The Hoon

TLDR: This week, National called for an independent review of the Reserve Bank’s unleashing of a ‘tidal wave of cash’ during Covid after a former Governor joined a chorus of critics, which Finance Minister Grant Robertson dismissed as ‘hindsight economics’.Also in the news in global geo-politics and our political economy:* China warned the United States it was ‘playing with fire’ by planning to send House Speaker Nancy Pelosi to Taiwan; * Russia halved its gas supplies to Europe, forcing it to plan voluntary consumption cuts of 15% that economists see as recessionary;* the US economy entered a technical recession, which stock investors celebrated because they think it means the US Federal Reserve won’t have to hike interest rates quite so much; and, * Democratic Senator Joe Manchin backflipped on his opposition to higher taxes on US companies and hedge fund managers to pay for climate emissions reduction measures. In this week’s ‘hoon’ webinar for paid subscribers to The Kaka at 5pm yesterday, I discussed these and other events with co-host Peter Bale and special guest Josie Pagani. The audio of the hour-long webinar is in the podcast above.Elsewhere in the hoon above, we talked about Russia’s decision to end the International part of the International Space Station and the death of James Lovelock. Here’s Peter’s Weekly World Bulletin email newsletter for more background.The highlights on The Kaka this weekIn Monday’s Chorus, I made the case for profitable and dividend-paying companies to repay the remaining $19b of their Covid wage subsidies and for the beneficiaries of over $500b of land appreciation paying a Covid windfall tax. In Tuesday’s Chorus, I covered former Governor Graeme Wheeler’s criticism of the Reserve Bank, including a pointer back to my call last week for a full independent review of its operation of monetary policy.In Wednesday’s Chorus, I looked at National’s call for a review and why it had put Governor Adrian Orr’s reappointment for a second five-year term from the end of next March in doubt. In Thursday’s Chorus, I dived into the positive reaction to the Fed’s second consecutive 75 basis point hike this week and why global investors and traders are now betting on a soft landing for the US economy.In Friday’s Chorus, I covered the US economy’s surprise fall into a technical recession in the June quarter, and what that might mean for interest rates and house prices here in Aotearoa-NZ.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.A reminder to free subscribers reading here that we have a special $30 a year deal for under 30s and anyone on a benefit. We also have a new special $65 a year deal for over 65s who are renting and reliant on NZ Superannuation. Any students, teachers and staff who signs up to the free tier with a .school.nz or .ac.nz email address will also be comped up to the full paid tier for free. This is a public episode. If you'd like to discuss this with other subscribers or get access to bonus episodes, visit thekaka.substack.com/subscribe

TLDR: This week, Aotearoa-NZ’s annual inflation rate rose more than expected to 7.3%, which restarted the debate about who was to blame and what should be done about it, as I wrote in Tuesday’s Chorus. Meanwhile, Europe finally tightened its monetary policy, but faces the potential for another debt crisis, as I wrote in Friday’s Chorus. In the climate crisis, I wrote in Monday’s Chorus about performative declarations of climate emergencies by politicians and why they can’t now be trusted. In Wednesday’s Chorus, I wrote about growing fear of another house-building bust and why that’s both a long term problem and a symptom of our political economy’s structural failings. 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.We talked about:* who Liz Truss is and why she might become Britain’s next Prime Minister;* how the ground war in Ukraine is now playing out;* whether inflation is really peaking;* whether the Reserve Bank here can be blamed for high inflation;* how the Auckland Mayoralty campaign is playing out.Here’s Peter’s Weekly World Bulletin email newsletter for more background.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.A reminder to free subscribers reading here that we have a special $30 a year deal for under 30s and anyone on a benefit. We also have a new special $65 a year deal for over 65s who are renting and reliant on NZ Superannuation. This is a public episode. If you'd like to discuss this with other subscribers or get access to bonus episodes, visit thekaka.substack.com/subscribe

TLDR: This week, demands to loosen restrictions on bringing in migrant workers grew to a crescendo amid widespread delays, cancellations and employer concerns about wage inflation. In Thursday’s Chorus, I looked at whether a loosening is a good idea on its own, and what a bipartisan deal on migration along with infrastructure spending should look like.Also, the Reserve Bank hiked its official interest rate as expected and house prices kept falling, but I took a closer look in Wednesday’s Chorus at the central bank’s $12.7b worth of cheap loans for banks, which are diluting the effects of its tightening and giving already-very-profitable banks a taxpayer subsidy. I also challenged the assumptions about our ‘squeezed middle’ in Friday’s Chorus and detailed in Tuesday’s Chorus how our bi-partisan 30/30 mantra on public debt and the size of Government is sucking our future dry. In Monday’s Chorus, I looked at how a pathway to citizenship for New Zealanders living in Australia would expose employers here to much more ‘brain drain’ pressure.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 and special guest Professor Robert Patman from the University of Otago.We talked about:* Sri Lanka’s political and economic implosion;* what Boris Johnson’s departure might mean for Aotearoa-NZ; and,* How the Pacific Islands Forum went and why China may have over-played its hand in the Pacific.Here’s Peter’s Weekly World Bulletin email newsletter for more background.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.A reminder to free subscribers reading here that we have a special $30 a year deal for under 30s and anyone on a benefit. We also have a new special $65 a year deal for over 65s who are renting and reliant on NZ Superannuation. This is a public episode. If you'd like to discuss this with other subscribers or get access to bonus episodes, visit thekaka.substack.com/subscribe

TLDR: This week PM Jacinda Ardern pushed back at talk Aotearoa-NZ has joined the ‘west’ too strongly in a new cold war between the United States and China, British PM Boris Johnson (finally) resigned (sort of) and former Japanese PM Shinzo Abe was shot and killed.Closer to home, two-year mortgage rates were cut 30-40 basis points to around 5.45%, commodity prices fell again as global recession fears mount, and consumer confidence here slumped despite record-low unemployment and household income growth actually being more than than the CPI inflation rate. Also:* the Infrastructure Commission told the Government and Wellington’s Councils that their choice of $7.4b of tunnels for ‘Lets Get Wellington Moving’ was not the best option for reducing carbon emissions, although the Councils approved it anyway; and,* the Government announced plans to appoint a single Grocery Commissioner inside the Commerce Commission in the hope of doing a ‘2 Degrees’ on the groceries duopoly of Foodstuffs (Pak’n’Save/New World/Four Square) and Woolworths (Countdown).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 and special guests Professor Robert Patman from the University of Otago and ANZ economist Finn Robinson.We talked about:* British PM Boris Johnson’s demise (finally);* PM Jacinda Ardern's two big foreign policy speeches at Chatham House in London and the Lowy Institute in Sydney, which struck different tones on China, Russia and our independent foreign policy;* Shinzo Abe’s assassination;* the unprecedented joint warning in public from the bosses of MI5 and FBI to business leaders in a speech in London warning of China's corporate espionage; and,* a preview of next week’s Pacific Islands Forum, where China’s recent attempt to pull various Island nations into its sphere of influence will be at the top of the agenda, along with how Australia, Aotearoa-NZ and the United States can do more on climate change and elsewhere to push back.Also, I talked with Finn Robinson about the curiously weak noises coming from consumers, despite unemployment being at 3.2% and household incomes actually outpacing inflation in consumer prices. Finn wrote this excellent note this week on the issue.Here’s the charts we refer to in the podcast. Firstly, this one showing how divergent confidence is from unemployment.And then this one showing how spending isn’t quite as depressed as confidence. At least yet.Peter and I also discussed:* the big four banks cutting their two year mortgage rates by around 30-40 basis points to around 5.45% after two year wholesale ‘swaps’ rates fell 80 basis points from their June 16 peak of 4.56% in response to cooling global economic growth and inflation expectations in recent weeks; and,* the fall in commodity prices to pre-war levels as fears grow that the ‘demand destruction’ from inflation’s post-war spike and much-higher interest rates are doing the central banks’ work for them.There’s more on those interest rate moves here from me earlier in the week.Earlier in the week, I looked in depth at the move to create a new Groceries Commissioner inside the Commerce Commission.I also covered another survey showing the depth of hopelessness among young renters.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.A reminder to free subscribers reading here that we have a special $30 a year deal for under 30s and anyone on a benefit. We also have a new special $65 a year deal for over 65s who are renting and reliant on NZ Superannuation. This is a public episode. If you'd like to discuss this with other subscribers or get access to bonus episodes, visit thekaka.substack.com/subscribe

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.A reminder to free subscribers reading here that we have a special $30 a year deal for under 30s and anyone on a benefit. We also have a new special $65 a year deal for over 65s who are renting and reliant on NZ Superannuation.The Five Things that changed this weekThe PM called out China in her NATO speechPrime 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 statementAotearoa NZ signed a trade deal with the European UnionArdern 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 turnedThe 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 housingAuckland 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 weekThe 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 weekendKa kite anoBernard This is a public episode. If you'd like to discuss this with other subscribers or get access to bonus episodes, visit thekaka.substack.com/subscribe

TLDR: This week the US Federal Reserve hiked its key interest rate by a super-sized 75 basis points to fight inflation running at 8.6%. That unleashed fresh mayhem on global markets, including another slump in shares into bear market territory and the collapse of crypto-lender Celcius. Bitcoin fell more than a third.Meanwhile, house prices in Aotearoa-NZ fell again, including Auckland City’s median price falling $360,000 or 23% in six months, the chances of a recession here rose and the Gib crisis morphed into shareholder complaints to Fletcher Building’s CEO. PM Jacinda Ardern replaced Building and Construction Minister Poto Williams with Housing Minister Megan Woods to deal with the crisis. Williams was also replaced by Chris Hipkins as Police Minister.In this week’s live hoon webinar for paid subscribers, which is in recorded form above, Peter Bale and I talk with special guests independent economist Rodney Jones and Easy Crypto CEO Janine Grainger.This is my weekly summary and sampler of the big news of the week I’ve covered on The Kaka 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. Come and join our community by subscribing in full. Our full subscribers have allowed us to make The Kākā fully free for students, teachers and those working for advocacy groups and political parties in these areas. Anyone in these groups should just sign up to the free tier with their work, school, university, polytechnic or advocacy group emails and we’ll convert you to the full paid tier behind the scenes.A reminder to free subscribers reading here that we have a special $30 a year deal for under 30s and anyone on a benefit. We also have a new special $65 a year deal for over 65s who are renting and reliant on NZ Superannuation. The five things that changed this weekThe Fed’s super-sized rate hikeThe US Federal Reserve announced a 75 basis point rise in its official cash rate to a range of 1.50% to 1.75%, which was its biggest official interest rate hike since 1994. Global stocks fell sharply before and after the hike, which only a week earlier economists had expected to be a 50 basis point hike. The difference was surprisingly hot inflation data last Friday night showing US CPI inflation of 8.6% in the year to May. Now we’ll find out how much pain the US economy and global markets can take before the Fed and other central banks have to stop the tightening, or even resume the money printing, as they have done repeatedly over the last decade whenever they tried to force investors to go ‘cold turkey’ on the easy and cheap money.The Federal Reserve appears determined to squash inflation rather than rescue investors again, but the European Central Bank showed on Wednesday it doesn’t have the same resolve. Having only just signalled last week it would stop printing this month and would hike from below 0% next month, the ECB held an emergency meeting and pledged to keep printing to buy Italian and Greek Government bonds to stamp on a threatened return of the repeated European debt crises seen from 2009 to 2012.We talked with Rodney Jones about the dramas through the week on global markets, and also looked again the Reserve Bank’s decision to keep lending at cheap rates to banks here, and to slowly unwind its money printing from 2020 and 2021.Crypto-currency lender Celsius collapsed and Bitcoin fell almost a thirdCelsius, an unregulated bank of sorts that lent crypto-currencies to crypto startups at double-digit interest rates, collapsed after a classic run on the bank. It froze withdrawals and is now trying to work out where the collateral for its loans is and whether it can pay back the crypto-currencies it has lent. Fellow crypto lender Babel Financial also blocked withdrawals and crypo-investing hedge fund Three Arrows Financial collapsed.The collapses comes after the implosion of the Terra-Luna stable coin complex a month ago and coincided with near 30% fall in Bitcoin to a key support level at US$20,000 on Friday. We talked late on Friday with Easy Crypto CEO Janine Grainger on the hoon about the events in global crypto markets and how it had affected traders in Aotearoa-NZ.Bitcoin fell another 15% to US$17,616 on Sunday morning.House prices kept falling in Aotearoa-NZThe Real Estate Institute released sales volumes and prices data for May showing prices nationwide down 6.0% from the peak in November to where they were in June 21. Prices, as measured by the REINZ’s House Price Index, were down 13.3% in Auckland City to where they were in October 2020. Prices were down 15.8% in Wellington City to where they were in October 2020.In median price terms, Auckland City’s median price has fallen by $360,000 or 23% from a peak of $1.54m in November to $1.18m in May. The median price isn’t as representative a measure as the House Price Index because a change in the type of properties sold can skew the figures. For example, a surge in the sale of apartments relative to larger houses would skew the numbers lower. But still, that’s a loss of $60,000 a month or $2,000 a day. In Wellington City, the median price fell 14.6% to $988,000 in May from a peak of $1.157m in October.The Gib crisis moves to Fletcher Building’s board roomAfter last week’s loudly-announced decision by Simplicity Living to dump Fletcher Building as its plasterboard supplier, Fletcher Building’s Wallstone Wallboards announced it would import one million square metres of plasterboard that would be available from July. The imports by the maker of Gib, which has a 94% market share, represents an increase of about 7-8% of annual supply.By Thursday, MBIE and Auckland Council were reassuring ministers and the public that the largest consenter was approving non-Gib plasterboard. By Friday, the Shareholders Association and Simplicity, which owns 0.8% of Fletcher Building worth $35m, met in person with Fletcher CEO Ross Taylor. It didn’t go well from the shareholders’ point of view.A recession in Aotearoa-NZ by the end of 2022?Stats NZ reported this GDP fell 0.2% in the March quarter and was up 1.2% in Q1 from the same quarter a year ago. GDP in the year to the end of the March quarter was up 5.1%. The result was below market expectations that ranged from no growth to as high as 0.7% growth by the Reserve Bank in its April Monetary Policy Statement. Covid illness and the after-affects of the lockdowns in the second half of 2021 were blamed.Economists said the result hadn’t changed their views on what the Reserve Bank would do with the Official Cash Rate on July 13 because the labour market and inflation pressures remained very tight. They still see another 50 basis point hike to 2.5%, although markets have been flirting with the prospects of a 75 basis point hike in recent days.Most see GDP rebounding around 1.0% in the June quarter to avoid the technical definition of a recession, which is two quarters of lower GDP in row. However, BNZ Economist Stephen Toplis said on Thursday a mild recession was possible later this year.Other places I’ve been this weekPart of the deal I have with paid subscribers is that I’ll spread my analysis and reporting on the economy, housing, climate and poverty as widely as I can through interviews and panel appearances on publicly available media, such as Newshub’s The Nation, Waatea News, my When the Facts Change podcast via The Spinoff and The Working Group.Ka kite anoBernard This is a public episode. If you'd like to discuss this with other subscribers or get access to bonus episodes, visit thekaka.substack.com/subscribe

TLDR: This week our Reserve Bank detailed its plans to slowly unwind its $55b of Covid-era money printing, the European Central Bank finally stopped its money printing to fight inflation of over 8%, the United Nations warned the war in Ukraine was unleashing a global hunger and poverty catastrophe, and Simplicity Living cancelled its orders to buy Gib from Fletcher Building.Elsewhere: US inflation figures overnight was higher than expected, which triggered another slump in share prices and fears the US Federal Reserve will have to hike interest rates much faster and higher than previously thought. Meanwhile, the Reserve Bank of Australia surprised most investors and economists earlier this week by hiking a full 50 basis points. That slammed Australian bank share prices and prompted ANZ to put up its mortgage rates here.In this week’s live hoon webinar for paid subscribers, which is in recorded form above, Peter Bale and I talk with special guests Professor Robert Patman from the University of Otago about the latest geo-political news and Simplicity CEO Sam Stubbs about financial market ructions and Simplicity Living’s decision to cancel its orders to buy Gib from Fletcher Building. This is my weekly summary and sampler of the big news of the week I’ve covered on The Kaka 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. Come and join our community by subscribing in full. Our full subscribers have allowed us to make The Kākā fully free for students, teachers and those working for advocacy groups and political parties in these areas. Anyone in these groups should just sign up to the free tier with their work, school, university, polytechnic or advocacy group emails and we’ll convert you to the full paid tier behind the scenes.A reminder to free subscribers reading here that we have a special $30 a year deal for under 30s and anyone on a benefit. We also have a new special $65 a year deal for over 65s who are renting and reliant on NZ Superannuation.The five things that changed this weekThe Reserve Bank confirmed a slow unwinding of its money-printingThe Reserve Bank detailed on Thursday its plans to unwind its $55b programme of money printing relatively slowly over the next five years to avoid disrupting the economy and asset markets. It also says it might have to print again and wants to sideline the issue of growing inequality between renters and home owners in its current review of monetary policy.I argued in Friday’s Dawn Chorus that the Reserve Bank decisions in early 2020 to unleash a credit boom that inflated the housing market by 45% to save the economy should be reviewed with an eye on the long-term effects of money printing on inequality. Right now, both the Government and the Reserve Bank are hoping few will notice or care about the $1t transfer of wealth to asset owners engineered during Covid without debate.Finally, the Europeans stopped printingThe European Central Bank took a hawkish turn against inflation on Thursday night, announcing after its monthly monetary policy meeting it would stop printing money later this month and hike next month by 25 basis points. That would be the ECB’s first hike in 11 years. Its main deposit rate is actually still -0.5%. The ECB said it expected to hike by more at its September meeting, which markets saw as meaning a 50 basis point hike is likely. It forecast inflation wouldn’t fall from 6.8% this year to its 2% target until well into 2024.So what? - It’s astonishing to think that the ECB still hasn’t stopped quantitative easing yet, which means it is still creating its own cash to buy European Government bonds, especially the ones from the PIGS (Portugal, Italy, Greece and Spain). Remember the PIGS? And the ECB pledging in 2012 to do ‘whatever it takes’ to stop the euro zone breaking up? It’s still doing that, partly because that last rate hike in 2011 was premature and destabilised the euro zone economies. So that’s why the pivot to stop printing and start hiking overnight matters.Behind the curve - For comparison’s sake, our Reserve Bank stopped printing money and buying bonds in the middle of last year and started hiking in October. Our official cash rate is now up to 2.0% and is expected be hiked by another 50 basis points on July 13. Our inflation is about the same as Europe’s, but our unemployment rate is half that of Europe’s at 6.8%.Brace for fallout - Even the anticipation of this ECB pivot from very dovish to slightly hawkish has caused ructions in financial markets. That’s because the euro zone economies remain much weaker than others in the developed world and its banking system is still under-capitalised. The ECB also has to extricate itself from being the largest owner of PIGS bonds and avoid another Greek-style meltdown in financial markets. That’s why the ECB went out of its way in its statement overnight to reassure investors it would keep buying Greek bonds to stop another collapse.Mamma Mia - Italy’s 10 year bond yield jumped 27 basis points to 3.68%. It has tripled in the last year. It has also risen sharply relative to Germany’s 10 year yield at 1.51%, which has itself risen faster in the last 90 days than at any time in this century. This gap or ‘spread’ between Italy’s 10 year yield and the German ‘bund’ is a key indicator of stress and fear inside Europe’s financial system. It rose to a two-year high this week. And then there’s the not-so-small matter of the most destructive war since World War Two raging on the edge of the euro zone…On meltdown alert - Plenty of players in financial markets have feared some sort of repeat of the Global Financial Crisis at various points since the Covid pandemic broke out in February 2020. Central banks acted preemptively and globally to throw all sorts of money-printing kitchen sinks to avoid a repeat of the 2008 GFC, which forced central banks and Governments to bail out US banks and UK banks, and to prop up European banks. The US and British banks have since been reorganised and recapitalised, but the European banks have mostly just staggered on without having to have proper cleanouts.The excuses evaporate - The ECB’s ‘whatever it takes’ interventions in 2012 helped the European banking system stave off its ‘Minsky Moment.’ Here’s a useful Enda Curran backgrounder via WaPo on what a Minsky Moment is. But those interventions through money printing to buy the weakest European government’s bonds and hold up their values on bank balance sheets was only possible because European inflation was painfully low and the ECB knew it could stimulate through money printing without having to worry about a damaging inflation breakout. Now there is nowhere for the ECB, European banks and the PIGS to hide. That’s why many fear this pivot to rate hikes and the end of ECB money printing could trigger a European version of the 2008 GFC. As if we (and the Europeans in particular) don’t have enough to worry about…UN warns of global food and poverty catastrophe‘A food catastrophe’ - The United Nations warned on Wednesday that the war in Ukraine and the after-effects of the Covid Pandemic had turned into a perfect storm of higher food, energy and finance costs for 1.2b workers. It issued a briefing note showing how higher energy and food costs, along with blockades on fertiliser and wheat exports via the Black Sea, could turn a food crisis this year into a food catastrophe next year.UN Secretary General Antonio Guterres called again for a lifting of the blockades in the Black Sea and said the developed world would have to ensure emerging market debt crises can be resolved. See more below in chart and quote of the day.“The cost-of-living crisis could spark a cycle of social unrest leading to political instability.” UN trade chief Rebeca Grynspan in a briefing note on what the UN calls the greatest cost of living crisis of the 21st Century.The note explains the negative feedback loops and spirals of prices and supply that are worsening the situation, driving more than a third of a billion people into starvation territory. The bolding is mine.“Countries and people with limited capacity to cope are the most affected by the ongoing cost-of-living crisis. Three main transmission channels generate these effects: rising food prices, rising energy prices, and tightening financial conditions.“Each of these elements can have important effects on its own, but they can also feed into each other creating vicious cycles - something that unfortunately is already starting. For instance, high fuel and fertilizer prices increase farmers’ production costs, which may result in higher food prices and lower farm yields. This can squeeze household finances, raise poverty, erode living standards, and fuel social instability.“Higher prices then increase pressure to raise interest rates, which increase the cost of borrowing of developing countries while devaluing their currencies, thus making food and energy imports even more expensive, restarting the cycle. These dynamics have dramatic implications for social cohesion, financial systems and global peace and security.” UN briefing note.I think the note is this week’s must-read. It includes this chart showing how even-faster-rising fertiliser prices were worsening the feedback loops.Simplicity Living cancelled its orders for Gib from Fletcher Building‘We’re not taking it any more’ - Simplicity Living, which is building 550 build-to-rent- homes in Auckland, announced on Thursday night it had cancelled its orders for Gib plasterboard from Fletcher Building and was importing an alternative from Thailand for 40% cheaper per-sheet of plasterboard board, even after shipping costs. Simplicity Living MD Shane Brealey blasted Fletcher Building over the Gib crisis."It's tragic that it takes only eight weeks to get much needed plasterboard from South Asia, but eight months from south Auckland. By looking at building consents, Fletchers must have known there would be a shortage of plasterboard at least 12 months ago. So why aren’t they doing what we’ve just done?” Simplicity Living MD Shane Brealey in a statementWe asked Simplicity CEO Sam Stubbs onto the weekly hoon to talk in more depth about the decision and he explained how the Gib shortages were hammering so many small builders, who were too dependent on Gib-driven building techniques and too fearful that using an alternative would mean their homes weren’t approved by Council building inspectors, who are themselves hyper-focused on avoiding any new products that might expose councils to ‘last-man-standing’ building quality claims (as happened with leaky buildings that used James Hardie’s Hardietex cladding).The discussion is fascinating. I’d recommend listening to the start, where Peter explains the origin of the Gib brand name, and from 44:18 onwards where we discuss the Gib crisis and the way it is scuppering large sections of the building industry.Don’t expect a grocery duopoly breakup pre-election…or maybe everHigh bar for breakup - MBIE released a Cabinet paper on Wednesday that it prepared for Commerce Minister David Clark on The Government’s response to the Commerce Commission’s recommendations on dealing with (or to…) the supermarkets duopoly. MBIE’s advice included slightly more detail on the breakup option including talking about retail divestment rather than structural separation, but noted there would be a high bar for action and hardly any preparatory analysis had been done. Consultation would not begin until early next year.Here’s the key details in the cabinet paper on Clark’s actions and officials’ timelines (bolding mine):“Retail divestment would involve divestment of existing retail stores or banners by major grocery retailers to establish new grocery retailers. There is a high burden of proof to be met before decisions on retail divestment can be taken as the Commission did not carry out a detailed cost-benefit analysis.There are several considerations to be worked through further, including: considering possible implementation options in detail; undertaking policy design and a detailed cost-benefit analysis of retail divestment options; considering potential risks and issues; understanding the potential impacts of retail divestment on retailers’ operations, economies of scale, property rights and supply models; and, determining how interventions would be enforced. MBIE on Page 15 in the paperOfficials will consider these matters in detail between now and September 2022. I will then report back to Cabinet in October 2022 with a detailed cost benefit analysis on retail divestment options and to seek decisions on whether to proceed with further steps on retail divestment. Based on this work, implementation options could then be developed for public consultation in early 2023.” David Clark on Page 15 in the paper.So what? I’d be surprised if any concrete breakup plans or action emerge before the next election. The grocery duopoly can happily stall action ahead of a likely change of Government. National has said it supports the creation of a regulator and mandatory codes for wholesale access and suppliers, but has been cautious about supporting a breakup. I think that would be highly unlikely, given National stalled Section 36 reform from 2009 to 2017 that would have given the Commerce Commission more powers. This is a public episode. If you'd like to discuss this with other subscribers or get access to bonus episodes, visit thekaka.substack.com/subscribe

TLDR: In the podcast above of this week’s ‘hoon’ webinar for paid subscribers, co-hosts Bernard Hickey and Peter Bale bring talk with special guests Robert Patman and Josie Pagani about China’s backlash against a strengthening of NZ’s security ties with the United States.This is our weekly sampler email for both free and paid subscribers.A reminder to free subscribers reading here that we have a special $30 a year deal for under 30s and that students and teachers should sign up for the free tier using their ‘school’ or ‘ac’ email addresses to get converted to the full subscription for free. And we have a new special $65 a year deal for over 65s who are reliant on NZ Superannuation.Five things of note this weekAotearoa-NZ strengthened ties with the United StatesThis week PM Jacinda Ardern met with US President Joe Biden in the White House. They talked about gun control, the Christchurch Call and trade, but most importantly they signed a detailed joint statement that was heavily critical of China in the Pacific and elsewhere, and which strengthened our security and defence ties with the United States.China lashed back at the joint statementChinese officials attacked what they saw as a strengthening of our military ties with the United States and a ramping up of joint anti-China rhetoric in the strong joint statement. They suggested it might affect our trade ties.Here’s what I wrote on Friday about the back and forth.Cabinet threatened the grocery duopoly with a breakupThe Government threatened to break up the supermarkets duopoly if they don’t play nice with plans for mandatory wholesale access.Here’s what I wrote on Tuesday.The grocery duopoly’s oppressive lease clauses revealedThere were revelations that supermarkets on Thursday that the supermarkets duopoly have been using special clauses in leases to stop competitors in all sorts of retail categories being allowed into shopping centres.Here’s the deep dive I published today on that.Yet again, a sugar tax is rejectedHere’s the chorus I wrote on Thursday, which led with the latest research showing sugar taxes work to reduce consumption, but the Government continues to oppose them.Ka kite anoBernard This is a public episode. If you'd like to discuss this with other subscribers or get access to bonus episodes, visit thekaka.substack.com/subscribe

TLDR: This week the Reserve Bank warned of a rise in mortgage rates to 6% and a peak-to-trough fall in house prices of 15%, but said the economy and homeowners could handle it without forcing the economy into recession. It also rejected Opposition claims that Labour’s fiscal policy and employment mandate had forced the Reserve Bank’s faster move to higher interest rates.Elsewhere, China launched an aggressive push for much deeper trade and security deals in the Pacific to add to the one it already has with the Solomon Islands. In response, the United States opened a new Indo-Pacific Economic Framework that it hopes will contain China, even though it doesn’t offer extra trade access into the world’s largest economy. Aotearoa-NZ and Fiji joined it.In this week’s live hoon webinar for paid subscribers, which is in recorded form above, Peter Bale and I talk with special guests Professor Robert Patman from the University of Otago about the latest geo-political news and Green Finance Spokesperson Julie Anne Genter about monetary and fiscal policy. This is my weekly summary and sampler of the big news of the week I’ve covered on The Kaka 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. It has allowed us to make it all free for students, teachers and those working for advocacy groups and political parties in these areas. Anyone in these groups should just sign up with their work, school, university, polytechnic or advocacy group emails and we’ll convert to the full paid tier behind the scenes.A reminder to free subscribers reading here that we have a special $30 a year deal for under 30s and that students and teachers should sign up for the free tier using their ‘school’ or ‘ac’ email addresses to get converted to the full subscription for free. And we have a new special $65 a year deal for over 65s who are reliant on NZ Superannuation.The five things that changed this weekThe Reserve Bank turned more hawkishThe Reserve Bank hiked its Official Cash Rate 50 basis points to a six-year high of 2.0% this week. That was an unprecedented second ‘double-whammy’ 50 point hike in succession, but that wasn’t the surprise. The central bank also raised and steepened its forecast track for the OCR in a way that would see mortgage rates rise to around 6% by early next year and help drive house prices down 15% from the peak in November last year to a trough late next year. The Reserve Bank described its approach as “briskly” raising interest rates to get annual inflation down from 6.9% in the March quarter to under 3% late next year, and that it was “resolute” about getting back into its 1-3% target band. Here’s my preview on the day and my report on the next day.China went fishing for friends in the PacificChina’s Foreign Minister Wang Yi embarked on a series of visits to nine Pacific Island nations this week, offering a series of deeply integrated trade, security, data sharing and police cooperation deals similar to the one it has just signed with the Solomon Islands. The depth and breadth of the proposals surprised many and alarmed the ‘western’ powers in the Pacific. In response to China’s latest push for influence in the Pacific, the United States announced a widening of its ‘Quad’ security alliance with India, Japan and Australia to a new Indo-Pacific Economic Framework (IPEF), which Aotearoa-NZ and Fiji immediately joined. IPEF is the US-driven alternative to the Trans-Pacific Partnership, which was originally designed to include the United States in a grouping that excluded China and created a massive free trade block. But Donald Trump pulled the United States out and Joe Biden does not have domestic support for an easing of trade access to the world’s largest economy. IPEF is largely about writing the rules for and securing supply chains and services trading arrangements that don’t include China. Here’s what I wrote about IPEF this week.Global recession warnings flashed redFresh data was reported this week showing the US and Japanese economies contracted in the March quarter because of Covid supply chain disruptions and weak consumer spending due to demand destruction from real wage deflation.China also warned its strict lockdowns to maintain Covid elimination had reduced output in the world’s second largest economy, and Aotearoa-NZ’s largest trading partner. Here’s what I wrote about that this week. Britain announced a 25% windfall taxBritain’s Conservative Government made a U-turn and decided to go ahead with a 25% windfall profit tax on oil, gas and electricity companies to raise £15b to paid for energy discounts for households. I talked in Friday’s Chorus about the prospects for a windfall tax here to claw back some of the $20b in cash payments to businesses that are now stored in company bank accounts or being paid out as dividends. Fresh quake shocks for Wellington’s CBDThe Ministry of Education moved 1,000 staff out of its relative-new head office building on Bowen St in Wellington after it was found to have hollow-core pre-cast concrete floors that are now deemed quake prone. Another 150 buildings in Wellington’s CBD use the same flawed construction system, delivering another blow to the capital city’s economy after an awful few years dominated by Covid lockdowns, protest blockades at Parliament and brutally high rents and house prices. I talked about this in Friday’s Chorus too.Chart of the weekReal wages deflated, but real household incomes still roseHere’s the Reserve Bank’s summary from its MPS this week:“A strong labour market and higher costs of living have driven wages higher in recent quarters. The share of annual wage increases greater than 5 percent is near its peak prior to the global financial crisis (GFC). Despite this, wage growth for those staying in the same job has not generally kept up with inflation. Overall, household incomes have been supported by workers switching jobs for higher pay, promotions with the same employer, and working longer hours (figure 2.10). Once these factors are taken into account, aggregate labour income growth has been stronger than consumer price inflation over the course of the pandemic – albeit to a much lesser extent in the past year.” Reserve Bank May 25 MPSHave a great weekendKa kite anoBernard This is a public episode. If you'd like to discuss this with other subscribers or get access to bonus episodes, visit thekaka.substack.com/subscribe

TLDR: This week the Government released a tame Emissions Reduction Budget and presented a tighter Budget, while overseas, the United Nations warned 47m more people will starve within months if the war in Ukraine continues and Australian PM Scott Morrison faces an election loss this week. I discussed these events and more in our weekly ‘hoon’ live webinar for paid subscribers to The Kākā, which is in recorded podcast form above for all to listen to. This is our weekly ‘sampler’ email 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. It has allowed us to make it all free for students, teachers and those working for advocacy groups and political parties in these areas. Anyone in these groups should just sign up with their work, school, university, polytechnic or advocacy group emails and we’ll convert to the full paid tier behind the scenes. A reminder to free subscribers reading here that we have a special $30 a year deal for under 30s and that students and teachers should sign up for the free tier using their ‘school’ or ‘ac’ email addresses to get converted to the full subscription for free. And we have a new special $65 a year deal for over 65s who are reliant on NZ Superannuation.Five big things this weekIs that it?On Monday the Deputy PM Grant Robertson and Climate Change Minister James Shaw released the long-awaited Emissions Reduction Plan, which is the Government’s roadmap to achieve the emissions reductions budgets set by the Climate Commission.The $2.9b of spending over four years listed in the plan is being paid for by $4.5b of receipts from the Emissions Trading Scheme (ETS), which has been cordoned off into an Climate Emergency Response Fund (CERF) . It disappointed those hoping for faster and more aggressive action to shift people out of cars and onto bikes, buses, trains, footpaths, electric cars, e-bikes and scooters. It also did not include details of how to bring Agriculture into the ETS. That is due later this year.Here’s what I wrote from the ‘lockup’ presenting the plan.The 12 blocks of Tasty Cheese BudgetOn Thursday, Robertson tabled his fifth Budget, including a $27-a-week-for-three-months one-off cost of living support payment for people not already getting the winter energy payment or a benefit. The price of a block of ts The Opposition criticised the Budget as profligate, although it actually represented a slight tightening of fiscal policy over the next four years. Here’s what I wrote on Wednesday, Thursday and Friday about the background to Budget 2022 and the details announced on the day.A looming global food crisisThe UN warned on Thursday night that another 47m people faced starvation within a few months if the war in Ukraine and Russian blockades of grain shipments from Black Sea ports continued, adding to the 276m already hungry because of climate change and civil wars. Wheat prices rose another 6% on Wednesday night after India, the world’s second largest grain grower after China, banned exports.The Economist-$$$ reported yesterday that Russia and Ukraine usually provide 12% of the world’s traded calories. They supply 28% of globally traded wheat, 29% of the barley, 15% of the maize and 75% of the sunflower oil. Russia and Ukraine contribute about half the cereals imported by Lebanon and Tunisia; for Libya and Egypt the figure is two-thirds. Ukraine’s food exports provide the calories to feed 400m people. The war is disrupting these supplies because Ukraine has mined its waters to deter an assault, and Russia is blockading the port of Odessa. The Economist-$$$The United States is considering sending long-range anti-ship missiles to Ukraine to destroy Russian vessels enforcing the blockade and accused Russia of holding the food security of tens of millions hostage.The UN’s World Food Programme also called for the blockade to end.Scott Morrison is set to lose power this weekendThe Opposition Labor Party is ahead of the governing Liberal/National coalition by around five percentage points in the last polls before this weekend’s Federal election. PM Scott Morrison looks set to lose because women see him as sexist and his Government has taken little action to address climate change.Stocks slumped on fresh recession fearsUS stocks briefly fell into bear market territory overnight, taking their falls from their peaks in January to over 20%. Here’s what I wrote on Tuesday. This is a public episode. If you'd like to discuss this with other subscribers or get access to bonus episodes, visit thekaka.substack.com/subscribe