May 15 • 58M

The hoon about the week that was

Including Peter Bale & me with guest Robert Patman on gas supplies to Europe being cut off; NATO's Scandi-pansion; this week's crypto-collapse; a Budget preview; double-digit housing deflation

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Bernard Hickey's discussions about the political economy in Aotearoa-NZ and in geo-politics, including issues around housing affordability, climate change inaction and child poverty reduction.
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TLDR: The Kākā’s hoon about the week that was in the podcast above included Peter Bale and me talking with special guest Professor Robert Patman about the latest geo-political and economic fallout from Russia’s war on Ukraine, along with closer looks at Budget 2022 on Thursday, the week’s crypto-crash and double-digit house price deflation.

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Bombed buildings wait to be demolished as essential services and people begin to return to the town of Borodianka, now Russia has moved to concentrate its attack on the east and south of Ukraine. Photo: Christopher Furlong/Getty Images

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Five things of note this week

War in Ukraine generates more inflation

Gas supplies cut - Russia cut off one gas pipeline through Ukraine and Poland to the rest of Europe, forcing European gas futures prices up more than 20%. Russia also cut off its electricity supplies to Finland after Finland indicated it would formally apply early in the coming week to join NATO. The European Union is close to agreeing a Europe-wide ban on imports of Russian oil by the end of the year.

Sweden is also on the verge of joining NATO, which Russia said it would respond to with measures of a “military-technical” nature. Meanwhile, US howitzers are already being used in eastern Ukraine by Ukrainian forces. The M777 155mm howitzer can fire a GPS-guided shell 40km with pinpoint accuracy. Patman talked in the podcast above about these howitzers being reported to have hit targets inside Russian territory.

Here, petrol prices rose over $3/litre and all eyes will be on the Government’s Emissions Trading Plan this coming week as to whether it is extended beyond three months.

The Emissions Reduction Plan and Health Budget

The Government will release its Emissions Reduction Plan in a two-hour ‘lockup’ in The Beehive that ends at midday on Monday. I’ll be inside and do a special email as it is released. It is speculated to include an extension of the current half-price discount for public transport and a congestion charge for Auckland. There’s also talk of a congestion charge. I welcome the suggestions for queries in the comments below from paid subscribers.

In the Budget itself on Thursday, the Government is expected to focus the bulk of its $6b operating allowance (unchanged from what was announced in December) on funding the Health system restructuring (and tidying up DHB debts and deficits) and leaving the multi-year capital allowance unchanged from December at $9.8b.

Double-digit house price deflation

The Kākā by Bernard Hickey
Dawn chorus: Double-digit house price deflation
Listen now (12 min) | TLDR: House price deflation hit double-digits for Auckland and Wellington in April, but business leaders, forecasters and households are yet to buy the Reserve Bank’s suggestions that a 30% fall is feasible, or even that the ‘sustainable’ level of house prices is still another 5-20% below the already lower levels. …
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The crypto-crash

This week the algorithmic stable coin Terra-USD collapsed, taking the Luna digital currency with it. The most-used fiat-backed stablecoin Tether also ‘broke the buck’ briefly on Thursday night, although was back at US$1 this morning.

I was asked to talk about the collapse on TVNZ’s Q+A yesterday and spoke in a panel discussion with Jack Tame and Rebecca Stevenson. Here’s the full panel sesssion resulting video report:

The migration ‘rebalancing’

The Kākā by Bernard Hickey
Dawn Chorus: Not-so-cold turkeys
Listen now (10 min) | TLDR: The Government has unveiled what it calls a ‘rebalancing’ of migration settings to offer new and faster pathways to residence for higher paid migrants. But it held off forcing low wage temporary migrant employers in hospitality, tourism and aged care to pay the new $27.76/hour median wage threshold for at least 12 months…
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