Of the international intelligence information that comes to Australian agencies from the Five Eyes, 90 percent comes from the CIA and related US intelligence agencies. So in effect we have the colonisation of our intelligence agencies These agencies dominate the advice to ministers, writes John Menadue.

INTERVIEW: John Menadue talks with Michael Lester

Michael Lester: Hello again listeners to Community Radio Northern Beaches Community Voices and also the Pearls and Irritations podcast. I’m Michael Lester.

Our guest today is the publisher and founder of the Pearls and Irritations Public Policy online journal, the celebrated John Menadue, with whom we’ll be so pleased to have a discussion today. John has a long and high profile experience in both the public service, for which he’s been awarded the Order of Australia and also in business.

As a public servant, he was secretary of a number of departments over the years, prime minister and cabinet under a couple of different prime ministers, immigration and ethnic affairs, special minister of state and the Department of Trade and also Ambassador to Japan.

And in his private sector career, he was a general manager at News Corp and the chief executive of Qantas. These are just among many of his considerable activities.

These days, as I say, he’s a publisher, public commentator, writer, and we’re absolutely delighted to welcome you here to Radio Northern Beaches and the P&I podcast, John.

John Menadue: Thank you, Michael. Thanks for the welcome and for what you’ve had to say about Pearls and Irritations. My wife says that she’s the Pearl and I’m the Irritation.

ML: You launched, I think, P&I, what, 2013 or 2011; anyway, you’ve been going a long while. And I noticed the other day you observed that you’d published some 20,000 items on Pearls and Irritations to do with public policy. That’s an amazing achievement itself as an independent media outlet in Australia, isn’t it?

JM: I’m quite pleased with it and so is Susie, my wife. We started 13 years ago and we did everything. I used to write all the stories and Susie handled the technical, admin, financial matters, but it’s grown dramatically since then. We now contract some of the work to people that can help us in editorial, in production and IT. It’s achieving quite a lot of influence among ministers, politicians, journalists and other opinion leaders in the community.

We’re looking now at what the future holds. I’m 89 and Susie, my wife, is not in good health. So we’re looking at new governance arrangements, a public company with outside directors so that we can continue Pearls and Irritations well into the future.

ML: So you made a real contribution through this and you’ve given the opportunity for so many expert, experienced, independent voices to commentate on public policy issues of great importance, not least vis-a-vis, might I say, mainstream media treatment of a lot of these issues. This is one of your themes and motivations with Pearls and Irritations as a public policy journal, isn’t it? That our mainstream media perhaps don’t do the job they might do in covering significant issues of public policy?

JM: That’s our hope and intention, but I’m afraid some of them are just incorrigible. They in fact act as stenographers to powerful interests.

It’s quite a shame what mainstream media is serving up today, propaganda for the United States, so focused on America.Occasionally we get nonsense about the British royal family or some irrelevant feature like that.

But we’re very badly served. Our media shows very little interest in our own region. It is ignorant and prejudiced against China. It is not concerned about our relations with Indonesia, with the Philippines, Malaysia, Vietnam.

It’s all focused on the United States.We’re seeing it on an enormous scale now with the US elections. Even the ABC has a Planet America programme.

It’s so much focused on America as if we’re an island parked off New York. We are being Americanised in so many areas and particularly in our media.

ML: What has led to this state of affairs in the way that mainstream media treats major public policy issues these days? It hasn’t always been like that or has it?

JM: We’ve been a country that’s been frightened of our region, the countries where we have to make our future. And we’ve turned first to the United Kingdom as a protector. That ended in tears in Singapore.

And now we turn to the United States to look after us in this dangerous world, rather than making our own way as an independent country in our own region. That fear of our region, racism, white Australia, yellow peril all feature in Australia and in our media.

But when we had good, strong leaders, for example, Malcolm Fraser on refugees, he gave leadership and our role in the region.

Gough Whitlam did it also. If we have strong leadership, we can break from our focus on the United States at the expense of our own region. In the end, we’ve got to decide that as we live in this region, we’ve got to prosper in this region.

Security in our region, not from our region. We can do it, but I’m afraid that we’ve been retreating from Asia dreadfully over the last two or three decades. I thought when we had a Labor government, things would be different, but they’re not.

We are still frightened of our own region and embracing at every opportunity, the United States.

ML: Another theme of the many years of publishing Pearls and Irritations is that you are concerned to rebuild some degree of public confidence and trust that has been lost in the political system and that you seek to provide a platform for good policy discussion with the emphasis being on public policy. How has the public policy process been undermined or become so narrow minded if that’s one way of describing it?

JM: Contracting out work to private contractors, the big four accounting firms, getting advice, and not trusting the public service has meant that the quality of our public service has declined considerably. That has to be rebuilt so we get better policy development.

Ministers have been responsible, particularly Scott Morrison, for downgrading the public service and believing somehow or other that better advice can be obtained in the private sector.

Another factor has been the enormous growth in the power of lobbyists for corporate Australia and for foreign companies as well. Ministers have become beholden to pressure from powerful lobby groups.

One particular example, with which I’m quite familiar is in the health field. We are never likely to have real improvements in Medicare, for example, unless the government is prepared to take on the power of lobbyists — the providers, the doctors, the pharmaceutical companies and pharmacies in Australia.

But it’s not just in health where lobbyists are causing so much damage. The power of lobbyists has discredited the role of governments that are seduced by powerful interests rather than serving the community.

The media have just entrenched this problem. Governments are criticised at every opportunity. Australia can be served by the media taking a more positive view about the importance of good policy development and not getting sidetracked all the time about some trivial personal political issue.

The media publish the handouts of the lobbyists, whether it’s the health industry or whether it’s in the fossil fuel industries. These are the main factors that have contributed to the lack of confidence and the lack of trust in good government in Australia.

ML: A particular editorial focus that’s evident in Pearls and Irritations is promoting, I think in your words, a peaceful dialogue and engagement with China. Why is this required and why do you put it forward as a particularly important part of what you see as the mission of your Pearls and Irritations public policy journal?

JM; China, is our largest market and will continue to be so. There is a very jaundiced view, particularly from the United States, which we then copy, that China is a great threat. It’s not a threat to Australia and it’s not a threat to the United States homeland.

But it is to a degree a threat, a competitive threat to the United States in economy and trade. America didn’t worry about China when it was poor, but now that it’s strong militarily, economically and in technology, America is very concerned and feels that its future, its own leadership, its hegemony in the world is being contested.

Unfortunately, Australia has allowed itself to be drawn into the American contest with China.  It’s one provocation after another. If it’s not within China itself, it’s on Taiwan, human rights in Hong Kong. Every opportunity is found by the United States to provoke China, if possible, and lead it into war.

I think, frankly, China will be more careful than that.

China’s problem is that it’s successful. And that’s what America cannot accept. By comparison, China does not make the military threat to other countries that the United States presents.

America is the most violent, aggressive country in the world. The greatest threat to peace in the world is the United States and we’re seeing that particularly now expressed in Israel and in Gaza.

But there’s a history. America’s almost always at war and has been since its independence in 1776. By contrast, China doesn’t have that sort of record and history. It is certainly concerned about security on its borders, and it has borders with 14 countries.

But it doesn’t project its power like the US. It doesn’t bomb other countries like the United States. It doesn’t have military bases surrounding the United States.

The United States has about 800 bases around the world. It’s not surprising that China feels threatened by what the United States is doing. And until the United States comes to a sensible, realistic view about China and deals with it politically, I think they’re going to make continual problems for us.

We have this dichotomy that China is our major trading partner but it’s seen by many as a strategic threat. I think that is a mistake.

ML: But what about your views about the public policy process underlying Australia’s policy in reaching the positions that we’re taking vis-a-vis China?

JM: There are several reasons for it, but I think the major one is that Australian governments, the previous government and now this one, takes the advice of intelligence agencies rather than the Department of Foreign Affairs.

Our intelligence agencies are part of Five Eyes. Of the international intelligence which comes to Australian agencies, 90 percent comes from the CIA and related US intelligence agencies. So in effect we’ve had the colonisation of our intelligence agencies and they’re the ones that the Australian government listens to.

Very senior people in those agencies have direct access to the Prime Minister. He listens to them rather than to Penny Wong or the Department of Foreign Affairs and Trade. On most public issues involving China, the Department of Foreign Affairs has become a wallflower.

It’s a great tragedy because so much of our future in the region depends on good diplomacy with China, with the ASEAN, with the countries of our region.

Those intelligence agencies in Australia, together with American funded, military funded organisations such as the Australian Strategic Policy Institute have the ear of governments. They’ve also got the ear of the media.

Stories are leaked to the media all the time from those agencies in order to heighten our fear of the region. The Americanisation of Australia is widespread. But our intelligence agencies have been Americanised as well, and they’re leading us down a very dangerous path.

ML: I’m speaking with our guest today on Reno Northern Beaches Community Voices and on the Pearls and Irritations podcast with the publisher of Pearls and Irritations Public Policy Journal, John Menadue, distinguished Australian public servant and businessman.

John, again, it’s one thing to talk about that, but governments, when they change, and we’ve had a change of government recently, very often, as I’m sure you know from personal experience, have the opportunity and do indeed change their advisors and adopt different policies, and one might have expected this to happen.

Why didn’t we see a change of the guard like we saw a change of government?

JM: I think this government is timid on almost everything. It was timid from day one on administrative arrangements, departmental arrangements, heads of departments.

For example, there was no change made to dismantle the Department of Home Affairs with Michael Pezzullo. That should have happened on day one, but it didn’t happen.

Concerns we’ve had in migration, the role of foreign affairs and intelligence with all those intelligence agencies gathered together in one department has been very bad for Australia.

Very few changes were made in the leadership of our intelligence agencies, the Office of National Assessments, in ASIO. The same advice has been continued. In almost every area you can look at, the government has been timid, unprepared to take on vested interests, lobbyists, and change departments to make them more attuned to what the government wants to do.

But the government doesn’t want to upset anyone. And as a result, we’re having a continuation of badly informed ministers and departments that have really not been effectively changed to meet the requirements and needs of, what I thought was a reforming government.

ML: In that context, AUKUS and the nuclear submarine deal might be perhaps a case in point of the broader issues and points you’re making. How would you characterise the nature of the public policy process and decision behind AUKUS? How were the decisions made and in what manner?

JM: By political appointees and confidants of Morrison. There’s been no public discussion. There’s been no public statement by Morrison or by Albanese about AUKUS — its history, why we’re doing it.

It’s been left to briefings of journalists and others. I think it’s disgraceful what’s happened in that area. It’s time the Australian government spelled out to us what it all means, but it’s not going to do it. Because I believe the case is so threadbare that it’s not game to put it to the public test.

And so we’re continuing in this ludicrous arrangement, this fiscal calamity, which Morrison inflicted on the Albanese government which it hasn’t been game to contest.

My own view is that frankly, AUKUS will never happen. It is so absurd — the delay, the cost, the failure of submarine construction or the delays in the United States, the problems of the submarine construction and maintenance in the United Kingdom.

For all those sorts of reasons, I don’t think it’ll really happen. Unfortunately, we’re going to waste a lot of money and a lot of time. I don’t think the Department of Defence could run any major project, certainly not a project like this.

Defence has been unsuccessful in the frigate and numerous other programmes. Our Department of Defence really is not up to the job and that among other reasons gives me reason to believe, and hope frankly, that AUKUS will collapse under its own stupidity.

But what I think is of more concern is the real estate, which we are freely leasing to the Americans. We had it first with the Marines in Darwin. We have it also coming now with US B-52 aircraft based out of Tindal in the Northern Territory and the submarine base in Perth, Western Australia.

These bases are being made available to the United States with very little control by Australia. The government carries on with nonsense about how our sovereignty will be protected.

In fact, it won’t be protected. If there’s any difficulties, for example, over a war with China over Taiwan, and the Americans are involved, there is no way Americans will consult with us about whether they can use nuclear armed vessels out of Tindal, for example.

The Americans will insist that Pine Gap continues to operate. So we are locked in through ceding so much of our real estate and the sovereignty that goes with it.

Penny Wong has been asked about American aircraft out of Tindal, carrying nuclear weapons and she says to us, sorry but the Americans won’t confirm or deny what they do.

Good heavens, this is our territory. This is our sovereignty. And we won’t even ask the Americans operating out of Tindal, whether they’re carrying nuclear weapons.

Back in the days of Malcolm Fraser, he made a statement to the Parliament insisting that no vessels or aircraft carrying nuclear weapons or ships carrying nuclear weapons could access Australian ports or operate over Australia without the permission of the Australian government.

And now Penny Wong says, we won’t ask. You can do what you like. We know the US won’t confirm or deny.

When it came to the Solomon Islands, a treaty that the Solomons negotiated with China on strategic and defence matters, Penny Wong was very upset about this secret agreement. There should be transparency, she warned.

But that’s small fry, compared with the fact that the Australian government will allow United States aircraft to operate out of Tindal without the Australian government knowing whether they are carrying nuclear weapons. I think that’s outrageous.

ML: Notwithstanding many of the very technical and economic and other discussions around the nuclear submarine’s acquisition, it does seem that politically, at least, and not least from the media presentation of our policy position that we’re very clearly signing up with our US allies against contingency attacks on Taiwan that we would be committed to take a part in and we’re also moving very closely, to well the phrase is interoperability, with the US forces and equipment but also personnel too.

You mentioned earlier, intelligence personnel and I believe there’s a lot of US personnel in the Department of Defence too?

JM: That’s right. It’s just another example of Americanisation which is reflected in our intelligence agencies, Department of Defence, interchangeability of our military forces, the fusion of our military or particularly our Navy with the United States. It’s all becoming one fused enterprise with the United States.

And in any difficulties, we would not be able, as far as I can see, to disengage from what the United States is doing. And we would be particularly vulnerable because of the AUKUS submarines. That’s if they ever come to anything. Because the AUKUS submarines, we are told, would operate off the Chinese coast to attack Chinese submarines or somehow provide intelligence for the Americans and for us.

These submarines will not be nuclear armed, which means that in the event of a conflict, we would have no bargaining or no counter to China. We’d be the weak link in the alliance with the United States.

China will not be prepared to strike the mainland United States for fear of massive retaliation. We are the weak link with Pine Gap and other real estate that I mentioned. We would be making ourselves much more vulnerable by this association with the United States.

Those AUKUS submarines will provide no deterrence for us, but make us more vulnerable if a conflict arises in which we are effectively part of the US military operation.

ML: How would you characterise the mainstream media’s presentation and treatment of these issues?

JM: The mainstream media is very largely a mouthpiece for Washington propaganda. And that American propaganda is pushed out through the legacy media, The Washington Post, The New York Times, the news agencies, Fox News which in turn are influenced by the military/ business complex which Eisenhower warned us about years ago.

The power of those groups with the CIA and the influence that they have, means that they overwhelm our media. That’s reflected particularly in The Australian and News Corporation publications.

I don’t know how some of those journalists can hold their heads. They’ve been on the drip feed of America for so long. They cannot see a world that is not dominated and led by the United States.

I’m hoping that over time, Pearls and Irritations and other independent media will grow and provide a more balanced view about Australia’s role in our region and in our own development.

We need to keep good relations with the United States. They’re an important player, but I think that we are unnecessarily risking our future by throwing our lot almost entirely in with the United States.

Minister for Defence, Richard Marles is leading the Americanisation of our military. I think Penny Wong is to some extent trying to pull him back. But unfortunately so much of the leadership of Australia in defence, in the media, is part and parcel of the mistaken United States view of the world.

ML: What sort of voices are we not hearing in the media or in Australia on this question?

JM: It’s not going to change, Michael. I can’t see it changing with Lachlan Murdoch in charge. I think it’s getting worse, if possible, within News Corporation. It’s a very, very difficult and desperate situation where we’re being served so poorly.

ML: Is there a strong independent media and potential for voices through independent media in Australia?

JM: No, we haven’t got one. The best hope at the side, of course, is the ABC and SBS public broadcasters, but they’ve been seduced as well by all things American.

We’ve seen that particularly in recent months over the conflict in Gaza. The ABC and SBS heavily favour Israel. It is shameful.

They’re still the best hope of the side, but they need more money. They’re getting a little bit more from the government, but I think they are sadly lacking in leadership and proper understanding of what the role of a public broadcaster should be.

I don’t think there’s a quick answer to any of this. And I hope that we can extricate ourselves without too much damage in the future. Our media has a great responsibility and must be held responsible for the damage that it is causing in Australia.

ML: Well, look, thank you very much, John Menadue, for joining us on Radio Northern Beaches and on the Pearls and Irritations podcast. John Menadue, publisher, founder, editor-in-chief of, for the last 13 years, the public policy journal Pearls and Irritations. We’ve been discussing the role of the mainstream media, independent media, in the public policy processes too in Australia, and particularly in the context of international relations and in this case our relationships with the US and China.

Thank you so much John for taking the time and for sharing your thoughts with us here today. Thanks for joining us John.

JM: Thank you. Let’s hope for better days.

John Menadue, founder and publisher of  Pearls and Irritations public policy journal has had a senior professional career in the media, public service and airlines. In 1985, he was made an Officer of the Order of Australia (AO) for public service. In 2009, he received the Distinguished Alumni Award from the University of Adelaide in recognition of his significant and lifelong contribution to Australian society. This transcript of the Pearls and Irritations podcast on 10 August 2024 is republished with permission. 

This article was first published on Café Pacific.

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SPECIAL REPORT AND ANALYSIS – by Stephen Minto.

Housing affordability is more than a simple case of demand and supply; there are structural factors creating too much investor demand for residential housing.  Because of this, New Zealand can’t just build its way out of this crisis. And removing planning restrictions will delay intensification and the supply of affordable housing, the exact opposite of what its proponents claim. The structural forces, in which the property market functions, must be fixed.

To see this we need to understand three things:

1. How we got here, and where here is.
2. Our current trends and economic forces.
3. What direction do we want to go in and how (possible solutions).

Part 1: How we got to this crisis – the NZ economy is a one trick pony; residential housing

We all know:

• The ‘normal principles of taxation’ favour holding a relatively low-effort, non-productive asset – residential property. Especially because you could claim the mortgage interest paid as an expense.
• There was no capital gains tax.
• The banks want to lend on leveraged property as a relatively secure loan. They are risk adverse.
• You can have a holiday home and rent it out occasionally as a pretend business to subsidise having it.
• Huge tourism to New Zealand along with AirBNB and ‘bookabach’ etc have given a lucrative income stream in the short-term rental market.
• Mum and dad savers/investors learnt from the 1987, 1998, and 2008 economic crashes that property was the best at retaining its value.
• The renters pay your mortgage, so there is little drain on your ‘income’ or there is positive enhancement from rental losses.
• New Zealand has had positive migration flows.

All these factors have been in place for many years making residential housing a fantastic investment, or superannuation scheme, or wealth–gain mechanism. It’s not clever to invest in residential property, it’s stupid not to.

But wait there’s more – the neo-liberal economic crisis

Commentators don’t talk about the neo-liberal structural changes in New Zealand and other first world economies from 1980 that have collapsed alternative investment opportunities.

The world economy was opened up on the mistaken belief that the great growth years of capitalism were made in an environment of little regulation and tax. A mantra to free up the private suppliers of goods and services (supply side economics) from laws, labour, and taxes was said to lead to an economic boom.

We all know there has been no boom for working or middle class people. There has been a boom for financial capitalism, technology, and billionaires.

What happened was skilled manufacturing and industrial jobs were exported to countries like China, Vietnam, and India. Many high income jobs evaporated in New Zealand leading to fewer people being able to save house deposits or save capital to start a business. Yes we got lower cost imports to match lower incomes, but we also got a throw away society with so much rubbish brought in.

Also, lower taxes and a smaller government meant the main source of apprenticeships, from Ministry of Works, Railways, Defence etc., dried up, leaving New Zealand small businesses without a source of trained and qualified people. They now had  to pay to train them. We now have to import skilled people. We have fewer skilled people to build houses. Fewer apprenticeships means fewer people to set up their own businesses meaning fewer opportunities for those wanting to strike out on their own. Fewer new businesses means fewer medium-sized businesses, which could be an investment option for those wanting to invest.

The above reality is compounded due to the absence of a capital gains tax as business owners have an incentive to take an easy-life option and sell up to overseas buyers. These overseas owners contribute tax and labour costs but they often do their best to avoid these. Businesses listed on the sharemarket are often sold overseas and pulled out of our sharemarket. We now have a thin share market. Profits from New Zealand assets are exported overseas. Most investment capital is not being invested back into growing the New Zealand economy, instead huge amounts of New Zealand’s investment capital is going to non-productive assets, such as residential property. These are all structural problems significantly damaging the ability of the New Zealand economy to grow.

New Zealand is now a service based economy but business set-ups in New Zealand are often for overseas franchises with low margins and wages. In fast food our small shop owners struggle. Retail as a business model is struggling because consumers have less disposable income because of high rents. High rents, and other utilities like power, suck money out of other areas of the economy. Our overall economy is being damaged by being skewed to the non-productive asset, residential property.

This is where the New Zealand economy is today; there is almost nowhere in New Zealand to invest except in residential property. Neo-liberal policies have shrunk our domestic economy and removed opportunities for investment. Entrepreneurs are risk averse – they minimise risk and buy property.

Is there a property bubble?

Yes. High house prices mean loans are beyond the ability of borrowers to ever repay. But that is still profitable for banks. The loans help push house prices higher, which rewards investment in property, and so it continues. But like the 25 July 2021 Radio NZ article ‘The problem with economists forecasts’, many have predicted a bubble burst but all have failed. Why? It’s obvious. The structural problems and incentives to buy residential housing are all still in place. Where else can the investors go? The economic signals from a dysfunctional economy trap investors in residential property. (ref. Radio New Zealand; July 25, 2021)

The property bubble can’t deflate until there is a functioning economy with alternative low-risk options for investment.

There are ways out of this, which is covered in Part 4 of this four part series.

Part 2: The current trends and economic forces shaping housing affordability

New Zealand can’t just build its way out of the affordable housing crisis. Previously I noted the ‘normal principles of taxation’ and the legacy of the neo-liberal experiment are skewing the economy to trap investors into holding residential housing as investments.  This part looks at the recent developing economic trends that now trap middle and working class people into renting for life and why that is bad for our economy.

Trends – big business residential renting

The New Zealand situation sits along with a trend in the United States where large corporations, e.g. the Koch brothers, have been investing in new rental properties because the returns on rentals are so strong. This is because house prices in the US, like NZ, are high. This shuts out most young middle- and working-class buyers. These people then become a captive market of renters as they are wealthy enough to pay high rents. And the high rents in turn make it almost impossible for renters to save a deposit to buy a home, and the captivity continues. The returns and prospects for business are great.

Over time, the rental investor market is moving away from mum and dad investors as they surrender their houses to pay for retirement homes or to release capital to live comfortably. Big business will take up a lot of that divestment; they can leverage far more and so are able to pay and sustain high prices for residential houses. They will also be buyers of older homes to redevelop into more ‘productive’ new builds. Banks will feel secure to lend to a large business with captive renters.

This means the future of housing is evolving into a big business ‘build to rent’ model, which means not ‘generation rent’ but ‘generations of rent’.

And this is bad for the economy. One of the ways it is bad is it leaves people with little capital to borrow against to take up a business option. It traps people as employees. And people renting won’t be able to build equity because there are fewer other investments options and those other options aren’t performing as well as residential property because all the investment capital to grow those other options is being sucked into residential property. And the chances of saving to build equity are low because rents are high. More reasons are given in the next trend (see below).

Some governments have also undermined social housing, which has exacerbated the problem, but that failure did not create the affordable housing crisis.

At this point, some people who own lots of properties will say, ‘So what?’

• Nothing is wrong with people renting.
• Nothing is wrong with high rent if the market is willing to pay it.
• The critics are all anti-business.

My response is this:

• Yes, it is wrong if there is no choice.
• People are not willing to pay high rents – they have to pay them.
• Redirecting investment to the productive economy (exports, innovation, producing goods and services) is good for business.

All businesses will benefit from a shift to investment in the productive economy except the types of business based on highly leveraged rental property. The property investor landlords that are not based on highly leveraged property will carry on renting.

Trends – high price houses and rents are here to stay.

In theory, increasing housing supply will bring down house prices, but that is not so in the economy we have.

For renters, the high prices paid for housing purchases are used to justify charging high rents. Also, big business is very keen on making sure there is a good rate of return on capital, so there’s an incentive to keep rents high.

Supply of housing and the rental price is not really linked. Pricing is about how much ‘consumer surplus’ the seller believes they can extract. It is not about the costs of the business so much as what they think the renter can pay e.g. linked to area, what others are charging in that area for that size of house. What the renter thinks the rent should be is not really relevant. Business costs do not really matter for price e.g. as a landlord pays down their mortgage on a rental property they do not reduce the rent on the property. Cost and supply do not drive rent prices.

The easiest example to see how supply and price is not linked is the car market (used and new). There are a huge number of cars in New Zealand and it is presented to the consumer as a myriad of choices about car style and performance, ‘why do you want the car?’. Each choice means it becomes a smaller range of cars to choose from. Every ‘extra’ feature is a way to distinguish one car from the hundreds of other cars; to push price up, or help hold it up.  This is what will happen with the housing market. The business model market will have a deliberate desire to push choice and variety up to push, or keep, the price up.

So for the ‘build to rent’ business model we will see tiny studio apartments marketed as the affordable option, which really primarily just suits a very young guy on his own, or short-term stays. As the size increases it will exponentially get more expensive. The business model will run that tried and true for-profit strategy. They will start organising your loans to make the purchase so they can get a commission.

Supply is only one of the many factors (e.g. location, quality, number of rooms), to set a rental price. Too many people are talking as if supply will fix the problem of affordability and this is a mistake. For example, a ‘tradie’ did a job at a rental house (almost $700 a week for a whole house in an outer suburb) there were several people home (a Polynesian extended family) and the rental owner, in casual conversation with the tradie, said as there were more people in the house than they thought, they would raise the rent, i.e. they can charge more. This is an insight to price setting. The idea, that people can just go somewhere else if rents rise, is silly. People want continuity with where they live, especially if they have children at schools. Also, demand to rent a property would generally be seen as inelastic, i.e. you need a place to live so you have to pay what is asked for. If you negotiate a rent reduction it tends to be by quite small amounts. (I’m sure there are anecdotes of some large reductions but clearly that is not the norm from the Trade me site or as renters report).

This shows cost, and supply, is not what primarily drives rent prices and this business model will work counter to the government’s, and most voters’ objectives, of ensuring there is affordable housing for our families, children and grandchildren.

Trend – a business ownership model versus a home ownership model

Residential housing is currently being repurposed into a very strong and profitable business model either with long term renting, or short term renting (Airbnb, book a bach etc) for tourism – when tourism returns – the previous model being high levels of home ownership. These business models will further push out home buyers unless they can pay a very high price. Therefore an affordable housing shortage will persist due to New Zealand’s lack of building resource capacity and a positive net migration. This is the nature of the private market and it has already shown it can’t deliver affordable housing. It needs a push, and help, to deliver affordable housing.

With a move to big business running more rentals, the chances of rents being lowered by supply are slimmer than if it was lots of mum and dads running the rental market. A large business will hold many properties and can carry empty property more easily as tax deductions can still be made against the property. High rents on some properties can cover for vacant periods on other properties.

Also the concept of ‘affordable’ is a monetary concept but housing is a qualitative experience. The economic/profit drive for business will be what is market ‘affordable‘ – e.g. those apartments that are south facing and that do not get any direct light, or they look onto a concrete wall. More planning rather than less will be needed to avoid these sort of outcomes.

The private rental market is not conducive to lower rents. For example, one rental comes onto the market and the fact that 10 or 100 people applied for that one new flat is taken as a signal to all the other people holding rentals (with that rental service company) to raise the prices on their other rentals. The private market tends to quickly inflate the impacts of scarcity. But when one rental takes a long time to rent there is no rush to drop their prices on their other rental properties. Private markets tend to hold prices high. So housing supply, if held in the private business model market, will not necessarily bring down rental prices. Anecdotally, I am personally aware of many houses in New Zealand’s capital city Wellington, that are not occupied. Ideally, this housing stock would be used for housing supply if done up, restored, renovated, or simply rented out. Some supply currently exists but is not being utilised. This is the scourge of land banking.

Rents are high now and deflation is only generally associated with economic crashes. There is nothing identifiable yet that would indicate rental prices will decrease. The whole discussion, about increasing the supply being the solution to the housing affordability crisis, is just magic thinking. If left alone, the economic forces at work will prevent increasing supply being able to have a positive impact.

Former BNZ economist (and now an independent economist) Tony Alexander made a point in a NZME bulletin that getting tough on landlords will just drive up rental prices. However, I argue, prices not quality have been rising anyway. Therefore, now is the perfect time to remove interest deductibility from residential rental property, particularly as interest rates are currently low. Nobody is getting tough on landlords, rather investor demand is being dampened and investment capital gently directed away to the productive economy. (ref. Youtube, NZHerald.co.nz; March 1, 2021)

I repeat increased supply and intensification definitely needs to happen but it is not going to launch a huge reduction in house prices or rent as the forces driving investor demand will still be in place. And supply is still a long way off.

But there are things that can be done to free renters and house buyers from high prices by making the market work better. See solutions in Part 4 of this four part series.

Trend – Government as the good quality high paying tenant

The outlook for investors in the rental business is getting even better if rent is made to beneficiaries as the rents are paid direct to the landlord by the government. If there is an overloaded or not properly funded bureaucracy any complaints about the quality of the rental may be slow for the government to follow up on, but the rent continues to be passed through directly to landlords. Business loves it as it is a very secure income stream. If government has to pay repairs for damage it may be a more reliable payer than a private tenant.

On rental price settings that impact government, it was strongly anecdotally reported that with the Government’s first budget, where the accomodation allowance was raised by $50 a person, rents increased correspondingly. This showed the rental business market’s true colours. The rental rise was not based on costs but on the ability to extract the money as the government had declared it available. This shows the government therefore will become trapped in a cycle of paying for high rents by leaving so much of the rental market in this growing private business model.

Trend – business model housing is bad for the economy.

This is bad for the New Zealand economy. High rents, or mortgages (and for other utilities) means less disposable income for renters/mortgagees which leads to less stimulus into the rest of the economy. More disposable income could mean more people seek education, experience the arts, take up exercise, domestic travel, etc. All these are NZ based service industries that are struggling at the moment. But landlords in particular have a captive inelastic market where they can continue to raise rental prices even though interest rates are at a record low.

As said before, high house or rental prices prevent/slows people developing capital on which to create a business opportunity and/or push an innovation they may have developed.

As bad if not worse is the diversion of so much of New Zealand’s investment capital into a non-productive asset, residential housing. We need that investment capital to go into innovation projects and/or producing things for export, or for the services industries that our economy employs most of our people in. The housing market, built on a business model, is not a service industry we want to encourage.

And once the ‘build to rent’ companies take over and they are big enough they might list on the stock market and then the chances of it being sold overseas – with all the rental profits going overseas – becomes very real.

New Zealand will not get wealthy selling houses to each other.

No business representative group should be upset about this redirection of investment into the productive sector of the economy. It will benefit most businesses. It is only those rental businesses built on being highly debt leveraged that will have to change.

There are solutions to high housing prices and the affordability crisis outside a big business rental model, I talk about some solutions in Part 4 of this four part series.

Part 3 – The problems that come from a supply fixation as a solution to housing affordability

The government is aware of complexity in dealing with the housing affordability crisis so it wants to include the private market as part of the solution. They have reflected this in the Urban Growth Agenda. It encourages changes to relax planning rules to facilitate residential development and intensification. This means developers can force their dreams and vision through, rather than a community’s visions of a city being realised. History shows this will inevitably result in conflict and a firestorm will come down on the government and councils as the private market will not deliver affordable housing. Again, inevitably, government and councils will be blamed for damaging the cities as developers will insist they are simply following the rules. And, in turn, opposition political parties can exploit that conflict. The places where these ideas arose from is as follows.

Alternative ideas on affordability

Tony Alexander in the YouTube clip ‘When will house prices cool down/Cooking the books’ from March 1, 2021 says house prices won’t go down because low interest rates are what is driving the high prices. This is a factor because it makes it easier to borrow and leverage a property. But pressed for his suggestion to solve the housing crisis, it is not to raise interest rates (I agree with him) but to remove planning restrictions. This solution is linked to the defective increase supply argument as explained previously. He expresses sympathy for first home buyers and has a great analysis but overall he is passive about most of the factors driving affordability, they just exist for him. Using the metaphor of climate change, I think his analysis is more as a weather forecaster looking at the factors of the day but not as a climate scientist looking at what is underlying and driving the factors.

Alexander’s suggestion on planning is to relax the rules so that six story buildings can be built beside single story buildings. To take Wellington as an example, when this sort of absence of rules existed back in the 1950’s and 1960’s, huge amounts of heritage (for example in central Wellington, Te Aro flats and into Thorndon and Mount Victoria) were destroyed in an ugly way. This is why protection rules were introduced.

Alexander also critiques actions that impact the landlord/investor as being counter productive as any costs placed on them will just be passed on in rents. But even without any government actions rent prices are unaffordable. Fatalism, or perhaps a desire for defeatism, pervades his argument. Because if the actions were successful and investors are less active in the market there would be less demand and less push for prices to rise. And the New Zealand Property Council has said actions on removing the deductibility of interest would dampen investor demand.

• Can planning laws alone fix supply?

The answer is no because of the structural problems created by the ‘normal principles of taxation’ and the neo-liberal economic legacy that encourages excessive investor demand and that will hold housing values up – which holds up rents as well. Planning laws are needed to drive intensification which I fully support, but not at a cost to the historic character and liveability of a city. However, it appears the policy ideas Alexander supports are being listened to by the government.

Urban Growth Agenda – right idea, wrongly executed

For those on the left, the government’s recently developed Urban Growth Agenda is a neo liberal’s dream come true. Why? It is predicated on giving ‘permission’ to private developers to disregard the needs and wants of the existing local communities so the developer can build a six story build right beside one story houses meaning they will loose their sun and privacy with no chance to complain. The developer’s dream or plan (to make money) will come first and be forced through.

The Urban Growth Agenda does not have urban planning as its primary focus. It does have a vision of urban growth intensification which I fully support, but it is not ‘urban planning’. It has a feature Housing Infrastructure Fund which is money set aside to pay for infrastructure to support the private developer’s vision. This fund could cover parks, play areas, but it could also cover drains and water etc. But that is not urban planning for the local community. The risk is the fund will just be mitigation after an eyesore is built and the damage done to the house values of surrounding private home owners – the result: one group is allowed to make money over another group.

Some developers may not care if large buildings are built beside their properties as they can put one up beside it and each building can look into each other. The private developer sector’s vision is bounded by the constraints of; – I have this bit of land here and I need to maximise the profit from it so I stay comfortably in business. Even allowing for ideas like stunning new architecture it is still bounded by those facts. And those facts are not transformative urban planning in a positive community-led way.

The Urban Growth Agenda  also has the Housing Acceleration Fund which provides for government directed as well as private developments. Why should it include private developments when these companies already have access to funds through debt leveraging, which banks seem quite happy to do? Our current housing experience in Auckland already shows private developers are not building affordable housing. They advertise studio apartments for $600,000. This suits short term rentals (Airbnb) investments, or young men looking for a bolthole to call their own. And if a studio costing $600K is rented out, the rent will be high, it will not be affordable.

The history of private developers conflicting with the Resource Management Act is simply their vision conflicting with others who are also stakeholders in the community. A simple way to fix this problem is for there to be an earlier process to identify needs in the city, a proper urban plan of what the housing should approximately look like in this or that area or site, and then for developers bidding or volunteering to be part of that development. The current connect of development and ownership of random pieces of land and then developers trying to impose their vision on that piece of land is causing conflict. Urban development should be more planned. Areas should change as part of a process that is well signalled and worked towards over time. In many areas of central Wellington for example, this can be done quickly as there is so much low intensity commercial use.

The current Urban Growth Agenda is not urban planning but a one sided urban permission to build. The plan too much takes the side of the developers’ interests. Once high rises are built there will be community reactions. Developers will then say we are just doing what we are allowed to within the rules. The public will then turn on the rules makers (the government and council). It is a recipe for anger and conflict which is generally not good long term politics.

There are many ideas to fix the affordable housing crisis while increasing intensification which I fully support. I cover these in Part 4 of this four part series.

Wellington City – an example of planning relaxation that will not lead to intensification and affordable housing supply

Presumably following the Urban Growth Agenda the current Wellington City Council has gone zombie-logic against historic suburbs in the mistaken belief that this is the cause of a lack of intensification in the central city where more people want to live. But a simple glance across the city shows there is lots of low-level commercial buildings and plenty of land on which to intensively build (e.g. Te Aro), and there is little heritage over large parts. Huge fields of carparks cover large amounts of Te Aro. So intensification is not happening in the non-heritage areas, which indicates that heritage is not the cause of a lack of intensification.

There is simply no economic push to intensity which is why intensification hasn’t happened. And reducing the planning rules to increase the amount of land that could be available to intensify (which is what the council has done) will actually reduce the drive to intensify in the central areas.  The issue is simply not about heritage holding back intensification, and counterintuitively, is not about relaxing planning restrictions to increase the supply of land.

There needs to be some scarcity and an economic push to intensify (profit is a good one but that won’t make for affordable housing), and not just a council or government planning rule ‘we want to intensify’ and a permission ‘you can’. Developers will be screaming at this point ‘there is scarcity now!’ Okay? So what is causing that scarcity for their development ideas? Landbanking.

Developers have their little pieces of land they want to develop but they can’t get central city pieces of land because others own it and are just holding it for huge capital gains, (and possibly a lack of finance, or ideas, or ability, or desire). As an example; Wellington City is underdeveloped for central city living because of previous lax misguided neo-liberal councils and in part caused by reducing rates on commercial ratepayers and shifting (the cost of commercial rates reductions) onto residential taxpayers as part of the user pays philosophy. With lower land/rates costs businesses can afford to sprawl and underutilise land. Land banking is more cost effective with low costs. This has encouraged a lack of intensification of land use in the central city and encouraged suburban sprawl up the coast and Hutt Valley to get affordable housing.

The Wellington City council is currently allowing several developments of low level townhouses in the city, (car yards in Taranaki Street, and near Vivian Street between Willis and Victoria streets). The obvious question ‘why aren’t these semi industrial/commercial areas (car yards and carparks) developed into quality high-rise intensified living areas? The owners likely answer is – that low level two story builds are lower-cost to build compared to multi-storey builds, and therefore profit is maximised. But the real answer is nobody is demanding they build up or else. Developers should be instructed that as this site/area is slated for medium to high density housing, therefore they must comply and build it that way. And, if they are unwilling to do so, then perhaps somebody else will.

Another example to demonstrate this lack of push to build up, is car parks in Wellington. Carparks used to be many stories high. Now Te Aro has many sprawling field carparks. Parking provides enough income to business to cover costs. There is no drive for central city landowners to intensify and make the most of their land, so they do not. Council has listened and responded to developers who argued about planning issues, because that is what developers see. But what residents see is liveability with heritage. There are plenty of other areas to build affordable housing without destroying heritage.

The new Wellington Spatial Plan, which has significantly relaxed planning rules, is a disaster for heritage housing in central Wellington and the liveability of the city for all ratepayers. Heritage brings tourism and is one of the main factors that makes a place special and gives it character. Successful central cities have gardens and trees connected to history that allow views and sun. For those who have lived in and hated dilapidated heritage houses; that fault lies with the landowners who are land banking and exploiting people. That is what needs to stop.  Heritage housing can easily be renovated and restored to a modern exciting excellent standard.

To those who say heritage is a poor use of land which is not permitting inner city development to occur so as to accomodate an increase in inner city residents; and people come first. Heritage is people coming first. The brand new two story no parking townhouses in Taranaki Street are no more effective at housing than low level heritage. Yes more people will live there than before (it was a car yard) but what about the long term opportunity cost of not having medium to high density intensification on those sites. More importantly these are crammed in with little outlook or privacy. The chances of them being subject to an urban ‘Vicious cycle’ is quite high, i.e. good residents move out as the units are too cramped/not private/noisy from wooden frames, ergo; rents drop, maintenance drops, those with little means arrive, poverty can drive overcrowding, meaning more people move out, repeat.

But even if we destroy all heritage and built residential Burj Khalifi towers over every block in Wellington, a time will come when all space will be used with a maximum possible number of people – then what for the people who still want to come? My point; there is a limit to the number of people who can live central. New York did not destroy Central Park to allow more people to live central. Beijing didn’t destroy the Forbidden city to allow more people to live central. Wellington should not destroy its heritage either.

Heritage (pre-1930’s houses) is a very finite and dwindling resource that is critical to the Wellington economy, i.e. tourism, including domestic tourism. It is also critical for the liveability of all residents. And unfortunately New Zealand history can’t just be corralled to a few tiny zones as proposed in the plan because historic houses in Wellington have not been corralled previously, so they are mixed in with other buildings, that is the nature of history. The problems arise as though the buildings do not mind a big new six story building beside it, the people living there do, and they vote.

Relaxing planning rules on heritage is not the solution to drive intensification of the residential housing supply.  More planning and direct requirements on developers is needed, not less. But their projects can be supported when they accord or are adapted to fit with the community’s vision of the city. It could be that a developer may have land in an unsuitable location for their desired project but there may be land in another location, held by council, or government, or somebody else that could fit with that development. So it could be supported by a land transfer or some such vision.

I put forward several solutions to the housing affordability crisis and the need for intensification in Part 4 of this four part series.

I also suggest that Wellington City councillors roll back their Spatial Plan before the next local body election as there is already talk about councillors being challenged. It is a political gift to an opposition when large buildings are built in low level residential areas. Councillors want affordable housing and intensification like I do, but the roll back of planning restrictions is the empowerment of big business to force through changes they want without direct community involvement. You are facilitating the old neo-liberal ideas that have failed. (So Ironic that Nicola Young didn’t vote for less planning rules. Good on her.) On affordability you are saying to developers ‘you do it, build it, save us’. But that is simply not how they operate. They are attracted by the high prices for high rewards. But the high prices can’t deliver the affordable rents as they must have a sufficient return on capital. Your permission to developers to ignore the community is going to come back and bite you.

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Part 4. Solutions – What can we do to fix the housing affordability crisis

SOLUTIONS: We first need to acknowledge there is an affordable housing crisis. Also, it is not a political issue but a fact that needs action to be taken to address it. The current actions will not fix it because the underlying economic forces are still in place that trap investors in the housing market and an increasing number of renters will be trapped renting, with long term equity consequences for the New Zealand economy. That is the basis for the following suggestions. It is the crisis that means we must look at things that may previously have been unthinkable for many.

No political party should be upset about redirecting investment into the productive economy for innovation and exports. No political party should want to stop voters, the average New Zealander, having the chance to build some equity through owning a house, and possibly create business opportunities for their family and for the rest of society from that equity. Those on the conservative side might reflect on the fact that homeowners have traditionally been more conservative. Voters who are eternal renters may be less conservative than you would like.  Tough confronting solutions have to be looked at; it is a crisis.

The following areas of action are needed:

1. ‘The normal principles of taxation’ are overdue for a reset – not just for housing, but in regards to how it directs and shapes the economy, and supports tax avoidance. If done right, it can lead to a less growth oriented economic model but a more sustainable one. Less chance of boom/bust, with more economic activity that benefits smaller entrepreneurs and NZ based businesses. If we don’t do this the lack of affordable housing will remain a problem for New Zealand as the principles are twisted in our economic environment and it will continue to push money into housing that is not affordable. I have developed a submission that reduces tax avoidance, and by shutting down some behaviours it redirects investment capital into innovation, exports, technology, and small local businesses.
2. Provide councils, communities and government with the tools to urban plan more forcefully and directly. These can then be used to ramp up affordable housing much more quickly. The current idea with reduced planning rules is to give that ‘force’ to private developers.
3. Ensure the current housing stock is available and being used to reduce the affordable housing crisis.  This is a cheaper and quicker option than building new, especially compared with intensification projects.
4. Create secure, profitable, alternative investment options other than housing.

Government must take the lead

To build an affordable housing market there is no escaping the fact that the government must take the lead. It must be government projects first. The recent trends show private enterprise does not deliver affordable housing. The burden must be on private developers to prove otherwise.

How can the Government build affordable housing?

The government is best placed to provide affordable housing but is constrained by not having much control over urban land on which to build and intensify housing. And it needs to be fiscally prudent to prevent inflation so it must be careful about borrowing. So as the need for social housing is in crisis, the government should take some or all of the following steps to get hold of existing residential housing.

• Trade in house for investment security – mum and dad investors with one or two rentals may be willing to trade the rentals in for a long term Government ‘term deposit’ paying a high rate of interest that is sufficient to compensate for loss of the rental revenue. This means government gets a house it can provide instantly to a family or person in social need (displacement of demand by another renter occurs but it is for a higher need).
• Public Works Act acquisition – we do it for roads so let’s use it for affordable housing. Sites close to transport could be taken if they were identified for development. From my understanding the Act is actually generous and some people dream of the cash injection from having some rural land taken. A question to consider is; should it be this generous? (In the Netherlands and Germany such acquisitions for housing are normally made at existing land use cost – I’ve not researched what happens in New Zealand).
• Trade up a home for a home – If an intensive development is going to occur but some local houses are needed for that development then perhaps they should be invited to choose one of the brand new houses at no cost to surrender their existing house. This policy would need to consider how much mortgage there is to pay. Should some of that mortgage be paid as well?
• Low intensity land use swap – a developer may have a vision for urban housing intensification and can think of a site where it would be good but does not own the land. In such a situation, a process could be initiated to evaluate the desirability of the low intensity land use versus the quality ‘affordable’ development, and whether the two could be integrated e.g. business on a lower level with apartments above. Once a decision is made, a swap of land could be enforced and perhaps a small compensation paid. Exemptions for historic buildings can be made for low intensity use. Other factors would need to be considered. The same could also apply for the government or local council around transport hubs where they have a desire for housing intensification, or other urban planning objectives, like parks that would support intensified housing.
• Reverse mortgages for house acquisition – the government eyeing up future development sites or as a more general service, could enter the reverse mortgage market with lower fees and protections for these people. A purpose in this is that the house could eventually become an asset for affordable housing.  It should allow transfers from other entities that hold reverse mortgages. These mortgages are generally not good for home owners in rising markets.

Several of these options are relatively low cost to the government or a council. There is a cost layout but the asset (house and land) will be on the government’s/council’s books.

Once land is accumulated the process may be the government/council create a site, designing and planning its function and then inviting tenders to build it. If land is going to ancillary services or activities attached to it e.g shops, there may be the possibility of a joint cost or build. It could be that a site or area is identified and developers are invited to make proposals and tenders for development of that site.

Redirecting investment from housing.

• Trade in house for investment security – The first bullet above is a key component for redirecting investment. In some ways it is similar to a mum and dad rental investors who pay a property company to handle dealing with the rental (maintenance and monitoring etc) and the renters. So they don’t really see the rental house. This option would have to be developed and promoted.
• Micro private/public partnership – The government can also rethink the private/public partnership model which is heavily centred on cooperation with large corporate enterprises. The government could trial a descale down to individual New Zealand investors. A series of infrastructure projects (e.g. transport, housing, education, research, stadium) could be announced  and people could choose to sign up to invest in the ones they want to. Their capital could be used to support the construction and then they would get some sort of reward over time as the asset is used. It means New Zealanders can use their capital to back New Zealand projects and they can see the result. The government would have to ensure there is not too much exposure to risk, just like they do with a big business.

Other options to deliver affordable housing sooner.

• Requiring maintenance of historic houses – For historic houses (pre 1930’s) the local council should have the power, whether the building is rented or not, to require the owner to bring the house up to a modern or restored excellent standard of housing. A house cannot be left to become dilapidated even if the owner chooses to do that, because it is an asset for the city and future generations. It is also a little piece of carbon capture. But as importantly the community must ensure a person living there is not at a health, fire, or safety risk to themselves or others.  If the house is rented then the renting standards should apply – there should be no slum landlords. But the local council or government (perhaps administered by Heritage New Zealand) must decide if any action is to be taken. Should the owner not be financially able to update the house professionally, then the council/government should undertake the work and the amount spent becomes a low interest loan that is secured over the property. They should not be permitted to do the work themselves unless it is professionally being done and checked. Timeframes would be established. When the person sells or dies the loan can be collected from the house sale/disposal, or the house can move into the council’s or government’s stock of affordable housing assets with any balance in value paid out to the estate.
• An ‘empty home tax’. This is a tax in Vancouver as I understand. Anecdotally around Wellington there are lots of empty houses that could be rented but aren’t. Such houses should be sold if the person doesn’t want to do it up. Neighbours could be one of the main way this is identified. Obviously more work needs to be done to investigate and establish how this would work before it is applied.
• If a house has no occupier, then the house must be required to be rented – this is similar to an historic houses requirement and an empty home tax. If the house is in need of repair so it can then be rented, the council can undertake the work (contract in) and the cost of the work becomes a loan (normal interest) secured against the house. In Wellington for example there is anecdotally many empty houses that are a little rough but could quickly and easily be brought up to an excellent standard for rental. If the house is still not rented then the ‘empty home tax’ would apply. Details to stop delaying tactics would all need to be worked out.

These options would all generate local work and open opportunities for apprenticeships. They are quicker than new builds to increase the housing supply.

How should the government/council treat housing ownership when built through schemes it leads or looks after

The ownership model for affordable residential housing is open.

• Government ownership with rotating occupancy as people move on (Traditional state housing occupiers and rents).
• Rent to buy with financial support schemes from government to make this viable.
• Government (creates and builds affordable housing) on sells. The price will vary according to each development. Price would be influenced by market but pushed down to make affordability possible.
• Government owns houses but rentals not targeted to any economic group, rents capped at affordability for the renter. e.g. 20% of income. As income rises so does the rent.

A mix of the above is possible, and there may well be others. e.g. below – rent capped.

Rent capped?

According to some economists there should be no need to buy a house but just rent which gives social/economic mobility if people need to move for work or there’s a change in family circumstances. I do not support this model but it is not without some merit. If this was the case most housing should be owned by government or other entities and rent capped according to an ‘affordability’ concept. e.g. 20% of income. Some push back may occur if private entities complain about the ability to maintain property, or to get a sufficient return on capital.

You can clearly see the housing investment sector is currently in a holding pattern due to the government announcements on removing interest deductibility and the Inland Revenue discussion document that holds out the prospect of options to get around the restrictions. But if this rent cap was required by government now, it would certainly create a very quick and immediate reaction in the rental and housing sectors. It is not something I would recommend but excess investor demand would dry up almost instantly.

In summary

The New Zealand economy is a one horse pony based on residential housing. Excessive investor demand, driven by ‘the normal principles of taxation’, leveraging, and a lack of safe alternative investor options is holding up prices leading to a housing affordability crisis. High prices shut out working and middle class people from buying, and make saving deposits impossible as high prices mean high rents. Even if banks make huge loans for people to buy, this strips disposable income out of the economy just as high rents do. This leads to less demand through all other sectors of the New Zealand economy, e.g. education, arts, domestic tourism, hospitality, the ‘trades’. As importantly it leads to less chance for a person to build equity, to one day take up a business opportunity of their own making, which in turn could employ others and turn into a medium sized business that further benefits New Zealand.

New Zealand has had almost forty years of a private business model focus on housing and it has not delivered affordable housing but rather the opposite. It can not deliver supply to meet demand. The new ‘build to rent’ model is driven off the current system and the prospect of good profit, not affordability.  But we cannot build our way to sufficient quality affordable houses because all the drivers of excess demand remain in place, so prices will remain high. We need to make a collective effort, not just our private effort, and use the strength of government for; tax reform, overhaul existing housing stock, and building.

The affordable housing crisis is not just about the low quality of the lives of New Zealanders now and the problems from low levels of disposable incomes. It is now about the strength of the economic future of New Zealand, for our children’s and grandchildren’s sake.

EDITOR’S NOTE: Stephen Minto lives in Wellington with his two children. He worked for New Zealand Inland Revenue Department for approximately 33 years and is now enjoying no longer being bound by public service etiquette of being non-political.

I made the case yesterday in my column, The Budget ‘hack’ scandal reveals big accountability problems, that there are some vitally important issues at stake involving the integrity of the political system. These boil down to the idea that we need a properly functioning democracy in which manipulation and deception are kept to a minimum, and government departments don’t become the politicised attack weapons of the Beehive used to undermine dissent or opposition.

Others feel the “Budget hack” saga is more of a distraction from the bread and butter issues that voters really care about. As John Key used to say in the storm of controversies about the GCSB misusing their powers, the Saudi Sheep scandal, or even Nicky Hager’s revelations about dirty politics, he was “relaxed” about these problems because his government focused instead on the “issues that matter” to ordinary people.

Some media and Government-partisans are now making the same sort of arguments about the difficulties that the Government is in over their handling of the so-called “Budget hack”. After all, the issues are rather abstract, high-level, and murky, in contrast to more “substantial” policy issues that have a more direct impact on peoples’ lives.

For the best argument in favour of ignoring the “Budget hack” story, see Bernard Hickey’s Newsroom column, in which he argues that “the ‘scandal’ is symptomatic of an accelerating and more extremist form of politics in a social media-driven age of snap judgments and tribal barracking” – see: Our political metabolic rate is way, way too fast.

Hickey’s column is a plea for people – including his own colleagues in the media – to focus less on the latest controversial “drama of ‘he said, he said’ and who was right and wrong, and who should resign” and instead concentrate on the substantial issues that are of immediate interest to voters. In this case, he wants less attention on the “Budget hack” and more on the details of housing, transport, and incomes in Grant Robertson’s Budget.

He makes the case that “news and commentary have ramped up into a blur of headlines, memes, click-bait, extreme views, abuse and a desperate game of trying to grab the attention of a distracted media and whip their own social media bubbles into a frenzy”.

This has been bad for democracy: “The end result is a disengaged public, policy paralysis, a lot of noise and not much light. I understand how it happened and I’ve been living in it now for a decade. A political firmament driven by social media, sound bites, cheap shots and one-day-wonder stories is not going to solve the problems of South Auckland or Tamaki. Everyone should take a chill pill, stop jumping to conclusions for a quick political hit and instead think beyond the beltway to the real world and long term concerns of citizens.”

Hickey’s column has identified valid concerns. There’s certainly an argument to be made that an “increased metabolic rate of politics has warped the public debate”. This point was also made by the new Sunday Star Times editor Tracy Watkins in her feature story, Madness on Molesworth Street – has politics reached peak crazy?

Watkins, who has just stepped down as Stuff’s political editor, describes the increased pace that she has observed working from Parliament: “Chaos is the new normal. Politics has turned into a crazy, churning roller coaster that no one seems to know how to stop. When press gallery journalists and others try to trace back the start of the madness, there is disagreement on the exact turning point. Was it the Kim Dotcom showdown, the teapot tapes election? Or was it when former prime minister John Key up-ended convention and everything we thought we knew about politics when he suddenly announced his intention to retire, while still at the height of his powers?”

I’m also referred to in her story, in terms of the difficulties the rapid churn of political news poses in putting together this Political Roundup column, the fact that the sheer volume of information makes it harder for the public to engage deeply with stories, and the danger of the “Budget hack” scandal appearing as just another example of deception, manipulation and game playing on both sides that will drive voters to be further alienated from the political process.

Similarly, Massey University political commentator Claire Robinson says: “It’s that gotcha politics that amuses people in Wellington but it doesn’t necessarily go beyond that.”

In a blog post, former Cabinet Minister Wyatt Creech declared that “The debate over Budgets in Wellington is the ultimate in beltway-ness” and the leak/hack story would get “little cut through to sentient beings outside the political realm” – see: Treasury troubles, strike money & growing grains of salt for polls. He says “The beltway game is of little importance to Joe or Jane Citizen waiting for an operation.”

Reportage of the scandal is also critiqued by RNZ’s Mediawatch specialist Colin Peacock who complains that “political reporters were making hyped-up claims of their own” to match those of the intensity of the politicians involved – see: Budget leak draws media away from our wellbeing.

For the must-read rejoinder to all of this – and particularly to Bernard Hickey’s piece – see Liam Hehir’s argument for taking the Budget “hack” and other such “beltway” scandals seriously: Sometimes with politics, you should sweat the small stuff.

Hehir begins by acknowledging the merits of the idea that Government scandals don’t necessarily make a big difference, and that some of the same points could have been made during the last National Government’s term: “For years during the Key era, I wrote about the way the dozens of little contretemps touted as ‘game changers’ were anything but since they didn’t really touch on people’s overall confidence in the government’s economic management. Those pieces were never heralded for their wisdom, quite naturally, since they argued against the always prophesied Watergating of John Key.”

But Hehir is careful to point out that just because something might seem “beltway” and not directly important to the average voter doesn’t mean it shouldn’t be covered. He draws a parallel with much of the opposition to Donald Trump’s integrity and governance in the US, and suggests that the likes of the Washington Post shouldn’t just “call off scrutinising the potential administrative sins of the Trump administration” because many in wider America aren’t interested in “Attorney-General William Barr’s refusal to release the full, unredacted Mueller report to Congress”.

Instead, Hehir argues, we need the media to focus on the minutiae of governance in order to keep the system clean: “Those who engage with political minutiae are a bit like the timberwolves of the political eco-system. Few people in the town think about what happens in the wooded hills on a day-to-day basis and when they do pay attention, pack-hunting might not be the prettiest thing to watch. Take the wolves out the food-chain, however, and the cascading effects will be felt soon enough. It won’t be long before you have deer stripping the bark from the trees in your backyard. If the smaller fiascos and debacles (over which reporters and commentators actually have some influence) are set to one side to allow more focus on the big, substantive issues (over which they really have none) then an invitation to vice into the country will occur.”

Similarly, for Newstalk ZB’s Heather du Plessis-Allan this issue is an important one in determining whether Jacinda Ardern’s Government really is “the most open and transparent government in the history of New Zealand” – see: Jacinda Ardern’s Govt as brutal as any (paywalled).

Today’s Dominion Post editorial also makes the case for the importance of the issue, pointing out that the whole scandal involved Finance Minister Grant Robertson issuing “one of the most remarkable statements in recent New Zealand politics” when he backed up Treasury’s statement about “deliberately and systematically hacked” and linked his to National – see: Time for truth in the ‘hacking’ saga.

Most of the above debate is about how the Government and Treasury have handled the “Budget hack”. However, there are still questions about whether National should have even released the Budget information that it obtained in the first place.

For one of the best challenges to National’s decision, see Mark Longley’s Budget leak shows how shamefully out of touch modern politicians are. Here’s his main point: “While the Budget leak saga played out like a schoolyard argument over who kicked the ball through the window, did any of the taxpayer-paid politicians involved wonder what was best for New Zealand? Did Simon Bridges, who had details on Labour’s landmark Wellbeing Budget in his excited little hands, wonder if leaking those details was best for the voters who elected him? Or did he just spot the opportunity to land one on the opposition and screw the consequences?”

Not surprisingly, Government-aligned blog, The Standard also disapproved, saying “We see arguably the most important day of the year for the Government and thus for the public being hijacked and overshadowed by slanderous accusation and wild speculation, a Government in apparent disarray, and overall chaos that turns off most people from showing any interest in politics whatsoever. What is worse, the turmoil most likely will cause people to distrust politicians even more than before. A sad day for democracy in New Zealand and thank you again, National” – see: Same old dirty National.

For a similar critique, see Oscar Kightley’s Urban Dictionary’s apt noun to sum up National’s actions. He says “I can’t see what National really gained from it. They would have had a bigger hit, and held the moral high ground, if they’d just exposed the weakness in the Treasury security systems, but not released the information they had.”

But such “pontifications” don’t carry much weight with political journalist Stacey Kirk, who says: “The Treasury website is a public website. It exists for transparency’s sake, so to claim as the Government has, that National’s information on it was ‘unauthorised’ is grasping at straws. Whether it was a good move politically is a valid question and will likely be decided by a voter’s personal politics, but a few points bear considering. Budget day is notoriously difficult for any Opposition to be heard, and whether coverage of National in the days leading up to it was negative or positive, their strategy served them extremely well on the day” – see: Smartest men in the room? Pffft! Treasury stands alone on Budget bungle.

Finally, there are still some experts who maintain that National taking Budget secrets from the Treasury website was indeed still a “hack”, and for the best of these accounts, see Keith Ng’s Treasury hacking: The time I hacked WINZ, Lyndon Hood’s J’Hackuse, and Alexander Stronach’s The 2019 NZ Budget Leak: what actually happened.

By Amanda Watson

Papua New Guinea’s Communications Minister Sam Basil has decided to extend the deadline for mobile phone subscriber identity module (SIM) card registration by more than two months – to July 31.

This will give more time for citizens to register their mobile phones, thus ensuring that they are able to make phone calls, send and receive texts messages, and so on, after the new deadline is reached.

According to Loop PNG, Digicel, which has the bulk of the customers in the country, has registered more than 1.4 million subscribers. This leaves roughly 1.1 million subscribers on that network who are still to register.

READ MORE: Compulsory SIM card registration in Papua New Guinea

Digicel has been offering incentives to customers to register, such as free air time.

The other two telecommunication companies are also continuing to register their customers, and attempting to inform customers about the need to register through radio advertisements and other means.

-Partners-

Various countries have introduced mandatory SIM card registration.

In neighbouring Indonesia, the deadline was February 28, 2018, and then more than 100 million SIM cards were partially blocked, before a further deadline of April 30, 2018.

In that case, registration could be done online, through text messaging, at a call centre, or in person.

No identification database
However, in Papua New Guinea, people need to register in person as the country does not have an identification database.

Mobile phone users in PNG need to visit a store or an agent and have their photograph taken as part of the registration process.

According to The National daily newspaper, the devastating earthquake that hit several Papua New Guinean Highlands provinces in February, was one reason why the minister decided to further extend the registration deadline.

The initial deadline was on January 23, but this was extended to April 30.

Threatened deactivation of SIM cards on that day did not go ahead due to a court injunction, which is no longer in place.

The telecommunications regulator NICTA says its action is a necessary step in the process of registering mobile phone users in order to address harassment through anonymous text messages and phone calls, sharing of unwanted pornographic images, and other abuse of mobile phone services.

Dr Amanda H A Watson is a lecturer at the Development Policy Centre of the Crawford School of Public Policy, Australian National University (ANU), and a visiting lecturer in public policy at the University of Papua New Guinea (UPNG) as part of ANU’s partnership with UPNG. She is also an occasional contributor to Asia Pacific Report.

Article by AsiaPacificReport.nz