• New Auckland Council and government working group to address housing and urban growth issues gets ready for action

    A new joint Auckland Council and government working group to tackle Auckland’s housing and urban development issues is close to sign off.

    In September last year Mayor Phil Goff, Deputy Mayor Cashmore and councillor Chris Darby met with Housing Minister Phil Twyford and Economic Development Minister David Parker to discuss greater collaboration on housing and urban development in Auckland.

    They agreed to create a formalised arrangement with a set programme that would be overseen by a working group.

    The Auckland Council’s Planning Committee is expected to sign off the terms of reference for the group this week which will include Goff, Cashmore, Darby and chairwoman of the council’s Environment and Community Committee Penny Hulse. While on the government side it will include Twyford, Parker, Minister for Building and Construction Jenny Salesa and Local Government Minister Nanaia Mahuta. The group is expected to meet quarterly.

    Some of the issues it will have to look at include the Auckland Development Programme, affordable housing, the funding and financing of infrastructure, spatial planning, the government’s Housing and Urban Development Authority (HUD) and removing the barriers to the efficient delivery of housing.

    The council’s Planning Committee agenda for this week’s meeting says that a lot of the work the group will look at is already underway, but it will allow greater co-operation between central and local government. It states:

    “By formalising the arrangements, the programme will ensure a more coordinated effort where officials believe “greatest value add” can be achieved by working collaboratively to remove blockages/enable faster delivery of private and public projects in multiple locations where planning is already well advanced, focus on areas where Council and Crown agencies are strongly aligned, avoid spreading Council and Government resources too widely.”

    Auckland Council Planning Committee Chairman Chris Darby says the new working group has a major task ahead of it in trying to address the super city’s housing and urban growth problems.

    “One of the key things is partnering up with the government so we’re not running off on different tangents,” he says.

    Darby admits the council and central government have often been working at cross purposes in the past.

    “There hasn’t been a lot of genuine collaboration. In the past there’s been a lot of packaging with little substance. But now we’ve got a phenomenal challenge in front of us and that’s to accommodate Auckland’s need for more homes.”

    Figures released by Statistics NZ in the 12 months to the end of January showed the growth in building consents for new homes had been particularly strong in Auckland, where 1128 new homes were consented in January, up 57% compared to a year ago.

     “We weren’t expecting those numbers to be so high, but while they might look rosy and it’s the best they’ve been in 20 years, we’re not taking our eye off the ball.”

    Darby says Auckland still has a housing shortage of 46,000 homes.

    He says after this week’s meeting the next step will be for the terms of reference to be signed off by cabinet and he says he expects the group to have its first meeting shortly after that.

    Darby’s keen to emphasise that there’s always been ongoing communication between the government and the Auckland Council, but establishing this new body formalises it.

    “It’s not like we’re just waiting for this to happen.”

    He says the new body will also allow the council to work more closely with the government’s Housing and Urban Development Authority (HUD), which the government announced in November last year.

    The new authority will be responsible for leading the government’s large-scale urban development projects and act as state housing landlord. It will bring together the three existing agencies that build homes – Housing New Zealand, its subsidiary HLC, and the KiwiBuild Unit.

    Twyford said it would have wide-ranging powers to transform suburbs and cut through any roadblocks to large-scale development. Housing New Zealand’s role as a state housing landlord will become part of the authority.

    Darby says the Housing and Urban Development Authority will have a major role to play in the future of Auckland’s housing and the local authority is keen to work with the government as gets it up and running.

    “That has a very big mandate and I think it’s fair to say that it’s still in gestation and the council needs input into that as it’s established.”

    source https://www.interest.co.nz/property/98452/central-and-local-government-get-set-join-forces-address-aucklands-housing-and-growth

  • Treasury surveys the risks to our economy of a hard Brexit and finds little likely impact, other than a rise in immigration and a stronger Kiwi dollar

    This is a Special Topic from Treasury’s Monthly Economic Indicators report for February 2019.

    The United Kingdom parliament continues to debate the terms of the UK’s departure from the European Union (EU) (the departure is called ‘Brexit’). One possibility is that the UK leaves without a withdrawal agreement and transition plan. This Special Topic discusses the economic impacts of a ‘no deal Brexit’ on the UK and the implications for New Zealand.

    The impacts of Brexit depend on the terms…

    Most studies conclude that Brexit will reduce the UK’s economic output owing to frictions that reduce trade and investment. These effects may be larger or smaller depending on the terms under which the UK exits.

    Brexit has already had negative consequences for the UK economy. Leaving the EU abruptly, without a withdrawal agreement and transition plan would amplify these effects. Growth in the EU would also be lower, particularly in the latter scenario. In contrast, scenarios where the UK maintains current arrangements over a transition period to a future state that has few new barriers to trade have relatively benign impacts on the UK and its trading partners.

    The consensus view among economic forecasters is that the UK will avoid a no deal scenario, although the shape of the deal is uncertain and both no deal and no Brexit are still possible. The ‘no deal’ scenario, which could cause a serious economic shock in the UK, is the most likely to have significant implications for New Zealand.

    …a no deal Brexit may have small negative impacts on economic activity in New Zealand

    Should it occur, our judgement is that a no deal Brexit would be likely to have a modest overall negative impact on economic activity in New Zealand. There are three main reasons for this assessment:

    • Total trade with the UK is a small proportion of total trade and New Zealand’s direct investment in the UK is also relatively small (see Table 2).

    • Some goods exports would likely be diverted to other markets eventually, although they may receive a lower price.

    • New Zealand businesses and the government have taken steps to mitigate adverse impacts.

    Nonetheless, some specific New Zealand businesses and industries may experience particular disruption. Inbound UK tourism may fall sharply as real UK incomes fall. Goods exports may be delayed at the UK border, and it may not be possible to find alternative markets in the short term, causing hardship for some exporters. Some importers may encounter supply disruptions from the UK and returns to some investors may be reduced by weaker UK conditions.

    The medium-term impacts also depend on the nature of future trade arrangements New Zealand is able to agree with the UK and the EU.

    Table 2: New Zealand/UK trade and investment
    ($billion and shares as a percentage of New Zealand’s total goods exports, and imports, total services exports, and imports, and stocks of total inward, and outward investment, year ended September 2018)

    Activity in the UK could fall markedly…

    The Bank of England finds that a “no deal” Brexit could generate a contraction in GDP of comparable magnitude to the global financial crisis. That is, GDP could be 3% to 8% lower than baseline where the UK remains in the EU1. The unemployment rate could rise to around 6% from below 4% at present.

    In the no deal scenarios, the combination of immediate logistical and regulatory impairment to imports of goods and services, and associated behavioural responses, reduce economic activity. The estimates are largest where lower trade, investment and migration have a permanent effect on UK growth. Conversely, when the UK is able to negotiate free trade access with the EU and with other countries, the impacts are smaller.

    …with a lesser contraction in EU activity

    The EU’s exports of goods and services to the UK, scaled relative to the GDP, are around a quarter of those running in the other direction. Given that the direct systemic consequences for the EU of “no deal” would be less than for the UK, an upper bound of the “no deal” hit to EU/euro area GDP might be 25% of that seen in the UK, that is, in the range of -0.5% to -2%. In the context of the recent loss of euro area growth momentum, the impact may be large enough to push the region as a whole back into recession.

    New Zealand trade may be disrupted…

    In the short-term, disruptions to trade with the UK can be anticipated owing to logistical issues. UK border inspection and approval services may struggle to cope with the increased volume of physical and regulatory checks and certifications required to move goods. Some transport routes may be disrupted. These issues may lead to exporters facing delays in receiving payment for goods.

    A no deal Brexit could lead to tariffs on UK agricultural exports and imports which could lead to large shifts in trade flows. For example, tariffs on UK lamb exports to the EU may lead to more product on the domestic market, driving down prices. Similarly, EU exporters of dairy and beef to the UK may divert produce to their home markets, putting pressure on exports from third markets, including New Zealand.

    …and the New Zealand dollar appreciate …

    The UK exchange rate may depreciate sharply, increasing the cost of New Zealand goods to UK buyers, and increasing the cost of UK residents taking holidays in New Zealand. The Bank of England study assumed the UK exchange rate would fall 25%. Under this scenario, the NZD/GBP, which has averaged around NZD$0.52 over the past year, could rise to NZD$0.65.2

    …while export demand eases…

    Slower growth in incomes across the EU more broadly may also depress demand for New Zealand goods and services. In the short to medium term, this is likely to feed into lower prices, but overall export volumes may be less affected if it proves possible to divert these to other markets. It is difficult to judge the magnitude of the impacts, but it is worth noting that movements in New Zealand’s export values of around NZ$600 million per quarter – around 40% of the annual value of goods exports to the UK – are not unusual.3

    However, slower income growth in the UK and the EU may put downward pressure on goods prices and slow demand growth in services exports, particularly tourism. Figure 14 shows UK visitor arrivals have been variable in recent years, although it is unclear how big the Brexit impact might be.

    Figure 14: Net migration to the UK and UK visitor arrivals

    Source: Stats NZ

    On the other hand, net migration from the UK and EU to New Zealand may increase, as worsening UK economic conditions lead to fewer New Zealand resident departures to the UK and more UK resident arrivals in New Zealand4. In the context of an economy operating at full capacity, this may be a positive development.

    …and risks to investment in the UK rise

    The UK has a large presence in New Zealand’s financial markets, particularly in the area of portfolio investment, reflecting its role as a major financial services provider. The UK is also a significant source of foreign direct investment in New Zealand. Whether these investments are affected depends on the details of the individual investments, but in general, Brexit does not appear to pose any immediate threats to investment in New Zealand.5 However, New Zealand investments in the UK, which are valued at $1.4 billion, may not realise the return previously expected.

    New Zealand’s preparations for Brexit and beyond

    The New Zealand government has taken steps to ensure continuity in key regulatory arrangements underpinning trade with the UK. These include agreements to maintain all relevant aspects of the current EU-NZ Veterinary Agreement governing the export of animals and animal products and the EUNZ mutual recognition agreement (MRA) on conformity assessment. The MRA allows for continued recognition of each other’s testing and certification in respect of seven areas of manufactured goods.

    The UK is also prioritising a new free trade agreement with New Zealand after it leaves the EU as well as potential accession to the trans-Pacific trading bloc, CPTPP, which counts New Zealand as one of its members.

    Negotiations towards an EU-NZ free trade agreement will continue without the UK after it leaves the EU. New Zealand launched these negotiations in June 2018 and negotiators met for a third round recently in Brussels.

    Free trade deals with the UK and the EU would be expected to have positive impacts on New Zealand’s economic activity through increased trade and investment.


    1. EU withdrawal scenarios and monetary and financial stability: A response to the House of Commons Treasury Committee, Bank of England November 2018

    2. The BNZ provide a range of possible currency movements under different Brexit scenarios (BNZ currency research)

    3. That is, quarterly goods exports (seasonally adjusted) have a standard deviation of almost $600 million.

    4. During the global financial crisis, a fall in departures to the UK drove an increase in net UK migration of around 2,000 people. NZ goods exports to the UK rose during the GFC as the NZD fell.

    5. An appreciation in the NZD/GBP might raise returns for investment in NZ.

    source https://www.interest.co.nz/business/98451/treasury-surveys-risks-our-economy-hard-brexit-and-finds-little-likely-impact-other

  • Winston Peters has spent decades gaming MMP to keep himself in the position of king (or queen) maker. Asks Danyl Mclauchlan, are we really going to make it even easier for politicians like him?

    Winston Peters, by Jacky Carpenter.

    By Danyl Mclauchlan, The Spinoff*

    The Green Party has put forward a members bill which, among other things, advocates lowering the MMP threshold from 5% to 4%. Let us set aside the terrible, terrible optics of a political party that is part of the government, and hovering just above the 5% threshold in the recent round of polls – and which routinely under-performs the polls on election day – attempting to alter the electoral system to its own advantage and consider the 5% threshold itself.

    It is obviously unfair and distortionary. A party that gets 5% of the vote gets six seats in parliament, while a party that gets 4.9% gets zero. Why should 131,508 voters (5% of the turnout in the 2017 election) have their votes translated into seats into Parliament, and a slightly smaller number have their votes nullified? And the threshold distorts the decision making process around who to vote for if their favoured party is in that danger zone. Does a Green voter vote Green, with the risk that their vote will get wiped out, or switch to Labour, who they support less but whose vote carries essentially zero risk?

    A 4% threshold still has these problems, but because the threshold is lower the unfairness and distortion are reduced. Why not lower it to 1%? Or whatever percentage is enough to capture a single seat in parliament (this number shifts around, depending on various factors). The assumption is that this would lead to a proliferation of weird minor parties and lead to the instability we see in, for example, Israeli politics.

    But New Zealand seems to be heading in the opposite direction, drifting back towards the two party system MMP was designed to prevent, and the 5% threshold seems to play a key role in this. It’s just too high for aspiring new parties to breach and it’s endangering both the current minor parties. So lowering the threshold to 4% seems like a moderate step to address this. And prior to the last election I was a strong advocate of a 4% threshold for all the reasons I just described. Now I’m not so sure.

    A few years ago I was arguing with the recently departed and much missed political commentator Rob Hosking and he told me the parable of Chesterton’s Fence. The conservative essayist and novelist G K Chesterton wrote about two farmers walking down a trail. They come across a fence blocking their way. The first farmer suggests they get rid of it; the second farmer replies, “First let’s figure out why the fence is here. Then we can decide whether we should get rid of it.” This is a very flattering way for conservatives to think about their role in politics: silly old progressives keep trying to abolish customs and traditions without understanding them, while conservatives patiently prevent them from hurting themselves and everyone else.

    But it seems relevant with regard to the 5% threshold. Our version of MMP was copied from the German system and the threshold was there to prevent the rise of extremist political parties, something that nation was apprehensive about for obvious reasons. That didn’t seem like a realistic fear for New Zealand so copying such a high threshold seemed unjustifiable. But now that we’re seeing a global rise of extremist parties, a fascist government in Brazil, etc, it no longer seems like such an abstract fear.

    But my main problem with lowering the threshold is that it will also probably save New Zealand First, and it will make the New Zealand First model of politics so much more viable.

    This is a model in which you fundraise from exploitative, extractive industries (fishing, forestry), campaign on populist issues (Peters’ flagship policies in 2017 were lower immigration, a referendum to ditch the Māori seats and to remove GST on fruit and vegetables), ditch all of your policies and issues as soon as the election is over, and use your position in the political centre to maximise your personal power.

    It means Peters gets to operate as a de facto co-prime minister, he gets to veto any attempts to regulate his corporate donors, he gets to unilaterally change our long-standing foreign policy towards China without bothering to tell the actual prime minister, let alone the Cabinet, his deputy gets given three billion dollars to just give away to whoever he wants, and none of this has any mandate from the public whatsoever. Nobody wanted or voted for any of this, not even New Zealand First’s voters, but here we all are.

    The 5% threshold hasn’t saved us from Peters but this is because he’s one of the most brilliant politicians the country has ever seen. His model is a very successful hack of the MMP system, but you have to be Peters to pull it off – otherwise everyone would do it: after all, you get near total political power with virtually no votes.

    But Peters was kicked out of parliament after his last shambolic tenure in government and, based on the current polls, he’ll be wiped out at the next election, so it is (hopefully) not a sustainable model, even for him. The 5% threshold is what protects us from countless imitators reproducing the hack and wrecking our government. That is what the fence is protecting us from. We’d be fools to lower it.

    *This article first ran on The Spinoff here and is used with permission. Danyl Mclauchlan is a contributing writer for The Spinoff.

    source https://www.interest.co.nz/opinion/98450/winston-peters-has-spent-decades-gaming-mmp-keep-himself-position-king-or-queen-maker

  • A review of things you need to know before you go home on Monday; more TD rate cuts; Barfoot sales slump; TPP now a big deal; Dashboard updated, swaps rise; NZD stable, & more

    Here are the main things you need to know before you leave work today.


    no changes to be reported today.


    Kiwibank today reduced some term deposit fees. You can follow all the many recent movements here. February sales fell in AUCKLAND Barfoot & Thomson’s sales in February fell -29% compared to the same month last year. In 474, its sales volumes were the lowest we have seen in February and the lowest of any month since December 2008. (Our record goes back to 2001.) Average prices fell -3.2% in relation to January and average selling prices fell -1%. Sales volume was lower in February than January in five of the past six years and this year is no exception. Sales volumes in March are generally about + 70% higher than the average for January and February. So this sets a test for March 2019 in 960. If it reaches that level, it will be the lowest month in March in nine years. The March average over the past decade is a sales level of 1,210 transactions across the Barfoots residential network.


    Statsitcs NZ today pointed out that bidirectional trade with TPP countries represents almost a third of trade and is almost touching $ 50 billion / year. By comparison, China, our single largest non-TPP trading partner, accounts for only 20% of our total two-way trade. New Zealand’s three main trading partners – China, Australia and the EU – accounted for almost half of total trade with the rest of the world. Total exports of goods and services were $ 82.3 billion, an increase of + 6.8% over 2017, while total imports were of $ 80.8 billion, an increase of + 11.6% compared to 2017. Also interesting is that 70% of our trade with the EU is with countries other than the United Kingdom. (We will discuss more about this separately, soon.) PANEL UPDATE Now, we’ve updated the data for the RBNZ Panel on our Key Bank Metrics tool, now covering four quarters of 2018.


    The stock markets opened today today strongly.

    New Zealand and Australia are up about +0.7% while they are also enthusiastic in Hong Kong (up +0.2% in early trade), Tokyo (+0.8%) and Shanghai (+1.3%). Expectations are high that the US President will cave in his trade negotiations with China, accept a deal from China to buy more soybeans, and declare victory.

    We all know that Aussie building approvals are declining and that is because of a slump in the apartment market. January data out today shows that in the year to January, apartment building approvals are down -18% and more than -50% on a January-2019 vs January 2018 basis. But also worrying for them is that house approvals are starting to slip as well and now taking 12-month-on-12-month data into negative territory too. For all that, the industry in Australia saw green shoots in the data, noting it wasn’t as bad as for December. Good luck with that.

    Local swap rates are firmer today by about +1 bps, except at the long end where they are up +4 bps. The UST 10yr yield is up +3 bps at 2.72%. Their 2-10 curve is higher at +20 bps while their 1-5 curve remains inverted at -3 bps. The Aussie Govt 10yr is up +4 bps to 2.15%, the China Govt 10yr is up +2 bps at 3.21%, while the NZ Govt 10 yr is up +1 bp so far today to 2.21%. The 90 day bank bill rate is unchanged at 1.89%.

    The bitcoin price is unchanged from this time on Friday at US$3,802.

    The NZD remains at 68.1 USc. And we are little-changed against the Aussie at 96.1 AUc, and at 59.9 euro cents. That leaves the TWI-5 at 72.6.

    This chart is animated here. For previous users, the animation process has been updated and works better now.

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