TLDR: This week PM Jacinda Ardern signed a trade deal with the European Union and gave an historic speech to NATO’s summit in Madrid, which edged Aotearoa-NZ ever closer to the US-led alliance lining up against Russia and China. In response, our largest trading partner called the speech wrong and unhelpful.
Also, business and consumer confidence here slumped again and the Reserve Bank’s new Chief Economist said he was hopeful the tide was finally turning against the housing market’s one-way bet. House prices have fallen 7% from their peak in November and the central bank sees a 15% fall from peak to trough over the next year.
In Friday evening’s live hoon webinar for paid subscribers, which is in recorded form above for all subscribers, I took a lap around these issues and more in geopolitics and the global economy with co-host Peter Bale.
This is my weekly summary and sampler of the big news of the week we’ve covered on The Kākā for both free and paid subscribers. The public interest journalism I do daily on housing unaffordability, climate change inaction and poverty reduction is possible with the support of paid subscribers. Join our community by subscribing in full.
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The Five Things that changed this week
The PM called out China in her NATO speech
Prime Minister Jacinda Ardern called in a speech at a NATO summit for the alliance to stand firm against China’s newly assertive approach in the Pacific and again pointed to China’s human rights abuses. This followed Aotearoa-NZ joining a new aid and cooperation grouping formed by Australia, the United States and Japan called the Partners in the Blue Pacific (PBP).
In turn, NATO named China as a significant challenge in its new statement of strategic intent and lumped China in with Russia.
“The deepening strategic partnership between the People’s Republic of China and the Russian Federation and their mutually reinforcing attempts to undercut the rules-based international order run counter to our values and interests.” NATO in its new strategic statement agreed at a summit in Madrid.
China called Ardern’s comments ‘wrong and regrettable’
In response to all of this, China’s Embassy in Wellington stated Ardern’s speech was ‘misguided, wrong and regrettable.’
“It is obvious that such comment is not helpful for deepening mutual trust between the two countries, or for the efforts made by the two countries to keep our bilateral relations on the right track.” China Embassy statement
Aotearoa NZ signed a trade deal with the European Union
Ardern announced a last-minute trade agreement with the EU that will dramatically improve access for our kiwifruit, fish and honey exports, but has disappointed meat and dairy exporters. Overall, the deal is expected to increase exports to Europe by $1.8b by 2035, with up to $600m extra in meat and dairy exports.
But meat and dairy exporters were unhappy the deal was accepted, but Ardern may have decided the winds were blowing against and improvement and some sort of deal was needed, just in case our largest trading partner decided to restrict access.
RBNZ said it hoped the housing obsession tide has turned
The Reserve Bank’s new Chief Economist Paul Conway talked hopefully about the chances the tide is turning on the ‘one-way bet’ for housing as an investment because interest rates are rising, houses are being built, tax rules have been tweaked and migration is low. I’m not so sure and made my case in Friday’s Chorus.
Councils prevaricated again on transport and housing
Auckland Council voted to protect 15,000 villas in central suburbs from intensification, Stuff’s Todd Niall and the NZ Herald’s Bernard Orsman reported this week. Meanwhile Wellington City Council voted this week to water down its intensification plans, The Spinoff’s Jacob Flanagan reported.
Earlier in the week, the Government and the Wellington Council announced a preference for $7b worth of road tunnels and (possibly) a light rail line to Island Bay some time in the next 20 years, although no money was allocated or final decisions taken.
These performative announcements and council set pieces all disguise the unwillingness of central and local Government to take on higher debt and use higher taxes to pay for the transport and water infrastructure needed to underpin new house building. The National and Labour parties have agreed over the last 30 years to keep net Government debt and tax at around 30% of GDP and to keep capital gains on owner-occupied residential land tax free. Significant infrastructure investment and a shift away from the ‘one way bet’ is not possible without a change in that consensus.
These performative announcements also disguise that central and local Governments don’t have social licenses to reconfigure roads for rail, walking and cycling, or intensify housing zoning in a way to enable housing supply growth.
Median-voting homeowners and voting ratepayers don’t want new development near them or the bills that come with that, but they do like the house price and low-wage benefits that come with high population growth that is not catered for.
Other places I’ve been this week
The agreement I have with paid subscribers is to spread my public interest journalism around onto as many publicly available platforms as possible after publishing it and including it on podcasts put out here via The Kākā. That means I often agree to go on television and radio to talk about these issues, in particular housing unaffordability, inequality and poverty.
This week I talked through my idea for a Matariki account using a new central bank digital currency with Wallace Chapman on RNZ on Tuesday.
On Friday, I put out this week’s episode of When The Facts Change with The Spinoff.
Last night I was interviewed for Newshub on TV3 about this tweet I sent out on why so many young renters are looking to move to Australia.
I referred in the tweet to this chart showing a surge in job advertisements in Australia.
Have a great weekend
Ka kite ano
Bernard
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