1. 8 things that mattered this week

Here are the eight news events that mattered this week in New Zealand's political economy.

1. Insurance's bad week - Last week it was the banks. This week, regulators and the Government turned their guns on the insurance sector, both for denying claims over irrelevant non-disclosures and for conflicts of interest around life insurance products.

Commerce and Consumer Affairs Minister Kris Faafoi released an issues paper this week to guide a review of Insurance Contract Law. It made clear the Government is serious about wanting stop insurers blocking claims because irrelevant information is not disclosed. It is also looking at whether to bring in a regulator for the insurance sector. This would replace the industry-run dispute arbitration system that rarely finds against insurers. See more in Thomas Coughlan's piece here on Newsroom Pro.

Then yesterday the Financial Markets Authority and the Reserve Bank sent a 'please explain' letter to life insurers, asking for reassurance that misconduct being unveiled by the Hayne Royal Commission in Australia isn’t happening here, or at least is being addressed. See more in Nikki Mandow's piece here on Newsroom Pro.

2. MFAT's good week - Fresh from receiving almost a billion dollars in extra funding in Budget 2018, MFAT will have been pleased to hear from the European Union this week that its leaders have given the green light to start free trade agreement negotiations with Australia and New Zealand.

The EU’s impact assessment for a deal with New Zealand estimates an FTA would increase New Zealand’s GDP by 0.5 percent or $2.2 billion. In a sign of potential pitfalls to be addressed during negotiations, the document also cites as a cost the impact of trade liberalisation on small farmers in Europe. Untangling the impact of Brexit on New Zealand-EU trade may also be a topic of discussion, with a spat over market access last year providing a taste of the difficulties ahead. If New Zealand is forced to choose between the two or prioritise one over the other, the EU deal looks more attractive.

The irony will also not be lost on those with long memories of New Zealand being abandoned by the UK in the 1970s when the 'mother country' joined the European Union. It was a major factor in the decade of economic pain that eventually led to New Zealand's even more painful deregulation and reforms from the mid 1980s to mid 1990s. See more here in Sam Sachdeva's piece on Newsroom Pro.

3. Parliament's bad week - A low level guerilla campaign of dissent by National MPs against Parliament's Speaker Trevor Mallard broke out into open dissent this week. This has been building for a while because of his question time tactic of docking supplementary questions from either the Government or the Opposition if MPs misbehave. The Opposition has been hit hardest.

It escalated last week when it was reported a National MP had said during a particularly heated exchange that Jacinda Ardern was a "silly little girl". The audio recordings were indistinct and National MPs vehemently denied saying it. They accused Mallard of telling the media and demanded an explanation from him.

Things turned toxic in Question Time on Wednesday when Paula Bennett walked out of Parliament, saying she was sick of being treated like a child. National's shadow Leader of the House Gerry Brownlee was particularly exercised, sending a letter to Mallard saying the speaker's behaviour was unacceptable and National MPs were losing confidence in Mallard.

None of this makes Parliament look like the great debating chamber of New Zealand political life. Mallard's practice of docking questions to try to reduce the rowdiness appears to have caused more trouble than it's worth. Understandably, National MPs have accused Mallard of running a "warped quiz show."

4. Phil's bad week - Phil Twyford is arguably the most important 'doing' minister in the Government. His housing and transport portfolios are at the heart of the Government's programme around housing affordability and decongesting our biggest cities. If he fails to make a substantial start to Kiwibuild or get Auckland's light rail projects going in this term, this Government will fail. He has a huge workload and can ill-afford distractions.

This week he was ticked off twice by his Prime Minister for avoidable and irrelevant mistakes. He called Treasury officials he didn't agree with a "bunch of kids," which didn't go down well with the public service or Jacinda Ardern. Then yesterday he had to apologise again for using his mobile phone after the door of a plane had closed and before it took off, which breached civil aviation rules. He offered to resign, but Ardern declined to accept it. Instead, she stripped Twyford of his **Civil Aviation role** and handed it to associate transport minister Julie Anne Genter.

Neither offence was substantial to his core Kiwibuild and urban transport tasks, but the episodes were distractions. He will be hoping for a quieter period during the next two weeks of Parliamentary recess.

5. De-nuclearisation's bad week - This morning US President Donald Trump called off his June 12 summit with Kim Jong Un , referring to North Korea's "open hostility" and warning America's military was ready in the event of any reckless acts by Pyongyang. Trump did it without talking to his South Korean allies.

The mood turned sour earlier in the week as first North Korea cancelled talks with South Korea and made clear it had no real intention of unilaterally denuclearising.

Asked if cancellation of the summit increased the risk of war, Trump replied: “We’ll see what happens.”


6. A mixed week for farmers - It was the best of times. It was the worst of times.

Dairy farmers free of the threat of Microplasma Bovis had a good week. Fonterra lifted its milk payout forecast for this year to $6.75/kg and issued its first forecast for 2018/19 of $7/kg because of solid demand from China and elsewhere. That was offset somewhat by news of a lower dividend, but a payout with a seven in front of it will hearten many after some dark years of low payouts.

Kiwifruit farmers had an excellent week, receiving news of a tripling of its dividend from Zespri to 76 cents a share and hearing that total payments to growers rose six percent to $1.47 billion. Export returns, particularly from the gold variety, are at record highs and the dramas around PSA seem a long distant thing of the past.

But cattle and dairy farmers face an immediate threat and decision in the form of mycoplasma bovis. Cabinet and industry groups are due to decide on Monday whether to keep trying to eradicate the disease, or to try to manage its existence here. Prime Minister Jacinda Ardern is scheduled to announce the decision at 4pm on Monday from the offices of industry leaders in Wellington.

7. A wintry week - The weather turned decidedly wintry up and down the country this week. It reminded us that winter is a thing and should be thought about in all the big decisions, including whether New Zealand's electricity sector can get to the Government's full 100 percent renewable target by 2035.

Transpower released a report this week predicting power shortages during winters when there is not enough water, wind or sun. It argued this remained the Achilles heel in New Zealand's otherwise huge potential to move most of its fossil fuel-driven economy to renewable electricity.

Entitled Te Mauri Hiko, the report suggests fast-starting power stations using natural gas should not be closed "without an energy storage solution" under scenarios that show the gap between supply and demand during winter is likely to balloon as the electricity system moves towards 100 percent renewable generation. See Pattrick Smellie's full report on Te Mauri Hiko here on Newsroom Pro.

8. A bad week for Otorohonga - This week the Government admitted it had decided against building a $1 billion 'mega prison' at Waikeria to house 3,000 inmates. The news was a real blow for the South Waikato area, which had started planning new houses and businesses for up to 600 staff needed to build and run the facility.

Otorohonga had already started a new subdivision to handle an extra 1,000 to 2,000 residents.

But it will also be politically painful for the Government because it will force a debate about the bail and sentencing laws that have seen the prison muster rise by more than 1,500 in the last five years despite a flat crime rate. See Shane Cowlishaw's full report on the prison decision here on Newsroom Pro. Also see Peter Dunne's excellent explainer below and here on Newsroom Pro around the politics of the issue going back to the 1990s. Astonishingly, our prison muster has grown almost three times faster than our population and despite a lower crime rate over the last 25 years.