For samplers of our subscription email, here's the daily email we put out earlier today. It includes detail on how insurers and banks might respond to rising sea levels and a look behind the record high number of new gas guzzlers and old used cars that were imported last year.
1. When will insurers and banks retreat?
Newsroom's Environment and Science Editor Eloise Gibson is pushing forward with her series of in-depth articles on the effects of climate change on sea levels and New Zealand's often low-lying coastal communities.
The flooding seen around the Firth of Thames in the first week of January reinforced the growing concerns about how home owners, councils, insurers, banks and ultimately the Government will react to the long-term risks -- and who might pay if they don't get ahead of the curve.
It's a moving feast, particularly with the change of Government. Eloise has already reported on the delays before the election in getting advice from the Ministry for the Environment out to Councils, and how developments in the Coromandel had been consented in the interim despite potential risks.
Now Eloise has taken a look at the key issue of when insurers and banks will make the issue of where to build and buy a moot point by refusing to reinsure (an annual process) or to lend when a property turns over. They will effectively make the tough decisions that central and local Governments are shying away from in an environment where property values dominate the political and economic conversations.
She reports that researcher Belinda Storey is working with a team at Victoria University in Wellington to piece together equations based on what is known of our coasts and the insurance industry, and the likelihood and severity of flooding.
Over the next 18 months, Storey will use coastal elevation maps and storm-surge data from NIWA to try to work out when insurers might retreat from an area. The results could prove explosive (or more likely implosive) for property values in those areas.
Storey is one of several Deep South-funded researchers who are looking for answers to urgent questions, such as who’ll sue whom to try to recover the rising cost of property damage, and who’ll probably win. A project on the legal implications of rising seas is in its very early stages, but another project, looking at the ethical issues of sea level costs, is already underway.
See Eloise's full article here on Newsroom. It is a must read for planners, councillors, Government ministers, insurers, bankers and home owners.
She reports from Liz Ellis at the University of Otago that moral hazards abound as owners and developers often assume that central or local Government will always compensate or help out in the event of an emergency.
“If you’re not sure what your role is versus the Government’s, you have a perverse incentive to hope – and when I say hope, I mean externalise your cost onto the general ratepayer and taxpayer," Ellis said.
"We shouldn’t be surprised if people are accelerating their coastal development plans, even if they have an inchoate intuition that it might be a bad idea," she said.
One thing Ellis will consider is whether people building new coastal homes today, knowing the sea level risk, should, in fairness, be treated differently from people who’ve lived near the water for ages.
Again, I highly recommend a click through to Eloise's full article.
2. Swallowing a nuclear rat
Victoria University Strategic Studies Professor Robert Ayson has written his analysis of the North Korean situation from a New Zealand point of view as Foreign Affairs Minister Winston Peters flies up to Vancouver for a meeting of foreign ministers to discuss the issue.
He suggests New Zealand may have to quietly park its desire for full nuclear disarmament and swallow the dead rat of allowing a North Korean nuclear freeze supported by the idea that mutually assured destruction and deterrence might be acceptable to America.
None of the options look attractive, as Ayson points out here at Newsroom.
3. Craft beer dozens?
Newsroom's National Affairs Editor Shane Cowlishaw quietly co-hosts a beer podcast on the side called The Beerhive and has a healthy interest in our beer industry.
Appropriately for a hot summer, he's has spoken to the key players in the beer industry to see whether the craft brewing boom is about to extend to the final frontier in the supermarkets of the 'kiwi dozen'.
Shane's analysis on Newsroom is a great read for those trying to understand what's happening with consumer spending habits and inflation.
The price of a pint in a pub has risen 50 percent since 2007 because of the rise of higher alcohol and more expensive craft beers. But the price of a dozen beers has only risen 11 percent in that time, which is less than the 19 percent rise in the Consumer Price Index over that time.
The big question is whether the craft brewers can develop the scale to profitably produce cheaper dozens for the supermarkets that also means they can profitably sell their half dozens and pints in the pubs. Some deflation seems in order across the board.
4. Big gas guzzlers and even older used cars
Business owners may be pessimistic about the wider economy and consumer confidence dipped towards the end of last year, but that caution was not evident in new and used vehicle sales last year, which boomed right through the year.
The Motor Industry Association reported last week that new vehicle registrations hit a record high 160,124 last year. This was the fourth consecutive year of record high new car sales, driven in part by the high New Zealand dollar and also by low prices because of surplus production in Europe and Japan.
The final figures for used car imports, which are usually around the same levels, have yet to be reported, but will be in Statistics New Zealand's vehicle registration figures for December due on Friday. There were 151,552 used car imports in the 11 months to November with the potential to rise over 166,000 for the full year given 11 percent growth in the first 11 months from a year ago.
Combined imports of vehicles of almost 890 cars a day hit New Zealand's roads last year (which means at least 300 a day in Auckland), which poses both infrastructure and climate change issues for the new Government. It's a particular worry given some new and used cars being imported now will still be on the roads in 2050, and they are heavy vehicles with large engines.
The top 10 new vehicles sold in calendar 2017 were in this order: Ford Ranger, Toyota Hilux, Toyota Corolla, Toyota RAV 4, Holden Colorado, Mitsubishi Triton, Kia Sportage, Mazda CX5, Nissan Navara and Toyota Hiace.
The skew towards double cab utes, SUVs and rental vehicles reinforce that the strongest areas of growth in the economy are in construction and tourism, but they also suggest any Government trying to reach carbon neutrality by 2050 has a big job on their hands, given New Zealand's car fleet is not rolling over fast and is likely to still be remarkably old in 2050 at the current import rates and practices.
Transport Ministry figures show there were 3,645 electric vehicles registered in calendar 2017, which lifted the fleet size to 6,162. But there were almost three times as many Ford Rangers imported in 2017 and the total vehicle fleet size is approaching four million.
The rise in the share of imports of SUVs and double cab utes has both increased the average weight of newly registered vehicles and has stopped a long-running decline in average CO2 emissions per kilometre, as these Ministry of Transport charts below show.
The strong growth in used imports from Japan and of increasingly older used imports has offset the benefits for the age of the fleet from a sharp rise of new imports.
5. Private passions: The drummer boy
Newsroom's Sam Sachdeva has been doing a series of videos with our own Paul Enticott on the private passions of politicians.
The first one was of Anne Tolley's sewing hobby.
The next one is on Simon Bridges love of his drum kit. Here's the full video.
6. Briefly in the political economy...
Still spending - The closely watched slump in wider business confidence and the uncertainty around the change of Government didn't hurt spending in the shops much towards the end of last year. Statistics New Zealand reported yesterday that retail spending with credit and debt cards rose 0.5 percent in December from November and was up 1.3 percent in the December quarter. This followed a 0.2 percent fall in the September quarter. Higher fuel spending because of higher prices was responsible for the rise in December, with core spending down 0.2 percent in the month in seasonally adjusted terms. Both were in line with expectations.
Lighter traffic - Another useful early indicator of economic activity is ANZ's Truckometer series, which measures light and heavy traffic movements. Light traffic tends to be a leading indicator, while heavy traffic tends to be concurrent with GDP. ANZ reported this morning that both light and heavy traffic measures fell in December, although earlier strength suggested GDP growth momentum had continued into the December and March quarters. The heavy index fell by 4.2 percent in December, while the light index fell 1.7 percent. This fall in light traffic may suggest softness later in 2018.
“Despite the December fall, the indexes are providing a positive signal for GDP growth in Q4, due to earlier strength. However, the Light Traffic Index is giving a mildly softer signal for growth in mid-2018, with the three-month average level of the index dipping a smidgen for the first time since late 2014," ANZ's Sharon Zollner wrote.
“Political uncertainty, a cooling housing market, tighter credit availability and transitioning growth drivers could cause a growth hiccup in the near term. However, the still-strong upward trend in the Light Traffic index (despite the small dip) suggests this economy still has plenty of momentum,” she said.
Bouncing - Prices rose around five percent in last night's fortnightly GlobalDairyTrade auction, with whole milk powder prices (which are used to set Fonterra's payout level) rising 5.1 percent. This was the second consecutive rise this year and follows Fonterra's announcement yesterday that it expected production to be down three percent this year because of dry conditions. Production in December was down six percent on December 2016.
Power switches - The Electricity Authority reported a record high 440,000 customers switched electricity providers in calendar 2017, up more than five percent from two years earlier.
7. Coming up...
Cabinet is due to meet for the first time in 2018 next Tuesday. It will be followed by an afternoon news conference in the Beehive Theatrette.
Parliament resumes on January 30 for one week before the Waitangi Weekend break.
8. Two fun things
So it turned out the Hawaii false alarm wasn't caused by someone 'pushing the wrong button', as first explained by Hawaii's Governor. It was actually a new shift worker scrolling down a menu drop-down that had a range of "missile alerts" to choose from, none of which were blindingly clear for newbies.
Designers of failsafe systems will be slapping their foreheads all over the world at the actual drop-down menu below. (Washington Post)
Do you really, really want to push that button...
Have a great day
By the way, it appears as if Wellington will have its fourth perfect day of sunny, warm and calm weather in a row. I've been swimming every afternoon for the last three days at Island Bay and am hoping for a record-breaking fourth today.
This is one part of climate change I quite like (although as a former farm boy I do feel for the farmers out there dealing with drought).