Mōrena. Long stories shortest: Standard & Poor’s has cut the credit ratings of 18 councils, blaming the new Government’s abrupt reversal of 3 Waters, cuts to capital grants & new unfunded mandates. The downgrades, with the potential for one more cut for Wellington Regional Council, Wellington City Council and Dunedin City Council, are likely to increase interest costs for ratepayers and restrict their ability to invest in the infrastructure the Government says is needed to grow GDP faster.
Also, weeks after PM Christopher Luxon said he wanted to ‘go for growth’ in 2025, large parts of the economy fell into a hole. Data out yesterday showed consumer confidence collapsed in the March quarter and job advertisements resumed falling in February. This comes days after news of a surprise contraction in February in the services sector that comprise more than 60% of the economy, along with more signs the housing market is struggling to fire up under a wet blanket of new listings and sellers reluctant to crystallise capital losses.
(There is more detail, analysis and links to documents below the paywall fold and in the podcast above for paying subscribers. If we get over 100 likes from paying subscribers, we’ll open it up for public reading, listening and sharing, although we’d love it if you subscribed to join The Kākā’s community and support making this journalism public. Students and teachers who sign up for the free version with their .ac.nz or .school.nz emails are automatically upgraded to the paid version for free. Our special are: $3/month or $30/year for under 30s & $6.50/month or $65/year for over 65s who rent.)
Long stories short, my top six news items in Aotearoa’s political economy around housing, climate and poverty on March 20 are:
Ratings agency Standard and Poor’s yesterday announced one notch debt rating downgrades for the credit ratings of 18 councils and three council-controlled organisations (CCOs), including Christchurch City, Dunedin City, Greater Wellington Regional, Hamilton City, Hastings, Hutt City, Kapiti Coast, Marlborough, Nelson, New Plymouth, Palmerston North, Porirua, South Taranaki, Tasman, Taupo, Waimakariri, Wellington City and Whanganui. It put the ratings of the Wellington and Dunedin councils on review for another downgrade. S&P said policy uncertainty after the new Government’s various actions in 2024 had caused the downgrades. (See more detail in the lead article below)
The Westpac-McDermott Miller survey of consumer confidence published yesterday found it slumped in the March quarter to levels not normally seen since 1991. Meanwhile, Seek reported job advertisements fell 2% in February from January, resuming a decline that had seemed to end during the month Luxon declared the country should ‘go for growth’. Stats NZ reported this morning December quarter GDP rose 0.7%, but that’s not enough to offset the 2.2 percentage points of contraction in the previous two quarters. Real National Gross Disposable Income per capita fell 2.0% in 2024.
BNZ Head of Research Stephen Toplis said consumer confidence had “shattered” in the March quarter, adding in a note yesterday: “for our forecasts of household spending to prove anywhere near accurate, consumer confidence will need to lift aggressively from here. It’s getting increasingly hard to see how this might happen. This is especially so when cost of living issues are a widespread concern which will not dissipate any time soon, particularly when folk see what happens to their power bills come the expected hikes on April 1.”
Luxon said in his ‘Going for Growth in 2025’ State of the Nation speech on January 23 that: “The bottom line is we need a lot less no and a lot more yes,” proclaiming the nation “open for business.” But yesterday Contact CEO Mike Fuge said the exact opposite was the case after a panel of experts rejected Contact’s plan for a 330 MW wind farm in Southland. (See more in quote of the day below.)
Another expert panel also demonstrated that ‘culture of no’ last month by rejecting a consent for an 11-storey wooden office building next to a new railway station in Auckland. Contrasting with the PM’s exhortation for the economy to develop a ‘culture of yes,’ Contact CEO Mike Fuge noted a panel’s rejection of Contact’s big wind farm proposal in Southland showed New Zealand wasn’t actually open for business. (See quote of the day below)
The World Meteorological Association published its annual report overnight, finding global temperatures averaged 1.5 degrees above pre-industrial levels in 2024, which was the warmest the planet had been in 800,000 years. (See number of the day below)
S&P downgrades 18 councils, blaming Govt
The Government did its best last year to please ratings agencies and bond investors by reining in new capital spending in an effort to reduce borrowing and borrowing costs for households. But the moves to slash capital grants and housing and transport spending have had the opposite effect. Standard and Poor’s just blamed the Government for downgrading the ratings of 18 councils, and warned there may be more to come.
Here’s the key points from S&P (bolding mine):
“New Zealand's councils will continue to experience credit strain. Debt will rise further for the local government sector and the policy environment is less predictable than in the past,” said S&P Global Ratings credit analyst Anthony Walker.
In our view, the sector is heavily indebted due to strong population growth and pressing needs for infrastructure including renewals in response to past underinvestment and new quality standards.
We recently lowered our institutional framework assessment on New Zealand's local government sector to very predictable and well balanced. This is second highest on our six-point scale, down from highest, extremely predictable and supportive. We believe the sector's revenue and expenditure balance and predictability of policy have weakened.
In response to this change, we today downgraded 18 New Zealand local councils and three council-controlled organizations by one notch.
This reflects factors including the quick passage and repeal of several key laws governing local councils, the cancellation of various Crown grant programs, an increase in unfunded mandates, and recent announcements about infrastructure financing options. These changes can materially affect councils' financial outcomes, making it difficult for S&P Global Ratings and the sector to accurately forecast financial outcomes. Standard and Poor’s announcement
My Pick’ n’ Mix Top Six at 6am
Poverty detail: A baby in a tent, a granddad sleeping in a slide: The growing homelessness ‘epidemic’. Outreach workers saw almost 60 new people living on the street in January alone, including an 8-week-old baby living in a tent. The Press-$’s Maddy Croad
Politics: Windfarm consent rejection indicates NZ closed for business - ContactBusinessDesk-$’s Ian Llewellyn
Scoop: ‘Contrary to law’: Ombudsman singles out Health NZ’s attitude to official information NZ Herald-$’s Thomas Coughlan
Scoop: 'Zombie' postboxes leave residents in dark, vital mail piling up RNZ’s Nine-to-Noon
Local politics: Western Bay of Plenty District Council quits LGNZ, calling it 'far left' RNZ/LDR
Scoop & deep-dive: TAB's $150m gamble for online casino licence fails RNZ’s Guyon Espiner
Full paying subscribers can see the full suite of Pick ‘n’ Mixes in today’s Pick ‘n’ Mix at 6am article and email sent earlier.
Quote of the day
“The question is, ‘is New Zealand really open for business?’ or is a significant portion of the country saying actually, no, we're not. Yeah, we quite like our lawyers’ fees and our concerns.” Contact CEO Mike Fuge talking to BusinessDesk-$’s Ian Llewellyn.
Number of the day
800,000 years: The World Meteorological Organisation (WMO) released its annual State of the Global Climate report overnight, confirming 2024 was likely to have ben the first calendar year to be more than 1.5°C above the pre-industrial era, making it the warmest year in the 175-year observational record, with atmospheric concentrations of carbon dioxide are at the highest levels in the last 800,000 years.
Document of the day
Platform, Aotearoa’s peak body representing mental health and addiction NGOs and community groups, has published a report measuring the value of their services titled: “A sound investment.”
Substack essentials
Chart of the day
Yet NZ’s solar & battery rollout has been so tepid
Video or podcast of the day
Thread of the day
“I wanted to pull out the lessons Auckland Transport (plus everyone else responsible for transport in Auckland), needs to learn from the Mercury Lane story. 1/7” ConnorSharp via BlueSky
Cartoon of the day
Timeline-cleansing nature pic of the day
Ka kite ano
Bernard
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