Briefly for all subscribers on Friday, July 18, the key scoops, breaking news, deep-dives, editorials, analysis and other news links in Aotearoa-NZ’s political economy around housing, poverty and climate today are:
* Politicians are scrambling for excuses and scapegoats over a fresh surge in living costs in recent months, ranging from a 46.5% rise in butter prices from a year ago, a 10.4% rise in household electricity prices, and a 12.2% rise in council rates. See more below in The Lead and hear more in the podcast above.
* The Government ramped up its attacks on rates increases this week, although councils say they had to hike so much because the Government cut and froze funding for local roads, water and public transport, and keeps adding new things they must do. See more in The Sidebar below.
* Despite the inflation being generated from international commodity prices or Government and monopoly-administered prices, both of which are unable to be changed by local interest rates, the Reserve Bank’s decision last week to bluntly hold rates because of this latest inflation spike shows how broken the economy’s operating system is. Monetary policy is increasing unemployment pointlessly and unfairly. See more in The Chart of the Day below the paywall fold.
* The Quote of the Day below is from a farmer in the Tasman region mystified and distraught about the two one-in-hundred-year floods he has seen this month. For the umpteenth time, the article he was quoted in did not mention the role of climate change in making such floods more frequent and extreme.
* Today’s Number of the Day illustrates just how stalled our housing market is, which is making homeowners feel less wealthy and gumming up the cashflows that usually pulse through our housing-market-with-bits-tacked-on economy. The number of listings pulled from the market in June has more than tripled since June 2021 to 3,800, as Greg Ninness reports for Interest.
* Today’s must-read is from a prominent publisher of climate change news and analysis globally. Royce Kurmelovs writes for Drilled: How New Zealand Is Quiet Quitting Climate Action. See more in my Picks ‘n Mixes below the paywall fold.
Paying subscribers hear more detail, analysis and commentary in the podcast above and get the links and sourcing below the paywall, along with my full Picks ‘n’ Mixes for this morning. I’ll open it up for all to read, listen and share if paying subscribers give it more than 100 likes.
The Lead: ‘It’s not our fault. It’s your fault’
Stats NZ reported yesterday (see more below in Docs of the Day) food price inflation more than doubled in the month of June to 1.2% from 0.5% in the month of May. The annual food price inflation rate rose to 4.6% from 4.4%.
Butter prices rose 46.5% in June from a year ago. Cheese prices rose 30%. That’s despite wholesale dairy prices rising 15.7% over the same period on globaldairytrade.
That dairy inflation was on top of a 10.4% rise in consumer electricity prices in June from a year ago and a 12.2% rise in council rates in the March quarter from a year ago (the June quarter numbers are due on Monday).
Both the Government and councils have been at pains to blame each other this week at the Local Government New Zealand conference over the rates increases. (See more below in my Picks n’ Mixes.) Meanwhile, Finance Minister Nicola Willis said she’ll make a ‘please explain’ visit to Fonterra next week, and she continues to talk tough about increasing competition in electricity, banking and supermarkets.
Energy and Local Government Minister Simon Watts also trumpeted the Electricity Authority’s decision this week to force the gentailers to offer better prices for power used off-peak and for solar power sold back into the network. That was after he introduced the Local Government (System Improvements) Amendment Bill to try to force Councils ‘back to basics.’ He’s also looking at capping rates, although ACT, strangely, now seems opposed to that and is more interested in rebating GST on building materials back to Councils.
In my view, all this deflection and finger-pointing is performative. The cause of the council rates increases and the Government’s own many increases in fees and charges is its decision to freeze and cut capital grants to councils for water, roads and public transport, along with its own freezes and cuts in investment spending. Both of these are in service of the Government’s North Star: reducing deficits and borrowing to try to lower mortgage rates.
Talk about an own goal
The irony is the Reserve Bank stopped cutting rates last week because it was worried about the very ‘administered inflation’ caused by the Government’s decision to essentially pull forgone capital spending and debt servicing costs into day-to-day goods and services inflation. Capital spending and interest costs aren’t measured in the Consumer Price Index, and therefore are ignored by the Reserve Bank when they rise or fall. The Reserve Bank can’t ignore ‘administered’ price increases that come as a result of the freeze in capital spending.
Here’s how the Reserve Bank’s Monetary Policy Committee explained its reluctance to cut rates last week (bolding is mine):
“Inflation is expected to increase further in the June and September quarters, towards the top of the MPC’s inflation target band. The near-term increase in inflation is due to a pick-up in food prices and elevated administered price increases.” RBNZ statement.
The Sidebar: The poor and the young pay the price…twice
The Reserve Bank’s independence and a (renewed) single focus on keeping annual CPI inflation between 1-3% means it feels it has no choice but to keep interest rates high, in order to increase unemployment to reduce domestic spending pressure on prices.
Its use of the OCR is incredibly blunt, particularly when bank lending is now fully into the housing market. Banks have not lent any net new money to businesses and farmers since Covid. They are now completely dedicated to servicing home owners. The only way the Reserve Bank can influence the economy is remotely through household spending by homeowners. It means homeowners actually experience more living cost inflation when the Reserve Bank tightens monetary policy.
Tighter monetary policy designed to lower inflation actually increases living costs, but it’s not measured in the CPI because interest costs are not included. That tighter monetary policy is also responding to international commodity prices and prices administered by Governments and councils for their own reasons. Changes in the OCR have no chance of changing inflation from these sources.
Not only is monetary policy blunt in how it works, it works to redistribute income from young borrowers to old savers through higher mortgage rates paying for higher term deposit rates. It also makes it harder for the young to make money through work. Higher unemployment and slower economic growth hit graduates and young, new and inexperienced workers hardest.
Chart of the day: These are global prices
Quote of the day: ‘I had no idea’
“I don't really want to know what's happening. If it comes back through here I might start looking for another job. I’m not 300 years old and it’s supposed to be a one-in-100-year flood. We’ve had two in two weeks.” Andrew Fry via Nadine Roberts for Stuff: ‘All I can do is hope’: Farmer fears another flood may end his career
Top Six Pick ’n’ Mix for Friday, July 18
* Rob Stock for The Post-$:At least 20,000 people applied for 500 jobs at Ikea’s soon-to-open Auckland store.
* Farah Hancock for RNZ: Hijacked website filled with AI-generated 'coherent gibberish'
* Tuwhenuaroa Natanahira for RNZ: Benefit sanctions surge by 27%
* Yasmeen Serhan for Reuters: UK playwright James Graham on why the 2008 crash still defines our politics
* Charles Marohn for Strong Towns: The Infrastructure Conversation I Didn’t Expect in New Zealand
Scoops and breaking news here and overseas this morning
* Cecile Meier for BusinessDesk-$: Simmonds bins official advice on waste policy
* Laura Walters for Newsroom Pro-$: Seymour will allow changes to flagship bill but won’t reveal what’s on the table
* Guyon Espiner for RNZ: Cancer warning labels on Kiwi wines
* NZ Herald: Measles spreads beyond Wairarapa, 6 locations of interest in Feilding
* Alice Peacock for Newsroom: Wellington mayoral candidate ordered to pay worker $28k in wages and compensation for humiliation
* Reuters: UK to lower voting age to 16 in landmark electoral reform
Politics, geopolitics, economy, business & tech
* Jonathan Milne for Newsroom: Govt to explore sharing GST with councils next year
* Bridie Witton for Stuff: ‘I want genuine competition’: Minister to speak to Fonterra as butter price surges
* Stephanie Ockhuysen for RNZ: Plan to scrap agriculture courses sparks backlash
* Lillian Hanley for RNZ: ACT, NZ First cast doubt on capping council rates
* Russell Palmer for RNZ: Fears up to 285 more staff needed to make Seymour's bill work
* Liam Ratana for The Spinoff: David Seymour blames karakia for high power bills. Here’s what he gets wrong.
Housing, Transport, Infrastructure & Councils
* Maria Slade for BusinessDesk-$: Supply of new homes misaligned with what buyers want
* Anne Gibson for NZ Herald: 'We're saying no' – house-building boss on timber price hikes
* David Hill for LDR via RNZ: Councils complain huge rate rises result of government rules
* Bella Craig for RNZ Checkpoint: 'Mark your own homework': Healthy Homes checks under fire
* Jonathan Leask for Stuff: Push for regions to keep and spend road tax money
* David Hill for LDR via RNZ: Councils blindsided by government call to halt planning work
* Susan Edmunds for RNZ: The return of the property investor - but why?
Health, Poverty, living costs, work, education, justice & crime'
* John Gerritsen for RNZ: Fears of spike in poorer students leaving school without qualifications
* Libby Kirkby McLeod for RNZ: Toi Ohomai closure will 'condemn another generation to poverty'
* Jimmy Ellinghman for RNZ Checkpoint: Auckland mental health facility Segar House to close
* Op-Ed by Sheffield Uni’s Matthew Hobbs, Auckland Uni’s Chris Sibley, Canterbury Uni’s Elena Moltchanova and Waikato Uni’s Taciano Milfont for The Conversation: Is our mental health determined by where we live – or is it the other way round?
* Rachel Helyer Donaldson for RNZ: Health researchers, MPI clash as study finds campylobacter cases have surged
* Sanda Arambepola for Stuff: Wellington sushi restaurant fined for exploiting ‘vulnerable’ migrant worker
Climate, water, land, air and environment
* Alexia Russell for Newsroom/The Detail: Real people, real lives, right now - the reality of climate change
* RNZ: Families still isolated in parts of Motueka Valley after floods
* Libby Kirkby McLeod for RNZ: 'Deliberate and sustained': Forestry operator fined $112k for pollution
* Monique Steele for RNZ: Farmers and council at odds over management of Tasman's flood-hit Upper Motueka River
* Tony Wall for Stuff: A sudden exit at Molesworth Station, amid a plan to plant the very pest they’ve been fighting
* Op-Ed by Sustainability Council Executive Director Simon Terry for Newsroom: Radical genetech bills ignores global standards at Kiwi producers’ peril
Good news & solutions
* Marc Daalder for Newsroom Pro-$: Solar farms in investment pipeline could triple NZ’s power capacity
* Nick Stride for Interest: Comcom final decision scales back card fee savings
* Lillian Hanley for RNZ: Law change letting workers talk about salaries likely to pass RNZ: Consumer watchdog moves to lower debit and credit card surcharges
* Craig Ashworth for RNZ: Homegrown health workers fill Taranaki gaps
* RNZ: Devastating rain brings silver lining for winter power supply
* Julia Gabel for NZ Herald: Lake Alice redress pool grows by $7 million as more survivors than expected are deemed eligible for payment
Docs of the day
* MSD Benefit Fact Sheets: June 2025 quarter report
* Stats NZ: Selected Price Indices June 2025: Food prices increase 4.6 percent annually
* Local Government New Zealand Electoral Reform Working Group final paper: ‘Refreshing our grassroots democracy.’
* RBNZ announces six month delay in licensing of deposit takers to 30 November 2028 due to its current review of bank capital settings. Updates to DTA implementation timeline and standardsDeposit Takers Act
* Infometrics doubles GDP growth forecast to 2%
Cartoon: If only we could eat bitcoin
Ka kite ano, Bernard
