Long stories shortest this week in our political economy:
Standard & Poor’s judged the Government’s council finance reforms a failure.
Professional investors showed the Government they want it to borrow more, not less.
GDP bounced out of recession by more than forecast in the December quarter, but data for the just-ending March quarter suggests the recovery is stuttering.
Behind in the polls and facing growing provincial unrest over health cuts and higher speed limits, the Government relented on some of the speed limits and reversed a plan to close Napier’s Health Centre at night and on weekends.
Contact Energy said New Zealand was actually closed for business and mired in a ‘culture of no’ after its 330MW Southland wind farm proposal was rejected .
New Plymouth Mayor Neil Holdom criticised the Government’s inaction on homelessness in a Taranaki Daily News Op-Ed.
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Long stories short, my top six news items in Aotearoa’s political economy around housing, climate and poverty in the week to March 23 are:
Debt referee judges Govt’s council finance moves a failure
Standard & Poor’s downgraded the ratings of 18 councils on Tuesday, saying the Government’s cuts to capital grants to councils and its abrupt reversals of Three Waters and RMA reforms gave it less confidence in council finances. S&P told me in an interview I’ll publish tomorrow that the Government would have been able to fund the necessary infrastructure development much faster and cheaper by simply borrowing more themselves through vanilla Government bonds.
The Government’s own capital spending cuts were supposed to force councils and private borrowers to take on the debt, but the U-turns on policy have backfired, making it harder and more expensive for councils to borrow and invest in infrastructure needed for housing and more economic growth.
Professional investors want much more Govt debt, not less
Banks and pension funds bid for four times the amount of bonds the Government offered in its weekly auction on Thursday, reinforcing the message that professional investors want the Government to borrow more, not less.
The Government’s determination to return to surplus within the forecast period and reduce borrowing is its single guiding force, but this austerity-driven approach is starving the economy of public investment catalysts for wider growth and has been proven by OECD studies not to work to either reduce debt or grow GDP.
GDP rose late in 2024, but the bounce looks dead-cat-ish
Stats NZ reported on Thursday that GDP bounced out of the mid-2024 recession by a higher-than-forecast 0.7% in the December quarter, but leading indicators from the almost-over March quarter show a much wobblier picture and the rise did not offset falls of 1.1% in each of the June and September quarters last year.
The services sector contracted in February, BusinessNZ-BNZ reported on Monday from their PSI survey, and Westpac reported its March quarter McDermott Miller survey found consumer confidence collapsed. Job ads fell in February, Seek reported on Wednesday and REINZ reported on Monday that house sales volumes rose just 3.4% in February from a year ago, while the median price fell 2.4%, weighed down by the numbers of homes for sale the highest they’ve been since 2015.
The Government’s strategy of reducing its own investment and borrowing to lower interest rates and create space for private borrowing and investment, mostly through the housing market, is failing because private investments require public infrastructure investment first and landlords are being restrained from borrowing more to spark a new housing boom by the Reserve Bank’s DTI limits
National responds to pressure from the regions
The drumbeat of bad polling for the Government continued this week, including Ipsos reporting a record low level of confidence in the Government’s performance and clear signs the health sector crisis is either number one or number two as the main issue of concern for voters, along with the cost of living. Local protests over hospital services being cut and speed limits being increased have also grown in recent months.
Napier was the latest provincial city up in arms over its healthcare services, with a march scheduled for today to protest a planned removal of after-hours and weekend care from Napier’s Health Centre. Napier hasn’t had its own hospital since 1998, forcing those who are sick after hours to drive themselves to Hastings.
Health Minister Simeon Brown announced on Thursday the dropping of the plan leaked in January to Hawkes Bay Today’s Rafaella Mello to close the centre at night and on weekends. But locals still plan to go ahead with the march, saying the new plan will still not have a doctor in the centre on weekends and nights.
Protests about Brown’s reversal of speed limit reductions when he was Transport Minister are also slicing away at the Government’s popularity in heartland electorates, which was no doubt a factor in NZTA’s quiet announcement on Tuesday that it would review 16 of the state highway sections with planned speed limit increases.
‘NZ is actually closed for business,’ Contact CEO says
A panel of experts rejected Contact Energy’s 330 MW Southland wind farm consent application under covid-era fast track law on Tuesday, saying they were worried about losing some vegetation for some bats and lizards. They prioritised the vegetation over generating enough renewable power in the right place to use the South Island’s lakes as effective wind-power batteries. The panel was also ok with not creating around 250 jobs with $250 million a year of local spending from the 55-turbine wind farm, which local councils and iwi supported.
Contact Energy CEO Mike Fuge told BusinessDesk-$’s Ian Llewellyn on Wednesday the rejection was a sign New Zealand was actually closed for business, contrary to PM Christopher Luxon’s ‘Going for growth’ State of the Nation speech on January 23, which called for a ‘culture of yes’ to projects such as this. Here’s Fuge’s comments (bolding mine):
“If you were a board sitting in Vienna or Copenhagen or Munich or Geneva, and you just laid down $20m on a project that every bit of legal advice, consenting advice, environmental advice, expert advice, said this is a good project in every sense of the word, and it got tripped up, what would you be thinking now?
“The question is, ‘is New Zealand really open for business?’ or is a significant portion of the country saying actually, no, we're not. Yeah, we quite like our lawyers’ fees and our concerns. Because, look, we'll go through the process. We'll take a year, two years; we will spend another $10 million on lawyers’ fees, consultants’ fees.
“There will be another dozen late-model Audis and BMWs going down Remuera Rd, The Terrace, when we've finished this. But this project will be two years late. We will go through two more tense years of security of supply. The poor New Zealand electricity consumer will ultimately bear the cost of that. And you've got to ask yourself, come on, is that fair? Is that right? Is that the right outcome? And so, you know, I think we've … got to get in behind the Prime Minister and go, actually, we are open for business. And this is not right.” Contact Energy CEO Mike Fuge via BusinessDesk-$
My Pick ’n’ Mix Six of the week
These links to scoops and deep-dives are my pick of the bunch this week.
Housing infrastructure deep-dive by Luka Forman via RNZ: ‘Gobsmacked' - Developers slam call to stop new connections to wastewater network
Migrant worker deep-dive by Nikki Macdonald in The Post-$: Who are our biggest migrant employers? Covid-shutdown staff shortages exposed the country’s reliance on overseas workers.
Budget cut deep-dive by Marin Lourens in The Press-$: ‘The point of crisis’: Nearly 300% more youngsters ending up in Christchurch Hospital ED for mental health.
Homelessness deep-dive by Maddy Croad in The Press-$: A baby in a tent, a granddad sleeping in a slide: The growing homelessness ‘epidemic’.
Local politics report for RNZ/LDR: Western Bay of Plenty District Council quits LGNZ, calling it 'far left'
Health news scoop by Glenn McConnell for Stuff: ‘Chilling effect’: Why doctors fear they’ll no longer be able to talk freely.
Journal of record for the week to March 23
Politics, government, the economy & geopolitics
Stats NZ cited an increase in travel service exports for a drop in the seasonally adjusted current account deficit to $5.9 billion in the December 2024 quarter.
International tourism also contributed to a 0.7% quarterly rise in GDP, Stats NZ said. The real estate, retail, and healthcare sectors also led GDP growth, whereas media, construction, and IT activity fell from the September 2024 quarter.
Housing, transport & infrastructure
Two thirds of 2024 building consent applications were subject to council requests for additional information, adding what Building and Construction Minister Chris Penk claimed are often "unnecessary" processing delays to applications.
Poverty, health, education, justice & crime
Atamira Platform Charitable Trust's new report on mental health and addiction NGO services in NZ found that roughly 73,000 people accessed such services in 2023/24.
Construction began on a new Christchurch mental health facility at Hillmorton Campus, Health Minister Simeon Brown and Mental Health Minister Matt Doocey announced. The facility, expected to be completed at the end of 2027, will provide 80 beds for adults with acute mental health needs.
A study in the Lancet found that a slowdown in the decline of smoking coincided with the rise of vaping in NZ, with the study authors suggesting that vaping may be contributing to adolescent uptake of smoking, rather than reducing it.
Climate, environment, air, land & water
Resources and Regional Development Minister Shane Jones attended a hui with Rotorua mana whenua to discuss developing geothermal energy. GNS Science presented new research on possible sites for exploratory wells, and Jones expects to release the Government's formal geothermal strategy later this year.
The Guardian and AFP will spearhead a journalism campaign exploring popular support for government action on climate change. The campaign was inspired by a University of Oxford global survey finding that 86% of respondents want their countries to set aside differences in order to co-operate on climate change.
The World Meteorological Organisation's global climate report for 2024 found Antarctic sea ice has been at its lowest recorded levels for the last three years, and glaciers are also retreating at a record rate. NZ climate researcher James Renwick said the resultant sea level rises would take centuries to reverse.
The Kākā’s diary for the week to March 30, and beyond
Monday, March 24
Post-cabinet news conference expected around 4pm.
Tuesday, March 25
Parliament scheduled to meet from 2.00 pm for the next three weeks. Meetings are streamed live on the Parliament website.
Wednesday, March 26
Stats NZ scheduled to release an update to its 2023 wellbeing statistics document, including new data on te reo Māori, digital inclusion, and volunteering.
Reserve Bank of New Zealand scheduled to release data on residential mortgage lending and NZ’s foreign currency assets & liabilities for February 2025.
Simeon Brown will give a keynote speech at a ‘Project Auckland’ luncheon in Auckland at 12.45 pm.
Thursday, March 27
Chris Bishop will speak at the Property Council of New Zealand's 2025 Residential Development Summit in Auckland at 11.30 am.
Friday, March 28
Stats NZ scheduled to release data on business count indicators and employment indicators for February 2025.
Beyond March 30
7 Apr 25 - Health Coalition Aotearoa hosts an event on the influence of lobbying on NZ democracy at the University of Auckland from 5.30 pm.
8 Apr 25 - The New Zealand Institute of Economic Research will release its Quarterly Survey of Business Opinion for the March quarter.
9 Apr 25 - RBNZ will review the OCR.
29 Apr 25 - New Zealand Media and Entertainment shareholders will vote on 10% stakeholder James Grenon's board takeover bid at their annual meeting.
7 May 25 - RBNZ releases its half-yearly Financial Stability Report.
12 - 14 May 25 - The Environmental Defence Society hosts a conference on NZ's energy transition at the Grand Millennium Hotel in Auckland.
22 May 25 - The Government releases Budget 2025.
25 - 27 June 25 - The New Zealand Association of Economists holds its annual conference at Victoria University of Wellington's Pipitea Campus.
Many thanks to Eilish Grieveson for compiling and editing these Journals of Record items.
Podcast of the week
Cartoon of the week
Timeline-cleansing nature pic of the week
Ka kite ano
Bernard
