TLDR & TLDL: The Government has agreed to calls from employers to extend the work visas of up to 10,000 workers already here for another six months and has issued visas for another 250 agricultural workers. The hospitality sector has launched a campaign to stop the previously suggested tightening of migration settings, including a protest to turn off the lights in all cafes and restaurants for two minutes on July 6.

Also, the Climate Commission is recommending a 42% cut in climate emissions by 2035, which was 6% more than it proposed in January. It proposed a ban on petrol and diesel imports by 2035 and having half of all vehicle imports be EVs and hybrids by 2029. It sees cow and sheep numbers falling 13.6% by 2030. However, it sees these moves only cutting GDP by 0.5% by 2035, although it argues doing nothing would carve twice as much off GDP.

My view? Both bits of news highlight the political pain of trying to change the status quo and the problems the Government will have trying to achieve two of its big aims: carbon zero by 2050 and reducing the now-heavy use of temporary migrant workers in tourism, hospitality and agriculture.

The bottom line: Going cold turkey on a low-wage small-business-dominated economy where the main business investment is a double-cab ute is hard, especially when you haven’t (and won’t) change the tax settings for investing in productivity-enhancing equipment and business structures, rather than leveraged land. The PM’s decision to rule out a Capital Gains Tax or wealth tax makes that big switch impossible any time this decade.

A tricked-out double-cab ute and two luxury SUVs parked outside a restaurant on Jervois Rd in Auckland’s Herne Bay. Photo: The Kaka.

Elsewhere briefly in our political economy this morning

Kawerau hit: Norske Skog announced it would close its 66-year old Tasman paper mill in Kawerau by the end of June with the loss of 160 jobs, citing a lack of demand for newsprint. The associated pulp mill owned by Oji remains open. For now. (RNZ)

Briefly in the global political economy this morning

China’s delta fears: China has locked down parts of Guangzhou, the capital of the key factory-and-port-laden southern province of Guangdong, after outbreaks of Covid-19 with the ‘delta’ Indian variant of Covid-19. The disruptions to global supply chains are intensifying because of the lockdowns, in particular with the recent closure of the large Yantian port. (New York Times)

Falling bond yields: Many commentators have warned this year that a global inflation breakout could force central banks to put up interest rates and stop printing money, and therefore endanger the extraordinary rally in asset prices. But the evidence on the ground of a permanent lift in goods and services inflation remains sparse.

The ‘wisdom of the crowds’ in the world’s deepest and most liquid financial markets for bonds shows the bulk of investors don’t believe in the inflation breakout theory, or at least believe central banks will keep printing money regardless and they can rely on the ‘central bank put.’ That was evident overnight when the US 10 year Treasury bond yield fell to 1.48%. It has been as high as 1.77% in March. Investors are all watching for US CPI inflation data tomorrow morning for May. A headline annual growth number over 4.7% and a core number over 3.5% might spook that benign view.

Also overnight, in a sign European bond markets also think their central bank will keep printing long and hard, a Greek Government bond auction was 11 times over-subscribed and Greece’s 10 year bond yield fell to 0.81%.

China vs West geopolitical rift deepening: Overnight, Joe Biden announced a full security review of foreign apps such as TikTok and WeChat, although he revoked a Trump-era ban on the apps. Meanwhile, the EU looks set to join America in calling for a closer probe of whether Covid escaped from a lab in Wuhan.

Also, Australia has called for G7 support in its battles with China in the WTO over various trade sanctions in retaliation for its call for an investigation into the Wuhan outbreak. Japan backed Australia’s call for a more sceptical view of China.