The week that was for the week’s end

Featuring a hoon with Peter Bale and me around this week’s news, including the death of consensus on elimination and hard borders, plus a look ahead to next week’s expected rate hike

  
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TLDR and TLDL: This is my wrap up of the week’s key news from Aotearoa-NZ’s political economy for all subscribers, both free and paid, including a podcast above of my Friday afternoon live video ‘hoon’ with Peter Bale.

This week we look ahead at whether Cabinet will lower Auckland’s Covid restrictions to level two from level three, and how the broad consensus on the elimination and hard borders approach broke down completely this week. We also look at whether the Reserve Bank will decide on Wednesday to hike the official cash rate for the first time in seven years, and whether it should.

This is the weekly summary and sampler for free subscribers of the more indepth work we’ve done through the week, which is available daily for full paid subscribers. An initial introductory offer expired last week, but there is still a Housing Affordability special offer open for a couple more days. Subscribe here to support my journalism and join The Kākā community. See the highlights of the week below, plus seven numbers for seven days, my weekend reading and some fun things.

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Breaking: Just before publishing, news broke of two new Covid cases in the Waikato and of a Covid-positive truck driver who drove down the North Island. PM Jacinda Ardern and Ministry of Health DG Ashley Bloomfield are due to hold a news conference in the Beehive Theatrette at 1pm today.


The end of elimination. But now what?

This week’s cases confirmed the pursuit of elimination any time soon is effectively over. The seven day average of cases remains in double digits and well above the low single digits seen last year in the lead-up to the decision to take Auckland down to level two. The continued ‘surprise’ arrival of cases at Auckland hospitals and growing signs Covid is established in South Auckland’s most overcrowded and stressed households is clear.

PM Jacinda Ardern signalled this week that Cabinet would on Monday keep Auckland’s boundary settings at the current level-four style restrictions that mean very few Aucklanders can get out, except to bring in essential goods. The option to take Auckland down to level two restrictions inside those boundaries is still on the table, but appears less likely by the day as the number of cases remains well into the high teens and twenties, with regular arrivals of ‘unlinked’ cases. Epidemiologists and modellers are now consistently saying there are no good health reasons to take Auckland down, which means an easing of restrictions would be for economic and political reasons.

Cabinet faces the most awful choice tomorrow. If it stays at level two, it will further stress already ragged public support in Auckland and elsewhere for the lockdowns, which can’t easily or quickly end if the elimination strategy continues to be pursued credibly. Or the Government can effectively acknowledge elimination before Christmas is a hopeless task and aim to reopen as safely as possibly while working as hard as possible to get as many vaccinated. The trouble is the rise in first-dose vaccination rates have slowed dramatically in the last fortnight as the ‘final 15%’ looks to be much harder to achieve.

The problem for the Government is it has now boxed itself into a corner and the virus has it on the ropes. It has said it wants Auckland’s first-dose vaccination rate over 90% in order to reopen without stressing the hospital system too much, but that could take until well into mid-November at the current slowing rates. But many Aucklanders had their hearts set on a re-opening from this Tuesday, and many outside Auckland were hoping to reconnect from then too, as well as go down to level one. But the case numbers aren’t low enough, if the Government sticks with elimination and wants to keep the numbers suppressed at or below these levels. Dropping to level two would just force air onto the embers as hundreds of thousands of people start working, playing and mixing again.

However, the pressure to drop anyway is intense, both socially and economically. There are early signs of fading adherence to the restrictions around bubble mixing and mask usage. Gatherings of gang members at a funeral and anti-vaccination protest in Auckland on Friday and Saturday are signs of a fraying social license. Aside from the initial March 23, 2020 decision to go hard and early with nationwide level four lockdown, Cabinet faces its toughest decision of the Covid crisis on Monday.

Here’s what I wrote and said about elimination earlier in the week. These are available to read in full for subscribers.

The Kākā by Bernard Hickey
Dawn Chorus: Vaccination passport coming
Listen now (19 min) | TLDR & TLDL: The Government is continuing to back slowly away from a hard elimination and even harder borders stance towards some sort of reopening plan in the next couple of weeks. That is set to include a vaccination passport that would allow venue operators and hospitality businesses to bar entry to the unvaccinated, while calls from business figures are growing for a home isolation pilot for returnees sooner rather than later…
Read more

No plan or progress

The Government released its flagship Government Policy Statement for Housing and Urban Development this week and detailed its tax deductibility policy for landlords.

Here’s what I wrote for subscribers. It also includes a podcast.

The Kākā by Bernard Hickey
A housing travel plan without a destination or a vehicle
Listen now (54 min) | TLDR & TLDL: The Government has announced a swathe of housing policies aimed at increasing housing supply for rentals and owner occupiers, all with the loudly-stated aim of improving affordability. That included a broad housing policy statement aimed at councils and others that didn’t say what amount of affordability improvement it wanted, and to what level…
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The consensus on elimination broke down

Both ACT and National abandoned their remaining support for the Government’s strategy of staying locked down and preserving the elimination and hard borders strategy beyond Tuesday.

Given a level drop is not credible in health terms with an elimination strategy, the Opposition are calling for a graduated opening up based on various vaccination thresholds from 70% to 90%. Modelling from Shaun Hendy’s group this week suggested significant numbers of deaths and hospitalisation rates that would overwhelm Auckland’s ICU units and positive pressure rooms if Tamaki Makaurau was re-opened at vaccination rates below 90%.

This has ramped up the pressure on the Government, which is also dealing with a crescendo of calls from businesses and many individuals stuck on either side of both Auckland’s boundaries and the international borders with all manner of personal and business tragedies unfolding. The social fabric is beginning to fray under the pressure, particularly once the bulk of the population becomes double-dosed within the coming fortnight and the ‘holdouts’ and unreachable are in communities that many in that majority have no connection to and not much sympathy for.

The danger is that the majority, particularly outside Auckland, start blaming and persecuting and excluding those groups in South and West Auckland who currently have much-lower-than-90% vaccination rates, for both legitimate and tragically false reasons.

This tension was inevitable, as I wrote in this piece ‘Time to stop kidding ourselves on the reopening’ on Sept 9 and this piece on Aug 23 asking if it was Time to eliminate elimination.


Finally, some relief for 165,000 guest workers in our ‘Team of 5m’

Immigration Minister Kris Faafoi finally bowed to pressure to offer residency in a one-off process for up to 165,000 people.

I called for this in a piece I wrote and a podcast I did published on August 8 to all called ‘How Aotearoa-NZ could live up to its Team of 5m self belief’.

The Kākā by Bernard Hickey
How Aotearoa-NZ could live up to its kind 'Team of 5m' self-belief
Listen now (34 min) | TLDR & TLDL: I spoke to a variety of people late last week for my Spinoff podcast on calls for a residency amnesty for nearly 200,000 temporary workers stranded here, cut off from their families. Some of the interviews weren’t included for time and space reasons, so here’s the other interviews put together in a podcast above…
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Seven numbers for seven days

49.6 - China’s Purchasing Managers’ Index for September, which was below the 50% threshold for expansion and weaker than expected. Power shortages and Covid disruptions could be slowing down our economy’s most important trading partner.

4.1% - Germany’s annual inflation rate in September, which was a 28-year high and outside the ECB’s 2% inflation target. However, the ECB is still printing and buying bonds at a rate of €80b/month because it sees the inflation as transitory.

$28,000 - The average annual earnings of a resident of KawaKawa, which has the most lucrative pokies machines in the country. (Stuff)

20 years - The period of exemption for new builds for rental property investors from new tax deductibility for mortgage interest costs from Oct 1.

26% - The average cost of housing as a percentage of household disposable income, which is the highest in the OECD, where that average is 20%.

46% - The rise in house prices since the Labour Government was sworn in in October 2017. There has also been a 12% increase in rents over the last four years. During that time average wage and salary rates rose 7.8%.

$10b - The amount of exempted high LVR lending since March last year, mainly for new builds, including around $3b to first home buyers and owner occupiers, and the rest to landlords.

70 - The number of the uses of the word affordable in the GPS-HUD, but nothing on what the Government thinks is an affordable house price level, or how it will get there.

The Kākā by Bernard Hickey
Dawn Chorus: 'Vaccine certificates for summer'
Listen now (19 min) | TLDR & TLDL: The summer’s music festivals and Christmas holiday travel within Aotearoa-NZ could go ahead with widespread use of vaccination certificates. Meanwhile, there’s also more hope any further delta outbreaks over the 90% vaccination threshold won’t be as dangerous as overseas and our hospitals could cope…
Read more

My weekend reading


Some fun things

Ka kite ano

Bernard

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