TLDR & TLDL: This week the Government announced it would force through its Three Waters plan, widened Covid-19 vaccination mandates to 40% of the workforce and unveiled its preferred Auckland Light Rail plan.
Also, the Electricity Authority exposed a $200 per year subsidy every household is giving to the Tiwai Point smelter, wholesale interest rates rose sharply because of inflation fears and Joe Biden was forced to halve his US$3.5t ‘Build Back Better’ plan for social and renewable energy spending.
Check out the podcast above of the zoom webinar ‘hoon’ that I do with Peter Bale from 4-5pm every Friday for paid subscribers to The Kākā. We unpacked the events above, plus Facebook’s name change to ‘Meta’, my broken tooth in a television interview and the rights bestowed on Pablo Escobar’s hippos. Peter is a colleague of mine from my days at Reuters and the FT Group. He produces a great weekly email on world affairs here.
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Five things that mattered this week
Three Waters was turned on to flush councils out - After a couple of months of hoping and working to get councils to agree to hand over their water assets voluntarily, Nanaia Mahuta announced the Government would force through the creation of four new public water entities. (The Kākā on Thursday)
The true cost of Tiwai Pt was revealed for all - The Electricity Authority published papers estimating Meridian Energy agreed to sell power to the Tiwai Point smelter for $500m less than it cost to produce. It probably did this so it could charge other customers more because it didn’t have to dump this power onto the market.
The Govt finally listened and acted on mandates - After weeks of businesses begging for the Government to mandate vaccinations to remove their legal risks, Cabinet decided to widen its mandates to 40% of the workforce to try to speed up the vaccination rollout. A further widening is expected to be announced in the coming weeks.
Markets forced Australia to tighten monetary policy - Stronger-than-expected Australian inflation figures sparked a selloff in short term bond markets that pushed up the three year bond yield well over the Reserve Bank of Australia’s 0.1% target level. Last week the central bank intervened to protect the 0.1% level by printing money to buy A$1b in the market. This week after the hot inflation figures, the Reserve Bank did nothing, despite the market pushing it well over 1.0%. The markets saw that as a tacit acknowledgement from the RBA that it will signal a tightening at its monthly monetary policy decision next Tuesday.
America’s elites forced Biden to gut his big tax and spend plan - US President Joe Biden had to halve his US$3.5t ‘Build Back Better’ tax and spend plan to boost social spending and renewable energy after campaigning by business lobbyists and billionaires successfully convinced two centrist Democrat senators to oppose a corporate tax hike and a range of spending for poor kids.
Five numbers that mattered this week
$12b - The amount of extra borrowing the govt estimates could be unleashed once councils hand over their $54b of water assets and $2b of debt to four new water authorities. It sees the four authorities being able to borrow $8b extra because they’ll be able to levy water charges that support the debt, while councils will be able to borrow $4b extra to fund infrastructure for housing and transport.
2.7% - The market expectation by the end of the week for what the Official Cash Rate will be by early 2023. That followed on from Aotearoa-NZ’s strong inflation figures last week and higher-than-forecast inflation in Australia. A 2.7% OCR would translate to mortgage rates well over 5% and headed for 6%.
40% - The percentage of the workforce covered by vaccination mandates after the Government’s announcement of a widening from education, healthcare, airlines and the border (15% of workers) to include hospitality, events, gyms, hairdressers and other close contact sectors. Mandates are expected to soon also be extended to construction, retail, other transport and the Police. Air NZ is also considering a vaccination mandate for domestic travellers.
2052 - The year in which the preferred tunnelled rail option for the Auckland Light Rail project is forecast to reach carbon neutrality, in large part because of the carbon emitted to produce the steel, concrete and tunnels while it’s built from 2030 to 2040.
$200 - The size of the effective subsidy being paid by each household in the form of higher electricity prices so Meridian could offer a massive discount to Rio Tinto to keep the Tiwai Pt aluminium smelter operating to 2024. The EA reckoned Meridian and Contact realised that if they sold Manapouri’s power to Tiwai Pt for $500m less than it was worth, it would be able to keep prices for electricity higher for the rest of the market to the tune of $1.6b-$2.6b.
(FYI below here is Five Charts of the week, my Five questions for ministers for the week ahead and what I’ll be watching for this coming week. It’s especially for paying subscribers. If you’re a free subscriber and have gotten this far, I’d love you to subscribe.)
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