The Kākā by Bernard Hickey
The Kākā by Bernard Hickey
Using blunt instruments and magical thinking to ignore evidence of harm
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Using blunt instruments and magical thinking to ignore evidence of harm

A Saturday soliloquoy on how the new Govt’s laser-like focus on debt reduction and use of blunt instruments and magical thinking is wreaking havoc in hospitals, schools & the economy
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The abrupt cancellations and suspensions of Government spending also caused private sector hiring, spending, and investment to freeze up for the first six months of the year. Photo: Lynn Grieveson / The Kākā

This week we learned:

  • The new National/ACT/NZ First Coalition Government ignored advice from Treasury that it didn’t have to reduce net public debt to an arbitrary range of 20%-40% of GDP and could instead borrow up to $80 billion in coming years to create an investment pipeline to grow productivity;

  • instead, the new Government created a series of blunt and arbitrary instruments to cut spending in health, education, health, transport and social services in ways that are causing dangerous and poverty-inducing conditions in hospitals, schools and in housing, all to pursue a debt reduction strategy baked between 1984 and 1993 and now totally unnecessary in the eyes of the Government’s creditors;

  • which meant the abrupt cancellations and suspensions of Government-funded water and transport infrastructure spending, a freeze in building and repairing of school buildings, hospitals and homes, and the sacking of thousands of staff during the Budget-building process of early 2024 also caused private sector hiring, spending, and investment to freeze up for the first six months of the year;

  • the Government ignored official advice during the Budget process that these arbitrary spending cuts and freezes would make kids sicker and poorer, dump extra emissions into the climate and contradicted its own aspirations to grow investment and productivity in the wider economy;

  • the new Government’s Climate Change Minister openly started musing about failing to meet our Paris Agreement targets for emissions reductions in a way that would breach our recently signed trade agreements with Europe and the UK; and,

  • in another perverse outcome of the debt-reduction obsession, the Government is pushing ahead with a series of fee hikes, new levies and public-to-private cost transfers that amount to a fresh burst of domestically-administered inflation that is delaying a monetary policy easing.

My story of the week

Treasury told the new Government it considered a 50% net core crown debt limit fiscally prudent under the Public Finance Act (PFA), but the National/ACT/NZ First coalition decided in Budget 2024 to go ahead with a 20%-40% target range.

Treasury warned the new lower 20%-40% range might undermine the coalition’s aim of building a stable public investment pipeline and risked “passing up on productivity and growth enhancing investments.” See more in Friday’s email.


Scoop of the week elsewhere

RNZ’s Ruth Hill reported this week Te Whatu Ora-Health New Zealand has scrapped the highest Code Black alert used by some emergency departments to show when they are critically overcrowded or understaffed.


Solutions news charts of the week


Quote of the week

“Feedback from schools, teachers, and learners was that student-level targeting ('means-testing') requires learners to self-identify as in-need, which generates a stigma, shame, and whakamā so significant that they will, in almost every situation, refuse to engage with free kai programmes.” Ministry advice to the Government that cutting back the Ka Ora, Ka Ako school lunch programme would hurt poor kids. RNZ


Charts of the week

Job losses ramped up in earnest from April onwards

Real per-capita retail and hospitality spending is back at 2012 levels


Cartoons of the week


Timeline cleansing video of the week


Timeline cleansing nature pic of the week

Life/ fungi finding a way in the city centre. M. Grieveson for The Kākā

Have a great weekend

Mā te wa

Bernard

Discussion about this podcast

The Kākā by Bernard Hickey
The Kākā by Bernard Hickey
Bernard Hickey and friends explore the political economy together.