The mathematics behind relying on foreign direct investment to fill a $64 billion hole left by the Government's retreat from the economy just doesn't add up.
Does Luxon have a point when he says we have a 'culture of no', in the context of mining in NZ?
You don't have to dig very deep into the 'energy transition' to find warnings from the likes of IEA of forecast supply-demand imbalances, and encouragement for government policies to support the 'clean energy' critical minerals supply chain.
Would someone help me understand why suggestions of additional income from mining in NZ are so quickly and scornfully dismissed?
What's our problem? Is it dishonourable, bad, to profit from mining, no matter the objective? Are we too precious to get our hands dirty; are there dirtier countries for that? Is it because drunk uncle Shane on the centre-right supports it? Is the argument that gets bandied around that NZ shouldn't confront its emissions because it's too small to have a meaningful impact actually the same argument we're using to dismiss mining the raw materials these new technologies actually need?
Ignoring for a moment the apparent indifference many of them have to the environmental damage they cause, Google's AI overview of your question comes up with a refreshingly honest answer: "a significant portion of the value leaves the country with the raw materials, leaving a relatively small percentage of the total value within the country where the mining occurs."
Not mining, but I remember oil and gas extraction company Malaysian-owned Tamarind Taranaki went bust in 2019, leaving creditors with a $600m hole and the taxpayer with the clean-up bill.
I'm sure that's not the first time that sort of thing has happened. They are called extractive industries and they are pretty good at extracting.
Appreciate your answer. The issue may be that mining is not so competitive/profitable when things like environmental damage, health and safety, are valued and managed correctly. The 'energy transition' arguably hasn't even started, and already we're calling into question whether it's just another environmental disaster
And, the pro mining factions in the government have turned many people off mining because of their seemingly unqualified support for hugely unpopular, and potentially environmentally disastrous, seabed mining off the Taranaki coast.
I'm flabberghasted that the Government is allowing this through the fast track bill. Not only does it destroy the ocean ecosystem but it will delay the ability to place a windfarm in that area for up to 30 years. Such backward thinking. All I can say is I hope that Company paid a lot to be able to do this.
At this point in history its incredibly dishonourable to profit off mining. It doesn't mean that we don't need mining of some kind, but the scale needed to make it profitable is the problem/dishonourable part. Both dishonourable socially and environmentally.
Globally all economies are moving from ‘growth’ towards contraction. If Luxon thinks any of these Band-Aid fixes can stop that, he’s deluded. You’re right Bernard, borrowing is the only way to get any ‘growth’, as we all tip towards long term contraction. These forces are bigger than any country, especially NZ.
Borrowing is the only way any economy has been able to grow over the last decade +. And I would argue that approach only has a short window to work as well.
This is not to mention economic growth (how classical economics sees it) is incompatible with complex life on earth, including and especially our own. It’s madness and a cult / extremist religion to ‘go for growth’ at this point. We desperately need people in governance with clarity on our predicament and a willingness to challenge our myths. Not a revolutionary, but someone who can gently break the news to everyone that life will be different in the future. And lead them towards an ecological future, one richer in life than money.
Absolutely! Growth in per capita GDP is tied very closely to emissions and CO2 levels. So pushing up growth means pushing up the rate of climate change… and that’ll cost us sorely.
Not sure we’ll willingly reverse it, but it’ll happen eventually. Whether through depletion of resources, thermodynamics and climate change or simply the energy cost of energy.
This trend has only been possible by increasing extraction. As Nate Hagen’s says “we’ve just made bigger straws, means we’re closer to the slurping sound.”
Excellent thoughts on the need to refocus redeem and repurpose our whole attitude/belief system away from growth and towards sufficient/enough/make do.
As in post WW2.
Trouble is no one votes to reduce their position in society.
We need a Citizens' Assembly system to bring real needs actual evidence and collective informed decisions.
I’ve been thinking about this state of the nation address for a while now. I’ve had coffee, so that can’t be the problem.
None of what they’re doing makes sense. But maybe this is providing insight into how super wealthy people think: maybe the expectation is that someone else will pay; because someone else always does?
I don’t know. Certainly seems that this government expect someone to step in and throw money at these problems. And people will only do that if they think that there is a lot of money to be made.
Dame Anne Salmond wrote a terrific piece for Newsroom https://newsroom.co.nz/2025/01/21/anne-salmond-hayeks-bastards/ in which she points out that the neolib obsession with "freedom" is not about people, it's about freedom for individuals to make unfettered money. So these plonkers in government are doomed to go round and round saying we can't spend anything but we really want to turbocharge the economy, forgetting that people who think like them want to make maximum profit from minimal risk and only the involvement of an institution the size of government can reduce that risk.
I can just picture the scene; A Foreign Direct Investment Fund Management meeting today. Someone asks " What about investing $300 million in New Zealand' RONS? After the laughter dies down, someone answers: 'yeah, nah'.
“We’ve been here before” — it sure feels that way. I have a hazy recollection Key also once referenced Singapore as an example. But Singapore isn’t really generalisable, those historical circumstances were particularly unique and Lee Kuan Yu’s navigation required a fairly authoritarian government. Singapore is not an example which can be so simply emulated, it’s exceptional because of the particular circumstances its leadership navigated.
The lessons of Singapore are far less direct than the PM seems to suggest.
During your video Bernard, you said you asked a question of Luxon regarding why sovereign wealth funds should trust his government when only a few years ago, NZ First specifically lead to the cancellation of Auckland light rail projects. Did you get an answer or did he fudge or ignore your question?
Why are these neo-liberal leaders obsessed about saying things like “I believe that New Zealand is the best country on Planet Earth…”. I mean, do you really think that? And if you do, that doesn’t matter because it probably doesn’t check out against many NZers experiences right now - losing jobs, living in cars, etc etc. And what constitutes being the “best”?? It just feels like some macho American-esque positioning and chest-bashing. Not helpful.
And what is it with the constant lame arse slogans!? New Zealand 'going for growth' - right up there with 'where everyone gets a bargain' 'you'll never buy better'..and 'because you're worth it' .. Luxon is a shallow salesman...not a statesman. His State of the Nation reads like a pep talk given to the sales team at the launch of a new product no one is really convinced about...
Unfortunately politics has been reduced to 3-4 word slogans. It works (“Get Brexit Done”, “Make America Great Again”) in terms of convincing a populous who have no wish to invest time in challenging the message. Too many people have switched off and/or are too busy just trying to exist. Just my opinion.
Hi Bernard. Relatively new subscriber and first time commenter. I do not have a back ground in economics or political science. However, I follow politics closely. Thank you for explaining the economics in easy to understand language and concepts. Secondly thank you for explaining the history of other attempts at trying the same thing. i.e. John Key tried PPPs to rebuild Christchurch and now Chris Luxon is trying for, Invest NZ, PPPs to build hospitals that are urgently needed and roads that may be not needed so urgently. There are other alternatives. That is exactly why I became a subscriber.
My personal point of view. A country should build and own it's own infrastructure. The best way is through Government borrowing. Cheaper in the long run and you have more control over the infrastructure. Better to own your own house rather than be a renter all through life. ( I know that homeownership is a lot harder than it was 40 years ago, when I started).
When it comes to infrastructure, New Zealand need to be more self sufficient, reliable and planed worthwhile projects not cancelled by a small group of people wanting to score political points.
Thanks to everyone who has made a comment this morning. They are all thought provoking.
I was interested in Winston Peters announcement at the NZF conference last year that one of their policy objectives was to establish a $100bn infrastructure fund that has broad bipartisan agreement. Linked to an entity that makes the spending decisions independent of government this policy could have some merit imho.
Excellent analysis. Thank you Bernard. It’s this type of analysis that’s missing in pretty much every other media channel in Aotearoa. I would love to see the Kākā scaled up to enable you to bring in other like-minded journalists to continue and expand on this important work.
All I hear from this government is that they have no confidence in this country or kiwis. If they have no confidence in us how will any overseas investor have confidence? Throw on top of this the fact that NACT1 are just not able to be trusted (with anything, would you let Seymour babysit?).
You have hit one of the many nails on the head. New Zealanders, as well as the government, have no confidence in ourselves. Far easier to bring someone else into NZ to finance and build big infrastructure projects. We need to build capacity again. We have had capacity to do infrastructure in the past.
Yes, building homegrown knowledge, skills capacity, and capabilities is essential across multiple sectors and society as a whole. It’s all interconnected, and a critical part of improving these systems is urgently increasing New Zealand’s Brain Capital initiatives.
For years, successive governments have relied on importing Brain Capital while neglecting to adequately invest in retaining and nurturing our own. While I don’t see the Brain Capital economic framework as a silver bullet, it offers a useful lens to evaluate policy and economic strategies.
Currently, the government seems focused on the quick sugar rush of more international students and visitors, betting on these to pull their economic fat out of the fire. They also appear to be banking on foreign direct investment (FDI) and partnerships to bring in financial and Brain Capital. But where is the thinking about building our own capabilities and talent pools for the long term? This is especially critical as the global mobility of talent is increasingly restricted by immigration policies, as we saw under Trump’s administration.
We no longer live in the same globalised world of the past few decades. New Zealand must act now to build its infrastructure—both hard and soft—and develop its own capabilities, rather than waiting years down the track when the opportunity may be lost.
Like Carolyn, I've had to have a coffee to digest what the Prime Minister said at his State of the Nation and the thoughts Bernard has shared and I've got this observation I'd like to share, Chris Luxon is not really the leader he and everyone else thinks he is. Yes, he's been a leader of people, however he's always had someone he reported to, someone who would say 'great job Chris' or "next time you could try this Chris' etc. In his corporate working career he had staff who would give him the summarised version of what they or someone else has done and he'd probably give some guidance and approve someone else to do some work and if he was unsure, he'd consult with the person (or people) he reported to and he'd act on their advice. As Prime Minister, and Leader of the National Party, the buck actually stops with him... and I really don't think the penny has dropped for him. Other former Prime Ministers have understood this, John Key and Helen Clarke, Jacinda Arden had some moments and certainly David Seymour understands it... (Winston Peters is a force for chaos... pure and simple). Thoughts?
Where have toll roads ever worked?
Does Luxon have a point when he says we have a 'culture of no', in the context of mining in NZ?
You don't have to dig very deep into the 'energy transition' to find warnings from the likes of IEA of forecast supply-demand imbalances, and encouragement for government policies to support the 'clean energy' critical minerals supply chain.
Would someone help me understand why suggestions of additional income from mining in NZ are so quickly and scornfully dismissed?
What's our problem? Is it dishonourable, bad, to profit from mining, no matter the objective? Are we too precious to get our hands dirty; are there dirtier countries for that? Is it because drunk uncle Shane on the centre-right supports it? Is the argument that gets bandied around that NZ shouldn't confront its emissions because it's too small to have a meaningful impact actually the same argument we're using to dismiss mining the raw materials these new technologies actually need?
It's a fair question.
Ignoring for a moment the apparent indifference many of them have to the environmental damage they cause, Google's AI overview of your question comes up with a refreshingly honest answer: "a significant portion of the value leaves the country with the raw materials, leaving a relatively small percentage of the total value within the country where the mining occurs."
Not mining, but I remember oil and gas extraction company Malaysian-owned Tamarind Taranaki went bust in 2019, leaving creditors with a $600m hole and the taxpayer with the clean-up bill.
I'm sure that's not the first time that sort of thing has happened. They are called extractive industries and they are pretty good at extracting.
Appreciate your answer. The issue may be that mining is not so competitive/profitable when things like environmental damage, health and safety, are valued and managed correctly. The 'energy transition' arguably hasn't even started, and already we're calling into question whether it's just another environmental disaster
And, the pro mining factions in the government have turned many people off mining because of their seemingly unqualified support for hugely unpopular, and potentially environmentally disastrous, seabed mining off the Taranaki coast.
I'm flabberghasted that the Government is allowing this through the fast track bill. Not only does it destroy the ocean ecosystem but it will delay the ability to place a windfarm in that area for up to 30 years. Such backward thinking. All I can say is I hope that Company paid a lot to be able to do this.
No doubt it will be devastating. So much easier to do the dirty work out of sight and out of mind somewhere else, right?
"Hide the supply chain, I only want the nice 'clean' finished product", said New Zealand.
The 'energy transition' looks to be well underway
https://www.euronews.com/green/2025/01/23/major-milestone-for-eu-energy-revolution-as-solar-power-overtakes-coal-for-the-first-time
On that I disagree. Below are the results of our efforts so far, it's not pretty:
https://ourworldindata.org/grapher/global-energy-substitution
At this point in history its incredibly dishonourable to profit off mining. It doesn't mean that we don't need mining of some kind, but the scale needed to make it profitable is the problem/dishonourable part. Both dishonourable socially and environmentally.
And what are the implications of this for the energy transition away from fossils to 'clean' energy?
The energy transition is to less energy overall.
Good work giving us your observations on the three countries Luxon uses as examples of growth potential.
His usual skim over deeper facts is classic neoliberal cant.
He picked up some useful research strategies from Casey Costello
State of the Nation? More like an episode of Luxon in LaLa Land.
La la Land has better dancing.
Globally all economies are moving from ‘growth’ towards contraction. If Luxon thinks any of these Band-Aid fixes can stop that, he’s deluded. You’re right Bernard, borrowing is the only way to get any ‘growth’, as we all tip towards long term contraction. These forces are bigger than any country, especially NZ.
Borrowing is the only way any economy has been able to grow over the last decade +. And I would argue that approach only has a short window to work as well.
This is not to mention economic growth (how classical economics sees it) is incompatible with complex life on earth, including and especially our own. It’s madness and a cult / extremist religion to ‘go for growth’ at this point. We desperately need people in governance with clarity on our predicament and a willingness to challenge our myths. Not a revolutionary, but someone who can gently break the news to everyone that life will be different in the future. And lead them towards an ecological future, one richer in life than money.
Absolutely! Growth in per capita GDP is tied very closely to emissions and CO2 levels. So pushing up growth means pushing up the rate of climate change… and that’ll cost us sorely.
Have a look at this plot; how do we reverse this trend?
https://ourworldindata.org/grapher/global-energy-substitution
Not sure we’ll willingly reverse it, but it’ll happen eventually. Whether through depletion of resources, thermodynamics and climate change or simply the energy cost of energy.
This trend has only been possible by increasing extraction. As Nate Hagen’s says “we’ve just made bigger straws, means we’re closer to the slurping sound.”
Sadly, yes, exactly
Exactly. And this one … https://www.artberman.com/wp-content/uploads/carbon-emissions-temperature-and-overshoot-of-planetary-boundaries-are-unlikely-to-decrease-.jpg
“ We desperately need people in governance with clarity on our predicament and a willingness to challenge our myths” - someone perhaps like Bernard? 😊
Excellent thoughts on the need to refocus redeem and repurpose our whole attitude/belief system away from growth and towards sufficient/enough/make do.
As in post WW2.
Trouble is no one votes to reduce their position in society.
We need a Citizens' Assembly system to bring real needs actual evidence and collective informed decisions.
I’ve been thinking about this state of the nation address for a while now. I’ve had coffee, so that can’t be the problem.
None of what they’re doing makes sense. But maybe this is providing insight into how super wealthy people think: maybe the expectation is that someone else will pay; because someone else always does?
I don’t know. Certainly seems that this government expect someone to step in and throw money at these problems. And people will only do that if they think that there is a lot of money to be made.
Grumble grumble.
Yes, that could be it
Dame Anne Salmond wrote a terrific piece for Newsroom https://newsroom.co.nz/2025/01/21/anne-salmond-hayeks-bastards/ in which she points out that the neolib obsession with "freedom" is not about people, it's about freedom for individuals to make unfettered money. So these plonkers in government are doomed to go round and round saying we can't spend anything but we really want to turbocharge the economy, forgetting that people who think like them want to make maximum profit from minimal risk and only the involvement of an institution the size of government can reduce that risk.
I can just picture the scene; A Foreign Direct Investment Fund Management meeting today. Someone asks " What about investing $300 million in New Zealand' RONS? After the laughter dies down, someone answers: 'yeah, nah'.
...and adding yet another 'new' ministry when they're busy raiding health and every other existing one ... I'd like to see the cost/benefit on that!
“We’ve been here before” — it sure feels that way. I have a hazy recollection Key also once referenced Singapore as an example. But Singapore isn’t really generalisable, those historical circumstances were particularly unique and Lee Kuan Yu’s navigation required a fairly authoritarian government. Singapore is not an example which can be so simply emulated, it’s exceptional because of the particular circumstances its leadership navigated.
The lessons of Singapore are far less direct than the PM seems to suggest.
During your video Bernard, you said you asked a question of Luxon regarding why sovereign wealth funds should trust his government when only a few years ago, NZ First specifically lead to the cancellation of Auckland light rail projects. Did you get an answer or did he fudge or ignore your question?
He said that was ancient history….
That's almost funny... almost
Like cancelling the Cook Strait ferry project with no viable alternative. Is that ancient history too?
Why are these neo-liberal leaders obsessed about saying things like “I believe that New Zealand is the best country on Planet Earth…”. I mean, do you really think that? And if you do, that doesn’t matter because it probably doesn’t check out against many NZers experiences right now - losing jobs, living in cars, etc etc. And what constitutes being the “best”?? It just feels like some macho American-esque positioning and chest-bashing. Not helpful.
And what is it with the constant lame arse slogans!? New Zealand 'going for growth' - right up there with 'where everyone gets a bargain' 'you'll never buy better'..and 'because you're worth it' .. Luxon is a shallow salesman...not a statesman. His State of the Nation reads like a pep talk given to the sales team at the launch of a new product no one is really convinced about...
I wouldn't buy a used car from him.
New Zealand. New Zealand.
Where everyone gets a bargain…. And a money back guarantee.
That should persuade a whole bunch of sovereign wealth funds!!!
Unfortunately politics has been reduced to 3-4 word slogans. It works (“Get Brexit Done”, “Make America Great Again”) in terms of convincing a populous who have no wish to invest time in challenging the message. Too many people have switched off and/or are too busy just trying to exist. Just my opinion.
Hi Bernard. Relatively new subscriber and first time commenter. I do not have a back ground in economics or political science. However, I follow politics closely. Thank you for explaining the economics in easy to understand language and concepts. Secondly thank you for explaining the history of other attempts at trying the same thing. i.e. John Key tried PPPs to rebuild Christchurch and now Chris Luxon is trying for, Invest NZ, PPPs to build hospitals that are urgently needed and roads that may be not needed so urgently. There are other alternatives. That is exactly why I became a subscriber.
My personal point of view. A country should build and own it's own infrastructure. The best way is through Government borrowing. Cheaper in the long run and you have more control over the infrastructure. Better to own your own house rather than be a renter all through life. ( I know that homeownership is a lot harder than it was 40 years ago, when I started).
When it comes to infrastructure, New Zealand need to be more self sufficient, reliable and planed worthwhile projects not cancelled by a small group of people wanting to score political points.
Thanks to everyone who has made a comment this morning. They are all thought provoking.
I was interested in Winston Peters announcement at the NZF conference last year that one of their policy objectives was to establish a $100bn infrastructure fund that has broad bipartisan agreement. Linked to an entity that makes the spending decisions independent of government this policy could have some merit imho.
Something like a National Building Authority? That's a refreshing, new and bold idea!
* They must have been watching Utopia and thought, that sound familiar...
Excellent analysis. Thank you Bernard. It’s this type of analysis that’s missing in pretty much every other media channel in Aotearoa. I would love to see the Kākā scaled up to enable you to bring in other like-minded journalists to continue and expand on this important work.
All I hear from this government is that they have no confidence in this country or kiwis. If they have no confidence in us how will any overseas investor have confidence? Throw on top of this the fact that NACT1 are just not able to be trusted (with anything, would you let Seymour babysit?).
You have hit one of the many nails on the head. New Zealanders, as well as the government, have no confidence in ourselves. Far easier to bring someone else into NZ to finance and build big infrastructure projects. We need to build capacity again. We have had capacity to do infrastructure in the past.
Yes, building homegrown knowledge, skills capacity, and capabilities is essential across multiple sectors and society as a whole. It’s all interconnected, and a critical part of improving these systems is urgently increasing New Zealand’s Brain Capital initiatives.
For years, successive governments have relied on importing Brain Capital while neglecting to adequately invest in retaining and nurturing our own. While I don’t see the Brain Capital economic framework as a silver bullet, it offers a useful lens to evaluate policy and economic strategies.
Currently, the government seems focused on the quick sugar rush of more international students and visitors, betting on these to pull their economic fat out of the fire. They also appear to be banking on foreign direct investment (FDI) and partnerships to bring in financial and Brain Capital. But where is the thinking about building our own capabilities and talent pools for the long term? This is especially critical as the global mobility of talent is increasingly restricted by immigration policies, as we saw under Trump’s administration.
We no longer live in the same globalised world of the past few decades. New Zealand must act now to build its infrastructure—both hard and soft—and develop its own capabilities, rather than waiting years down the track when the opportunity may be lost.
“ would you let Seymour babysit?”
Just the thought of that is enough to give you nightmares. 😬
Like Carolyn, I've had to have a coffee to digest what the Prime Minister said at his State of the Nation and the thoughts Bernard has shared and I've got this observation I'd like to share, Chris Luxon is not really the leader he and everyone else thinks he is. Yes, he's been a leader of people, however he's always had someone he reported to, someone who would say 'great job Chris' or "next time you could try this Chris' etc. In his corporate working career he had staff who would give him the summarised version of what they or someone else has done and he'd probably give some guidance and approve someone else to do some work and if he was unsure, he'd consult with the person (or people) he reported to and he'd act on their advice. As Prime Minister, and Leader of the National Party, the buck actually stops with him... and I really don't think the penny has dropped for him. Other former Prime Ministers have understood this, John Key and Helen Clarke, Jacinda Arden had some moments and certainly David Seymour understands it... (Winston Peters is a force for chaos... pure and simple). Thoughts?
Bang, bang, bang….on! 👍👍👍