting employers ability to get migrant workers.

Then there’s Three Waters and the very real threat that they’ll take away both the assets and control from local authorities and rural water schemes.

And the biggest take away is money  in higher taxes, higher costs through more regulations, and worst of all the loss we’re all having to bear because of inflation that’s adding to the cost of everything and eroding the real value of savings.

Not content with that the government is looking at how to take more from the wealthy, in spite of a promise there would be no new taxes and no wealth tax.

Just think how much better off we’d all be, individually and collectively if they put as much thought in how they could help us to make more instead of how they could take more.

This is a government of takers. The country desperately needs one that understands and supports makers.

People don’t want big spend up


A Curia poll for the Taxpayers’ Union shows most people don’t want the government to increase its spending.

Given the current levels of inflation, do you think the Government should continue to
increase overall spending in this year’s budget, or keep it about the same?

. . . Should Govt increase spending or keep the same:
Increase spending 152 15%
Keep it the same 643 65%
Unsure 200 20%
Total 995 100%

Only 15% of respondents wants overall spending in the Budget to increase compared to 65%
who want it to stay at current levels, with 20% unsure. . . 

Only 27% of Labour and Green voters wants the Government to increase spending while
inflation is high. Of undecided voters only 8% want an increase in spending.

Net support for increasing spending by party is:
1. Greens -21%
2. Labour -25%
3. Undecideds -61%
4. National -70%
5. ACT -76%

The public is more concerned about inflation and the deteriorating state of the economy than the government which is planning to announce plans for big spending in today’s Budget.

The only cause for optimism is that the government is much better at announcing and planning to plan than doing.

This could mean most of the spending won’t have been undertaken before next year’s election when voters will have a stark choice between the old high spending government and a new one that understands the importance of reducing the burden of the state to help individuals and businesses get ahead.

Now for the good news


The clock is here.

Five ways to counter inflation


Finance Minister Grant Robertson is washing his hands of inflation, blaming it on overseas factors out of his control.

He’s wrong and National’s finance spokesperson has five ways he could help:

. . . One: Stop adding costs to business that end up being passed-on to the rest of us, as we’ve seen with new taxes on rental properties. Halt plans for proposals such as a jobs tax and new union-mandated industry-wide employment agreements.

Two: Remove bottlenecks in the economy that are constraining productive growth. Begin by fixing immigration settings that are causing some highly skilled workers to pack their bags and preventing others from coming at all.

Three: Take a more disciplined approach to Government spending. This year, Government spending will be around $128 billion, around $52b more than the Government spent in 2017. More than ever, ministers have a solemn responsibility to get maximum bang for every buck, ensuring that money is delivering more services and better outcomes and not just pumping up prices across the economy.

Four: Re-visit plans to go on the biggest Budget spend-up in history. The Finance Minister has foreshadowed a record-breaking amount of new operational spending in an overheated economy. Carefully assess each proposal to ensure it won’t add fuel to the inflation fire.

Five: Prioritise income relief for workers. Inflation has pushed people into higher tax brackets, piling billions more into the Government coffers, when Kiwis need that cash more than ever. The Government should follow National’s plan to inflation-adjust tax brackets, so that taxpayers can hold onto a bit more of what they earn, with $1600 more a year for a household on an average income. . . 

The government can’t do anything about imported price rises but it is partly responsible for the domestic component which makes up around half the 6.9% inflation.

It purports to care about the poor but failing to deal with inflation will everyone poorer, hitting those who can least afford it hardest.

If . . .


If the Reserve Bank hadn’t got so carried away printing money. . .

If it had acted sooner to increase interest rates. . .

If the government hadn’t misspent so much money so wastefully. . .

If it hadn’t spent so much more money and achieved so little with it, for example $1.9 billion on mental health with nothing to show for it  . . .

If it hadn’t increased the bureaucracy by so many people . . .

If government agencies hadn’t competed with the private sector, for example Kaianga Ora buying houses and land, and doing it at inflated prices. . .

. . .  then inflation wouldn’t be at a 30 year high of 6.9%.

And if the government isn’t going to admit it is partly responsible we can have no hope it will do anything about it.

Some inflation is imported but some is domestic and the government has no plan to deal with it:

The Finance Minister needs to face up to New Zealand’s cost of living crisis and present a plan to help get skyrocketing inflation under control, Opposition leader Christopher Luxon says.

“Inflation has hit a new 30-year high of 6.9 per cent. It’s a silent thief in your pocket putting Kiwis under massive pressure, and we are seeing a squeezed middle emerge.

“Kiwis are facing the consequences of Labour’s poor economic management, with inflation in New Zealand outpacing Australia’s and many other countries.

“Rents are up $150 a week since 2017, interest rates are rising and wages increases are barely a third of inflation. Kiwis are going backwards under Labour and many families are struggling to make ends meet.

“This is not just an international story. The domestic ‘non-tradable’ element of inflation is the highest on record, at 6 per cent.

“This week the Reserve Bank sent a message that it will need help from the Government to try to get inflation under control.

“Grant Robertson has no plan to help tackle skyrocketing inflation. He must take responsibility for presenting a sensible plan to help combat inflation pressures, reducing costs, removing bottlenecks and ensuring value for taxpayers’ money.

“Instead, at a time when we need careful economic management and spending discipline, he seems intent on pushing ahead with a record $6 billion increase in annual spending in next month’s Budget.

“This is not the time to put fuel on the fire. Instead, Grant Robertson must do his bit to remove inflationary pressure in the domestic economy.

He must start by accepting his government is responsible for a large part of the problem and that the solution lies in both monetary policy, which is the Reserve Bank’s responsibility, and fiscal policy which is the government’s.

A line by line analysis of every Budget item to cut out the waste and sorting out immigration to lessen the pressure on employment would be good places to start.

Theft as servants


A letter from the bank told me the supposed good news.

The interest on my savings account is going up from not very much to a little bit more.

I don’t expect a letter form my bank to talk about tax and inflation and it didn’t mention that the government will take tax off the interest nor did it say that inflation will take even more not just from the interest but the real value of the money invested.

When that money is for extras, that’s unfortunate. When it’s for rainy days, it undermines security and feeds uncertainty, and when, as it will be for a lot of people, it is for necessities it will lead to hardship.

Inflation is even worse for people with no savings as it feeds the cost of living crisis:

New figures on food prices from Statistics New Zealand confirm the cost of living crisis is only getting worse on Labour’s watch, says National’s Finance Spokesperson Nicola Willis.

Data released today shows the highest annual food price increase in a decade at 7.6 per cent, with fruit and vegetable prices increasing a staggering 18 per cent in the past year.

“These numbers confirm what Kiwis already know: New Zealand is experiencing a worsening cost of living crisis, with prices running laps around wage growth.

“Meanwhile the Minister of Finance continues to pat himself on the back, telling Kiwis they are better off, while in reality many Kiwis are slipping further behind each month as they struggle to keep up with skyrocketing costs.

“Labour needs to stop playing the blame game on inflation and do their bit to rein in costs.

“The War in Ukraine isn’t to blame for fruit and vegetables going up by 18 per cent in the last 12 months.

“The Government should rein in its big spending plans, hit pause on plans to add more costs to business and prioritise tax relief for the squeezed middle.

“Right now the biggest beneficiary of runaway inflation is the Finance Minister – who will rake in billions more in tax receipts as a result.  He should put New Zealanders first and give them some relief. 

“Kiwi families deserve relief. Under National’s tax plan, a family with two earners each on the average wage would receive $1600 a year in tax relief. In contrast, Labour is doing nothing for the squeezed middle and their failed policies are pushing everyone further behind.”

Last week Minister of Commerce and Consumer Affairs David Clark blamed supermarkets for inflation but as Eric Crampton pointed out, that’s economic nonsense:

. . . Greed is a poor explanation for inflation, not because companies are altruists, but because greed is always with us. It isn’t cyclical.

Should we credit corporate public-spiritedness for the five years from December 2011 through December 2016 when inflation ran well below the midpoint of the RBNZ inflation band?

Of course not. Monetary policy drives inflation, not changes in greed. . .

And whose responsible for monetary policy? The Reserve Bank. And whose responsible for the Bank’s target and ensuirng it meets it? The government.

. . . In short, the minister was wrong from beginning to end. Absolute economic ignorance would be the most charitable explanation, but even then he might have considered asking Treasury’s advice.

More plausibly, Clark was scapegoating the supermarkets to justify populist measures against them, or to deflect attention from his government’s failure to keep the Reserve Bank on target, or both.

Voters should be wary of policies justified by scapegoating.

The government’s excessive borrowing, reckless spending and the RB’s missing its target are to blame for inflation that is well above the bank’s targetted range.

Theft as a servant is a serious criminal offence. It doesn’t apply to public servants in this context but inflation is theft and they – the government and RB are responsible for it.

Food security under threat


The war in Ukraine is threatening world food supplies.

World Vision shares the concern:

World Vision New Zealand warns that the crisis in Ukraine and the downstream impact on world wheat supplies threatens to plunge millions into an acute hunger crisis.

Ukraine and Russia are responsible for nearly a third of the world’s wheat exports, but the conflict has curtailed the planting season and caused a spike in the global price of wheat.

World Vision New Zealand National Director, Grant Bayldon, fears that the reduced wheat supply and its soaring price will severely impact emergency food supplies.

“Wheat is a staple in diets around the world and is a key component in emergency food rations. Any crash in wheat supply will have a devastating impact on millions of families in Afghanistan, Syria, and Eastern Africa who are reliant on emergency supplies to feed their children,” he says.

“We are already hearing stories of mothers in East Africa who are checking the pulse of their babies during the night to make sure they are still alive. What a devastating and disturbing ritual to have to perform each night.”

Bayldon says World Vision partners with the United Nations’ World Food Programme (WFP) to deliver food aid in countries grappling with starvation and malnutrition, but the WFP gets half its grains from Ukraine and Russia.

“The crisis in Ukraine is rippling beyond Europe in a catastrophic way. We are concerned that the food price rises will mean more and more people in vulnerable countries will struggle to buy food and will be pushed to the brink of starvation,” he says.

In seven East African countries alone, more than 28 million people currently need humanitarian assistance due to varying levels of food insecurity. Around one in five of these are children who are suffering high levels of malnutrition.

“Starvation is devastating. We know that mothers in conflict zones often say to us that the hardest thing for them to bear is not the violence, but it is watching their children slowly perish from starvation while they are helpless to do anything. This is the brutal experience for many mothers in Eastern Africa right now,” he says. . . 

Crops should be being sown in Ukraine now. It will be too late soon and crops that aren’t sown can’t be harvested.

A food shortage could be seen as good news for New Zealand when we produce so much more food than we need but it’s not.

We don’t produce all the different types of food we need and with the costs for inputs like fertiliser increasing, profits are eroded, even if prices increase.

Price increases are bad news for consumers who have to pay more for food and that hits the poorest people and the poorest countries the hardest.

Food shortages and higher prices are sowing the seeds for both a humanitarian crisis and political instability.

FPAs really UPAs


They’re called Fair Pay Agreements but for whom are they fair?

They’re not fair for the 90% of workers who will be forced to accept them if 10% of people in their occupation want them.

They’re not fair for the workers who will lose flexible pay and conditions that suit them and be forced to accept inflexible pay and conditions that don’t.

They’re not fair to employers in different parts of the country with different cost structures who will be forced to accept the pay and conditions imposed on them regardless of whether they can afford them.

They’re not fair to the businesses that will collapse under the weight of unaffordable wage bills and the workers who will lose their jobs to business failures and increased automation.

They’re not fair to the everyone already struggling with inflation who will face higher costs as a result of them.

It’s not fair that they will harm the economy:

Labour’s misnamed ‘Fair’ Pay Agreements Bill will reduce flexibility and harm New Zealand’s economy, National’s Workplace Relations spokesperson Paul Goldsmith says.

“This bill is an ideological overreach, deliberately going to war with employers at a time when we’re facing huge economic challenges.

“The modern workplace is changing rapidly and people value flexibility. Labour’s bill would take us in the opposite direction, towards rigid national awards.

“It’s another example of this Government’s belief that central government knows best – better than employees and employers trying to arrange things for themselves in a way that works for them.

“Flexible labour markets are one of the foundations of our relative economic success in the past few decades. This bill undermines that foundation and will harm our economy and our national competitiveness.

“National stridently opposes this bill.”

They are so unfair that Business New Zealand is saying no to the payment being offered to them:

BusinessNZ has confirmed that it will not accept payments included in the Fair Pay Agreements Bill introduced to Parliament today.

Under the terms of the Bill, BusinessNZ would be offered $250,000 a year for supporting compulsory bargaining in major sectors of the economy.

But Chief Executive Kirk Hope says the FPA scheme is unacceptable and BusinessNZ will not take part.

“The Bill shows the Government is not listening, and we think the legislation should simply be canned.

“The scheme would make it compulsory for businesses to take part in collective bargaining, and compulsory for them to accept union demands or imposed arbitration.

“The FPA scheme would be deleterious to the economy, to people’s prosperity, and to the human rights of those involved, and despite the mention of BusinessNZ in the Bill presented to Parliament today, I can confirm that BusinessNZ will definitely not be taking taxpayer money to support compulsory national pay schemes.”

The Employers’ and Manufacturers’ Association says FPAs are a step back in time:

The Government’s step backwards to National Compulsory Awards, also known as Fair Pay Agreements (FPAs), is a retrograde move for employees and employers that removes the flexibility we’ve come to expect and need in the modern workplace, says the EMA.

Head of Advocacy and Strategy, Alan McDonald, says this is a step back to a centralised, antagonistic wage bargaining system that failed workers and their employers in the 1970s and 80s and was done away with in the 1990s.

“It puts a Wellington bureaucracy between employees and their employers and enforces the same pay and conditions for all employees regardless of their circumstances and those of their employer.”

Mr McDonald says inflexible, unwanted, slow moving, centralised bargaining was the last thing needed in the modern workplace.

This is what we had decades ago when a worker who sprained an eyelash at one workplace could trigger strikes the length and breadth of the country.

“FPAs are not consistent with the goal of the New Zealand economy being made of flexible, innovative, competitive and agile businesses.

“If nothing else, how would we have coped with the demands for flexibility and adaptability in the workplace imposed by Covid if we were working with these ponderous, unwanted awards?”

“The fact they must be compulsorily brought to an outcome is illegal under the International Labour Organisation (ILO) principles signed up to by previous Labour governments and currently illegal under our domestic bargaining frameworks where employers can choose to opt out.

As only 10 percent of a workforce or 1,000 workers in any sector can demand one of these agreements, they are demonstrably undemocratic.”

Mr McDonald says the EMA and other members of the BusinessNZ network had opposed these agreements from the moment they were proposed and would continue to oppose them.

He said it was hard to see what the issue was that they were meant to solve, especially with such widespread access to such agreements.

“MBIE, the government’s own advisors, said there may be a few areas where there could be an issue with pay and conditions and the best solution was to apply a market test and review conditions in those sectors and make changes where required.

“We’d support that, but instead this legislation takes a scattergun approach that will result in inflexible, rigid conditions across multiple industries with some employers having to deal with multiple awards in one workplace.

“It’s a logistical nightmare if nothing else. How do you reach every employee and employer from Stewart Island to Cape Reinga?

Inflexible, rigid and a logistical nightmare – what’s fair about that?

“I see the Government’s release ignores the fact that Business NZ and its network and the Chambers of Commerce have already ruled out being the bargaining agent for employers. The fact the CTU is the Government’s bargaining agent of choice also shuts out all the other non-affiliated unions from the bargaining process and ignores the fact around 80 per cent of the workforce is not associated with unions,” says Mr McDonald.

It’s not even fair to many unions.

How fair is it to democracy when the CTU supports the Labour Party financially and with people power for campaigning.

If corruption is too strong a word for it – and I”m not sure it is – then unfair certainly isn’t.

These aren’t FPAs they’re UPAs – unfair pay agreements – and another reason to ensure this government doesn’t get a third term.

Rural round-up


Not so fast – Rural News:

Predictions that NZ’s farming sector is in for a bumper year need to be put into context.

While many primary sectors – including dairy, horticulture and red meat – are experiencing record commodity prices, a number of factors are leading to some even bigger cost increases, which will mean less on-farm profitability.

As Rabobank NZ’s analyst Emma Higgins recently opined, “Rocketing input costs and crimped production in some regions will not translate into new benchmark profits”.

This is due to a number of reasons: the ongoing impact of Covid, the war in the Ukraine, growing inflation and the imposition of government-imposed regulations – to name just a few.

Worrying external deficit should give govt cause to shy away from calls to cull the country’s dairy herd – Point of Order:

Even  though NZ  is  reaping record prices for  its  primary exports, the  country’s current  account deficit  “exploded”  (the  BNZ’s  word  for it) in calendar  year 2021  to  the  equivalent  of  5.8% of  GDP,  or  $20bn. The  previous  year  the  annual deficit had been only  0.8%  of  GDP.

Economist  Cameron Bagrie  said  the current account deficit didn’t  get the  attention  it  deserved. The  BNZ’s  economists, noting there had been  a  very  big change in a  short  space  of time, said the deficit   is  the  largest   since 2009.

“It continues a rapid widening of the external deficit that we have been warning of for quite some time. The deficit is now getting to a level that some in the market and/or rating agencies might start paying attention to.”

Whether  the  government, preoccupied  with Covid  and  rising inflation, is  paying   any attention  isn’t clear — but  it  should be.  Some insiders  believe it is  beavering  away  on climate change  measures  that could have a  damaging effect on  farming  morale—particularly if the government goes  ahead with  measures as  proposed  by the Climate Change Commission to reduce  methane emissions  by  cutting cow herds by  15%. . . 

Otago pulls out the stops on its most insidious pest – Jill Herron:

When the rabbits spill off Otago’s land and on to its sea lion, seal and penguin-populated beaches, you know there’s a serious pest-control problem

For the first time in years – so many no one wants to put a number on it – non-compliance notices have been served on Otago landowners for letting rabbits run amok on their land.

A further 40 notices ordering immediate action or costly consequences are set to follow, as a shake-up in the pest department at the Otago Regional Council (ORC) last year starts to bear fruit.

Environmental implementation manager Andrea Howard, who has been in the role less than two years, concedes the ORC has had a “less than active stance” on the rabbit front and that this would have contributed to current numbers. . . 

Big names back NZ agtech breakthrough:

 Two global leaders in agriculture are helping advance world-first pasture technology designed, tested and made in New Zealand.

Investment from Gallagher and the Royal Barenbrug Group will fund wider farm roll-out and faster development for Christchurch-based Farmote Systems, company founder Richard Barton says.

Launched in Canterbury last spring, the Farmote System is a unique new way of automatically recording precise, consistent and reliable pasture data, 24/7. It now covers over 6000 hectares of farmland.

Fast forward

“We’re excited to have attracted new investment from Gallagher, as well as further investment from Barenbrug,” Richard Barton says. . . 


Export deal to see NZ wool carpet used in $1bn New York skyscraper :

A Kiwi company has secured a US export contract to supply one of New York’s tallest skyscrapers with its wool flooring product.

The $1.1 billion Brooklyn Tower will be home to hundreds of the city’s elite and will stand at 327 metres when it opens later this year, making it one of the world’s tallest residential buildings.

The new contract will see Bremworth supply over 3,000sqm of wool carpet for the 93 storey, supertall skyscraper and is one of the company’s largest ever installations of its natural fibre product in the US.[1]

The North American deal is the highest profile commercial contract for the company since Bremworth’s wool carpets were used in the refurbishment of dozens of US retail outlets owned by Cartier, the luxury French jewellery maker. . . 

Dairy giant Arla warns of supply issues unless farmers paid more – Emma Simpson:

The UK’s largest dairy has warned milk supplies could be under threat unless its farmers are paid more.

The managing director of Arla Foods said costs are increasing at rates never seen before and that farmers can no longer cover their expenses.

“Because of the recent crisis, feed, fuel and fertiliser have rocketed and therefore cashflow on the farm is negative,” said Ash Amirahmadi.

He added farmers are producing less milk as a result of the higher costs. . . 

Principles vs politics


Labour’s election commitment to climate change was supposed to be its nuclear-free moment.

File that along with child poverty, Kiwibuild and so many other grand promises that have been followed by little, if any, progress.

The carbon tax on fuel was supposed to encourage people to use less. The steep increase in oil prices recently ought to have reinforced that.

But National leader Chris Luxon hit the target when he spoke about a cost of living crisis and the government folded.

Its poll-driven decision to reduce the excise tax on petrol, at least for three months, shows what happens when principles meet politics.

It illustrates the problem with so many policies that are supposed to address climate change – they impose too high economic and social costs to be politically acceptable. Too often they have little if any positive impact on the environment and sometimes they make it worse.

European countries are back peddling quickly from their decisions to get rid of coal and nuclear power plants because its left them too reliant on Russia’s gas.

Labour’s rush towards greener power has left us reliant on imported coal that is dirtier than the local fuel we’re no longer permitted to mine.

Its ute-tax achieves nothing because of the way the ETS works and its insistence on a carbon tax on fuel has been undermined by the excise tax cut.

Worse, still, Matt Burgess explains the government’s emissions reduction policies are based on the pretence of necessity:

At May’s Budget, the government will commit $4.5 billion to new spending on climate change, more than $2,000 per household. The government will also deliver its Emissions Reduction Plan, an array of levies, subsidies, regulations and hard bans. The government will say these interventions are necessary and that they will help deliver emissions targets.

Neither claim is true. Existing policies already have New Zealand firmly on track to deliver statutory emissions targets. Parliament has committed to reduce net emissions of greenhouse gases. Legislation defines net emissions as gross emissions (for example, from car exhausts) minus offsets (for example, the carbon captured by trees, co-operation with other countries). Offsets are recognised in domestic law and international agreements. They are affordable and available in effectively unlimited quantities.

These facts secure emissions targets. Regardless of how much or how little existing policies including the Emissions Trading Scheme (ETS) lower emissions, offsets will bridge the gap to targets. New Zealand is not in a position of having to resort to desperate measures to meet its climate change obligations. This country can make reasonable or best efforts to lower net emissions with existing policies and be certain
of success.

Accordingly, further policies are not necessary. We have options. The government could choose not to add thousands of dollars to the cost of imported vehicles from next month with its Feebate policy and be certain of delivering our obligations. Agriculture could stay outside the ETS indefinitely while the country reaches net zero emissions. Only by overlooking offsets can the government maintain the fiction that drastic further actions are necessary. The government bears the burden of proof to show how its new policies improve on existing policies.

Even if existing policies were not enough to reach targets, the government’s strategy would not help. The government has already capped greenhouse gases. Changes to the ETS in 2020 introduced a quantity cap. The new cap will be a sinking lid on emissions, set to fall in line with targets. It is well known that policies cannot reduce emissions from under an emissions cap. Cap-and-trade schemes like the ETS effectively neutralise other emissions policies. Where a policy lowers a sector’s emissions, the sector will buy fewer emissions permits. That leaves more permits for others, meaning higher emissions elsewhere. Overall emissions do not change. New Zealand has one of the most comprehensive ETSs in the world. Nearly all of the government’s policies will be neutralised – regardless of whether existing policies are enough.

The government’s vast new spending on climate change policies could reduce emissions by zero tonnes. If this were business, it would be fraud.

Whether or not the government can be accused of fraud, that is scandalous.

This report reviews the government’s climate change strategy. The strategy is based on a misunderstanding of the relationship between the ETS and other policies. The government is pushing its disruptive policies by misconstruing the legislation and by ignoring every feasible alternative. Officials have mostly abandoned cost-benefit analysis; they reject cost and effectiveness as primary goals; they believe climate policies should manage inequality and historic grievances as well as reduce emissions; emissions policies are rarely checked after they are launched; and poor performance is rarely corrected. It is not surprising that policies regularly spend 20 times more than the ETS to abate each tonne of emissions.

We are witnessing an historic public policy failure. Later this year, when the government delivers its new policies, it will call its policies “necessary” or “vital.” This is the pretence of necessity. It is cover for policies that could not survive any test of their merits. After all, there can be no case for expensive, ineffective, and often regressive policies if they are not needed.

It would be difficult, if not impossible, to mount a case for expensive, ineffective and often regressive policies if they are needed.

Inflicting them on us when they aren’t, is bad politics based on flawed principles.

It’s a very bad example of must do something and be seen to be doing it policy on the theory that doing something is better than doing nothing, even when in this case, it isn’t. It’s merely virtue signalling to the green zealots here and abroad.

Like far too many other supposedly green policies it unbalances the three-legged sustainability stool – cutting off the economic and social legs leaving the environmental one that superficially looks strong but will not support the weight of science.

The full report Pretence of Necessity is here.

Crisis or not, it’s top concern


National leader Chris Luxon’s state of the nation speech included the assertion that we’ve got a cost of living crisis.

Journalists picked that up and asked the Prime Minister if it is a crisis.

. . . I wouldn’t describe it that way, there is an impact that people are feeling undeniably but I wouldn’t describe it in that way,” Ardern told AM.  . . 

Many disagree including :Mum of five Krystine Nation and concerned Kiwi Steve Christodoulou say it is a crisis and families are struggling. . .

“To say there isn’t a crisis… she [Ardern] needs to get on the ground floor,” she said. “I couldn’t understand why we were struggling so much when in the first lockdown I was teaching people how to buy their groceries for $200 a week and live comfortably…In just over a year my groceries have increased $7000 annually. That’s a lot, my husband hasn’t received a $7000 increase in his pay. Not only that there is the petrol, the rent, I have spoken to so many people about this.”. . .

Christodoulou agrees, saying the increased cost of living is impacting his family too even though they aren’t low income. 

“It really irked me when the Prime Minister said this is not a crisis because look I am not going to lie, I wouldn’t classify myself as being on the breadline however there are things we notice changing drastically. . .

Christodoulou says petrol prices are also hitting his family. 

“You really do think before you put your key in the car, ‘do I really need to nip into town now or can I hold off, can I wait until I have to pick the kids up from kindy or have to go to an appointment’.” . . 

Others added their views in a Reddit thread:

One user said Ardern was “simply ignoring facts”, while another called it a “piss poor take” given food, petrol, rent and house prices were “skyrocketing”.

“How is this not a cost of living crisis?” . . 

Every week I have to withdrawl [sic] money from my savings to make ends meet with rent, food and petrol bills. So my full-time wage is not enough to service basic living costs without pulling money from somewhere else,” another user said.

“If it’s not a crisis what is it cause I feel crisis point and upset every day this year so far.” . . 

Whatever Ardern calls it, the cost of living is New Zealanders’ top concern.

. . . Consumer NZ’s Sentiment Tracker survey – a nationally representative quarterly survey – found the cost of living has overtaken previous top concerns of Covid 19 and the price of housing.

The tracker also looked at ongoing financial concerns for New Zealanders, with the cost of groceries ranking highly, superseded surpassed only by housing costs and unmanageable debt.

“We’re concerned about the rising cost of living and how many New Zealanders are struggling to afford their grocery bills. We’ve been campaigning for much needed change in New Zealand’s highly concentrated supermarket industry. With only two main players there is a distinct lack of competition that is contributing to high prices and higher than acceptable profit margins,” said Jon Duffy, Consumer NZ chief executive. . . 

Anyone who puts petrol in their vehicle or shops at the supermarket knows that the cost of living has increased and even people on reasonable incomes are finding their budgets are stretched.

Of course, it’s even worse for people on lower incomes.

That might not be obvious from the Beehive but it is for charities which work with them:

Monte Cecilia CEO Bernie Smith is pushing back on Prime Minister Jacinda Ardern’s statements on Monday that while rising living costs were having an impact, she wouldn’t describe the situation as a crisis.

“From Monte Cecilia’s perspective, we’re working with hundreds of families every day who were already struggling to keep a roof over their children’s heads and food in their bellies, who are now being pushed well past the line. If that’s not a crisis, I don’t know what you’d call it.”

“Between rent, food, fuel and other basic necessities, families are expected to somehow find thousands of dollars extra a year to cover the rising costs. That’s a tough blow for those of us who are doing ok, but for families who were already struggling it’s crushing.”

Monte Cecilia has had to stop taking referrals earlier in the year after its wait list grew to almost 400 families and the government restricted its ability to contract new homes from landlords.

“The level of need in our communities right now is staggering and it’s a gut punch each time we have to tell a family that we’re not able to help them right now. If we as a country don’t do something urgently, the number of families in serious need, and the severity of that need, is only going to continue to grow.” . . 

Whatever she calls it, the PM’s comment makes her look out of touch :

The Prime Minister’s refusal to acknowledge the cost of living crisis shows she is out of touch with how tough it is becoming for Kiwis to put food on the table, says Opposition Leader Christopher Luxon.

“This week the Prime Minister stated inflation will get better this year. But in fact, the Reserve Bank’s forecast shows annual inflation is set to get worse, increasing to 6.6 per cent, while ANZ has today forecast that inflation could hit 7.4 per cent in the second quarter of this year.

“That‘s up from 5.9 per cent, which is already the highest inflation rate in three decades. Not only is annual inflation forecast to increase, but Kiwis’ wages are not keeping pace.

“The cost of everyday basics like food, petrol and housing are all through the roof. The average Kiwi family is worse off than they were 12 months ago and the Government needs to act.

“Instead, Labour is refusing to offer tax relief to Kiwis by adjusting tax brackets for inflation, meaning people will have to dig even deeper into their pockets just to fill up the car and put food on the table.

“It’s time for the Government to take action and deliver tax relief by adjusting tax brackets to account for the rampant inflation we’ve seen under Labour, to help Kiwis struggling under a cost of living crisis.”

The PM, and her government, can’t be held responsible for global shortages and other imported contributions to price rises, but their borrow and spend policies have contributed to domestic price escalations.

So too have the MIQeue of misery,  immigration policy and end of sanctions for beneficiaries who don’t actively look for work. All of those have led to the labour shortages that have left, and are still leaving, fruit and vegetables unpicked and that in turn leads to lower supply and higher prices.

And whatever she calls the problem isn’t nearly as important as what she plans to do to solve it, which so far looks like nothing.

Inflation is theft


Government spin is trying to tell us that the highest inflation rate in three decades is due to global pressures. It’s not.

Inflation hit a 31-year high at the end of 2021, with a strong rise in domestic costs expected to create headaches for the Reserve Bank.

Statistics New Zealand said the consumer price index (CPI), the official measure of household inflation, rose by 5.9 per cent in 2021, the highest since 1990, shortly after the Reserve Bank was given new powers to use interest rates to keep prices stable.

While the figures were largely in line with expectations – several economists had predicted inflation hit at least 6 per cent last year – the breakdown of the theoretical basket of goods used to calculate the CPI suggested the current wave of increases is more of a domestic issue than some had expected.

Shortly after the figures were announced, Prime Minister Jacinda Ardern told reporters that the rise, predicted by commentators, was largely the result of global inflation pressures.

While tradeable inflation – generally reflecting costs imported from overseas – rose to 6.9 per cent, this was actually below expectations. Non-tradeable inflation, made up of the components of inflation that are mostly domestic, was 5.3 per cent, well above expectations and at the highest level recorded since Statistics NZ began providing a breakdown of local and imported elements. . .

A large contributor to the domestic component is government spending:

The Finance Minister must rein in his spending to avoid adding more fuel to the inflationary fire that is hurting everyday New Zealanders, National’s Finance spokesperson Simon Bridges says.

“At 5.9% for 2021, inflation is the highest it has been in three decades. It’s a thief in New Zealanders’ pockets, and it’s the least well-off Kiwis who will be doing it the toughest.

People on low and middle incomes are already over-stretched. Inflation will make life even harder for them.

Parents will have to put food back at the supermarket, workers will only be able to partly fill up at the petrol station, and there’s even less hope for young people trying to buy their first home.

“With wage growth of only 2.4%, well under half of inflation’s growth, New Zealanders are going backward. At the same time, we’ve got rising interest rates and record amounts of government spending.

“Grant Robertson’s spending has been 40% higher throughout his time as Finance Minister than it was under National. This year he’s planning to increase that to a staggering 68% at $128 billion, with $6 billion in new spending.

“While elevated spending was appropriate through much of the pandemic, some easing off and greater focus on the quality of spending is now required.

The elevated spending wasn’t all appropriate. Some that was authorised for Covid recovery was spent on other much lower priority projects and some, like the $50m on the bike bridge to nowhere, was simply wasted.

The big spend increasingly won’t achieve anything in a constrained economy where each public dollar is just competing with New Zealanders’ investments in scarce resources and workers.

“Even worse, big spending now will simply push inflation higher, which will act as a double whammy, hitting New Zealanders in the pocket twice through the inflation effect and as the Reserve Bank is forced to continue hiking up interest rates, higher than would otherwise be necessary.

Grant Robertson’s glib response on inflation in the past has been that ‘it’s international’. If that’s a complete answer, then he needs to explain why the domestic part of New Zealand’s inflation is also rising and why Australia’s is considerably lower than ours at 3.5% over the same period.

“More importantly though, he needs to act by focusing on the quality of his spending and reining it in so that everyday Kiwis don’t keep getting burnt by price rises that far outstrip wage increases.”

Wages haven’t kept up with inflation but they have pushed some people into higher tax brackets:

Grant Robertson must urgently respond to spiking inflation with an adjustment of tax brackets, says the New Zealand Taxpayers’ Union in response to Stats NZ’s latest inflation figures.

Union spokesman Louis Houlbrooke says, “At the Reserve Bank’s last forecast, inflation was expected to hit 5.7% in March, but inflation has already hit 5.9% – that’s two months early.”

“Inflation doesn’t just hammer New Zealanders with higher prices – it also means we pay more in income tax. As salaries scramble upwards to keep up with rising costs, New Zealanders end up in higher income tax brackets, despite being or worse off in real terms. Workers are whacked once with inflation, and again with a tax hike.”

“The dirty secret of inflation is that Grant Robertson benefits from it. More tax revenue means he can make bigger spending promises – spending that itself serves to bid up the cost of goods and services, fueling inflation further.”

“There is one simple thing the Grant Robertson can do to avoid the perception he’s got a vested interest in driving up inflation – he needs to urgently adjust tax brackets and index them to shift automatically to counter the effects of rising costs.”

Inflation is theft.

It steals the real value of wages and without an adjustment to tax brackets the government will be making life harder for people by taking even more from them

Economic clouds gathering


Steven Joyce opines on the gathering economic clouds:

. . . The sad fact is that the world economy is facing darker days ahead. Despite appearing to have skated smoothly through the pandemic, the pressures have been building up. Ironically, the very medicine that has made the pandemic seem so economically benign has created the pressures we now have to deal with. Like much in life, in economics it seems you can take your lumps now or later — but you will have to take them.

The most obvious problem remains inflation. Pretty much everyone now accepts that central banks and governments overshot the stimulus response. Inflation is not transitory as was the collective hope of policymakers last year. In the US it has now hit 7 per cent, the highest level in 40 years. Federal Reserve chair Jerome Powell has finally admitted inflation represents a “real threat” to the US economy. Not before time.

Back here things are not yet as bad, but we are doing our best to emulate our American friends. Inflation for the September year was just a tick under 5 per cent, with much of that occurring in the most recent six months. There is every chance we will be much closer to 7 than 5 by the middle of this year.

Inflation is bad enough, because it erodes the purchasing power of ordinary people and hits the poorest hardest. But the medicine needed to treat inflation presents its own significant problems. 

What the left like to call the failed policies of the 80s and 90s were the tough medicine required to treat inflation which raged in the years before the medicine was prescribed.

Inflation fools people into thinking they are wealthier when the reverse is true. Any increase in value is an illusion when inflation is eroding the real value of money.

In order to bring inflation under control, interest rates have to go up, and all the signs suggest a more aggressive set of rate hikes than many were envisaging even six months ago. In the US they are now expecting four interest rate increases this year, while here in New Zealand our largest consumer bank has just upped its expected interest rate increases by a further percentage point, and now expects the OCR to hit 3 per cent. . . 

A lot of people have borrowed a lot of money to buy houses.

Even small increases in interest rates on a lot of money is a big number that will be unaffordable from some, possibly many.

At the same time, asset prices are going to come under downward pressure. Indeed, that is already happening. In America the sharemarket has had a tough start to the year, with all three major indices significantly down and the Nasdaq entering correction territory. Here at home, the NZX is off around 5 per cent since the start of the year. . . 

Low interest rates fuel higher share prices. As interest rates climb shares will be less expensive and will fall in value.

Given all these risks, prudent governments would be starting 2022 with a plan to constrain government spending where they can to take pressure off interest rate increases, take steps to increase competitiveness and encourage competition in consumer markets to lower prices, and make it easier for firms to do business.

Unfortunately that isn’t the mood around much of the world currently. Governments seem to believe their policy decisions in all areas need not be concerned about economic consequences and our own is no exception.

Indeed, our Government makes matters worse through its highly reactive approach to issues (think the Covid response), and its huge mistrust of the private sector (think Covid again and issues like MIQ, rapid antigen testing, and vaccination). It’s a fair guess the economy is hardly on the Cabinet’s radar currently.

The Government’s economic team should stop the self-congratulatory economic back-slapping of the last six months, roll up their sleeves and think about how we are going to encourage more business investment and grow our way out of this pandemic. Otherwise the coming storm could mean a long, unhappy period of economic underperformance and all the negative effects on wellbeing that come with that.

The uncertainty we’re facing owing to Covid-19 and the response to it, will add pressure to the economic clouds and there’s little hope that the government that is fueling inflation will be any help in sheltering us from the coming storm.



Another economic blunder


The government’s plan to introduce an unemployment insurance scheme is, Dennis Wesselbaum says, another of its blunders:

We do not have details about its precise design, but what we hear is that the new scheme will pay up to 80 per cent of income for up to half a year, if an employee loses their job. In any case, the reform will be a historic turning-point.

This policy, however, will reduce welfare (wellbeing would be more politically correct), increase unemployment, increase the duration of unemployment, reduce income, increase inequality, and lead to higher inflation. This outcome is robust and well-known in the field of macro-labour economics.

Recent experiences in Spain and Germany have shown that increasing the duration of unemployment insurance increases level and duration of unemployment. The probability of being unemployed for 12 months, for example, increases from 15 per cent to 40 per cent, if you move from a no unemployment insurance scheme to a one-year unemployment insurance scheme.

Hence, this leads to more (long-term) unemployment. . . 

The longer people are unemployed, the harder it is for them to re-enter the workforce.

Anything which encourages longer term unemployment is economic and social sabotage.

In Opposition Labour was highly critical of increasing inequality but this policy will make it worse.

Those workers who are employed enjoy a higher wage, but there will be fewer of them. This will increase income inequality in the economy. Importantly, overall welfare in the economy decreases.

Firms face higher labour costs which increases prices and creates inflation.

With less consumption, production falls, and overall income in the economy drops. . . 

More unemployment requires more to be spent on benefits and fewer people working leads to less tax being paid.

This will reduce fiscal space to deal with future recessions and restricts spending for important long-run factors such as infrastructure, education, or health.

Even worse, be prepared to have lower incomes, because all of this will be financed via an income tax increase. Taxes will increase by about 3-4 per cent. This tax hike will damage economic growth, by reducing incentives to invest and work. This will additionally shrink the supply side, which further fuels inflation.

In conclusion, you will be paying higher income taxes, have lower income, and pay higher prices such that the Government can implement a policy which will be harmful for the economy in many ways and reduces welfare – which this Government claims to be its raison d’être.

This reform is against every lesson economists have learned.

In my opinion, this shows the Labour Government does not care about designing useful economic reforms that would lead to better outcomes, but rather does whatever is required to transform Aotearoa into a socialist welfare state with a central government controlling all aspects of life.

Few, if any, people would never have an accident which is a good argument for ACC.

Few, if any, would never need hospital treatment which is an argument for a health insurance scheme, perhaps similar to Singapore’s.

But very few people are made redundant which makes the unemployment insurance scheme just a tax by another name that will do far more harm than good.

The blundering doesn’t stop there.

The proposal to impose UnFair Pay Agreements on employers and their staff  will compound the economic and social damage the government is inflicting on the country.

Complacency incompetence & control freakery


Sir Brian Roche has yet another report criticising the government’s Covid-19 response:

Sir Brian Roche warned lockdown tolerance was waning, the vaccine rollout was failing Māori and MIQ was causing social and economic harm, a document dump released on Friday shows.

The esteemed advisor also told the Government the “current outbreak has revealed the very poor level of preparedness of hospitals for Delta”.

Sir Brian reviewed the Delta outbreak and its impact on reopening the borders. He sent his advice to ministers on September 23 – two days after Auckland moved to alert level 3.

Tolerance and goodwill for lockdowns and closed borders were being challenged, Sir Brian warned.

“The current Delta outbreak has, to a significant extent, exposed urgent issues with respect to New Zealand’s preparedness for reconnecting.

“Delta has fundamentally changed the model of preparedness and response and we must adapt accordingly. We do not have a do-nothing option.” . . 

The lack of preparedness for Delta is matched by being ill-prepared for opening the borders:

Sir Brian also wanted the Government to begin opening the international border “to address escalating economic and social harms”, but said before doing so there needed to be a means for vaccination verification, “coherent and fit-for-purpose plan” for MIQ alternatives with saliva and rapid antigen resting rolled out widely “as quickly as possible”.

“Rapid antigen testing is a critical prerequisite – we cannot afford the delays in its introduction that have been experienced with saliva testing.”

The Government only rolled out vaccine passes on November 17 and announced changes to MIQ alternatives and rapid antigen testing this week – two months after getting that advice.

To address the issues Sir Brian wanted a fit-for-purpose COVID agency or response unit because the current model “is failing and will fail” when the country reopens.

“We recommend that this unit is put in place before the end of the vaccination rollout as the current arrangements put the country at unnecessary risk.”

The lack of preparedness is partly due to complacency – all the time wasted last year that led to the delay in the vaccine strollout.

There are also elements of incompetence, especially around the delays in saliva testing and rapid antigen testing.

The costs of that have been compounded by control freakery:

Newshub can reveal Director-General of Health Dr Ashley Bloomfield advised the Government “the rest of New Zealand could move to Alert Level 1” back in September. 

The Government dropped a heap of documents related to the COVID-19 Delta outbreak response on Friday, revealing behind-the-scenes advice from the Ministry of Health that informed alert level decisions. 

In a document dated September 12, Dr Bloomfield advised Prime Minister Jacinda Ardern and her Cabinet that Auckland could shift to alert level 3 while “the rest of New Zealand could move to Alert Level 1”.  . . 

Keeping Auckland at level 4 and the rest of New Zealand at level 2 for longer than advised  has been very expensive in both economic and human terms.

All sorts of events have been cancelled, businesses have failed, wedding services and funerals have had restricted numbers or been postponed because of restrictions on what can operate and how many people can gather.

The financial losses and emotional strain of this are incalculable.

But the biggest cost could yet be political.

The government has told us time and time again it’s following medical advice but this information dump shows that at least in this case it wasn’t.

So what was driving this very costly decision?

It wasn’t complacency, it might not have been incompetence – it looks very like control freakery as does yesterday’s traffic light announcement.


Paying cost for incompetence


Kate MacNamara asks: Did scandal-mired former Health Minister David Clark ignore Pfizer’s vaccine meeting request?

Labour Minister David Clark was sent a key Pfizer letter on June 30 last year, in which the drug company pressed the head of New Zealand’s “vaccine taskforce” to meet and discuss its vaccine candidate.

Taskforce officials, however, were not equipped at the time to begin talks with the drug company, and over six weeks elapsed before a first meeting took place.

The Cabinet finally armed the taskforce with funds both to contract specialist negotiation expertise and to make vaccine purchases on August 10; officials signed a non-disclosure agreement with Pfizer on August 13 and a first meeting with the company took place the following day, on August 14.

Clark, the then Health Minister, refused to answer questions about the letter, including whether he read it at the time and whether he made any effort to hasten the readiness of the taskforce to begin meetings and negotiations with the drug company. . .

Clark’s press secretary, Sam Farrell, said Clark, now reinstated to the Cabinet with four portfolios, including Commerce and Consumer Affairs, will not answer questions about the Pfizer letter because, “[he] no longer has ministerial responsibility for the health portfolio …” . . .

But he did have responsibility at the time.

Pfizer’s June letter noted: “We have the potential to supply millions of vaccine doses by the end of 2020, subject to technical success and regulatory approvals, then rapidly scale up to produce hundreds of millions of doses in 2021. . . 

Once we came out of the first lockdown the government rested on its laurels, basking in praise for no community transmission (well apart from that which locked Auckland down again, and again . . ); and responding to criticisms that we needed vaccines sooner by saying other countries needed them more.

Chris Bishop, National’s spokesman for Covid-19 Response, said Clark’s “inaction” showed “unforgivable incompetence from a minister clearly distracted by other things at the time.”

“He should have been moving with speed and alacrity to get a meeting with Pfizer as quickly as possible. The fact that the Pfizer meeting took over six weeks clearly set us back in 2021,” Bishop said. . . 

At the very least it shows a lack of focus and poor prioritisation.

It’s unclear whether earlier engagement with Pfizer could have secured a larger quantity of early vaccine doses for New Zealand.

If in June 2020 Pfizer was telling the government it could supply millions of vaccine doses by the end of the year, it almost certainly would have done so had the government not delayed responding.

By October, New Zealand lagged many of its peers in signing so-called bilateral advance purchase agreements with drug companies for vaccine candidates.

In March the Government signed a second agreement with Pfizer to secure a further 8.5 million doses, likely on a delivery schedule for the second half of 2021.

The Government has declined to release the Pfizer contracts, citing commercial confidentiality. The first doses arrived in New Zealand in February, 2021, following Medsafe approval, and the Ministry of Health’s schedule shows that 1.5 million doses had arrived in the country by early July, 2021.

New Zealand has subsequently incurred a roughly estimated cost to the economy of some $10 billion through lockdowns and the Government has pinned reopening to very high levels of vaccination. . . 

Had more people been vaccinated sooner the latest lockdown could at least have been shortened and possibly avoided.

Instead we were all locked down for three weeks and Aucklanders have now been locked down for more than three months.

Delays in vaccination have been very expensive in both human and financial terms, and recovery from both the social and economic impacts will take years.

Inflation steals from us all


The last election took us back more than 25 years to a First Past the Post result and the government that gave us is giving us an increase in inflation from the same era:

The consumers price index rose 2.2 percent in the September 2021 quarter, the biggest quarterly movement since a 2.3 percent rise in the December 2010 quarter, Stats NZ said today.

Excluding quarters impacted by increases to GST rates, the September quarter movement was the highest since the June 1987 quarter, which saw a 3.3 percent rise.

Annual inflation was 4.9 percent in the September 2021 quarter when compared with the September 2020 quarter. This was the biggest annual movement since inflation reached 5.3 percent between the June 2010 and June 2011 quarters.

Excluding periods impacted by changes to GST rates, the September 2021 annual inflation was the highest since it reached 5.1 percent in the September 2008 year. . .

The Prime Minister who promised to address child poverty is leading a government that is fueling a sharp increase in the cost of living:

The Government needs to urgently recognise soaring inflation as the biggest medium-term threat to the New Zealand economy and halt its wasteful spending, says National’s Finance spokesperson Michael Woodhouse.

“Today, StatsNZ has confirmed what Kiwis all across New Zealand already know – the cost of living is rising fast under the Labour Government.

“In the past 12 months, the cost of living has increased by almost 5 per cent, meaning prices are now rising faster than they have at any time in the past 10 years.

“Grant Robertson has increased the size of government spending by more than 40 per cent in just four years. It is no surprise New Zealanders are now seeing costs increase all throughout the economy.

“Labour’s big spending is hurting the very people Labour claims to represent. The cost of renting a house has now increased 7.8% since just September last year, the biggest increase since records began.

“Prices of fresh fruit and vegetables have increased 9.3 per cent in the past 12 months.

“The increase in prices in just the last three months is the highest three-monthly increase since the 1980s, excluding the one-off increase in GST in 2010.

“The next big cost increase is unfortunately likely to now be mortgage costs as the Reserve Bank is forced to painfully increase interest rates as Kiwis and businesses try to recover from the current Covid outbreak.

“Grant Robertson needs to hit pause on any and all of his so-called Covid stimulus spending that is not fully committed. It makes no sense for the Government to be spraying cash at pet projects like the Green School when the biggest problems now facing the economy are inflation, labour shortages and Covid closures.

“The Covid Fund needs to be used to support businesses impacted by lockdowns and to ramp up the health response to Covid, not as Grant Robertson’s personal slush fund.”

The only winner from soaring inflation is the government that will collect more tax as pay increases push people into higher tax thresholds:

Responding to the revelation of 4.9% inflation for the last year, Taxpayers’ Union spokesman Jordan Williams says:

“Skyrocketing prices are an indictment on the Government’s print, borrow, and spend economic strategy. In general, Government spending is more inflationary than leaving money in taxpayers’ pockets, and Grant Robertson needs to shoulder some of the blame for today’s numbers.”

“The need to adjust income tax brackets has now become desperate. Inflation pushes our wages up into higher tax brackets even when we’re no better off in real terms. Grant Robertson might be pleased to get his hands on all this inflation-driven tax revenue, but during a pandemic this tax grab is unconscionable.”



It steals from us all, devaluing the real value of wages and savings by making everything more expensive.

It creates a vicious circle. When people know things will cost more in the future they are much more likely to buy more today. That feeds inflation which encourages people to buy more . . .

It will almost certainly force an increase in interest rates which will make mortgages unmanageable for the highly indebted and add to the costs of doing business which will in turn push up prices and that will feed into higher inflation and all of this will hit the poorest hardest.

Aoteanomics Labour’s plan


Robert MacCulloch asks: has Aoteanmoics become Labour’s plan for New Zealand?:

It started as a few comments that weren’t seen as mainstream. Now it’s become a veritable tsunami.

The Head of the Productivity Commission has just announced his disdain for GDP. He says it “is not a great measure of anything useful” and blames the profit-oriented shareholder model for our society’s ills. Even though it forms the basis of wealth creation in this nation.

GDP isn’t a measure of anything useful and a focus on profit is wrong? What would they replace them with?

The Reserve Bank is backing him. As for the Climate Change Commission, had it cared about both the environment and economic growth, it would’ve advocated for carbon taxes with the revenues being used to cut other tax rates. But it didn’t. Furthermore, the keynote address at the NZ Association of Economists 2021 Conference by the Ministry of Primary Industries’ Chief Economist called for a “systemic transition” to a new “holistic”, “post-growth”, “doughnut” approach to management of the country’s affairs.

The keynote gave this new approach a name. Aoteanomics. What is it? A full blown rejection of the idea that GDP growth is desirable. And it is way more radical and experimental than Rogernomics ever was. So why won’t the PM and Finance Minister come clean to the nation about the new post-growth agenda that’s the talk of the Wellington elite?

Are they terrified of their party being wiped by Kiwi business if they make the big reveal? Is this the reason why the government is pretending to be inventing gravity-defying forms of economic management? Ones that can close borders and still yield long-term prosperity? Ones that can impose a swathe of command-and-control rules relating to climate change with little effect on output? Ones where more equity can be achieved by dumping the shareholder model, or by introducing fair-pay agreements, without giving up efficiency?

These policies are sadly typical of people who see a desirable goal without understanding any of the downside in the way they plan to get there.

The twin aims of good economic and good health outcomes that the PM describes were achieved the past year due to robust consumer demand made possible by our domestic elimination of the virus. People were able to go on holidays and enjoy a freedom of movement denied in most other places. But the policy actions that achieved this outcome were short-term patch-up jobs. The factors that determine long-run growth rates are very different to the consumption spending that has recently been underpinning output. Those factors include skills, innovations and investments, which are being severely constrained by our border controls. . . 

Closing the borders last year was justified by the risk of letting Covid-19 in. They are still closed because our vaccine roll-out is so slow and until most of us are vaccinated the risk of the disease spreading as it has, and still is, in most other countries dictates that they will stay closed.

But that has come at a huge personal and economic cost. Families and friends are being kept apart, business people can’t meet customers and the public and private sector are both facing desperate staff shortages.

Countries are now moving beyond addressing the fall-out from what first appeared would be a temporary shock to designing ways of accommodating what’s fast looking like becoming a more permanent state of affairs. In this new equilibrium, biting trade-offs will occur. Better virus-related health outcomes supported by closed borders are likely to lower long term growth paths, especially for small, isolated countries. The best-of-both-worlds scenario that we previously savored is about to evaporate.

As NZ enters this new phase, some truths about government priorities are beginning to be revealed. Long-run economic growth isn’t one of them. . . 

Is there any alternative to long-run economic growth other than decline?

If our economy doesn’t grow, how will we afford the health care, infrastructure and other goods and services that allow us to call ourselves a first world nation?

If the government is going to take us down this uncharted territory, shouldn’t they tell us what they’re doing and why?

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