1. Ticking off the to-do list
With just 10 days to go, the new Government is nearing the end of its first 100 days in office and has only a couple of items left to tick off on its 100 day plan.
Prime Minister Jacinda Ardern and Health Minister David Clark ticked off one of the biggest ones yesterday with the announcement of The Inquiry into Mental Health and Addiction.
Grassroots campaigns successfully made the failure of the health system to cope with a surge in demand for mental health services an election issue, demanding a full independent inquiry. They included Actionstation's Peoples Mental Health Report.
Labour, the Greens and New Zealand First all supported the calls for an inquiry and agreed to create one in their coalition and support deals, while the then Government argued it was aware of the issues and no inquiry was needed. Now-Opposition Leader Bill English repeated that view yesterday, saying the problems could be collated and documented in a week.
The inquiry, costing $6.5 million, will be chaired by former Mental Health Commissioner Ron Paterson and is due to report back by the end of October. Clark said he recommended a Government Inquiry rather than a Royal Commission to ensure an earlier completion of an inquiry with recommendations for reform. Clark expects the re-creation of the Mental Health Commission (its role was subsumed into the Health and Disability Commission in 2012) as one of the inquiry's recommendations.
Why it matters: Growing public disquiet about the failure of the Government to address the issue more substantially was one of the key issues in the election campaign, along with housing and water. Ardern's address to the families of suicide victims on the steps of Parliament was one of the most powerful moments of the campaign. She broke down in tears as she described the effects of the suicide of her best friend's brother when she was 13.
The inquiry also reinforces the Government's momentum in a largely positive first three months in power. The two remaining major items in the 100 day plan are around employment law changes "to introduce fairness in the workplace" (due to be announced on Thursday) and the creation of a child poverty reduction target. Both will be announced before the February 3 end of the 100 days. Next Wednesday, Ardern is scheduled to give a speech in Christchurch outlining the 'what next' for the Government.
See Sam Sachdeva's full report on the announcement of the inquiry and reaction to it here on Newsroom Pro, where it was first published yesterday.
2. Hardly a winter of discontent
The one fly in the ointment for the Government is the risk around the slump in business confidence on the wider economy seen in the last six months of 2017, and whether 'fear itself' will be enough to tip the economy into a slowdown.
Some have warned the late 2017 slump in confidence is an echo of the 'winter of discontent' seen in the first year of the 1999 to 2008 Labour Government. Back then, angry business leaders staged an investment strike in reaction to employment law reforms introduced early in the Government's to change the Employment Contracts Act, among other things. Eventually, a truce of sorts was called, but only after a bitter debate that muddied the wider political view of the Clark-led Government.
Ardern was asked on Monday if she had ruled out more substantial early employment law reforms to reassure business leaders and avoid a similar 'winter of discontent' in 2018.
But it's worth challenging that narrative. Confidence about the wider business economy has fallen sharply, but the better predictor of GDP growth is 'own activity' confidence by business leaders in their own businesses. That has fallen, but much less sharply.
Independent economist Rodney Dickens has done some analysis of the correlation between wider confidence and 'own activity' and GDP over the years. He found the ANZ survey measure of wider confidence had only a 20 percent correlation with GDP growth since 2002, down from 70 percent before 2002. Meanwhile the 'own activity' correlation had risen from 70 percent before 2002 to 80 percent since. The NZIER's 'own activity' measure has an even better correlation with GDP and suggests just a slight slowdown.
Dickens published two charts of the NZIER series for wider confidence and 'own activity', which shows the gap that opened up between wider confidence and GDP from 2000 to 2009.
There are also differences in the personalities involved and sheer proximity to the ructions of the late 1980s and early 1990s when the sharp swing towards deregulation, labour law changes and state sector reform polarised views.
Helen Clark and Michael Cullen were products of the bitter fight within Labour in the late 1980s against the Roger Douglas-led reforms, while business leaders in 2000 saw the deregulation project as the best and only path, and incomplete.
Now a new generation of political and business leaders have softened both sets of views, partly because of the Global Financial Crisis, and partly because of the moderating nature of MMP.
That was evident in the reaction gathered yesterday by Newsroom's Shane Cowlishaw to the employment law changes likely to be announced on Thursday.
Their reaction was cautious and open, rather than openly hostile and angry, which was the reaction to the first set of changes proposed by the Clark-Cullen Government of 1999-2008.
The economy is also in a different space relative to 1999 and 2000. New Zealand had just been through a near-recession in 1998 because of the Asian financial crisis and growth did slow marginally in 2000. It soon rebounded to over four percent and stayed near three percent until 2007.
Currently, the global and local economy has been growing solidly for several years and financial markets remain buoyant for now.
See Shane's full report here on the employment law changes on Newsroom Pro, where it was first published yesterday.
3. CPTPP on track for March 8
Officials from the remaining 11 countries in the renewed and renamed Comprehensive and Progressive Trans Pacific Partnership agreed their remaining differences in Tokyo overnight after two days of talks.
The agreement clears the way for the American-free CPTPP to be signed in Chile on March 8, NHK reported.
The likely signing of the deal reinforces the pressure on the Government to get its foreign buyers' bill changes through Parliament before the CPTPP is signed. Submissions have just closed for a truncated select committee process.
It also puts the spotlight back on whether the Government can mollify Singapore enough to rewrite New Zealand's free trade deal with the South East Asian trading powerhouse. In its current form, this deal would be invalidated by the foreign buyers' ban.
By the way, here's a useful MFAT briefing note explaining the differences between the TPP and the CPTPP.
4. Briefly in our political economy...
Regional blow - Japan's Juken announced proposals yesterday to cut around half of its 200 staff at its Matawhero plywood and laminated timber plant near Gisborne. Just at a time when the Government wants to ramp up house building with timber products, the mill said there was not enough demand in Japan to justify its current production levels. Ardern was asked if the Government would get involved, but said the plant was set up for a specific product for the Japanese market.
New headwinds - The New Zealand dollar hit a four-month high of 73.6 USc early this morning after Donald Trump announced a 30 percent tariff on solar panel imports and a 50 percent tariff on imported washing machines. The currency's rise further reduces any imported inflation pressures and is another headache for exporters who had hoped for the currency would remain below 70 USc. However, it is great news for the more electorally voluminous number of consumers and importers, who will find imported consumer goods and overseas holidays cheaper.
5. Briefly in the global political economy...
America First. Rest of World last - Donald Trump announced his first major protectionist moves on trade overnight, slapping a 30 percent tariff on all solar panel imports and a 50 percent tariff on washing machine imports. The move will hit China and South Korea hardest, but will also affect Canada and Mexico, where many factories have been set up. (New York Times).
US instability - Speculation is growing that Donald Trump is preparing to push out his Chief of Staff John Kelly after a deterioration in their relationship. Kelly told Fox News last week that Trump's views on the Wall were not fully formed before the election and had evolved. Trump fired back on Twitter that his views had not 'evolved'. Vanity Fair reported Ivanka Trump was quietly sounding out a replacement. Meanwhile, Axios reported FBI Director Christopher Wray had threatened to resign after Trump and his Attorney General Jeff Sessions had tried to force Wray to fire an FBI Deputy Director, Andrew McCabe, that they didn't like.
6. Coming up...
Donald Trump's speech at Davos will be closely watched, but there is a New Zealand presence there too. Trade and Environment Minister David Parker is travelling there and has written a blog post for the World Economic Forum on how Governments could spend US$400 billion that they currently spend on subsidies for oil and gas.
The Prime Minister and other political leaders gather at Ratana today for annual celebrations. Newsroom's Sam Sachdeva is attending.
7. One fun thing...
We're all having some fun at the look and feel of the Bitcoin bubble and how many unusual things can try to tie themselves to the blockchain enthusiasm.
This one cited by Omar on Twitter took our fancy: Humans of late capitalism and their cryptocurrencies #bitcoin #BananaCoin
8. This morning's political links
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