Category Archives: NZ Politics

Inequality and Revolution – Bryan Bruce * An Analysis of ‘The New Zealand Way’ – Georg Menz.

Today inequality is an all too familiar word in our country and the coalition’s handing of the economy isn’t fixing it.

Why? Because it’s the same neoliberal approach the last National government took and the Clarke government before it .. going all the way back to David Lange and Roger Douglas who introduced this economic virus in 1984.

So how and when will things change?

Bryan Bruce . . . The Daily Blog

The New Zealand Way

Georg Menz

How did a country known for its progressive policies, its welfare state and its anti nuclear and environmental policies so quickly and emphatically embrace the tenets of Neoliberalism and the New Right?

New Zealand, in the 1980s, went from being one of the most regulated countries in the OECD to being one of the most deregulated.

. . . An Analysis of ‘The New Zealand Way’ – Georg Menz


“Out-Thatchering Mrs.Thatcher”. USER PAYS, NEW ZEALAND’S NEOLIBERAL CONVERSION, Rogerpolitics – Chris Trotter * An analysis of ‘The New Zealand Way’ – Georg Menz.

How did a country known for its progressive policies, its welfare state and its anti nuclear and environmental policies so quickly and emphatically embrace the tenets of Neoliberalism and the New Right?

New Zealand, in the 1980s, went from being one of the most regulated countries in the OECD to being one of the most deregulated. It underwent a very painful period of transition and adjustment during the reforms. Even now the beneficial effects are far from obvious. Market liberalisation has come at a very high social cost. Poverty and social inequality are rising. New Zealand presents a paradigmatic case of complete market liberalisation and the embrace of neoliberal doctrines.

With remarkable alacrity, the ideological and practical political infrastructure required to support the new economic regime was cemented into place. In the nation’s schools and universities; in it’s publicly and privately owned news media; in its local and national institutions, Rogerpolitics became the new orthodoxy. For the next thirty years it would not only inspire the design of the mechanisms by which political power is exercised, but also the moral justifications for their use.

Those New Zealanders born after 1984, New Zealand neoliberalism’s “Year Zero”, have absorbed the “free market” catechism practically without thinking.

Rogerpolitics does not believe that democracy is a market friendly form of government, and all Rogerpoliticians are expected to act accordingly.

New Zealand is a case study of a small country moving from strong isolationism to full fledged market liberalism. New Zealand policy makers concluded in the mid 1980s that isolationism was no longer a viable policy option. Instead, they turned their country into a laboratory of free trade and Chicago style Neoliberalism. Does this model have insights to offer to other small states?

Chris Trotter

“ROGERNOMICS” is political shorthand for the neoliberal economic policies introduced by Labour’s finance minister, Roger Douglas between 1984 and 1988. While most New Zealanders have heard of Rogernomics, nowhere near as many have heard of its inseparable companion, “Rogerpolitics”.

The term was coined by the New Zealand political scientist, Richard Mulgan, to describe the form of politics required to make sure that Rogernomics “took” in a country which, on the face of it, should have rejected neoliberalism out of hand. Had Rogerpolitics not been so successfully embedded in the key organs of the New Zealand state, then Rogernomics would not have lasted.

Critical to the success of Rogerpolitics was the widespread public disillusionment with the style of politics that preceded it. In New Zealand’s case, the principal target of the public’s hostility was the National Party Prime Minister, Rob Muldoon, and his highly interventionist economic policies – “Muldoonism”.

An additional factor in the public’s antipathy towards Muldoon was his facilitation of the extremely divisive Springbok Tour of 1981. In the eyes of younger New Zealanders, “The Tour” was proof of their elders’ unfitness to rule. The people referred to by the then prominent political journalist, Colin James, as the “RSA Generation” had, in the eyes of the “Vietnam Generation”, been confronted with a straightforward moral test, and they had failed.

Without Muldoon and Muldoonism; without the Springbok Tour; the hunger for a new way of managing the economy and running the country would not have been so acute. The proponents of neoliberalism, or “free market forces” (as the ideology was more commonly referred to thirty-five years ago) were pushing against an open door.

It was the same all over the advanced capitalist world. The interventionist economic policies that had played such a crucial role in generating the unparalleled prosperity of the post-war period had finally run up against the buffers of the capitalist system. Every attempt to reduce the rising levels of unemployment and inflation that were the primary manifestations of the system’s failure only ended up pushing them higher. Margaret Thatcher’s Conservative Party captured the growing sense of unease with its 1979 slogan: “Labour isn’t working.” The following year, in the USA, the Republican candidate for President, Ronald Reagan, summed-up the popular mood when he declared: “In this present crisis, government is not the solution to our problem, government IS the problem.”

In its essence, this is what Rogerpolitics is all about: getting government out of the way. If politicians, by interfering in the economy, only made things worse, then the obvious solution is simply to prevent them from interfering.

. . . Bowalley Road

A Model Strategy for Small States to Cope and Survive in a Globalised World Economy? An Analysis of the “New Zealand Way”.

Georg Menz, Department of Political Science, University of Pittsburgh

Can New Zealand indeed serve as a model for other small states?

1. Introduction

A major issue of concern to contemporary social scientists is the relative decline of the autonomy of the nation state. Traditionally, the nation state served as a useful unit of analysis for scholars in international political economy. It may no longer be a useful starting point. Advocates of the globalisation thesis argue that the nation state is losing much of its room for maneuver in public policy decision making. This is a result of trade liberalisation and deregulation, particularly of the financial sector; rapid technological advances in telecommunications and data processing, and the exponential growth of international trade and foreign direct investment (FDI).

As I will argue below, two opposite arguments about the impact of globalisation on small states might be put forward.

First, it would appear that small states are particularly affected by a loss of autonomy as a result of globalisation. Smaller states face a constrained choice of responses to the impact of the world economy on their own national markets. By virtue of their economic and political power, size and strength, smaller states dispose of a relatively smaller array of policy responses than larger states. They cannot hope to set the parameters of the global economy given their relatively small economies and limited political and military clout.

Small states are usually host to only a small number of transnational corporations and, owing to the size of their own domestic market, they are commonly not only dependent on exporting their own products, but also on importing raw materials from abroad.

Alternatively, the opposite argument might be made. Small states are particularly well prepared to deal with open markets because of their economic structure. For many European small states, a protectionist trade policy was never a viable option.

Katzenstein (1985), who is often credited for his pioneering work on “small states”, points out that these states, due to their dependence on both imports and exports, are committed to the cause of international free trade. Foreign trade typically makes up a large proportion of small state Gross Domestic Product (GDP). Small states also depend on occupying market niches with relatively highly developed technology in sections of the economy where they enjoy a comparative advantage in production or a technological lead over their competitors.

In this study, I seek to analyse how one small state has responded to the challenges of globalisation. Using New Zealand (NZ) as a case study, I will examine New Zealand’s remarkable reform process as one possible policy response to dealing with a globalised world economy. “Model New Zealand” has been heralded as a successful model of structural adjustment by international observers. Regardless of whether one accepts the normative component of this judgement, New Zealand presents a paradigmatic case of complete market liberalisation and the embrace of neoliberal doctrines.

Can New Zealand indeed serve as a model for other small states? I seek to critically examine the reform process and shed light on its intellectual sources, employing some of the insights generated by the constructivist approach in international relations. Can New Zealand be properly considered a success story from which other small states can learn? The country went from being one of the most regulated countries in the OECD to being one of the most deregulated.

I argue that it underwent a very painful period of transition and adjustment during the reforms. Even now the beneficial effects are far from obvious. Market liberalisation has come at a very high social cost. Poverty and social inequality are rising.

The economic data reveals an equally mixed picture. In 1995, commentators admired the “turn around economy” and observed that the initial hardship seemed to be finally paying off. After the devastating impact of the Asian crisis in New Zealand, this assessment seems questionable and premature. New Zealand has been able to successfully fill some market niches in cutting edge agricultural engineering. At the same time, however, extreme liberalisation also means strong dependency on foreign capital, as is especially true for New Zealand with its large current account deficit and high level of foreign direct investment. Dependency on highly volatile foreign capital can become problematic rather quickly, as New Zealand’s recession in the wake of the Asian crisis vividly demonstrates.

2. Small States and Globalisation

How should we conceptualise globalisation? And how is it affecting the policy choices of small states? The purpose of this section is to arive at a working definition of globalisation and to analyse its impact on small states.

Since academic discourse on this subject is of a relatively recent nature, it is perhaps unsurprising that no single coherent definition of the phenomenon has yet emerged. However, from the writings of those authors who are willing to acknowledge globalisation as a genuinely new phenomenon a common thread can be extracted. These authors argue that the nation state is losing its autonomy, or posit, as Susan Strange has done “the retreat of the state”. The state’s sphere of control is decreasing, as an array of new actors moves in to undermine the state’s formerly comfortable command of territorially based authoritys. Among those actors are international institutions, networks and, most importantly, private transnational and multinational corporations.

While the nation-state no longer seems able to command the same array of macroeconomic tools, obvious winners are international markets. Global financial flows of gigantic proportions play an important role in shaping and curtailing governments’ choices.

Following the wave of deregulation and market liberalisation, which commenced in the late 1970s, particularly in the financial sector, the state’s macroeconomic weaponry chest looks considerably less well-stocked today. No longer can a government simply rely on monetary policy to set its economy’s parameters: If it tries to increase the interest rate so as to curtail inflationary growth, this move will simply attract mobile foreign capital.

National fiscal policy is also affected by the increased mobility of global capital. Nation states cannot freely determine corporate tax levels, because what the market deems to be an excessive rate will only cause companies to invest in regions or state more amiable to their interests. Some analysts have gone as far as positing a global “race to the bottom” in which regions and indeed nations have to compete for corporate investment by lowering their environmental, safety, health and social standards and offering tax breaks and other incentives”. Regardless of state incentives, due to the decrease in strict regulation of the financial sector, global capital is much more uninhibited to move into and out of new locales at relative ease. Large volumes of money are on the move, “free to roam the globe looking for the brightest investment opportunities”.

There are two factors contributing to the relative ease with which large scale global financial flows are occurring today at an unprecedented rate.

Firstly, deregulation of the financial markets made short term foreign investment and portfolio investment much easier than before. Secondly, technological innovation, another important factor mentioned by Strange and Drachels, has meant that such transfers of financial capital can take place at an ever accelerating pace. Rapid advances in modern computer based technology allow for rapid and easy data processing and manipulation. The progress of telecommunications technology enables global dissemination of information at unprecedented levels of speed. In fact, I would argue that innovations in technology as such undermine the feasibility of the nation state’s regulatory capacity.

The dramatic increase in foreign direct investment (FDI) should also be mentioned, which is a relatively recent development as well. Investment of a given company abroad in means of production (factories, plants, refineries, etc.) is a phenomenon unparalleled in previous economic history and ought to be distinguished from colonial patterns of raw material extraction through subsidiary companies within colonies. Foreign direct investment in production facilities either seeks to elude protectionist measures by the host country or endeavours to exploit different levels of wages or social standards for production.

Thus, global trade is to some extent no longer the exchange of goods among companies from different nation states (taking advantage of Adam Smith’s comparative advantage in the production of goods), but instead has to be re-conceptualised as the intra company exchange of goods in various stages of the production cycle”.

Closely related to the issue of establishing a concisely specified definition of globalisation are questions of distinctiveness and uniqueness. Is the current degree of global economic interdependence and growth of trade dependency indeed a genuinely new phenomenon? Is there something that distinguishes the global exchange of money, goods and services today from exchange routes and networks in the age of Cecil Rhodes’ Imperialism, Marco Polo’s Asian expeditions, trans Saharan trade routes, or Roman trade with its neighbours? Perhaps so, some authors might concede, but they are less convinced that the level of current global interdependence and international trade is more than just a return to the pre 1914 levels of global interchange.

Different scholars emphasize different policy areas, which vary in the degree to which they are affected by a globalised world economy. Obviously, there are also different normative points of view arguing about whether or not globalisation is a phenomenon worthy of appraisal or condemnation, usually depending on the author’s political persuasion .

Based on this discussion, I propose to define and conceptualise globalisation in terms of the speed and regulatory ease of worldwide flow of capital. While it is important to consider the rapid growth of international trade in recent years as well, the latter component does not constitute a genuinely new phenomenon and therefore does not really deserve a new label.

At this juncture, it is important to distinguish between globalisation as defined above and internationalisation, that is, the increasing global interdependence based on growth of international trade.

How and in what way is globalisation affecting small states? While Katzenstein contributed significantly to research on small states, his work and that of others exploring small states in the literature dates back to the mid 1980s or earlier. At that point, the imminent pressures of globalisation had not yet received the same amount of scholarly attention as is true of today, since they were not as readily apparent.

As briefly alluded to in the beginning, two arguments could be advanced here.

Based on Katzenstein’s research, one might argue that small states are actually particularly well prepared for a world of deregulated financial and trade flow. Since they have always been dependent on the international market place for the raw materials they imported and the export of the manufactured goods they exported, they had to be able to navigate the treacherous tides of the international marketplace from very early on. In fact, because of their status they had no choice other than to open up their economy. At the same time, they found ways to specialise in niche products.

On the other hand, the argument could be made that small states are but pawns in a game they cannot control nor even manipulate. The globalised economy finds small states in a particularly vulnerable position.

If we accept the premise that nation state lose some of their ability to manipulate their macroeconomic parameters, this must apply with particular vengeance to small states. They are even more vulnerable to the consequences of the rapid inflow and outflow of foreign short term investment. If governments of large countries can no longer counteract the speculative movement of the markets, this must be an even more unsurpassable challenge for small states.

Companies from small states cannot enjoy the advantages of the economies of scale, which a large domestic market offers. Small states are typically host to only a small number of transnational companies (TNCs), which are in a position to take advantage of deregulated international trade and investment opportunities. Their economies are made up by small and medium sized businesses, which run the risk of being taken over or run off the road by large foreign TNCs. The best these small and medium sized businesses can hope for is to diversify their customer base by gaining new markets abroad. However, they will cenainly be hard pressed to find products they can effectively and competitively market abroad owing to their limited resource basis for international advertising, marketing, and distribution.

New Zealand is a case study of small country moving from strong isolationism to full fledged market liberalism. New Zealand policy makers concluded in the mid 1980s that isolationism was no longer a viable policy option. Instead, they turned their country into a laboratory of free trade and Chicago style neoliberalism. Does this model have insights to offer to other small states?

3. Introducing the ‘New Zealand Way’

In 1984, the small South Pacific island nation of New Zealand gained worldwide attention by implementing the most comprehensive economic reform program of any OECD country to date. Within only a few years, New Zealand experienced a paradigmatic shift from neo Keynesiasism to New Right monetarism. It went from being one of the most regulated countries in the OECD to being the most liberalised and deregulated. In fact, neo liberalism found a much more zealous disciple in New Zealand’s Labour Party than is true for any other New Right leader. New Zealand “out Thatchered Mrs. Thatcher”.

A small remote island nation, over a thousand miles from its nearest neighbour Australia, it had previously been known for pre-empting its European cousins with progressive policies such as female suffrage in 1893, a comprehensive welfare system and a fervent environmental and anti nuclear policy. Now New Zealand stood at the forefront once again. This time, though, it overtook Western Europe on the right. It made headlines for a radical move away from Keynesian economics and the welfare state. Perhaps surprisingly, it was a Labour government, which under the stewardship of Prime Minister Lange and Minister of Treasury Roger Douglas jump started a radical programme of deregulation, market liberalisation and privatisation of state owned enterprises.

The OECD, The Economist, and other like minded apostles of the neo liberal New Right outdid themselves in praises for the blitzkrieg style economic reform programme which radically redefined the role and scope of government in New Zealand within a few years.

The reform programme included the deregulation of the financial sector, the removal of subsidies to producers, both in the manufacturing and the agricultural sector; the removal of tariffs on imports, a fundamental tax reform, a comprehensive restructuring of the public sector, a radical cut in the generous system of welfare provisions, a total remodelling of labour relations, and the corporatisation and privatisation of formerly government owned enterprises. The following table provides an outline of the reform program enacted in New Zealand between 1984 and 1994.

As can be seen above, the liberalisation programme occurred in two major waves. Under Labour Party guidance, from 1984 to 1990. the first wave of reforms was implemented. As Minister of Finance Roger Douglas played such a pivotal role in the process, the label “Rogermomics” is often applied to the reforms. These included industry deregulation, trade reform and capital market reform. Startling to many voters and academic observers, the National Party continued the reform programme, after it took over power from Labour in 1990. The second wave of reforms entailed macroeconomic stabilisation, corporatisation of state owned enterprises (SOEs), privatisation of SOEs, a comprehensive labour reform, and a fundamental restructuring of the welfare state.

As can be seen, the reform programme bears a striking resemblance with structural adjustment programmes commonly recommended for Third World countries.

The first steps of deregulation affected the financial sector. and included the removal of exchange rates and a floating of the New Zealand dollar. The government committed itself to a monetarist anti inflationary regime, by means of sustaining high interest rates and exchange rates. Price stability was enshrined as the overarching goal in the Reserve Bank Act of 1989, leading to what can be described as the “Bundesbank-sation” of the institution. Labour drastically cut down subsidies, abolished import licences, and began to phase out tariffs. It also opened up the economy to foreign direct investment. In fiscal policy, personal income tax for top earners was reduced significantly and a goods and services tax was introduced.

Government activity and the public sector as a whole were fundamentally restructured. Government departments were re-organised along corporate lines. In many cases, this meant transformation into SOEs and subsequent privatisation, in most cases to Australian or American companies. This corporatisation included government research facilities, hospitals, public housing, and universities.

As part of the second wave, the labour market was liberalised and the welfare state underwent severe cutbacks in scope and size. This translated into a full blown attack on the structural power of unions with the abandonment of collective bargaining imbedded in the 1991 Employment Contracts Act. At the same time, welfare benefits and eligibility were drastically curtailed.

This “big bang” reform program marked a revolutionary departure from the past. New Zealand has a long history of heavy state interventionism and government regulation. Barry Gustafson notes that:

“Manufacturers and wage earners were protected by import controls, and farmers were encouraged to produce and were protected from fluctuations in overseas markets by subsidies, tax incentives, and producer boards, responsible for the coordination of marketing of products. The banking system and value of the currency were tightly controlled.”

In fact, some of the economic measures pursued by its government were commonly associated with the State Socialist countries of the former Warsaw Pact such as tight controls on the circulation of currency, high tariffs, import quotas, and a central government agency co ordinating export policy. Government intervention has traditionally been regarded as beneficial and a cautiously modernising force.

Due to almost unlimited access for its agricultural products to its former motherland Britain, “England’s Garden” prospered throughout the 1950s and 1960s, boasting the third highest standard of living in the 1950s. New Zealand was able to provide its citizens a generous set of cradle to grave welfare provisions, universal health care and free access to education. Until the mid 1970s, unemployment was virtually unheard of.

Wage levels were set so as to guarantee a living wage “for a man, his wife and three children”.

The National Party government provided generous agricultural subsidies and managed the worldwide marketing of New Zealand’s agricultural products. Meanwhile, domestic manufacturing was protected from competition from abroad through high tariff barriers. The government willingly underwrote New Zealand’s continuing current account deficit by accumulating foreign debt. As delightful as life at the other end of the planet seemed, some troubling structural problems were already evident, such as the excessive dependence on the export of commodities.

In the 1970s these problems were brought to light as the global economy experienced meagre growth and high inflation. New Zealand was hard hit, exhibiting one of the lowest growth rates of any country within the OECD during the 1960s and 70s. There were a number of external shocks which New Zealand faced.

Firstly, main customer Great Britain joined the European Community, thereby becoming part of the Common Market for agricultural products. Though exceptional provisions were made to buffer some of the shocks for the New Zealand economy, this meant a sudden loss of New Zealand’s main market.

Secondly, in the wake of the oil crises of 1973 and 1979, New Zealand’s terms of trade deteriorated dramatically. Not only did oil prices rise exponentially, demand for commodities slipped. This hurt New Zealand’s economy badly, since its exports were still largely composed of wool, meat and dairy products. Notwithstanding a temporary boom in commodity prices between 1971 and 74, terms of trade deteriorated further throughout the 1970s and early 1980s. New Zealand’s unsophisticated reliance on agricultural products and its failure to diversify its export basis in time was beginning to backfire.

Thirdly, and related to this, in the wake of global stagflation, the Europeans were not alone in their hesitance to accept agricultural imports. A worldwide shift towards more protectionism occurred in the agricultural sector. This development continued to bedevil the New Zealand economy and only gradually came to an end.

Robert Muldoon, Prime Minister and Finance Minister between 1975 and 1984, attempted to address the economy’s sour performance by pseudo Keynesian methods. As part of the so called “Think Big projects”, he led an ambitious campaign to reduce New Zealand’s dependence on foreign oil imports and increase the domestic heavy manufacturing industry such as the steel industry in Northland. His macroeconomic policy was unfortunately poorly designed and inconsistent.

Though Keynes had called for state intervention to stimulate demand, this did not imply gross misallocation of funds to poorly planned projects.

Muldoon’s short sighted and ill advised course maneuvered unsteadily between heavy state interventionism, including the 1982 wage and price freeze, and cautious flirts with reforms. Essentially, this misguided lingering highlighted his lack of any real vision.

In 1984, the country underwent a severe economic crisis. Muldoon and his National Party had failed to offer anything more sophisticated than a simple wage and price freeze, while clinging on to an overvalued New Zealand dollar. Foreign debt had accumulated to a level of 40 percent of Gross Domestic Product (GDP), well in excess of what crisis ridden countries such as Mexico and Argentina had taken. In this situation, the National Party called a snap election on 14 July. Labour scored an overwhelming victory.

4. Why did it happen and why in New Zealand? Analysing the intellectual sources

“Government bad! Market good!”

Notwithstanding the economic malaise the country faced in 1983 and 1984, the dogmatic zealousness with which economic reforms were implemented by Labour Minister of Finance Roger Douglas and his small group of cohorts in the Treasury Department presents somewhat of a puzzle to the outside observer.

How did a country known for its progressive policies, its welfare state and its anti nuclear and environmental policies so quickly and emphatically embrace the tenets of neoliberalism and the New Right?

The simplest answer is usually provided by the defenders of New Zealand’s neo liberal experience. They are quick to point out that New Zealand faced with tremendous economic structural problems and facing a severe crisis and government bankruptcy had little choice. A small country cannot continue down a path of isolationism, but must accept to navigate the tides and the ups and downs of the global market.

This is, of course, hardly a satisfactory answer. The country still had other policy options, such as moving towards a more neo corporatist direction, as in Western Europe, or a much more gradual and cautious reform programme such as that in Australia.

A more satisfactory answer can be provided if we follow some of the insights generated by the constructivist literature in international relations. Scholars in this tradition have questioned the static structure-agent relation embedded in the neo realist paradigm and posit a more dynamic interrelation between the two. Since our environment is socially constructed and interpreted, actors respond to their perception of the environment. Constructivist scholars emphasise the importance of what states make of their situation. In this process of forming one’s perception, it is of obvious importance what types of intellectual frameworks inform the actor and to what extent these parameters can be manipulated as a result of the inflow and acceptance of ideas. There is now a burgeoning body of literature on the influence of ideas on policy makers. Scholars basing their work on these premises emphasise the diffusion of ideas through network channels. The results of a “cognitive evolution“ might thus disseminate worldwide.

Especially interesting is the suggestion that while ideas might be out in the open, they have to find channels of access to policy makers and are then usually adapted to circumstances and institutional configuration of individual countries.

However, we should remind ourselves, that the influence of ideas on actual policy makers, particularly those originated by academics, has been pointed out quite some time ago.

Keynes himself asserted in 1936:

“Indeed the world is ruled by little else than ideas. Practical men, who believe themselves quite exempt from any intellectual influences, are usually the slaves of some defunct economist. Madmen in authority, who hear voices in the air, are distilling their frenzy from some academic scribbler of a few years back.“

In the case of New Zealand, it seems fairly evident that the type of ideas and intellectual constructs embraced by Douglas and his associates at Treasury were imported from abroad, seeing that they constituted a revolutionary break with New Zealand’s state interventionist and later Keynesian tradition. Since the ideas behind the reform programmes were so alien to the New Zealand context, how can we account for this policy turn? Where, then, did these ideas originate?

In this context, the two major documents released by Treasury following the 1984 elections, Economic Management, and the 1987 elections, Government Management are informative to study. Economic Management was prepared by Treasury in a mere six weeks and provided the outline for the economic policies for the following six years. The spirit and at times even the letter of these documents betray their heavy indebtedness to the ideology of the New Right.

Most centrally, the neoclassical ideology of the Chicago School, the Public Choice writings and Austrian economics left their heavy imprints on the guidelines which were to dominate the New Zealand reform process.

A thorough summary of these intellectual sources would be well beyond the scope of this paper. However, one can adequately summarise these intellectual sources by pointing out the common themes stressed by these writers, namely a fundamental distrust in the state and a reliance on the market for the efficient allocation of resources and the greater good.

Or, to put it into slightly more acerbic terms, just as George Orwell’s pigs had chanted “Four legs good! Two legs bad!’ , so Friedman, von Hayek, Buchanan and their cohorts were chanting “Government bad! Market good!”

While New Zealanders profited over the decades from a benevolent state interventionism, Friedrich von Hayek, epitomising the Austrian school, portrayed the state as an inevitably power maximising leviathan, eager to clutch its paws around individual citizen’s liberties. Thus, the state was virtually guaranteed to intervene into an ever increasing array of individual liberties, thereby perpetuating a journey down a “road to serfdom”. The market, on the other hand, provides innovation and allows for creative discovery.

Chicago School economist Milton Friedman also strongly criticised government’s tendency to curtail an individual’s liberty. He postulated a minimalist role for the state. Only the unregulated market would provide for the most efficient price setting, send out the “right” signals, and thereby foster and encourage the activities of the utility maximising individual. Consequently, Friedman rallied against the welfare state and against any state intervention beyond a closely circumscribed array of public goods.

The sum of actions of rational, utility maximising individuals, on the other hand, would provide benefits for evelyone as the economy would move towards an equilibrium.

This semi religious belief in the invisible hand of the market in efficiently allocating resources and a general distrust in government was complimented by some of the Public Choice theorists, also originating at the University of Chicago as well as Virginia. Public choice applies some of the basic tenets of economics to political activity, arguing that bureaucrats, far from being benevolent altruistic and high spirited individuals, working in the interest of the greater public good, are really just as pettily minded profit maximising as anybody else. Thus, they attempt to maximise their department’s budget, size and scope.

How did Chicago influence New Zealand? What were the channels of influence along which these ideas travelled? And what characteristics of the domestic structure, emphasised by constructivists like Risse Kappen, nourished the implementation of the reform programme?

In this context, it is important to recognise the importance of channels of intellectual exchange with the United States. A number of Treasury officials had received their graduate training in the United States. To some extent, this mirrored the development in Latin American countries, particularly Chile and Mexico, where students trained in the US (the “Chicago Boys” in the Chilean example), applied with almost religious zealot the theories they had been indoctrinated with to restructuring the domestic structures of their home countries.

Similarly, many NZ Treasury officials had spent time at academic institutions in the US or had previous experience at such free market bastions as the World Bank or the International Monetary Fund (IMF).

We should mention in passing that many New Zealanders began to develop a negative self image of their own country as a sleepy backwater prone to old fashioned ‘boring’ Keynesian state interventionism. They were fed up with Muldoon’s heavy handed and fairly authoritarian paternalism.

In addition, we can point to at least two other intellectual sources.

First, there is the IMF. Schwartz points out that New Zealand’s reform programme bears striking similarity to the recommendations of the IMF for structural adjustment. New Zealand removed its wage, price and interest controls. deregulated financial transactions and phased out subsidies for manufacturing and agriculture. As mentioned previously, some NZ Treasury officials had professional experience at the IMF.

Secondly, it is certainly no coincidence that New Zealand launched its reform programme a mere five years after a similarly minded individual had ascended to power at 10 Downing Street. The former colonial power Great Britain still exerted an intellectual hegemony over New Zealand. Thatcher exhibited distrust towards the state and its role in the economy, initiating an expansive programme of privatisation and an extensive restructuring of the public sector. She also significantly curtailed the role of unions.

Meanwhile, in the United States, supply side economics and market liberalisation also carried the day after the election of Ronald Reagan in 1980. Reagan’s policies included measures such as deregulation, prominently in the field of telecommunications and airlines, “rolling back the state”, cutting down welfare expenditures, and enacting tax cuts, particularly at the top end of the income scale.

Following the constructivist research agenda, the particular domestic structures of a host nation also ought to deserve attention in an analysis of the impact of ideas on a given polity. In the case of New Zealand there are indeed particularities, in fact peculiarities which fostered the swift and rapid enactment of a comprehensive package of economic reforms. Two central factors merit our attention here.

First, as part of its colonial heritage, New Zealand had up until 1993 a Westminster style “first past the post” system and only two major political parties. In fact, New Zealand constituted a more perfect example of the Westminster model than the British motherland. Thus, once Labour had got hold of power in 1984, it commanded a comfortable absolute majority of seats. Political opposition thus had practically no way of manipulating the course of events. The same applies for the situation of the National Party after 1990. Because of the amount of power the executive could wield in this system, no checks and balances were in place to act as a dam against the blitzkrieg style policy making approach of Mr Douglas. Thus he and his intellectual companion in the Treasury Department were able to quickly enact their programme.

There was no second chamber of parliament, no effective opposition and no presidential veto to impede the onslaught of reforms.

Secondly, Treasury played a central role in the reform processs. In fact, it “became the principal initiator” and formed a “consistent, cohesive, intellectually convicted group” as Prime Minister Lange later recalled. It was able to do so owing to its “near monopoly position with respect to economic policy advice” within the “unitary, centralized structure” of the political system in New Zealand.

Because the reforms constituted such a radical break with the intellectual tradition hitherto pursued we must look abroad for some of the intellectual sources of the New Zealand sources. In this context it is enlightening to accept the premise of the constructivist turn in international relations and consider how ideas and norms can influence policy makers. The Treasury documents outlining the economic reform programme bear the heavy imprint of the Chicago school, the Austrian school and to some extent the insights of Public Choice. Based on the premise of a distrust of the state and placing faith in the invisible hand of the market, these theories shared in common their advocacy of relying on an unregulated market and a minimised state.

They made their way to New Zealand by way of intellectual interchange with the United States. A feeling of disdain towards Muldoon’s heavy handed authoritarianism, commonly yet falsely associated with Keynesianism helped usher in a paradigmatic intellectual change in New Zealand and a shift towards the free market ideas of Chicago. Domestic structures, such as a Westminster style political system, ensuring an absolute majority for one party, and the strong influence, which Treasury could exert, both contributed to the implementation of these ides in to practice.

5. A Model Strategy? Analysing the implementation of the “New Zealand Way”

In 1984, economic crisis mandated immediate action. Defenders of the reform programme argued that there was little choice to a comprehensive restructuring in light of the apparent failures of Muldoon’s pseudo Keynesianism. In any case, in the early 1990s “Model New Zealand” was touted in the international press as a success story and not only by the OECD. A never ending stream of international journalists, academics, and politicians descended perennially upon Wellington to explore what it was that had turned this small South Pacific nation into a “job creation machine”.

Commonly, New Zealand’s relatively low unemployment rate was mentioned along with its economic growth rate as measured by GDP. In 1993, GDP grew by 4.8 per cent, by 6.1 per cent in 1994 and by 3.3 per cent in 1995. Employment grew by 2 per cent in 1993, 4.3 per cent in 1994, and 4.7 per cent in 1995. Meanwhile, unemployment declined from 9.5 per cent in 1993 to 8.2 per cent in 1994 and again to 6.3 per cent in 1995 (see also appendix).

Government was able to record a surplus in its budget balance, allowing it to enact a tax cut in 1997. The implication was, of course, that both developing countries and the advanced industrial countries could stand to learn a lesson or two from this powerhouse in the South Pacific. Slavish adoption of an IMF style structural adjustment programme seemed to have paid off for the Kiwis. An economy, which up until the 1980s had exhibited sluggish growth and still bore uncanny resemblance to a developing country owing to its heavy reliance on a large commodity sector, was now showing signs of remarkable growth.

Meanwhile, the advanced industrial countries of Europe were suffering no or slow growth while facing a pressing structural unemployment problem. There was considerable debate about liberalising the labour market and restructuring the public sector in order to be able to successfully compete in a global economy. New Zealand had enacted all these changes and seemed to be harvesting the fruits the reform programme bore. It had gone from being extremely regulated and protectionist to being the most ardent supporter of an unregulated market environment. New Zealand’s remarkable reform programme seemed to translate into impressive economic benefits. Thus, the country seemed well suited to serve as a model for coping with the challenges of globalisation.

However, a closer look reveals a much more mixed record. Upon closer inspection, it becomes evident rather quickly that the 1993-95 economic boom constituted little more than a temporary recovery from almost a decade of recession. Throughout the 1980s, the payoffs from the reforms appeared far from evident. New Zealand went through a drawn out period of extremely painful adjustments. On many indicators, such as employment, the economy is returned to pre 1984 levels only in the late 1990s. In the following section we shall examine the economic performance in more detail.

As I will point out, the country paid a very high price for its “success”. Both the social cost is chilling and the issue of loss of national autonomy is far from a purely academic concern for many Kiwis. Privatisation and economic liberalisation has meant that many economic decisions are no longer being made in Wellington, but in corporate headquarters in Australia, Britain and the US.

Due to its reliance on foreign capital both in the form of portfolio investment and FDI the country has made itself vulnerable to the whims of the international financial markets, as became painfully obvious during the Asian crisis. A genuine success is New Zealand’s cutting edge technology in the field of agricultural engineering. But overall, a sober analysis of the costs and benefits of the reform programme cannot lead to the sameenthusiastic conclusions of the international financial media.

Let us consider the economic side flrst. Throughout the 1980s, New Zealand’s macroeconomic indicators were anything but impressive. In fact, between 1985 and 1992 total growth across OECD economies averaged 20 percent, while New Zealand’s economy shrank by one percent. In both 1989 and 1991 GDP growth was negative. Between 1987 and 1991, the unemployment rate more than doubled from 4.1 to 10.7 percent, reaching unprecedented levels and exceeding the OECD small member countries’ average (see appendix 2 for further details). While labour productivity did begin to increase in 1986, this was mainly due to massive labour cutbacks and not even a consistent trend. In fact, between 1984 and 1993 productivity growth averaged only 0.9 percent.

While Muldoon’s practice of heavy borrowing from overseas was severely criticised, Labour actually continued this practice without passing down the benefits to NZ citizens. Both total public debt and public overseas debt continued to increase, the former reaching a record 80 per cent of GDP in 1987. Inflation continued to vex the economy until 1993, averaging 9 per cent.

In the short to medium term the reforms brought about the worst recession in New Zealand since the 1930s. The “reinvention” of government and the public sector translated into a massive rise of unemployment. A country in which unemployment was virtually unheard of now saw workers laid off by the thousands. Unemployment peaked up to record levels.

Yet after eight painful years of transition, the reforms finally seemed to pay off. In December 1991, inflation dropped to below two per cent. In 1993, the balance of payment deficit moved below two per cent of GDP and the government budget showed a surplus for the first time in fiscal year 1993/94. Real GDP began to grow again in 1992 and unemployment began to sink in 1994-95. However, unemployment was still well above pre 1984 levels and so was public debt. According to the OECD, real GDP in 1992 was still 5 per cent below the 1985-86 level. The GDP growth in 1993 seemed to have brought NZ merely back into a general trend of worldwide economic recovery.

In the meantime, New Zealand had become a dramatically different society. Before analysing the more recent development and the impact of the Asian crisis, it is worth shedding some light on the social costs of “Model New Zealand”.

New Zealand has always been proud of its social cohesion. A quasi social democratic commitment to social equality, equal wages and a welfare state had meant a stable, peaceful and socially cohesive society.

Now, as the commitment to “sleepy backward” Keynesianism went flying out of the window, so too, did the commitment to social equality. The income gap rose and as unemployment grew, so did social inequality. Despite a slight increase in productivity, real wages by 1999 had slightly decreased since 1985/86.

A lot of the growth in employment can actually be traced back to the growth of part time jobs which doubled from 200,000 to 400,000 between 1984 and 1995, while the number of full time positions decreased. These part time positions typically do not entail the same amount of benefits as full time jobs.

Following the first wave of corporatisation and privatisation, which lead to massive growth in unemployment, the National party, adding insult to injury, enacted a combined programme of welfare cuts and labour market deregulation in 1990/91.

Subsequently, poverty increased markedly. By 1991, 17.8 per cent of all New Zealanders lived below the poverty line, while the median income had declined by 19.2 per cent between 1982 and 1991.

Perhaps unsurprisingly, crime rates rocketed, violent crime increasing by 50 percent between 1982 and 1991, endowing New Zealand with the dubious distinction of having the third highest violent crime rate in the world.

New Zealand today has the highest youth suicide rate in the western world. For a country which is trying to portray itself as one of the few success stories in creating a bicultural society, Aotearoa New Zealand, the disproportionate rise in poverty and unemployment among its Maori and Pacific Island population presents at the very least a severe embarrassment.

Of serious concern is the emergence a two tier social stratification of society, which parallels racial lines and mirrors the unfortunate American experience. Symptoms of this development are the growth of urban ghettos in South Auckland and the growth of criminal youth gangs among Maori and Pacific Island youths.

Following the cuts in the welfare system enacted by National in 1990, real poverty emerged in New Zealand to a degree previously unprecedented. There was a rapid growth in the number of people reliant on soup kitchens and private welfare organisations. Furthermore, corporatisation and privatisation of the Housing Corporation has obliged this former component of the welfare state to raise profits. A logical result has been the steady increase in rents and sales of a number of flats. This policy accepted the eviction of the most needy, precisely those for whose purpose the system was created. This lead to the emergence of homelessness for the first time in the history of the country.

At the same time, the corporatisation of higher education has meant the introduction of steep fees for tertiary education. Government drastically cut its spending on the education sector. While New Zealand students previously were obliged to a nominal fee of approximately NZ$100 per academic year, rates increased to between NZ$3000 and NZ$20,000 by 1999. Student loans are available, but at market level interest rates only. At the same time, student allowances were cut both in size and scope. This has contributed further to social stratification and inequality. Meanwhile, the policy of privatisation and corporatisation was extended to cover the health sector with the better off being offered the option of buying into private health insurance schemes. Meanwhile. the quality and scope of public health provision is deteriorating.

In the medium to long term, the radical privatisation programme and liberalisation of the economy has made New Zealand extremely dependent on volatile international financial markets. Such dependency became readily apparent during the Asian crisis.

As speculators withdrew their money from the overvalued Asian currencies they did not stop and discriminate, thereby excluding New Zealand. The Asian flu rapidly spread to the country, plunging it into recession and causing a fall of the NZ dollar to below 50 US cents for the first time in eleven years. New Zealand’s Top40 share index followed the dramatic decline of its Asian cousins in late 1997 and again in June 1998. In a sense this was not surprising. seeing that New Zealand suffered from similar problems as Thailand did, namely a large current account deficit, caused by the large inflow of foreign capital. While superficially speaking, the situation might be seen as different from Thailand because a large proportion of the deficit was due to large sale FDI, foreign investors in East Asia had thought exactly that to be true of countries there.

It is clear that the negative impact of the Asian crisis also had to do with the extent to which Asian countries, such as Japan and Korea, had begun to replace Britain and Europe as main outlets for New Zealand products. Owing to the persistence of trade barriers to agricultural sectors, New Zealand farmers were glad to find customers in resource poor commodity importers such as Hong Kong, Singapore and Taiwan. The rise of the New Zealand dollar versus the currencies of most of its Asian trade partners inevitably made its products more expensive and thus less attractive. This also translated into losses in revenues from the tourism sector. Furthermore, since Australia toik 20.3 percent of NZ exports, some indirect effects also came to play a role.

The exposure of New Zealand’s economy to the international financial markets is so high because of a perpetual current account deficit. The external deficit to GDP ratio hovers between 6 and 7 percent, while the foreign liabilities amounted to 80 percent of GDP in 1998. This level of foreign debt was a record high for any OECD country. It makes New Zealand dependent on the volatility of the market. To some degree, this is a result of the policy of the private sector to accrue high levels of foreign debt, in order to finance investment so as to stay internationally competitive. Another large causal factor of the problem of a current account deficit is New Zealand’s radical privatisation programme, enticing overseas investors to invest in a country with a very business friendly environment and causing profits to be repatriated. The stock of foreign direct investment more than tripled between 1989 and 1994, now making up one quarter of the GDP. Whether this level of foreign direct investment can be sustained over a long term period now that key assets of the New Zealand economy have been sold off into private hands is, however, far from certain.

Regardless of whether or not one accepts the neoliberal premise that privatisation of public enterprises results in overall efficiency gains for the economy, for a small country such policy raises the non-trivial concern over real loss of sovereignty. Foreign control over New Zealand is anything but a purely academic subject. In 1995, foreign investors owned half the stock market, 40 per cent of government bonds, while foreign ownership of companies amounted to 33.6 NZ$ billion as compared to government assets of 30 NZ$ billion. Around 90 percent of the banking sector is foreign owned, primarily by Australian companies.

US, British and Australian companies profited from the wave of privatisations, buying up companies at relatively low prices, though NZ taxpayers’ money helped create the bulk of the infrastructure of these companies in the first place.

Major examples of privatisation include the sale of Telecom, Air New Zealand, Bank of New Zealand, New Zealand Rail, and the cutting rights for the states’ forests. At the same time, Asian investors bought up large shares of NZ real estate, both commercial property and forestry land. These developments led one NZ politician to comment that “we risk being transformed into sharecroppers on our land”.

With telecommunication, transportation, the financial sector, the energy sector and increasingly the natural resource base and urban real estate being turned over to foreign owners, constraints on the array of policy measures a NZ government can undertake are quite severe. In a small country, privatisation programmes run the risk of attracting predominantly foreign investors due to the small domestic capital basis. As the case of New Zealand demonstrates this can leave the “independence as a nation substantially undermined”, with decisions affecting the economic and political life of the polity being made in boardrooms in New York, London and Sydney and no longer in Wellington.

This also implies that for the sake of marginally reducing its debt levels, the NZ government has terminally abandoned its control levers over a large section of the economy, now no longer controlled by a democratically elected government, but rather by purely profit oriented private businesses. It has also given away valuable sources of revenue which are now used to maximise private sector profits. These profits, in turn, are being quickly repatriated to overseas locales. For a small country, following the ‘New Zealand Way’ there is a very real danger of turning into a banana republic.

However, while large scale enterprises where sold off to foreign buyers, New Zealand has been fairly successful in developing cutting edge products in a number of agriculture related technologies, thereby occupying specialised market niches. Companies specialise in high tech agricultural products and services, particularly geared towards the dairy and sheep farm industries. These range from technical equipment for livestock feeding to livestock genetics services. Companies have the advantage of profiting from high quality research and development conducted at the Department of Technology at Waikato University in Hamilton and the Department of Agricultural Engineering at Massey University in Palmerston North. High quality research in agricultural sciences is also being carried out on the South Island at the Animal Division and Food Sciences Department at Lincoln University in Christchurch. There are early signs of the development of a “cluster economy” in Hamilton where the university promotes the co operation with the regional Crown Research Institute (CRI) and the emergence of spin off companies commercialising in some of the fruits of the research activity. These are encouraging signs and indicators of New Zealand taking advantage of its experience, expertise, and technical know how to develop unique globally competitive leading products.

This is an indication of acknowledging and profiting from niche markets which other, larger countries are either unaware of or incapable of penetrating. However, we might voice some concern about the fact that these products are still related to agriculture. Thus, the economy’s reliance on this sector is sustained.

6. Conclusion: A Mixed Picture

New Zealand has launched an ambitious and comprehensive series of reforms, commencing in 1984. The country chose to respond to the challenges implied by a globalising world economy in a fairly radical fashion, moving from being one of the most regulated economies in the OECD to the opposite extreme.

This paper has analysed the New Zealand reform programme in a quest to explore its feasibility as a model for other small states in coping with the pressures of globalisation. It is commonly argued that increasing interdependence, exponentially growing trade flows and expanding foreign direct investment are undermining the nation state’s level of autonomy. More precisely, the nation state loses its capability to manipulate key macroeconomic tools and thereby effectively to control key parameters of public policy making. As my analysis has shown, the ‘New Zealand way’ presents a mixed track record. The fairly limited successes of the much heralded “Model New Zealand” have come at a significant cost. Unemployment, poverty, and social inequality all stand at unprecedented levels today in New Zealand. While some macroeconomic indicators have been stabilised, the short to medium term impact of the reforms has been devastating. The short term recovery of the mid 1990s faded in the wake of the Asian crisis.

New Zealand’s high level of foreign debt combined with an extraordinary level of foreign direct investment means that the country is highly exposed to the whims of the international financial market.

Owing to large scale privatisations, initiated in the mid 1980s as a measure to reduce foreign debt and in line with the neoliberal antistatist dogma, substantial sections of the New Zealand economy are now controlled by Australian, American and British companies. This leads to the repatriation of profits from NZ operations and a huge current account deficit. It also means that the NZ government has voluntarily abandoned its capability of controlling large sectors of the economy and has given away revenue generating resources.

The NZ government thus finds the range and effectiveness of its public policy options severely curtailed, not least due to the Fiscal Responsibility Act, the Public Finance Act and the Reserve Bank Act, all of which constrain the role of government in the economy.

It will be interesting to follow the further developments of the New Zealand economy. A current assessment of the reforms, however, cannot lead to an endorsement of any such package of measures for other small states. The costs are quite considerable, while the benefits of a policy of effective capitulation to the market seem fairly limited.

Journalists, policy makers, and academics will probably continue to flock to Wellington to study this most ambitious of all public sector reform programmes.

Yet a comprehensive candid assessment about the overall results of this programme leads to the conclusion that New Zealand in liberalising its economy has overdone it.

Download this report (pdf)

The New Zealand Way. European Consortium for Political Research

Jacinda Ardern is the very hero the global left needs right now – Van Badham.

“The signal this sends is that this is life in the 21st century.” former NZ Labour Prime Minister Helen Clark.

The achievement here is Ardern’s marriage of the old left economic programme with the new explicitness of identity politics and it resonates because it’s sincere. Failure to bridge these positions will doom all of us.

The future of the left is bright if it looks like Jacinda Ardern and Alexandria Ocasio-Cortes.

“The people closest to the pain should be closest to the power and they should pursue power, without shame.” Alexandria Ocasio-Cortes.

As social media birth announcements go, Jacinda Ardern’s handheld Facebook Live of herself and her newborn Neve Te Aroha Ardern Gayford is charming.

New Zealand’s prime minister introduces her new baby with radiant sincerity. She thanks her midwife and the hospital staff for their generous professionalism, and New Zealanders for their kindness and gifts. With a quick cutaway, she even jokes with the baby’s father about his “dad jumper”.

But as a political communication, the video is matchless. In an epoch overcast by growing shadows of reenergised rightwing authoritarianism, Ardern’s public hospital nativity offers a luminous symbolic affirmation of her leadership not just of New Zealand, but of the western electoral left.

The leader of the first Labour government in New Zealand for a decade shares the explicit left agenda for investment in health, education and climate action, public housing, social justice. Ardern’s pledge to build “a kind and equitable nation where children thrive, and success is measured not only by the nation’s GDP but by better lives lived by its people” is the ancient standard of our side.

Yet while recent celebrity left leaders have failed to win elections, or even nominations, Ardern gained the leadership of her party seven weeks out from an election, and she won.

She nearly doubled the Labour vote, wrangled herself into office with a complex multiparty coalition, and just passed a social democratic budget. Polls have held. The most recent gives her party and one coalition partner, the Greens, enough votes to govern between them. Her personal approval rating is a thumping 76%.

To understand why is to look beyond policy and into her representation of it. What distinguishes Ardern is her active embrace of what Walter Benjamin referred to as “the time of the now” and the diverse and complex identities of a community that no longer sees itself as by, for and of propertied, straight white men. Doing so shatters a traditionalism that imprisons the left even as much as it inspires today’s right.

Ardern is the first elected world leader to ever go on maternity leave. Of this, former NZ Labour prime minister Helen Clark noted:

“These are the kinds of practical arrangements working women make the world over, the novelty here is that it is a prime minister who is making them. The signal this sends, however, is that this is life in the 21st century.”

But the insight is enhanced by considering theorist Stuart Hall’s old observation that “Politics does not reflect majorities, it constructs them”. Local NZ commentator, Michelle Duff, lauded the events of Ardern’s maternity as a national achievement, writing, “Let’s just take a moment to appreciate that we, as a nation, have pushed the boundaries and created an environment where this can happen.” Clark said for New Zealand, this was merely “evolution”.

Observe, also Ardern who is Pakeha, not Maori meeting the British queen wearing a Kahu huruhuru: a Maori feathered cloak “bestowed on chiefs and dignitaries to convey prestige, respect and power”. It was a demonstration of a status conferred, and not stolen, and a representation of a New Zealand unafraid to show pride in its indigenous past even as it engaged in diplomatic pleasantry with its colonial one.

Little wonder that “the prime minister’s empathy with and interest in the indigenous people of New Zealand (is) improving relations between Pakeha [European] and Maori faster than at any other point in history,” a spokeswoman for Ngati-Haua, of the Tainui federation of tribes, has said.

In this case, the spokeswoman was responding to Ardern’s choice of “Te Aroha” as her newborn’s middle name, which refers both to a mountain where Ardern grew up and a Maori language word for love. “Everybody knows what aroha means,” says Ardern in her baby Video. Even though“everybody” doesn’t, every New Zealander certainly does. Ardern’s grasp of the local from giving birth in a public hospital, to announcing her pregnancy on Instagram is exemplary. The town of Te Aroha is planning a celebration of their namesake baby’s birth; plans are to paint its buildings pink.

The achievement here is Ardern’s marriage of the old left economic programme with the new explicitness of identity politics and it resonates because it’s sincere. Failure to bridge these positions will doom all of us.

Theorist Wendy Brown explained this in her 1999 essay of prophetic relevance to today’s particular political moment. Brown writes of a “left melancholy” as a state of wilful, purist political nostalgia, in which the left “has become more attached to its impossibility than to its potential fruitfulness, a Left that is most at home dwelling not in hopefulness but in its own marginality and failure, a Left that is thus caught in a structure of melancholic attachment to a certain strain of its own dead past.”

It’s hard not to see this melancholy in the celebration of electoral defeats as somehow moral victories, when across the world the present, visible reality for women, indigenous people, the LGBTQIA+ community, refugees and so many others is that electoral outcomes represent life and death stakes.

The alternative proposition is to remember “that the people closest to the pain should be closest to the power” and they should pursue power, without shame. This statement was quoted by the victorious Alexandria Ocasio Cortes, who delivered a shock upset to the established order when she won a Democratic primary in New York this week.

In a party where the top three positions are held by septuagenarians, commentator Dana Milbank saw Ocasio-Cortes’s election not as a disruption to the Democratic trajectory but an event of happy augury. “The emerging electoral majority that already dominates the party and will soon dominate the country,” he observed “is progressive, young, female and nonwhite. It is no accident that Ocasio-Cortez, a 28-year-old Latina, is all four.”

If today’s left is going to stand a chance against an ascendant, muscular right, my hope is that she and other avowed socialists emerging within her electoral generation eschew the stale temptations of left melancholy for energising examples of a visionary left that looks as different to its past as a pregnant woman in a feathered cloak does to a room of suited men.

“Strong men” of the right are now lining up governments from Italy to Turkey to the USA. The times of the now are ones in which we can construct majorities of a diversity they cannot and do not wish to represent.

We can hope the influence of Jacinda Ardern and Alexandria Ocasio-Cortes spread, or we can ensure that it does. The stakes for the marginalised remain life and death.

The Commonwealth can kickstart a global offensive on climate Change – Jacinda Ardern.

The task ahead is immense, but New Zealanders know it can be achieved. We have a proud history of this kind of leadership.

Leaders of Commonwealth nations are meeting in London this week instead of the South Pacific nation of Vanuatu because things did not go according to plan. In 2015, cyclone Pam roared across Vanuatu, knocking out power, crippling water systems and levelling homes, schools and churches.

In only 24 hours, the storm dashed the island nation’s hopes of hosting the Commonwealth summit. Three years later, many communities have yet to fully recover, in a place where the impact of a changing climate is on full display.

Vanuatu is one of New Zealand’s Pacific neighbours and friends and its experience is an increasingly common one. In February, Tonga was hit by its worst cyclone in decades, cyclone Gita. When I visited the country in March, I spent time with schoolchildren who were learning in tents, the roof of their school had been blown off and the classroom walls destroyed by the storm.

Such extreme weather events are tragedies. They are also provocations. They tell us that climate change is not a theory, or a projection, but something that is already happening. They tell us we must be more ambitious when it comes to tackling this urgent global challenge.

The Commonwealth heads of government meeting is a good place to start. Twenty eight years ago, the same meeting produced the Langkawi declaration on the environment, among the first collective statements to cite greenhouse gas emissions as one of the chief problems facing the world. I am confident that this year’s gathering can be just as decisive by fostering bold commitments to step up climate action.

And while the task ahead is immense, New Zealanders know it can be achieved because we have a proud history of leadership on challenges than can seem too hard to contemplate.

We were the first country in which women won the right to vote, we were at the forefront of the anti nuclear movement, and we were at the table when the United Nations was born. And we are ready to lead on climate change, the defining challenge of our generation.

That is why my government has committed to setting an ambitious new target of achieving carbon neutrality by 2050. In June, we are starting a consultation process on how to enshrine this commitment in law.

Our plan includes an expert Independent Climate Commission which will develop carbon budgets through to 2050 setting a path to carbon neutrality that maintains enough energy to run our economy and country. Along the way, we are committed to helping regions and industries directly affected by the transition move away from fossil fuels, with billions of dollars of investment in local infrastructure and clean energy projects on the horizon. We are also active in building international cooperation on climate action.

Nearly half of New Zealand’s emissions come from our world renowned farming sector. This is why we lead the 49 nation Global Research Alliance that is developing techniques to reduce agricultural emissions without compromising food security. And that is why we are committed to helping other countries achieve more climate friendly agricultural production, in ways that will increase farmers’ yields and build resilience while reducing emissions.

Alongside the UK, we belong to coalitions of forward thinking countries and cities pressing to phase out coal generation, eliminate harmful subsidies that encourage wasteful fossil fuel use, and help our economies transition to carbon neutrality.

The international consensus on climate change in Paris in 2015 was a historic achievement. Now we all need to do our part by delivering on what we signed up to.

This means setting ambitious and concrete goals, like New Zealand’s plan to achieve 10000 renewable electricity generation by 2035. And it means agreeing on the finer details around holding countries accountable for reaching their Paris targets.

Leadership on climate change cannot be left to the big economies. It demands broad and deep action. New Zealand contributes less than 1% of global emissions. Yet together the world’s small emitters account for about a quarter of global emissions. History calls on us to play our part.

At this week’s Commonwealth meeting, I’ll be thinking about Vanuatu’s experience and the summit that couldn’t happen. I’ll also be guided by a Maori saying from my country Mo tatou, a, mo ka uri, a muri ake neighbour, for us and for our children after us.

That is what’s at stake when we talk about climate Change, the world we’ll leave for the generations that follow us. They are why we need to act now, with purpose and courage.


Jacinda Ardern is the prime minister of New Zealand

48 hours with Jacinda: warm, earnest, accessible. Is our PM too good to be true? – Amanda Hooton * Jacinda Ardern on life as a leader, Trump and selfies in the lingerie department – Eleanor Ainge Roy.

On a cool grey morning in Wellington, in the doorway of her office on the ninth floor of parliament, the 25th prime minister of New Zealand is looking about as worried as anyone with her famously enormous smile is capable of. “I‘m so sorry, I’ve given you nectarine hand,” says Jacinda Ardern, a moment after shaking hands. “I was just eating one, and you know how the juice goes everywhere. But anyhow, welcome!”

Wiggling her fingers, she leads the way into her office, a big room with a curving wall of windows.

She takes a seat at a large wooden desk and begins detangling a pair of headphones while examining a pink Tshirt with the words “Rt Hon Spore” written on it. Adern has attended annual music festival Splore several times. “I better not strip and put this on,” she says reluctantly. Did her partner, fishing show presenter Clarke Gayford, get a Tshirt, too, asks her social media editor, setting up camera gear. ”Yes,” says Ardern. ”Something to do with fishing I can’t remember. But mine is better.”

I’m not supposed to be bothering Ardern, I have permission to shadow her for two days, with an interview only at the end and at this point, my assigned media person begins to usher me out of the room.

Ardern turns. “You can stay longer while I do my boring rattle-off thing, if you like,” she smiles.

She spends the next 10 minutes doing a series of unscripted, perfect-first-time clips for social media. Then, obviously changing her mind, she pulls her dark floral shift dress off.

She’s wearing a modest black slip underneath, but still, I’m glad I’m not Charles Wooley. She puts on the pink Tshirt, then records a welcome to Splore. Smiling into the camera, she apologises that she can’t be present in person, and says she’s looking forward to seeing someone dressing up “in a brown wig, Labour rosette and pregnancy gut”.

So, fruitjuice, partial strip, self-parody. We’ve seen and heard a great deal about Ardern since she became prime minister last October, but clearly, there’s more to the world’s youngest elected head of government (until she was pipped by the new 31-year-old Austrian chancellor in December) than meets the eye.

Let’s not forget that Ardern performed a political miracle last October. Amid an international climate of disastrous defeats for social democratic politics, the US, UK, France, and Italy have all rejected their centre-left parties in the past 18 months alone, this 37-year-old woman led the Labour party to victory after almost a decade in the political wilderness, having taken over the leadership less than eight weeks earlier.

Ardern had been an MP for nine years but had no ministerial experience. Yet after a 54-day campaign ”Let’s Do This” she did it. She got Labour to within 10 seats of the National party, which had been in power for three three year terms (almost all of them under John Key). Then she conducted weeks of coalition negotiations that against all expectations snatched electoral victory.

“She was meeting with the Greens in one room, and New Zealand First in the other, and she kept both partners in the tent, talking,” recalls Annette King, former Labour deputy leader and 30-year political veteran, who was on the negotiating team. “And don‘t forget, they were talking to the National Party as well. She was moving from room to room, morning and afternoon, day after day. She had to hold in her mind exactly what she was negotiating, you can’t make a promise to one party and then renege on it with the other. It was a massive feat, and she led it all.”

Along with negotiating skill, Ardern had charisma on her side: she’s one of those intensely likeable people that almost everybody, well, likes. As David Farrar, a right-wing pollster, blogger and ex National Party staffer (so theoretically not a Jacinda fan) puts it: “Jacinda herself is very warm, very genuine, very comfortable in her own skin.”

Certainly, every time I go somewhere with Ardern, whom the entire country seems to call by her first name, there’s a feeling that can only be described as giddy. Grown men and women smile and laugh when they see her; they rush up for selfies; they clutch their hearts with excitement; they hug her often and hold her hand. At the first event I attend, the opening of a building at Victoria University in Wellington, someone gifts her a grey onesie for the baby she’s having in June. Someone else helps her hold a tuatara. “He may bite,” I can see the worried handler mouthing. Predictably, the lizard relaxes in Ardern’s hands, legs dangling.

Jacinda Kate Laurell Ardern was born on July 26, 1980. She has one older sister, Louise, and just before she started school, her family moved to the Bay of Plenty town of Murupara, infamous during the 1980s for gang violence. Her father Ross was the local police sergeant, her mother Laurell worked in the school canteen.

It sounds like a dramatic place to be a little kid: their house was pelted with bottles, the man who lived next door committed suicide , and the family babysitter turned yellow from hepatitis C. Ardern once recalled sneaking barefoot out through the back fence and coming upon her dad being confronted by several scary-looking men. ”Keep walking, Jacinda. Keep walking,” he told her.

Reading between the lines, one suspects she was one of those super-bright, super-nice kids you sometimes come across: a star debater, a school defender of the vulnerable (aged 5, she stood up to kids bullying her older sister), and the underprivileged those who had “no lunch and no shoes”.

At home: ”I was always trying to fix everything,” she explains. “I was the peacemaker. I remember hearing my sister packing her bags once to run away, and slipping a note under her door begging her not to go. I would have been so irritating.”

She studied politics and communications at Waikato University, and was employed as a staffer in Helen Clark’s government in the mid-2000s after a stint in London, where she headed the International Union of Socialist Youth and worked for Tony Blair’s Labour machine. When she returned, she entered politics in 2008 as a list MP.

She was 27, the youngest sitting member of parliament. One of her former teachers, Gregor Fountain whom she invited to her swearing-in as PM recalled her “amazing ability and curiosity. I remember her staying behind in class to talk about issues, because she really wanted to grapple with them.” At the end of high school, her year book contained various “Who’s most likely…‘I descriptions. Ardern’s category? “Most likely to be prime minister.”

Her mother and father were major influences and the family are close, though her scientist sister lives in London and her parents live in Niue, where Ross Ardern has been High Commissioner since 2014.

Ardern was raised a mormon: her nanna was converted via the classic Mormon doorknock and the rest of the family followed. And even though she left the church many years ago (mostly over its rejection of homosexuality), there’s no breach with her family.

“I can’t separate out who I am from the things that I was raised with,” says Ardern. “I took a departure from the theology, but otherwise I have only positive things to say about it.” She’s retained certain Mormon characteristics: the positivity, the surprising openness, the at times almost painful sincerity.

“I’m really earnest,” she agrees. “I think it annoys people! I asked a reporter about it once. ‘I She laughs. “And she said, ‘Um, look, yes, maybe.”‘

But if she’s earnest, she’s also ballsy: and perhaps that’s a Mormon legacy, too. “I’ve never had any hesitancy in talking to people,” she says. “If I’ve got a purpose and I need to go and speak to people, or knock on doors, I will. I don’t mind doorknocking for politics.” She grins. “Because nothing is as hard as doorknocking for God!”

The morning after we meet, I travel to Christchurch with Ardern’s entourage. Or rather, in front of it. Ardern, who uses commercial domestic flights, boards last, at the very back of the plane, and I’m not even sure she’s present until I see her after we land: a tall, black-clad figure striding across the tarmac pulling her wheelie bag, nodding (earnestly) as an elated-looking air steward talks beside her.

Her first meeting is to commit $10 million to the restoration of earthquake damaged Christ Church Cathedral. Various officials stand around awkwardly until she arrives and gathers them up with a big embracing motion. “This isn’t staged at all, is it?” she jokes cheerfully, as everyone shuffles towards the cameras. She gives a little speech, explaining that “the people behind me here have actually done all of the work”.

She performs this praise deflecting manoeuvre repeatedly.

At Canterbury University later in the day, when an official recalls that she was “mobbed” by students during her last visit, she immediately corrects him. “I don’t think I was mobbed,” she says with a smile. “It was raining, and I had an umbrella.” The next day, when US Vogue publishes a profile piece including a photograph of her looking like a supermodel, she responds by posting a picture on social media of her as a little kid with a “full ’80s mullet”.

It’s as if it’s impossible for her to take a compliment, I say. ”That’s actually true,” admits Ardern, sounding surprised. “No one’s ever said that to me before.”

After the cathedral, Ardern’s entourage heads 500 metres down the road for the launch of an electric car share company.

Off to one side, a small knot of protesters have gathered holding placards about their seven-year fight over earthquake insurance claims. Megan Woods, the local MP, wades in.

After a minute, I realise that Ardern, last seen being ushered towards the red carpet, is standing beside her. The protesters seem surprised. Someone called Gary begins to ask a very long question about obstruction and incompetence and the loss of his life savings. “OK, Gary, that’s enough,” says someone else, and Gary subsides. Ardern, who has been listening and nodding, says: “What’s the best way for us to communicate with you?” Several big trucks roar past, and she pauses. “Because there’s a long list of stuff we’re doing, and we want to make sure you hear about it every step of the way.” She shakes hands with several protesters, who look thrilled, then sets off back to the launch, holding a bag containing another onesie white, this time.

Ardern’s next function is with families of the 115 people who died when the Christchurch Television (CTV) building collapsed during the earthquake. Late last year, after six years, four investigations and millions of dollars, New Zealand Police announced it would not prosecute the building’s engineers for negligent manslaughter due to inconclusive and contradictory evidence.

The meeting takes place in a church and is closed to journalists, so a big group of us wait in a stiflingly hot anteroom. Someone is playing an organ at high volume close by, a long dirge which seems appropriate to Ardern’s words when she emerges.

“I felt not only a duty of care to come and speak to the families today,” she says, “but also just from a human perspective I felt it was important, being in the position I’m in, that we do everything in our power to prevent such a tragedy from happening in the future.”

She goes on to explain that many of the families are taking comfort from the idea of future legislation to allow for prosecution in similar scenarios. But the families’ representative Professor Maans Alkaisi, who lost his wife, GP Dr Maysoon Abbas, in the collapse looks entirely uncomforted when he appears. He wants a judicial review into the police decision and money from the government to support the families in a civil case.

“Ardern is a wonderful person,” he says, “very sincere. But she is considered to be one of the most influential female politicians in the world. We feel that if she asks for something, she can get it.”

The CTV case, which one commentator describes to me as ”a deep, painful open wound”, has the potential to become a problem for Ardern, as does the complex rebuilding of Christchurch as a whole. She campaigned on empathy and fairness, but empathy, however sincere, does not heal all wounds. If it leads to false hope, in fact, it can actually make things worse.

During parliamentary sitting weeks, Ardern typically spends Monday to Wednesday in Wellington, and Thursday visiting a regional area. On Fridays, she heads home to Auckland. The day following her return from Christchurch, I arrive at her home for our interview.

Ardern currently lives in Point Chevalier in Auckland (though a few days after we meet it is announced she and Gayford have bought a four-bedroom home 10 minutes down the road in Sandringham).

This is a startlingly normal-looking suburb, and her house is a modest, single-storey brick and tile building. It’s indistinguishable from others on the street; except, that is, for the two security guards, one old and one young, who travel everywhere with her.

They are standing against a dark fence that looks mostly like a fence you’d buy at Bunnings, and slightly like a fence that could repel a tank attack.

Ardern is inside, wearing another shift dress and tights, but no shoes. She pours me a lemonade (“homemade, but not by me”) and sits on her low grey couch in her bright living room, opposite a TV and a large heap of shoes notionally piled into a basket. Outside, there’s a little patch of grass, some hopeful jasmine and lots of small weeds beside the window the garden of someone who’s rarely home.

You must be exhausted, I say: all those events, all that hand-holding and hugging. “I like it!” she exclaims. “Partly it’s probably me: I always put my arm around them.

During the election campaign, people would say every day, ‘Can I hug you?’ and I’d say, ‘Of course you can!’ I think it’s wonderful if people think I’m accessible enough that I can do that’ I take it only as a compliment.”

She pauses for a moment. “Of course, I do get angry, and upset,” she says. “Not with the hugging but I am a normal human.”

This is slightly surprising: one of Ardern’s favourite words is “robust”, and she often seems to brush off political criticism not to mention obsessive interest in her personal life with phrases like “it was a robust debate” or “I’m pretty robust”. So what’s her technique for managing stress? “Well, if something’s bothering me, in order to really work it through, I talk it out a lot. That’s my way of processing stuff.” She smiles. “Sometimes that means people around me have to put up with a lot of chat”

These things, she goes on, are part and parcel of political life: a life she chose a long time ago. She was handing out Labour leaflets at 17; three years earlier she interviewed Marilyn Waring former National Party MP, now a noted feminist and academic, for a school project.

“I thought her courage was phenomenal,” Ardern recalls. “So I went down to the school canteen where my mum worked, and found her phone number. And of course she didn’t pick up, and I left this long garbled message, as only a 14-year-old could do.”

A few weeks later, Waring called her back. “What I really remember about Jacinda was that she had specific issues she wanted me to address,” recalls Waring, now a professor of public policy at the Auckland University of Technology. “‘What do you think are the key issues facing my generation? What do you think about a nuclear-free New Zealand?”‘

Today, Waring feels hopeful about Ardern’s election, and also very relieved. “I can’t tell you: my generation [Waring was born in 1952] has cruelly stuffed it up, whether it’s the free market bullshit, the environmental devastation, or the incredible gap between rich and poor.

”Political transitions have to be dynamic like this, maybe like Canada, too because if you’ve just got the old boys hanging on, they make sure you never get to prove that they did anything wrong, and so you can never get anywhere.”

Now that this country has chosen Ardern, ”let’s just hope she can keep being herself, and having this lovely candour, and enabling us to trust. Politics is a terrible trap: you can’t transform it all on your own because the structures all work in such patriarchal Victorian ways.”

Even for those such as Waring, who have faith in Ardern personally, this is a worrying issue. As pollster David Farrar says: “Labour has so few really good ministers, they’ve had to load all the really important stuff on to just a few people, and they’re struggling.”

The composition of Ardern’s government won’t help. Any coalition is inherently unstable, points out Farrar: the more actors, the greater the potential for disunity. “The history of small parties in government in New Zealand is that they’ve all lost votes in the next election,” he explains.

”The problem is that if you, as a voter, think the government is doing a good job, why wouldn’t you choose Labour next time?”

This is, theoretically, good for Ardern, but small parties can become disruptive and hostile in a bid to avoid destruction, which can make government difficult. In this case, head of New Zealand First and Deputy Prime Minister Winston Peters has fallen out with just about everyone, in every party, during his long political career. And though the Greens co-leader James Shaw is a personal friend of Ardern’s, his party’s vote has already dropped to 5 per cent the cut-off for presence in parliament. “In 18 months,” says Farrar, “the pressure could really be on.”

Speaking of pressure, by June, Ardern will not only be PM, but also a mother. She discovered she was pregnant soon after coalition negotiations; and as is her way, she’s already announced lots of plans about what’s going to happen and when. She’ll take six weeks of maternity leave, during which Winston Peters will be acting PM, then she’ll return full-time, and Gayford will become the primary carer.

Gayford and Ardern met four years ago, when he (belying his knockabout radio DJ-cum-TV fisherman image) contacted her with his concerns about privacy legislation.

In his retelling, they met for a coffee and he discovered, to his amazement, that she liked Concord Dawn “a fantastically awesome heavy drum’n’ bass outfit”. He took her fishing, she caught a 51/2 kilogram snapper, dolphins and whales frolicked on cue. The rest, as they say, is history.

Gayford has previously described his main role as the PM’s partner as, “Just to make sure that she’s OK and be in the background going, ‘Have you eaten your lunch? Have you slept properly? You’ve got lipstick on your teeth.”

Perhaps unsurprisingly, he seems unfazed about fatherhood. “It’s not like we haven’t been through a few changes in the past year,” he points out genially, speaking on the phone from Wellington. “Although I’m lucky, because I get to clip in and out of her world. I still get to bugger off and go fishing, where everything’s exactly the same. But then I come home and put on a suit and go to an awards dinner where they announce your name as you come into the room.”

What has her being PM done to their home life? “Well, I have been making jokes recently that there’s three of us in the relationship now,” he laughs. “Me, her and the cabinet papers. And the cabinet papers appear just in time to ruin every weekend. They come in this big, security-coded briefcase, and it’s my job to go out and get it from the gate on Friday. And I gauge the severity of my weekend based on the weight of that bag.

So I walk in, and I stand there, and she looks at me and goes, ‘OK, so what do you think? I And then I go, ‘Not a good weekend, darling.’”

Early parenthood doesn’t lend itself to good weekends either, of course, but one of the unexpected details about Ardern’s impending motherhood is that, in fact, her work scenario is surprisingly baby friendly at least on parliamentary sitting days.

“We’ve got several newly elected members of parliament who have babies” explains Annette King. “And the Speaker of the House, Trevor Mallard, is called the Baby Whisperer: whenever there’s a baby around, Trevor’s got it.”

It is not unusual to see Mallard, in the Speaker’s chair, holding a baby while overseeing debates (he also apparently has a cot in his office), or members breastfeeding in chamber.

Ardern explains that Gayford will bring the baby and travel with her if need be, and that they’re open to ”friends and family” helping out: basically, her plan seems to be to keep doing the job as she does it now. “I don’t have many choices work-wise,” she explains. ”No one’s saying, ‘How would you like your work and home arrangements to be?‘ It just is what it is. So there’s no guilt, because if I want to do this job, there’s no choice.”

For all the initial reluctance, and the less than ideal preparation and timing, there’s no doubt Ardern does want to do this job. “I do enioy it enormously.” she says, almost sheepishly, tucking her legs underneath her. “It’s a job about spending time with people, advocating on their behalf, and making decisions for New Zealand. That’s what drove me into politics in the first place.”

A few days after our interview, Ardern makes a lightning trip to Australia, where I see her at a business lunch with PM Malcolm Turnbull. An unusually ebullient Turnbull starts his speech by telling everyone that Ardern came to his house the previous night for dinner, like a schoolkid boasting that the popular girl went to his party.

Ardern, in turn, is enthusiastic and charming.

She avoids (on this occasion) mention of tensions over university fees and criminal deportations, and makes much of Australia’s position as New Zealand’s valued trading partner (second only to China). while saying the historic trans-Tasman bond is as strong as ever. She also mentions a new domestic policy: a standard-of-living framework she plans to build in to the 2019 budget, measuring not only economic but social success.

“Yes, balancing the books matters,” is how she puts it to me. “But so does making sure that your people aren’t sleeping in cars, and your children aren’t living in poverty.”

She wants environmental and social measures, as well as economic ones, put in place so that we “can understand where our investment and spend is going and the impact of what we’re doing”.

If she pulls it off, Ardern‘s will be the first government in the OECD to implement “wellbeing economics” in a meaningful way.

Who knows if she’ll achieve this scheme or any other, for that matter. Her story, so far, reads like a political fairytale, but other wildly popular leaders Tony Blair, Barack Obama all lost support as the realities of power set in.

However beloved you are, once you are faced with tough decisions, which have winners and losers, you will inevitably disappoint people. Canada’s Justin Trudeau, another charismatic, liberal leader, saw his disapproval rating jump above 50 per cent this month for the first time since his 2015 election. If things don’t work out in this bold political experiment, it won’t be Labour or the government that takes the blame, it will be Jacinda Ardern.

Time will tell whether she has the political intelligence, endurance and luck to navigate this; if she has the ability to lead the nation safely through the shoal waters of 21st century politics.

Still, in a world in which we’re increasingly expected to accept alternative facts, and indefinite strongman rule, and threatening, isolationist policies from world leaders, it’s nice to be offered something and someone different to believe in. As Ardern puts it, barefoot in her modest house: “I don’t think too much about the magnitude of the job. I just immediately skip to, ‘Let’s get the plan going.”

Jacinda Ardern on life as a leader, Trump and selfies in the lingerie department

Eleanor Ainge Roy

In a Guardian interview New Zealand’s prime minister reveals how her life has changed and her ambition for a can do country.

It’s just gone lunchtime in New Zealand’s largest city and Jacinda Ardern arrives at her two bedroom suburban home after a primary school meet and greet.

The 37 year old prime minister of New Zealand and poster woman of progressive politics is sitting in the passenger seat of a blue Subaru, craving a muesli bar and wearing woollen shoes that look like slippers.

She has the movers in and will shortly relocate to a bigger, family-friendly home a few suburbs away, but apologises that the old house is mid packing and “a bit of a mess” (it’s not).

This time last year Ardern was known as a young opposition MP with a passion for eradicating child poverty, in fact she could rather bang on about it. She had a well stocked whisky cabinet, frequently popped up at music gigs, and would return journalists’ phone calls within minutes, at pretty much any hour of the day or night.

Fast forward and Ardern is now the leader of the country, six months pregnant and seeking advice on how to juggle milk bottles and briefings for Barack Obama.

Obama had two young daughters when he entered the White House in 2009, and instigated a domestic regime that allowed him to spend regular time with his family including nightly dinners.

“I did ask him [Barack Obama] how he dealt with guilt,” says Ardern, who first met the former US president last week.

She is in the throes of figuring out how she will balance parenting and the prime rninistership. Her baby is due on 15 June and she plans to be back at work six weeks later.

“He just talked about the things you can do. Just to do your best, and that there will always be elements of that [guilt] in the roles that we do, and probably to a certain degree just accepting that; but we are still doing our best.”

The challenges of buying milk

Ardern has a good natured disposition and genuine, megawatt smile but she is also a prime minister who rebels somewhat against her police minders by popping down to the corner shop. She believes New Zealand’s “unique perspective” has been undersold on the world stage. She never questions if she can juggle her many hats but simply sets her mind to the logistics of how.

“It [pregnancy] certainly can feel like an illness for a really long period of time,” says Ardern. “And I had 16 weeks of morning sickness. And no one knew about it. I think a lot of people struggle with things in their day to day lives that their workmates will never know about and I just happen to be one of them.”

The last year has been a rollercoaster for Ardern and her partner Clarke Gayford, but retaining some degree of normality despite their very changed circumstances is a priority as they embark on becoming parents. They hope to bring up their child with some of the freedoms they experienced as country kids living amid orchards.

“Certainly life has changed. It is just incredibly busy. But I really value being able to do normal things,” says Ardern, sitting in a retro armchair in her small, simple living room.

“So yes, I do still drive from time to time. The wonderful police officers who spend time with me I don’t think appreciate that, but I do still drive. I do still cook, not often, but just last week, I really felt like making one of my mum’s old recipes so I did. I do still go to our local department store to buy things like maternity jeans that no one else can really do for me.

“Getting stopped in the middle of the lingerie section when you’re trying to stock up on a few things by an older man who wants a selfie is a little bit awkward but I don’t let that get in the way of me trying to do normal things, because that is when I get to interact with people as well. Preferably not amongst the underwear though.

“Even going out to get milk becomes a little bit challenging. Just because there is a whole entourage that then travels with me for this simple thing. So I tend to try and find ways not to inconvenience a whole raft of other people, so it changes my mindset a little bit.

“The challenging thing from a work perspective is just the range of things on any given day that you’re dealing with, and making sure you have the head space to really be giving them the thought and consideration you’d like to.”

On Trump and women

A lot has been made of Ardern’s “niceness” and she is reliably warm, inclusive and fun. But underlying the down to earth charm is a determined feminist and canny career politician, who now uses eye rolls and smiles to express what her position as head of a “five eyes” nation no longer allows her to say.

For instance, on Trump’s treatment of women she says: “It is often easy to forget that people draw from the way that you behave. But all I know is that is something I can control and feel responsible for. And I know what I feel comfortable with, so when that comes to the way we portray women for me it’s just how I like to be treated, how would I like to be talked about, how would I like my mother to be treated and talked about, and that is the lens that I apply

“Can’t change the way that anyone else behaves though,” she says with a smile that doesn’t reach her eyes.

During the 2017 election campaign, Ardern was portrayed as the saviour of the beleaguered left; a panacea after Trump and Brexit; a do gooder who wanted to decriminalise abortion, increase paid parental leave, save the penguins and plant 10m trees.

“Do it for all of us,” said the British Labour leader, Jeremy Corbyn, in a video of support.

When asked what keeps her up at night now, Ardern, in her characteristically earnest way, nominates child poverty, climate change and a prison population that is increasing despite a static crime rate.

But is anything really changing under her leadership?

In her first six months Ardern has faced criticism that she lacks control of some of her forceful coalition cabinet ministers, that she is having afternoon tea with pop stars rather than the poor, and that she is prone to undiplomatic disclosures (after the Apec summit, Ardern told a friend Trump had mistaken her for Canadian prime minister Justin Trudeau’s wife within days the world had heard the remarks).

But despite a few small stumbles Ardern remains forcefully sanguine and has no trouble sleeping.

“It [being PM] is actually just an amplification of the thing I experienced as an MP and that’s the diversity of the people that you get to meet,” she says.

“And as much as you do get a whole host of sometimes really awful communication, you get some amazing things as well. The number of schoolchildren who write to me and say ‘I want to be prime minister too, PS can you do something about plastic bags?’ I love that.”

Why growing up Mormon matters

Ardern grew up in small, rural New Zealand towns, went to state schools and worked in the local fish and chip shop as a teenager. She and partner Gayford want their child to have similar upbringings, similar community minded values.

Ardern’s parents brought her up in the Church of Jesus Christ of Latter day Saints, a background that sowed strong seeds, and despite renouncing the Mormon church in her early 20s, she says its teachings continue to have an impact on her today.

“I am very service minded, I often think about what I can do for others, did that come from my mother, or did it come from the church I was raised in? I can’t really say, but I know it is something that I feel quite strongly about. So I have no doubt it had an impact on me.”

The day after a glamorous Vogue image of her posing in designer clothes on a windswept beach went viral, Ardern posted a grainy shot of her as a child with a mullet haircut, standing in the back of a truck with her schoolmates in the deprived town of Murupara; an infamous gang stronghold where her dad worked as the local police officer.

I’m just like you, the picture said. And you’re just like me.

“Since being pregnant it becomes, quite a welcome distraction, is not quite the word but reminder of life beyond the thing that you’re in. Because as with any job, that moment that you’re really tackling a big issue, or something is really causing you stress, that becomes the big focus and it is easy to think that is the most important thing in the world that you’re dealing with and of course everyone else should be concerned with too,” says Ardern, laughing.

“But I think the beauty of children, at least I know this to be true of my family, is that they draw you away from that thing, and just make you have that wider perspective. There have been a couple of meetings where I have been working away, very focused on an issue, and I’ll get a sharp kick in the ribcage and it is this little reminder that there is something else going on in my life, too.”

Ardern has worked under some of the most politically successful leaders of the past decades, including the former New Zealand leader Helen Clark and Tony Blair, the former British PM.

“I was one small cog in a very large machine,” she says of working for Blair in the Cabinet Office. “I was there at the time the leadership was transitioning from Tony Blair to Gordon Brown.

“I had this view, perhaps overly simplistically, that when a government creates [policy] overall, then that is what is then rolled out and applied across the board.

“What I saw was actually those rules can be misinterpreted. They can be capitalised on by consultants, they can lead to fear unless they are well understood.”

Ardern still follows news from Britain with interest and says she can’t deny “holding opinions” on Brexit, but says her government will continue to engage with a post EU Britain that democratically chose to leave, and has “our hand up and are ready and waiting” as a starting point for the UK to determine future bilateral free trade agreements.

Speaking up on a global stage

With the Commonwealth heads of government meeting (Chogm) just two weeks away in London, Ardern is preparing to make New Zealand’s voice heard on the global stage and not let the country’s tiny size and remote location get in the way. She would also like to advocate on behalf of smaller Pacific nations such as Kiribati and Tuvalu.

“Our other unique perspective is we are isolated, but we are isolated in a particular part of the world. Within the Pacific obviously there are challenges we are facing, we are not immune to the challenges of climate change, and even though our emissions profile might be small, we see ourselves as having a responsibility to amplify those places that will ultimately be as affected as we will be,” says Ardern.

Ardern has prepared a playlist of eclectic songs for the 24 hour flight to London, where she hopes to have breakfast with Corbyn, and meet her fellow Commonwealth leaders at a time when the Queen’s succession is becoming an increasingly open question.

Ardern says “no one really wants to discuss” succession plans, and it is ultimately “something that sits as a question for the royal family”.

The royals have longstanding ties and connections to New Zealand, Ardern says. She can’t remember the last time a voter asked her about the country becoming a republic it “is not top of mind for New Zealanders”.

However, she says: “When I have been asked for an opinion, I think within my lifetime I think it is a likelihood we will transition. It is not something this government is prioritising at all though.”

Ardern appears to envision an increasingly independent country contemplating a possible break from the motherland, seeking a louder voice on the world stage, and embracing New Zealand’s unique Pacific history and identity.

“On major issues, on things like climate change, or even nuclear issues, our view has been, and should be important,” she says. “I’ve never felt that diminished New Zealand’s view just because we are small and geographically isolated.

“I think our approach to life is the same approach in politics. We’re a very pragmatic people, perhaps because of our isolation, we tend to be pretty inventive as well. We’re not ones to say something is too hard, so when we’re confronted with challenges, be they big or small, we tend to tackle them head on, and without much question we just get on with it.”

Ring-fencing Rental Losses. An officials’ issues paper – NZ Inland Revenue Department.

Prepared by Policy and Strategy, Inland Revenue, and the Treasury.

March 2018


The Government has committed to a number of policy measures aimed at making the tax system fairer and improving housing affordability for owner occupiers by reducing demand from speculators and investors.

One of these measures is to introduce loss ring fencing on residential properties held by speculators and investors. This means that speculators and investors will no longer be able to offset tax losses from their residential properties against their other income (for example. salary or wages, or business income), to reduce their income tax liability.

Current settings

Under current New Zealand tax settings tax is applied on a person‘s net income. We do not generally ring fence income and losses from particular activities or investments. This means that there is generally no restriction on losses from one source reducing income from other sources though there are some exceptions to this general treatment.

Investment housing is currently taxed under the same rules that generally apply to other investments. This means that rents are income. and interest and other expenses (other than capital improvements) are deductible. Capital gains on sale of the property are not taxed unless the property is on revenue account. This could be, for example, because you are in a land related business (for example, a land dealer or developer), bought the land for resale, or sell the property within the bright line period of either two or five years (depending on when you first had an interest in the land). Most rental property investors hold their property on capital account and are not subject to tax on the capital gain.

While rental housing is not formally tax favoured. there is an argument that it may be under taxed given that tax free capital gains are often realised when rental properties are sold. The fact that rental property investors often make persistent tax losses indicates that expected capital gains are an important motivation for many investors purchasing rental property. While interest and other expenses are fully deductible, in the absence of a comprehensive capital gains tax not all of the economic income generated from rental housing is subject to tax. There is therefore an argument that. to the extent deductible expenses in the long term exceed income from rents, those expenses in fact relate to the capital gain, so should not be deductible unless the capital gain is taxed.

Aim of the proposed changes

The introduction of loss ring fencing rules is aimed at levelling the playing field between property speculators/investors and home buyers. Currently investors (particularly highly geared investors) have part of the cost of servicing their mortgages subsidised by the reduced tax on their other income sources, helping them to outbid owner occupiers for properties. Rules that ring fence residential property losses. so they cannot be used to reduce tax on other income, is intended to help reduce this advantage and perceived unfairness.

Officials are interested in feedback on the suggested changes outlined in this paper.

How to make a submission

Officials invite submissions on the suggested changes and points raised in this issues paper. Send your submission to who.webmaster@ird. with “Ring fencing rental losses” in the subject line.

Alternatively, submissions can be sent to:

Ring fencing rental losses

Deputy Commissioner, Policy and Strategy Inland Revenue Department

PO Box 2l98

Wellington 6l40

The closing date for submissions is 11 May 2018.

Submissions should include a brief summary of major points and recommendations. They should also indicate whether it would be acceptable for Inland Revenue and Treasury officials to contact those making the submission to discuss the points raised, if required.

Submissions may be the subject of a request under the Official Information Act l982, which may result in their release. The withholding of particular submissions, or parts thereof. on the grounds of privacy, or commercial sensitivity, or for any other reason, will be determined in accordance with that Act. Those making a submission who consider that there is any part of it that should properly be withheld under the Act should clearly indicate this.

Summary of the suggested changes

The proposed loss ring fencing rules will mean that speculators and investors with residential properties will no longer be able to offset tax losses from those properties against their other income (for example, salary or wages. or business income), to reduce their tax liability. The losses can be used in future years. when the properties are making profits. or if the person is taxed on the sale of land.

A summary of officials’ suggestions for the design of the loss ring fencing rules is set out below. These design issues are discussed in more detail in the chapters that follow.

Property the rules will apply to

It is proposed that the loss ring fencing rules will apply to “residential land”. We suggest that the rules use the definition of “residential land‘” that already exists for the bright line test which taxes sales of residential land bought and sold within either two or five years.‘

The rules would not apply to:

A person’s main home

A property that is subject to the mixed use assets rules (for example, a bach that is sometimes used privately and sometimes rented out)

Land that is on revenue account because it is held in a land related business (that is, a business of land dealing, development of land, division of land or building).

Portfolio basis

It is suggested that the loss ring fencing rules should apply on a portfolio basis. That would mean that investors would be able to offset losses from one rental property against rental income from other properties calculating their overall profit or loss across their portfolio.

Using ring-fenced losses

Under the suggested changes. a person’s ring fenced residential rental or other losses from one year could be offset against their:

Residential rental income from future years (from any property); and

Taxable income on the sale of any residential land.

Interposed entities

Under the suggested changes, there would be special rules to ensure that trust, company, partnership, or look through company cannot be used to get around the ring fencing rules. It is proposed that such an entity will be regarded as “residential property land rich” if over 50 percent of its assets are residential properties within the scope of the ring fencing rules and/or shares or interests in other residential property land rich entities.

Where that is the case. it is suggested that any interest a person incurs on money they borrow to acquire an interest in the entity (for example, shares. securities, a partnership interest. or an interest in the trust estate) would be treated as rental property loan interest. The rules could then ensure that the interest deduction is only allocated to the income year in question to the extent it did not exceed the distributions from the entity (deemed rental property income). any other residential rental income, and residential land sale income. Any excess of interest over distributions, rental income, and land sale income would be carried forward and treated as “rental property loan interest” for the next income year.

Timing of the introduction of the rules

It is proposed that the loss ring fencing rules will apply from the start of the 2019/20 income year. The rules could either apply in full from the outset, or they could be phased in over two or three years. We are interested in feedback on which of those approaches should be taken.


Property the rules will apply to

Under the proposed changes, the loss ring fencing rules would apply to “residential land”. The rules would use the definition of “residential land” that already exists for the bright line test.

Definition of “residential land

There is already a definition of “residential land” in the Income Tax Act, which is used for the bright line test which taxes sales of residential land bought and sold within two years. It is proposed that the loss ring fencing rules apply to land within that definition with the exceptions discussed below. Using the definition already in the legislation would avoid the additional complexity of having different definitions for different rules.

“Residential land” means:

Land that has a dwelling on it

Land for which there is an arrangement to build a dwelling on it

Bare land that may have a dwelling built on it under the relevant operative district plan rules.

However, “residential land” does not include:


Land used predominantly as business premises.

“Residential land” is not limited to land in New Zealand it would extend to overseas land. This means that losses from overseas residential rental investments could not be offset against other income in New Zealand.

Apart from the exceptions below, the rules would apply to all residential land, whether or not it is currently rented out. including bare land. This is because the proposed rules are aimed at levelling the playing field between residential property speculators/investors and people looking to buy their own home or land to build a home on.

Main home

The proposed loss ring fencing rules will not apply to a person’s main home. This is to ensure that a person who has a boarder in their main home, or who rents out a spare room occasionally, would not have to apply these rules, which are primarily targeted at residential investment properties. The meaning of “main home” would be the same as for the bright line test, which has a main home exclusion.

A person can only have one main home at a time. If someone has more than one residence, their “main home” would be the one they have the greatest connection with. That would be determined by looking at factors such as:

The amount of time the person occupies the dwelling;

Where their immediate family live;

Where their social ties are strongest;

Their use of the dwelling;

Their employment, business interests and economic ties to the area where the dwelling is located; and

Where their personal property is kept.


A significant number of family homes in New Zealand are owned by family trusts. The definition of “main home” would therefore ensure that a home owned by a trust can be regarded as a main home.

Like with the bright line rules, we suggest that a dwelling owned by a trust only be considered a main home (so not subject to the loss ring fencing rules) if it is the main home for a beneficiary of the trust. provided that a principal settlor of the trust does not have a different main home.

This restriction would ensure that trust ownership cannot be used to claim multiple properties as main homes. and so not subject to the loss ring fencing rules.

Mixed-use assets

The existing definition of “residential land” in the Income Tax Act would also include holiday houses that are sometimes used privately and sometimes rented out. However, many such properties would be subject to the mixed use asset rules, which already provide for the quarantining (or ring fencing) of losses where there is low income earning use of the asset.

We suggest that property subject to the mixed use asset rules should be scoped out of the rental loss ring fencing rules, because the mixed use asset quarantine rules will cover most if not all mixed use asset losses. We are interested in feedback on whether property subject to the mixed use asset rules should be outside the scope of the loss ring fencing rules.

Revenue account land in dealing, development, subdivision and building businesses

Land that is held in certain land related business is on revenue account. so the profits on sale are taxed. This applies to land held in dealing, development, subdivision, and building businesses.

At balance date, taxpayers in these businesses are likely to have a number of properties on hand, though they may not be currently rented out.

It is proposed that residential rental or other losses could be used against taxable land sales to reduce the taxable gain to nil, with any further unused losses remaining ring fenced to future rental income or taxable income on land sales. While taxpayers in the business of land dealing, development of land, division of land, or building may have losses in respect of properties on hand at balance date, those losses being able to be used against income from other sales or rental activity in the year would mean that their businesses would be unlikely to be disadvantaged by the ring fencing rules. In most cases the income from their sale or rental activity would be expected to exceed their losses.

However, in any overall loss making year, we do not consider it necessary to ring fence losses for land held in these businesses. There is not the same concern about any of the deductible expenses in relation to land in these businesses relating to untaxed gains, as all of the businesses’ land is on revenue account. Therefore, we propose that the ring fencing rules not apply to land that is on revenue account because it is held in a land related business. This would enable taxpayers in these businesses to use losses arising in any year against other income for example within their corporate group (as they are likely to be companies).

Property owned by companies and trusts

There is an argument that the loss ring fencing rules should apply only to individuals (that is, natural persons), and not to companies or trusts. This argument could be made because company losses are effectively ring fenced inside the company, as are losses in a trust.

However, such an approach would leave open the possibility of individual speculators or investors operating through a company or trading trust, holding their residential properties in that vehicle, and offsetting the losses against their labour income. It would also mean that a family trust holding residential rental property and also some other investments could offset rental property losses against income from the other investments. For example, it would not be fair for a professional operating through a company or trust to not be subject to the ring fencing rules where another person operating as a sole trader would be.

It is acknowledged that there may be some compliance costs for some corporates that own some residential property incidentally to their business. However. it is considered that limiting the ring fencing rules to individuals would significantly undermine the fairness of the rules. For this reason. we suggest that the ring fencing rules should apply to all taxpayers, not only to individual taxpayers.

Portfolio basis

It is suggested that the loss ring fencing rules should apply on a portfolio basis. That would mean that investors would be able to offset losses from one rental property against rental income from other properties calculating their overall profit or loss across their portfolio.

The alternative, a property by property basis, would mean that each property would need to be looked at separately, with losses on one not able to be offset against income from another.

A property by property approach would be stricter than a portfolio approach, achieving the highest level of ring fencing. However, it would add complexity, as losses would need to be tracked separately for each property. Moreover, a property by property approach may just result in taxpayers with portfolios re balancing their debt funding to avoid having loss making properties (or at least minimising the extent to which any particular property is loss making). That response to the rules applying on a property by property basis would be inefficient. and may mean that this approach may have no real advantage over a portfolio approach adding considerable complexity and increasing compliance costs for no real gain.

Also, a property by property approach may be seen as unfair in that if a taxpayer has two properties and breaks even on the ponfolio overall, the taxpayer’s tax position would depend on whether they break even on both properties or make a gain on one and a loss on the other.

We therefore suggest that the ring fencing rules apply on a portfolio basis. so a person with multiple properties would calculate their overall profit or loss across their whole residential portfolio.

Using ring-fenced losses

Under the suggested changes, ring fenced residential rental or other losses from one year would could be offset against:

Residential rental income from future years (from any property); and

Taxable income on the sale of any residential land.

Most residential rental investors are not subject to tax on the sale of their investment properties under current tax rules. However, in some circumstances. the sale of a residential rental property may be taxed under one of the land sale rules in the Income Tax Act or the taxpayer may have taxable income on the sale of other residential property (not rented out). This could be the case, for example, because the taxpayer is in a land related business (for example, a land dealer or developer), bought the land for resale, or sells the property within the bright line period of either two or live years (depending on when they first had an interest in the land).

Under the suggested changes. where a taxpayer sells a property that is subject to the ring fencing rules (that is a residential property) and the sale is taxed, any ring fenced losses the taxpayer has could be used to reduce the taxable gain on sale to nil. Any remaining unused losses would stay ring fenced, and could be used against any future residential rental income or taxable income on other residential land sales.

There is an argument that in the case of a property with ring fenced losses that is taxed under one of the land sale rules on disposal, the losses should be able to fully utilised (that is unfenced) at that point. and be used to offset any other income of the taxpayer. This would reflect that all of the economic income from the investment has been taxed (the rental stream and the capital gain), and that the investor should not be penalised for making an overall loss on the investment.

However. if the rules are to apply on a portfolio basis, as suggested, allowing accumulated losses to give rise to a tax loss on a disposal subject to one of the land sale rules would create risks. For example, it would enable a portfolio investor to sell a property that has made a small capital gain within the bright line period. offset that gain with ring fenced losses from across their portfolio, and apply any remaining losses from the portfolio against other income. While there are ring fencing rules in relation to the bright line test, they only apply to deductions for the cost of the land, not other costs.

Enabling taxpayers to sell their lowest capital gain makers within the bright line period and access what might be substantial portfolio wide accumulated ring fenced losses would significantly undermine the credibility of the rules.

For this reason, we propose that where a disposal is caught by one of the land sale rules, ring fenced losses should be allowed to be used only to the extent they reduce the taxable gain to nil, with any further unused losses remaining ring fenced.

Structuring around the rules

There are two main structuring opportunities that we have considered, creating specific rules to deal with. These concern interest allocation and the interposing of entities.

Interest allocation

We have considered whether specific interest allocation rules are required, as without them investors may be able to structure around the loss ring fencing rules. For example, this could be done by reorganising funding so that business assets other than rental properties are debt funded, and rental properties are equity funded to the greatest extent possible.

However, interest allocation rules would add substantial complexity and compliance costs. Because money is fungible, it is very difficult to attempt to match borrowings to particular investments (tracing). Stacking rules (for example, allocating debt firstly to ring fenced investments) may be seen as unfair. And pro rata interest allocation between assets that are subject to the ring fencing rules and those that are not would require regular valuation of assets.

If interest on any loan that was secured by a residential property was included in the rules, this would create issues for many people who use their rental properties to secure loans for their businesses. This would impact on small and medium business’ access to capital. In addition. many arrangements could be even more difficult to apply interest allocation rules to, as revolving credit facilities are often used to fund both a rental property and a business.

We do not propose specific interest allocation rules because of the considerable complexity and compliance costs they would add, which would be particularly onerous on smaller taxpayers.

Interposed entities

Under the suggested changes, there would be special rules to ensure that a trust, company, partnership, or look through company cannot be used to get around the ring fencing rules. These ownership structures are referred to here as entities for simplicity.

Otherwise a simple way to get around the ring fencing rules would be for a taxpayer to interpose an entity to hold a residential rental property, and borrow money to invest in or acquire an interest in the entity. For example, a taxpayer could borrow money to buy shares in a company, which uses those funds to buy a residential investment property. Because the money is borrowed to buy shares, the individual taxpayer would be able to claim deductions for the interest on the borrowings. and offset those amounts against other income sources.

However, if the taxpayer had used the borrowed money to purchase the property directly themselves, the interest expense would be attributable to the residential rental investment, not shares, so would be taken into account in determining whether the person‘s residential rental activity was profit or loss making. And if the rental activity was loss making. losses would be ring fenced under the proposal rules.

This simple mechanism is illustrated in figure 1.

A suggested approach to dealing with interposed entities is to specifically define when such entities would be “residential property land rich”. It is proposed that this would be the case where over 50 percent of the entity‘s assets are residential properties within the scope of the ring fencing rules, and/or shares or interests in other residential property land rich entities.

The rules could then treat dividends, interest, or distributions from the entity as being “rental property income”, and treat interest on borrowings to acquire an interest in the entity (for example, shares. securities, a partnership interest, or an interest in the trust estate). as “rental property loan interest”. The rules could then ensure that the interest deduction is only allocated to the income year in question to the extent it did not exceed the distributions from the entity (deemed rental property income), any other residential rental income, and residential land sale income. Any excess of interest over distributions, rental income, and land sale income would be carried forward and treated as “rental property loan interest” for the next income year. This would mean that losses from rental properties would not reduce the tax on other sources of income.

This suggested approach is illustrated in figure 2.

We are interested in feedback on this suggested approach to preventing the simple interposition of an entity to get around the ring fencing rules.

Timing of introduction of the rules

It is proposed that the loss ring fencing rules will apply from the start of the 2019/20 income year.

The rules could either apply in full from the outset, or alternatively they could be phased in over two or three years. If the rules are phased in, this would be done by reducing the proportion of losses that could be used to offset other income over a two or three year period, until no losses could be used to offset other income sources.

For example, if phased in over two years, 50 percent of residential investment losses could be used to offset other income in 2019/20, and no offsetting would be allowed in 2020/21.

Tax law changes are not usually phased in. But this possible approach has been suggested to allow affected investors more time to adjust to the new rules, or to rearrange their affairs before the rules apply in full. However, we note that phased introduction of the rules would result in some additional complexity.

We are interested in feedback on whether the loss ring fencing rules should apply in full from the 2019/20 income year the simpler approach or be phased in over two or three years.

First published in March 20l8 by Policy and Strategy. Inland Revenue, PO Box 2198. Wellington, 6140.

Ring-fencing rental losses an officials” issues paper. ISBN 0-978-0-478-424454

New Zealand Neoliberal Corruption. Citizen Thiel – Matt Nippert.

Peter Thiel is an internet oligarch who believes in a stateless world free of regulation or limits on human endeavour. He made millions on PayPal, and billions on Facebook.

He lobbied New Zealand Cabinet ministers and public servants, presenting himself as our exceptional angel of venture capital.

He was secretly granted citizenship, but within months of his “solemn vow” appeared to move on. He has barely seen since and has recently been buying up real estate while selling down his local technology investments.

What remains are his boltholes in Queenstown and questions over whether political pressure played any part in his granting of citizenship.

Thiel declined to be interviewed for this story, but issued a brief statement about the saga saying, “I believe in New Zealand”, and noting that he’s invested $50 million in New Zealand tech companies.

This story is, instead, based on dozens of interviews and hundreds of pages of documents sourced under the Official Information Act.

This is the story of Citizen Thiel.


It was 1995 when Peter Andreas Thiel first visited New Zealand. He was 28 and the German-born naturalised American was yet to found a single company. The billionaire-to-be would have been indistinguishable from the hordes of middle-class tourists also enjoying the thrills of Queenstown.

Thiel was drawn to the region’s adventure tourism industry at least partly out of his disdain for government regulation. In his only local public speech to date, at an Auckland University conference in 2011, he spoke of his white-knuckled ride on the Shotover Jet as being among “all the crazy things you can do in New Zealand that you can’t do anywhere else, risky things that are probably not allowed [elsewhere]”.

Thiel — now worth $3.7 billion and with deep links to Western intelligence agencies, the Trump administration and the Silicon Valley firms dominating the internet — seemed, in 1995, to still be in search of a purpose. Around this time the Stanford graduate changed jobs from judicial clerk to securities lawyer to derivatives trader.

Three years later he’d find that purpose, co-founding online payment company PayPal to set himself up to make a small fortune that he’d later leverage into a large one.

According to his 2012 book Zero to One, his purpose is more than making money and extends to escaping limits of both the human body and social rules. An interest in lifespan extension (including transfusing blood from the young), musing whether freedom was compatible with democracy, and support for artificial island habitats free from the constraints of traditional government and laws have led critics to caricature him a Bond villain for the internet age.

PayPal: Co-founded by Thiel in 1999, he made $75 million when the online payments firm was sold to eBay in 2002.

And, as with most caricatures, underneath lies a grain of truth. Thiel says in Zero to One that his first company sought to do far more than simply make online transactions easier. “PayPal had a suitably grand mission — the kind that post-bubble sceptics would later describe as grandiose. We wanted to create a new internet currency to replace the US dollar.”

Zero to One sketches out Thiel’s vision of technology enabling a world post-government, and is broadly shared by PayPal’s other founders — a group of young men who grew into a new generation of technology oligarchs.

Elon Musk went on to create Tesla and SpaceX; Reid Hoffman started LinkedIn; Steve Chen founded YouTube. As their influence grew this crew would become known as the “PayPal mafia”.

While the other members of the PayPal mafia were spreading their wings and priming their rockets in the United States, Thiel took a short detour and sought to formalise his relationship with New Zealand.

His application included two years of tax returns, the disclosure of two reckless-driving convictions in February 2000 (officials ruled these were minor and wouldn’t count against his application), and a schedule of assets as part of a listing of his net worth.

Thiel made more than $1 billion from a 2004 investment of $750,000 in Facebook. While he’s since cashed out his shares, he still serves as a director on the social media giant’s board.

Incomplete redactions show Thiel was by this point rich from PayPal — sold to online retailer eBay — but not yet super-rich. His declared net worth at this point ran to only nine figures. His $750,000 punt in 2004 on a small start-up called Facebook was yet to level him up to the realm of the world’s billionaires.

But in the end, only a relatively small slice of wealth was needed to nudge Thiel’s application over the line. The points-based visa he sought awarded him eight for his age — young migrants being preferred — and four for business experience. Applicants are allowed to pump up their score by setting aside funds to invest and awarded one point per $1 million. Thiel was just one point short.
Correspondence from his advisers talked about the possibility of investing the required million into vineyards or property, and Thiel himself indicated on his application form he had a particular interest in the South Island.

Damper Bay: His $13.5m purchase of a 193-hectare section on the shores of Lake Wanaka first brought Thiel’s citizenship to notice as his new status meant the deal did not require Overseas Investment Office approval.

As it turns out, that $1m tagged for investment ended up stashed in a term deposit for the required two years. And, of all the financial institutions in all the places he could have chosen to park this money, documents show he opted for the National Bank’s provincial branch in Whanganui.

The choice of an out-of-the-way bank seems to speak to Thiel’s tightly-guarded privacy. Bank workers in Whanganui — hardly a tech mecca, with an agricultural economy and population of barely 40,000 — would have been unlikely to pick their new client as an offshore dotcom multimillionaire.

This preference for discretion didn’t end there. In a New York Times opinion piece explaining why he was bankrolling defamation action against a gossip site he stated: “The defense of privacy in the digital age is an ongoing cause.” Last year his lawyer lobbied New Zealand’s Department of Internal Affairs to redact information from material released under the Official Information Act.

And, shortly after news of Thiel’s surprise New Zealand citizenship broke in January 2017, Jeremiah Hall of San Francisco’s Torch Communications acknowledged questions for Thiel about the issue.

“I’ll be back in touch if we have any comment,” he said.

He did not get back in touch.

In the 12 months since, the Herald has 10 times asked questions of Thiel — about his citizenship, his shrinking holdings in Kiwi software firm Xero, why he appears to have ghosted New Zealand, ties between his firm Palantir and local intelligence agencies, and even the celebrity classic, “What do you think of New Zealand?” And 10 times he again did not get back in touch.
But on the eve of publication of this story — a year and a day after questions were first asked about this saga — Thiel broke his silence with a short statement.

“I believe in New Zealand, and I believe the future of New Zealand’s technology industry is still underrated. I look forward to helping it succeed long-term.”

Thiel has stayed in touch with the country with short visits every few years, but it was around the 2008 United States presidential election that he took a serious focus on Middle-earth.

Thiel’s horse in United States politics at this time wasn’t nearly as successful as Trump would be eight years later. He’d initially backed Ron Paul for the Republican nomination, and after the libertarian outsider tanked in primaries he switched to party candidate John McCain. But McCain also tanked and Democratic candidate Barack Obama swept into the White House.

John Key: Thiel was enamoured with the National government, and met the Prime Minister in 2010 to expound on his plans to boost the New Zealand tech sector.

Where one window to government closed in 2008, another opened. Days after Obama’s victory, a fresh-faced financier named John Key took control of the Beehive. Thiel liked what he saw.

Rod Drury, whose cloud software company Xero is the biggest winner from Thiel’s brush with New Zealand, says his keystone shareholder was then disillusioned with the United States.

“If you know Peter, and if you’ve tracked him for years like I have, he was always into small government. He really likes that, compared with the US at the time, we were pretty much a free-market economy, fairly lightly regulated. You can imagine the affinity he’d have with that,” he says.

Rod Drury: Xero founder and chief executive Drury counted Thiel as one of his earliest and most significant investors.

Drury acknowledges a closer examination of the National Party’s platform would likely see them placed on the left wing of the Democratic Party, but he says Thiel was more interested in the general direction the country seemed to be going.

This affinity escalated into a courtship that would see multiple meetings with Cabinet ministers, lawyers from a high-end law firm shuttle from Auckland to Wellington to lobby Internal Affairs, and bold statements made about rerouting rivers of Silicon Valley capital and the establishment of a high-tech incubator in Auckland.

By the end New Zealand — or at least some officials in Internal Affairs — were smitten. But even Drury acknowledges we may have been naïve.


Thiel came on heavy in the two years ahead of his audacious and ultimately successful bid for citizenship in 2011. He visited the country three times during the period in a whirlwind of lobbying, business deals and public relations.

He met no fewer than four senior members of the Cabinet — including the Prime Minister — to present his case for turbocharging New Zealand’s tech industry, arranged his first business investment (five years after first being granted an investment visa), started buying real estate, and gave his first and, so far, only interview with New Zealand media.

The formal part of his bold quest saw his lawyers Bell Gully travel from Auckland to Wellington in late 2010 to hand-deliver a letter from Thiel to the Minister of Internal Affairs with his truly exceptional request.

“In the course of pursuing my international business opportunities, my travel, personal philosophical commitments and benefaction, I am happy to say categorically that I have found no other country that aligns more with my view of the future than New Zealand,” Thiel wrote.

“It would give me great pride to let it be known that I am a New Zealand citizen.”
The letter was accompanied by a note from his lawyer making it clear his client’s application would require the Minister to exercise rare discretion under “exceptional circumstances” rules, as Thiel was not intending to live here and sought unprecedented “citizenship at large”.

“Mr Thiel’s principal place of residence cannot be described in the context of the ordinary rules,” Thiel’s lawyers said.

In mid-2010, Thiel had incorporated Valar Ventures, a limited partnership which he said in his letter was intended to “become an active player in New Zealand’s venture capital industry”. The fund’s name is a reference to the mythical beings who created the world in The Lord of the Rings. Its first major target was Xero.

The accountancy software company was floated in 2007 and, three years on, the local sharemarket still didn’t know what to make of this ambitious company burning cash which saw profitability as only a medium-term objective. Its share price was languishing close to its $1 launch.

Drury, the company’s energetic founder and chief executive, says Thiel’s representatives came knocking in early 2010.

“They came to our offices, we met them a few times, they seemed impressed. So we took distance out of the equation and said, ‘Well, shall we come up and meet Peter?’”

That trip to San Francisco to pay homage to Thiel’s court was, recounts Drury, “one of the most exciting meetings that I’ve had”.

Drury says he doesn’t share Thiel’s libertarian views but is laissez-faire when it comes to ideology.

“They’re quite intense those guys, those PayPal guys. They’re really seen as royalty in the global tech scene. And he’s incredibly bright, and he’s always been a contrarian. He’s one of those people [who will] always stretch you,” Drury says.

Recounting the mood at the time, Drury conveys the impression of a starstruck nation.

“Everyone was so excited to see him. I think we were so flattered that someone of that status in the technology industry was even interested in New Zealand.”

In October 2010, Xero announced Thiel had tipped $4m into the company.

Drury describes this development as a “massive deal” that was instrumental in growing his company into the multi-billion-dollar business it is today — and said Thiel began looking locally, unsuccessfully as it turned out, for more Xeros.

During this period Thiel seems to have made a conscious effort to court the new National Party Government, meeting Key, Finance Minister Bill English, Minister of Economic Development Gerry Brownlee and Minister of Science Wayne Mapp.

Bill English: The then-Finance Minister also met Thiel in May 2010, but officials say no records of what was discussed exist.

English confirmed a May 2010 meeting, but said no records of what was discussed existed. Official Information Act requests to the Prime Minister’s Office regarding the meeting with Key were not answered — but the then-Prime Minister told Parliament in 2013 he’d met Thiel on “a few occasions” and described the relationship as “cordial”.

In early 2011, Thiel’s camp made contact with the New Zealand Venture Investment Fund (NZVIF), seeking to partner with the taxpayer-funded body to invest further in local tech firms.

NZVIF staff also made the pilgrimage to San Francisco that August, and a deal was inked in December to set up a $40m fund. Of this, Thiel was supposed to kick in $15m and the Government $20m, with Stephen Tindall and handful of other smaller local investors making up the difference.

Crucially, the deal included a generous buy-back clause, allowing Thiel and his private-sector partners to split losses with the Government if the fund tanked, but collect all the profits if it did well. The clause had been standard in NZVIF deals — intended to encourage the development of local venture-capital markets — but its inclusion with the Valar fund would later raise questions in Parliament and help see the clause retired from use.

While this was being finalised, Nathan Guy replied to Thiel’s letter, advising him to submit a formal application to officials who would draft a report for the Minister’s consideration.

That report from officials highlighted his connection to ministers, especially Key. Thiel wasn’t just giving a talk at Auckland University that June, he was “presenting at a conference in Auckland in July (along with the Prime Minister)”. Thiel didn’t just donate $1m to the Christchurch earthquake recovery, he made a donation “facilitated by Mark Weldon, chief executive of NZX, on behalf of the Prime Minister”.
Thiel stated an intention to help establish a technology incubator in Auckland and set up a landing pad in San Francisco to assist New Zealand companies breaking into the United States.

Largely on the basis of these non-binding intentions, that single earthquake donation and the relatively modest $4m invested to date in Xero, along with another — failed — Pacific internet cable company, officials concluded he was an exceptional philanthropist and investor and recommended his application be approved.

“It is interesting … I think the Minister may go for it,” one official emailed to another at the time.

Gerry Brownlee: The then-Minister for Economic Development also met Thiel during his whirlwind of government lobbying in 2010.

Peter Dunne was Minister of Internal Affairs when news of Thiel’s citizenship broke a year ago, but he was not at the time of the application. He wouldn’t have gone for it.

Speaking from his Khandallah home, Dunne admits he initially didn’t know who Thiel was when the news broke. But after becoming aware he was a “person of significance”, Dunne immediately reviewed the citizenship file. His copy, of course, was unredacted.

Now retired and transitioned from his trademark bowties to an open-necked collar, Dunne is relaxed and frank in saying he is unconvinced by the case made by officials.

“I looked at the documentation the Minister would have received, which basically said, ‘These are the facts and, by the way, we recommend it’. I thought, ‘I can’t quite see how you to get to this conclusion on the face of the fact he’d been in the country only 12 days.’”

The 12 days became a minor national scandal for some when it was belatedly revealed — after having been initially redacted at the request of Thiel’s lawyers until the Ombudsman forced its release — and showed the billionaire had failed to meet even 1 per cent of the typically required 1350 days of in-country residence in the five years prior to being granted citizenship.

Information released by Immigration NZ shows his fleeting appearances during this period were typical. In the three years after he was awarded his investor visa in 2006, he spent six days in New Zealand. In total, during the 16 years prior to Guy awarding him a passport, his combined stay in the country amounted to fewer than five weeks, or around the same length of stay as a single visit by an typical backpacker.

Not a Dunne deal: Peter Dunne, Minister of Internal Affairs at the time Thiel’s citizenship became public, says questions remain over his predecessor’s decision.

Dunne’s opinion of Thiel’s bid is: “Give me citizenship: I want the passport, but don’t expect me to put in an appearance.”

Asked what he’d have done if he’d been in the chair in 2011, Dunne said: “To me, had the application come across my desk for consideration, I’d have said no.”

But he wasn’t the one occupying the Minister’s office. That was Guy who, in the days after his decision was revealed a year ago, pleaded ignorance.

“I don’t recall this specific application,” he said.

Dunne is unable to understand Guy’s decision to approve Thiel’s application. “I can only speculate. As I say, the documentation gives no clue. Whether it was the prospect of investment from Mr Thiel, or whether there was some form of political pressure, I don’t know.”

For its part, Internal Affairs denied their former minister’s suggestion that its advice was subject to political interference. “The Department is satisfied that it tendered robust information and advice on what the minister of the day had to weigh up in making a decision on whether or not to grant citizenship.”

The senior official who wrote the recommendation in 2011 has since retired from Internal Affairs and moved to Australia. He did not return repeated calls or emails from the Herald.

With a signature, Guy approved Thiel’s request application on June 30, 2011, and a month later, in a private ceremony at the New Zealand consulate at Santa Monica in California, the technology billionaire swore on the Bible to become Citizen Thiel.

An award of citizenship is effectively permanent and is granted without subject to conditions. It allows voting and residence rights and the ability to run for office, and can only be revoked under extreme circumstances.

Thiel’s lawyer used almost religious language in explaining how important his client considered this moment.

“Mr Thiel has advised that citizenship is irrevocable. It is the public recognition of a hallowed bond. For that reason and others, he is prepared to make this solemn allegiance to thereby embrace and contribute to the life, history and culture of New Zealand.”


With passport in hand, the eye of Citizen Thiel began to wander almost immediately.

Six months after the Santa Monica ceremony that had made him a citizen, the mission listed on Valar Ventures’ website — which had previously billed itself as having been “founded to help grow New Zealand into a hub of technological progress” — was rewritten to remove references to the country that had just gifted him his new nationality.

Valar was instead given a global mandate and would go on to make investments in Brazil and Australia. The fund invested in precisely one new company locally after 2011 — retail software firm Vend. The investment used funds from a mixture of private and public sources through the NZVIF joint venture.

While publicised numbers around Thiel splurging capital locally look impressive — $4.5m initially in Xero and Pacific Fibre, $15m into the NZVIF partnership, another $22m into Xero in late 2012, with tens of millions more in 2013 — the headlines overlap.

Thiel’s initial $4.5m in local investments was included in the NZVIF deal as his initial contribution. The latter Xero and Vend investments also included co-investors and government cash from its matching contribution to the NZVIF partnership.

And this partnership fund itself languished and didn’t even meet half its billed potential — the NZVIF joint venture was initially touted as worth $40m, with Thiel contributing $15m — but he ended up tipping in just over $7m.

Thiel’s financial structuring uses multiple entities, and the terms of venture capital deals are notoriously secretive with hard numbers and details of third-party investors not made public, so the extent of his investment into local tech companies is difficult to confirm and has been redacted from official documents.

A spokesperson for Thiel said the billionaire’s total investment to date in local tech firms was $50m.

Meanwhile, offshore, Thiel was running into some challenges. His hedge fund Clarium Capital Management lost the house on a large and wrong bet on oil supplies collapsing. Outside investors fled and by 2011 it was one-twentieth the size of its peak with barely a couple of hundred million of Thiel’s own capital remaining.

But all was not lost. Facebook was edging towards a public listing that would allow Thiel to exit and crown one of the most spectacular deals of the internet era. The $750,000 investment he’d made in in 2004 was largely cashed out following the 2012 IPO for more than $1.3b.

If Thiel was growing increasingly distant from New Zealand, Xero’s Drury says he still noticed the halo effect from his celebrity shareholder. “It’s always hard to measure these sorts of things absolutely, but having Peter involved was a massive deal for us.”
Thiel sat for a time on the company’s US advisory board as it sought to break into the world’s biggest market, and provided introductions to new partners and investors in Silicon Valley.

Drury: The Xero founder says Thiel’s involvement was crucial in turning his company into a multi-billion-dollar business.

When Thiel became involved, Xero was loitering on the start-up crossroads to success or failure and had a share price of just $1.50. The company’s stock went on to pass $40, and the company is now one of New Zealand’s largest with a market capitalisation in excess of $5b.

“Look back to 2010. It was an incredibly important time for us and he provided a huge amount of value. And now, at 1.2 million customers, 1800 staff all over the world? That was a key time. We’re incredibly grateful for his support.”

The support for Xero — from which various Valar vehicles would make hundreds of millions of dollars in capital gains as the share price surged — is the most tangible legacy of Citizen Thiel.

Re-reading Thiel’s letter today, with the benefit of hindsight, it seems other non-binding claims made during his bid for citizenship are less fulfilled. Valar Ventures has been inactive in this country for years. Its New Zealand website resembles digital tumbleweed. The Auckland technology incubator never eventuated. Thiel’s touted involvement with the San Francisco landing pad for Kiwi companies reportedly ended once his three-year sponsorship deal expired in 2013.

The Herald could find no other charitable giving by Thiel in New Zealand since that $1m earthquake appeal donation and, given the opportunity to provide details, Thiel’s representatives did not respond.

And in hindsight, that million-dollar donation doesn’t seem entirely selfless. It occurred while officials were mulling Thiel’s application, and the application explained the donation in such a way to avoid it being seen as an attempt to influence decision making.

Thiel: A speech at Auckland University in 2011 remains the sole public appearance Thiel has made in New Zealand.

“Our client has been approached on behalf of the Prime Minister to play a role in the offshore initiatives in relation to the Christchurch Earthquake Fund. It is anticipated there will be publicity about this. This has arisen subsequent to the original application, such that its context is unique to the circumstances. Our client was anxious to avoid it being considered in any manner relative to the merits of this application,” his lawyers wrote in March 2011.

A month later that anticipated publicity for the donation did indeed occur, the result of self-promotion by proxy. Wide local coverage of this selfless act of charity was triggered by a press release: From Bell Gully on Thiel’s behalf.

And claims Thiel would use citizenship to act as an ambassador-at-large seem like mere pillow talk. In a widely reported interview with Business Insider, Thiel described New Zealand as a “utopia”. This interview also occurred during the citizenship application process, and Bell Gully quickly forwarded this clipping to Internal Affairs officials.

The Herald has been unable to find any public statements by Thiel promoting New Zealand since.

Tim Hunter, columnist for National Business Review, noted in February that Thiel and Valar had been distant from these shores in recent years.

“Looking back, it seems Mr Thiel’s love affair with New Zealand is less intense that it was when he was seeking citizenship,” Hunter wrote.

Even New Zealand’s Ombudsman, the statutory neutral arbiter for making decisions on government information, seemed perplexed about the case when compelling Internal Affairs to confirm Thiel had been in the country only 12 days in the qualifying period prior to being awarded citizenship.

“In Mr Thiel’s case, there had been and continued to be public disquiet that the minister granted him citizenship in circumstances where his connection to New Zealand was not publicly known and, even in hindsight, was not obvious.”


News of Thiel’s surprise citizenship — overnight he became New Zealand’s second-richest man — came as his profile in the United States reached its zenith.

In January 2017, Thiel was serving on newly elected President Trump’s transition team, after having been an early backer of the outsider candidate. He’d spoken at the Republican Convention and donated $1.5m to Trump’s campaign, with the biggest cheque coming during the candidacy’s lowest ebb — in the days after the release of the infamous Access Hollywood “Grab ’em by the pussy” tape.

Trump connection: Thiel’s support for Trump continued after the election, including organising a summit of tech leaders during which he was seated next to the president-elect.

His move into mainstream politics — having previously backed fringe libertarian candidates — caught those who knew him both here and in the United States by surprise. “We were all surprised that he was so into Trump. But it was consistent with his contrarian and small government point-of-view,” says Xero’s Drury.

Hard news about the extent of Thiel’s involvement with the Trump administration has been hard to come by.

In lieu of Thiel talking, fevered rumours have swirled in the American media about what role he plays in United States politics. He’s been variously reported: having soured on Trump; being considered by Trump as a candidate for the Supreme Court, intelligence director or ambassador to Germany; being suddenly concerned about technology company monopolies; and running for Governor of California.

But as Drury notes, despite the reports, there’s been little resulting evidence to underlie the above claims. Thiel is neither Trump’s man in Berlin nor suddenly seeking to regulate the likes of Facebook (of which he remains a director).

“He’s been relatively quiet since all of that [the US election]. I keep a really close eye on that stuff, and he don’t seem around that too much anymore.”

In a twist, Thiel also may have been ghosted — a slang term for the practice of ending a personal relationship by suddenly and without explanation withdrawing from all communication — himself. Michael Wolff’s explosive book Fire and Fury has him telling a fellow billionaire that, despite being forewarned Trump was prone to outrageous flattery and hollow promises, he’d taken the bait and now found himself on the outer.

“He absolutely was certain of Trump’s sincerity when he said they’d be friends for life — only to basically never hear from him again or have his calls returned,” Wolff writes of Thiel.
His sudden elevation to the centre of politics in the United States occurred as Thiel appeared to be busy trimming his remaining business exposure to New Zealand.

In October 2016 he activated the buyout clause in his NZVIF partnership — requesting his public partners keep this news secret — seeing him book a gain conservatively estimated at $30m from his contribution of $6.75m, while NZVIF was left barely breaking even.

The clause had been a feature of all NZVIF deals, and its original purpose to was to encourage new local venture-capital firms to invest in nascent start-ups. Its use by Valar — a savvy international operator which effectively went all-in on a single listed company — caused some concerns within the Government over what exactly it had got itself into.

A 2014 government-commissioned report into NZVIF said the deal with Thiel “creates some difficult optics where, in the Valar Ventures example, the taxpayer is offering an American billionaire a loan at less-than-market rates”.

The buyout led to finger-pointing in Parliament over who was accountable for the one-sided deal, and has cast serious doubts over the future of the fund as whole.

But Thiel wasn’t done cutting his local links. In the middle of 2017 he cashed out of his flagship New Zealand investment in Xero, with Crunchbase now listing the company among Valar’s exits. According to available records, Thiel’s only remaining local equity investments of note are small — recent valuations put it as worth a few million — stakes in Vend and e-reader technology creator Booktrack.

Drury sees Thiel’s subsequent ghosting as more a lack of opportunities than any misrepresentation. Despite boosters, with only four million people the New Zealand economy is on par with a mid-sized city internationally and our technology industry is nascent.

A flying visit by Thiel to New Zealand in December to visit an Auckland gallery gives some credence to an alternate explanation. The venue, on Karangahape Rd, was home to The Founders Paradox, the latest work by artist Simon Denny, with the ideas of Thiel as a central focus.

According to art critic Anthony Byrt’s notes accompanying the exhibit, Thiel’s hardcore libertarian and Lord of the Rings-inspired world-building fantasies — along with his position at the apex of the technology ecosphere — have seen him become “one of the most influential thinkers in the world”.

(Asked by another gallery visitor what he thought of the exhibition — including a large rendering of himself as a blue-skinned knight fighting the forces of fair elections and democracy — Thiel reportedly said: “It’s actually a work of phenomenal detail.”)

Denny’s work paints New Zealand as a stepping stone — and safe haven — for powerful technologists seeking to escape government limits on human activity.

A crude description of this attraction for New Zealand came last year in The New Yorker where Reid Hoffman, the co-founder of LinkedIn (and a member of the so-called PayPal mafia) said the country had become shorthand for apocalypse insurance in Silicon Valley.

Boltholes: Fellow PayPal founder Reid Hoffman has described New Zealand as a preferred hedge for Silicon Valley tycoons concerned about the collapse of the United States.

“Saying you’re ‘buying a house in New Zealand’ is kind of a ‘wink, wink, say no more’,” Hoffman says.

Drury says this trend started after the September 11, 2001, terror attacks on the US and hasn’t slowed, and considers Thiel as part of it.

No other Silicon Valley hedger has quite gone to the length of Thiel, however. Internal Affairs figures show the libertarian internet tycoon is the only businessman in at least the past six years to have secured citizenship despite neither living nor intending to live here.

Drury is aware of the controversy his one-time shareholder has caused, but says the episode was worth it.

“So, maybe we were all a little starstruck back then.” he concedes.

“My view is these people are net contributors, even though they’re not here all the time. I sort of joke, ‘If you can give me a 10-pack of passports, let me flick ’em around’.”

Dunne, however, is unimpressed by Drury’s enthusiasm, saying the Thiel episode raises issues about both how citizenship was obtained and how much the country values its passport.

“It’s a transparency issue,” he says.

“As far as I can tell, having been granted citizenship, Mr Thiel has been conspicuously absent ever since.”

Thiel’s presence in recent years appears to have been primarily related to real estate. An unexpected quirk in the tale of Citizen Thiel is how, despite his reputation as an investor with a Midas touch, he seems to be one of the few people to lose money in New Zealand’s recent frothy real estate market.
In 2011 he bought a striking four-bedroom Queenstown holiday home constructed with Swiss granite and known locally as the “Plasma Screen”, due to its expansive windows, for $4.8m.

Six years after he purchased the house, the local council assigned it a capital valuation of only $2.5m. Thiel similarly lost $200,000 on a Parnell property he bought in 2010 and sold two years later.

The value of the land that brought him to public attention in New Zealand — a 193ha block of former Crown leasehold farmland on the shores of Lake Wanaka — is also intriguing.

Bought by Thiel for $13.5m in late 2015, the previous owners had tried — and failed — over the previous decade to subdivide the section. Council planners said the site was classed as an “outstanding natural landscape” and it was unlikely they would approve consents for any more than the single building already present.

Real estate agent Graham Wall told the local paper while the land itself — rolling scrub hills — wouldn’t seem out of place on the Desert Road, Thiel was immediately sold on its isolation.

“You turn up there with a jaded billionaire from San Francisco and it’s, ‘Oh my God, I could have a house here and not see anything except lakes and mountains — the best thing on Earth and for $10m!’”

For now council records show this land appears to be being banked. In the two years since Thiel made his purchase, no resource or building consent applications have been filed.

Exactly what is intended for the land at Damper Bay is unknown, but Thiel has built at least one physical bolthole in this country.

According to building consent records, his Queenstown Plasma Screen holiday home last year suffered a serious fire, causing more than $500,000 in damage. Building consents for the repairs filed with the Queenstown Lakes District Council in May show Thiel took this opportunity to rebuild and repurpose a walk-in closet.

Plans now describe this nook as a panic room.

NZ Herald

Winston Peters’ view on capitalism will challenge new Govt – Chris Trotter.

Crucial to the success of the “unfriendly capitalism” indicted by Winston Peters has been its stalwart bodyguard of “expert lies”.

Ever since 1984, when its unfriendliness began gathering pace, a seemingly endless procession of “experts” has been summoned to represent this new “unfriendly” capitalism’s cruelty as kindness.

Some of these so-called experts were paid for by the big corporations. Others were commissioned by government agencies to prepare the way for changes destined to place an ever-increasing number of New Zealanders at the mercy of private economic power.

None of the core institutions of the New Zealand State were exempted from this “restructuring” process. Health, education, social welfare, the trade union movement, the universities, local government: all fell victim to the “gleichschaltung” (co-ordination) demanded by an increasingly foe-like capitalist system. And, in each case, these government “reforms” were presented to the public as the only rational response to what was, after all, “expert” opinion.

In a tiny number of cases, the tendered “expert advice” was so extreme that the Government of the day simply balked at introducing reforms that seemed so patently politically unsaleable. For the most part, however, the experts’ findings were accepted and implemented.

That these arguments, for what can only be described as dramatic and socially-wrenching change, were received uncritically, and then promoted enthusiastically, by the news media was a crucial factor in their success. It encouraged the view that economic management had become such a complex business that “ordinary people” could not, realistically, be expected to play any useful role in the formulation of economic policy.

It required the system-threatening shock of the Global Financial Crisis of 2008-09 to set off a world-wide revolt against what we now call “neoliberal” economic orthodoxy – and the “experts” who have for so long expounded and defended its “principles”.

This revolt has come late to New Zealand because, through the worst years of the Global Financial Crisis, the Chinese economy’s absorption of so many of this country’s exports shielded it from the high levels of unemployment and the swingeing austerity programmes which have unsettled so many larger western nations.

On October 20, however, the NZ First leader, Winston Peters, from the stage of the Beehive Theatrette, told New Zealand that: “Far too many New Zealanders have come to view today’s capitalism, not as their friend, but as their foe. And they are not all wrong. That is why we believe that capitalism must regain its responsible – its human face. That perception has influenced our negotiations.”

In that moment, it was clear that the revolt against neoliberal economic orthodoxy and the lies of its “experts” had finally reached New Zealand’s shores. That, in his declaration for a Labour-NZ First-Green Government, New Zealand was experiencing its very own “Brexit” moment, would become even clearer when Peters declared that he and his party had rejected the option of a “modified status quo” in favour of “real change”.

Just how much “real change” Jacinda Ardern’s government is willing to countenance will be revealed in the people she chooses to advise her.

At the APEC summit in Vietnam in early November, where she is hoping to persuade the remaining 11 signatories to the Trans-Pacific Partnership to allow New Zealand to renegotiate the Investor State Dispute Settlement provisions of the agreement, who will Ardern include among her expert advisers? A prime minister whose ambitions extended no further than slightly modifying the status quo would limit her APEC entourage to all the usual MFAT and private sector suspects. A prime minister determined to signal her commitment to “real change”, however, would invite Professor Jane Kelsey to join her in Danang.

A “Real Change” Government, determined to reverse the draconian policies adopted by a Ministry of Social development advised by neoliberal “experts”, would call upon the experience and expertise of Sue Bradford and Metiria Turei. Those who find themselves astonished and/or offended by the thought of two such bitter opponents of this country’s actuarially inspired and excessively punitive welfare system being asked to advise Jacinda’s government on its root-and-branch reform should, perhaps, pause and consider just how radical (albeit from the opposite end of the political spectrum) was the “expert” advice that created it.

In his review of four recent books addressing the worldwide “rage against the elites”, Professor Helmut K Anheier, of Berlin’s Hertie School of Governance, writes: “It is well within elites’ power to make decisions that benefit all of society, rather than narrow interests. Elites have surely failed in this regard over the last quarter-century, but they need not continue to fail in the future.”

But, is it reasonable to expect “real change” advice from the same neoliberal elites whose ideologically-driven recommendations created the very problems our new government is pledged to solve?

Capitalism with a “human face” has no need of a bodyguard.


New Zealanders like to think that we are, in most respects, up with – if not actually ahead of – the play. Sadly, however, as a new government is about to emerge, there is no sign that our politicians and policymakers are aware of recent developments in a crucial area of policy, and that, as a result, we are in danger of missing out on opportunities that others have been ready to take.


The story starts, at least in its most recent form, with two important developments. First, there is the now almost universal recognition that the vast majority of money in circulation is not – as most people once believed – notes and coins issued on behalf of the government by the Reserve Bank, but is actually created by the commercial banks through the credit they advance, using bank entries rather than cash, and usually on mortgage.


The truth of this proposition, so long denied, is now explicitly accepted by the Bank of England, and was – as long ago as 1994 – explained in a letter written by our own Reserve Bank to an enquirer, and stating in terms that 97% of the money included in the usually used definition of money known as M3 is created by the commercial banks.


The proposition is endorsed by the world’s leading monetary economists – Lord Adair Turner, the former chair of the UK’s Financial Services Authority and Professor Richard Werner of Southampton University, to name but two. These men are not snake-oil salesmen, to be easily dismissed. They have been joined by leading financial journalists, such as Martin Wolf of the Financial Times.


The second development was the use by western governments around the world of “quantitative easing” in the aftermath of the Global Financial Crisis. “Quantitative easing” was a sanitised term to describe what is often pejoratively termed “printing money” – but, whatever it is called, it was new money created at the behest of the government and used to bail out the banks by adding it to their balance sheets.


These two developments, not surprisingly, generated a number of unavoidable questions about monetary policy. If banks could create billions in new money for their own profit-making purposes, (they make their money by charging interest on the money they create), why could governments not do the same, but for public purposes, such as investment in new infrastructure and productive capacity?


And if governments were indeed to create new money through “quantitative easing”, why could that new money not be applied to purposes other than shoring up the banks?


The conventional answer to such questions (and the one invariably given in New Zealand by supposed experts in recent times) is that “printing money” will be inflationary – though it is never explained why it is miraculously non-inflationary when the new money is created by bank loans on mortgage or is applied to bail out the banks.


But, in any case, the master economist, John Maynard Keynes, had got there long before the closed minds and had carefully explained that new money could not be inflationary if it was applied to productive purposes so that new output matched the increased money supply. Nor was there any reason why the new money should not precede the increased output, provided that the increased output materialised in due course.


Those timorous souls who doubt the Keynesian argument might care to look instead at practical experience. Franklin Delano Roosevelt used exactly this technique to increase investment in American industry in the year or two before the US entered the Second World War. It was that substantial boost to American industrial capacity that was the decisive factor in allowing the Allies to win the war.


And the great Japanese (and Keynesian) economist, Osamu Shimomura, (almost unknown in the West), took the same approach in advising the post-war Japanese government on how to re-build Japanese industry in a country devastated by defeat and nuclear bombs.


The current Japanese Prime Minister, Shinzo Abe, is a follower of Shimomura. His policies, reapplied today, have Japan growing, after years of stagnation, at 4% per annum and with minimal inflation.


Our leaders, however, including luminaries of both right and left, some with experience of senior roles in managing our economy – and in case it is thought impolite to name them I leave it to you to guess who they are – prefer to remain in their fearful self-imposed shackles, ignoring not only the views of experts and the experience of braver leaders in other countries and earlier times, but – surprisingly enough – denying even our own home-grown New Zealand experience.


Many of today’s generation will have forgotten or be unaware of the brave and successful initiative taken by our Prime Minister in the 1930s – the great Michael Joseph Savage. He created new money with which he built thousands of state houses, thereby bringing an end to the Great Depression in New Zealand and providing decent houses for young families (my own included) who needed them.


Who among our current leaders would disown that hugely valuable legacy?


Bryan Gould, 2 October 2017



The Last Thing Progressive New Zealand Needs Is A Coalition Of Contradictions – Chris Trotter.

It is possible to want something too much.
The New Zealand progressive community’s hunger for power – so shamelessly on display since Election Night – has led it to treat Labour, the Greens and NZ First as unambiguously progressive entities capable of working together without fault or friction. That they know this assumption to be false has not prevented them from presenting a Labour-NZ First-Green Government as unequivocally “a good thing”. Consequently, there is now a real danger of a coalition of contradictions being brought into existence: a forced parliamentary alliance with the potential to be as politically unedifying as it is electorally short-lived.

As by far the most progressive member of the tripartite alliance in prospect, the Greens will be expected to make the most wrenching compromises and concessions. They will discover very rapidly just how vast the discrepancy is between NZ First’s and Labour’s pro-environmental rhetoric, and any willingness on their part to join with the Greens in rolling-out the practical policy measures necessary to give it effect.

The differences between the Greens: a party rooted in the most sophisticated layers of metropolitan New Zealand; and NZ First: a party drawing it most steadfast support from the country’s smallest towns and rural servicing centres; is unlikely to be limited to the best means of tackling climate change and cleaning up the rivers. The Greens and NZ First will find that they are not only at odds over what constitutes practical policy, but that, culturally, they have almost nothing in common. Metiria Turei spoke no more than the truth when she described NZ First as a “racist” party. Quite how the Greens will cope with the sexism and homophobia that is reportedly rife within their newfound ally’s ranks will be agonising to observe.

The Greens’ relationship with Labour is likely to be even more fraught. Disagreements are always sharpest between those who believed themselves to be in accord on the issues that matter most – only to discover that they aren’t. Jacinda’s promises about eliminating child poverty notwithstanding, Labour is not about to abandon its policy of keeping in place a regime of strong “incentives” to “encourage” beneficiaries to move “from welfare to work”. There will be no bonfire of MSD sanctions under Jacinda. Nor will there be a 20 percent increase in beneficiaries’ incomes.

The one election promise Labour will keep and, since the Greens foolishly signed up to it as well, the promise their junior partner will also be expected to honour, is the promise to abide by the self-imposed restrictions of the Labour-Green “Budget Responsibility Rules”. Since these amount to a guarantee that National’s undeclared austerity regime will remain in force across whole swathes of the public sector, it is impossible to avoid the conclusion that the Budget Responsibility Rules will become an extraordinarily divisive force within any Labour-NZ First-Green coalition.

Having denied themselves the ability to raise income and company taxes before 2020, the Labour Party has effectively turned itself into a massive economic brake on its own, and its potential allies’, policy expectations. Unless the Greens and NZ First can persuade the likes of Grant Robertson and David Parker to avail themselves of hitherto out-of-bounds financial resources, this ‘progressive austerity’ will soon turn the coalition into a bitter collection of thwarted hopes and dreams.

Small wonder then, that, according to political journalists Richard Harman and Jane Clifton, there is a growing faction within both the National Caucus and the broader National Party to walk away from any deal with NZ First. Convinced that the coming together of Labour, NZ First and the Greens can only end in bitter disappointment and, ultimately, coalition-dissolving division, they are arguing that it is better to allow the “three-headed monster” to demonstrate its utter incapacity to provide “strong and stable” government for New Zealand. “Give them enough rope,” runs this argument, “and in three years – or less – they will have hanged themselves, and National will be back in the saddle and ready for another very long ride.”

It would be an enormous error for New Zealand’s progressive community to convince itself that the deep contradictions embedded in the manifestos of Labour, NZ First and the Greens can somehow be overcome. Far better for Labour and the Greens, the two parties who are, at least theoretically, ideologically compatible, to spend the next three years developing a suite of progressive policies capable of making a real difference to the lives of the many – not the few.

Right now, with the progressive community’s desire for political power so unreservedly on display, it should be very, very careful what it wishes for.

Bowalley Road


New Zealand Election. “It’s the Economy, Stupid!” – Bryan Gould. 

It was Bill Clinton who identified the main issue in his election campaign as “It’s the economy, stupid”.

And so it almost always is, and New Zealand’s 2017 election campaign will be no different.

Of course other issues will matter too, but it is the economy, and the impact its fortunes will have on individual voters, that will usually have the greatest impact on the greatest number.

That is not usually seen as a plus for parties of the left. It is usually thought to the extent that it is almost an article of faith for some voters, notwithstanding the evidence of their own experience, that parties of the right are best equipped to manage the economy, and that other contenders for power necessarily start therefore at a disadvantage in that regard.

So Jacinda Ardern showed commendable courage when she devoted part of the time she had available in the first leaders’ debate to an economic issue.  That issue was productivity, or the lack of it.

Many experts, whether on the left or right, will agree that productivity growth is the essential factor in a successful economy. And most will say that our record in this regard is not good enough.

Why does it matter? Because it measures how much each individual worker across the whole economy produces on average. If our productivity gains are sluggish, as they have been, and fall behind those of other countries, we slip further down the international ladder in terms of living standards and prosperity.

We have been able to increase national output over recent years, but that is almost all down to taking in more immigrants. That produces a larger cake overall, but it does nothing to raise individual living standards, indeed, the reverse, since there are more slices to be cut from only a slightly bigger cake and we have to share our existing capital equipment with that greater number.

So, if productivity growth is the only sure way of raising living standards and providing more resources to spend on essentials, like housing, health and the environment, why have we failed to produce a better performance?

Because, as Jacinda Ardern pointed out, we have failed to invest in the new skills, new techniques, and new equipment and technology needed to increase the productive capacity of each member of the workforce.

We have failed to provide young people as they join the workforce with the skills, the training and apprenticeships, that are needed in a modern and competitive economy. We have handicapped our workforce by saddling large numbers with poverty (engendered by inequality) so that they have to contend with poor housing, health care and educational opportunities.

We have failed to provide incentives so that the necessary investment in new productive capacity, especially in research and development, and new equipment, is made.

And we have refused, for ideological reasons, to use the power of government to make good all these deficiencies.

Perhaps less obviously, we have failed to do what more successful economies do as a matter of course, move resources to the growth points in the economy. Where are those growth points? They should be, and almost invariably are, in the export sector, which is where the biggest markets are and where economies of scale, and therefore productivity gains, can most easily be achieved.

So, has our focus been, as it should, on improving our export performance and improving our export returns?  No, quite the contrary. We have insisted on running an economic policy characterised by high interest rates (in international terms at least) and an overvalued dollar.

As a result, our exporters face a constant head wind, because they have to charge a premium on everything they sell. And that makes it difficult both to compete for sales and  to earn a proper return on what they do sell. Just ask the dairy farmers or the Manufacturers and Exporters Association what the high dollar has done to them. Little wonder that the return on investment is so low that there is little to spend on raising productivity.

These failures are the government’s Achilles heel in managing the economy.  It seems Jacinda Ardern picked the right issue to focus on.

Bryan Gould, 1 September 2017

Jacinda tsunami is looking very hard to halt – Richard Prebble. 

Occasionally New Zealand elections produce a tidal wave. I witnessed the tidal wave that swept the Lange government to power. The pre-conditions are in place.

It is very hard for any government to win four elections in a row. Replacing Prime Ministers, Bolger to Shipley, Lange to Palmer has led to defeat in the next election. The signs are it will be a tidal wave.

First the tide goes out for the minor parties as it has for the Greens, United Future and Maori Party. New Zealand First is also losing votes to Labour.

Then the wave sweeps in. Anecdotal evidence is urban “John Key” women voters are switching to Jacinda Ardern.

Each poll shows the wave is gaining momentum. When Labour’s support crosses National’s it is all over.

The wave started when the Greens defended benefit fraud. Peters repaying his overpayment reminds us that Metiria Turia, who is still a Green candidate, has not.

Conditions were ideal for Labour. They just had the problem of their leader, until he fell on his sword.

In Jacinda, Labour have the ideal candidate for a five week campaign. Her regular Breakfast TV appearances have made her an accomplished TV performer.

The Maori Party is leaking votes to Labour too. Instead of campaigning on Maori water rights the party is campaigning for an amnesty for overstayers. They have lost the plot.

The only way to stop a tidal wave is to prevent it starting. Bill English and National’s strategist Steven Joyce are just too cautious. National also underestimated Ardern. In Parliament she has been ineffective. In six years she has not landed a single attack on Paula Bennett. But none of this matters.

This is the age of celebrity politics. It is image not substance. Macron in France, Trudeau in Canada, Trump in America and now Ardern in New Zealand. The camera loves Jacinda.

The red T-shirt crowd we first saw on TV may have been Matt McCarten’s “rent-a-mob” imported from overseas but mania when it gets going is infectious. Now the crowds are real.

I saw the Lange tidal wave. People came into my electorate office and took away handfuls of enrolment cards. On election day people lined up to vote in record numbers. Big enrolment and high voter turnout benefits Labour. As of June, the Electoral Commission estimated 445,234 voters (nearly all young and overwhelmingly Labour) had not registered. Last election just 76.77 per cent of those who did register voted. Labour strategists believe if they can lift enrolment and turn out, the party has 600,000 extra votes, enough to win.

Labour could be elected to govern alone. If the Greens, United Future, Maori and TOP all fail to reach the threshold then with the votes redistributed, Labour could govern alone on as little as 45 per cent. Winston Peters, confident he would be kingmaker, pulled New Zealand First out of the minor party debates. Now he finds himself in the middle of a benefit overpayment and is railing against “dirty politics”. What is worse, when Labour does not need him Peters becomes irrelevant.

What could stop the Jacinda tidal wave? A major failure in the leaders’ debates. Not likely. The Opposition Leader usually wins the leaders’ debate.

Labour is doing its best to lose. The party is rolling out Andrew Little’s ill-thought manifesto of promises the party never thought it would have to implement. In any other election promising to tax water, fuel, capital and tourism would be fatal.

All of Labour’s new taxes are extra. Many of Labour’s promises are just silly, such as trams up Dominion Rd. Others are reckless. “Nationalising” Maori water rights will prove very divisive.

If Labour continues to issue massive tax and spend promises for the next four weeks it may alarm the voters, though it seems nothing will turn the media against their love affair with Jacinda.

Elections are won by the party that sets the agenda. National wanted to make the management of the economy the issue. National has lost confidence in its strategy. It feels it must match Labour’s spending promises with its own. If the election is not fought on who can best manage the economy but on Labour’s agenda of housing, health and education, nothing will stop the Jacinda tidal wave. Five weeks is not long enough to discover whether Jacinda is too inexperienced and three years is going to be three years too long to learn the answer.

NZ Herald 

University of Otago’s Andrew Coleman looks at the intergenerational effects of the tax system on New Zealand’s housing markets. 

The tax system plays a crucial role in New Zealand’s housing markets. At the simplest level, the Goods and Services Tax is applied to new land development and new house construction, raising the price of new housing by 15%.

But the effects of the tax system are more complicated than this.

Since 1986 several tax changes have caused an intergenerational rift in New Zealand society by increasing the prices young people pay to purchase houses.

Some of these tax changes appear justifiable on efficiency grounds, but even these have made it more expensive for young people to purchase or rent property.

In conjunction with other tax changes that have artificially raised property prices, a generation of older property owners have become rich at the expense of current and future generations of New Zealanders.

The scale of the problem

The scale of the problem is seen by observing how average property prices have increased by over 220% in inflation-adjusted terms since 1989; the highest rate of increase in the developed world.

The average size of new houses has also increased more quickly than in Australia or the United States, the only two countries that publish this data.

The average size of a new dwelling in 2013 was 198 m2, up from 125 m2 in 1989, and nearly twice as large as the average new house in Europe.

The tax changes that have affected housing can be divided into those that affect the cost of supplying housing and those that affect the demand for housing.

Unfortunately, unravelling the effect of taxes on house prices and rents is challenging.

The effects depend on the extent that the supply of new housing is responsive to prices.

If the supply of housing is very responsive to prices, taxes that affect supply prices (such as GST) become fully reflected in prices, while taxes that affect demand (such as the relative size of taxes on housing income and other assets) do not. Conversely, if the supply of housing is not really responsive to prices, supply taxes like GST have little effect on prices but demand taxes have large effects.

The analysis is further complicated because the supply of land – particularly land in good locations – is less responsive to price than the supply of new houses.

It is quite possible that a particular tax can simultaneously lead to higher land prices but not much new land, and larger houses but not much of an increase in building costs.

Since 1989, the ways that the tax system affects the demand for housing has been the biggest problem.

The fundamental difficulty is that the returns from other classes of assets such as interest income are more heavily taxed than the returns from housing.

Because interest is more heavily taxed than the returns from owneroccupied housing – which are essentially the rent people get from their own home – people have an incentive to live in larger houses than otherwise, and pay more for well-located properties.

In the absence of this tax distortion, many people would choose to live in smaller houses and land prices in major cities would be a lot lower.

It is not unreasonable to suspect the premium people pay for well-located properties is twice as high as they would pay under a non-distortionary tax system.


But this is not all. The tax system provides incentives for landlords to pay a much higher price/rent multiple for the houses they lease, largely because the absence of a capital gains tax.

Because the houseprice/ rent multiple could increase either because house prices increase or because rents decline (or some combination of both), the tax system could make buying more expensive or it could make renting more affordable. Most of the evidence suggests house prices have increased rather than rents have fallen; either way, the result is a tax-induced decline in home ownership rates.

When the tax system causes artificially high house prices, costs are imposed on current and future generations of young people, who have to borrow more and pay higher mortgage costs.

Why 1989? New Zealanders have never paid tax on the capital gains associated with house price increases, and the way housing is taxed was not fundamentally changed in 1989.

This is true. But the distortionary effects of taxation depend on the way houses are taxed relative to other asset classes, and in 1989 the government changed the way some other capital income is taxed.

Until 1989, money placed into retirement saving schemes was tax deductible, and the earnings from this money were not taxed as they accumulated.

Under this tax scheme – which is used in most developed countries including the United Kingdom, the United States, France, Germany, and Japan – the money placed in these savings schemes is taxed in a similar way to housing.

It reduces the incentive for owner-occupiers and landlords to overinvest in housing.

While the distortions in the current tax system could be eliminated by introducing a capital gains tax on housing and all other assets, and by taxing the rent you implicitly pay yourself when you own your home, most countries have found this too difficult to do.

As they have discovered, it is far simpler to change the way other savings are taxed.

On the supply side, in addition to GST, the Local Government Act (2002) has also affected the cost of supplying housing by changing taxes.

Instead of levying property taxes (rates) to fund the costs of developing new sections, local governments have progressively imposed development charges.

This change has improved efficiency by moving the costs of a larger city to the new people populating it, but it has also increased the price of housing right across cities.

People who bought before 2002 shifted the cost of new development to others, increasing the value of their houses, even though their development costs had been paid by other ratepayers.

For a long time, economists have pointed out that if you tax the income from housing less than other assets, you tend to increase land prices.

At the macroeconomic level, they have noted that this tends to increase national debt levels, and lower national income.

The first owners of land benefit from these schemes, but everyone else loses.

Perhaps this is a reason why other countries have been concerned to tax housing on a similar basis to other assets.

It is unfortunate New Zealand does not do so, even if the tax changes implemented since the late 1980s have proved very advantageous to middle-aged and older generations.

Winston Peters doesn’t like Facts – The New New Zealanders: Why migrants make good Kiwis – Dr Rachel Hodder and Dr Jason Krupp. 

“The much-touted surplus will vanish in the twink of an eye when population growth driven by immigration is properly accounted for.”  Winston Peters

So much for Winston’s rubbish. Here’s some of what he doesn’t like, Facts. 

New Zealand is widely regarded as a unique place, renowned for its natural beauty, culture, economic freedom, and quality of life. Immigration has played an important part in achieving this outcome. Simply by moving here, immigrants have helped shaped the forces that make up modern New Zealand.

New Zealand has a lot to offer to both temporary migrants and those who want to make this country their home. But are we suffering from our own success?

With 125,000 people moving here on a permanent and long-term (PLT) basis in the June 2016 year, many question whether New Zealand’s open door policy threatens the things that make the country unique. Are migrants squeezing New Zealanders out of the job and housing markets? What does it mean to be a Kiwi when a fifth of the population are migrants? Are Kiwis paying higher rates and taxes because of migration? Isn’t the population too big already?

These are all valid questions, but ones difficult for the public to answer because of the complexity of the topic. The New New Zealanders addresses these questions by putting the latest research, data and analysis in the hands of the public. Broadly, it finds there is undoubtedly a cost to high levels of immigration, but it is outweighed by the benefits that foreigners bring to New Zealand.

Big numbers, fine detail

Arrivals figures can overstate the extent of permanent immigration to New Zealand. The PLT term covers all people who plan to spend more than 12-months in New Zealand, including many who are here temporarily. Of the 125,000 PLT arrivals, 29% comprised of New Zealand and Australian citizens. A further 55% comprised of people on temporary student and work visas. Official figures show less than a fifth of these temporary visa holders gain permanent residency.

PLT departures make up the other side of the migration equation. In the June 2016 year over 56,000 people planned to leave New Zealand for 12 months or more. It is also important to count those who have not left the country. New Zealand’s positive economic climate means more Kiwis are choosing to move back, even as fewer New Zealanders choose to leave. Overall, there was a net loss of 3,200 native born New Zealanders in 2016, the lowest level in the current PLT data series.

Integration story

Of those who do choose to move to New Zealand permanently, analysis of the New Zealand General Social Survey show immigrants integrate well. They are less likely to claim a benefit, more likely to be employed, and their children have better education outcomes than native born New Zealanders. There is relatively little ethnic or migrant clustering, and where concentrations do occur there is no indication of high unemployment. 87% of migrants say they feel they belong to New Zealand. Surveys show New Zealanders too have a generally positive view of migrants, and value the contribution that make to the economy and the cultural diversity they bring.

Home and feeling confident

Migrants certainly have an effect on the housing market, but one that is complex. Economists Bill Cochrane and Jacques Poot note that high levels of migration and high house prices occur when the economy is doing well, but one does not necessarily cause the other. That is because visitors on a temporary visa, such as students, do not tend to buy accommodation but rent it. In this they compete with Kiwis in the rental market, but the effects are modest. Rents in Auckland rose 0.2% in September 2016 compared to the same month a year ago. Cochrane and Poot suggest instead it is returning/remaining Kiwis, confident in their economic prospects, pushing up house prices.

Wages and productivity

The perception that migrants steal jobs from native born New Zealanders is wide-spread, but there is little evidence to support it. That is because the number of jobs in an economy is not fixed. Migrants also contribute to job growth by increasing demand for local goods and services.

Research into the effects of temporary migration in the decade to 2011 found a positive effect on the earnings and employment of New Zealanders. This may be because migrants fill jobs that native born are reluctant to do, and because migrants provide a boost to the sectors in which they work.

Despite concerns that immigration is dragging down GDP per capita even as headline GDP grows, the evidence suggests that there is little reason to be concerned. Research from New Zealand and overseas finds that immigration improves productivity and GDP per capita growth.

Fiscal impact

Migrants contributed a net +$2.9 billion to the government’s books in 2013. On a per capita level, this was equivalent to +$2,653 per migrant. Native born New Zealanders contributed a net +$540 million to the government’s books, or +$172 per person. This reflected the age structure of the native born population, with 47% in the economically active band in 2013, versus 60% for migrants.


On balance, the available evidence suggests that New Zealand benefits from migration, or at the very least the country is not made worse off. The current policy settings look broadly fit for purpose, but policymakers should be vigilant to ensure this remains the case.

Government should also consider reducing bureaucratic drag in the immigration system. Measures such as letting high salaries count towards a migrant’s point tally, and letting private businesses sponsor migrants could ease some of the red tape that keeps high quality migrants from moving here. New Zealand also needs to jump on opportunities for bilateral free movement agreements with other countries. Lastly, where there are concerns that migration imposes a burden on local infrastructure, Government could consider imposing an upfront levy on migrants.

The New Zealand Initiative 

Paradise lost for Kiwis can be paradise regained – John Hawkes. 

During my 1950s sport-obsessed youth, I had no idea we were the world’s third-wealthiest country. Nor did I know we had a trove of natural resources, including the world’s fourth-largest exclusive economic zone. Our climate, and the absence of ferocious mammals and deadly reptiles, meant I was unwittingly living in a virtual South Sea Pacific island paradise.

Though we remain far removed from the world’s numerous conflict zones, that paradise is now unobtainable for many. Why? Foremost causes are unaffordable housing, household and foreign debt levels, a largely low-wage economy with few well-paid jobs and low productivity. How might we regain our paradise potential for all of our people?

First, forgo investing overwhelmingly in property. We invest much more in housing than in businesses that employ many. And we won’t raise our standard of living selling houses to each other.

We need more leaders of the calibre of the compassionate Dr Lance O’Sullivan, a North Auckland Maori GP, who has instigated a workable consensus to lessen poverty and improve not only healthcare but employment and education.

Politicians and others who fail to ensure quality, well-funded universal education need to heed the dictum, “If you think paying for education is expensive try ignorance”. About a fifth of our pupils leave school illiterate or semi-literate and innumerate or semi-numerate.

We need more skilled tradespeople, scientists, engineers, technicians and other quality people working, especially, in high-tech and intellectual capital enterprises. Ideally, these are home-based and owned by residents who work together with their colleagues to put the nation’s interests ahead of their own.

Such role models are Auckland’s Beca Group and Buckley Systems; Gallagher Group of Hamilton and Christchurch’s Tait Communications; Hamilton’s Jet and Canterbury Scientific. Admirably, these export-led enterprises plan long term, with innovation and collaboration paramount.

Many of us are uninterested in politics and ignorant of finance, trade and industry. Leisure and sport dominate. We should apply the same collaboration, investment and long-term planning to export-led sectors that is done in sports.

Further, we must stop substituting well-informed consensus with our highly quarrelsome individualism. Individualism underpinned the success of our British and European settlers. As wealthier nations advance, we’re in danger of falling back. Most of us should be well off but instead we have a stand-apart rich class and a large, burgeoning, impoverished underclass.

We must discover new ways to participate effectively in the global economy. An enlightened dialogue is required involving our people that replicates the consensus achieved by the Danes, Finns, Norwegians and Swiss who think globally and act locally.

Hopefully an accord will emerge, enabling our intellectual, creative, innovative and entrepreneurial potential to be realised. If not, many could be on the road of despair to nowhere.

I believe that, with our many enviable advantages compared to most other developed nations, we should be doing very much better.

• John Hawkes is a writer in retirement

NZ Herald 

The Opportunities Party Campaign Launch – Gareth Morgan. 

New Zealand was founded on the idea of a fair deal, the concept that peoples from different backgrounds could come together and work out their differences without resorting to warfare and hatred.

The idea of that deal was to allow everyone in this country the opportunity to pursue their dreams.

That deal hasn’t always been honoured, but it is at the very core of what we as a nation are all about, fairness and opportunity.

This land of egalitarianism and opportunities has seen Kiwis achieve some remarkable things in the past century and a half….

A scientist from Nelson became the first person to split the atom

A beekeeper from Auckland conquered the highest mountain in the world

A girl from a tough background in Rotorua became the greatest opera diva of her generation

Writers, artists, sportspeople, thinkers, inventors people from every walk of life in New Zealand have proved time and time again that given the opportunity Kiwis can be the best in the world.

We have led the way in woman’s rights, social welfare, anti-nuclear activism and gay rights……..we have much to be proud of.

The opportunities that allowed us to do that were also based on the notion that each generation would pass on to the next a better country than they were born into.

A country with better education, healthcare and economic openings.

A country that was fairer, more egalitarian more civilised……in short, a country that offered ever greater opportunity.

But something has gone terribly wrong with that idea… the current generation…..the baby boomers ….. may be the first to leave behind a New Zealand of shrinking opportunities, less fairness and more inequality than they were born into.

We are in the process of flicking an intergenerational hospital pass to our children and grandchildren

We’re leaving them loaded with debt for their education, while we ask them to pay for our retirement.

We’re pricing them out of the housing market so we can make tax free capital gains.

We’re importing cheap unskilled labour to cut them out of entering the job market..and turning the country into a low wage, treadmill economy.

And when they don’t conquer the massive hurdles we put in their way we make them jump through hoops for welfare payments while calling them lazy dope heads.

We’re screwing the environment they will have to live in, by tolerating farming practices that degrade our waterways…..paying lip service only to the idea of climate change and the solutions needed to overcome or adapt to it, while pandering to industry sector groups without regard to the sustainability of their businesses.

We are criminalising and locking up ever growing numbers of men and women who don’t even get a chance in this shrinking world of opportunity, and we are standing by as the gap between the haves and the have nots widens.

You don’t need me to tell you how wrong all this is, you hear about it every day when you read our suicide statistics, homeless numbers, real estate ads, and crime stories.

And what is our political establishment doing…..pretty well nothing. Stuck in outdated left versus right political ideology with a tax & targeted welfare regime that is obsolete, they trade insults and argue at the margins as New Zealand, the land of opportunity, slips away.

They fight, not to restore the fairness of our society but to perpetuate their own political power in some vain belief that an ideology is what’s needed to get this country back on track.

Let’s be very clear TOP doesn’t care who leads the next government.

Those who campaign to change from blue to red or right to left are like a bunch of kids screaming “DAD’s burnt the dinner…let’s get the dog to cook”.

What New Zealand desperately needs are ideas to restore opportunities…..policies that aren’t designed to get a party into power but to fix the problems we have, reduce inequality, and take us forward into a world where our children again have more opportunity than we did.

If we don’t, we’ll end up with a select few owning million dollar houses in a ten-cent economy.

We know what those policies are.

Fair tax reform to close the 11 billion dollar property loophole, and deliver income tax cuts to every worker.

A UBI to end witch hunt welfare, underwrite human dignity, and ensure that when any of us are at our most vulnerable, our society is backing us.

Tenancy reform to give renters real rights so they can build secure homes without the mission Impossible of property ownership.

Real action on cleaning up our waterways, and having polluters pay, while encouraging best environmental practice from all industries.

A democracy reset to give us all clear constitutional rights, curb the power of cabinet and recognise the Treaty of Waitangi.

Real commitment to confront and deal with the challenges of climate change and make the country resilient to its inevitable assault.

A justice policy that wages war on prisons not prisoners

Education reform that recognises schools should lie at the centre of communities, and that the role of education is to prepare New Zealanders for a world of ever-increasing automation and diminishing income from mundane work.

And health policies that stop us literally killing ourselves, be it through suicide, or the ever increasing consumption of deadly foodstuffs.

None of these policies are rocket science, they are based on expert, evidence-based analysis of what New Zealand needs and can achieve with the resources we have available right now.

The only thing lacking has been a political establishment with the will to see, and courage to embrace the way forward.

We are all here today as part of the TOP movement to make a change……… not a change of government, but a real change of direction and focus…to make a real change in the lives of all New Zealanders to restore opportunities for future generations.

We’ve come a hell of a long way since November, thousands have put up their hands to join TOP, hundreds have volunteered, and we have awesome candidates standing across the country.

It hasn’t been easy – we’re the new kids on the block, so we don’t get the sort of coverage or funding the old establishment parties have access to.

But we have one huge advantage, we are free of the hatred of old tribal politics, we know what we stand for, and we can work with anyone who is genuinely prepared to implement policies that restore opportunities to New Zealanders.

I want to thank all of you for putting your hands up and having the courage to be part of a real change for good in New Zealand.

For having the courage to leave behind the class warfare and name-calling that has dominated politics for so long.

For having the brains to know that more of the same-old-same-old isn’t going to cut it for future generations

And most of all, believing that good ideas and genuine dialogue will beat self-interest and political game playing any day of the week.

We have already moved the policy debate in this country without a single vote being cast for TOP.

Acceptance of the need for cannabis reform is now widespread, our tenancy reforms have been lauded for their foresight, the UBI is now an accepted part of this country’s welfare debate.

But there is a long way to go.

I know we will be in Parliament after September the 23rd……just how much we can change the direction of this country will be up to voters.

You are the people that will help them make the right decision, to restore the values this country was founded on, and give equal and growing opportunities for everyone no matter what their gender, age, social status or ethnicity.

You can do that by sharing our ideas, reaching out to the good in every Kiwi’s heart, and making sure every New Zealander makes the decision to


The Opportunities Party

Housing Affordability, The Opportunities Party.

The Opportunities Party has a bold new plan to address the major problems confronting New Zealand, housing affordability.

While TOP’s ground-breaking Fair Tax System will stop residential properties being misused as tax free investment vehicles for the wealthy and suppress rampant house price inflation, TOP believes structural reform of the rental and social housing markets is also needed to solve the country’s most pressing social issue.

TOP will adopt a German type model to vastly improve the rights of private market tenants while demanding minimum standards for all homes and gifting current state housing stocks to non-profit social housing organisations.

The Opportunities Party intends to develop a deep market for long term rental accommodation so that families can be secure knowing that investing in home ownership is not the only way that security is achievable.

Party Founder and Leader Dr Gareth Morgan says, “Homes not Houses will alter the profile of New Zealand home ownership so the modest and low incomed no longer need to climb the mountain of home ownership in order to create a stable long-term home for themselves and their families.”

The ability to evict tenants will be greatly reduced and rental properties will need to be sold with existing tenants in residence. While market rents will still apply there will be regulations to prevent existing tenants being priced out of their homes.

The benefits of this policy package do not accrue to tenants alone. Reducing the social disruption of constantly moving home will result in less stress on families, higher educational achievement and reduced spending on social services to address the problems caused by that disruption.

“Solving the housing crisis isn’t just about increased building or decreased prices” says Dr Morgan, “It’s about the way a civilised society should regard residential property as a social asset for an entire nation rather than a financial asset for a select few”.

What Does Gareth Morgan Really Believe? – Bryan Bruce. 

Last Friday I sat down with Gareth Morgan to talk about why he had started The Opportunities Party and to try to gain a better understanding of his policies.

It’s the first of what I intend will be a series of conversations with politicians leading up to this year’s General Election.

I use the word “conversations” rather than “interviews” because as you will see the style is that I listen to what the person has to say for quite a long time before asking some searching questions.

If you don’t want to watch my  whole conversation with Gareth here are some highlights.

Gareth ultimately wants to give everyone, rich or poor, $200 a week unconditionally as a basic income. He acknowledges he cannot do this all in one go, so he wants to start with 18 to 25 year olds and families with young children.

He says no one would be short changed. If you are on a benefit that is more than $200 you would continue to get it.

Where does he propose to get the money for the UBI for young people from? By taxing the superannuation of over 65 year olds.

All pensioners would get the first $10,000 as of right, the next $10,000 would be subject to a means test. So if you are a wealthy oldie you won’t get the second $10,000 – that money instead would go to younger people as a UBI. 

He also proposes to tax people every year for living in a house they own because he wants to tax the total equity of a person i.e. a wealth tax.

During the conversation you will hear me raise a number of issues which I think are flaws in Gareth’s scheme – but he doesn’t.

For instance , if you are over 65 , receiving the superannuation and living in your own house you would have to pay tax each year on the estimated value of your property.

Now, unlike Gareth a great many superannuitants are not wealthy and will not be unable to pay the tax because they don’t earn enough each year.

No problem says Gareth.

The yearly house tax owed would roll over until you die. The trouble is, if you live for a long time then the State could end up owning your house and you would have nothing to leave to your children or grand children.

Do you think that’s fair?

Gareth thinks so, because he “doesn’t believe in inheritance”. 

He also says that he doesn’t have any preferred coalition partners. He will work with any government that will instigate some of his flagship policies.

I put it to him that if voters cast their vote for TOP then it is a vote for uncertainty (as it is with NZ First) because they will not know what government he is prepared cooperate with until after the election.

He doesn’t see that as a problem.

I of course do see it as a problem because I think voters want to have a very good idea of what kind of coalition government they are electing before they vote.

As you will hear – while I understand why Gareth wants to propose this radical tax reform I do think there are more than a few fish hooks in his plan –  some of which I raise with him on camera and some I didn’t because if people don’t buy into his main proposals then arguing about details that would then  never happen would have been a waste of his time and mine.

I appreciate Gareth took the time to have this conversation and  I have to say, I did enjoy it.

Bryan Bruce talks with Gareth Morgan

NZ Labour leaves genuine Social policy to others. The Greens make a moral decision. – Bryan Bruce. 

Good on them. The Green party’s Social Justice proposals released today are moral and just.

Those who are struggling and say they don’t have a choice this election need to think again.

Reducing  the bottom tax rate from 10.5 per cent to 9 per cent for anyone earning less than $14,000, while raising the tax rate to 40% for anyone earning more than $150,000 per year is a well overdue move to close the gap between the haves and have nots.

We have to lift around 179,000 Kiwi kids out of poverty. Their tomorrow, and ours, depends on what we do today


– A sole parent on a benefit, with two school-aged children and no paid employment: $179.62 better off each week.

– A sole parent receiving the Student Allowance, with two children, and part time work on just above minimum wage: $176.15 more each week.

– A single person on jobseeker support: $42.20 more each week.

– A two-parent family, with one working parent on the median income, with three children: $104.52  more each week.

– Two parents, both on jobseeker support, with three children: $207.46 more per week.

– A two-parent family, both earning the median income of $48,000 with three children: $130.19 more each week.

– Two parents, one in paid work earning $70,000 a year, two children: $87.85 more a week.

Never Was So Much Owed By The Few To The Many – Bryan Bruce. 

Apologies to Sir Winston Churchill

Voting 2017 – Taxation

What’s the purpose of an economy? Is it so a few of us can get very rich at the expense of the many? Or is it to provide the greatest good for the greatest number of us over the longest time?

I’m on record as arguing for the greatest good definition (see my documentary Mind The Gap) – which is why I think the following fact from Statistics NZ  tells you everything you need to know about why 30 years of neoliberal economics has been a disaster for the majority of Kiwis.

The richest 10% of us now own 60% of the wealth of our country … and the poorest 40% own just 3% of it.

That’s serously unfair.

Which raises the question: How could I use my two votes this September to turn our country back in the direction of a fairer society?

Well, for one thing, I could consider casting them for candidates and parties offering to  alter our Tax Laws so the wealthy are reqired to pay more of their fair share to the sociey from which they so greatly benefit.

So I’ve taken a look at what I understand each of the political parties to be saying about Tax reform and added a comment or two about each of them.

NATIONAL – say their economic plan is working so well they want to give us tax cuts.

Well, who wouldn’t want more money in their  own pocket? But when DHB’s are begging for money to meet a Mental Health crisis in Canterbury and being told it’s “inappropriate”,  when there’s a teacher shortage, when we have food banks and families sleeping in cars and motels because we don’t have enough houses for them – then it seems to me we clearly need more money in the public purse, not less. So Tax Cuts don’t impress me.

ACT – want to cut taxes dramatically but say they won’t cut core services. 

How’s less money in the public purse going to deliver better health, housing  and education for all?

More trickle down theory? More public /private partnerships like Serco ? No thanks.

UNITED FUTURE – a bit hard to find their policy. You have to hunt through press releases. One page I did find says they want a “broad based low rate tax system” so  currently my comment about ACT also applies to them. 

If anyone from United Future wants to send me a link to a synopsis of their tax policy I’d like to read it and update my notes if necessary.

MAORI PARTY  –  I may have missed it but I can’t find a 2017 tax policy statement on their site (other than they want to extend the Tax Credit for all low income families).

Last election The Maori Party Tax policy was No tax on the first $25,000 earned, all food exempted from GST, removal of tax from prescription medicine,implement financial transaction tax which curbs the ability of speculators to make tax-free profits from short-term investments in our financial markets.

Interestingly they went into active coalition with a  party  that wants none of those things.

MANA PARTY  – I also can’t see a current tax policy on their site . Again I’d appreciate a link to a tax position statement.

In the past Hone Harawera has promoted such things as removing GST from everything but tax fast food and soft drinks, a financial speculation tax, no tax on first $27,000 earned in low-income househod, high-earners paying high taxes, capital gains tax (excluding Maori land and family home) and reintroducing inheritance tax.

Perhaps a joint Mana/Maori taxation policy is coming?

LABOUR  – say they want to do things like  “build thousands of affordable homes, fix the health system by turning National’s years of underfunding around and rebuild world-class. 

All apparently without raising taxes.

It seems to me the only way you can spend money on selected policy areas without  raising additional revenue through taxes is to take it from some other part of the budget . So what would  Labout cut back on?

Then there’s the apparent inconsistency with the 5th statement in their Budget Responsibility rules:

“The Government will ensure a progressive taxation system that is fair, balanced, and promotes the long-term sustainability and productivity of the economy.

This is where I find Labour’s Tax policy confusing. The current taxation system is clearly unfair (otherwise the richest 10% would not own 60% of the wealth) but Little says they are not going to change it.

So what does the promise of the 5th Budget Responsibility statement amount to? How will they ensure “a progressive taxation system that is fair” if they are not going to increase taxes??

Again if someone has a link that explains these apparently conflicting statements please send it to me.

GREENS – Under the Budget Responsibility Rules they say that in coalition with Labour they want to “build a fairer tax system” and that they “will establish a group of independent experts on how best to achieve this.”

Frankly I’m surprised that given all the years they have been in opposition they haven’t done that already.

So the way I read it, under a Labour/Greens coalition, taxation would stay the same until they figure our how to make taxation fairer and until that happens they will be shifting money around from the existing tax take to spend more on social and environmental policy areas. So again, which budget areas will receive less so that  their preferred areas can have more?

NZ FIRST   – say they want to “replace the existing tax system with a fair and equitable system based on people’s capacity to pay, so that people and businesses who benefit from the higher incomes made possible by New Zealand’s economic potential will bear a greater portion of the tax burden than those with lower incomes.”

So again there is a recognition that the wealthy are not paying their fair share, but also again – unless I missed it – they don’t explain what their new “fair and equitable” tax  would look like and how it would work.

They do say they want to remove GST from food .

That’s good –  but while recovering that loss of income by chasing tax evaders (as they say they will do) is laudable, it won’t be easy and it won’t be cheap (There will be new costs – everything  from additional tax inspectors to court costs.)

So in the coming weeks I’d really like to see some costings and a clearer explanation of how their “fair and equitable” tax reform will work.

THE OPPORTUNITIES PARTY  – wants tax reform but not as most of us have thought of it in the past.

They say they “want to change WHAT is taxed not the amount of tax.”

They think that “all income should be taxed, whether it is in cash or in kind.”

Now I’m good with the idea that making a profit on the sale of your house shouldn’t be treated any differently from tax you pay on, say, the interest you earn your savings bank account (if you are fortunate enough to have one).

Where they lose me is when they argue that home owners are effectively living rent free and therefore tax free – because if they were renting their house to someone else they would be taxed on  that income. They say  that situation is unfair .

They seem to be arguing that homeowners should pay what they call “imputed rent” for the privilege of living in their own home. 

However home owners often pay mortgages in order to have the privilege of having a home and security of tenure and they pay rates which is a tax based on the estimated value of their property. A tax which pays for many things that non property owners enjoy – such as rubbish collection, parks, up keep of the city roads etc.

Also not all homeowners are speculators or in it for the capital gain. My guess is that most homeowners are in it because they want security of tenure for themselves and their families. 

So I’m not persuaded home owners are getting the totally free ride TOP seems to be suggesting is the problem.

Also it seems to me that if you want better social services such as better health and education then you have to find ways of getting MORE money in to the public purse – no the same amount albeit in a different way


They want to abolish GST and replace it with a Financial transaction tax. They are a monetary reform party but I can’t see a policy on personal income tax reform. Again if I’ve missed it please send me a link and I will modify my notes. 

Me? I’m still deciding .

I think the established parties of the Left are leaving  themselves open to the John Key line “show me the money”.

However I also think the parties on the Right need to ”show me the compassion”.

How can you take less money in through taxation and deliver things like quality education and health?

Through public/private partnerships? Well, maybe where the private arm is genuinely a not for profit (and the executives don’t cut themselves huge salaries) … but private profit driven companies working for the public good? What? You mean like Seco? No thanks.

But, as I say, that’s just what I think. How about you?

Please remember Knowledge is Power – and so is Voting. So talk about the issues that affect us all with your friends and whanau. To have your say on election day please make sure you are enrolled.

Here’s the link:

‘These problems will not be fixed by the market’ – Bruce Plested. 

Over the years I’ve had a variety of bosses. In seeking to recognise a good boss from one not so good, I asked this question: ‘Would they make a good foreman?

  • Could they ask the workers to do a difficult or unpleasant job and expect them to do it?
  • Could they do the job themselves?
  • Could they take their people with them?
  • Did they get the job done every day, week and year?

With 2017 being an election year in New Zealand it is worth asking these questions of our politicians.  Too many of them fail the test and are lost in platitudes, jokes, jibes, foxy words and sheer procrastination.


Our houses, through most parts of New Zealand, cost some ten times the net annual income of the family seeking to buy them.

These high prices (three times annual income was normal for many years prior to the early 2000s) have been progressively increasing for the past 15 years, and all governments have been aware of the problem. No government or local government has taken any meaningful action against this rising tide.

As the New Zealand Initiative has stated, “There are not enough homes being built to meet the demand.”


  • Planning restrictions make it difficult to increase population directly within the city boundaries.
  • Cities are prevented from growing outwards because of rural and urban boundaries.
  • New developments require infrastructure investment from local councils, which can only pay for such investment by rates increases.

Politicians, both local and national, must take action on this very fixable social disgrace. “The market” cannot sort out this problem. Real leadership and intestinal fortitude is needed now.


Measured by some standards, our education is at satisfactory levels on a global average scale. However only 30% of children from lower decile school areas are reaching the New Zealand average for level 3 NCEA.

This low level of success continues the establishment of a permanent socio-economic group of under-achievers in education, and it is our Māori and Pacific Island people who make up most of this group.

This group of under-achievers are more displaced than ever by rising housing and rent prices. Without educational success they will continue to make a lesser contribution to society.

Business can play a bigger role in attempting to sustain and assist educational development. If businesses and schools, particularly in lower decile areas, get together in a meaningful way, benefits will evolve. The more children understand how a business (from a farm, to a fruit shop, to an engineering factory, to a quarry) works and interacts, the more they can understand the possibilities. Business people may be able to inspire children and parents to strive for success, and may be able to contribute to financing school wish lists, from computers to sports equipment, books to bus trips.

Can electorate and local politicians help make this happen?


Pollution and degradation of our environment is another area requiring strong political will.

Most cities provide bins for rubbish and bins for recycling. There is however no education, or ongoing exhortation, on how to recycle, why to recycle and whether it works. Is an unwashed bottle or can recyclable, or does it go into landfill? Should we recycle bottles with the lid left on? Should wine bottles have the lead seal removed? What happens to polystyrene, what happens to plastic bottles with pumps attached, what about empty aerosol cans? Much of this stuff is going to landfill because our local authorities don’t tell us what is required. If recycling is just a myth, let us know, otherwise teach us to recycle for the benefit of the planet.

Our lack of respect for water and water quality is an indictment of governments going back decades. Various businesses and pressure groups have been allowed to pour chemical waste, animal entrails, milk, and human and animal effluent into our streams, rivers and sea. Freshwater rights for irrigation have been given, to the extent that some rivers run dry most years. And now we are giving water rights to export freshwater in plastic bottles.

Regulators could have stood against many of these past and present excesses, but chose to do nothing and leave the problems to our children and grandchildren.

A couple of years ago I heard a European billionaire being interviewed. When the slightly irritable reporter asked “Well, how much money do you want?” the billionaire answered “Just a wee bit more.”

And it is the “wee bit more” that has done so much to damage our environment – just a few more cows per acre, just a wee bit more water for irrigation, just another water bore in case it doesn’t rain, just a wee bit more sewerage mixed with a wee bit more storm water, just a few more years hitting our already depleted fish stocks.

The problems mentioned here are not fixed by the market. They are like law and order – the local and national politicians should be dealing with them and committing to solutions before the next elections.


Bruce Plested, Mainfreight founder. 

The Spinoff

NZ Budget 2017. A Government trying to make up for past neglect – Max Rashbrooke. 

In it’s 2017 Budget the NZ Government seems to be playing the role of a parent who, after years of providing minimal support, turns up at their child’s birthday party bearing presents and hoping to be showered with praise.

There is, admittedly, much to commend in the Budget, for what it does to support New Zealanders and to increase fairness: the $321 million package for “social investment”, focused on mental health; the major boost to Working for Families that will raise payments by up to $26 a week per child; the lift in the accommodation supplement that gives low-income people $25-$75 extra a week to offset housing costs; and so on.

And the Government did last year increase benefits for those with children by $25 a week.

But this has to be set against the overall neglect of past years. Working for Families may get an extra $1.1 billion between now and 2021, but it has, according to Auckland University assistant professor Susan St John, been cut by $2.8 billion since 2010. Those cuts have been made stealthily, by clawing back more of the payments as people’s incomes rise and by not adjusting payments for inflation.

The low- and middle-income families who rely on those payments to make ends meet are still worse off in the bigger picture.

Health, meanwhile, gets a little under $900 million in the coming year, but analysis by the CTU shows that it needed nearly $1.1 billion just to keep up with health sector inflation – the increased costs of medicines and equipment – and the equal-pay settlement for aged-care workers.

So despite the headlines, and some genuine giveaways, this Budget often falls short of what is needed just to maintain current services, adding to the shortfalls that have occurred throughout the past eight years.

That parsimony has been a choice, not a necessity: ministers could have maintained vital services by adding a little to our extremely low government debt, an investment that would have more than paid itself off over the long run.

The Government may say that it is spending more, in pure cash terms, than it did on taking office.

But the true value of its spending can be seen only when it is adjusted for inflation, which eats away at the worth of each dollar, and for population growth, since each extra person – as a patient, a pupil, or whatever – needs extra funding.

Calculations by Victoria University and the New Zealand Institute for Economic Research show that, from 2009 to 2016, core government spending actually fell on an inflation-adjusted, per-person basis – only by 0.7 per cent, hardly the slash-and-burn some on the Left would claim, but a cut nonetheless, at a time when the  global financial crisis has been hammering families and problems like climate change have loomed ever larger.

It’s no wonder that schools, for instance, are struggling, when their funding has, on this measure, fallen in the past seven years.

Separately, Forest & Bird calculates that spending on core native species protection has dropped 21 per cent since 2009 – a cumulative shortfall of $230 million.

And the damage done by these funding shortfalls is clear to see, in the thousands of New Zealanders who are homeless, in the tens of thousands of children living in poverty, or in the over-subscribed mental health services having to turn people away.

The Budget will, of course, get plaudits for lifting disposable incomes through its tax threshold changes, something that makes the biggest difference, proportionately, to low- and middle-income earners.

But people on six-figure salaries will also be made more than $30 a week better off by the tax cuts, even though they are hardly struggling now.

And bear in mind that, even though more people have been moving into higher tax brackets (a process known as fiscal drag), New Zealand still takes less in income tax from typical wage earners than any other developed country, according to the OECD.

The consequence of the latest tax cuts, especially those that benefit the already well-off, is that there is relatively little to spend on the collective goods needed for the country to function: protecting endangered species from extinction, educating our children for a fulfilling and active life, making sure everyone has a warm and safe house, and so on.

Finance Minister Steven Joyce says the families package will lift 50,000 children out of poverty. That would be fantastic news. But presumably it relies on the extra money really going into families’ pockets, as opposed to being swept up by landlords who may now think they can charge more.

And with little in the Budget to help build houses and create more competition among landlords, the latter scenario looks quite likely.

The Budget may still be an electoral success. Governments often aim not to solve problems but to stop their softest voters deserting them on specific issues, and this Budget may do just that for compassionate National supporters. It really depends on how much voters feel inclined to punish ministers for their past neglect.


Max Rashbrooke is the author of Wealth and New Zealand and a research associate at the Institute for Governance and Policy Studies.

NZ Election 2017: Voter silence means we’re destroying our democracy – Richard Shaw. 

On Saturday, September 23, New Zealanders will go to the polls and vote for the 52nd Parliament. Well, some of us will. Probably fewer than did three years ago.

Declining voter turnout has become the canary in the political coalmine: an indication that something is wrong with our democracy. Once upon a golden age turnout was routinely in the 80 to 90 per cent range.

That began to change in the 1970s when the emergence of new social movements, disaffection with governments’ inability to tackle gnarly economic and social issues, and the erosion of traditional ties to the two major parties began to chip away at turnout.

By the time of the last general election we had reached the point where nearly 23 per cent of registered voters did not vote, and a further 252,581 eligible voters did not even enrol.

Turnout in 2014 was the lowest of any election held under the universal franchise except for the the one we had three years earlier, at which only 74 per cent of enrolled voters made it to the booths. And it’s not looking that flash this year, either: the registration data show that just over 349,000 eligible voters have yet to enrol.

Broadly speaking, those who are quietly shuffling away from electoral politics tend to be Maori, people without work or on low incomes, and members of some recent migrant communities (especially those from nations without long-standing democratic norms and conventions).

Crucially – because age cuts right across every socio-cultural category – the trend is perhaps most pronounced amongst young people. In 2014 only 75 per cent of eligible voters aged 18 to 24 enrolled, and one third of those who did enrol did not vote at all. (So far, 65 per cent of eligible voters in this cohort have registered for this year’s election.) Roughly the same figures applied for those between the ages of 25 to 29 and they weren’t that much better for people aged between 30 to 34.

The turnout at the last election amongst those aged 18 to 29 was less than 50 per cent.

In short, an entire generation is at risk of being lost to politics. If this trend continues, shortly the only people standing outside polling booths will be elderly.

Why might someone choose not to exercise this most fundamental of citizenship rights? The standard explanation explains non-voting as an individual deficit: too lazy, too apathetic, too busy on Facebook. Conveniently, this approach ignores some of the compelling and entirely rational reasons people might opt out of the electoral game.

Above all, if you live a life of poverty, ill health or marginalisation as a result of successive governments’ policies, might you not at some point be tempted not to vote? If your interests, your wellbeing and your aspirations are routinely ignored in public policy decisions, might it not at some point make a sort of sense to simply step away?

Possibly, and yet declining turnout matters. At the most obvious level, political disengagement does not stop politics: governments continue to make decisions that affect lives whether or not people vote. It also matters because we achieve more informed, more just, and more durable decisions when all voices are heard in the public conversation.

Imagine what sort of policy course we might chart as a nation were those who are most affected by housing unaffordability and current superannuation policy were to make their views felt through the electoral process. Instead, many of those people will not vote on September 23, and policy inequities that disproportionately affect the young and the impoverished will likely endure.

Perhaps most concerning of all, there is the risk that over time political disengagement erodes the legitimacy of the entire political system such that, when the populist stars align, we find ourselves caught up in the sorts of intolerant, bigoted and anti-democratic politics we see being played out in parts of Europe and North America. When that happens, some of the voices that are silent now may be making a very great deal of noise indeed.


Richard Shaw is a Professor of Politics and the Director – Bachelor of Arts (External Connections) at Massey University.

The Mother of all Blunders – Bryan Gould. 

“Neoliberal economic policies have failed, and an important aspect of that failure has been that most of such new wealth as has been created has gone to the richest people in society.”

Jim Blogger, former NZ Prime Minister

Jim Bolger headed a government that set about cutting taxes and therefore public services, and weakening trade unions, policies often seen as the hallmarks of neo-liberalism, and that is to say nothing of Ruth Richardson and her boast of delivering “the mother of all budgets”.

It is beyond dispute that the countries which have enjoyed the best economic outcomes have been those – like the Scandinavian countries – which have at the same time most stoutly resisted the growth of inequality.  As for the rest, the application of neo-liberal policies has meant a poorer economic performance, accompanied by greater social division.

We do not have to choose, in other words and as is so often asserted, between social justice and economic success.  The former is an essential element in producing the latter and is not just a “luxury” we can do without.

Or, to put it in another way, the failure of neo-liberal policies is largely attributable to their inevitable tendency to exacerbate inequality and to foster a lack of concern for the less fortunate.

And a moment’s reflection will tell us why that is so.  An economy will always be more successful if it engages with and uses all of its productive capacity – and that means its human resources – rather than leaving some of them under-used and undervalued.

The loss and damage we sustain, if we fail to take account of the interests of the whole of society, creates not only a weaker economy, but a more divided and unhappier society.

In today’s politics, it is the right that is ideologically driven while it is the left that constantly seeks merely pragmatic solutions to pressing problems.  The left’s difficulties in attracting majority public support suggest that solutions to problems will stand a better chance of being accepted if they are seen to be grounded in a coherent analysis of what has gone wrong.

It may be that, in their anxiety to gain support from the “middle ground”, the left has too easily been frightened away from developing such an analysis.  Surprisingly, they seem reluctant to engage in an ideological debate and prefer to leave the territory uncontested.

If Jim Bolger can do it, and link outcomes to policy frameworks, why not the left?  But, if there were to be a next time, Jim, could you please see the light and find the road to Damascus a little sooner?

Bryan Gould

New Zealand’s Voting Reality? Hopeless! – The Opportunities Party. 

Little has changed.

We just commissioned market research to determine what makes New Zealand voters tick and the answers are depressing.

One of the line of questions asked of a poll of 1,000 voters was designed to determine the factors that contribute to their views on policy. It went like this;

  • Respondents were presented with three electoral options and asked to choose their preferred option (or none of these.)
  • Each option includes a party banner, a policy, a statement of ‘where the money comes from’ and an underlying description of the tax system being promoted: how fair is it?
  • Respondents do the exercise 10 times – each time being presented with different alternatives. They might be a diehard National supporter, but even then, some policies or tax schemes may prove untenable. In other words tax may trump party allegiance.

By studying the collective choices made, 10,000 of them, we can determine the decision architecture of the voter – and also compare the attractiveness of the competing policies, parties, etc.

This is how it turned out:

…  TOP

When it comes down to it, self-interest predominates – and we wonder why our politicians focus mainly on delivering us candy, and never tell us which taxpayers specifically will be paying for it.

Are we really such children?

New Zealand – Labour and the Greens commit political HariKari, nail their flags to the Neoliberal flagpole. 

Middle and Lower income NZ betrayed and abandoned. Labour and Greens are no longer relevant in 2017 election.

My pick is there will be a massive swing to the Maori Party and NZ First. My votes will be going to The Opportunities Party, they are the only party making economic sense. 

Does New Zealand still have political parties on the left in parliamentary politics? No

Do the poor and working classes have anyone to vote for this year? No

These are some of the key questions being asked in the wake of the Labour-Green announcement that they will restrain themselves in government from any significant deviation from the economic status quo.

“The Greens have completely sold out on where they started from in my generation of MPs in 1999.

The new rules adopted by the left parties is a ‘totally business-friendly’ policy and will constrain them in being able to depart from the National Government’s main economic settings.

So what you see here is the Green Party deciding to go after votes on the centre and the right of the New Zealand political spectrum. It wants business in its corner. It wants your National blue-green voters in its corner. And completely abandoning the huge number of people who are in desperate need in the areas of housing, welfare, jobs, and education”.

It’s about political opportunism by the Greens, in order to get into government.

At what price power, if you sell out everything that your party was originally set out to achieve?

I mean, this Green Party here is following the same trail as green parties all over the world, some of who have ended up in coalitions and alliance with really rightwing governments.

Some Green Party supporters are going to end up like some of us already, who have no one to vote for this year. The Greens was perhaps the last hope. This is the death knell for the Greens as a left party in any way, shape or form. They are a party of capitalism. They’re a party that Business New Zealand now loves.” Sue Bradford

“We support higher levels of Government activity and investment than these rules permit. There is an urgent need. Many countries who are more successful than us socially and economically have much greater government activity. If an incoming Labour/Green Government is serious about fixing the problems we have in our education, health, housing and other public services, if it’s going to correct the imbalances we have in terms of pay equity, if we are going to really tackle income inequality and our environmental challenges together as a nation, then it will need to be prepared to invest significantly. That will test these rules as they stand.” Richard Wagstaff, CTU

“Who says voters won’t buy into tax increases on high incomes? I’m sad that our redeemers are capitulating to that rather than making the case for it. Elections are an opportunity to win support for ideas. Not just frame ideas around putative support.” Laila Harre

NZ Herald

The Opportunities Party – UBI and Thriving Families. 

The Opportunities Party is starting along the road to an Unconditional Basic Income (UBI) by ensuring two groups are the first to get it.

As covered in the book, The Big Kahuna, a UBI:

  • empowers people through giving them more choices on how to spend their time, invest their means;
  • recognises the contribution of the 1 million people who work but are not paid, and without whom our society would collapse;
  • provides a cushion to lessen the impact of the casualisation of work;
  • eliminates the poverty trap, the disincentive to work accompanying targeted benefits; and
  • winds back the dehumanisation and stigmatisation of benefit targeting.

The major constraints on how high that a UBI can be set includes its cost to the taxpayer and its relativity to the rewards for paid work. If fiscal overload is to be avoided then the taxpayer cannot be expected to foot the bill for whatever level of UBI proponents dream of. Likewise, the incentive to seek paid work cannot be undermined by the level of the UBI otherwise the resultant lack of labour available and the rising costs of production faced by New Zealand firms, would impart serious consequences to our economy.

A full UBI is our firm objective but requires first that integrity be restored to the income tax regime as per Policy #1 and then we will introduce further taxation reform to fund this aspiration. It is unlikely that a UBI will ever totally replace targeted social assistance but it certainly will markedly reduce our reliance on targeting, with its stigma-laden selection criteria and its perverse impact on behaviour.

A UBI can relieve poverty without creating poverty traps. This will be increasingly important as the job market becomes more and more disrupted. The key difference between the UBI concept of social assistance and the targeted approach of the current regime is the absence of work testing. There may be broad criteria for certain types of UBI – age, income, family type for example – but those delineations will be nowhere near as granular and onerous as the poverty traps that targeted, work-tested benefits entail. In time there will be an underlying UBI for everybody – it must be modest of course and not compromise the incentive to take paid work.

The Policy … 

The Opportunities Party UBI Policy

New Zealand’s Neoliberal Drift – Branko Marcetic. 

In New Zealand, neoliberal reforms have widened inequality and undermined the country’s self-image as an egalitarian paradise.

A few years ago, when the 2008 global financial crisis was just one or two years old, a coworker and I were talking about the increasingly common sight of homeless people in Auckland, New Zealand. While homelessness in Auckland was nothing new, we agreed that we were seeing more and more men and women curled up in doorways, draped in layers of old clothes and blankets, and holding up tattered signs asking passers-by for money on Queen Street, the city’s main commercial hub.

It was sad, I remarked, that while the problem seemed to be getting worse, the government seemed to be doing very little to help these people escape poverty. She too expressed sympathy for the poor and stressed the importance of giving them a leg up, but confessed she found it difficult to feel bad for homeless people. After all, New Zealand had a generous welfare state that made sure no one was left behind.

“I mean, if you can’t make it in New Zealand,” she said, “then there must be something really wrong with you.”

Her attitude is not particularly unusual — millions of New Zealanders share it. The image of New Zealand as a kind-hearted social democracy, a Scandinavia of the South Pacific, is deeply engrained in its culture.

In fact, this view extends far beyond the country’s borders. A Kiwi in the United States is likely to field three common queries: questions about the country’s natural beauty, about The Flight of the Conchords, and about how much more progressive New Zealand is than America. (There’s an occasional fourth that has something to do with Lord of the Rings.)

To be clear, New Zealand has earned this reputation. Its quality of life is consistently ranked among the highest in the world. In metric after metric — whether examining corruption or life expectancy — it rates well above average. Perhaps most significantly, New Zealanders themselves report extreme satisfaction with their lives.

All of these accolades cover up another truth, however: New Zealand hasn’t been a social-democratic paradise for a long time now. Often considered a “social laboratory,” New Zealand eagerly adopted radical neoliberal reforms in the 1980s like few countries before or since. Nevertheless, its kindly image persists, in and out of the country.

A Social-Democratic Laboratory

All countries have narratives. In United States, it’s the “American Dream,” the idea that hard work makes millionaires. In New Zealand, it’s the idea that a benevolent, liberal state will look after its people.

This self-image can be traced back to the period between 1890 and 1920, when the country became known as the “social laboratory of the world.” By then, New Zealand already had a long egalitarian streak: it established government life insurance in 1869 to help those who couldn’t afford private plans, assisted new immigrants, and embarked on an expensive public works scheme to lay roads and railway lines. But in 1879, a severe depression dented New Zealanders’ widespread belief in the free market and individualism.

The Liberal governments of Richard Seddon and then Joseph Ward, which first took power in 1893, passed a flurry of social welfare reforms, including distributing free textbooks, improving workplace conditions, establishing food and drug standards, and breaking up large estates to provide land for settlers. The Industrial Conciliation and Arbitration Act of 1894 instituted a guaranteed minimum wage and a system of compulsory arbitration for settling industrial disputes. The 1898 Old Age Pensions Act created one of the world’s earliest public pension schemes, even if it was small, means-tested, and only applied to “persons of good character.” (Much of this came at the expense of the indigenous Maori, who were dispossessed of more and more of their land to make way for English settlers and railroad lines).

Foreign visitors returned with tales of an egalitarian paradise and “a country without strikes”. American Progressives drew on New Zealand’s example to push for similar changes back home.

New Zealand’s reputation for progressive enlightenment continued into the twentieth century, even as consistent labor agitation undermined its popular image. The benefits of its burgeoning welfare state expanded over the years, particularly during World War I, when it began covering widows, the blind, influenza victims, and consumption-stricken miners.

Then, like the rest of the world, the Great Depression devastated New Zealand’s economy. The downturn hobbled the country’s labor movement. Widespread economic suffering — exacerbated by the country’s lack of unemployment relief — swept the Labour Party to power in 1935. Its leader, Michael Joseph Savage, promised New Zealanders a “reasonable standard of living in the days when they are unable to look after themselves.”

The country’s first Labour government gave unemployed workers an immediate Christmas bonus, launched a state housing program, established compulsory union membership, and started a Keynesian scheme of guaranteed prices for exports. The centerpiece of its stimulus package was the 1938 Social Security Act, which established universal superannuation for those sixty-five or older, universal free health care (at least in theory), and welfare payments for the poor and unemployed. Savage died trying to enact this bill, putting off cancer surgery to help get it passed and win that year’s election. (Once again, Maori were left out — the law’s language gave officials wiggle room to discriminate and pay them reduced benefits).

Perhaps most importantly, however, the government’s commitment to full employment would endure for decades to come. Successive Labour governments paired this policy with a gradually increasing family allowance, culminating in 1946, when a universal benefit for all families with children passed.

By 1949, the International Labor Organization (ILO) claimed the Social Security Act had “deeply influenced the course of legislation in other countries.” English prime-minister-to-be Clement Atlee praised New Zealand as “a laboratory of social experiment.” In 1944, Labour prime minister Walter Nash wrote that the country offered a “practical example” of what “may well become typical of most democracies tomorrow.”

While Labour’s time in power ended in 1949, its policies of government intervention New Zealand endured. The country remained a highly controlled economy with an extensive welfare state and widespread state ownership in various sectors through the 1970s. Government-guaranteed full employment enjoyed bipartisan support. Even Robert Muldoon, who served as the right-wing National Party’s prime minister from 1975 to 1984, once joked that he knew all seventy unemployed New Zealanders by name.

Weird Science

This all changed in the mid-1980s. As in the Depression years, a crisis sparked a political sea change. New Zealand lost a major trading partner with the United Kingdom’s turn to Europe in 1973, while a series of oil shocks through the 1970s plunged the country into recession. In 1965, New Zealand ranked as the sixth wealthiest country per capita; fifteen years later, it fell to nineteenth.

Again like in the 1930s, the Labour Party implemented a major political transformation, making New Zealand once again a “laboratory of social experiment.” But this time, Labour responded to the crisis by deregulating, selling off public assets, and slashing state investment.

The reforms came to be known, somewhat derisively, as “Rogernomics,” after the finance minister Roger Douglas, who would go on to found ACT, a radical free-market party that has recently embraced US Republican-style law-and-order policies. Prime Minister David Lange acted as an affable and charming salesman for the reforms but had little interest in either economics or policy more generally. For the most part, he allowed his team to experiment with the economy however they liked.

Through the 1980s and 1990s — first under Labour, then under National Party rule — New Zealand ushered in neoliberal reform on an unprecedented scale. Controls on wages, prices, rents, interest rates, and more were scrapped. Finance markets were deregulated, and restrictions on foreign investment were removed or relaxed. Based on the belief that welfare helped create unemployment by encouraging dependency, the system was overhauled in ways that the government’s own official encyclopaedia describes as “particularly swift and severe.”

In 1986, Labour slashed the tax rate for high-income earners and introduced a goods-and-services tax. This change effectively hiked taxes on low- and middle-income earners, given that they spend a larger proportion of their earnings on consumption. (Douglas even tried to institute a flat tax, which turned out to be a step too far for Labour.) Legislation in 1991 eliminated hard-fought reforms like compulsory union membership, compulsory employer-employee bargaining, and unions’ special place in this process.

Most state-owned assets were fully or partially sold off, including three banks, the Tower insurance company, shipping companies, the national airline and the country’s main airport, and various energy companies, among many others. In some cases, the results were disastrous, as when National sold off the country’s national rail network to a consortium of financial companies, who soon ran it into the ground forcing a government buyback. It wasn’t the only privatized asset the government later had to rescue. 

Government disinvestment from public services abandoned the most vulnerable citizens. Nearly all psychiatric hospitals closed down by the 1990s, their responsibilities passing on to nongovernmental organizations. University tuition fees shot up by nearly 1,000 percent in 1990 and have climbed steadily ever since. The price of attending college in New Zealand now ranks as the industrial world’s fourth highest. The abrupt end of farm subsidies and protectionist policies hit farmers hard, plunging them into debt and leading to a spate of suicides. One prominent Kiwi recalled seeing a beggar on the streets of New Zealand for the first time in his mid-fifties, an experience he described as “like being kicked in the stomach.”

All of this happened at a dizzying pace. And it had to because the reforms were hugely unpopular.

“It is uncertainty, not speed, that endangers the success of structural reform programs,” wrote Roger Douglas in 1993. “Speed is an essential ingredient in keeping uncertainty down to the lowest possible level.” Douglas would later reportedly advise foreign leaders to keep their equivalent programs hidden from the public and to implement them as quickly as possible to bypass opposition.

New Zealand once again became a global poster child for policy innovation, as Jane Kelsey outlines in The New Zealand Experiment. The New York Times gushed that a “heavily protected, over-regulated, high inflation economy” had been turned into “one of the most open in the world.” The Financial Times claimed New Zealand offered a “blueprint for a shrinking state.” The Wall Street Journal applauded that “this little Prometheus unchained itself from a rock of high taxes, high tariffs, heavy welfare burdens, and pro-union labor laws,” and celebrated that “anybody can follow New Zealand’s example to prosperity.” None praised New Zealand more than the Economist, however, which ran story after story on what it called a “free market experiment in socialist sheep’s clothing” that was “out-Thatchering Mrs Thatcher.”

New Zealand’s neoliberal employment reforms attracted policymakers’ attention internationally. In 1996, Newt Gingrich — then House Majority Leader — sent a congressional delegation to study the country as a “model” for industrial relations deregulation. Powerful neoliberal institutions like the IMF, the Asian Development Bank, and the World Bank exported New Zealand’s grand “experiment,” organizing and funding study trips, speaking tours, seminars, and reports that promoted the program.

Partly thanks to this, countries like Mongolia and Thailand copied New Zealand in their own reforms and worked closely with prominent architects of the experiment. In 1998, New Zealand’s minister of international trade boasted that the “success of New Zealand’s economic reforms” was now as internationally well known as its sheep, its rugby team, and its milk brand.

If you look narrowly at metrics like inflation and government debt, the reforms worked. If you look at more fundamental economic measures like employment, income levels, and economic growth — all of which free-market policies are supposed to boost — they were a miserable failure.

The economy shrank by 1 percent between 1985 and 1992, while other countries in the OECD saw 20 percent growth. Poverty skyrocketed, with one in six falling below the poverty line by 1992. Unemployment jumped, too, and even when it later fell, much of the recovery was in part-time work. Income inequality widened sharpley, with the bulk of income gains going to the country’s wealthiest citizens.

Binging on Neoliberalism

While these reforms profoundly shifted New Zealand’s politics, citizens’ self-image hasn’t kept pace. There remains a prevailing view that their country is an idyllic paradise apart from the rest of the world’s ills that, if anything, is too generous to its less advantaged citizens.

Surprisingly, many business leaders believe that New Zealand is an over-regulated, antibusiness economy hostile to economic success. Complaints that companies are mired in “red tape” never seem to end. CEOs regularly report that fear of regulations keeps them up at night.

These beliefs stand at odds with reality. Three times since 2005, New Zealand has topped the World Bank’s annual “Ease of Doing Business” report, which measures regulations that, at least according to the World Bank, enhance and constrain business activity. Every other year, it’s come third or, more often, second. It ranked first twice during Helen Clark’s Labour government, which often faced accusations that its legislation was making it impossible for businesses to succeed.

Furthermore, Forbes has listed New Zealand in the top three “best countries for business” each year since 2010. It ranked first in 2012. Two years later, Forbes called it best in the world when it came to “red tape.”

Every year since 2009, the conservative Heritage Foundation has put New Zealand in the top five countries for its “Index of Economic Freedom.” Investment banker and right-wing commentator Peter Schiff said he would like to live in New Zealand because of its lack of governmental interference.

Resistance to “the nanny state,” a paternalistic government unreasonably worming its way into every little of detail of individuals’ lives, has also become widespread. This belief most commonly finds its expression in complaints about the welfare program, which many think discourages hard work and desperately needs to be cut back. This narrative took center stage from 1999 to 2008, when Clark’s Labour government went some way toward slowing, though not ultimately reversing, the march of neoliberalism.

New Zealanders would be shocked to find that since 2001 and throughout all of the Labour years, social spending as a percentage of GDP has been on or below the OECD average. New Zealand has consistently appeared in the lower half of OECD social spending, closer to the United States than to countries like Finland, Denmark, Sweden, and even France and Germany, which rank far above it.

Nonetheless, popular myths about New Zealand’s safety net persist. Tales abound of unscrupulous beneficiaries gaming the system and ripping off taxpayers, or of apparently sociopathic parents churning out children just to receive more paltry benefits. Much of this is based on anecdotal evidence and high-profile yet rare incidents that receive heavy publicity. As per usual, it is also heavily racialized — the “dole bludger” that exists in popular imagination is usually Polynesian — even though 44 percent of working-class welfare recipients are Pakeha, or white.

The dramatic changes to the welfare system made by John Key’s National Government, which took power in 2008, are founded on these myths. As of 2012, single parents who wanted to keep their benefits had to start looking for work as soon as their child turned five (previously, they could wait until the child was eighteen); parents who had children while on welfare had to start job-hunting after one year. These changes enjoyed wide approval, even among voters who identified as left-leaning. Two years later the government promised to cut welfare rolls by a further 25 percent.

Meanwhile, charities like the Salvation Army reported a massive strain on their resources as overwhelming demand for food and other assistance outstripped their ability to provide it. Poverty, a normalized, structural feature of the New Zealand economy since the 1980s, has reached shameful levels: a third of the country’s children now live in poverty, and an increasing number of families live out of their cars as rents in cities go up.

Meanwhile, attitudes have hardened. A 2013 bill that would have provided free breakfasts and lunches at schools in low-income neighborhoods failed after the opposition called it “an abdication of responsibility of parenting.” One influential right-wing blogger and pollster mocked the bill as a plan to “replace parents”:

[I]f a family is so incompetent that [it] can’t arrange breakfast or lunch for their kids, then surely we can’t trust them to do dinner also . . . So I think we also need huge state owned dining places where kids can get their dinners for free.

After businessman and one-time Trump prototype Bob Jones said beggars were “fat Maoris” and “a bloody disgrace,” an online poll found that 72 percent of the nearly forty thousand respondents thought begging should be outlawed.

Such views also spurred a recent crackdown on welfare fraud, which saw as many as one thousand people a year being prosecuted for costing the country around $30 million annually. By contrast, less than a tenth of that number are prosecuted for tax evasion, despite the fact that this problem cheats taxpayers of $1 billion annually.

Public services have been further hollowed out over the past nine years. In its quest for budget surpluses, no matter how small and meaningless, the Key government slashed health funding, relentlessly defunded the Department of Conservation, and cut support for education at all levels. It has ramped up privatization over public objections, ignoring the fact that selling profitable state-owned assets for a one-time payment makes little economic sense.

Workers’ rights have also been steadily undermined — a stunning fact for a country once viewed as an international model for its labor laws.

Shortly after coming to office, the National Party introduced a three-month probationary period for all new employees, during which they could be fired for any reason without appeal. A 2010 Department of Labor survey and a 2016 Treasury report found this extra flexibility had done nothing to help employment, but had simply cut “dismissal costs for firms” while creating uncertainty for workers, a fifth of whom had been fired under the provision.

In 2010, the government passed legislation that excluded film workers from the definition of employees. Warner Brothers had threatened to move the production of The Hobbit to Ireland if the change wasn’t made, and the measure had been both publicly urged and privately promoted to top policymakers by the film’s director, national treasure Peter Jackson.

Anti-union sentiment became so bad that a group of global unions issued a joint statement in 2012 calling for “an immediate end to concerted attacks on workers in New Zealand” and “an end to the union-busting measures.” More recently, the government narrowly succeeded in revoking workers’ long-held right to rest and meal breaks.

While the benefits once afforded to workers and the poor are slowly being eroded, it’s never been a better time to be wealthy. Inequality may not be as extreme as in other countries, but as journalist Max Rashbrooke notes, the wealth gap has widened more quickly than anywhere else in the developed world.

Certainly, the National Party’s tax policies have helped: in 2010, the Key government embarked on a series of reforms that gave the biggest cuts to high earners and further raised the goods-and-services tax — a stealthily regressive tax regime that undermined any gains for lower-paid workers.

While New Zealand has been hesitant to welcome Syrian refugees, its doors are open wide if the price is right. It offers the global rich two separate residency visas, one of which — the Investor Plus, introduced in 2009 — has only two conditions: émigrés must invest $10 million over three years and spend at least eighty-eight days in the country in the final two years.

Since then, there has been an uptick in ultra-wealthy individuals gaining residency. As Peter Thiel recently showed, citizenship appears to be easily available to those with a high enough net worth.

Indeed, a recent New Yorker article revealed that New Zealand has become a popular refuge for billionaires preparing for the breakdown of society. But this has been known for years, at least since Robert Johnson told  the Davos World Economic Forum in 2015 that hedge-fund managers were buying farms as “boltholes” to escape increasing unrest over inequality. New Zealand’s absurdly loose rules around foreign property ownership make this strategy possible: buyers don’t need visas and pay no stamp duty. Until recently, it was one of the few developed countries to have no capital gains tax. (Even now, it only applies to houses sold within two years of their purchase.)

New Zealand’s laws benefit the rich in other ways. For years, it operated as a tax haven, allowing foreigners to stash income in anonymous trusts and pay no tax on it. John Key expressly requested this rule, which a top law firm said would put New Zealand on even footing with the Cayman Islands, Luxembourg, and Ireland — all world-famous tax havens. While some have denied this label, the Panama Papers heavily implicated New Zealand and showed that these trusts more than quintupled from two to eleven thousand over a decade.

Ironically, the politicians behind this continued neoliberal rollback all directly benefited from the programs they are now dismantling. The social development minister who cracked down on single parents on welfare was once a single parent on welfare. Former prime minister John Key, whose government sold off thousands of state houses, grew up in a state house. Virtually everyone involved in the reforms that have burdened generations of young people with student debt enjoyed the right of free education.

But a significant part of the population has long since internalized the idea that this is simply the way it has to be. Just prior to Donald Trump’s victory, the New Zealand Listener (the country’s equivalent to Time magazine) criticized Trump and Bernie Sanders for “their unimplementable and often mendacious policy prescriptions.” Some of Sanders’s signature policies included a public health-care system and free college — both of which once existed in New Zealand (and one of which, public health care, still does, albeit in a modified form).

The First Step

Despite adulation from people like Peter Schiff, New Zealand is hardly the libertarian promised land. It continues to have a robust government involved in many aspects of its citizens’ lives.

But neither is New Zealand the progressive paradise that foreign travelers once breathlessly described — or that many of its citizens still believe it is. Perhaps it never was, given that ideas about self-reliance and individualism have always been central to its culture and self-conceptions.

Still, decades of neoliberal reforms have not only hardened social attitudes and eroded some of the country’s greatest legislative accomplishments, but also rolled back many of the elements central to its self-image. A country once proud of its egalitarianism now has higher income inequality than much of the developed world. A country once known for its prosperity now suffers with shameful levels of poverty. A country that markets itself as “clean and green” now must face the reality of its environmental degradation.

For the vast majority of the population, much of this remains invisible, which explains why Kiwis continue to view their country through social-democratic-tinted glasses. Perhaps if they looked more honestly, they could start to solve these problems.

Jacobin Magazine


The Opportunities Party to run for Mt Albert. 

While we are still nascent and so far have only announced 3 of our 7 policy priorities, let alone socialised them with the public, yet another forced by-election gives us the opportunity to do the right thing by the people of Mt Albert.

Frankly we were a bit surprised National couldn’t be bothered. In fact it seems to be a bit of an insult to a large portion of the Mt Albert electorate – the 10,000 who voted National last time – almost as though you don’t matter. The taxpayer is paying for this by-election, one might at least expect those on the taxpayer payroll to show up. The people of Mt Albert do deserve representation from now until the election and it looks like the Nats just don’t care

The Opportunities Party

NZ needs to stand with the people of the world against Trump’s ‘muslim ban’. – Nigel Latta. 

It’s time for NZ to step up… our government needs to speak out strongly against injustice. We cannot simply politely and diplomatically side step this, we have to call it for what it is. We show who we are as a country not when it’s easy, but when it’s hard.

Donald Trump’s executive order for what is very blatantly a ‘muslim ban’ is inhumane, unjust, and completely irrational. He says it is about “protecting” America, yet his ban does not include the countries from which actual terrorists originated from. Co-incidentally the countries not included on his list are all countries he has significant business interests in (for example Saudi Arabia and the UAE). Any ban of people from any predominantly Muslim country is wrong, and this irreconcilable inconsistency serves only to reveal the utterly irrational bigotry of this policy.

[NOTE: and for all those people who say it isn’t a muslim ban, and this is simply the corrupt media misreporting him yet again, you might recall that amongst all the other truly terrible things he said during his presidential campaign, one of the things he did say, over and over, was that he was going to stop muslims coming to the US. Quote: “Donald J Trump is calling for a total and complete shutdown of muslims coming into this country…” He actually said that. So, there’s the fact that he actually promised a literal muslim ban to his supporters which lends considerable credence to the idea that this is in fact the “muslim ban” he said he was going to implement.]

Countries all over the world are speaking out against this action, and are offering to take in refugees effected by Trump’s ‘muslim ban’. We need to do the same. We have a moral obligation to offer these displaced people a haven. Not because it’s easy, but because it’s right.

Speaking out against Trump is a unquestionably a dangerous thing to do. This is a man who has demonstrated again and again that he takes any criticism deeply personally, and he is clearly willing to use the powers of his office to strike back at people who oppose him. He may well punish the countries who stand up to him, and who condemn him. There may be implications for NZ economically and politically, yet stand up to him we must.

Throughout human history people have stood by while terrible things were perpetrated against specific populations and groups. We cannot stand aside and be part of this grievous injustice being perpetrated on a group based simply on their religion. The worst crimes against humanity all begin as minor infractions, as the progressive curtailment of rights and freedoms of innocent people.

We stood up to the US over nuclear weapons, not because it was easy, but because it was right. Now that moment has arrived again, and we are once again having our moral courage questioned. We either stand aside, or we step up. Now more than ever, the world needs courageous leadership in the face of injustice, ignorance, and bigotry.

New Zealand needs to show that leadership now. We need to stand up, and speak out. It isn’t the easy thing to do, but it is the right thing to do.

Waitingi Day, Now tell me why we are cringing – Lizzie Marvelly. 

This is the story of a good Kiwi farmer. Let’s call him Joseph Smith.

Joseph’s family had been toiling the land for generations. That all changed, however, the day Joseph signed the Agreement.

The Agreement seemed like a great idea at the time. Signed by most of the farmers around the country, it formalised the Government’s promises of partnership and protection. It guaranteed the farmers ownership of their land. It seemed like a way to control the lawless foreign city-dwellers as they flooded into country towns. A way to work together towards a brighter future.

A few of Smith’s mates refused to sign. They were wary of the Government, and felt it couldn’t be trusted. They suspected that the Government – run, as it was, by city-dwellers – was bound to prioritise urban interests.

Smith dismissed their concerns, a decision he bitterly regretted when the Government stole his farm. This annexation of his family land was, of course, in breach of the Agreement, but the Government didn’t seem to care.

Some of Smith’s friends had their farms stolen too, while his northern cousins sold theirs to the Government, receiving £341 in return for 3000 acres of land, 44 acres of which sold for £24,275 just nine months later.

They had no access to valuation or legal services, and by the time they realised they’d been duped, it was too late.

Some of Smith’s friends resisted the Government, but after seeing their wives raped, their children killed and their homes burnt in retaliation, Smith decided to comply with the foreigners.

With the farm gone, however, Smith found he could no longer care for his family. His kids, once happy and well-fed, became anxious and withdrawn.

They were punished at school for speaking their country dialect, and forced to speak like city-dwellers. They were taught that the farmers were better off now that the city-dwellers had taken charge. They learnt about the city-dwellers’ history rather than their own.

Smith and his family moved from place to place, as he sought work on the farms once owned by his friends and family

Smith’s sons, like their father before them, adjusted to simply living for the day: taking whatever menial jobs they could find to put food on the table, and spending whatever was left on the only escape still available to them – booze.

They watched their kids grow up, and saw their sons go off to fight a war for the city-dwellers against other city-dwellers in a faraway land. A war that would be forever remembered, while the wars the city-dwellers had fought against the farmers would be almost wilfully forgotten.

Only Smith’s youngest grandson, John, returned home from the war. Despite his service to the country, he was left out of the ballot for returning soldiers to be given a piece of land to farm by the Government.

The city-dweller soldiers received land set aside to be “resettled”, while Smith went with his father to the freezing works, where John Smith’s son Edward would eventually join him, and his son after him.

When John Smith finally retired, he was given a pension by the Government. As a descendant of the farmers, he received only half what retired city-dwellers collected.

He would often sit with his grandchildren and great-grandchildren and tell them stories of what life was like before the Agreement, stories that had been passed down the generations.

As they grew older, some of those great-grandchildren began to protest. They joined with the other descendants of the farmers, and took their concerns to Parliament. They were met with fierce resistance from the city-dwellers, but they had nothing left to lose. “Honour the Agreement!” the farmers would chant as they marched.

Eventually, they began to gain momentum. A panel was set up to right historical wrongs. The Agreement was finally recognised. A relationship began to develop between the city-dwellers and the farmers. It wasn’t always plain sailing, but progress was being made.

The city-dwellers began to adopt the customs of the farmers, performing their songs and chants on important occasions. The farmers’ dialect was formally recognised, and taught to children in schools. The anniversary of the signing of the Agreement was observed as a celebration of the nation.

The Anniversary Day was always fraught, as the signing of the Agreement and the manner in which it was subsequently ignored had forever changed the lives of the farmers.

While progress was celebrated widely around the country, pain would remain for generations.

Protest became a regular part of the proceedings, as was perhaps fitting, given that the farmers would never have been treated fairly by the Government had it not been for their peaceful resistance efforts.

And then, one Agreement Anniversary Day during an election year, the leader of the Government was invited to celebrate with the farmers at the place where the Agreement was signed.

The farmers, wise to the potential for heated politicking on the historic day, decided to separate the celebration of the occasion and the political discussions. The leader of the Government was invited to speak, “freely and uninhibited” immediately after the traditional proceedings had concluded.

He, the leader of the people, appointed to represent both the city-dwellers and the farmers, and the many people who had since moved to the land, refused the invitation, demanding instead that he determine when during the proceedings he should speak. He also refused to attend the sacred service on the morning of the Anniversary, sending his deputy, a descendent of farmers, instead.

He told the nation’s media that the proceedings and the celebrations of the day made people “cringe”. He decided instead to spend the day in the city.

The story of the farmers and the city-dwellers is, of course, an allegory. It is, however, based on a true story. Our story. The one we often try to forget.

Change the names Joseph to Hohepa, John to Hone, and Edward to Eruera. Replace “farmer” with “Māori” and “city-dweller” with “Pākehā”.

Now tell me why we are cringing.

NZ Herald

40 years on from the Bastion Point occupation: Where are we now? – Hannah Martin. 

On January 5, 1977, a small group of Maori pitched tents on top of a hill. It was the first day of what would become the 506-day occupation of Bastion Point. 

Their message was simple: Bastion Point is Maori land.

Under the leadership of brothers Joe and Grant Hawke and Jack and Roger Rameka, Ngati Whatua o Orakei set about to stop Auckland’s Bastion Point (Takaparawhau) from being used for a housing subdivision.

Forty years later, arguments over the proposed Ihumatao development in south Auckland – where 80 hectares of historic Maori land are set to be used for 450 new homes – beg the question: did enough people take notice of what happened at Bastion Point?

In 1840, Ngati Whatua chief Apihai Te Kawau signed the Treaty of Waitangi and gifted 3000 acres of land to the Crown to establish Auckland city.

Barely after the ink had dried, Ngati Whatua were virtually landless, left only with a quarter of an acre of land, for an urupa (cemetery).

So when plans for a high-end housing subdivision at Bastion Point were unveiled by former prime minister Robert Muldoon in the late 70s, the people of Ngati Whatua sat peacefully in protest to protect what little of their land remained.

2017: NZ In The Shadow Of Trump. Goodbye Labour Party – Chris Trotter. 

The most significant NZ political event of 2017 could well be the collapse of the Labour Party and the emergence of the Greens as New Zealand’s leading party of the centre-left.

A key factor driving the New Zealand electorate’s flight to the right will be the profound and ideologically toxic influence of Donald Trump’s presidency. Nobel economics laureate, Paul Krugman, predicts a global trade war, and the prestigious Foreign Policy magazine is filled with disquieting articles foreshadowing an ominous deterioration in the relationship between the USA and China.

If either of these predictions come to pass, then the consequences for the New Zealand economy will be extremely serious.

If push comes to shove our government will come under enormous pressure from both Washington and Canberra to declare for the “auld alliance”. The Foreign Minister may conclude that he has no choice but to recommend to Prime Minister Bill English that we let go of China’s hand – with all that portends for New Zealand’s primary industries.

The provinces will suffer most if the NZ-China economic connection falters and the voters most affected: farmers and the agricultural servicing sector; will be looking for someone to blame. Inevitably, the government will be criticised, but by far the largest share of the blame will be directed towards the government of the Chinese people. This rapidly-developing, racially-charged, crisis will be Winston Peters’ opportunity.

In a neat division of political labour, NZ First will lead the attack on China while, publicly, National condemns (but not too loudly) Peters’ racially-charged rhetoric. Meanwhile, privately, the conservative supporters of both parties will be encouraged to recognise the inherent electoral synergies of the unfolding crisis. As the countdown to the election shortens, the prospect of a National-NZ First coalition government will begin to acquire the aura of inevitability.

Bowalley Road

“Gutter Holes” and “Sewer Pipes”. A New Zealand environmental crisis second to none – Chris de Freitas. 

It is an uncontroversial fact that the state of the country’s freshwater resources has for decades been moving towards ecological collapse.

Freshwater ecosystems are key features of New Zealand’s natural heritage. Plentiful precipitation feeds many hundreds of streams, more than 70 major rivers, about 770 lakes and numerous underground aquifers.

More than 700 lakes are classified as “shallow” and up to 40 per cent of these are nutrient-enriched and no longer capable of supporting fish life.

Until relatively recently, water has never been considered a scarce resource in New Zealand. Consequently, the economic and regulatory controls over its allocation and use have been neglected.

The greatest impacts, however, have not come from water use but from land use: Agriculture, Urban, Dams, Mining & Forestry. 

NZ Herald 

The Ghost of Poverty This Christmas – Bryan Bruce. 

In 1843 Charles Dickens released his classic tale A Christmas Carol.

Creatives are like sponges. They soak up what’s happening in society and squeeze the gathered material into their work. Dickens was a master of it.

A year earlier he’d read a British parliamentary report on the condition of children working in mines for 10 hours a day – naked, starving and sick. The cause of this misery, he recognised, was greed – a few people getting very rich at the expense of the many. (Sound familiar?)

So, in that magical way it takes a genius to do, Dickens poured all of Victorian Britain’s mean-spiritedness into his fictional character Ebenezer Scrooge, the miserly old man who hates Christmas.
Until, that is, he is visited on Christmas Eve by three Ghosts (Of Christmas Past and Present and Yet To Come) who reveal to him how giving can be much more rewarding than taking.

173 years on a lot of Kiwis have got that message. They help their friends and neighbours whenever they can, they run food banks, free used clothing and furniture outlets, and open their maraes to the homeless.

But none of these things would be necessary if the meanness of Scrooge had not become institutionalised into the Neoliberal economic policies successive New Zealand governments have promoted over the last 30 years.
Yes it’s true that children no longer work in factories or down mines  – but that’s simply proof (if proof be needed) that things can change if we vote to alter them.

What I suspect is that if Dickens could return like one of his ghosts to visit us today, he’d look in dismay at the long lines of poor outside the City Missions this Christmas and tell us that we are going backwards towards the selfish society he railed against – where the poor were dependent on the good will of strangers for food and the essentials of life.

That we have lost sight of what is really important is clear….
85,000 of our children are living in severe hardship
•14 % of our kids (155,000) are experiencing material hardship which means they are living without seven or more necessary items for their wellbeing. • 28% per cent of our children (295,000) are living in low income homes and experiencing material hardship as a result.

So thank you to all of the good people throughout our country who know this widening gap between the have and have-not  isn’t right and do so much to help those less fortunate than themselves.
But let’s also make a new year’s resolution – to encourage our friends and families and everyone we know to vote for a better deal for all our children next year.
10% of New Zealanders now own 60% of the wealth of our country while the bottom 20% own nothing of worth at all.
Let’s make the scrooges of New Zealand pay their fair share.

My very best wishes to all of you this Christmas Eve.
Take care.
Bryan Bruce. 

All we want for Christmas is to be safe in New Zealand. 

About 300 refugees have arrived here since the Government announced it would take 750 over 2.5 years from Syria in September last year. Yesterday the Government announced an extra $1 million in aid.

The Morad family languished in tough conditions in Lebanon for three years before recently moving to New Zealand, along with Mohamad’s mother Gazala Dib Fayon.

NZ Herald 

An utterly unacceptable and callously insignificant contribution by NZ to a massive international situation.

We are accepting 70,000 migrants annually yet we have no room for desperate people fleeing a situation that is entirely a consequence of western Middle East policy. 

We spend millions on bullshit. Flags nobody wants, dairy farms in the desert, etc etc, yet our government is proud to announce with a perfectly straight face an extra 1 million in aid.

New Zealand once had a caring population that was always at the ready to speak out and help in situations such as this. 

We have lost our hearts in the swamp of Neoliberal greed. 

Norman Loves Bill’s outdated Economic management. 

For Mr English to cut government debt in the difficult economic times of the GFC and its aftermath was a big challenge. That he achieved it without much, if any, resistance from his own party, and little from the political left, will mark him out as an especially successful finance minister.

Norman Gemmell


Cutting social spending to the bone to gloat about your financial housekeeping ability is no achievement. It’s a greedy and criminal subversion of the very purpose of democratic government. 

All it shows is that the NZ Labour Party is washed up ideologically and their chances of a comeback in 2017 are minimal.

There’s very little to find in their policies that is new and in line with current debate internationally on the left. Labour needs to find the courage to clearly and decisively turn it’s back on Neoliberal economic thinking and push social policy suited for a rapidly evolving technological world. Capitalism in the technology age will grind to a halt if it’s management and regulation remains rooted in the goal of full employment.

The goal of technological advance is directly opposed to the idea of full employment, it’s ultimate happy aim is full unemployment. Our technology will do the work. We can concentrate on and share the things we like to do and are into.

The Good Life, if we let it.

We urgently need to reorganise capitalism or there will be no customers, no earnings, no tax payments, no government expenditure and no social services. 

Nation of Debt: Ready, set, crash – could New Zealand be next to fall? – Liam Dann. 

“We’ve almost got the perfect storm,” says veteran fund manager Brian Gaynor as he reels off the many reasons New Zealand house prices and debt levels are soaring to precipitous heights.

There are many ingredients. But right now, New Zealand seems to have them all: not enough building, restrictions on development, surging migration, baby boomer savings, low interest rates and banks that are all too happy to lend for property investment.

“When you get the perfect storm like we did in the 1980s with the sharemarket, you see things just go up and up. People start to believe they will never fall,” he says.

“People didn’t believe the sharemarket would fall in the 80s. I’d come in from a trip to Australia and the guy at customs wouldn’t let me in unless I gave him sharemarket tips. It was just euphoria. Everyone was talking about the sharemarket. Now everyone is talking about the property market.”

New Zealand’s gross debt is a whopping half trillion dollars; housing now accounts for $218 billion of that.

NZ Herald 

How our Tax Reform will result in more houses being built – Gareth Morgan, TOP. 

While the Establishment Parties are falling over themselves to build more houses, their policies leave the real problems unsolved. These problems include land banking, and viewing housing as an investment rather than as a means for providing shelter. Our tax policy would address both of these, and see developers scrambling to build rather than bid up the value of existing stock.

The line the Establishment Parties are pushing is that we just need to build more houses to solve the problem. National is pointing the finger at Councils for providing paperwork bottlenecks, when even their own attempt to step in and create Special Housing Areas has achieved little. Meanwhile the HomeStart scheme simply fans the flames of an overheated housing market.

Meanwhile the Labour Party is promising to put on their collective carpenter belts and build houses.

The real problems here? Land banking and demand for housing as an investment that outstrips the need for shelter.

Our tax reform policy will deal with both of these issues.

We simply cannot keep getting richer buying houses off each other indefinitely and this has to stop. Our Tax Reform Policy will halt the rise of house prices, which will cut off the demand for buying housing as a speculative investment.

The Opportunities Party

Will Common Sense Economics Prevail? Tax the house? It’s worth a look – Brian Fallow. 

“Vote for me. I’ll tax the equity in your home” does not sound like an election winner. But the tax policy released last week by Gareth Morgan’s political vehicle, the Opportunities Party, deserves a second look.

It would gradually but substantially broaden the tax base and recycle the proceeds as income tax cuts.

It is a serious proposal for dealing with an entrenched structural distortion in the tax system, which drives savings into bricks and mortar rather than enterprises that might employ people and earn us a first-world income.

The distortion contributes to the capital shallowness, or low levels of capital invested per worker, which is part of the explanation for our weak productivity and income growth.

And it fuels the house price inflation which deepens inequality, condemns lots of Kiwi families to poverty and blights the prospects of children, as the Children’s Commissioner’s latest report reminds us.

So the status quo should not be the default option.

The Morgan plan starts from the proposition that not all income is cash income.

Income from labour (wages and salaries) is taxed. So is the income from some forms of capital, including financial assets like shares, bonds and bank deposits.

But if you own the roof over your head, you avoid the cost of renting a similar property out of your after-tax income.

That return on your investment – “imputed rent”, in the jargon – escapes the tax system altogether.

“The benefit you receive each year from owning the house is every bit as real as that you receive from owning a bank deposit or from rent paid by a tenant,” Morgan says.

“Why should you be tax-exempt when tenants have to pay rent from their income after tax and their landlords pay tax on that income received?”

The Morgan plan would take all forms of capital above some threshold, including land and housing, and net off any associated debt; it is equity which is the tax base.

It would then specify some deemed minimum rate of return on that capital and tax that. If the asset already returns more than the minimum, the higher amount is what would be taxed, as it is now.

We are not talking about trivial sums here.

NZ Herald 

Renters must Vote next year to achieve change – Bernard Hickey. 

$1 trillion will be the total ‘value’ of New Zealand’s houses by the end of 2016 if prices keep going up in December at the rate of the previous 11 months.

The ‘value’ of New Zealand’s homes has risen by more than $400 billion, or two thirds, over the past eight years. Those homes are not bigger or fancier or warmer or drier or have better views, but interest rates are substantially lower and over that time we failed to build enough houses to match population growth.

Also over that time, New Zealand’s home ownership rate has fallen to close to 60 per cent and many young Auckland first-home buyers have had to abandon their dreams and deal with rents rising faster than incomes.

Yet voters also rejected Opposition proposals at the past two elections for a Capital Gains Tax. Labour has given up trying to campaign for any changes that would see house prices fall.

Less than half of young renters voted at the last election, and more than 90 per cent of property owners over the age of 50 voted. Politicians know this and have calculated that more voters want higher house prices, which means they can afford to ignore the renters.

The big question for New Zealand in 2017 is: will young renters start voting at high enough rates to change that political calculation in the same way that poor white voters started voting and changed the calculations in America?

Finding a job for genial John Key – Paul Little. 

To the Directors.

Thank you for inviting me to provide a reference for John Key, whom I understand is being considered for a position with your independent republic/gift shop/rapacious multinational behemoth.

As one of John’s 4 million employers for the past eight years, I feel I am ideally placed to give a fair assessment of both his strengths and those areas in which he may benefit from guidance and learnings.

I understand the position for which John has applied is a sensitive role requiring a great deal of tact, and that it depends to a large extent on earning and maintaining the respect of those with whom the successful applicant will interface. Well let me put your minds at rest on this point – John will soon put an end to that.

If there is one quality above all others that John brings to the job it would have to be empathy and an ability to put into words what others are feeling. When he told us that his incumbency had put a strain on his family, thousands of other families around the country, hearing the news in the motels and garages where they live, understood exactly what he meant.

NZ Herald

NZ Labour and Andrew Little need to get a grip – Heather du Plessis-Allan

On the day John Key resigned, Andrew Little’s face flashed with something most of us hadn’t seen on him in years, if ever. Hope.

He smiled at the journalists and their cameras. Privately – I’m told – he behaved in a manner that can only be described as excitement.

It’s pretty clear he reckons next year’s election is now in the bag. Andrew Little needs to get a grip.

As tired as we are of listening to and looking at Nick Smith, Gerry Brownlee and Steven Joyce, they’re still a preferable option to the ideas vacuum on the other side.

Even a year out, Labour has a helluva long way to go to beat National.

NZ Herald

The New Zealand Labour Party desperately needs three things to have a fighting chance in next year’s general election.

1. Immediately find a new leader with some charisma to be able to reconnect with people. Heather is absolutely right that Andrew is Labour’s biggest liability right now. 

2. An election turnout in the upper 70%.

3. An (and this is inevitable, only the timing is unknown) economic shock and downturn in NZ. People’s party loyalties historically become strained significantly when things get tougher.

Even then I think it’s a big ask. The rot in the Labour Party has become so bad they can hardly be called an ‘opposition’ anymore.

Personally I think the only hope for socially conscious Kiwis is to wind up the Party altogether and hope enough of us turn to the Greens and Maori Party. 

John Key, The Smiling Assassin. He pulled ponytails instead of grabbing pussies – The Guardian. 

John Key’s legacy will not be defined by great policy achievements; it’s his success as the model of a neoliberal leader, a poster boy for trickle-down economics, that he will be remembered for.

Key presided over increasing and gross social inequality.

Like another poster boy for trickle-down economics, Tony Blair, the New Zealand prime minister had the Teflon gene. Even while presiding over record levels of child poverty, his popularity remained high.

Despite ignoring public preferences not to privatise state-owned enterprises, increasing the GST, and more-or-less ignoring New Zealand’s chronic child poverty, because he blamed the victims, none of it stuck.

Only because the average greedy Kiwi is not only politically naive but also has succumb to Neoliberal doctrine and decided ‘To hell with everybody else, I’m getting as much as I can for Me Me Me.’

Key was like a Tony Blair of the South Seas: a certain level of personal charisma and a socially inclusive façade allowed both Key and Blair to sell the nasty side of neoliberalism.

Never mind the hundreds of thousands of children living under the poverty line in New Zealand, a country of only four million, and him brushing off the recommendations of the government panel charged with improving their lot; Key was seen as a good guy and a safe pair of hands.

Key was a person who fitted the narrative of Neoliberalism perfectly, he was a man of his time. He came of age at a time when a Neoliberal coup turned the more-or-less socialist mixed economy of New Zealand on its head.

As financial markets were deregulated and the Keynesian social consensus dismantled, Key began his ascendency to banking-money heaven.

The heart of the Key narrative, like the Trump narrative, is money.

They both have a personal story about business acumen and the notion that making money is the high art of society and the hallmark of good character.

It’s no coincidence that this “good with money” story has found such great traction and continues to propel wealthy business people into political power. In New Zealand, and many other countries, including Australia, the UK and the US, there’s a powerful narrative that says that running a government is very much like running a company; you must balance the books first of all.

Equating the values of entrepreneurship and fiscal discipline with the judgment required to legislate in the public interest is crude nonsense.

But this money story not only has currency, it is the currency of the reigning monetarist fiscal discourse.

Many of the opponents of neoliberalism, including those who tried to unseat Key, still haven’t figured out how to counter the “money story”.

Labour parties around the world have long been experiencing an identity crisis: they are divided between their complicity in creating a neoliberal society, their adoption of Keynesian responses to the global financial crisis and the ideological opposition to neoliberalism among their ranks, in the form of, for example, Jeremy Corbyn and Bernie Sanders.

Until you pull that money story apart, and New Zealand Labour still need to do this, people do buy into it, and they kept voting Key in because they believed in the equation that “good with money” equals “morally upstanding”.

People don’t want this bubble popped.

The Guardian 

Neoliberal New Zealand Government won’t commit to debt-to-income limits on house buying. Risk to economy not yet big enough! 

The Reserve Bank is asking the Government for new powers which would limit lending to home buyers if they did not earn enough.

If introduced, the restrictions would restrict what New Zealanders could borrow for a mortgage relative to their income. It is used in the United Kingdom, where buyers cannot get a mortgage higher than 4.5 times their annual earnings.

Reserve Bank governor Graeme Wheeler said he was not proposing to use the tool at this time, but he was signalling he wanted it in reserve, just in case.

“Restrictions on high [debt-to-income] lending could be warranted if housing market imbalances were to deteriorate further.”

NZ Herald 
Get on with it! 

Land-banking lessons from Britain. 

The upper end of the British housing market has slowed this year, with homes worth more than one million pounds down by more than 15 percent compared with last year. That weakening has been attributed to changes in stamp duty rates introduced at the end of 2014, introduced to make the tax system fairer for people at the lower end of the market. 

Annual price growth in Britain is tipped to further slow next year, to about 3.4 per cent, and Britain is facing a slowdown in the economy as household average earnings dip.

Inflation there is predicted to rise and wages slow, with real pay likely to be below 2008 levels even in 2021. Headlines about real wages have already dubbed it Britain’s “dreadful decade”.

Economies around the Western world face real challenges in the short to medium term. It can only be hoped that should any dire scenario play out in Britain it will not have too detrimental an impact on New Zealand, and the two countries do of course face very different challenges and trading realities, particularly in the wake of Brexit.

But the state of Britain’s housing market does have some parallels in New Zealand, and Auckland in particular.

While developers in an open economy are obviously welcome to do as they please in terms of buying and selling land, Javid’s threat will strike a chord with New Zealanders who are struggling to enter the housing market in this country.

It may well be that local authorities here will analyse any changes in the UK industry and consider similar tweaks to our own development laws. Many people will have sympathy for the idea of conditions being introduced to try to prevent land banking from happening.

NZ Herald 
Trump’s in. Interest rates have already started rising. New Zealand is very vulnerable. 

Why Populism In New Zealand Is A Right-Wing Thing – Chris Trotter. 

In the final analysis, revolution should be about overturning and replacing the existing order.

Populism, in almost every instance, is about restoring the old one.

At its heart, populism is a revolt against the idea of political and cultural diversity. The populist seeks to make real the homogeneous nation of his imagination, and whether or not he’s successful depends upon how closely his imagined national community resembles the idealised nation of his fellow citizens. A populist movement only ever gains significant political momentum when large numbers of citizens discover that they share a common vision of what and who their nation is – and isn’t.

And if you’re not included in the populists’ definition of the nation, then your chances of being invited in are slim. Seriously, they’d rather build a wall.

Ideologically-speaking, nearly all of New Zealand’s populist moments have been driven by a deeply conservative restorative impulse. The National Party, in particular, owes its existence to the determination of rural and provincial New Zealanders to overthrow Labour’s socialist usurpers and restore the nation’s rightful rulers – farmers and businessmen.


National’s choice of name was no accident. The new party was (and still is) perceived as standing for the pioneering virtues of the nation’s early settlers: those enterprising men and women, overwhelmingly of British stock, whose Christian capitalist values gave New Zealand its distinctive cultural signature.


The Labour Party, by contrast, was (and still is) seen as the party of the big cities: those sinkholes of moral corruption, physical squalor and political insubordination, whose representatives are incapable of recognising and protecting the cherished values of “heartland” New Zealand.

Bowalley Road

Kiwi families need homes – Kerre McIvor. 

The image of Michael Joseph Savage carrying a dining room table into New Zealand’s first state house is etched into the consciousness of many Kiwis.

Providing affordable, quality family homes was a major aim of the first Labour Government and under Michael Joseph Savage, they provided it.

State houses, they believed, would give families a home to call their own. Furthermore, the local economy would be stimulated and construction would provide employment for the thousands of men left jobless by the Great Depression.

Labour came to power in 1935 and set about buying up hundreds of hectares of land and engaging private contractors to build the homes – the first significant public/private partnership.

The first of these was opened in 1937 – 12 Fyfe Lane in Mirimar, Wellington – and the first tenants were the McGregors.

David McGregor was a tram driver and the rent he paid for the house was just over a third of his pay.

Now in 2016 we have a Government looking to abrogate its responsibilities by contracting out the supply and management of state housing to community providers.

NZ Herald 

For the 60th anniversary of state housing in 1997, the New Zealand Herald visited the house, which at the time was occupied by John and Winnie Nysse and their three children. The market rents imposed on state housing by the fourth National government meant the family were paying 73.5% of their income ($215 out of $292) in rent, compared to the 34.5% paid by the McGregors in 1937.

On 25 September 1986, the house was registered with the New Zealand Historic Places Trust as a Category I heritage item, with registration number 1360. It was registered for its historical significance, for its cultural significance, and for its architectural significance. – Wikipedia




Celia Lashlie Documentary Film: Research and pre-production – Givealittle. 

New Zealand has the worst domestic violence record in the world. Last year 13 babies and toddlers were killed by their parents or step parents. Domestic and child abuse is estimated to cost the country $7billion (2014). The statistics show no sign of an improvement. Yet, Celia Lashlie had the vision, the international credibility and the determination to change all that with her simple message to the world: “Turn to the mothers.” 
It’s only by working with the mothers that we will get to save the lives of these children.

Get ready for Trump Thump. – Bernard Hickey. 

It has been called the “Bondcano” and the “Trumpocalypse of the bond markets” to impress upon regular savers and borrowers just how important the events of the last fortnight have been.

Since November 4 the US 10-year Treasury bond yield has risen from 1.77 per cent to almost a one-year high of 2.26 per cent.

That doesn’t sound dramatic, but it represents the fastest increase in the most important interest rate in the world in more than 7 and a half years.

It means investors holding US Government debt and other bonds priced off this benchmark just lost more than US$1 trillion.

It means all sorts of longer-term interest rates have risen sharply since the election of Donald Trump as US President as investors start to worry the host of The Apprentice would cut taxes, increase the cost of imports and spend money willy nilly in a way that will push up inflation globally.

New Zealanders can’t ignore these events. 

NZ Herald 

Will the Trump effect be felt Downunder too? – Bryce Edwards. 

As the election of Donald Trump continues to send shockwaves around the world, New Zealand badly needs a revolt against the current political system for the good of our democracy. 

Donald Trump is the latest political success to highlight the power of anti-establishment politics – but he’s not the best advert for it.

Instead, Trump is a reminder that revolts against the Establishment emerging around the world at the moment take many different forms. Some are left-wing, others right-wing, nationalist, populist, and so forth. So to be anti-establishment doesn’t necessarily mean being a supporter of reactionary politics.

What all these revolts have in common is their rebellion against the status quo and those in power.

Such a revolt could be beneficial in New Zealand – especially if it took a much more progressive orientation, compared to Trump and other more populist, reactionary and nationalist demagogues who sometimes surf the wave of public disenchantment with mainstream politics.

Anti-establishment politicians and movements are a necessary part of politics. They shake things up and open up possibilities with radical ideas. By asking difficult questions, putting forward unfashionable ideas and questioning authority, an anti-establishment force can highlight problems in the system and give voice to the powerless and forgotten.

Such a movement here is likely to be more left-wing. Earlier in the year when a UMR opinion poll on the US presidential candidates gave a choice between radicals, 77 per cent of New Zealanders chose Bernie Sanders, compared to 8 per cent for Trump.

Of course, radical politics is rarely idyllic. There will always be ugliness and problems and sometimes this involves the destruction of parts of the status quo.

However that can allow something better to be built.

Here’s my 10-point manifesto for change in New Zealand.

NZ Herald 

Trans Pacific Partnership could go ahead without the United States. 

If Donald Trump doesn’t want to be part of the TPP, other countries could just ditch him and go ahead with it anyway.

Leaders and trade ministers of the 12 countries signed up to the Trans Pacific Partnership (TPP) have congregated in Peru for the annual Asia-Pacific Economic Cooperation (APEC) Leaders’ Week. 

Prime Minister John Key says Trade Minister Todd McClay has been meeting with his counterparts, and some have expressed a wish to go ahead with the deal, even if they can’t get the US President-elect on side.  NewsHub 

Well then we could be talking about a worthwhile deal. A proper trade deal with mutual benefits for all countries but minus the ISDN structure and minus American corporations greedy blackmail. That kind of Trans Pacific ‘Partnership’  makes sense. 

Fiddling While Schools Burn – Bryan Bruce. 

Congratulations to our teachers for standing firm against bulk funding. We have a very unfair Public education system and Hekia Parata’s proposal to force principals to choose between hiring a teacher or buying school equipment would have made an already terrible situation worse.

The way to fix our broken education system is not to tinker with the Decile funding model. It is to admit that the self-management system of school administration, introduced by David Lange and designed by former Supermarket boss Brian Picot 3 decades ago, has been a disaster for children of low (and now also middle) income families.

THAT”s what we need to fix.

We are the only country in the world that has a completely autonomous self management school system and you would think that if it was such a wonderful thing then, at some point over the last 30 years, some other country would have copied us. But they haven’t.

They haven’t  because they can see that not only has school self-management created rich and poor schools within a Publicly funded school system, it has also loaded teachers  with so much “accountability” administration that it has robbed our educators of invaluable teaching and professional development time.

If the Decile system serves any useful purpose at all it is simply as a measure of how unfair our school system has become.

A student who attends a Decile 1 or 2 Secondary School has about a 30% LESS chance of attaining NCEA level 2 than if they attended a Decile 9 or 10 school. That’s not because teachers in Decile 1 and 2 schools are worse than teachers in Decile 9 and 10 schools, it’s because over the last 30 years we have created a very unequal society.  

So fixing our school system cannot be separated from fixing our society. 

In Finland and Shanghai (who the OECD say lead the world in education) they have the centralised system of school administration that we once had before Lange introduced his radical new scheme. Back then, teachers from other countries used to visit us – not Finland – to see how we ran things like our reading programmes because we taught that skill better than anyone else. Why? Because we had a cooperative education system in which teachers shared information and good ideas in order to make every school a good school. Not the competitive one we have today, which inherently encourages teachers and schools not to share good ideas and methods but hold on to their “intellectual property” so they can gain more pupils and funding.

So in my view, returning to a centralised system of light administration that unburdens our teachers from unnecessary administrative tasks in order to spend more time on the difficult job of preparing our children for life is the place to start. Fiddling with funding won’t fix our systemic school administration problem. Taking away the  control of education from politicians and putting back into the hands of our educators however, just might.

If you would like to know more about my views on our Public education system you can watch  my documentary World Class? for free for the next 10 days here: Bryan Bruce

NZ too slow to learn from quakes – Fran O’Sullivan. 

It’s time New Zealand dropped its famed “number eight wire” mentality and “she’ll be right” attitude, and opted for professionalism when it comes to enforcing building standards.

Five years on from the disastrous February 2011 earthquake which devastated the Christchurch CBD, what lessons have really been learnt?

Conflicting tsunami warnings and a 111 system that did not work properly are just the outward manifestations of a civil defence system that is too amateurville for the seismically challenged land we live in.

NZ Herald

A Massive March for Peace. People for Peace. Come and demonstrate that Kiwis Do Care. 

Saturday November 19, 2pm, Town Hall, Queen St, Auckland. 

Large numbers of people are stunned that the New Zealand Navy has invited approximately 15 warships to participate in the Navy’s 75 birthday celebrations and an International Naval Review. Other countries are sending senior officers to participate.

The vessels, with their array of deadly weaponry, will berth at both Ports of Auckland and Devonport Naval Base. This is a stark call to all peace activists who opposed the US warships in the eighties and worked for a peace that may now be under threat globally, and also to the new generation of young people who see the insanity of warfare and want to take a stand for peace.

“Even if the ships are non-nuclear armed, it is still not desirable to be reinforcing a warfare mentality and militarism when we should be promoting peace and underpinning the UN Charter that New Zealand signed in 1945. 
By endorsing conventional warships New Zealand is effectively being groomed for involvement in future wars”  –  Lisa Er.


Growth! What Growth? Bernard Hickey: Get real! Work rate drives wages.

Productivity Growth = Wage Growth. It’s that simple. Working smarter is the only way. 

So what was the point of economic and jobs growth again?

It’s worth asking this obvious question after this week’s apparently stonkingly strong set of jobs figures.

They showed an extra 35,000 jobs were created over the September quarter and that employment has grown 179,000 or 7.7 per cent over the last two years.

The unemployment rate also fell to 4.9 per cent in the September quarter, which is its lowest rate since the Global Financial Crisis in December 2008.

Those numbers looks terrific at first blush and are certainly much better than jobs falling by 179,000 and the unemployment rate rising.

But a closer look shows the number of unemployed actually rose by 1000 to 128,000 over that two-year period and the number of 15 to 24-year-olds who were Not in Employment, Education or Training (NEET) rose by 3000 to 74,000.

Astonishingly, even construction industry annual wage inflation was barely over 2 per cent in the September quarter.

All these numbers should drag everyone back to the ultimate conclusion:

It’s always, always about productivity.

On this measure, New Zealand’s record is awful, and especially since 2012. Real GDP per hour worked has basically flat-lined over the last four years.

Our record is almost as bad over the last 45 years. We have been the second worst country in the OECD for real GDP per hour worked over that period. Worse than Italy, Portugal and France – all of whom are now seen as basket-case, stagnant economies

Basically, we have kidded ourselves that we are richer because there are so many hours being worked by so many people and house values have almost doubled in the last eight years.

The rise in value of New Zealand’s houses to $1 trillion last month has made home owners feel much richer. These values have nothing to do with real incomes. They are all about high net migration, under-building and lower interest rates.

Renters, the young, the unemployed and the under-employed certainly don’t feel the joy of this burst of growth. A much better aim for any Government or business would be to increase real output per hour worked and real hourly wages.

That would really be going for growth, as opposed to the growth we’re kidding ourselves about at the moment.

NZ Herald 

Gareth Morgan ‘overwhelmed’ at support for new party as hundreds sign up. 

Gareth Morgan’s new political party already has more than 750 paid members – with the entrepreneur saying he has been blown away by the response.

Morgan launched the Opportunities Party (Top) on Friday, saying problems like inequality and housing affordability could be solved but not by “establishment” politicians.

He plans to gauge public reaction to his campaign before registering the party next year.

Political parties need 500 financial members to register, and that mark was surpassed by Top within 24 hours of launching.

“I thought would take us months to get those kinds of numbers, particularly given I haven’t released any policy yet!”

People that follow and support you pretty much know what the policy is going to look like Gareth. Good Luck, this will hopefully turn out to be a defining moment in New Zealand’s political history. We urgently need to rethink our social economic policy’s for the betterment of the 90% and the long term survival of our economy. 

NZ Herald 

​Blind leading the blind.- Bryan Bruce. 

Three weeks ago Bill English was crowing about the government’s books being in surplus. Today I read of 30 people going blind in Southland while waiting for eye operations . 
English was born in Lumsden in Southland. He represented Clutha- Southland for many years before he became a list MP.You’d think he might be interested in this problem.
Yet the talk is of tax cuts rather than increasing the health budgets of DHB’s who have patients  going blind waiting for surgery.
In the end all economic decisions are moral decisions. How you spend your money and what you spend it on reveals a lot about your core beliefs and moral values. 
Neoliberal economic theory, introduced by Labour and put on steroids by National, is morally bankrupt. It has blinded many of our  politicians to the fact that allowing a few people to get very rich at the expense of the many  is taking us back to the Nineteenth century and the days  when if you could afford a doctor you got treated. If not,you suffered.

We have got this every wrong folks. We need to decide what kind of society we want and then figure out how to pay for it. Not live in the  society some self-centred economic theory wants us to have.
As Nobel Prize Winning economist Prof Muhammad Yunus  astutely observed during an  interview with me for MIND THE GAP …
“We follow the theory.Theory should be following us!”