The 8 things that mattered this week
New Zealand's 'Monopoly Nation' got a workout this week.
1. Big banks and fuel retailers were in the spotlight. Regulators sharpened their focus after shocking revelations from Australia's banking royal commission and a leaked BP email again raised questions over their behaviour towards customers and prices respectively. The Reserve Bank and FMA called in bank CEOs and asked them to show they weren't as bad as their bosses in Australia.
The top council of financial regulators met to discuss the royal commission. The FMA again warned banks about disclosing conflicts of interest when discussing Kiwisaver and other investments with their customers. Simplicity CEO Sam Knowles and the banking union called for a royal commission.
Energy Minister Megan Woods said the petrol market was "broken" after meeting BP executives. This chart showing the Gull effect in areas without Gull stations is instructive. Wellington and the South Island are big losers.
2. Prime Minister Jacinda Ardern tried to pull the focus of business leaders back from their weak confidence about the economy to their own more positive business outlooks, and onto the Government's Future of Work agenda ahead of the fast-approaching Budget on May 17. (See more on the Future of Work in Rod Oram's column below. And see more on Ardern's comments in Thomas Coughlans' report below.
3. The New Zealand dollar briefly dipped to a four month low under 70 USc for the first time in 2018 after the US Federal Reserve raised its inflation forecast and signaled three more hikes in the key US short term official interest rate (the Federal Funds Rate) from 1.75 percent now to 2.5 percent by the end of 2018. However, US 10 year interest rates failed to break through the key 3.0 percent level, suggesting a lack of conviction among long term investors that inflation is about to take off.
4. New Zealand's official cash rate is expected to remain on hold at a record low 1.75 percent until well into 2019, making the US dollar relatively more attractive for investors. That lower-for-longer outlook was reinforced this week by labour force figures showing solid jobs growth but still tepid private sector annual wage growth of around 1.9 percent. Wage growth without last year's massive pay equity deal for aged care workers was just 1.6 percent, with little sign of follow-through from that deal. It's a remarkably benign situation for an economy that the Reserve Bank has repeatedly estimated has already been at full capacity for a couple of years.
5. New Reserve Bank Governor Adrian Orr will deliver his first Monetary Policy Statement next Thursday and give his first detailed indication of where he sees interest rates tracking now he has agreed to support "maximum sustainable employment", whatever that is. Statistics New Zealand reported this week formal unemployment edged down to 4.4 percent, its lowest level since December 2008. Back then, wage growth was almost twice as fast. However, Statistics New Zealand also reported there were 119,000 fully unemployed people in the March quarter and 338,000 who were either out of work or looking for more work.
6. The Government announced plans for an 'Amazon Tax' that extends GST to imports of items bought for less than $400 from overseas websites. This adds to the 'Netflix Tax' that has already applied GST to imports of services from overseas websites. That extension of GST to imported services added $113 million in tax revenue in its first year, almost triple the initial estimates. The Government estimates the extension of GST to small goods imports will raise $87 million a year by 2022, although experts worry compliance will be much less than the 75 percent hoped for by Revenue Minister Stuart Nash.
7. President Donald Trump admitted he had reimbursed his lawyer for paying Stormy Daniels just before the 2016 Presidential election to not talk about an affair with Trump, which Trump denies having. Trump had previously also denied knowing about the payment, which his opponents argue was an illegal campaign contribution. Meanwhile, the Mueller Inquiry is closing in on either a forced or agreed interview with Trump. Planned questions for that leaked this week, unleashing a fresh twitter rant.
8. Elsewhere, Trump delayed steel tariffs on Europe, Japan and Canada for a month and did not give New Zealand an exemption. Meanwhile, his supporters started campaigning for Trump to be awarded the Nobel Peace Prize after North Korea agreed to talk about denuclearising the peninsular, whatever that means. Trump and North Korean supremo Kim Yong Un plan a summit in the next month or so, either in Ulan Bator or Singapore.
2. 'Not ready for the rise of the machine'
In his column this week, Rod Oram sifted through a fresh and local report on what Artificial Intelligence might mean for New Zealand.
He found we're behind the curve and not ready either for the risks or the opportunities.
See Rod's full column here first on Newsroom Pro this morning.
3. An elephant in the economic room.
Prime Minister Jacinda Ardern yesterday tried to set a better scene for the business community ahead of Finance Minister Grant Robertson’s first full budget on May 17.
Ardern pointed to how businesses’ confidence about their own performance was much stronger than their views about the wider economy, and reached out to business leaders by including them in a new tri-partite group on the Future of Work.
The slump in wider business confidence immediately after the formation of the Government has been the biggest 'off note' in an otherwise mostly positive first six months.
Confidence about the wider economy picked up slightly in the new year, but ANZ’s monthly survey found confidence slipped again in April, with 23 percent of businesses being net pessimistic about the economy, up 20 percent from March. However, that view about the wider economy continues to jar with businesses’ confidence about their own businesses.
Ardern told a Business NZ event in Wellington she hoped businesses would soon start to align their perceptions of the economy as a whole with perceptions of their own businesses. Most businesses continue to have a positive outlook for their own futures, according to the most recent quarterly survey by NZIER.
Ardern also announced the creation of a Future of Work Forum, which will include Business New Zealand CEO Kirk Hope, CTU president Richard Wagstaff and Finance Minister Grant Robertson, who will represent the Government..
Newsroom Pro’s political reporter Thomas Coughlan was at the lunch and filed this report for Newsroom Pro first yesterday.
4. A test of the profession's culture
A women's law group says an inquiry into lawyer Catriona MacLennan by the Law Society over comments she made critical of a judge will damage the profession and stifle debate about important issues of domestic violence.
Newsroom Co-Editor Tim Murphy reported this morning the group wants the inquiry abandoned and an apology made to MacLennan.
MacLennan's comments related to Judge John Brandts-Giesen who in a Queenstown case discharged a man without conviction for violently assaulting his wife and made comments about the victims that the Auckland Women Lawyers Association believe normalised and minimised domestic violence.
A family lawyer for two decades, she told the New Zealand Herald the judge should not continue sitting on the bench - and that has prompted the Law Society's national standards committee to open an inquiry into her conduct.
5. First, $100m for housing first
Housing Minister Phil Twyford announced this morning the Government would spend $100 million this winter on temporary housing and Housing First support schemes for the homeless.
The Ministry of Social Development would invest $37 million with housing providers and community groups to urgently increase housing supply.
“By the end of winter, we will have more than 1,500 additional transitional, public and Housing First places, compared to the end of last year," Twyford said.
The Government had also earmarked $63.4 million of new operating spending in Budget 2018 to expand and sustain Housing First services for more than 1,450 households over the next four years.
This included $20.5 million for on-going services for more than 900 households in the Housing First programme in Auckland, Christchurch, Tauranga, Hamilton, Wellington and Lower Hutt. It would also expand the Housing First programme to a further 550 households in other regions by spending $42.9 million.
“Housing First is a programme for the most vulnerable people and families; those who are really struggling with long-term homelessness or facing multiple and complex needs. It aims to end homelessness, not just manage it,” Twyford said.
6. Weekend Reads
This piece by AP shows how the US-based culture of drug testing in the workplace may be softening there as laws on marijuana change state by state and as the economy hits full employment.
Maggie Haberman is worth the price of subscription to the New York Times on her own. She reports on the White House and this piece this week on how Chief of Staff John Kelly and Trump are (not) getting on is fascinating.
Reserve Bank of Australia Governor Philip Lowe gave an interesting speech this week that talked about low wage and made this excellent comment:
"While low growth in wages has helped boost employment, it has also put the finances of some households under strain, especially those who borrowed on the basis that their incomes would grow at the old rate.Perhaps more importantly, sustained low wages growth diminishes the sense of shared prosperity that we have in Australia."
7. One fun thing...
This video is hilarious from Australian political satirist Mark Humphries on the recent translation snafu involving the French President Emmanuel Macron and Malcolm Turnbull's wife Lucy Turnbull. Laugh out loud funny.
8. This morning's political links
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