Free Press, 12 November - Rubbing Up Against Reality

Tue, 13 Nov, 2018

Rubbing Up Against Reality I

Any of Australia’s last five Prime Ministers can tell you what happens when energy prices rise and people are hit hard in the hip pocket. Our Prime Minister knows this. She got elected saying that climate change is her generation’s nuclear-free moment then rushed legislation through Parliament to harass petrol companies for charging motorists too much. A recovering dollar and falling global oil prices (an Ardern-Trump common interest through 2020, more later) have cut prices at the pump, but a bigger energy problem is coming that she cannot duck so easily.

Low Lakes

Lake levels across the South Island are low and a dry summer is forecast. Wholesale electricity prices are over five times higher than normal at this time of year. Retailers who promise consumers a fixed price are exiting the market and sooner or later those prices will be passed through to consumers. At this point the recent petrol price increase will look like a minor inconvenience to consumers. What will the Prime Minister do then?

The Solution is Coal

Huntly, which can run on either coal or gas, will pick up the slack. Its owner, Genesis, has ordered 120,000 tonnes of Indonesian coal in four shipments scheduled to arrive from December to February. Will the Government’s confidence and supply partner, the Greens, be picketing these shipments? Will the Prime Minster decry the arrivals, or protect the consumer’s back pocket (and summer beer chillers)? We hope she does not attack the electricity market like she did fuel retailers. As with fuel, the problem is the fundamentals that underpin the market.

Rubbing Up Against Reality II

Last Thursday, the Reserve Bank Governor announced the Official Cash Rate will remain at 1.75 per cent for six months, and probably into 2020. At a time of record low unemployment this is an extraordinary statement. With 1 per cent economic growth last quarter, other central banks raising interest rates and inflation returning, he might have said there’s at least a chance of raising interest rates. However, he is dovish because he knows this Government is rubbing up against reality.

Where Confidence Goes…

Growth follows confidence sooner or later, and confidence is still in the tank. The Reserve Bank says growth will stay strong for the next year or so due to fiscal and monetary stimulus. In other words, the Government is going to start running down the surplus while the Bank keeps interest rates low. Those can’t cancel out all the silly bans, random actions, and low quality spending this Government has undertaken, not to mention its labour law reforms that are coming down the pipe. The Governor’s surprising dovishness is really a vote of no confidence in the Government’s economic policy.

Politics Makes Strange Bedfellows

President Trump came through the mid-terms well, all things considered, especially compared with recent previous presidents at the same point. Trump is now running stimulatory fiscal policy and hoping the economy keeps humming until 2020. The other person who needs that to happen if she wants to get reelected in 2020 is none other than Jacinda Ardern.

Rubbing Up Against Reality III

If KiwiBuild homes are not being subsidised then they are being sold at market rates. If they’re sold at market rates, then nobody should expect to make a profit off them. There needn’t be a ballot for who gets them because they’re no more attractive than homes in the existing market. If KiwiBuild houses are being sold at market rates, then there is no need to restrict those who receive them from on-selling. Of course, none of that is true, KiwiBuild is but a program to subsidise existing projects and hand off the gains to a qualifying subsection of voters.

What Else is the Government Doing?

Just last week we finally heard from the Government on RMA reform. They intend to introduce legislation that will reverse the changes made by National and the Maori Party in 2017 after years of stalling, effectively taking the RMA back to the 2010 reforms. Then, next year, they intend to start work on bigger changes that don’t touch the Section II principles that make the RMA an affront to property rights. Altogether, by 2020 the prime piece of legislation that stops homes from being built will have barely changed in a decade.

What They Could Be Doing

ACT has set out the reforms that would boost housing supply, change councils’ incentives by giving them half the GST on construction they consent for building infrastructure, replace the RMA in urban settings with the Productivity Commission’s Better Urban Planning principles, and replace clunky council building inspections with mandatory private insurance on new builds. This plan was endorsed by the New Zealand Initiative and its time will come.

Rubbing Up Against Reality IV

The Government is now promising to introduce more specialist teachers to deal with a wave of behavioural challenges. Free Press picks up many and varied theories from teachers and principals, P-babies, kids whose parents talk to their phones more than their kids, parents starting families in their late thirties when their grandparents might have been popping out the odd tail-end Charlie. Whatever the cause, the challenge is real and crosses socio-economic groups.

Remember When...

The current Government has viciously attacked and ultimately terminated charter schools. Nearly every charter school was using its flexible funding to employ mentors who connected schools with community. Former Highlanders lock and Manu Samoa captain Filipo Levi, who works as a Community Liaison Manager at Middle School West Auckland, is a good example (Filipo’s rebuke of charter school critics is still worth a read here).

A Charter School by Any Other Name Would Smell As Sweet

Meanwhile the Government has put a rather curious tender on the GETS (Government Electronic Tender Service) website, asking for “expressions of interest from expert providers to develop and implement innovative approaches to foundational learning including oracy that support more students to experience effective learning.” It is not clear that the Government is asking for whole schools, or just programs in existing schools, but it is asking for help from edupreneurs.

Own Goal

Once again, the Government is rubbing up against the reality that the state system can’t provide all the answers for all kids. Ironically, they got rid of charter schools because union bosses didn’t like them, but they are having to introduce charter-like policies to address the non-pay concerns that teachers are striking over. And people wonder why New Zealand needs an ACT Party.

End of Year ACT Events Galore

If you’d like to meet some fellow Free Press readers, ACT has events coming up in Tauranga, Christchurch, Hamilton, Wellington and Auckland over the next month. There are also End of Life Choice public meetings in Napier and Auckland. Please check out the events section on our new website to find out more.