The news that mattered this morning

Here is the news that mattered this morning in New Zealand's political economy.

Trump vs Pharmac - US President Donald Trump vowed to pressure other Governments' drug buying agencies to stop ganging up on American pharmaceutical companies, arguing the lower prices paid overseas pushed up prices in America. He described the rest of the world's drugbuyers as 'freeloaders.' "We will demand fairness overseas. When foreign governments extort unreasonably low prices from US drug makers, Americans have to pay more to subsidise the enormous cost of research and development," he said. (BBC )

Prime Minister Jacinda Ardern said New Zealand's trade deals protected Pharmac from such bullying. Trump said in a speech he wanted to rejoin the Trans Pacific Partnership and "fixing this injustice is a top priority with every trading partner." ( NZ Herald )

Say what? - Trump tweeted this morning he wanted to help China rescue its ZTE Technologies from bankruptcy caused by US sanctions. He said he wanted to assist President Xi Jingping save Chinese jobs. He gave no further explanation for what appeared to be a major concession to China on the verge of his summit with North Korea's Kim Jong Un. Western security agencies have warned that ZTE and Huawei Technologies are security risks. ( New York Times )

Local Government funding - Local Government Minister Nanaia Mahuta announced quietly on Friday afternoon that the Productivity Commission would conduct an inquiry into local government funding mechanisms. Labour agreed with New Zealand First in their coalition deal to conduct an inquiry into local government funding a decade after the previous Labour Government's 'Shand' report.

Councils use property rates to pay for services and infrastructure, and these often lag behind funding needs in fast growing areas, or in areas where populations are falling. Councils have asked repeatedly in recent years for other funding tools, including a share of GST or income taxes to help fund debt for infrastructure. Councils in Auckland, Hamilton, Tauranga, Queenstown and Christchurch have struggled with rapid population growth racing ahead of infrastructure needs, pushing them to debt limits that have hamstrung house building ambitions.

"Local government is facing increasing costs for things like three waters, roading, housing, and tourism infrastructure as well as adapting to climate change. And some of the councils facing the biggest cost increases also have shrinking rating bases. Rates are rising faster than incomes so simply raising rates is not the solution," Mahuta said.

Local Government New Zealand President Dave Cull welcomed the announcement, saying the reliance of councils on property rates was not sustainable. The announcement came after the annual Central and Local Government Forum was held at Premier House on Thursday. See more detail in LGNZ's February 2015 Local Government Funding Review paper.

Education Budget news - Prime Minister Jacinda Ardern and Associate Education Minister Tracey Martin announced on Sunday this Thursday's Budget 2018 would include an extra $21.5 million in funding over four years for early intervention services for nearly 8000 more children to receive extra learning support.

Conservation Budget news - Conservation Minister Eugenie Sage announced on Saturday an extra $81.3 million in operating funds for predator control over four years. It would allow the Department to extend its area for predator control to 1.8 million hectares from 1.0 million hectares.