Luxon rejects Auckland's plea for $75m to earn $2b of America's Cup GDP growth, saying Govt must cut debt first; Businesses now see weak economy & Govt's 'culture of no' choking off investment
Hi Bernard - I'm not sure if you are aware of the work Gary Stevenson has been doing over in the UK to bring light to wealth inequality. He is a fantastic communicator, and has the credibility of being formally one of the top traders in the world working for City Bank.
His video here explaining the squeezing out of wealth from the bottom to the top is incredibly interesting and I would love to have your thoughts on what he is explaining here, particularly in a New Zealand context: https://www.youtube.com/watch?v=pUKaB4P5Qns
I agree, Garys Economics is great resource and provides a strong argument that the escalation of the gap between the haves and the have nots is a tax system problem that needs redressing desperately. It is afflicting many countries around the world including NZ and the basis for social unrest.
Gary's got a good book too. He inspires a lot of people in the UK who are asking very simple questions that never get a satisfactory answer from politicians.
Excellent video. Gary's labelling the process of the 'rich getting richer and the poor getting poorer" as Squeezing Out is so clear to see in the real world - nothing abstract here! The five levels of Squeezing Out are also totally visible in our everyday world. If only the media could make it so clear people might vote with their eyes open.
I second JB Bernard - please watch it. Can't imagine most people reading Piketty - grasping Gary's Economics though is pure fresh air.
To be fair re ‘I don’t trust those economic impact reports. Unless they’re about roads.’ is also true for those about roads. If you trusted the economic impact predictions for most RONS you wouldn't be investing in them and would look at more economic, still suitable, solutions. Particularly for SH1 to Northland
I well remember whilst on the NZTA board that the B/C ratio of Transmission Gully was below 1:1. I seem to recall it was .8. Stephen Joyce insisted on the road going ahead and it would be interesting for somebody to redo the costing now that all the costs are real rather than estimated.
Morena, a great summary Bernard. It really shows up the very, very short term thinking of the National Party led government that housing will save the day tomorrow... however the day after tomorrow when no-one can build new houses because there are no water pipes, no sewer pipes, no Internet fiber cables, no electricity connections and no roads to a block of land someone has been 'banking' for that last decade... whose fault will it be? Will they still be around, or like many, will they have just moved to live in Australia? Long deep sigh!!!
What we are experiencing is a double whammy last govt invested heavily in too buisnes and jobs during covid arguably worked well ? Only too be squandered by present govt .
"We just judged that at this time those resources are better in our hospitals, our schools and the other pressing needs of New Zealanders."
She said that with a straight face? I would be scared the sky will fall on me if I told such a lie in public.
They are not investing in our hospitals schools or any other pressing needs of NZers. They are doing the minimum they can get away with and the maximum they can to siphon out public money to the private hands of their donors.
I want each and every one of those managers, CEOs and business owners that are frustrated now to go on the public record and tell us who they voted for and why. For once take some responsibility for the consequences of your actions.
To be fair, this is a government that also announced a 'road cone hotline' with a straight face on April Fool's Day, so their obliviousness knows few bounds!
They put in the 'road cone hotline' because they don't give a shit about working people. Act's attitude is, 'if a reduction in road cone numbers means more road workers are killed/injured, then who cares?'
Wait that was real? Oh my gosh. Back to the future vibes with John Major who was the conservative PM in the UK. He annouced the exact thing in 1992, he was slated for it then.
I genuinely thought it was an April fools day prank....
Who sets the rates on Treasury bonds that are being offered to investors? Seems that if there’s 4x the demand as there is supply that maybe they are setting the rates too high? Whether or not I agree with your pro-borrowing sentiment, it seems that they should at least be trying to optimise for the lowest rates they can get away with to lower borrowing costs.
So does that mean that banks might be getting different rates based on their bid? That would be a pretty efficient way to do it from the treasury standpoint.
All true Bernard, sadly all true. What is also missing is a cohesive, well-articulated, long-term vision for how New Zealand can genuinely address the issues at hand. The constant need for political point scoring driven by incompatible ideologies is dividing people and removing them from opportunities that could be, should be, and would be there for the taking. The countries incredible resources and immense talent are being squandered by weak, inept, and feckless leadership. I never hear Luxon refer to value-capture strategy and he fails to leverage the upside of quality. For example, his government covets volume tourism. Why? A strategic focus on just those two elements could create much more with much less. Luxon’s commodification thinking linked to a mirage of magical, amorphous, and ambiguous growth hopes demonstrates his FMCG career and institutionalisation. His thinking supports short-term tinkering, not long-term nation building. The imprint of shareholder servitude is embedded in Luxon’s DNA. KPIs, quarterly targets, and spin. Somehow, New Zealand needs to find a way to harness its incredible potential. The current generation of politicians - including Chris from Sales - are proving through their daily actions that they aren’t up to the challenge and cannot meet the moment.
You're right, everything is delivered grudgingly - in a 'it's your fault we're in this mess and now we're saving YOUR ass but we're not happy about it' manner. They govern like parents of wayward teens, not as equals working together to achieve something.
I think this deserves a wider audience. Luxon's patronising "grown-up" comment is yet another example of the corp-speak babble he and Willis use to mask their incompetence. They claim there is no money to back the America's Cup in Auckland which would have been a massive investment, but they have enough to hand out to landlords again this year. This is a "no" government. It's deeply depressing.
National has a leader who only appreciates the housing market and its 'ability' to deliver. I'm not an Americas Cup enthusiast but anyone can see that a $75m investment with a, perhaps, $1.5bn return is a good investment. I can see nothing in National's road map that delivers anything like that return. Great column Bernard.
What happens if/when the cheap(er) money tap is turned off?
The council will also be reliant on a private supplier for water - admittedly its a trust, but there is still a commercial angle that could put them in a nasty spot.
“It’s a shame, because in a recession speeding up infrastructure investment moderates the economic pain, and delivers much needed infrastructure, typically under budget and on time."
That last part is so key and worth underscoring. An economic downturn is an amazing time to invest (if you're lucky enough to have plenty of cash, like say, a government that can magic it out of thin air). Borrowing costs are lower, and suppressed demand creates opportunity to negotiate down prices on almost everything, especially in bulk.
We are at the beginning of a massive re-shaping of global trade and alignment thanks to Trump and MAGA. Other world leaders are adapting. Ours are not. It's full of uncertainty and fear, but also opportunity for us as a country.
Investment money is flowing out of the US. It's not going to come here since our stock and housing market is over-valued and growth stagnant. If we had a thriving start-up scene, it might, but we don't so it won't.
Some of the most talented researchers and scientists are losing their jobs in the US. If we had a thriving science/R&D sector we could be hiring them here. We are cutting or cancelling R&D funding instead.
Trade relationships will be re-ordered as the US is seen as an unstable and unreliable partner. Ditto defense. This will create pockets of over-supply as supply chains shift, and pump a lot of extra money into the global economy. Instead, we're doubling down on dairy and still talking about AUKUS.
We wasted the last GF crisis by worrying about our debt. Let's not waste the next one. What we do in the next 5 years will determine our place in the world for the next 40.
Shamubeel Eaqub nailed it with that diagnosis. In essence, our tax take is not funding our day-to-day expenses, and (captured) ideology is preventing us from building any new mechanisms to grow our tax take, so we're basically borrowing to build a flywheel back to the developing world.
I (personally) do appreciate that (https://littleteapot.substack.com/p/earn-own-do) but - with respect - in practical terms, it's a semantic argument because you still have to pull money out of the economy somehow in order for it to be worth anything. When we try to make the argument that taxes don't pay for public things, we immediately run into the question of where the value of money comes from. It's absolutely true that government books don't need to operate the way they do, but that is key to the illusion that makes money 'work'... MMT has some very good things to say about measuring government spending against productivity (not debt) but certain care needs to be taken with it, to ensure you are bringing the "co-users" of a fiat currency (that is, citizens) along for the ride.
MMT explains that its taxation that creates the value of the other wise worthless tokens issued by the government. Acquire enough tokens to pay the levied taxes or go to jail....As for the "real" value, that's essentially set by the price the govt is willing to pay when it issues currency by purchasing stuff, however govt seem to have forgotten that they have this "power".
And in the background the polycrisis rumbles on... Another economics paper on the costs of warming - 16% of GDP at 2 degrees, 40%, ie WWII style constraints, at 4 degrees. The rainy day is here (atmospheric river anyone, draughts in Northland hence the 40m and Ruitaniwha dam in HB?) it will never be as cheap and easy to adapt as now.
Hi Bernard - I'm not sure if you are aware of the work Gary Stevenson has been doing over in the UK to bring light to wealth inequality. He is a fantastic communicator, and has the credibility of being formally one of the top traders in the world working for City Bank.
His video here explaining the squeezing out of wealth from the bottom to the top is incredibly interesting and I would love to have your thoughts on what he is explaining here, particularly in a New Zealand context: https://www.youtube.com/watch?v=pUKaB4P5Qns
Thanks JB. Will save that for the weekend. Cheers
Great video JB. I'll need to watch it a couple of times to make the details stick.
Tax wealth more, tax work less
Got the t-shirt just the other day :)
I agree, Garys Economics is great resource and provides a strong argument that the escalation of the gap between the haves and the have nots is a tax system problem that needs redressing desperately. It is afflicting many countries around the world including NZ and the basis for social unrest.
Gary's got a good book too. He inspires a lot of people in the UK who are asking very simple questions that never get a satisfactory answer from politicians.
Excellent video. Gary's labelling the process of the 'rich getting richer and the poor getting poorer" as Squeezing Out is so clear to see in the real world - nothing abstract here! The five levels of Squeezing Out are also totally visible in our everyday world. If only the media could make it so clear people might vote with their eyes open.
I second JB Bernard - please watch it. Can't imagine most people reading Piketty - grasping Gary's Economics though is pure fresh air.
To be fair re ‘I don’t trust those economic impact reports. Unless they’re about roads.’ is also true for those about roads. If you trusted the economic impact predictions for most RONS you wouldn't be investing in them and would look at more economic, still suitable, solutions. Particularly for SH1 to Northland
I well remember whilst on the NZTA board that the B/C ratio of Transmission Gully was below 1:1. I seem to recall it was .8. Stephen Joyce insisted on the road going ahead and it would be interesting for somebody to redo the costing now that all the costs are real rather than estimated.
This government has the strategic vision of a brown paper bag 💰.
It's almost like they are working towards quarterly sales reports to get a bonus and stuff the future
Morena, a great summary Bernard. It really shows up the very, very short term thinking of the National Party led government that housing will save the day tomorrow... however the day after tomorrow when no-one can build new houses because there are no water pipes, no sewer pipes, no Internet fiber cables, no electricity connections and no roads to a block of land someone has been 'banking' for that last decade... whose fault will it be? Will they still be around, or like many, will they have just moved to live in Australia? Long deep sigh!!!
Please open this up regardless of how many likes..is my opinion.
Yes, my vote too
What we are experiencing is a double whammy last govt invested heavily in too buisnes and jobs during covid arguably worked well ? Only too be squandered by present govt .
"We just judged that at this time those resources are better in our hospitals, our schools and the other pressing needs of New Zealanders."
She said that with a straight face? I would be scared the sky will fall on me if I told such a lie in public.
They are not investing in our hospitals schools or any other pressing needs of NZers. They are doing the minimum they can get away with and the maximum they can to siphon out public money to the private hands of their donors.
I want each and every one of those managers, CEOs and business owners that are frustrated now to go on the public record and tell us who they voted for and why. For once take some responsibility for the consequences of your actions.
To be fair, this is a government that also announced a 'road cone hotline' with a straight face on April Fool's Day, so their obliviousness knows few bounds!
They put in the 'road cone hotline' because they don't give a shit about working people. Act's attitude is, 'if a reduction in road cone numbers means more road workers are killed/injured, then who cares?'
Wait that was real? Oh my gosh. Back to the future vibes with John Major who was the conservative PM in the UK. He annouced the exact thing in 1992, he was slated for it then.
I genuinely thought it was an April fools day prank....
Who sets the rates on Treasury bonds that are being offered to investors? Seems that if there’s 4x the demand as there is supply that maybe they are setting the rates too high? Whether or not I agree with your pro-borrowing sentiment, it seems that they should at least be trying to optimise for the lowest rates they can get away with to lower borrowing costs.
Ultimately the RBNZ accepts bids from the purchasers in the primary auctions.
Current List of Registered bidders (as of December 13, 2024):
ANZ Bank New Zealand Limited
Bank of New Zealand
Barrenjoey Markets Pty Limited
Citigroup Global Markets Limited
Commonwealth Bank of Australia
J.P. Morgan Securities Australia Limited
UBS AG, Australia
Westpac Banking Corporation, New Zealand
So does that mean that banks might be getting different rates based on their bid? That would be a pretty efficient way to do it from the treasury standpoint.
Yes, different bidders can get different rates.
All true Bernard, sadly all true. What is also missing is a cohesive, well-articulated, long-term vision for how New Zealand can genuinely address the issues at hand. The constant need for political point scoring driven by incompatible ideologies is dividing people and removing them from opportunities that could be, should be, and would be there for the taking. The countries incredible resources and immense talent are being squandered by weak, inept, and feckless leadership. I never hear Luxon refer to value-capture strategy and he fails to leverage the upside of quality. For example, his government covets volume tourism. Why? A strategic focus on just those two elements could create much more with much less. Luxon’s commodification thinking linked to a mirage of magical, amorphous, and ambiguous growth hopes demonstrates his FMCG career and institutionalisation. His thinking supports short-term tinkering, not long-term nation building. The imprint of shareholder servitude is embedded in Luxon’s DNA. KPIs, quarterly targets, and spin. Somehow, New Zealand needs to find a way to harness its incredible potential. The current generation of politicians - including Chris from Sales - are proving through their daily actions that they aren’t up to the challenge and cannot meet the moment.
well said James
You're right, everything is delivered grudgingly - in a 'it's your fault we're in this mess and now we're saving YOUR ass but we're not happy about it' manner. They govern like parents of wayward teens, not as equals working together to achieve something.
I think this deserves a wider audience. Luxon's patronising "grown-up" comment is yet another example of the corp-speak babble he and Willis use to mask their incompetence. They claim there is no money to back the America's Cup in Auckland which would have been a massive investment, but they have enough to hand out to landlords again this year. This is a "no" government. It's deeply depressing.
Well done Bernard.
Are we seeing the ever so gradual introduction of Project 2025 here?
Winnie was shaking hands with Rubio several weeks ago.
not particularly gradual John.
National has a leader who only appreciates the housing market and its 'ability' to deliver. I'm not an Americas Cup enthusiast but anyone can see that a $75m investment with a, perhaps, $1.5bn return is a good investment. I can see nothing in National's road map that delivers anything like that return. Great column Bernard.
Exactly, you have to believe that the estimate is off by 20x for it not to make a return!
Why is the government able to invest in some water projects https://www.rnz.co.nz/news/political/556850/northland-water-pipeline-projects-to-receive-40-million-in-government-loans
But others, like Watercare, have to go to the more expensive capital markets?
Shane Jones shoring up his Northland base. As he never fails to remind us each election.
I was thinking pork barrels.
What happens if/when the cheap(er) money tap is turned off?
The council will also be reliant on a private supplier for water - admittedly its a trust, but there is still a commercial angle that could put them in a nasty spot.
“It’s a shame, because in a recession speeding up infrastructure investment moderates the economic pain, and delivers much needed infrastructure, typically under budget and on time."
That last part is so key and worth underscoring. An economic downturn is an amazing time to invest (if you're lucky enough to have plenty of cash, like say, a government that can magic it out of thin air). Borrowing costs are lower, and suppressed demand creates opportunity to negotiate down prices on almost everything, especially in bulk.
We are at the beginning of a massive re-shaping of global trade and alignment thanks to Trump and MAGA. Other world leaders are adapting. Ours are not. It's full of uncertainty and fear, but also opportunity for us as a country.
Investment money is flowing out of the US. It's not going to come here since our stock and housing market is over-valued and growth stagnant. If we had a thriving start-up scene, it might, but we don't so it won't.
Some of the most talented researchers and scientists are losing their jobs in the US. If we had a thriving science/R&D sector we could be hiring them here. We are cutting or cancelling R&D funding instead.
Trade relationships will be re-ordered as the US is seen as an unstable and unreliable partner. Ditto defense. This will create pockets of over-supply as supply chains shift, and pump a lot of extra money into the global economy. Instead, we're doubling down on dairy and still talking about AUKUS.
We wasted the last GF crisis by worrying about our debt. Let's not waste the next one. What we do in the next 5 years will determine our place in the world for the next 40.
Keynes was right!
So true. Our score for wisdom is around nil. Let's just go out for a burn - up on the motorway. Hunting for knowledge is for snowflakes.
Shamubeel Eaqub nailed it with that diagnosis. In essence, our tax take is not funding our day-to-day expenses, and (captured) ideology is preventing us from building any new mechanisms to grow our tax take, so we're basically borrowing to build a flywheel back to the developing world.
Taxes dont fund anything. Taxes destroy previously issued dollars.
https://youtu.be/ZZnjES18gzc
I (personally) do appreciate that (https://littleteapot.substack.com/p/earn-own-do) but - with respect - in practical terms, it's a semantic argument because you still have to pull money out of the economy somehow in order for it to be worth anything. When we try to make the argument that taxes don't pay for public things, we immediately run into the question of where the value of money comes from. It's absolutely true that government books don't need to operate the way they do, but that is key to the illusion that makes money 'work'... MMT has some very good things to say about measuring government spending against productivity (not debt) but certain care needs to be taken with it, to ensure you are bringing the "co-users" of a fiat currency (that is, citizens) along for the ride.
MMT explains that its taxation that creates the value of the other wise worthless tokens issued by the government. Acquire enough tokens to pay the levied taxes or go to jail....As for the "real" value, that's essentially set by the price the govt is willing to pay when it issues currency by purchasing stuff, however govt seem to have forgotten that they have this "power".
And in the background the polycrisis rumbles on... Another economics paper on the costs of warming - 16% of GDP at 2 degrees, 40%, ie WWII style constraints, at 4 degrees. The rainy day is here (atmospheric river anyone, draughts in Northland hence the 40m and Ruitaniwha dam in HB?) it will never be as cheap and easy to adapt as now.
https://www.theguardian.com/environment/2025/apr/01/average-person-will-be-40-poorer-if-world-warms-by-4c-new-research-shows?CMP=Share_iOSApp_Other
The National govt coalition sound as though they expect the country to grow by trading hats.