Wednesday, October 31, 2012

English's Housing Solutions Won't Work


The housing crisis has been with us for some time and the last Labour Government must also shoulder some responsibility for it. I originally wrote a post about housing four months ago and while it has been a huge issue for all the time that National has been in government it has only been this past week that it has been acknowledged and Bill English has made the first tentative steps to doing something about it. The lack of action before now is probably due to the fact that the crisis has only effected low income earners, who are largely ignored by this government. The fact that English himself once claimed an allowance of $1,000 a week to live in his own Wellington home, is an indication of how removed this Government is from the housing realities for most people. Now that many middle income earners can't to afford to buy a house and many even struggle to find reasonable rental properties, the Government is being nudged into action.

A number of factors have reportedly led us to the current situation (much of the information listed below comes from the Department of Building and Housing Report 2009/2010):
  • The lack of a capital gains tax has meant property investment is very lucrative and this has pushed our house prices up to a level which makes our housing amongst the most expensive in the world
  • The median house price in New Zealand is 5.2 times the median wage and in Auckland houses are 6.4 times the median wage. This makes housing in New Zealand more expensive than New York and Los Angeles.
  • Our housing is generally of poor quality (it has been suggested that the quality of our housing stock is 50 years behind Scandinavia) and the level of abysmally insulated and maintained housing is problematic. The Green's home insulation scheme has supported the insulation of over 100,000 homes but not generally those belonging to the lowest income earners or the cheaper rentals. There are still a large number of leaking homes that need to be repaired (around $11 billion worth).
  • There is little commitment or encouragement for innovation or the inclusion of energy efficient criteria in most new housing construction (e.g. using passive solar heating principles or solar water heating).  
  • Almost half of the current state housing stock are the original state homes built around seventy years ago.
  • The supply of Government housing has not kept up with demand with 350 families on the waiting list for a state house in Auckland alone, many of them desperate. The waiting lists are said to be managed by raising the criteria so that the lists are reduced.
  • One consequence of a housing shortage is the over crowding in existing homes and when this occurs there are often negative health consequences. In 2006 43% of Pasifika people lived in over crowded homes, for Maori it was 23% and for Asians it was 20% (only 4% of Europeans live in crowded conditions). Given the growing shortage of houses these percentages would have got worse over the last six years.
  • According to the Department of Building and Housing Auckland alone will be short of over 90,000 dwellings by 2031. 
  • The cost of building materials has increased considerably, it is 30% more expensive to build a house here than in Australia. It has been suggested that the Fletcher Building's monopoly of the construction industry has a major influence on construction costs. 
  • Due to high construction costs it is uneconomic to build affordable housing, so that almost all new houses are built for the elite market and our new homes are the third largest in the world after Australia and the US. The average floor area of housing being built now is almost double what it was in 1974.
  • With high demand and fewer houses, rental properties are a lucrative business. Even in Christchurch where the shortages are acute the Government has allowed market forces to dictate rental rates, which are now beyond many families and allowing huge profits for landlords. Some families have even resorted to sleeping in cars.
  • The construction industry is losing capacity at a time when it should be in most demand. 15% of the workforce (33,000 workers) have been lost from the industry since 2007. Little has been done in training new workers for the industry and building capacity for the predicted demand.
  • Construction related compliance costs are over five times what they were in 2002.
Given that the Government would have had all this information for at least two years it is extremely concerning how little has been publicly acknowledged until now and only after advice from the Productivity Commission. Bill English has admitted the complexities involved but his business, neoliberal leanings has lead him to the following four solutions: 
  • Increasing land supply - this would include both brownfield and greenfield development and expanding city boundaries. 
  • Reducing costs and delays with the RMA process - This would especially relate to medium sized housing related consents. This may also involve centralizing consent authorities into regional or national hubs and introducing competitor agencies (possibly private?). 
  • Speed up the provision of housing infrastructure - Ensure that the coordination and provision of service infrastructure to housing developments occurs in a "timely" fashion.
  • Improving productivity in the construction sector - Looking at a 20% increase in productivity. 
"Many of the changes that will make a difference lie with councils and the Government expects them to share the commitment to improve housing affordability," said Mr English. He has made sure that he has shifted responsibility from himself and his Government if it doesn't occur. It also looks like developer heaven, with fresh land to develop, cheaper building consents and timely provision of services. With faster, cheaper turnarounds the resulting increase in profits will be welcomed.

What English has ignored is the poor performance of Housing New Zealand and their hundreds of substandard or unoccupied homes. There is also no indication that any of the soon to be constructed "affordable" housing will have to meet any particular levels of quality (other than building codes) or specifications. When Michael Savage instigated the building of the first state houses there was a concerted effort to ensure their quality was of the highest standards for the time (the fact that so many still form around half of current state housing stocks supports this strategy). With the quality of houses largely left to private developers there will also be no such assurance of quality control, houses will be built for maximum profits, not to meet long term demands or to future proofing them by building them to last.

Gareth Morgan also makes the good point that availability of land is not the real issue and claims those who wrote the Productivity Commission report were using dated thinking around how housing can be created (the quarter acre section is no longer necessary). Morgan suggests a "capital" tax rather than a "capital gains" tax to shift investment from property and make the price of housing more affordable for ordinary New Zealanders. 

I have a concern that there has been no apparent effort by this Government to stop the continuing segregation of communities by their socioeconomic status and supporting the removal of state housing from areas of growing affluence is a concerning precedent. If private interests dictate housing developments they would want to maximise profits and having developments of mixed housing will diminish the value of the higher end houses and so not meet that end. Central government has a role in determining the shape of our future communities and ensuring a more equitable approach, otherwise we will head further to the establishment of exclusive or gated communities at one end of the spectrum and areas that resemble ghettos for the growing numbers of poor.

There also needs to be an investment in training new construction workers from the high numbers of unemployed youth and attract back the 33,000 workers who have left for greener pastures. What we don't want is a reliance on overseas workers to meet labour shortages and a plethora of unskilled, but cheap workers who may create difficulties in quality control. We don't want urgency and cutting of regulations to be the catalyst of another leaky building type debacle.

New Zealand is not a poor country in international terms, our level of government borrowing is growing but we are still better off in this regard than most, and we have $12 billion set aside for motorways that largely fail cost benefit analysis. Surely we need to reassess our priorities and have some minimum standards and expectations for how our most vulnerable children and families will be housed. Unlike the motorways, investing in housing will be cost effective through helping alleviate the billions spent on health care and remedial education, partly caused by unhealthy homes. An investment in energy efficient housing will reduce energy consumption and the costs of  having to continually increase power production.

Michael Savage had it right, good accessible housing can make a huge difference to lifting the living standards and aspirations of our poorest citizens and provide a useful boost to our economy.

Sunday, October 28, 2012

Hiding Destruction and Inventing Crisis



Each morning I turn on the radio to listen to Morning Report on Radio New Zealand National, it generally sets the scene for what will be the resonating issues for the day. My wife claims it is not good for my health because for the last four years she has witnessed me starting each day grumbling and muttering into my cereal and my blood pressure rising dangerously.

This morning my cereal was almost blasted out of the bowl by the force of my emotional outpourings and what cereal did reach my mouth struggled to negotiate my oesophagus as I choked on two particular news items. The first item was the Government's announcement that they would be discontinuing the five yearly State of the Environment Report (due in December) and the second was the Head of the Ministry of Education, Lesley Longstone, claiming that we can no longer call our education system world class.

The Parliamentary Commissioner for the Environment, Dr Jan Wright, strongly condemned the scrapping of the environment report. Dr Wright expressed the view that to no longer compile and have a detailed analysis of all the environmental data collected over the previous five years is "not good enough!". The State of the Environment Report is a pivotal one for allowing us to see an overview of our environmental management and establish the priorities for the next five years. The report is the most useful way for the public to judge the Government's performance as a responsible steward of our environment and to see if its policies are making a positive difference to areas of concern highlighted in the previous report.

Amy Adams claimed that the Ministry of the Environment will continue to track environmental performance on the 22 core indicators but will now only release new data as it comes to hand. This is just a highly manipulative method to hide the true extent of our environmental decline. By releasing random data at different times the Government can manage the information release and interpret the data with their own spin and so minimize the potential damage of concerning trends and the impact of a complete report.

Pure Advantage has estimated that around 75% of our exporters are dependent on New Zealand's "clean green" brand and yet amongst OECD countries we have plummeted from 1st for our environmental performance to 15th since 2006. While the National led Government have recognized the importance of the clean image, they would rather maintain it through subterfuge than make it a reality. Keeping dairy profits high means to ignore the consequences of intensive farming on our rivers and to take advantage of the quick profits from accessing fossil fuels will mean the destruction of many natural environments. Supporting sustainable and responsible industries and investing in R+D to advance environmentally sound businesses are not priorities and future proofing our economy is not being considered.

While the Government is desperate to hide the reality of our environmental decline they are bizarrely talking down the success of our education system. The New Zealand Institute rates education as one of the best performing sectors in its New Zealand Report Card and using internationally recognized assessments we are generally ranked amongst the top 5. Since 2008 this National led Government has used the fact that we have educational under-achievement amongst the least affluent in New Zealand (mainly Maori and Pasifika children) as evidence of system failure. Ministry of Education Head, Lesley Longstone, claimed in her annual report that "...the system is still under-performing for Maori and Pasifika learners, and learners from communities with significant social and economic challenges. While our education system continues to under-perform for these learners, we are not entitled to call ourselves world-class."

What Longstone and the government fail to recognise is that while teachers can have a positive effect on children from impoverished and struggling families their impact will always be limited. The Government's own flawed National Standards revealed that educational achievement is related more to the decile of the community than the standard of teaching. To claim that the education system is failing poor children is just shifting the responsibility from the Government for not dealing with the growing income inequities within New Zealand.

While the top two quintiles of New Zealand families (by income) have seen a considerable increase in wealth the bottom three have lost income and most especially Maori and Pasifika families. When 25% of our children live in relative poverty, and the majority of those children are struggling educationally, attacking the education sector won't make the slightest difference. The Government is creating a sense of crisis to bring ideological change to education like dismantling the public provision for private interests ($35 million extra to private schools and setting up Charter Schools), introducing competition through league tables and closing small community schools in favour of large megaschools. It is all about money, not addressing the needs of children.

This National led Government is desperate to hide the truth behind the declining state of our environment and is fabricating a crisis in education where none exists so that they can bring in ideological changes that have no professional basis. This is a vicious, dishonest Government that is prepared to do anything to hide their incompetence while supporting the growing wealth of the already rich and ignoring the suffering of our most vulnerable people and the negative impacts on our precious environment.

I did not enjoy my breakfast this morning.







Saturday, October 27, 2012

NZ Alcohol Industry Triumphs Again.


Alcohol has always been a problem in New Zealand since the first Europeans arrived on its shores. Lawlessness and bad behavior in the early years of European settlement, often fueled by alcohol, was partially responsible for the development of Treaty of Waitangi. The only way for Britain to have legal jurisdiction over New Zealand, and so be able to enforce the peace, was to gain British sovereignty over the nation. It appears that even in those early days the main approach to dealing with excessive alcohol consumption was policing the effects rather than controlling the sales and supply.

Those who have suffered most from the effects of alcohol have been families and children. The temperance movement early last century attempted to ban alcohol altogether and did succeeded to bring about prohibition in different parts of the country(they needed a 3/5 majority vote). However the liquor industry has always been very profitable and there was a strong reaction to the growing strength of the temperance movement from the industry and New Zealand History Online describes the time well:

The trade fights back

Publicans, brewers, and spirit merchants were naturally horrified, and moved swiftly to protect their trade. They had a lot to lose if local prohibition spread. The liquor trade organised itself into the National Council of New Zealand. With the backing of many wealthy and prominent businesses, this organisation was generally better-resourced than the New Zealand Alliance.
The National Council spent lavishly on advertising, and used cartoons to portray temperance advocates as joyless puritans – 'wowsers' – who wished to choke all the pleasure out of life and trample on others' liberties. ‘Moderate’ leagues sprang up in many electorates, arguing that people in a free society should be able to choose to drink or not drink.
The liquor trade's lawyers also kept a close eye on the polls, and delivered long lists of electoral ‘irregularities' to the courts whenever no-license was voted in. 
In many ways we are seeing a parallel in what is happening at present. There is a growing concern about the effects of alcohol in our communities and damning facts and statistics are readily available:
  • Alcohol related harm has been estimated to cost the country over $5.3 billion a year or $14.5 million every day.
  • We have seen an almost 10% increase in alcohol consumption over the last ten years.
  • 25% of adult drinkers are binge drinkers.
  • Half of drinkers under 25 years of age drink large quantities when they drink.
  • 61% of adolescent students drink and 34% binge drink.
  • Every year around 1000 people die from alcohol related causes.
  • New Zealand has a high rate of drowning compared to other countries and 40% of our drownings are alcohol related.
  • 44% of fire fatalities are related to alcohol.
  • We have one of the worst levels of youth suicide in the world and 30% of these are attributed to alcohol.
  • Between 20 and 30% of all injuries are due to alcohol consumption.
  • 22% of ACC claims have alcohol has a contributing factor with these claims costing around $650 million each year.
  • Between 2002 and 2006 there were 5,413 young people hospitalized because of alcohol.
  • For every 100 alcohol or drug impaired drivers killed in motor accidents 54 of their passengers died and 42 sober road users.
  • The 18-29 year age group has the highest rates of alcohol related mortality.
  • A recent survey found that 16.6% of 18-24 year olds had been physically assaulted by someone who had been drinking in the previous 12 months and 12% had been sexually harassed.
  • In 2008 there had been 20,000 violent offenses caused by offenders under the influence of alcohol.
  • A study of university students on sexual behaviour found that 25% had been involved in risky sexual behaviour because of alcohol, 15% of males and 11% of females reported having unprotected sex and 19% of males and 16% of females reported having sex that they later regretted. 
  • 40% of births are unplanned, our teenage pregnancy rate is one of the worst in the OECD and there is a growing binge drinking culture amongst our teenage girls.  It has been estimated that this culture is now causing around 3,000 children with foetal alcohol syndrome being born each year in NZ. 
Prof. Doug Sellman has been a particularly strong voice regarding the impacts of alcohol and he has advocated for changes to be made to reduce consumption. As happened 100 years ago he has been subjected to some strong attacks from the the industry and accusations of being a wowser, trying to impinge on individual rights and promoting the nanny state. While Prof. Sellman has always claimed the facts and science should dominate the debate the attacks he has been subjected to have been largely ideological and emotive.

The Law Commission took a very considered approach to manage the problems of alcohol and their 2010 recommendations largely supported Prof. Sellman's views: 
  • Raising the price of alcohol by an average of 10% through excise tax increases.
  • Regulating irresponsible promotions that encourage the excessive consumption, or purchase, of alcohol.
  • Returning the minimum purchase age to 20.
  • Strenthening the rights and responsibilities of parents for the supply of alcohol to minors.
  • Introducing maximum closing hours for both on and off-licences: (4am and 10pm respectively).
  • Increasing the ability of local people to influence how and where alcohol is sold in their communities.
  • Regulate alcohol advertising and sponsorship.
  • Increasing personal responsibility for unacceptable or harmful behaviors induced by alcohol, including a civil cost recovery regime for those picked up by the police when grossly intoxicated.
It is interesting that the final bill has largely watered down the recommendations to almost a fraction of what would be necessary to make a real difference, disregarding the fact there is strong community support for tougher alcohol laws:
  • There will be no increase in excise tax (despite its effectiveness in reducing tobacco consumption).
  • The only advertising and promotions that will be restricted are at the point of sale so television and sponsorship will largely continue as it is.
  • The minimum age of purchasing is remaining the same (this is was actually a conscience vote across all parties).
  • Changing the closing hours to only 4am and 7am, which means there would be only 3 hours in the early morning when alcohol couldn't be purchased. 
  • Communities will have more say in the way alcohol sales occur in their communities but when the collective strength of the liquor industry and supermarkets throw their weight and considerable finances around most communities will struggle to have their views accepted. 
  • Judith Colins has backed down on an attempt to reduce the alcohol content in RTDs.
 Labour, the Greens and the Maori Party have worthwhile Supplementary Order Papers (SOPs) to address the inadequacies of the bill and bring back the intent of the Law Commission's recommendations. However, despite the efforts of the opposition I see little changing the obvious influence of business interests over this National led Government. It appears that the industry will have its way again as it did 80-100 years ago.

Wednesday, October 24, 2012

Broadband in Schools Highlights Inequities


I do give credit to this Government when it is due and while many terrible things have been threatened or inflicted on our education system the Ultra Fast Broadband (UFB) and Rural Broadband Initiative (RBI) are positive additions. Sadly, once available, the broadband is only going to benefit those who will have access to the related tools and the knowledge and skills to use them.

Connectedness to the world of the internet and the World Wide Web is now essential for a child to fully succeed educationally. Those children who have the tools to access the information and capabilities of the digital age are able to complete tasks and increase their knowledge far more quickly than children who do not. Many studies have shown that access to a home computer has increased achievement in Reading and Mathematics (Tsikalas, Lee, & Newkirk, 2007).

Many high decile schools now expect all children to have a laptop or tablet/ipad and many have classrooms equipped with an interactive white board. The vast majority of lower decile schools would struggle to get their children to turn up with lunch let alone a laptop. Providing ultra fast broadband to many low decile schools will be a little like providing a carless family with free petrol, a pointless gift. My nephew teaches at a decile 2 school and claims they have 2 computers in each class and the school has recently bought an iPad (one for the whole school). At the other end of town a decile 8 school has the senior class (year 6) all with lap tops provided by their parents. Equity, I think not.

Invercargill's Licensing Trust provided all the city's classrooms with interactive whiteboards and then supported their installation with professional development for teachers and employing full-time advisors. The chair of the Licensing Trust was a past school principal and he realized that it is one thing to provide the tools but another to ensure that they will be used to their full potential, the professional support for teachers was equally as important as providing the boards. This was an equitable introduction of useful technology, regardless of the school decile.

This National led Government has sacked most advisors and cut the Education Ministry's budget by $25 million, this may have helped fund the broadband installation but as with most of their initiatives it will probably make little difference to the struggling children that they have identified but done so little to support.







Tuesday, October 23, 2012

John Key, Mastermind Contestant


The New Zealand TV quiz show Mastermind has been resurrected after an absence of 22 years, sadly its original host Peter Sinclair is no longer with us but MP Dr Lockwood Smith agreed to step into the role (Smith has some experience as a television quiz host).


Smith: "Good evening and welcome again to New Zealand Mastermind. Our first contestant is John Key, John's background is in currency trading but his current job is Prime Minister. His specialist area is New Zealand Governance and he has one minute to answer as many questions as he can, starting now!"

"What direct relationship does currency trading have to the governance of a country?"

Key: "I guess both involve making seat of the pants decisions and back room deals involving large sums of money..."

Smith: "No, there is no direct relationship, governing a democratic country such as New Zealand  involves using consultation and professional advice."

"When were you first told about the involvement of the GSCB in spying on the New Zealand resident Kim Dotcom?"

Key: "Dunno, don't remember...pass."

Smith: "What illegal activity was MP John Banks guilty of in relationship to the Auckland local body elections"

Key: "I haven't read the police report, dunno...pass."

Smith: "What evidence was used to base the Government's $12 billion investment in new motorways?"

Key: (Muttering quietly) "Hmm, that's Brownlee's area and he doesn't research stuff...um dunno, pass."

Smith: "How do the National Standards in Education lift the achievement of the bottom 20% of learners?"

Key: "We can identify who they are."

Smith: "No, that could already be done using existing and more accurate norm-referenced assessments. The correct answer is, they don't."

"Did the National Party's policy of state asset sales achieve a voter mandate in the 2011 elections?"

Key: "Yes!"

Smith: "No, the National Party only received 47% of the vote."

"Which type of fraud costs the country the most, tax evasion or benefit fraud?"

Key: "Benefit fraud, too many beneficiaries are living the high life on the money provided by hardworking taxpayers like you and I, it must be costing us millions."

Smith: "No, the answer is tax evasion which costs New Zealand up to $6 billion while welfare fraud cost us $39 million."

"How much did the Government spend on a fleet of new BMWs?"

Key: "I don't recall seeing anything about that, a lot of paper passes across my desk and it would have been some time ago...pass."

Smith: "$6.8 million, and you also asked for heated seats."

"What special efforts have been made by this Government to ensure the privacy of New Zealanders' personal details held by Government agencies?"

Key: (under his breath) "Hmm, Paula and Judith did say they were going to do something...um, new regulations?"

Smith: "No, the answer is none."

"What was the cause of New Zealand's $11.5 billion leaky building crisis?"

Key: "The Labour Government?"

Smith: "No, the 1991 Building Act introduced by the National Government of the time."

(A buzzer sounds, indicating one minute has passed.)

"John Key, your time is up and, out of the ten questions asked, you passed on four and gave wrong answers to six. You have a final score of zero."









Monday, October 22, 2012

Our Southern Paradise.

For many years my wife and I had contemplated having a our own place near the sea. My wife has very fond memories of family holidays in Appledore, North Devon. It is a very picturesque village with an unusual link to southern New Zealand. Both the Invercargill Museum and the Appledore Maritime Museum have displays devoted to the wreck of the General Grant. Both displays document the survivors ingenuity and tenacity in staying alive for one and a half years on an Auckland Island (sub-Antarctic) before finally being rescued. Two of the survivors came from Clovelly, near Appledore.

 Westward Ho Beach, near Appledore.

Instow, across the estuary from Appledore

While NewZealand doesn't have the human history of Britain our wild southern coast has many natural similarities to North Devon. Our favorite part of this coast is the Catlins and most especially Curio Bay. It has an amazing combination of natural features and wildlife: the fossilized forest, the broad sandy beach and wonderful surfing waves, the rare Hector Dolphins, the Yellow Eyed Penguins and the fur seals and sea lions that often visit.

Hector Dolphins surfing

Curio Bay

Fossilized forest

Wild coast

While driving to Curio Bay one passes through Waikawa, a small historic settlement that is situated beside the Waikawa Esturary. Waikawa has its beginnings in the late 1800s when the native timber mills in the area provided much of the materials that built Dunedin in the booming gold mining era. Waikawa was a busy port where the newly milled wood was loaded onto sailing ships bound for Dunedin. A wharf still exists but it is rarely used now although a nearby boat ramp gets lots of use for recreational boaties.


A small 1920's cottage came up for auction, the last property before the wharf and nestled into a bush covered hill. It was sheltered from the prevailing winds, looked directly onto the Estuary and Curio Bay could be reached in a few minutes by road or a little bit longer following the "Old Coach Road" on foot (at low tide). Our kayaks could be launched into the estuary just a few metres from the house, this was the place for us, our Waikawa Paradise.

 The 1920s cottage 

 Bellbirds and Tuis provide a natural background soundtrack.

 Fishing boat moored in the estuary

 The estuary

View from the cottage

Friday, October 19, 2012

Hugh Fletcher Slates Laissez Faire Economics


Hugh Fletcher is stepping down from the board of Fletcher Building and this will severe the ongoing connection of the Fletcher family to the firm started by his grandfather in 1909. In his interview with Kathryn Ryan he expressed frustration with the laissez faire management of the economy over the last 30 years. Given Hugh's long and successful business career and his involvement on the Board of the Reserve Bank, his comments carry some weight. Alison Paterson describes Hugh Fletcher in glowing terms and claims "I have never worked with someone with a bigger intellect then that guy." I feel therefore that the points he makes in the interview (my interpretations admittedly, and I'm open to corrections) are worth noting:
  • No iconic New Zealand Companies that were around when he began in business exist today.
  • There has been no commitment from recent governments to ensure that domestically headquartered businesses can compete with international companies.
  • There is not a level playing field for New Zealand owned companies and investors to compete against overseas investors. There needs to be generically determined macro and micro settings that can manage the imbalance that exists between overseas investors and local interests. Such controls should have some local bias to protect strong local businesses. 
  • International traders and exporters are more likely to produce high value jobs and these are being lost in New Zealand. There has been a growth in low value jobs in New Zealand because of the lack of support for New Zealand exporters. Per capita incomes in the bottom two quartiles haven't grown for some time.
  • 6% of our GDP is accrued by overseas interests and this is growing. This is allowing much of our wealth to be sucked offshore. 
  • Laisse faire economic management doesn't work, it is based on the premise that open markets allow perfect competition - this is highly flawed thinking.
  • Incentives and taxation for outside investors give them an advantage (there are too many loop holes that they can exploit). New Zealand is the third easiest in the world for doing business. 
  • Fletcher Energy (originally the state owned Petrocorp) should never have been allowed to be sold to Shell New Zealand (which actually has very little New Zealand ownership). Shell has continued with the ventures built by Petrocorp and Fletcher Energy but has invested in little new exploration or activity since. 
  • Few countries divest themselves of state owned or locally owned oil and gas companies. Australia wouldn't allow Woodside to be sold to Shell and the US is actively restricting Chinese takeovers of their energy companies. Fletcher Energy was recording profits of around 20% and this income has been largely lost to the country.
  • Overseas capital should only be allowed into New Zealand if it is going to add to our productive capacity and introduce something useful that doesn't already exist. 
  • New Zealand's current account deficit is a actually a huge concern and we are actually worse than Ireland in this respect and not much different from Greece. We are a hugely indebted country.
  • Government politicians have subscribed to Laisse faire economics for too long and need to be sincere in having a debate about introducing further controls to manage our economy and dealing with our inflated exchange rate that is crippling our manufacturers and exporters. 
Hugh didn't mention Russel Norman or quantitative easing, but the Greens seem to be the only party that is on the same wave length and taking our economic situation and local business interests seriously.  



Thursday, October 18, 2012

Government Prioritises Elderly Before Children



The Retirement Commissioner, opposition parties, the New Zealand Institute of Economic Research (NZIER) and all those who can do basic maths can see a huge issue with maintaining the current age eligibility for NZ Superannuation. The number of New Zealanders aged 65 and over is presently around 610,000 but is projected to be 1.1 million by 2031. NZ Superannuation is paid to all resident New Zealanders over 65 and while it currently costs us $9 billion a year, we will be looking at spending $20 billion in todays terms by 2031. That would mean every person in the labour force would be contributing around $7,800 each, almost twice the current bill according to the NZIER.

NZ Superannuation is one of the simplest and most generous pension systems in the world and we spend almost three times more of our GDP on Tier 1 pensions than other OECD countries.  According to a 2006 government report our over 65s have amongst the lowest levels of hardships of all groups measured and in 2008 New Zealand was in the top three of all OECD countries for having the least level of poverty amongst those of retirement age. Our elderly also have one of the highest levels of home ownership in the world.

It is interesting that the Prime Minister refuses to contemplate the possibility of raising the retirement age to 67 and is adamant that NZ superannuation is fiscally sustainable. He hasn't explained how he can justify his stand and yet there is ample evidence for raising the age of eligibility.

For our children the picture is very different. The Children's Commissioner claims that we have around 270,000 children living in poverty. For those children their future prospects and health will be severely compromised and will cost the country billions in reduced productivity and increased health costs. While we spend more on our elderly we spend less on children than most OECD countries. We are ranked near the bottom of all developed nations for the health and safety of our children (29th of 30) and spend almost half of other developed nations on early childhood education as a percentage of our GDP.

The median family income is dropping and Maori and Pasifika families have suffered most with incomes dropping around $50 a week  over the past four years. Those providing food parcels are reporting record numbers being distributed with a growing number of working families requiring support.

Our youth are also suffering from high levels of unemployment (17.1)%, 65,600 are not in work or education. The stress on our young people has led us to have one of the highest youth suicide rates in the world. The Government's plan to create a youth wage of $10.80 will mean that a single retiree receives a guaranteed $400 per week while our newly employed youth will only earn something similar if they can work 40 hours and most will end up in casual employment and earn far less.

We currently have two private member's bills that will have an immediate impact on reducing child poverty and helping struggling families. Sue Moroney's parental leave bill will provide much needed support for young families at a crucial and stressful time and Metiria Turei's extension of the tax credit bill will ensure that beneficiary families will get the full Working for Families package that was intended when Labour first introduced the scheme.

The National led Government has been very clear about where their priorities lie. Bill English will veto Sue's bill and has used deliberately inflated figures to dismiss it and National MPs have been scathing about Metiria's bill. John Key has also rejected the Child Poverty Advisory Group's recommendation to introduce a universal child allowance (similar to the old family benefit payment) because it will also be paid to higher income families. In using this excuse he ignores the NZ superannuation model and forgets the huge tax cuts he has already provided to the wealthy.

While National has wrung its collective hands regarding child abuse and poverty it determinedly refuses to address the primary causes. It keeps minimum wages low, has created few new jobs and ignores most initiatives that attempt to improve economic outcomes for struggling families.  While families and children are a low priority and money is tight, it does not appear to be so for our superannuitants.  While our elderly do deserve a good level of support, one can only conclude that this government strongly favours the elderly over families and children, this is inequitable and economically and socially irresponsible. While generously supporting our elderly we are underfunding our future.

Wednesday, October 17, 2012

"Pass the Responsibility" Latest Party Game.



This National led Government have invented a wonderful new game (well they think it's wonderful), it's called "Pass the Responsibility" and is loosely based on Pass the Parcel. The rules are very simple (they need to be): the blame shifts around anyone other than the government and when the music stops those holding the responsibility, cop it.

  • 270,000 children are living in poverty and many go to school hungry. Blame the parents!
  • Many children struggle at school because of their home circumstances. Blame the teachers!
  • Work and Income computers provide access to private information. Blame Ira Bailey!
  • GCSB spys on New Zealand resident. Blame a lowly spook who was just following orders, blame David Shearer, blame everyone who didn't tell the PM what he should have known (when they probably did, but he's conveniently forgotten)!
  • The Christchurch Schooling Review debacle: Blame the education unions, teachers and the school communities for being selfish, not accepting that what's good for Treasury is good for children and being disrespectful of authority!
  • Unemployment levels remain high. Blame the unemployed for being lazy and not being prepared to live in cardboard boxes and lick the road clean every morning for $10 an hour, 12 hours a day like the government MPs did when they were young (a slight exaggeration, but it seems like that)!
  • The Government's inept, is borrowing hugely, the environment is stuffed and income inequity is increasing rapidly. I blame the voters!

Tuesday, October 16, 2012

The Greens and Knitting.


"The Greens should stick to their knitting and only comment about the environment!"

I don't know how many times I have heard that statement and it generally follows some success the Greens have had in another field. It is a sad fact that many people feel that the environment is something separate from everything else and has no relationship with the economy, our health or the way we do business. Even the Prime Minister promotes the view that the environment has to take second place to the economy. 

Pure Advantage has determined that around 75% of our exports are dependent on us having a clean healthy environment. Our environment is our economy and our economy is our environment and the likes of Federated Farmers need to recognize that simple fact. When less than 20% of our beaches can be considered "very good" for recreation, almost 50% of our fresh water beaches are rated poor or very poor this isn't very good for tourism and appalling for our supposed 100% pure image. 

If we want to future proof our economy we must be working towards having all our industries operating as environmentally sustainable as possible. We should be working towards an energy efficient economy, products of the highest quality and using the best possible technology. We should be supporting and employing as many of our own people as possible, before outsourcing, so that we are as self sufficient as possible and not so subject to the vagaries of external markets for basic commodities and technical support.


Only 6% of Australia is arable and yet the Australian government is allowing much of it to be dug up for quick profit. This picture above is the Hunter Valley and a Google satellite view of the area shows the extent of the farm loss. We are proposing to do the same in the Mataura Valley to access lignite. Whether it is coal, lignite or milk, if we don't take care of our environment our capacity to use our natural resources to support our economy will only diminish rapidly and there will be little left for the following generations.

It takes around 1000 litres of water to produce 1 litre of milk so when Russel Norman said, "No Water, no milk; No environment no economy" he was stating fact. We have to keep reminding ourselves of this simple truth when others are desperately trying to follow a path that supports short term gain for long term pain. 




Sunday, October 14, 2012

Our Vulnerable Less Safe Under National.


"National is building a safer New Zealand. We’ve embarked on a comprehensive programme of reform to protect communities, prevent crime, and put victims first."

So says National MP Eric Roy in his latest blog post where he claims credit for the improved crime statistics. What Mr Roy conveniently ignores is that the highest levels of offending ever in New Zealand occurred under a previous National Government in 1992 and since 1997 overall offending rates have been in steady decline despite the Government in power. He also ignores the fact that it is crimes of dishonesty that has dropped most substantially but violent crime and domestic abuse is on the increase. 


This is also no time for self congratulation. Children in New Zealand are at greater risk of injury or abuse than most other OECD countries (29th out of 30) and we are one of the worst countries in the OECD for assault mortality. Sexual assaults have also risen considerably (up 15% over the last year) and so have our levels of domestic violence (over 2000 more police callouts over the last year). Even though our elderly are amongst the wealthiest in the world our levels of elderly care are shameful when few rest homes can meet basic requirements. We live in a violent, uncaring society and our most vulnerable are suffering. 


It appears that the majority of the money being spent by this National led government is focussed on the bottom of the cliff stuff. Money has been spent on extra police and there will be investment in a child abuse data base, both are dealing with effects, not the causes. 
Even the police have voiced concern that they are having to regularly deal with mental health sufferers (call outs have doubled over the last 10 years) who should be the domain of trained professionals and proper facilities rather than police cells. 

New Zealand has one of the fastest growing levels of income inequity in the OECD and we are suffering all of the consequences of inequitable societies.What we need is investment in families so that parents can stay at home looking after their preschool aged children without guilt or having to live in poverty. We need investment in those who are at the front line of support so that they can be paid a living wage and we can attract the best people to do this valuable work (we shouldn't have rest home owners making huge profits on the back of a cheap workforce and minimum standards of care).  


We need an increase in family incomes, more jobs, greater investment in early childhood education and teaching in general. We need a welfare system that actually supports people into better situations, not punishing them for not succeeding. I want to live in a country that considers money spent on helping people as an investment, not a cost


This National led Government is not being honest about the real statistics regarding personal safety and if it was being really sincere about making a difference they wouldn't be spending $12 billion on roads that don't pass basic cost benefit analysis, $36 million on the America's Cup challenge and only $20 million on saving our most vulnerable children.

The Greens Go Well in Gore.


Gore is in the heart of Bill English country, he has his busiest electoral office there and it is not far from his controversial Dipton home. It is a wealthy agricultural centre and is known for it's excellent, higher end shopping and the annual Gold Guitars Awards (it is the New Zealand equivalent of Nashville and Tamworth for country music). It is less well known for its Rhododenron Festival and its support for the Green Party.

I spent a busy Sunday at the bustling Rhododendron festival manning a Green stall with MP Steffan Browning, talking politics and collecting CIR (citizens initiated referendum) asset sales petition signatures. It was the first time I had set up a Green stall in Gore and I was interested to know how we would be received. I was pleasantly surprised. Steffan was a great front person, he has a an easy, jocular manner and his agricultural background allowed him to speak knowledgeably about farming issues to the locals.

It wasn't hard to get people to sign the petition, the asset sales are not popular even in Gore. One very staunch National supporter wanted desperately to sign the petition but found it too difficult to do so at a Green or Labour stall, his relief was almost palpable when we suggested he could sign it at the Grey Power stall further along.

The Labour Party had set up a stall beside ours and people seemed to think it was perfectly reasonable that the two parties would be cooperating. Roll on 2014 and a Green/Labour Government.


Thursday, October 11, 2012

HMS National, Off Course and Leaking!


Captain Key and his crew have built their remarkable ship HMS National using their traditional methods. They weakened building regulations to enable fast construction and have made sure the 1st class facilities were of the highest specifications. They ensured that the third class facilities were the cheapest possible and cut back services to a minimum. Their officers were paid the highest possible salaries and the crew were employed on the lowest wages. Brownlee, the ships engineer, loved coal  was adamant that the ship be powered on this fossil fuel, using engines well and truly past their use by date.

Soon after the ship set sail there were problems. The crew complained of their low wages and long hours and many jumped ship to HMS Australia cruising nearby. The third class passengers complained of cramped facilities and lack of food, many became stressed and took their frustrations out on each other. Bennett, the ships purser, castigated the fractious lower class passengers and claimed that their intolerable living conditions were no excuse for their behaviour. She also cut rations to the lowest class of passengers because, as they didn't pay a full fare, they didn't deserve them. Some of the 3rd class children ended up suffering from lack of food and poor health but this was blamed on poor parenting.

Leaks started to appear in the ship because of the lack of regulations and appropriate checks during the construction and the crew spent much of their time trying to fit patches and manning the pumps. Of course they got no extra pay for the extended hours, but the officers got another pay rise and extra brandy.

Many passengers were concerned that the ship was veering off course but English, the First Officer, claimed his course was fine even though he wasn't using the latest charts. Worrying vibrations began to be felt throughout the ship and many thought that it was being pushed too hard and the engine was under stress. Norman, a junior officer, suggested that some easing of the engine boiler pressure was needed but he was ridiculed by English.

"Full steam ahead!" shouted Captain Key.

Wednesday, October 10, 2012

Paula Bennett, Child Saviour


25% of New Zealand children are living in poverty, 50% of children will suffer poverty at some time in their childhood, we have some of the worst statistics for child health and welfare in the OECD, we have one of the highest rates of youth suicide in the OECD. Poor families are being forced to live in crowded conditions because of a housing shortage and jobs are continuing to be lost because of our high dollar and a struggling domestic economy.

The PM told Metiria Turei that she was barking mad to suggest a universal child payment (even though the elderly get one). Calls for meals in schools have been rejected, the fruit in schools scheme has had funding cuts and a youth wage has been introduced that is substantially less than the current minimum wage.

The White Paper on Vulnerable Children has been released and Paula Bennett has had an epiphany...what we need to do for children, above all else, is to introduce a dob in a child abuser scheme!

"I feel like this is what I came into Parliament for," said Ms Bennett.

Tuesday, October 9, 2012

Key's Compulsive Gambling Revealed.


Gareth Hughes' revelation that there have been 11 shipping near misses around our coast since the Rena grounding is a real concern. Not only have lessons not been learned from the earlier wreck but we are again relying on luck than good management.

This is a government whose leadership is essentially lazy and hard work and due diligence are avoided if at all possible. There are risks to this approach and to maintain the appearance of governing any revelations that they haven't done their homework have to be managed quickly, alibis constructed and potential disasters averted.

I have now come to realize that our Prime Minister's gambling background truly does dictate his approach to governance. As he ignores most of his advisors and refuses to read any reports that may conflict with his "Planet Key" view of the world he must have some way of navigating through the political quagmire. I believe that he has a team of actuaries in his office and he refuses to actually do anything or spend money until a high level of risk is determined.

The classic situation was the class size debacle when it became increasingly clear that none of the homework had been completed and the blank page in the homework book was about to be revealed. The decision was immediately reversed before the enormity of their negligence was exposed.

Key's actuaries have generally been fairly reliable but their prediction that there was little risk of the public finding out about the Kim Dotcom spying has been proved wrong and Key's spur of the moment excuses are proving suspect. However, it is tricky to accuse the Prime Minister of lying if he claims the dog ate his homework (no matter how implausible that may be) and, unless there is proof otherwise, his word has to be accepted. One also wonders how the loyalty of those beneath him will last when he continues to blame them for his own negligence. I can imagine some damning leaks appearing when the heat really comes on and the buck regularly gets shifted down.

Key is beginning to find out that the longer he continues with his risk analysis, hands off approach that the odds of being caught out actually increases. It is a little like our coastal shipping, if the odds were originally 100 to 1 for another shipwreck to occur and we've already had 11 near misses...?

Monday, October 8, 2012

National Govt. Brings Much Happiness to Some



This National led Government is getting some bad press at present, but we should remember that not all New Zealanders or companies are unhappy with their governance and quite a number are very pleased with how things are being done:

The US movie moguls find our government very helpful as they are prepared to change immigration and employment law to accommodate them. I'm sure they are also appreciative of the Government's willingness to spy on our own residents when their profits are threatened. Warner Bros were especially grateful for the $10 million in tax breaks and the $13.4 million in advertising subsidies.

Australian Banks love our Government, not only is all our government banking done through Westpac but the New Zealand wings of each bank tend to be the most profitable. The last four years have been more profitable than the previous four and the $14.42 billion earned between 2008-2011 meant the almost  $2 billion that was clawed back in avoided taxes was easily absorbed.

New Zealand's wealthy have benefited greatly from lower taxes and have seen a 20% average increase in wealth.

Steven Joyce's ex-employer Media Works were very pleased to receive a $43.3 million dollar loan to tide them through a a rough patch. It is obviously very useful to have friends in high places.

Private schools are especially grateful for the $35 million increase in funding. It is important that the children of National Party MPs, who attend these schools, are able to continue enjoying their small class sizes and greater individual attention.

The America's Cup Challenge also benefited from a generous $36 million taxpayer gift, it is so important to ensure we can compete on an equal footing with bigger nations in this elite competition.

Many private care providers are grateful for the government's support in keeping wages low and abolishing the Pay and Employment Equity Unit. This has allowed Ryman Healthcare (one of New Zealand's largest rest home providers) to record $84 million in profits last year, an increase of 17%. This wouldn't have been possible if they had to pay good wages.

The sales of luxury cars are now strong enough in New Zealand for Rolls Royce to open a local dealership. BMW were pleased to provide the government with a new fleet of their cars and were happy to include all the luxury extras like heated seats. The $6.8 million spent on these cars will ensure the bottoms of our MPs will be kept toasty warm.
$6.8 million worth of BMWs

Of course all those who have spent some of their growing wealth on luxury cars are very supportive of the $12 billion being spent on our Roads of National Significance (even though they will only cater for 4% of the country's traffic), it is not good for a Roller or BMW to sit idling in traffic jams. It is important to make sure that the money goes on these roads rather than public transport, because no self respecting billionaire or millionaire would wish to sit on a bus crushed full of hungry beneficiaries.

All those who invested in South Canterbury Finance were overjoyed to have their investments secured with the Government's $1.775 billion bailout. The $405 provided by every man, woman and child in New Zealand ensured that their rainy day nest eggs were safe.

International mining companies have been wonderfully supported by the Government's determination to make more conservation land and marine reserves open for prospecting and mining. They especially like the minimal 5% royalty and the limited environmental overview.

The Greek shipping company that owned the Rena feel that they were lucky that the Government did not sign the document that would have ensured that had to pay more of the cleanup costs. The $28 million that the Government will be paying for them is substantial.

John Banks is extremely grateful that John Key has refused to read the police report that proves that he had behaved illegally and that he continues to accept his explanation for what happened with Kim Dotcom. The Prime Minister's support means that this talented MP (he is a very animated story teller) will continue to enjoy the BMW's heated seats, courtesy of the taxpayer.

Despite some glitches, Sky City are very happy with John Key's enthusiasm to allow them to increase their revenue through increased numbers of pokies. The fact that the company only has to pay 2.5% of net profits to the charitable trust also suits it fine (it has to pay 28% to state governments in Australia). Sky City is especially pleased that normal process was short circuited to favor them for constructing a convention centre.

Many business are excited about the new youth rates that the Government will be introducing. Being able to employ workers for only $10.60 an hour will ensure lower labour costs and they may be able to get rid of more expensive workers. This may also offset the problems caused by the high dollar.

Those listed above may only be a small and exclusive group, but they are very happy indeed.


Sunday, October 7, 2012

Russel Norman, Finance Minister.


Russel Normans performance on Q + A last Sunday was measured, thoughtful and informed. He obviously has a good grasp of macro economics and has a pragmatic approach to solving our current problems. It amuses me that the stronger Russel performs in the economic arena the greater the confusion from the political right. Even the Labour commentator Josie Pagani felt compelled to suggest that the Greens should stick to talking about the environment.

New Zealand's manufacturers are under extreme pressure due to the strength of our dollar, thousands of workers are being laid off (many shifting to Australia) and tourists are not staying as long in New Zealand because of our high exchange rate. The International Monetary Fund believes our dollar is probably overvalued by around 15%.

The independence of New Zealand's Reserve Bank is generally accepted as important, however, it is limited by legislation that focuses on inflation and provides a limited tool box to do much else. According to Russel, the obvious way to deal with our high dollar is through quantitative easing and while this was partly dismissed as "just printing money", it is now common practice internationally and is considered mainstream economics.

While the Neo-Liberal economic approach (that New Zealand still largely follows) deplores intervention, in reality there are no strong economies that are fully hands off, and certainly none as small or as open as New Zealand's. Currency speculators will always move to where they will get the best returns and our country has set itself up for such attention. While we have a stable government and some positive growth, our currency will remain attractive until our export returns are totally compromised and our economic viability declines.

Currency speculation and property investment are similar in that neither activity increases productivity or are necessary for strengthening an economy. It makes sense that if our country isn't competitive in commodity markets or manufactured exports then local investment will shift again to these non productive sectors. Current economic policy is penalising our export industries and causing a further weakening of our economic competitiveness and levels of employment.

Russel's prescription for rejuvenating our economic health includes the following:
  • Broading the Reserve Bank mandate so that it can address the exchange rate as well as inflation. 
  • Reducing our exchange rate through quantitative easing.
  • Dealing with the housing asset bubble through a capital gains tax.
Considering the National led Government is only really looking at solutions that have quick returns but have negative long-term consequences, Russel's suggested strategies make good sense. When our net overseas debt has grown to 75% of our GDP through increased borrowing, we are relying on selling 49% of our major state assets and opening access to our mineral wealth (with limited environmental protections and royalties of only 5%) we are heading nowhere fast.

We may not have the same level of government debt as most OECD nations, but our borrowing is still increasing at an alarming rate (more than doubled since National took power). Using "earthquake bonds" generated by the Reserve Bank to finance the Christchurch reconstruction ensures a good use of new money and will reduce borrowing and the pressure on our dollar.

Bill English claims that such an approach will have an impact on our standard of living, but when you balance the availability of cheap imports with maintaining jobs, it obvious where the emphasis should be. Russel makes good sense and, when you compare his approach to that of an earlier New Zealand politician with an Aussie background, there is some historical support for his style of economic thinking. Josie Pagani may have been a little rash when she discounted the possibility of a Green Finance Minister.

Further explanation of the Green's proposals here.