Newsroom Pro's 8 Things that matter; Weekend Reads

Back by popular demand, here's the 8 things that mattered in our political economy in the (short) week that was, along with Weekend Reads at bottom.

1. 'Get ready for a change'

Jacinda Ardern electrified her election campaign launch in the Auckland Town Hall last year by saying climate change was her generation's 'nuclear free moment.'

This week she took the first tip toeing steps towards backing up that rhetoric by accepting a petition on the steps of Parliment from Greenpeace calling for an end to all oil and gas exploration.

Her mere presence there on Monday accepting a petition, which is unusual for a Prime Minister, appeared to lend some support to the idea, which if strictly enforced would cost thousands of jobs in the regions and be an economic jolt she has pledged to avoid.

Within a few hours she clarified that she was looking only at limiting or ending new offers of territory for exploration, which are known as block offers. She said she would not be tearing up existing agreements that allow for oil and gas exploration right up to 2046 in some cases.

Energy Minister Megan Woods also did her best on Tuesday at the beseiged PEPANZ conference for oil and gas industry executives to reassure the industry that an abrupt halt was not planned. But she did announce a delay in the annual block offer announcement and signalled Ardern would detail changes in a few weeks.

Woods told the industry that she had ordered officials to begin preparing for a transition to a carbon-neutral future.

This year will be crucial for the Government's climate change credibility. It will have to consult on and create the Climate Change Commission and start making the tough decisions needed to achieve carbon neutrality by 2050.

This block offer announcement in coming weeks is a key first test, and also an early indicator of some of the political tensions inside the coalition Government. The Greens want an early aggressive start to that transition, while New Zealand First is more focused on keeping regional jobs. It appears a compromise is being struck that would limit or stop new block offers.

One convenient fact on the ground for the Government is that the big explorers are wary of New Zealand's expensive offshore potential after plenty of dry wells in previous drilling seasons and because the oil price makes it economically difficult to justify right now.

Here's Shane Cowlishaw's report from Woods' speech with the background. He made it past the protesters at the TSB Arena in Wellington to report on the event.

2. The Auckland DHB capex crisis

The machinery of Government in Wellington is mired in the dark depths of Budget decision-making right now. Over the next two or three weeks the key decisions about the broad shape of the May 17 Budget will be made, including how much extra will be allocated to health, education and Auckland infrastructure.

The health budget is particularly concerning for the Government as it uncovers deficit situations in District Health Boards that have festered for years and large scale infrastructure under-investment linked to the population shock of the last four years, particularly in Auckland.

Ardern hinted at the financial ugliness under the surface at the DHBs in some revealing comments to Duncan Garner on Tuesday morning after nurses announced they wouldn't accept their first pay offer, raising the prospects of strikes.

"This is the issue we're grappling with now," Ardern said.

"We're right in the middle of the Budget process. I've been in meetings in recent days and weeks trying to sort through the allocations for major areas like health, housing, education.

"We already knew that there was a major crisis going on in health because the DHBs told us that. The issue we have is timing, because as I say, we're trying to make decisions as we speak around those allocations.

"In terms of capital expenditure, DHBs have suggested they have, from memory, over $10 billion worth of investment required. The last government, from memory, put aside roughly $600 million.

Pressed on whether she would allocate extra funding for pay awards, she said: "You're asking to announce a Budget about a month early, and I very literally yesterday had meetings about this very issue. This is not me not disclosing something, it's me saying that we're actively in the process of allocating as we speak.

"But it is, as I say, worse than I thought," she said, adding she had known some DHBs had deficits.

"But what I didn't anticipate was how serious the issues would be in other portfolios as well, including areas like education."

This suggests there are some very tough conversations going on behind the scenes in cabinet committees at the moment, including calls for other spending areas to tighten their belts.

The pressure was reinforced this week with a series of reports via RNZ on the problems with mouldy and asbestos-ridden buildings at Middlemore hospital. One of them also had raw sewage leaking into the walls because of aged pipes.

This is all due to the South Auckland hospital having to deal with very fast population growth and the DHB skimping on capital expenditure to avoid operating expenditure deficits under the final years with Jonathan Coleman as Health Minister. He refused to answer questions on that this week in the wake of his very early resignation to become Acurity CEO. He hung up during an interview on Morning Report with Susie Ferguson.

He denied knowledge of the leaky buildings, despite the DHB saying it was common knowledge.

"No, hadn't been told about it. Anyway, have a great day, I'm walking with my kids and I'm leaving politics, so thanks very much Susie, bye bye."

That's one way to spray and walk away...

Have a look too at Bryce Edwards' analysis for Newsroom Pro of Coleman's move to Acurity in one of the fastest revolving door moves of recent times. New Zealand is completely unregulated and unprotected against the inevitable conflicts of interests here.

Meanwhile, the Government now faces a massive infrastructure deficit challenge in Auckland with housing, transport, hospitals and schools after Auckland's population rose by nearly 200,000 people to nearly 1.7 million in the last four years.

The ability to respond to this unexpected population shock and the previous Government's under-investment is now a major tension for Jacinda Ardern and Grant Robertson to deal with in the current Budget 2018 decision making.

Labour and The Greens hamstrung themselves before the election with their promise to reduce net debt from 23 percent of GDP to 20 percent within five years of obtaining office. That has left them unable to properly respond to what is essentially a man-made version of the infrastructure shock that Canterbury saw with the earthquakes. The unexpected population growth should be seen as a population earthquake that hit Auckland and should be responded in the same way the previous Government responded to Canterbury's actual earthquake.

However, Labour is holding fast to its fiscal responsibility promise. This week the CTU called for the debt limit promise to be dropped and Robertson rejected the call.

"The responsible way to deal with any crisis is to reassess your game plan," CTU President Richard Wagstaff said.

"The prime minister has realised that underfunding in health goes even deeper than she expected when taking office. Mould is a visible symptom in our buildings, but it’s also visible in the unmet need for care in our community and the stress and burnout visible in health staff," he said.

Robertson ruled out a loosening of the debt target restriction.

"The government is confident that it will meet the Budget Responsibility Rules while being able to begin the process of rebuilding our social and physical infrastructure," he said.

3. The Russians aren't coming...or going

This weeks to-ing and fro-ing over an apparent lack of Russian spies in New Zealand would be mildly amusing if it wasn't quite so serious for our reputation in the international community.

The underlying problem is the growing doubt about Foreign Minister Winston Peters' views on Russia's activities.

Everyone is still shaking their heads at the extraordinary comments by Peters in an interview on The Nation with Lisa Owen on March 11. Peters questioned whether Russia was responsible for shooting down a Malaysian passenger jet over Ukraine and his initial statement about the nerve agent attack did not mention Russia. He was also still talking about restarting trade talks with Russia, which Ardern was forced to block.

Ardern said on Monday that New Zealand would not be expelling any diplomats from Russia, unlike most of our allies, because our spies believed Russia didn't have any spies here.

The news, reported fully first on Newsroom Pro by Sam Sachdeva, initially sparked amusement and then derision overseas.

Some were sceptical about the apparent lack of spies here, given New Zealand is a member of the Five Eyes security alliance. And even if there were none here, then the dismissal of simple diplomats would have sufficed to join the alliance against Russia's use of lethal nerve agents in Britain.

"There seems to be some mincing of words here on the part of the PM in order to wriggle out of what many think is the responsibility to join our allies in this solidarity action," defence analyst Paul Buchanan told RNZ.

"This is mostly about repudiating Russia's actions abroad, so it's symbolic. You could recall the expelled people within two to three months," Buchanan said.

Ardern was forced yesterday to backtrack somewhat by saying other measures being considered, including stopping New Zealand visas being issued to some people of Russian origin.

"For instance, around the issuing of visas for particular people of Russian origin who may be in some way inappropriate for travel to New Zealand. I'm awaiting that advice," she said, adding that New Zealand was subject to Russian intelligence gathering.

"People acting as spies do not declare themselves as such," she said.

"I would expect that the Opposition would do the same thing I have, that is, listen to the advice from the New Zealand SIS on whether or not we have any undeclared intelligence officers here. The advice was we didn't. That advice was verified by our partners. I had to act on that advice.

"New Zealand has done exactly the same thing as our partners, including Australia."

Australia expelled two spies.

Unfortunately, Ardern is having to over-compensate and deal with suspicions around Peters' approach to Russia.

4. Astoria is a bad place for a quiet non-meeting

New Zealand's media and political 'Beltway' was transfixed this week by the bizarre and tragic self-destruction of Carol Hirschfeld's career as RNZ's Head of News, and the collateral damage for Broadcasting Minister Clare Curran and her plans to inject $38 million into RNZ.

The story kicked off in earnest on Tuesday morning when Hirschfeld resigned with immediate effect after it was revealed she had misled CEO Paul Thompson and Chairman Richard Griffin over a breakfast meeting she had with Curran in December at the Astoria Cafe in Wellington shortly before key meetings between RNZ's board members and Curran.

Hirschfeld told Thompson it was a chance meeting and he and Griffin repeated that in a select committee. They were repeatedly challenged by National MP Melissa Lee on it to the embarrassment of both.

Hirschfeld and Curran had been spotted and it appeared in a John Drinnan column shortly after, raising speculation that Curran might be going around Griffin and Thompson to ensure her plans for a traditional in-line free-to-air broadcast channel would be carried out. Griffin and Thompson are less keen on that, and instead see more use of existing channels and time-shifted streamed clips and podcasts, rather than a full new television station.

It emerged Curran and Hirschfeld used 18 texts to arrange the 'chance meeting' so it was clearly pre-arranged. Curran apologised for initially characterising it as a casual rather than formal meeting, but also told RNZ a month ago that it had been pre-arranged.

Curran's apology and the backing of Ardern means her job appears safe for now, but it has thrown the future of the RNZ+ investment plans into doubt at a crucial point in the Budget process.

The other moral of the story is never meet at Astoria and expect it to remain secret.

Newsroom Co-Editor Mark Jennings gives a deeper backgrounder on the issues here.

5. Facebook gives NZ the finger

The big story globally in the last week has been the growing 'Techlash' aimed at the tech behemoths in the cloud such as Facebook, Apple, Netflix and Google, which are known on the stockmarket as the FANG gang.

Facebook's market value has fallen almost US$100 billion over the last two weeks since it was revealed Cambridge Analytica obtained the personal data of more than 50 million users through the back-door of a third party app with vague permissioning and used that to help get Donald Trump elected and engineer the Brexit vote.

Facebook is now scrambling to reassure users their data is safe, although daily revelations about the amounts of personal data now safely in the hands of data miners has undermined faith.

New Zealand got in on the act this week when Privacy Commissioner John Edwards, who is an astute and active observer of these existential data issues of our new networked age, announced Facebook was in breach of New Zealand's privacy laws.

He indicated Facebook had essentially given New Zealand the finger by saying our privacy laws don't apply to Facebook as it was an Irish registered company. Facebook also pushed back, saying it was disappointed with Edwards' requests for access to data over a privacy request.

Edwards is unfortunately powerless and can only publicise Facebook's breaches under the current account. However, it has highlighted to New Zealanders that Facebook is far from a benign influence in their lives. Over 2.5 million New Zealanders look at their Facebook news feeds an average of 18 times a day and for an average of more than half an hour a day.

For good measure, Edwards also announced he had deleted his Facebook app and explained why in this Op-Ed on TheSpinoff.

6. New horse whisperers-in-chief

The big news in the economic sphere in New Zealand this week was Grant Robertson and Adrian Orr giving their best impressions of monetary policy 'horse whisperers' on Monday when they released their first Policy Targets Agreement and revealed the first draft of Reserve Bank Act reforms.

Their agreement and comments about the reforms later this year moved to calm any nerves of the 'horses' in the business and economic community about disruptive changes to interest rate policy that might endanger low inflation or the bank's independence.

In summary, they kept the two percent mid-point of the bank's target range for inflation, did not indicate any imminent loosening of policy to ramp up employment growth, and made no comments suggesting they thought full employment was much lower than the current 4.5 percent unemployment rate.

Their vagueness about what the new guidance about 'supporting maximum levels of sustainable employment' meant, and Orr's comments about the economy being "very, very healthy at the moment," suggested he was disinterested in heating it up any further at the moment.

They also stuck with plans to not allow independent members of a monetary policy committee to talk publicly or to identify their votes in any minutes. That assuages Reserve Bank concerns the public debate would create a "circus."

Their talk this week was soothing and may indeed lead to little real change, but it may also disguise a more fundamental disruption to a bank that has been an operationally independent and strict inflation-targeting pioneer for nearly 30 years. A lot will depend on Orr's approach, which is unclear, and his chemistry with Robertson.

So far, their whispering has been in tune, but Orr is known for his strong views and taking stances that can conflict with the orthodox. Robertson was thrilled to announce Orr's appointment before Christmas, but has no guarantee Orr will take the Government's preferred approach of running the economy hot enough to drag unemployment below four percent.

Orr's very early comments suggested he sees few problems to solve in an economy that still has 122,000 people who want a job (4.5 percent of the workforce) and another 122,000 people who are categorised as working part time but wanting more work. That under-utilisation rate, which includes people not immediate seeking a job but available for work, is still at 12.1 percent of the workforce. Under-utilisation fell to 9.0 percent in late 2007 and unemployment fell to 3.3 percent. That previous low is well below the current 4.5 percent rate and below the 4.0 percent that the Government has said it wants to push unemployment.

Orr was particularly cagey when asked about his views on whether monetary policy had been run too tightly in recent years and whether the new maximum employment language in the PTA would necessarily mean looser policy to try to drag unemployment lower.

Orr said he was happy with where the economy was at the moment.

“I’d say that we are running a very, very healthy economy at the moment," he said.

He said that most of the time, the new employment mandate should not make too much of a difference to the bank's decision.

“It’s always going to be conditional on the issues," he said, "in general times it shouldn’t make too much of a difference".

Plenty of soothing noises there, but plenty of room too for a change of view at a later date. See our full analysis of what was said on Monday here on Newsroom.

7. The Sky (TV) is now falling

The big news in corporate New Zealand this week was Sky TV's announcement that CEO John Fellet would step down later this year as CEO after 17 years in the job, although he will remain on the board as a director (to the discomfort of any new CEO).

Fellet was literally the godfather of New Zealand television and sports scenes so his departure is a big one..

The sky is now literally falling for SkyTV's share price, which has lost more than $100 million in value this year as it first halved its basic package price and then announced it had lost the rights to cover the Rugby World Cup.

The slow drip, drip of customer losses as viewers shift from in-line watching of television to time-shifted streaming television has really started to hit Sky TV's bottom line this year.

I've had my own aha moment around television watching this year. In January, we decided to buy a new television to replace our 30 inch flat screen television that we bought in 2004 to make the most use of My Sky. I bought a 50 inch smart TV for less than $1,000 and cut off Sky and its $80 a month cost. We now watch Netflix, Amazon Prime and streaming TVNZ and TV3 instead of relying on My Sky at a cost of $20 a month.

Our experience is symptomatic of the changes that are dragging Sky TV's profits lower and triggering Fellet's pseudo-exit. They also reinforce the speed and depth of the changes to the global economy that are opening up domestically limited services sectors to dis-inflation or outright deflation.

See Mark Jennings' analysis of Fellet's impact and departure.

8. A secret visit in an armoured train

The main news on the international stage was the initially secret visit by Kim Yong Un to his patrons in China for a pre-game chat about summits he is planning with South Korean and American leaders later this year.

This was the young leader's first official trip outside his country and his first visit to Beijing.

It suggests there is a possibility for a peaceful end to the North Korean crisis and that China is very involved in making sure that happens, to the pleasure of Donald Trump. This is a crucial foreign issue for us and the planet. A conflict in North Asia would be devastating for New Zealand in a multitude of ways. We are now as reliant on trade with the Asian hemisphere as we were on Britain during the 1950s and 1960s, not to mention the global second round effects of such a conflict.

The meeting was eventually publicised, although the North Korean leaders' armoured train was hard to miss on its way to and from Beijing. It had so much bullet proofing steel that the fastest it could travel was 37 miles an hour.

See the New York Times' analysis

Some fun things

Shaun Hendy did that thing that cartoonists often do of combining two stories to make them both better:

"If we can’t find any Russian spies to expel, I say we find an Australian cricketer or two."

This from The Invisible
made one meat eater (with vegetarian family) smile:

"How to confuse a Vegan."

Some weekend reads

This New York Times piece on Cambridge Analytica's role in the Brexit defeat for the remainers is worth a read, if only to reinforce the power of Facebook in the political sphere now.

Sam Knight's piece in the The New Yorker also gives some insight into what life was like inside Cambridge Analytica.

To reinforce the pace and power of technology change, this Wired piece explains how AI-driven changes to voice recognition and language translation will change the face of tourism and much more.