The 8 things that mattered this week
Newsroom has a motto of sorts that guides our judgment on what stories to focus on. We look for 'the things that matter.' It helps us avoid diving into trivia and irrelevancies and allows us to focus on bigger issues that others may not be covering or that are being swamped in the latest wave of clickbait on celebrities, crime and 'breaking news' that isn't breaking or news.
That means we'll often 'kick into space' and focus on things that are not at the top of other news pages and bulletins, including areas like public health, food safety, harassment in the workplace, our relations with China, Auckland's housing and transport crises, the future of work, climate change and our constitutional arrangements.
So I thought I'd try something a bit different for the Friday email. These are the 8 Things I think that mattered in the political economy in the last week. I welcome your thoughts. Worth doing weekly?
1. Block offers blocked?
Prime Minister Jacinda Ardern accepted a Greenpeace petition on the steps of Parliament on Monday that called for the complete cessation of oil and gas exploration. But she said the Government was only looking at whether to continue its offers of new exploration areas known as block offers. She said reneging on existing agreements for previous block offers and stopping all drilling would cost billions in penalties and lost royalties. The industry has estimated a complete ban on exploration and oil and gas production would cost 11,000 jobs, $2.5 billion worth of GDP and $1.5 billion of oil exports.
Meanwhile, Newsroom's Eloise Gibson reported this morning that a preliminary count of the potential damage to Auckland’s roads from sea level rise found $500 million worth of roads, footpaths and other assets could be flooded after a big storm. Auckland Transport estimated that is the value of the city’s transport assets that could go underwater with a major storm surge after one metre of sea level rise. The figure rises to $700 million if seas rise by two metres.
2. A morally hazardous (empty) fund
Earthquake Commission Minister Megan Woods announced on Tuesday the Government planned to amend the EQC Act by December this year to increase the cap on residential cover to $150,000 from $100,000, to increase the time limit for claims to two years from three months, and to remove EQC cover from contents. The new cap and the changes to contents cover would apply from July 1.
But the Government did not detail how it would rebuild the National Disaster Fund to pay the $1.75 billion excess that would have to be paid in the event of another disaster. It will take another decade for higher levies to build up the fund. Meanwhile, taxpayers in general, including many renters, are on the hook to borrow that money if there is a disaster.
3. A legacy of big losses and flat dividends
Fonterra reported $433 million of losses on its 18.8 percent stake in Chinese infant formula company Beingmate on Wednesday and Chairman John Wilson announced CEO Theo Spierings will resign later this year after seven years in the job. Wilson denied Spierings was to blame for the losses. They have been running Fonterra together for the last six years.
I argued their legacy was mixed. It could have been worse, or much, much better. Rod Oram was unconvinced by Fonterra's confidence it could turn around Beingmate, given it still has a minority stake and has no CEO yet.
4. Facebook dis-liked
The Guardian and New York Times reported on Monday the revelations of Cambridge Analytica whistleblower Christopher Wylie about how the firm scooped up personal data from over 50 million Facebook users and then, essentially, psychologically manipulated vulnerable voters in key states to help Donald Trump (just) win the 2016 Presidential election.
The firm owned by Trump's biggest backer and partially led by Steve Bannon also helped get the Brexit vote over the line. Facebook banned Wylie and Cambridge Analytica and announced a review of the third party apps that were the vehicle for the data breach on Thursday.
Users started deleting their Facebook apps and politicians ramped up calls to regulate the social media platform, which has two billion users world-wide and over four million accounts in New Zealand. Channel 4 reported on Tuesday from a sting on Cambridge Analytica CEO Alexander Nix that he had suggested clients bribe and blackmail politicians, as well as use the firm's data mining techniques to win elections. Nix was suspended on Wednesday by his board.
5. Labour's labour hire reforms
A Labour private member's bill to reform the laws covering labour hire firms passed its first reading in Parliament on Wednesday night. The bill was originally put up over a decade ago by Darien Fenton and Trevor Mallard, but was blocked by the National Government in 2008.
It was revived as a private member's bill this year by new MP Kieran McAnulty, who says the exploitation of migrants and others by labour hire firms has worsened since its original creation.
The bill would allow sub-contracted workers to launch personal grievances against the firm actually worked for and to join a collective agreement that gave them rights to sick leave and annual leave. Labour, New Zealand First and The Green party voted for it. National voted against it.
6. Unfettered Trump targets China
US President Donald Trump, who is now unleashed from his now-resigned 'globalist' economic adviser Gary Cohn, announced US$60 billion worth of tariffs on 1,300 types of imports from China this morning.
Making clear his trade restrictions were targeting China, he also exempted the European Union, Argentina, Australia, Brazil and South Korea from the steel and aluminium tariffs he announced earlier this month.
They join Canada and Mexico on the exempt list. But the real world impact of the steel tariffs may be limited because China is only the 10th largest exporter of steel directly to the United States, with just two percent of supplies. More arrives indirectly, but that will be much harder to target.
China has threatened to retaliate and is sure to protest via the World Trade Organisation, which Trump loathes. US stocks fell 2.5 percent this morning on trade war fears.
7. Emperor Xi's bigger United Front
China announced on Wednesday that the Communist Party's Department of Propaganda would take complete control over censoring movies, television, radio and newspapers from the State Administration of Press, Radio, Film and Television. The changes were part of a broad concentration of power in the hands of President-for-life Xi Jingping that was confirmed at this month's annual Party Congress.
The Party also announced the government’s Overseas Chinese Affairs Office would be taken over by the United Front Work Department. This is the party’s arm for dealing with overseas Chinese as well, as an array of groups inside China, and is credited with liaising with many groups in New Zealand. (New York Times)
The changes under Xi Jingping towards less freedom of information and activity inside China and a more expansive foreign policy that encompasses China's diaspora abroad is under-appreciated in New Zealand.
Newsroom's Sam Sachdeva analyses President Xi's decision to abolish his own term limits in this piece published today first on Newsroom Pro.
8. Wouldn't you borrow at 2.8 percent?
For the first time in 24 years, New Zealand's government bond yields fell below the equivalent US Treasury bond yield this week. It now costs 2.79 percent per year for the New Zealand Government to borrow for 10 years, while America's borrowing rate for the same term was around 2.85 percent this week. A year ago New Zealand's Government borrowing rate was over 3.2 percent and was almost a full percentage point higher than America's.
Fears earlier this year of some sort of spike in global interest rates because of an inflation breakout in America have eased. The Reserve Bank held its Official Cash Rate at 1.75 percent for the ninth consecutive time on Thursday and is widely expected not to raise it until next year, and even then not by much. The decision was the last by outgoing Governor Grant Spencer before the arrival of new Governor Adrian Orr next week.
The economy is cantering along nicely as he arrives with unemployment at 4.5 percent and falling as the economy grows at around three percent, while inflation is well under two percent and not showing any signs of taking off. However consumer spending, service sector activity and migration have come slightly off the boil in recent months. The Government's extra infrastructure and housing spending is expected to put a little bit of heat back into the economy later this year and next year.
Meanwhile, the Government is sticking to its self-imposed target of reducing net debt to 20 percent of GDP within five years of taking office, despite knowing that the only way to deal with New Zealand's infrastructure and housing crises is to use the Government's balance sheet to borrow to invest in assets that will serve future generations.
New Zealand's governments need to invest at least $100 billion in railways, pipes, roads, hospitals, schools and (sadly) prisons over the next decade. The central Government is the only one with the strength, scale and balance sheet to do it, but is artificially restricting itself from responding to a man-made disaster. It would not (and did not) restrict itself like this for a natural disaster.
It's hard to fathom. Wouldn't you borrow at 2.8 percent if you knew that investing that money would create an asset that lifted an entire nation's productivity and well-being for decades to come?
One fun thing...
Sam Morgan pointed out on Twitter that Mark Zuckerberg has said a few things over the years that maybe got him into his current mess.
They include 'Zuck's' infamous instant message in 2004 about how 4,000 people at Harvard submitted their names, email addresses and pictures to his website:
'“People just submitted it. I don’t know why. They ‘trust me.’ Dumb f**ks.”
Sam wrote: "That would make a great t-shirt."
I know they're popular so I didn't want anyone to miss out. Here's your weekend reads.
Vox puts the case against Facebook in this explainer. "It's not just about privacy: it's core function makes people lonely and sad."
This week's Facebook scandal has refocused attention on the connections between research about psychology and the military industrial complex. Tamsin Shaw writes at the New York Review of Books about how researchers into happiness, kindness and love have been co-opted by spies and armies to wage cyber war.
This piece in Meanjin Quarterly was actually written by Mark Pesce in the summer of 2017 after revelations in Australia about Facebook's offers to advertisers wanting to influence vulnerable young people.
"As problematic as Facebook has become, it represents only one component of a much broader shift into a new human connectivity that is both omnipresent (consider the smartphone) and hypermediated—passing through and massaged by layer upon layer of machinery carefully hidden from view," he wrote. "The upshot is that it’s becoming increasingly difficult to determine what in our interactions is simply human and what is machine-generated. It is becoming difficult to know what is real."
Hope Hicks was Donald Trump's anchor and muse in the White House. Since her resignation earlier this month, he has acted on his base zero-sum instincts on trade, announcing tariffs aimed at China, and defied his advisers by congratulating Vladimir Putin on his re-election and agreeing to direct talks with Kim Jong Un. Here's a New York Magazine feature on Hicks that gives some flavour of how the White House operated before her departure, and why Trump seems even more unhinged now.
This morning's political links
These are available with the morning subscriber email