Jun 30, 2008

Bobby Zoellick

It is good to see that Adam Smith at The Inquiring Mind is feeling better. He looks today at an article about Robert Zoellick, World Bank head, by an Australian.

Adam asks some difficult questions.

Zoellick, like many in veterans of the Reagan Administration (and a few New Zealanders), find New Zealand challenging. There we were were in WWI, WWII, Korea and Vietnam fighting alongside. We share a similar interest in democracy, free speech and human rights. Yet we stiffed the US big time in the 1980s. Some have not forgotten.

Gratefully, Bush jr. has allowed the relationship to graduate and return to more of a normal state, but have a look at the timing. When did Zoellick move on? You will find an almost exact match. One of the reason why NZ does not have an FTA with the US but Australia does, is to do with our friend Zoellick. Unfortunately in the Reagan years Bobby was an arms negotiator. He was very worried about the spread of the New Zealand disease. He might also have felt personally let down. we were not just seen as friends - we were close family. He never got over it. Australia in contrast - Labour and Coalition, never let Bobby down.

Double Dipping OK - So Long As You Don't Ask Questions?

There has been a great example of investigative journalism by TV3's Duncan Garner over the past two evenings. He has been covering the court marshall of a Colonel Heaton who foolishly supplied duty free grog and smokes to a friend who was not entitled to duty free privileges. This a practice we have been aware of around the world for years, normally it is Defence or Police personnel involved [they normally only do one or two postings offshore and see this as a huge opportunity to cash in].

Heaton pleaded guilty to the charges and the matter is resolved. But we do wonder why the Defence Forces went for Heaton. He is far from alone in this practice, and given the practices that have gone on over the years this seems very minor. It was suggested to us today that they threw the book at him because he discovered that double dipping over housing allowances was deemed OK and he started asking too many questions. We can't comment on this.

But we do think that this was a pretty brave call by a Government just before an election to allow the scab to be rubbed off the issue of corruption in the overseas service. Is Heaton's crime worse than all the cars purchased in Jakarta, never used, and then sold on departure for a huge profit? What about those who served in Tehran or Moscow who sold cars on the black market and used the Embassy accounts to launder the proceeds at the official exchange rate? What about the Cop who used to supply far bigger quantities of grog to his mates in Singapore than Heaton has pleaded guilty to? What about trashing your house and causing thousands of dollars in damage which the NZ taxpayer paid up, and then being sent on several more postings? What about shipping a plane load of grandfather clocks (and possibly other antiques - this was many years ago) back to NZ for sale? What about flying a tractor back to NZ? What about missing or damaged works of art from/in MFAT residences? Why was nothing done about these transgressions? Why pick on Heaton?

There you Duncan - the rest is up to you.....

Hollow Nicky Described Perfectly - The Patricia Bartlett Of The Political Left

While driving to a meeting today we were able to catch this discussion on Nine to Noon on National Radio. It is worth a listen.


We agree fully with Hooton about the moral overtones to Hager's work. Who is he to think that he can appoint himself as the supposed guardian of the nation's political morals??? And why does he get so much space in the media to moralise?

Politicisation Of The Public Service

Shock suggestions from the Dominion Post Editorial today

A perception has grown up, rightly or wrongly, in recent years that the public service has left behind its tradition of political neutrality and become an operational arm of the Labour Party. That has been encouraged by a national librarian lavishly praising her minister in public, a chief executive bowing to bullying from his minister over a departmental appointment and a former state services commissioner who learned a senior state servant didn't have the doctorate she claimed yet failed to frogmarch her from the building, presumably because of her political connections.
A sense has also grown of a service no longer willing to give ministers advice they do not want to hear and a chief executive pool that erroneously believes their boss is their minister, not the state services commissioner.

And some ideas about what to do about the problem

The National Party, in the shape of state services spokesman Gerry Brownlee, has been the chief among the public service's critics in recent years, especially since the so-called Setchell affair, which peripherally involved one of the party leader's own staff. If it is truly determined to return to the public service the aura of neutrality it wore under Dr Mervyn Probine, it could do worse than look at a change of attack - if it becomes the government.
It might, for example, consider adding the position of state services commissioner to the small club of parliamentary officers who report to Parliament itself, rather than a minister, and replicating the employment arrangement of the auditor-general, who is appointed for a seven-year, non-renewable term. That would give the commissioner an independence the incumbent does not enjoy now.
No one can accuse Auditor-General Kevin Brady of being anyone's lapdog after the persistent way he went after illegal party spending at the 2005 election and reported his findings to Parliament. Were Mr Rennie to be given similar autonomy, ministers would think more than twice about taking on their chief executives, particularly if they knew such antics would inevitably be made public.
We wish Mr Rennie well in his new job. It is clear he has his work cut out for him.

We too wish Rennie all the best.

NZ Productivity A "National Disaster"

We have been saying this for ages so it is good to read confirmation in today's Dominion Post.

Good on Kerry McDonald for speaking the truth (a fault that cost him the Chair of the Australia-New Zealand Leadership Forum) and good on James Weir for writing the article.

New Zealand's low productivity is a "national disaster", according to professional company director and former Comalco managing director Kerry McDonald.
The Labour Government's climate-change policies are also "a very high risk to the economy", he believes.
Productivity was "disastrously low" and growing only slowly, limiting household incomes, international competitiveness and living standards, McDonald said in a paper, outlining his "personal views".
Handicapped by "ineffective economic policies", New Zealand's economic performance was unacceptably weak and it was being marginalised by a globalising, rapidly developing world.

We too are worried about the impact that the proposed emissions trading scheme could have on our already poor productivity performance. The mere threat of this policy has put many investment decisions on hold.

Morning Report Interviews Hager

We were surprised to learn that Morning Report has seen fit to interview hollow Nicky Hager over his latest conspiracy theory beat up. Lets hope Shaun P. does the interview and that he is rigorous.....Unfortunately it seemed like it may be a pre-record.

Congrats NZ First On Your First

Being the first party having to deal with the Police over an EFA breach.



This from the NZ Herald

Jun 29, 2008

Might Obama Have Blundered?

This from today's Wall Street Journal

The Chicago Challenge
Barack Obama made one shrewd move this week, along with one risky one.
In talking with reporters after the Supreme Court ruled that criminals who rape children may not be executed, Mr. Obama moved smartly to the political center. "I think that the rape of a small child, six or eight years old, is a heinous crime and if a state makes a decision that under narrow, limited, well-defined circumstances, the death penalty is at least potentially applicable, that does not violate our Constitution," he said, siding with conservative dissenters in the case.
Mr. Obama was on shakier ground when he insisted that none of the burgeoning scandals in Illinois politics have anything to do with him. In recent days, top Obama fundraiser Tony Rezko was convicted on influence peddling charges and Democratic Governor Rod Blagojevich is facing possible impeachment hearings in the Illinois legislature over Rezko-related scandals.
"You will recall that for my entire political career here, I was not the endorsed candidate of any political organization here," Mr. Obama told Chicago reporters. "My reputation in Springfield [as a state legislator] was as an independent. There is no doubt I had friends and continue to have friends who come out of the more traditional school of Chicago politics but that's not what launched my political career and that's not what I've ever depended on to get elected, and I would challenge any Chicago reporter to dispute that basic fact."
Throwing down a challenge to reporters might prove uncomfortable for Mr. Obama. Good government groups in Chicago have long deplored his seeming indifference to the corruption in the Daley machine that has dominated the city since 1955. Indeed, Mr. Obama's chief strategist David Axelrod is also current Mayor Richard J. Daley's top political adviser. And while Mr. Obama was not originally elected with the help of the machine, once in the legislature he became a close ally of state Senate President Emil Jones, a cog in the Daley machine who has been the chief obstacle to passing ethics reform through the state legislature.
"Obama may pretend he is Obambi when it comes to corruption," says Chicago Tribune columnist John Kass. "But the fact is that you can't come from Chicago without having your involvement with its politics scrutinized." At Mr. Obama's invitation, here's hoping enterprising reporters start digging.


We have avoided this subject for a couple of reasons - mainly because it was getting great coverage in the New Zealand TV, radio and print media (our international focus is on important issues which are not getting the attention they deserve in the New Zealand TV, radio and print media), and because we really haven't got that much new or different to say.

We were pleased to read this article by Nicholas Kristof in today's New York Times. We agree with every work and particularly strongly with the conclusion

The solution is for leaders at the African Union summit this week to give Mr. Mugabe a clear choice.
One option would be for him to “retire” honorably — “for health reasons” after some face-saving claims of heart trouble — at a lovely estate in South Africa, taking top aides with him. He would be received respectfully and awarded a $5 million bank account to assure his comfort for the remainder of his days.
The other alternative is that he could dig in his heels and cling to power. African leaders should make clear that in that case, they will back an indictment of him and his aides in the International Criminal Court. Led by the Southern African Development Community, the world will also impose sanctions against Mr. Mugabe’s circle and cut off all military supplies and spare parts. Mozambique, South Africa and Congo will also cut off the electricity they provide to Zimbabwe.
If those are the alternatives, then the odds are that Mr. Mugabe will publicly clutch his chest and insist that he must step down. There will still be risks of civil conflict and a military coup, but Zimbabwe would have a reasonable prospect of again becoming, as Mr. Mugabe once called it, “the jewel of Africa.”
Some people will object that a tyrant shouldn’t be rewarded with a pot of cash and a comfortable exile. That’s true. But any other approach will likely result in far more deaths, perhaps even civil war.
How do we know that sanctions will work? Well, we have Mr. Mugabe’s own testimony.
In a 1987 essay in Foreign Affairs, Mr. Mugabe called on the U.S. to impose sanctions on white-ruled South Africa for engaging in a “vicious and ugly civil war” against its own people. Mr. Mugabe demanded that the world “accept the value of sanctions as a means of raising the cost” of brutal misrule.
If only Mr. Mugabe were a white racist! Then the regional powers might stand up to him. For the sake of Zimbabweans, we should be just as resolute in confronting African tyrants who are black as in confronting those who are white.

We also note that the much maligned Bush Administration has ignored the advice from South Africa's African National Congress to not interfere in Zimbabwe, and has been quick to act following Friday's farce of an election.

President Bush called Saturday for an international arms embargo against Zimbabwe in the wake of last week’s “sham election,” and announced that the United States is drafting new economic sanctions that, for the first time, would take aim at the entire government of President Robert Mugabe.

Does this mean anything? Yes

“This certainly steps up pretty dramatically the scale of punitive action,” said J. Stephen Morrison, who directs the Africa program at the Center for Strategic and International Studies here, and worked on Africa issues in the State Department under President Clinton. “It’s long overdue, but having Bush get out there and say some hard things is very important.”

Will the rest of the world make these sanctions work? Probably not

The call for an international arms embargo, which Mr. Bush coupled with a proposed ban on travel by officials of the Mugabe government, is unlikely to be successful. American officials said it would almost certainly run into opposition at the United Nations from South Africa, Russia and China; South Africa’s position has long been that the Zimbabwe election is an internal affair.

Would unilateral action by the US (and New Zealand) be possible and effective? Yes

The United States’ own sanctions, by contrast, can be carried out unilaterally. American officials and outside experts said they hope the sanctions would put pressure on Zimbabwe’s mining industry, a crucial source of foreign exchange for a government that is very short of it. The sanctions are expected to restrict the government’s ability to do business with American companies, although it is unclear which agencies or state-controlled businesses would be affected.
Africa experts and human rights advocates have not generally been calling for sanctions, in part, Mr. Morrison said, because they have been so focused on trying to tamp down the violence and abuses surrounding the elections. In Washington, Mr. Morrison and a colleague, Mark Bellamy, a former ambassador to Kenya, have been pressing for a diplomatic offensive to create an international consensus that Mr. Mugabe must be ousted.
Zimbabwe’s opposition spokesman, Nelson Chamisa, asked whether his party favored sanctions, would say only that it sought intensified international pressure. It seems likely that the opposition is reluctant to demand sanctions for fear of playing into Mr. Mugabe’s hands. The state media, daily, in story after story, blame the limited sanctions imposed by the United States and Europe on the Zimbabwean elite for having led to the country’s economic ruin.

We look forward to hearing about New Zealand's intended policy response tomorrow.

Beware The Green Bubble

One of the themes of the report published last week by the Business Council for Sustainable Development last week was the great opportunity that an emissions trading regime will give the New Zealand economy. Rod Oram bemoans the fact that more business groups are not also promoting these opportunities. Before you invest have a read of this short op-ed from today's New York Times. Like Oram and the BCSD we do actually believe that there are opportunities which should be investigated. But like Daniel Gross, we think you should be cautious.

Hollow Man II - Or You Should Read This If You Do The Legal Work For The Sunday Star Times

We were a little surprised at the characterisation of Crosby/Textor, the Aussie political consultants that are the subject of the Sunday Star Times "hollow men" type revelations today, as being sinister and controversial. The only fact that might embarrass Mark Textor or anyone associated with the firm seems to be that in 1995 he did some push polling. He apologised and paid compensation for that mistake. It is now 2008.

Nicky Hager isn't the only conspiracy freak not to like Crosby/Textor. The Aussie website Crikey had a go at them earlier this year. Unfortunately they didn't do a terribly good job. Here is the result of that hatchet job:

On 17 April, we published a feature article which falsely suggested that Lynton Crosby and Mark Textor had leaked Liberal party polling in August 2007. This allegation was not checked with either Lynton Crosby or Mark Textor. They have strenuously denied this and we accept their denial. The false allegation has caused them serious embarrassment, and we regret repeating it.
On 18 April, we followed up with a report that there were serious but unspecified allegations against Crosby Textor which had yet to be brought before any Court. We accept that we knew of no specific matter which could support this claim when we made it, and that to publish in those circumstances was both very damaging and a serious breach of journalist's ethics.
Finally we alleged that Crosby Textor engaged in racism and thuggery. We acknowledge that this is not the case. We deeply regret having made this suggestion.
We sincerely apologise to Lynton Crosby and Mark Textor for the hurt and damage caused to them by our reports. We acknowledge that had we reported fairly, the compensation we have paid to them would not have been necessary.

We hope that sad little hollow Nicky and the SST have done a thorough job on their article. It seems that Crosby/Textor are pretty keen to protect their reputations. Note that the Crikey apology refers to allegations that the firm "engaging in racism and thuggery" and that Crikey acknowledge that this is not the case. Well have a read of the Sunday Star Times articles and suggestions of whipping up public feelings against refugees and Aborigines. Pretty close isn't it? We are going to watch this space with great interest.

Dirty Tactics

Isn't it interesting that when the polls were down just before the last election along came the Exclusive Brethren to save the day.

Now that the polls are even worse, along comes a new Hollow Men type conspiracy from Nicky Hager.

What more can we expect? During the campaign itself we have been promised at least one bombshell - news on who leaked the Brash e-mails is often suggested as the bombshell (several theories about here. One prominent name - not Key - is regularly suggested by those on the left - show us the evidence we say, and it never arrives. The theory we liked the best was that Don 'the rake' Brash had more than Dianne Foreman on the side. When one of these parties, who also happened to work for a National MP, learned that Don's attentions were not exclusive, she leaked the e-mails in revenge. Again there is not a shred of evidence we have seen to support this story either - no evidence of there being a bit more on the side, nor of the leak being made by such a person).

Come on Labour - you can do better. The public are beginning to see through these tactics. It is a shame that the Sunday Star Times sees fit to publish more Hager conspiracies.

Sarkozy v. Mandelson = Crisis For Europe?

The Independent yesterday examined the growing rift between the French President and EU Trade Commissioner Peter Mandelson. It also looks at the meeting the French are calling the week before the WTO Ministerial meeting to assess the EU position.

The Paris meeting could be interpreted as merely a prudent re-examination, pre-Geneva, of the joint EU position in the seven-year-old trade negotiations. But Paris wants to challenge what M. Sarkzoy insists on calling the "Mandelson" approach. The French minister for European affairs, Jean-Pierre Jouyet, said: "Europe cannot be inactive on the WTO [talks], which were a great cause of trouble [with farmers] in Ireland, as they are in France." France accuses Mr Mandelson of being too ready to make negotiating concessions, relaxing European barriers to food imports from Brazil, the US and other non-EU countries, and de facto subsidies to exports, without gaining serious concessions on exports of manufactured goods and financial services.

What would the consequences for the WTO be if France manages to win the day?

The European Commission says any weakening of Europe's offers on food trade would provoke the collapse of the negotiations – with serious consequences for the world economy.

One Brussels official accused M. Sarkozy of adopting a "simplistic, populist approach". Mr Mandelson's office did not comment on the unscheduled Paris meeting but said that the European Union would be pushing in Geneva for reciprocal trade concessions from other countries.

WTO: Battlelines Being Drawn For July Ministerial

This article from The Statesman suggests that the developed countries and the WTO Secretariat are trying to restrict the subject matter for the 21-24 July Ministerial meeting to just agriculture and non-agricultural market access NAMA). Developing countries want a wider agenda. We at The Hive want a wider agenda too. Services needs to be on the list also. With NAMA in trouble the EU and US (and India) will need some gains elsewhere if the deal on agriculture is to get through. The trouble is there have been virtually no liberalisation offered on services. There is therefore a huge amount of work to be done to whip services into shape, but not much time to do it.

UN Human Rights Council

Interest in New Zealand's candidature for the UN Human Rights Council is growing. Both Murray McCully and Stephen Franks have speculated that there might be more to this candidacy than meets the eye. McCully suggests that Helen Clark, because of her role in drafting our Electoral Finance Act, will be a shoo in to replace Nigeria as Chair of this Council. He goes further and suggests that Clark might be wanting to replace Don McKay as the NZ Rep on this Council (well Labour did send Anne Hercus as Ambassador to the UN in New York, why not Helen Clark to Geneva??). We feel that Miss Clark has higher ambition within the UN that Chair of the Human Rights Council. ILO comes up too soon so the next big job is the UN Environment Programme. Could this be why the PM is so determined to pass the Emissions Trading Scheme? Bugger the economy, but it will make my CV look good for that job?

So we doubt that McCully is right. But if he does have some inside info he might like to call Dell Higgie at MFAT as she is in the process of preparing for the move to Geneva the moment McKay moves on.

Oram v. O'Reilly

Phil O'Reilly replies to Rod Oram's article last week - see D6 of the SST. Surprise, surprise Rod Oram commends the sub-standard study that was produced earlier in the week by the Business Council for Sustainable Development (p.D2).

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Hollow Man

The Sunday Star Times has given Nicky Hager some space and he has filled it with another suggestion of evil forces pulling National Party strings. Of course, Nicky would not be politically motivated in writing this article - would he?

Fran On The Railways

Fran O'Sullivan has a look at the newly nationalised railways to be headed by Jim Bolger. We won't comment beyond observing that this issue has been badly handled and we are convinced this nationalisation will come back to bite Government. We think Bolger should have stuck to NZ Post and Kiwibank.

We hope that Government will move fast to sell the Wellington commuter network to NZ Bus and to put the Cook Strait ferry operation up for sale. There is no market failure on the Strait.

McCarten Wants Maori Support For His New Party

Matt McCarten today gives us his version of the history around the birth of New Zealand. Indeed it is very different to John Key's or Michael Cullen's. Will his views be appreciated by the Maori Party we wonder? We thought that they had the support of the down trodden, dispossessed and angry within Maoridom.

Although it forms only a small part of his article McCarten has some advice for Labour too

Labour's only possible chance of winning the general election is to hope it can nobble National's John Key by exposing him as a lightweight.

He would need to be a lightweight for this to work. And while he doesn't have the grasp of policy across all portfolios that Clark, Cullen and English display, he is getting better every day.

Hold Your Course And Don't Panic. The Polls Will Get Better

Well that is what Keith Ng concludes in an article he has written for the Herald on Sunday.

We are not sure he or those he quotes quite understands the shift in attitude that has been reflected in the polls. Nor is waiting for the opposition to make a stuff up going to work in current circumstances. To turn things around in Auckland Key and team will have to make a daily stuff up, and that isn't going to happen. Secondly, you can only really make the "let's wait for the Nats to stuff up" strategy work if you are going to be performing well yourselves. It assumes no more scandals (have a read of Craig Foss - he for one has more up his sleeve). It also assumes plenty of, at least OK news. The news on the economy and internationally is going to get worse before it gets better. People are going to blame the incumbent parties. Unfair, but true. We think that is Labour follows Ng's advice there is a real risk that the gap with National will widen.

Jun 28, 2008

Obama Set To Make Americans The World's Foremost Fiscal Prisoners

This from today's Wall Street Journal

Celebrity chef Alain Ducasse insists that his change of citizenship this week from high-tax France to no-income-tax Monaco wasn't a financial decision but an "affair of the heart." Right. But even if he's being sincere, plenty of other Frenchmen have moved abroad to escape their country's confiscatory taxes.
Americans should be so lucky: Theirs is the only industrialized country that taxes its people even if they live overseas. That hasn't been a big problem as long as U.S. tax rates have been relatively low. But with Barack Obama promising to lift rates to French-like levels, this taxman-cometh policy could turn Americans into the world's foremost fiscal prisoners.
And make no mistake, taxes under a President Obama could be truly à la française. The top marginal tax rate, including federal, state and local levies, could approach 60% for self-employed New Yorkers and Californians. Not even France's taxes are that high now that President Nicolas Sarkozy has capped the total that high-earning Frenchmen like Mr. Ducasse can pay in income, social and wealth taxes at 50% of earnings.
Mr. Sarkozy set this "fiscal shield" because he knows that tax rates affect behavior. When he visited London this year, he observed that the British capital is now home to so many French bankers and other professionals seeking tax relief that it's the seventh-largest French city. Those expatriates choose not to use their creativity and investment capital to benefit France and its economy.
Senator Obama's plans to raise income, Social Security and capital-gains taxes amount to a belief that people don't react to punitive tax rates. If so, he needn't worry about people leaving the country and could let them pay taxes in whichever part of the globe they choose to live in. Once Americans are paying French-style tax rates, they ought to have the same freedom to move as Alain Ducasse.

WTO: The High Stakes Game

Those who like playing poker should be watching the WTO right now. Is Lamy bluffing? What does he have in his hand?

The commentators and key Governments appear on his side. They recognise this is risky move, but they are largely supportive.

The Hive is a bit worried about the emphasis on Chair texts. For this to work Pascal,we think you need to produce YOUR text (which by the way Sarko will find a bit more difficult to white ant than a text produced by anyone else...). Take things away from the Chairs and have your own go at the final deal. We need far fewer square brackets on NAMA. Set out the deal you see achievable on agriculture. And rewrite services so that there is something there for the US, EU and India.

We agree also that you must have a plan "B". Failure is not an option. We need something for McCain to revive next year should the July Ministerial fail.

This is a summary of reactions from today's Guardian.

The DigiPoll Result

Most days of the week we read the hard copy version of the Herald to pick up those items we miss when reading the web version. Today, we did not invest in the Weekend Herald as we had no time to read it so it wasn't until driving along a back road of suburban Wellington on the way to pick up one of the golfing four, that we heard on radio the Herald DigiPoll result. So sorry for not commenting earlier. Thought about a post by cell phone (which you can do, and we have done once or twice), but texting in the car is not a good look, particularly with one of the Khandallah bridge/golf set sitting next to you. And cell phones are an even worse look at Royal Wellington. So we decided to wait for the evening.

Our conclusion is that Labour are toast. They have lost Auckland and there is nothing they can do to win it back. The Auckland electorate wants change. Aucklanders at all income levels have had it with Helen and co. They don't care about the fact that Key has been light on policy. He is a new face, and they want a new face - bigger tax cuts would not go amiss either.

Wellington is getting interesting also. Only Winnie Laban and Annette King are looking secure. This is going to put enormous pressure on the Labour list. No wonder this has been delayed.

Question For The Week - Should The PM Resign?

Is this acceptable? Has the PM lost touch? We thought Labour stood for the strugglers. Should the PM be personally responsible to make them struggle more? Interested in reader views.

Every New Zealander Should Read Fran O'Sullivan This Morning

We agree with every word. Fran makes the case for taking more time to get the emissions trading scheme right, and the need for a bipartisan approach that will result in a policy that stands the tests of time. We quote some of her comments:

Helen Clark's Government is at a critical crossroads on climate change.
It can rush blindly ahead and enact legislation that will give rise to the biggest economic restructuring in a generation, with huge negative consequences for smaller Kiwi companies and workers in the medium term.
Or it can reach across Parliament and seek to forge a genuine multi-partisan consensus in the knowledge that Labour's chances to milk global warming as an election issue will be stymied.
National's John Key could use his vaunted street smarts to call Clark and offer to remove climate change from the election agenda so the two major parties can work together to forge legislation.

We thought that National had been offering this since the last election...

Clark, who has portrayed herself as an international climate change warrior by setting a goal for New Zealand to be one of the world's first carbon neutral countries, will not want to back down. She has so exaggerated New Zealand's record internationally on combating climate change - when emissions have continued to soar during her Government's time in office - that her credibility is jeopardised.

A bit mean Fran, but true

The real problem is that Kiwis are unprepared for the enormous changes that will follow the introduction of the Climate Change (Emissions and Renewable Preference) legislation.
The economy will undergo an economic restructuring that will dwarf the changes wrought by Sir Roger Douglas in the mid-1980s. Higher prices for basic inputs like electricity and fuels will ensure that many jobs are lost during the transition to a green-collar economy.
This is inevitable. It is the upshot of transforming to the new international paradigm where exporters from high carbon-emitting economies face emerging trade barriers.
Clark and other Cabinet ministers who were part of the Douglas-reform era Government, repudiate the "misery" that was inflicted by ripping the struts out from under farmers, companies and families during the 1980s without introducing measures to reduce the pain of adjustment.
But now they they seem hell-bent on repeating the exercise. Let's not be in any doubt. Jobs will go.
A report by Australia's influential Commonwealth Scientific and Research Organisation (CSIRO) this week forecast some three million jobs in that country's polluting industries could be under threat after an emissions trading scheme comes into effect in 2010. The Australian jobs market would recover from 2017 and then soar as new jobs were created in areas like renewable energy, energy and water-smart buildings, green appliances and other sustainable lifestyle products.

We made the 1980s analogy ourselves yesterday. Not a good time for jobs to be going. And which jobs will be going? It will be Maori and Pacific Islanders who suffer most.

Kevin Rudd's Government is already facing up to major transitional costs. But here, it's still head-in-the-sand territory.
The problem is most business/land/ agriculture lobbies point to negative consequences without conceding the potential upside, while the NZ Business Council for Sustainable Development points to new jobs that will be created but does not focus enough on the downside.
It is incongruous that Clark has not drawn on the 1980s to develop programmes to offset the transition.

Rudd has Penny Wong, we have David Parker. It is not just the NZ business Council for Sustainable Development that sees opportunity Fran. You are being far too narrow. Have you not noticed the big accounting firms rubbing their hands with glee? Then there is the NZX with their baby TZ1. And then there are the commentators like Rod Oram who make heaps on the speaking circuit.

Parliament's finance and expenditure committee hasn't grappled with the big picture, despite official reports warning of the consequences to jobs. It is an outrage that the select committee took a mere 16 hours to consider more than 60 reports on the Climate Change (Emissions Trading and Renewable Preference) bill and was given just three days to consider more than 1000 amendments.

Yes, this was not Charlie Chauvel's finest hour.

A reality check - it is a given that New Zealand does need to put a price on carbon emissions so that the transition to a low-emission economy gets under way.
But forcing through ill-thought-out legislation by making yet more absurd concessions to get minor parties like NZ First over the line in a re-election frenzy will not increase either Clark's reputation or that of her Government.
Business and environmental lobbies are now deeply concerned at the results. Environmental lobbies believe there are now so many exemptions that costs will unfairly fall on smaller businesses and families. Businesses warn of a transfer of wealth elsewhere.
Some of this worrying could be eased if the Government built a safety valve into legislation to protect against high and volatile carbon prices. But, as it stands, an economy where exporters are hostage to the vagaries of the dollar is about to be hit by more uncertainty.
Surely it is in New Zealand's interests for both major parties to come up with a solution that will stand the test of time.

Agree fully

Does National Have A Cullen In Its Midst?

That is what John Armstrong asks this morning in the NZ Herald. He is not talking about the Cullen who criticises John Key for making historical comment that he has made himself, or the Cullen who has nationalised big chunks of the economy, or the Cullen who was ideologically opposed to tax cuts. He is talking about the Cullen who delivers big Treaty settlements.

The Hive sees a great working relationship between Iwi and National so is not quite understanding Armstrong's motivation here. Chris Finlayson was donkey deep in Treaty settlements as a barrister and was working for Iwi so that would be the first answer. We also recall that it was National who really started to get the Treaty settlement process going. Finally National is talking about productivity enhancing policies and getting the emissions trading scheme right. This will benefit Maori more than any other group given that they are more heavily involved in fisheries, forestry and agriculture than any other group in our society.

Jun 27, 2008

Don't Write McCain Off

Today's Wall Street Journal has good advice to those foreign jouranlists who are writing McCain off.

Some pundits claim John McCain has no chance of beating Barack Obama. "The current bundle of economic troubles should doom any Republican hoping to succeed George Bush," says NBC's Chris Matthews. "It's almost impossible to believe that another Republican could get elected," insists Katty Kay, the BBC's Washington-based correspondent. They need to better understand the rhythms of presidential campaigns and show more humility in a year that's been chock full of political surprises.
Some Democrats claim new polls by Newsweek and the Los Angeles Times showing Sen. McCain trailing by 15 points in each seal the deal on an Obama presidency. But both polls appear to be outliers. Other polls show the race to be close.
Both surveys polled registered, not likely, voters. Normally, only two-thirds of those end up casting ballots, and nonvoters lean Democratic. Second, Democrats had a 14-point advantage in Newsweek's sample, and a 17-point advantage in the Times poll, with Republicans making up only 22% of respondents. That's an unusually low number. Most other polls have the party ID gap with a significantly smaller Democratic edge.

This May Not Be Goood News For WTO

France calls a meeting to discuss the EU position on the WTO negotiations. France begins its 6 month term as EU President on 1 July and has the right to do this. We don't see the comment/context as positive.

Emissions Trading Scheme In Big Trouble

The Hive understands that Heather Simpson's negotiations with the NZ First team over the ETS have not gone well and that it is now most unlikely that NZ First will support the passage of this legislation without at least a further round of submissions on the 1,000 or so changes that have been made to the original Bill.

This means that the Labour Party (49 votes - 50 counting Anderton) will need the support of the Green Party (6 votes), Maori Party (4 votes) and 1 other to pass this law. That is assuming that Labour is prepared to take the risk on passing the law that will result in the most significant changes to our economic system since Helen Clark was last in Cabinet (and deputy PM) in the late 1980s by a margin of one vote.

We understand that Taito Phillip Field is not wanting to support the bill because he is concerned about the impact it will have on the poorer residents of his electorate.

The Maori Party is being lobbied hard by Maori fisheries, forestry and agriculture interests to oppose this legislation.

The Greens will support, but with changes required - the most controversial demand being that agriculture and transport come into the scheme earlier than is being proposed. Don't forget that next week, while Nandor is out there trying to buy a new watch, Russel Norman will be in Parliament. Will this make the Greens more radical and anti-dairy??

What is the Government to do? We would recommend agreeing to a new round of submissions and see whether more work in the select committee can bring National around. This will probably mean that the scheme will need to held over until the next Parliament (not what the Government wanted, but better than defeat).

The Government could force a vote, risk defeat, but in so doing seek electoral advantage (should there be some) by portraying National as the villains.

This is going to be fascinating to watch over the next couple of weeks. The same small parties are proving difficult over the land transport legislation also. If the polls were not so bad for Labour, this would be a good time to dissolve Parliament and go to the people. But given the polls, this isn't going to happen.

Are readers hearing what we are hearing? And what do you think the PM will do?

All Is Well Within Business Council

A member of the Business Council For Sustainable Development has kindly seen to it that the attached letter, that was sent yesterday to all members of the Council, ended up in our inbox. Many thanks to that member. We thought that it only fair that we share it with all of our readers as there seems to be great interest from the media and others in the Council's "internal processes". Sean Plunket, for one, certainly seemed more than interested in this issue on Morning Report the other day.

26 June 2008
Dear Member,
I would like to clarify some of the recent comments on the background to the recent
report issued by the New Zealand Business Council for Sustainable Development on
the likely scale of the economic opportunities forgone and threats caused by any
delay in the implementation of an emissions trading scheme.
The Business Council has long been a supporter of the use of economic instruments,
and specifically a cap and trade system, for helping manage and reduce greenhouse
gas emissions. Our first significant piece of work in this area was published in 2003
and we have been a consistent advocate of this approach since then.
In the recent debate over the proposed Emissions Trading System as set out in the
Climate Change (Emissions Trading and Renewable Preference) Bill there have been
many comments about the risks to New Zealand business from the impact of the
proposals and the potential for job losses and economic decline. While acknowledging
there are risks (and we believe we contributed positively to the changes needed to
help mitigate those risks) the Executive Committee was concerned that the debate
was not considering the opportunities that a low carbon economy would present and
the impact of the reputational risks for New Zealand of doing nothing. We therefore
asked Peter Neilson to commission a small piece of work to investigate these issues.
The report identified potential gains which could arise form [sic] business opportunities that
were in the public domain. In many ways the approach taken in the report is
conservative – we have since heard it probably understates the opportunity from
forestry, many new opportunities are not in the public domain as they are
commercially sensitive and clearly the impact of innovation, one of the major benefits
of cap and trade systems, cannot be modeled.
As an organisation we decided long ago that not every member had to agree with
every piece of work and we continue to respect the right of members to do so. The
research should stimulate debate and open up discussion about the potential upsides
from the scheme and the risks of delay as we were concerned that these were not
being properly discussed. It has not sought to counter the specific arguments by
individual entities about the challenges the Bill would present to them, nor would that
be helpful. It is a view of the other side of the coin.
I thought this background note would be helpful to members. Unfortunately the media
are speculating about the propriety of our internal processes which is not helpful, but
the process described above was followed and the position is entirely consistent with
our past position on this issue.
Finally, please accept my apologies for the late delivery of the report. We started to
deliver this electronically at 11.00am Tuesday but it seems to have been ‘drip fed’ out
by the system with some members not receiving the report until yesterday. This was
not our intention.
Nick Main

The GDP Number

As expected. We doubt that the dollar will crash, but it should continue its downward trajectory. The shock is agriculture. Indeed the dollar did fall a bit then it seems to have stabilised

Economic activity, as measured by gross domestic product (GDP), declined 0.3 percent in the March 2008 quarter, Statistics New Zealand said today. The agriculture and construction industries were the main contributors to the decline this quarter. This follows an increase in economic activity of 0.8 percent in the December 2007 quarter. In annual terms, the economy grew 3.0 percent to the year ended March 2008. Activity in the primary industries declined 4.1 percent in the March 2008 quarter. Agriculture was down 5.6 percent for the March 2008 quarter, the largest decline in agriculture since the March 1998 quarter. Drought conditions experienced by parts of the country contributed to lower output and increased costs (intermediate consumption) for the agriculture industry.

Activity in the goods producing industries was down 1.9 percent in the March 2008 quarter. The main drivers in the decline in the goods producing industries were construction (down 5.2 percent) and manufacturing (down 1.2 percent). Of the manufacturing industries the largest decline this quarter was in food, beverage and tobacco manufacturing. The decline in construction activity was in both residential and non-residential construction.

Note The Failure To Answer The Question

Hon Dr Nick Smith: Noting the crude convenience of the timing and slant of this report, can the Minister assure the House that no Minister, nor any ministerial staff, had any communication with the two State-owned enterprises or with former Labour Minister Peter Neilson regarding the commissioning and publishing of this report?
Hon DAVID PARKER: Mr Mallard says I can give the assurance for him. I certainly did not tell them, or cause them to prepare that report.

But what about the PM, other Ministers or Ministerial staffers? This was clearly a well considered response and Parker was clearly expecting the question. If the answer was that no Minister or Ministerial staffers had spoken to those responsibe for the report would Parker have not said so? We see a smoking gun.........

Rift Between Business Groups Bad News For Labour

We recommend that everyone read page 24 of today's National Business Review. Ben Thomas looks at the privileged role that the Business Council for Sustainable Development enjoyed with the Government and how things have this week blown up in the Council's face following the release of its rushed and substandard attempt to help justify the Government's desire to push the emissions trading bill through before the election. Thomas rightly sees the willingness of business to speak what it really believes (as opposed to meekly towing the Government's line) as very bad news for Labour. This is also bad news for Stephen Tindall, Nick Main and Peter Nielson - all of whom have lost considerable credibility this week. Many are speculating that the Business Council will not be able to survive, with this week's episode being the straw that broke the camel's back..

Thomas concludes

"That they [business] are now prepared, not just as associations but individually, [to] speak out with such vehemence means the balance of power may have shifted. That means another winter of discontent for the government. And if the electoral groundhogs in the business community are correct, the cold snap may be over by November."

When The Polls Are Low Create A Conspiracy

The latest from Winston First Party Leader Winston Peters has a conspiracy between the two major parties and the media to cover up what? That Elvis is working in the Upper Hutt KFC? That UFOs visit New Zealand regularly? That man never landed on the moon? No.

the Reserve Bank committed "economic vandalism" due to its focus on fighting inflation.

"What is even more disturbing about this is that there is no public outcry because the two old parties operate a conspiracy of silence over the Reserve Bank Act," Mr Peters said.
"The media have been complicit in this."

If the RB has committed economic vandalism Winston how would you describe the good work done by your hero Rob Muldoon??

All Eyes On Today's GDP Figures

James Weir reviews the implications of today's GDP number. If the numbers are worse than the expected 0.3% contraction Weir expects further downward pressure on the New Zealand dollar (yesterday's current account deficit was worse than anticipated and likewise added to pressure on the currency).

Further Evidence Of Desire to Collectivise Health

We can't believe this. Does Labour want to fall below 20% in this election?

A political row is brewing over suggestions that patients under private medical care could lose access to subsidised drugs - a move that would cost some people tens of thousands of dollars.
Director-general of health Stephen McKernan told Parliament's health select committee this week the Health Ministry would be reviewing subsidised pharmaceuticals for patients treated by private specialists.
"Our general policy is public funding is for public patients," he said.
Currently, patients receiving care from private specialists receive the same subsidies as public patients, paying no more than $15 a prescription.

Don't private patients pay their taxes (probably more taxes than many non-private patients) and pay for their medical bills as well?? Don't they actually save the Government money? You would think that the sensible thing would be for Government to encourage people to go private not discourage them. But already in Wellington patients of private specialists have to pay for their lab tests. Why does the left hate private health care, private eductaion and private ownership of the media? Because they can't control it. They would dearly love to shut it all down and have one big collective where the Party controls everything.

Has Minister Cunliffe distanced himself from his officials? Yes, he is learning.

However, the ministry review may have been shot down last night before it could even get under way.
Health Minister David Cunliffe said the Government was working to expand access to subsidised prescription drugs and a spokesman for Mr McKernan told The Dominion Post there would be no formal review.

Deer Industry Shows Leadership On Climate Change

The CEO of Deer Industry New Zealand has written an opinion piece in today's NZ Herald on the climate change policy response.

Deer Industry New Zealand is convinced the proposed emissions trading scheme will not make any real difference to climate change as it damages the New Zealand economy. The industry body believes there is a much more pragmatic and meaningful way forward.
As mounting economic analysis shows, the proposed trading scheme will have a large, negative economic impact on individual Kiwis' wellbeing.
There are indications that electricity bills may rise by 20 per cent, the equivalent to between 20,000 and 50,000 jobs will be lost and the average household spending capability will fall by $3000 a year over time.
On an economy-wide basis, the effect of the scheme on gross domestic product may be a drop of $6 billion by 2025. This is like losing revenue from the entire New Zealand wine and kiwifruit industries three times over.

Won't it help solve an important global problem?

Some of these analyses suggest the scheme will also do very little to get New Zealand any closer to carbon neutrality, or make any discernible impact on global emissions. Indeed, in its currently proposed form, there is a significant risk that efficient industries and businesses could cease to operate.
And in the case of agriculture, any drop in New Zealand production could be picked up by less efficient overseas producers, with the net effect that global emissions rise and this country loses valuable export earnings.

So do we do nothing? No

Although the main source of greenhouse gas emissions is the world's use of fossil fuel, New Zealand's economy relies on agriculture to produce food for the world's consumers. It needs to solve the challenges of methane and nitrous oxide emissions from agriculture.
NZ has some of the world's top pastoral systems scientists. Ground-breaking work is being done by Kiwi scientists, such as the recent mapping of the entire genetic sequence of a microbe which produces methane from the rumen of deer, cattle and sheep.
As well as reducing its greenhouse gas emissions, New Zealand would establish itself as a pre-eminent research, development and adoption centre worldwide in the mitigation of agricultural greenhouse gases.
It would make a real impact on global carbon emissions and show real leadership in the fight against climate change.
Solving the methane and nitrous oxide emissions problem requires commitment from the Government and the whole industry.
It also requires focus and creativity. We don't have enough of these at present.

The Media's Latest Attempt To Beat Key Up Backfires

It is quite clear from a read of all of John Key's comments that he is not ignorant of the Land Wars or the injustices that were inflicted on many Iwi as Pakeha settlement expanded. So we think it great that Key has lodged a complaint about how Newstalk ZB used the interview (Prime News should be similarly in the gun). We are also pleased that Dr Cullen has been silenced on the issue.

Labour's attempt to paint National leader John Key as unworthy of being Prime Minister because of his comments about colonial history have backfired after National revealed Michael Cullen made a similar comment three years ago.

Jun 26, 2008

Is Cunners Finished?

Baygate revisited

8. Hawke’s Bay District Health Board—Confidence
[Uncorrected transcript—subject to correction and further editing.]
8. CRAIG FOSS (National—Tukituki) to the Minister of Health: Does he have confidence in the Hawke’s Bay District Health Board; if so, why?
Hon DAVID CUNLIFFE (Minister of Health) : Yes, I have confidence in that district health board, under the commissioner.
Craig Foss: Can the Minister confirm that documents released under the Official Information Act show that he advised officials in December 2007 that he wished to appoint Sir John Anderson as commissioner at the Hawke’s Bay District Health Board, which was months before he expressed no confidence in the previous board and issued his ultimatum to the board demanding that it justify its continued position?
Hon DAVID CUNLIFFE: No. All I can say is that my final decision was not made until the afternoon of 27 February. The member is referring to a factual misunderstanding concerning a mistake made by the Ministry of Health in the release of papers, some of which were incomplete. This will be explained in court proceedings, and I can comment no further on it.
Jill Pettis: What progress has the commissioner made since he was appointed?
Hon DAVID CUNLIFFE: A great deal. He has moved quickly to appoint three deputy commissioners, worked with management on a recovery plan, and maintained close liaison with clinicians. Reports are that this process is proceeding very well indeed.
Rt Hon Winston Peters: Can the Minister advise us whether it is a fact that Sir John Anderson has been a one-time guest speaker at a National Party caucus and an oft-times nominee of the National Party for various jobs, and that he is a totally appropriate person to be looking into the problems of this district health board—which those members all know?
Hon DAVID CUNLIFFE: I can confirm that I have never inquired of Sir John as to his personal political affiliations or previous political meetings, but I hear tell that he is not a member of the New Zealand Labour Party.

Craig Foss: Can the Minister confirm that documents released under the Official Information Act show that an email from the Ministry of Health dated 18 February 2008—9 days before he sacked the board—lists the appointments of Sir John Anderson as commissioner, and Brian Roche as deputy commissioner, to the Hawke’s Bay District Health Board?
Hon DAVID CUNLIFFE: I am aware of that suggestion, which is based on a factual misunderstanding, and once again I absolutely refute the inference that has been drawn. This matter is to be ruled on by the courts, and under Standing Order 111, as the member already knows, neither he nor I can comment further upon it.
Craig Foss: Does the Minister stand by his statement in this House on 21 February 2008 that “no decision has been made, in that I have given the board a week to justify its position.”, when documents released under the Official Information Act show that preparations for installing a commissioner demonstrate that the 1-week consultation was a facade and an abuse of natural justice?
Hon DAVID CUNLIFFE: Let me state again to the member that my decision was not made until the afternoon of 27 February.
Craig Foss: Can the Minister confirm that he ignored Crown Law’s recommendation against appointing a commissioner to the Hawke’s Bay District Health Board—in particular, Crown Law’s view that “It is Crown Law’s advice that the situation is not so severe—
Hon DAVID CUNLIFFE: I raise a point of order, Madam Speaker. As I have noted, under Standing Orders 111 and 112, members are prevented from answering questions that may bear upon matters of potential prejudice in relation to judicial proceedings and especially in relation to documents that are privileged.
Gerry Brownlee: These are documents that are in the public arena; they have been released under the Official Information Act. To say that they are somehow privileged is an utter nonsense, and the Minister should not try to hide behind the facade of what he would say is a “factual misunderstanding” in order to dodge answering questions.
Madam SPEAKER: I have been listening very carefully, because I am now aware that the matter is before the courts, as I understand it. The member’s questions so far, I think, have been within the Standing Orders, but we are at the edge of them. So if I may, I just ask him to restate his question. Thank you.
Craig Foss: Thank you, Madam Speaker; I will restate the question. Can the Minister confirm that he ignored Crown Law’s recommendation, as shown in documents released under the Official Information Act, against appointing a commissioner to the Hawke’s Bay District Health Board—in particular, Crown Law’s view that “It is Crown Law’s advice that the situation is not so severe that it displaces the principles of natural justice.”
Hon DAVID CUNLIFFE: No. I confirm that I took account of a range of advice, but did not make my decision until the afternoon of 27 February.
Chris Tremain: When will the Minister apologise to the people of Hawke’s Bay for his total lack of regard for natural justice in sacking our democratically elected district health board?
Hon DAVID CUNLIFFE: The matter to which the member refers is now a matter that is before the courts.
Craig Foss: I seek leave to table three documents. The first document I seek leave to table is the story in the Dominion Post in which the Minister comments on the sacking of the Hawke’s Bay District Health Board.
Madam SPEAKER: Leave is sought to table that document. Is there any objection? Yes, there is.

Craig Foss: I seek leave to table a second document, released under the Official Information Act. It is a Ministry of Health email dated 18 February, listing and naming the appointment—
Madam SPEAKER: Leave is sought to table that document. Is there any objection? Yes, there is.
Craig Foss: I seek leave to table a third document, a Ministry of Health document released under the Official Information Act and dated 19 February 2008, advising against sacking the Hawke’s Bay District Health Board—
Madam SPEAKER: Leave is sought to table that document. Is there any objection? Yes, there is.

Big Jump In Our New York Readership

We wonder why?

Is There A Lobbyist Under Every Bed?

The wonderful neo-Marxist site watchbogaotearoa sees a huge conspiracy involving the IFIs (international financial institutions), PECs (private equity corporations), a SB (strangled bureaucracy), the NZCID, Education Forum, US Coalition of Services Industries, The European Services Forum, the credit rating agencies, the international agreements (eg the GATS) and, horror of horror, the lobbyists, conspiring to encourage New Zealand to ............. (don't mention the word - privatise). Who will be able to sleep tonight?

We quote in particular the following paragraph

The Lobbyists
Not only do these vested interests make their own cases and bring pressures to bear, with the ultimate threat being to leave New Zealand and take their money with them, but they organise their own lobby groups which try to provide a façade of advocating in the public interest rather than the narrow commercial benefit which is all too obvious when a corporation advocates an asset sale or commercial contract. The lobby groups are both New Zealand specific and international.There are the well known business lobby groups such as the Business Roundtable, the local Chambers of Commerce, the American Chamber of Commerce, and Business New Zealand. The Business Roundtable is of course notorious for its advocacy of privatisation as the universal cure, but one group also worth noting is the Wellington Chamber of Commerce which has appointed Charles Finny, a former senior Trade Negotiator with the Ministry of Foreign Affairs and Trade (MFAT), as its Chief Executive Officer. Former MFAT trade officials have shown up in a variety of business lobby groups, including the Trade Liberalisation Network, the Asia New Zealand Foundation, the APEC (Asia Pacific Economic Cooperation) Business Advisory Council, and of course the National Party. Finny makes a practice of loudly applauding any new trade agreements but in particular urging the Government to go further in opening New Zealand to the services transnationals in those agreements. As we will see, this is an important part of cementing existing privatisations and expanding the effect of them.

Where is Trevor Louden when we need him???? He reckons most of those mentioned are involved in a completely different conspiracy. Isn't the Wellington Chamber of Commerce a communist front organisation??

Good night readers, sleep if you can....

WTO: Bold Call Says Australia

Simon Crean says that Lamy has made a bold call. We agree we need leadership if we are to make progress in this negotiation which is so critical to future prosperity for New Zealand.

It is good to see that Crean appears aware of risks. Interestingly he mentions services. There is a huge amount of work needed to get any progress on services in the next few weeks.

Australian Minister for Trade Simon Crean on Thursday welcomed a decision by the WTO to hold a meeting, calling it a bold call.
WTO Director General Pascal Lamy has suggested a meeting of WTO Trade Ministers be held in Geneva on July 21 with the aim of pushing the Doha negotiations to a successful conclusion.
"I have been urging this course of action for some time and in discussions again yesterday with Director General Lamy, conveyed to him my full support for this move," Crean said in a statement.
"This decision by Director General Lamy means we are now within reach of a breakthrough on the core of the Doha deal on agriculture, industrial goods and services," he said.
"Although this decision is not without risk, it represents strong leadership. The danger of inaction now is far greater than the risks of attempting to secure an outcome. If we don't secure a deal on these core areas of the Round now, the talks may drift for some time to come," he added.
Crean said Australia would continue to push for an outcome that helps Australian exporters gain better access to overseas markets in agriculture, industrial goods and services.

Today's Trans Tasman

Another interesting issue of Trans Tasman.

Is Helen Clark dreaming on the polls? One article suggests that support for National might be a bit fragile

There’s no great mood for change
in NZ. Voters are grizzly, with a
financial hangover from the debt binge
too many of our citizens
have engaged in over the past few
years. An appetite for major policy
changes is missing.

Yet another is suggesting a major problem for Labour in Auckland

Long-time National strategists say they have got to go back to 1975 to find a mood in the electorate so deeply disillusioned with the incumbent Govt, though the target of the disillusion seems to be Michael Cullen more than Helen Clark. Failure to deliver tax cuts for eight years is laid at Cullen’s door and National’s slogan every time the Govt announces a new initiative “they’re spending your money,” resonates with voters.

We know which view we believe.

TT also reports that Crawford Falconer, NZ's WTO Ambo, is in line for the vacant MFAT Dep Sec slot (but we still think that Crawford would be crazy to come back). It does make an error though. It says that Jane Coombs - who is about to be replaced by Richard Mann is to come back to Wellington. Wrong. We hear she is being cross posted to Washington. Maybe TT's New York based correspondent could give some of his mates in Washington a bell on this and confirm. This will give a real Korea expertise to the NZ Embassy in Washington. Both Ambassador and #2 will be former Ambassadors to Korea.

Finally TT also reports that Condi Rice will visit on 26 July. Will Winston get a look in it asks?

Castalia Slams Business Council For Sustainable Development Report

Castalia has peer reviewed Peter Neilson's study. It is not pretty reading. The full review should be on the GPC website www.greenhousepolicy.org.nz . We have just read a pdf that was sent through. Here is the summary


Catherine Beard, executive director of the Greenhouse Policy Coalition, representing the energy intensive sector on climate change issues, says an economic peer review of the NZ Business Council for Sustainable Development report, The economic opportunities arising from emissions trading: the major cost of delay, concludes it makes claims that are unsupported by evidence and based on a basic misunderstanding of the way economies work.

The Greenhouse Policy Coalition asked economic consultancy Castalia to peer review the report and assess its conclusions that:
- The immediate introduction of the emissions trading scheme would lead to economic benefits in the form of new investment, jobs and wages
- Delaying the introduction of the emissions trading scheme would delay the benefits and impose additional costs on the economy through loss of competitiveness, investment and reputation.

Alex Sundakov, Chief Executive of Castalia, says the claim that “creation” of jobs and investment in particular sectors and industries under the scheme equates to an economic overall “benefit” reflects a lack of basic economic literacy.

“Workers and capital will not magically appear following the introduction of an emissions trading scheme, rather some capital and employment will be reallocated to different areas as relative prices change.”

“If that capital and employment is reallocated to areas of lower economic return or if the policy encourages “new” investment by artificially shortening the economic life of existing assets, that must be wasteful on economic grounds”.

Alex Sundakov points out that, under the logic applied by the BCSD, a Government policy that required every homeowner to demolish and then rebuild their family home would create economic “benefits”. Replacement of destroyed property would require investment and employment. “But it’s fairly obvious such a policy doesn’t make economic sense. In a fully employed economy, resources would simply be sucked away from areas where they can be used far more efficiently and contribute more to building New Zealand’s wealth.”

“It’s the same story with the emissions trading scheme. Investment and jobs will be moved around. But basic economic logic and most of the rigorous analytical work undertaken to date, suggests that the NZETS would reduce the efficiency with which available resources are used, by undermining New Zealand’s productivity in areas where we have a competitive advantage.”

Alex Sundakov says the Business Council for Sustainable Development report is also off the mark in predicting that delays in the introduction of an emissions trading scheme would impose costs through lost investment confidence and international competitiveness.

“Rushed policy that is flawed creates more investment uncertainty than a slightly delayed, but better thought-through emissions trading scheme. If there are business opportunities to be had in an increasingly carbon-conscious world, businesses do not need to wait for an emissions trading scheme to take the initiative and “green” their products and services.”

Alex Sundakov says the Business Council for Sustainable Development’s criticism of the conclusions of the NZIER economic analysis are unsupported by evidence or analysis, and reflect a clear misunderstanding of the analytical technique.

Catherine Beard concluded that an emissions trading scheme can work, as long as we take the time to get the policy right and ensure we design a scheme that keeps our efficient industries competitive in the transition to a global price on carbon.

Has Anyone Seen The Advertisement For The Next MFAT CEO?

Feedback from you readers please. Have we missed something? The reason we ask is that the MFAT rumour mill is suggesting that a decision has been made. All very strange, but as we have reported in the past our expectation is that Labour will be wanting to rush a decision through and not wait until after the election. The SSC decision was through at a record pace. MfE went through fast also. Everyone is saying that Wayne Donnelly is going to be the new Secretary of Transport. Geoff Dangerfield is due to head the new transport authority - but the legislation has not been passed so the agency doesn't exist yet.

We have no issue with the people involved here (indeed the name being mentioned around MFAT is a good person also - we like her a lot and thought she should have been given the job last time around). But there is a constitutional issue here. We don't think decisions should be made so close to an election without full involvement of the opposition, and we don't think decisions should be made about jobs that become available after the election, this side of the election. We would love reader feedback on this also.

How Public Sector Management Has Slipped Under Labour

Bernard Hickey has posted this item on public service financial management. It is a very concerning read. We just copy the para on Treasury as it supports comments we have made recently on this critical agency

Treasury are a shadow of their former selves - a joke in fact. I can understand why the brightest have left and they now offer no more than process guidance rather than rigorous oversight into departmental spending. Incredibly, I know of a dept who put in a bid for more than NZ$100 million whose only discernible benefit was for more transactions to be processed in NZ rather than offshore, but did not actually plan to reduce offshore spend. Treasury were not impressed but let the bid proceed to Cabinet. Treasury also urged us to find a catchy project name - apparently it’s helpful in the compressed timeframes and limited knowledge of Cabinet. God help us.

Chris Trotter: Why Labour Has Lost The War

Chris Trotter writes today in The Independent Financial Review (page 25) that Michael Cullen is fighting a battle he cannot win. Trotter lays blame on Helen Clark and Heather Simpson (H1 and H2 - H3 is now running as the Labour candidate for Wellington Central and seems to have jumped off the ship just in time to avoid Trotter's criticism) for miscalculations over the misuse of Parliamentary Service funds and the Electoral Finance Act, Steve Maharey is blamed for the anti-smacking stance , and Cullen takes the blame for failing to improve productivity, and failure to properly fund state broadcasting. Trotter's world view is very different from ours and we would not agree in any way to his suggested policy prescription on productivity, but we do agree that performance has been very bad under this Government. The broadcasting issue really comes out of left field. According to Trotter

"No social-democratic government can survive for very long without at least one branch of the news media in the hands of someone other than private sector capitalists"

Divisions Within Labour On Transmission Gully?

Annette King is working her guts out trying to force through progress on Transmission Gully and other roading projects in the Wellington region. But has Grant Roberston just kicked her in the guts with this less than fulsome support for this project (at a minimum he seems to be sitting on the fence)? Does this indicate that Grant is worrying about his chances of winning and is he seeing the need to fight in Green territory? Interesting.....Darren Hughes won't be that pleased to be reading this.

WTO : Ministerial Meeting Set

Pascal Lamy has upped the stakes and has called a Ministerial meeting for 21 July. There are still huge differences but Lamy is seeking to up the stakes and try and force an acceleration of the work on outstanding differences so that texts are in a state for Ministers to consider. We wish Lamy good luck, but we are still worried about the gaps that exist between many of the key players on so many issues. And after 1 July we have the French in the EU Presidency.

This report is from the IHT......

More Bad News For Government

Regular readers of the Roy Morgan poll results will have noted the correlation between support for Government and consumer confidence. The drop in consumer confidence (as measured by Westpac and McDermott Miller ) to a 17 year low is therefore not going to be seen as positive on the 9th floor.

New Zealand Too Vulnerable In Global War For Talent

One reason why we are so keen to have policies introduced in New Zealand that encourage growth, and productivity growth in particular, is our concern at New Zealand's relatively low wage rates. we have to get our rates much higher if we are going to keep our indigenous talent here, and attract the best people from around the world. Only a greatly improved productivity growth performance will allow us to have greatly improved wage levels. Unfortunately, the policies of the last few years have seen a poor productivity performance in New Zealand relative to others in the OECD. Our OECD per capita wealth ranking is almost identical to our productivity growth ranking - surprise surprise.

The second half of Brian Fallow's opinion piece this morning should send a shiver of fear through policy makers in Wellington and cause a renewed focus on productivity growth.

And in that respect there is a large time bomb ticking very loudly.
New Zealand is not the only country staring down the barrel of declining growth in the labour force when the baby boomers start retiring and have to be replaced from the significantly thinner ranks of Generation Y.
A scary presentation by Bernard Salt from KPMG in Australia at the Australia New Zealand Leadership Forum two weeks ago showed that early in the next decade growth in the labour force is about to lurch lower in both Australia and the United States.
Both countries are a whole lot richer than we are and better placed to compete for immigrants (including Kiwis) in an era of labour mobility.
That may be particularly true for those drawn from the footloose Generation Y for whom instant gratification takes too long. If the baby boom generation had invented the teenager, Salt said, generation Y had extended adolescence until the late 20s.

Ex-Expats Drive Up House Prices, Not Immigrants

Brian Fallow covers several important issues in his opinion piece in the NZ Herald today. We will cover tow of his themes. The first is the assumption that high immigration inflows are responsible for house price inflation.

Brian reviews work done by Steven Stillman and David Mare of the excellent Wellington think tank Motu, on this issue. The conclusion is an interesting one

"Our overall results raise doubts about whether the strong positive correlation that exists between immigration and house price appreciation over the time at the national level is in fact causal," they conclude.
Instead it may be that there are other factors which raise both immigration and house prices.
In other words immigrants are more likely to come to New Zealand when the country is doing well and house prices are on the rise.

They reach another interesting conclusion

"On the other hand, there is a strong positive relationship between inflows of New Zealanders previously living abroad into an area and the appreciation of local housing prices, with a 1 per cent increase in population arising from higher inflows of returning Kiwis associated with a 6 to 9 per cent increase in house prices."
This theme - that it is not immigrants driving up house prices, if anything it is returning expatriates - holds good when they tighten the focus to individual neighbourhoods and control for other factors which make one neighbourhood more or less attractive than another.

Industry Speaks On The ETS

Dear Political Leaders and Members of Parliament

The undersigned are writing to you to express on behalf of our collective memberships, and in the national interest, our strong concern at the process underway to introduce an emissions trading scheme via the Climate Change (Emissions Trading and Renewable Preference) Bill. We request the opportunity to provide further written submissions on the vast number of changes proposed in its latest iteration.

The Bill, as reported back from the Select Committee, has not taken heed of the serious concerns raised by those in the productive sectors of the economy, the sectors that generate the export receipts and employment in New Zealand.

In what is one of the most far reaching economic reforms New Zealand has ever attempted, many submitters to the Select Committee were given only 10-15 minutes to present on their concerns, while the Select Committee considered over 60 reports in 12 hours, and had three days to consider over 1000 amendments to the Bill. The Departmental Report on the Bill is longer than the Bill itself. This is a very rushed process for a matter of such great economic significance to New Zealand.

The complexity inherent in the introduction of an emissions trading scheme is immense, even more so when it is the most comprehensive scheme in the world. A scheme including all sectors and all gases is something that no other government in the world has yet attempted, and there is no precedent to follow. A comparison of the only other mandatory emissions trading scheme, the European Union ETS, shows that the New Zealand scheme (because it is much more comprehensive and there are proportionally less free allocations) is five times more expensive than the EU scheme on a per unit basis and 10 times more expensive on a population basis (see attached appendix).

A combination of the emissions trading scheme and the heavy restrictions on new thermal electricity generation are expected to increase the price of electricity by up to 40%. The costs of the scheme will be ultimately borne by households as business will reflect the cost in their prices or be forced to down-size or relocate.

All the economic analysis undertaken[1] indicates the impact on the economy, on jobs and wages will be severe, particularly if other countries choose not to follow New Zealand’s ambitious lead.

As it is drafted, the effect of the Bill will be the loss of industry and agricultural production to other parts of the world where they do not face a cost on carbon, because the Bill fails to adequately address the loss of international competitiveness of our productive sectors.

There will be a transfer of wealth to developing countries as industry and agriculture are forced to buy units from international brokers to cover their emissions, and investment in New Zealand will become less competitive once an additional cost of carbon is factored in.

The reported back Bill fails to provide any safety valve to protect against a high and volatile price of carbon, in an international carbon market that lacks liquidity and where the price of carbon reflects political decisions made in Europe, rather than the least cost emissions abatement.

New Zealand business and agriculture are supportive of the need to take action to contribute to the global effort to address climate change and are prepared to take action. Indeed, many large industrials in New Zealand have already reduced their emissions below 1990 levels. We would be supportive of an emissions trading scheme that puts a marginal price on greenhouse gas emissions and would send a price signal to incentivise on-going improvements in emissions intensity.

If the Bill is passed in its current form, economic analysis shows the result will be increasing global emissions as our productive capacity progressively exits New Zealand, a wealth transfer from New Zealand to developing countries through the purchase of units on international carbon markets, fewer jobs, lower wages, higher electricity, fuel and food bills.
There is too much of importance in the Bill being left to regulation, which is constitutionally bad practice and likely to result in poor policy outcomes. We believe policy of this magnitude should have the scrutiny of the whole of Parliament. In addition, the administration of the scheme is to be put in the hands of Ministers and Officials. We believe a better approach would be an independent regulator, such as mooted for Australia.

We urge all political parties to act in the best interest of New Zealand Inc and take the time to get this complex matter right and we respectfully request that stakeholders now be invited to make written submissions on the reported back Bill.

[1] Castalia, Infometrics, NZIER, Motu, CAENZ

Yours sincerely

Mike Petersen, Meat and Wool NZ Chairman
Tim Richie, Chief Executive, Meat Industry Association
Owen Symmans, Chief Executive, Seafood Industry Association
Phil O'Reilly, CEO, Business New Zealand
John Pfahlert, Executive Officer, Petroleum Exploration and Production Association
Peter Bodeker, CEO, Wood Processors Association
Charles Finny, Director, New Zealand Chambers of Commerce
Doug Gordon, CEO, New Zealand Minerals Industry Association
Roger Kerr, Director, New Zealand Business Roundtable
Catherine Beard, Executive Director, Greenhouse Policy Coalition
Frank Brenmuhl, Board Member, Federated Farmers
Tony Friedlander, CEO, Road Transport Forum
Ralph Matthes, Executive Director, Major Electricity Users Group