Mōrena. Long stories short, the six things that mattered in Aotearoa’s political economy around housing, climate and poverty in the week to Saturday, December 21 (Gravy Day) are:
* Nicola Willis pledged this week to cut public spending even harder to reduce public indebtedness after learning the first year of austerity had already helped cause New Zealand’s worst recession since Ruth Richardson’s Mother of All Budgets in 1991, and was making it even harder to reduce debt/GDP because the strategy to cut debt to GDP was increasing debt and reducing GDP;
* Simeon Brown and Christopher Luxon doubled down on blaming councils for reckless spending on pet projects for double-digit rate increases, even though councils rightly accuse the Government itself of causing the rates increases by cutting capital grants;
* This week’s recession news and the Treasury’s massive downgrading of its productivity forecasts reinforced the current Government’s lack of a strategy to pivot to productivity;
* The OECD and IMF have repeatedly advised New Zealand Governments of both flavours that a pivot to productivity would need to see capital and wealth taxed in ways similar to other countries (as opposed to not at all) and for an economic and legal restructuring to massively increase competition;
* MSD reported this week it is now rejecting around 220 pleas each day for emergency food grants to save money, just as food banks reported surges in demand and funding cuts by the Government. Meanwhile, about 220 workers are emigrating each day because low wages aren’t enough to cover high rents, electricity bills and food bills; and,
* Despite its self-professed ‘Going for Housing Growth’ strategy, we learned this week the Government has blocked Kāinga Ora was developing land near Tauranga for over 30,000 houses and has reversed plans to build over 1,000 new homes next year, event though they are consented and land is available. Meanwhile, I understand Kāinga Ora has decided to dissolve its LEAD Alliance partnership with private builders, engineers and lawyers in Auckland that was designed to build up to $200 million worth of homes each year.
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‘The floggings will continue until morale improves’
The Government ploughed ahead with an even more aggressive austerity programme this week after being told its own spending cuts this year and high interest rates had created the deepest recession since the 1991 Mother of All Budgets, which PM Christopher Luxon has referred to as the lesson we needed to relearn from 35 years ago of ‘tightening our belt’ and ‘living within our means’.
The results this week of that austerity programme included:
* the cancellation of a pilot that allowed Māori and Pacific people to access bowel cancer screening starting from the age of 50;
* the collapse of obstetric services at Whakatāne hospital;
* the sacking of over 1,000 IT workers that hospital staff have warned will lead to deaths;
* the cutting of funds for food banks and tougher criteria for emergency food grants from MSD;
* the cancellation of over 1,000 new house builds by Kāinga Ora next year; and,
* the cutting of funding for a successful immunisation programme for Māori and Pacifica, just as doctors warned of a whooping cough epidemic.
“Who's the first one they cut? Us. They're cutting back on all of these things to do with Māori development or Pasifika… so I'm not at all surprised. It's just going to be: keep cutting.” Tilly Turner, a Māori ward councillor, on news of the cancellation of the bowel cancer test trial.
See more details here:
* Successful immunisation programme has funding cut RNZ
* Some Auckland foodbanks may close due to funding cuts RNZ
* Report shows risks from cutting hospital IT staff RNZ
* Govt ends bowel cancer screening programme for Māori and Pacific RNZ
* Obstetrics cuts ‘devastating’, mayors say RNZ
* 'There will be deaths because of this' - warning over Health NZ IT cuts RNZ
Coalition blames councils for rate hikes it caused
The National-ACT-NZ First Coalition Government announced this week a new set of reports on council financial performance and suggested capping rates increases, accusing councils of reckless spending on ‘pet projects’ and blaming councils for double-digit rate increases this year.
Mayors and councillors hit back, accusing the Government of cutting capital grants and increasing fees for water, roading, bus and cycling infrastructure. The problem for the Government, and by extension its own ambitions to ramp up infrastructure spending to build more houses, is it needs the active cooperation and spending of councils.
“The Government just said they want us to keep rates low, yet they’re forcing a rates increase,” Christchurch City Councillor Jani Johanson via The Press
Where’s the strategy to revive productivity?
New Zealand’s GDP per capita suffered its worst recession since the 1991 recession in the June and September quarters, thanks in large part to interest rates being higher and for longer than in other countries and the Government arresting the development of new houses, schools, local roads and hospitals in the March quarter and unleashed 10,000 job cuts in the public service.
Treasury also reported this week it had lowered its productivity forecasts for years to come, which was reflected in its downgrading of its forecast size of the economy out to 2029, a reduction in taxes and a $20 billion increase in the Government’s borrowing requirements.
Yet there is no suggestion from the Government of it adopting any of the recommendations of the likes of the Productivity Commission (which it dismanted), the OECD, the IMF and countless tax working groups and official inquiries that New Zealand’s Government needs:
* to change incentives for savings and investment in more business equipment and IP, infrastructure, training and R&D, both public and private, and less savings and leveraged investment in residential land; and,
* to improve competition across major sectors of our economy that are currently dominated by quadropolies (banking and electricity), duopolies (supermarkets and building materials) and monopolies (airlines and insurance).
The policy changes that actually address productivity
That pivot to productivity would involve policy changes by the Government to:
* tax residential land values, wealth in assets, deceased estates and income from capital gains in some form, as is done in other countries;
* incentivise household savings and investment in pension funds, as is done in other countries; and,
* aggressively increase public investment in infrastructure such as public transport, health, education a…
