In this email we look at how today's Budget will be dominated by the need to respond to the pressures on housing, public services and transport caused by a surging population.
1. Population pressures
Today's Budget will be dominated by the Government's response to a surprise eight percent rise in the population over the last four years and the resulting pressures on housing, schools, hospitals and transport networks.
Stories are now regularly bubbling up from the education, health, social welfare and justice systems about shortages, delays and over-crowding because of the population shock in tandem with nearly five years of spending restraint after the 'zero' Budgets of 2011 and 2012, when no new operating spending was allowed.
Efficiency gains were used to pay for most of the extra costs of inflation and population growth in those 2011 to 2013 years, which meant there was little fat in the system between 2013 and 2017 when an extra 350,000 people turned up at the borders, schools and hospitals because of record high net migration and natural population growth.
That was evident in the latest attack by Labour on the issue of overcrowding in Auckland.
Newsroom's Sam Sachdeva takes a close look at the documents uncovered by Labour from Ministry of Education’s Auckland Schooling Network Annual Plan. They cite “unprecedented and sustained population growth” in New Zealand’s largest city that is putting pressure on schools as they try to house increasing numbers of students.
It says 40 Auckland schools are currently over maximum capacity and 130 are over 85 per cent capacity - most with rolls that are continuing to grow.
Education Minister Nikki Kaye sought to downplay the report, saying the information was in many cases out of date or wrong.
But this is a theme voters will hear repeatedly time and again before the election: the Government got caught out with an unexpected population surge and is now playing catch up with infrastructure and operational spending after years of restraint.
2. Data privacy pressures
Along with the detail of some sort of family incomes package, the Budget's other theme will be the Government's long-touted Social Investment Approach.
It is Bill English's big idea to make compassionate conservatism work to shrink the size of Government and break cycles of dependency and social deprivation by targeting spending through non-government organisations at specific groups and people.
It's a beguiling vision, particularly when allied to lots of talk about using big data to sharpen the blunt instruments of Government spending. English has made it his theme song in speeches and Q&A sessions for years and it has resonated with many.
But so far the idea has stuttered because the NGOs have either lacked the resources to get involved (ie the failure of the Salvation Army and others to buy in to state house transfers) or have balked at requests for personalised data because of a lack of trust.
MSD's bungling of an early attempt to collect data further undermined that trust and has put a spanner in the works of the social investment approach. See more from Newsroom's National Affairs Editor Shane Cowlishaw on how MSD used shared spreadsheets and accidentally gave access to personalised data to all the data providers.
Yesterday the Government bowed to the inevitable and announced it would continue funding NGOs without the requirement that they hand over personalised data while it reviewed its data collection. English also handed over responsibility for building a more robust set of rules around data collection to his newly minted Social Investment Minister Amy Adams. She is turning into something of a 'fix it' minister for English on the social investment approach, having also taken on Housing NZ and Social Housing.
Here's Shane's piece from yesterday on the big data backdown, including comments from Privacy Commissioner John Edwards about the need for proper consultation and not to rush things. See more below on that in Quotes of the day.
3. People in the news...
The big news around Parliament yesterday was Martin Matthews' decision to stand down as Auditor General after Opposition parties demanded it in the wake of revelations about the actions of Joanne Harrison, who committed fraud at the Ministry of Transport when Matthews was leading it.
News this week that staff who blew the whistle on Harrison were restructured out of the Ministry under Matthews' leadership and apparently at Harrison's direction was the final straw.
Matthews said in a statement issued yesterday afternoon he would stand down while an independent review of his suitability for the Parliament-appointed role was carried out. The former head of the Department of Prime Minister and Cabinet, Sir Maarten Wevers, will carry out the review.
The whole issue has turned into a mess for the MOT. Yesterday State Services Commissioner Peter Hughes announced the Commission had formally taken over the investigation into the treatment of whistleblowers from the Ministry.
Elsewhere, The Opportunities Party announced three new candidates for electorates and its list to go with its Leader Gareth Morgan and Deputy Leader Geoff Simmons. They are public servant Jessica Hammond Doube, who will stand in Ohariu, Tourism Export Council CEO Lesley Immink, who will stand for East Coast and lecturer Jennie Condie, who will be TOP's tax spokesperson and a list candidate.
And for a great profile of the new US Ambassador to New Zealand, America's sexiest man Scott Brown, check out this piece on Newsroom Pro yesterday from our Foreign Affairs and Trade Editor Sam Sachdeva.
4. Quotes of the day...
Privacy Commissioner John Edwards on the Government's initial botched attempts to collect the personalised data needed to make the social investment approach work:
“I think it kind of shows what can happen when you rush things and cut corners. With these kinds of things you’ve got to get buy-in and what we saw when we reviewed the process was the Ministry told these non-government organisations, and they had what they characterised as consultation, but that just involved going and telling them again that was going to happen so there wasn’t two-way engagement.”
ACT Leader and Epsom MP David Seymour on the party receiving a donation of $35,000 from chess Grandmaster Murray Chandler:
"I know a white knight when I see one."
Labour Health Spokesman David Clark on this RNZ report that a South Auckland man sat in a Middlemore A&E waiting room for nine hours with a deep gash in his face:
"After nine years the Government should admit that the hole in Health funding is hurting our front line medical care."
5. Numbers of the day...
$578 million - The trade surplus posted by New Zealand in the month of April. Statistics New Zealand reported it was the largest monthly surplus since 2015. Values of milk product, log and wine exports rose at double digit rates. The result was around double what economists had expected.
$6.50/kg - Fonterra's first forecast for the milk price for the 2017/18 season. It also increased its latest forecast for 2016/17 season by 15c to $6.15/kg. Farmers with shares in Fonterra will also get dividends of 40c per share, giving a payout for fully shared-up farmers of $6.55/kg, which is well above the costs of production (around $5.20/kg) for the first time in three years.
$400,000 - The amount donated so far this year to The Opportunities Party by Gareth Morgan.
$206,200 - The amount donated so far this year to the ACT Party by Alan and Jenny Gibbs.
$115,000 - The amount donated to the Labour ($50,000) and the Green ($65,000) parties by Phillip and Jackie Mills so far this year.
$50,000 - The amount donated by Oravida founder Stone Shi to the National Party so far this year.
The full list of donations to political parties are disclosed through the Electoral Commission here.
6. While you were sleeping
One economic hotspot for New Zealanders to watch is China's precarious internal corporate debt and shadow banking situation.
Last night Moody's downgraded China's sovereign credit rating for the first time since 1989, citing escalating domestic debt. China's debt rose to 260 percent of GDP last year from 160 percent in 2008. Here's Bloomberg's report on the downgrade.
7. Coming up...
Today will all be about the Budget, which is to be released at 2pm.
Newsroom's Wellington team, including myself, Lynn Grieveson, Shane Cowlishaw and Sam Sachdeva, will all be in the Treasury lockup and we will send Newsroom Pro subscribers an email with comprehensive coverage and insight shortly after 2pm.
We will include reaction and more analysis in tomorrow morning's email. Keep an eye on the Newsroom Pro website too for more.
8. Two fun things
A rather dense hearing of the Law and Order Select Committee was interrupted by a few chuckles following an appearance by representatives of the pawn broker industry yesterday.
The committee were considering the Anti-Money Laundering and Countering Financing of Terrorism Amendment Bill, aimed at cracking down on the flow of illegal funds.
Solicitor Rae Nield, acting for the New Zealand Licensed Traders’ Association, began with a caveat before launching into the industry’s concerns about the Bill.
“Today we’re here mostly to talk about pawn, and I have to say I like pawn very much, as long as it’s spelt with a W.”
Humour aside, you can read about potential issues raised by the Privacy Commissioner about the Bill here from our National Affairs Editor Shane Cowlishaw.
Donald Trump is now the butt of most late night comedians' jokes, but The Tonight Show's Jimmy Fallon has held back from criticising Trump, until this week, after the New York Times reported his ratings were falling because of his neutral stance.
This week he highlighted the remarkable similarities between a Trump commencement address last week and one from Reese Witherspoon in her 2001 movie Legally Blonde. Here's IndieWire's report with the video.