Tuesday’s Pro email: Economy and Govt stabilising
In the political economy and in business today, Parliament resumes for its final week of the year today and GDP figures on Thursday will be the last major economic indicator of the year.
The coalition Government and the economy is ending the year on a more solid footing than in the depths of winter, when Prime Minister Jacinda Ardern abandoned the Capital Gains Tax for her political lifetime and her Cabinet downgraded any serious aspirations for KiwiBuild. Total GDP, as opposed to real GDP per hour worked, is growing at more than two percent per year and the parties in Government would win an election on current polling, if all three got over the 5 percent threshold and combined again.
Last week's $12 billion infrastructure investment announcement has given some sense of momentum back to the Government, but the same problems evident in the economy before its late 2017 election are firmly in place. National is not proposing to change things markedly, touting yesterday in its housing and transport announcements it was the "Party of roads" and would be the "Government of Infrastructure," but without investing significantly more taxpayer funds in these mostly roading projects and continuing to talk about tax cuts.
Evidence of what that looks like is in the chart below showing investment per capita from 2007 to 2019. The forecast increase in per-capita investment in coming years barely covers lower population growth forecasts, let alone the infrastructure gap that opened up in the last decade.
Migration remains near record highs and at double to triple the levels of our OECD peers, while infrastructure spending and house building remain far below the levels needed to address either ruinous housing affordability or climate change preparedness (see more below in Sharon Zollner's chart). Any Government serious about reducing child poverty, cutting carbon emissions, increasing productivity and improving societal wellbeing would be investing heavily in transport and housing infrastructure to re-engineer our major cities with much more substantial public transport networks to support new medium-density housing.
It would also be talking a lot more about the effects of very fast and unplanned population growth, which has been an easy way for Governments of both flavours and small businesses to get politically-easy and investment-lite nominal and total economic growth.
However, output per hour work has remained stagnant for the last five years and GDP per capita is only rising because a greater share of the workforce is working longer hours. Like his predecessors Bill English and Steven Joyce, Finance Minister Grant Robertson has also been talking up the economy's achievements without addressing the fundamental problems of a lack of physical and social infrastructure investment and stagnant productivity.
There is no prospect of these issues being debated seriously or addressed with alternative policy choices in the election, at this stage.
That's because changing the settings to achieve the above would require higher Government borrowing, a shift of wealth from older landowners to younger renters, and a reset of the New Zealand suburban dream of owning a house in the suburbs with a backyard and two cars.
None of this is possible with the current voting demographics and an MMP system that drives the main parties to avoid changing the status quo, with only incremental changes that essentially bring forward future wealth and income from non-voters to current voters.
1. The Dubai of the South Pacific
This is the Golden Springs Motel and Holiday Park in Reporoa and it has become a symbol of what parts of New Zealand have become.
This is the story of how our economy has, in many ways, become a machine for turning migrants into cheap or no wages and 'houses' into high rents that support house inflation that has been the highest in the world in the last 30 years.
It is the story of how Shenshen Guan (photo below) was able to become a slumlord renting out cabins to the working poor for a fast-growing dairy industry while effectively keeping other migrants as slaves to run the complex.
This is a place where migrants and tenants were exploited because our economy is set up to grow as a low wage and high rent economy. A place where the investment in businesses and new infrastructure is shunned because it's simpler and easier to import cheap workers and bank the tax-free gains on leveraged property when not enough new houses are built to cope with the population growth.
The Labour Inspectorate yesterday released the details of a case it took to the Employment Court over migrant abuse. The Court ruled Shenshen Guan and her Fusion International Ltd company had been banned as employers and would have to pay a record $680,350 in penalties and unpaid wage arrears within 28 days to three migrant workers who paid the motel owner a bond and worked without wages.
“This judgement sends a strong message that employers who exploit their workers will be put out of business, and charged penalties far in excess of what they may have gained,” said Labour Inspectorate National Manager Stu Lumsden.
“The Chief Judge of the Employment Court also reinforced that such conduct requires firm denunciation to drive home that worker exploitation is totally unacceptable in New Zealand,” Lumsden said.
The Court heard two of the workers mortgaged a house and withdrew their children’s university funds in China to each pay a $45,000 premium “bond” to Guan before coming to New Zealand to work at the holiday park.
They arrived on visitors visas and began working unlawfully under false promises of being paid. The Court heard the three workers worked on various jobs at the holiday park seven days a week for no wages. Guan had changed their employment contracts and then used the fact that they had no working visas as a reason not to pay them.
She also said their “free” food and accommodation while staying onsite should also offset any expectation of payment.
The Court heard the workers referred to their time at the holiday park as being “a nightmare”, felt it was like living in a “prison”, and one of them said they “wanted to die”.
“Any worker is lawfully entitled to minimum employment standards. Any employer who thinks they can flout these laws, especially by being in a rural environment where they think isolating workers is sight unseen, can expect to be heavily penalised,” Lumsden said.
Fusion had been ordered to pay $300,000 in penalties, with Ms Guan ordered personally liable for a further $150,000. Each of the three workers would receive $100,000 of this total, on top of between $69,000 and nearly $92,000 they are to receive in unpaid wages and compensation. New Zealand Fusion and Ms Guan had also been banned from employing staff for 18 months.
“None of us want to believe that this sort of thing can happen in New Zealand. But it is happening and we have to deal with it if we want to maintain our reputation as a fair country to work in and to trade with,” Lumsden said.
“Our tourism sector, like other export sectors, is especially vulnerable to consumer concerns about the treatment of its workers."
It took almost a year for the Government to start its Temporary Migrant Worker Exploitation Review , which was begun after review was agreed as part of the coalition deal with New Zealand First. Consultations on proposed changes finished on November 27 and MBIE has said it expected Minister Iain Lees Galloway to report back to cabinet in early 2020 on the review and proposals for change. Temporary work visas have continued to rise since the Government was elected.
Meanwhile, a modest three bedroom home just down the road from the Golden Springs holiday park is currently for sale with an asking price of $395,000. It sold for just over $28,000 in 2005, $211,000 in 2014 and $269,000 in 2017.
See more in this Stuff story from Anuja Nadkarni, including that Golden Springs charges up to $400 per night for a two-bedroom motel unit. One online review said the place was a "shocker", with stained mattress covers, rat faeces and "in desperate need of repairs". "Never again" the reviewer posted.
There are currently no rental properties available in Reporoa on TradeMe.
2. New plan to fund rail infrastructure
Newsroom Pro's Dileepa Fonseka reports on The Land Transport (Rail) Legislation bill, expected to become law by July 2020.
Under the bill, all transport projects would be considered under one umbrella- preventing road projects with lower cost-benefit ratios getting the go-ahead over rail projects with higher cost-benefit ratios.
This is being hailed as “historic” by KiwiRail’s CEO Greg Miller but Road Transport Forum chief executive Nick Leggett said it would be better to fund transport infrastructure upgrades through government debt than the National Land Transport Fund, while economist Brad Olsen questioned whether there was enough money in the fund to cover both road and rail infrastructure.
New Zealand First leader Winston Peters says he is confident his party can avoid a post-government slump like the ones it suffered in 1999 and 2008, arguing his opponents have launched their attacks too early.
Peters and his party end 2019 under pressure regarding the New Zealand First Foundation, but the Deputy Prime Minister told Newsroom Pro he was confident the foundation was within the law.
He also expressed confidence the party could win over rural voters, despite some prominent protests by farmers and others, saying there was a “covert” but significant level of support for New Zealand First in the regions. And Peters has also lifted the lid on his party’s growing use of social media and online surveys, what he describes as artillery the party has kept in reserve.
You can read his full interview with Newsroom Pro’s Sam Sachdeva here.
4. Councils have less reason to say 'no'
A bill quietly introduced to Parliament last week is a lynchpin of Phil Twyford’s vision for better-functioning housing markets, writes Eric Crampton in his column on Newsroom Pro.
The Infrastructure Funding and Financing Bill, quietly introduced on Thursday, will let infrastructure keep up after the current political push for greater infrastructure spending has passed, by enabling a new way of financing infrastructure that spreads the burden of paying for it over time among those who benefit from it.
A fishy review - Forest & Bird is seeking a judicial review of the Fisheries Minister's decision to reduce the tarakihi commercial catch by only 10 percent, saying their modelling means it would now take 25 years for the stock to rebuild. In 2018 Fisheries NZ determined that the species had been depleted to only 15 percent of natural (unfished) levels.
Admission - Donna Mariana Grant, the 61 year old daughter of Sir Howard Morrison and herself a prominent Māori performing arts educator, has admitted defrauding a tertiary education provider and a Crown agency of approximately $1.25 million. Grant appeared yesterday in the Rotorua High Court where she pleaded guilty to three charges of ‘Dishonestly using documents’ and a single charge of ‘Obtaining by deception’. The charges were brought by the Serious Fraud Office, which says Grant used her position in several organisations to fraudulently obtain funding from Te Whare Wānanga o Awanuiārangi and the Tertiary Education Commission.
Announced - The members of Te Taumata Aronui, an advisory group to work with Government on tertiary education policy from a Māori community and employer perspective, have been announced. They are Professor Wiremu Doherty, Maru Nihoniho (MNZM), Te Ahukaramū Charles Royal, Mereraina Piripi, Dr Eruera Prendergast-Tarena, Brendon Green, and Mamaeroa Merito. Dr Wayne Ngata will chair the Group.
Unopposed - Directors Andrew Morrison (Southern South Island) and George Tatham (Eastern North Island) have been reappointed to the Board of Beef + Lamb New Zealand (B+LNZ) after no other nominations were received in those two districts. B+LNZ’s Annual Meeting will be held in New Plymouth on 26 March 2020.
Permission wanted - Juice Technologies Pty Limited has applied to the Commerce Commission for clearance to acquire APT Business Solutions Limited, trading as APT Childcare. Juice Technologies operates in New Zealand through its wholly owned subsidiary, Infocare Systems Limited. Clearance is required as both Infocare and APT supply student management software to childcare providers.
Revised down - The growth outlook has been revised down slightly in the latest NZIER Consensus Forecasts, relative to the previous quarter, thanks to lower expectations of business investment and exports (which were partly offset by slightly stronger expectations of household spending). NZIER says the uncertain global growth outlook has dampened expectations for export growth and business confidence has fallen in the face of persistently weak profitability, with businesses becoming more cautious about investment - although consumer confidence remains positive.
A model for the future - The Government is to invest $100 million designing and building a new courthouse in Tauranga which Justice Minister Andrew Little says will be a model for future courthouse design for New Zealand. The courthouse will be designed in partnership with iwi, the local community, the judiciary, the legal profession, court staff and other court users. Little says it’s time to "re-think the traditional courthouse design, ...for victims, being forced to share the same space with people who have hurt them can be incredibly confrontational ... Users of civil courts, such as the Family Court, also routinely ask for more family friendly design and an environment that is more sensitive to the stress associated with family break-ups." The new Tauranga courthouse is expected to be ready by mid-2025.
6. Coming up
Parliament in session this week. Select committee submitters list can be found here and select committee schedules can be found here
ANZ AGM, 10:30 AM, Brisbane
Auditor-General releases annual central government audits report
Abortion Legislation Select Committee considers the Abortion Legislation Bill
(Detailed Select Committee schedules can be found here)
Stats NZ releases balance of payments and international investment position for the September 2019 quarter
Education and Workforce Select Committee receives briefings on annual reviews of the Education Review Office and Education Payroll Limited and considers the Education and Training Bill, the Education (Vocational Education and Training Reform) Amendment Bill and the Holidays (Bereavement Leave for Miscarriage) Amendment Bill (No 2)
Finance and Expenditure Select Committee reviews RBNZ’s Financial Stability Report and the Government’s new Budget Policy Statement, considers the Arms Legislation Bill and the Public Finance (Wellbeing) Amendment Bill and receives three petitions
Governance and Expenditure Select Committee receives briefings on annual reviews of Southern Response Earthquake Services Limited, the Office of the Clerk and Parliamentary Services and hears three petitions
Health Select Committee considers the Mental Health and Wellbeing Commission Bill
Social Services and Community Select Committee receives briefings on annual reviews of Te Papa Tongarewa, the Housing New Zealand Corporation and the Social Workers Registration Board and considers the Rates Rebate (Statutory Declarations) Amendment Bill
(Detailed Select Committee schedules can be found here)
The Parliamentary Press Gallery holds its annual Christmas Party in Parliament.
Stats NZ releases GDP figures for the September 2019 quarter
Parliamentary Commissioner for the Environment Simon Upton will release a report on the environmental impacts of tourism
Napier Port Holdings AGM, 10:30 AM, Napier
Enjoy the holidays!
Parliament will be in recess until February 11
The Treasury will release its four-yearly Long-term Fiscal Statement in March
John Anthony (Stuff) Sir John Key sells mansion for $23.5m in what was NZ's second biggest house sale of 2017
Amanda Cropp (Stuff) Tourism industry body backs Whakaari/White Island chopper operators in registration row
Thomas Manch (Stuff) 'Snot those guys': Secret GCSB emails reveal Operation Burnham chatter
Audrey Young (Herald-Paywalled) The Kiwi digital whizzes who helped Boris Johnson win a landslide
John Gerritsen (RNZ) Schools' fraud controls lacking, auditing expert warns
Anuja Nadkarni (Stuff): Holiday park and owner to pay $680,350 for exploitation
Dominion Post Editorial Fuel tax or road-user charges - either way, you still pay
Jason Walls (NZ Herald):National Leader Simon Bridges is promising his party will be the 'party of infrastructure'
Jason Walls ( NZ Herald-paywalled):Jacinda Ardern made waves on the world stage in 2019 but faced issues back home
Audrey Young (NZ Herald-paywalled):Simon Bridges draws lessons from Boris Johnson's landslide in UK election
1News: National pledge drug driving tests, cancelling KiwiBuild and fuel tax alternatives
1News:Green Party condemns My Food Bag for beneficiaries
Henry Cooke (Stuff): National promises to repeal and replace RMA
Tom McKinlay (ODT): Time for climate change action
Jenée Tibshraeny (Interest): KiwiBuild brand to go under National-led govtKiwiBuild brand to go under National-led govt
1News: 'This is a public health crisis' - City Mission calls for food insecurity measure to understand issue of poverty
Farah Hancock (Newsroom): Flawed forecasting? Why MMR vaccine ran out
NZ Herald: Revealed: Sir Peter Jackson's Wellington election spend
Joanne Carroll (Stuff) Payment for Hokitika Racecourse kept secret by district council
BusinessDesk-paywalled: Meridian, Contact accused of $60m power market abuse
RNZ:Clearcut UK poll result a boost for NZ exporters
Ian Verrender (ABC Australia) A2 Milk's ousting of high-flying female CEO Jayne Hrdlicka leaves a lot unanswered
Matt Nippert (NZ Herald): Māori King's adviser Rangi Whakaruru admits fraud charges
Interest: Economic growth is slower, but hasn't ground to a halt and may now have reached the bottom
David Hargreaves (Interest): Economic growth is slower, but hasn't ground to a halt and may now have reached the bottom
Jamie Gray (NZ Herald):Greg Foran's plan for his first 100 days as CEO of Air NZ
BusinessDesk -paywalled:Sanford shareholders back value focus as Sealord profits on volume play
BusinessDesk -paywalled: Taco Bell sales at $100k a week as Restaurant Brands ups 3Q revenue
BusinessDesk -paywalled:"Boring" plodders rank among NZ's top 10 performing stocks
Gareth Vaughan (Interest): ANZ's on the block finance company UDC posts record annual profit
Anne Gibson(NZ Herald):Tiny house company fails leaving buyers with partly-built homes
Anne Gibson(NZ Herald): Property developers fined $123k for breaking overseas investment rules
Phil Pennington(RNZ):Document release reveals further concerns about building products quality scheme, CodeMark
Georgina Campbell (NZ Herald):National moots regional transport authorities for Wellington and Canterbury
Charlie Dreaver(RNZ): National proposes to scrap Auckland's regional fuel tax, start congestion charge
Stuff: Jetstar announces 10 per cent of flights to be cancelled in January
Chris Keall( NZ Herald-paywalled): 5G deal: Māori will be able to onsell spectrum
Tom Pullar-Strecker (Stuff): 5G deal a unique opportunity, say Māori negotiators
BBC Business: Profile of Nick Mowbray - How a university dropout built a toy empire
BusinessDesk -paywalled:OMV details Pohokura output cuts
Reuters: Factbox: What is actually in the U.S.-China 'Phase One' trade deal?
New York Times: Trump Officials Praise Gains From China Deal, but They Come at a Cost
Bloomberg: Boeing has a $50 billion headache
New York Times: China’s Hard-Liners Win a Round in Trump’s Trade Deal
Bloomberg: How Trump’s Trade War Went From Method to Madness
Reuters: China to target around 6% growth in 2020, step up state spending
SMH: Australia drops pledge to eliminate net Federal debt by end of next decade
ABC Australia: Federal Government budget surplus revised down to $5 billion amid forecast revenue slump
New York Times: Fashion Nova’s Secret: Underpaid Workers in Los Angeles Factories. The online retailer makes fast fashion for the Instagram elite. The way many of its garments are made is much less glamorous.
Eudaimonia : This is How a Society Dies
New York Times: China’s Companies Binged on Debt. Now They Can’t Pay the Bill
Productivity Commission: From sewing machinist to software programmer
The Detail, Newsroom's daily podcast co-production with RNZ looks at the ASB Tennis tournament Read more and listen here. iPhone users can subscribe here and Android users can subscribe here
Bernard, Lynn and the Newsroom Pro team.
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