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Tony Alexander’s New Zealand Economic Overview 9 June 2016

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Economic Analysis by Tony Alexander.

Thursday June 9th 2016

[caption id="attachment_10490" align="alignleft" width="150"]Tony-Alexander-BNZ-1 BNZ economist, Tony Alexander.[/caption] As was expected the Reserve Bank left its cash rate unchanged at 2.25% this morning and retained a warning that a further reduction may be needed. They in fact have one pencilled in which we think will arrive in August, and forecast no rate rise until beyond the end of their forecast horison which is the middle of 2019. This ongoing good environment for borrowers can do nothing other than provide continued support to a housing market replete with more and more people seeking accommodation but restricted by some existing shortages and less than optimal construction growth. House prices will rise further and the chances are now very high that soon the RB will strengthen existing loan to valuation rules – though it pays to note that the RB estimate that their effects in restraining the housing market can only be temporary. Some exporters might be surprised by the NZD’s rise above US 71 cents this week. They shouldn’t be. As we have long pointed out, compared with the rest of the world NZ looks politically stable fiscally and economically robust, our currency has already factored in a one-third fall in commodity prices, post-GFC developments suggest US monetary policy will tighten little and may reverse direction quickly, and our current account deficit is below average. But at current levels the NZD is looking stretched in the short-term so importers might want to discuss hedging with their currency advisors – at the BNZ of course. For the full analysis, continue reading below or Download document (pdf 373kb)
Low Interest Rates For A Long Time This morning the Reserve Bank released their latest Monetary Policy Statement and reviewed the 2.25% level of the official cash rate. As was near universally expected the rate was left at the 2.25% it was taken to in March and exactly the same words were used to describe the RB’s view that further easing might be needed. “Monetary policy will continue to be accommodative. Further policy easing may be required to ensure that future average inflation settles near the middle of the target range. We will continue to watch closely the emerging flow of economic data” http://www.rbnz.govt.nz/monetarypolicy/monetary-policy-statement/mps-june-2016 Does inflation seem headed for such midground? Not really. The current inflation rate is 0.4%, the exchange rate is about 4% above the long-term average, the World Bank last night cut its global growth forecast to 2.4% from 2.9% for 2016, and recent growth measures have been weak in the US, Japan, China, Europe and the UK. Wages growth still shows no signs of accelerating, Offsetting this oil prices have moved back above US50 a barrel overnight, measures of capacity utilisation have lifted slightly, and inflation expectations seem to have stopped falling. But with foreign inflation measures still generally declining the clear risk is that the Reserve Bank will find that further interest rate stimulus needs to be applied to the NZ economy. This is especially so as they have assumed both that the world economy improves and our currency declines. The chances are that the official cash rate will be cut again in August to 2.0%. For your guide, in their Monetary Policy Statement the Reserve Bank see the 90-day bank bill yield, currently just over 2.3%, still sitting at 2.1% come the middle of 2019. In other words they anticipate no need for higher NZ interest rates for at least the next three years. Housing Nothing new to add this week having written quite a bit on this subject recently. Insufficient construction, low interest rates for decades, strong population growth, ever rising construction standards and costs etc. all add up to high and still higher prices. Watch for a new credit supply control soon from the Reserve Bank as with the one hand they stimulate the housing market through record low interest rates and with the other try to impose restraint while waiting for supply to catch-up over the next decade or so. Note that in this morning’s MPS the RB wrote “House price inflation is likely to persist in the near term.” NZ Dollar Commensurate with our long held view that there is a big list of factors strongly supporting the Kiwi dollar we have this past week seen the NZD trade above US 71 cents. The main cause of the three cent jump from a week ago was the worse than expected employment growth number for the United States. Jobs grew just 38,000 in May rather than the 160,000 which had been commonly estimated. The implication of this outcome is that the next tightening of US monetary has – surprise surprise – been pushed back out yet again. Our warning since last year has been that assumptions of a steady upward path for US interest rates need to be restrained in light of complete rate rise reversals in numerous countries since 2010. These include New Zealand, Australia, Sweden, the Eurozone and so on. The way things are going there may be no further US rate rise this year and if there is then it could be reversed next year. The weak US jobs growth might not be quite so concerning if US firms were strongly investing and therefore presumably raising labour productivity. But investment indicators have been weak recently. This means the global development post-GFC of weak productivity growth (NZ included) shows no signs of changing in the US. The poor jobs report also calls into question the sustainability of recent strength in US consumer spending. Nevertheless, the monthly job results can jump all over the place so this latest outcome, nearly the weakest in six years, does not lead to a conclusion that US growth is slowing rapidly. Not yet anyway. But for ourselves the outcome is that with a reduced chance of further US monetary policy tightening our currency seems set to go higher rather than lower as many others have been forecasting on the basis of a blind extrapolation of the expected NZ-US interest rate differential. It pays to note that with oil prices recovering recently the general tone toward commodities has improved and this traditionally adds some support to the NZD. But in the absence of any strong sign of reduced milk production in the EU it would be unwise to simply assume rising oil prices mean a solidly rising track as yet for NZ dairy prices. The second major factor pushing the NZD higher this week was this morning’s Monetary Policy Statement and official cash rate review by the Reserve Bank. There was no cut in the cash rate, and although this was largely expected it appears some punts were nonetheless taken that a cut would come and covering of those positions has pushed the NZD to a one year high against the greenback near 71 cents. Against the Aussie dollar this week the NZD has changed little with the AUD also rising against a weaker USD and lifted by the RBA decision on Tuesday not to cut their cash rate again – for the time being. In Japan the Prime Minister has officially delayed indefinitely the planned consumption tax rise for next year in an effort to remove the risk of recession reappearing. But with the Three Arrows policy having failed because of the simple demographics of a shrinking old population plus absence of very strong structural reforms (the third arrow), it is hard to imagine the Yen being strong. However there is a big caveat to this view. If the Americans are stupid enough to vote Donald Trump as their President in November (President Obama’s lasting legacy?) then the lift in global geopolitical and economic uncertainty will boost flight-to-safety buying of the Yen. The Euro however faces a test in two weeks with the UK referendum on whether to remain within the failed cooperative structure which used to be called the Common Market then morphed into the European Union/track to political union. Same for the Pound. Event risk is huge so be wary of having FX transactions planned involving those two currencies in the next four weeks. Longer term the Euro looks like suffering from ongoing structural economic, political and social woes. No wonder our net migration numbers are so high. Taking all of these factors plus many more into account we get the point we have been making for a number of years now. New Zealand looks like a bright shining fiscal, economic, social and political light during ongoing days of so much darkness in the rest of the world. This will strongly support the Kiwi dollar. As previously mentioned, exporters should look for occasional bouts of weakness in the NZD to boost hedging. If I Were A Borrower What Would I Do? Were I borrowing currently I would have about 20% or so floating and fix the rest for two or three years. I would fix five years if I thought inflation might be a problem two or three years from now – but I don’t.
The Weekly Overview is written by Tony Alexander, Chief Economist at the Bank of New Zealand. The views expressed are my own and do not purport to represent the views of the BNZ. To receive the Weekly Overview each Thursday night please sign up at www.tonyalexander.co.nz To change your address or unsubscribe please click the link at the bottom of your email. Tony.alexander@bnz.co.nz
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Keith Rankin: Moving Auckland’s Port – The Tamaki Ship Canal

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Article by Keith Rankin.

The Nation on Saturday (4 June), ran a panel interview (including Phil Goff and Winston Peters) about where and when Auckland’s main Waitemata Harbour port would be moved to some other location, just as most other big city ports around the world have outgrown their original city locations (The future of Auckland’s Port).

While the key assumption that Auckland’s main port will someday be moved en masse rather than incrementally is probably not correct, all the alternative port options mentioned were unconvincing. Clearly the best location for a new port is the Manukau Harbour, near the substantial infrastructure around the airport, the Otahuhu freight rail terminus, and the existing Metroport in Southdown. The obvious problem is that large numbers of large ships cannot and should not negotiate the dangerous Manukau Bar.

Winston’s preference of Whangarei could only be a solution for a partial move, rather than a complete relocation of Auckland’s container port. The infrastructure needed to get this mass of goods from Whangarei to Auckland (and points south) would be both expensive and an environmental nightmare. (I am imagining a rail tunnel underneath Glen Eden, from Henderson to Mangere.) Other suggested options, such as having a port like Sydney’s Botany Bay in the Firth of Thames, seem as far-fetched.

So I put on my engineer’s hat, and thought, “why not use the Tamaki River and build a ship canal across the Otahuhu portage, into the basin of the Manukau Harbour east of Onehunga’s Mangere Bridge?” The 3km route I thought looked best goes south of Sylvia Park between the Eastern Line railway (which is also the North Island Main Trunk) and Panama Road, coming into the Mangere Inlet of the Manukau between Southdown and Westfield, just a kilometre from Metroport Auckland. My vision was that the Mangere Inlet east of the Mangere Bridge would be dredged, with a causeway just east of Mangere Bridge built from the tailings, creating a large shipping marina bordered by Mangere, Favona, Otahuhu, Westfield, Southdown, Te Papapa and Onehunga. A locking system could connect the new harbour with Port Onehunga, exploiting the two-three hour tidal difference between Auckland’s two coasts.

A Tamaki canal was first proposed in 1860 by one Colonel Moule at £22,876 (Paddle your way around Auckland, Colin Moore, NZ Herald 25 Feb 2002). In 1887 Public Works engineer JW Blair upped the cost to £250,000 (reported in Waitemata-Manukau Canal, NZ Herald 6 Jun 1907). Interest was quite high in the 1907-11 period (eg Waitemata-Manukau Canal, NZ Herald 5 Sep 1911). The idea was back on the agenda in 1960: “District must get behind Tamaki ship canal project now that there is a distinct possibility, it would open the way for new industries in area”. And in 1962, for the Otahuhu Golden Jubilee publication, a section was titled History of the Canal Scheme.

More recently we have this amusing piece by Chris Barton (Canals in Auckland’s south, NZ Herald 8 Apr 2005). And there’s this interesting 2007 (9 Feb) blog entry (and visualisation) by scientist David Haywood (The Geeks Shall Inherit the Earth), which refers to this entry (Manukau Harbour, European Settlement) in the 1966 Encyclopedia of New Zealand (“Future development of the harbour will depend largely on the construction of a canal linking it with the Waitemata, where the tides are approximately two hours later”).

In all these times the suggested solution was on a much more visionary scale than the problem being addressed. Now, however – as expressed on The Nation – the problem really has come. Port Waitemata has reached its growth limits (or exceeded them, given the city’s need to reclaim its harbour and gulf as Auckland’s playground and tourist magnet). Yet the visionary thinking that characterised our past seems to have gone.

I searched the newspaper literature for arguments why a Tamaki Ship Canal could not be built as a part of solution to Auckland’s growth. I could find none. Much bigger ship canals were built long ago in Greece (Corinth, completed 1983), Manchester (also 1893), and Kiel (1895). The Tamaki proposal seems puny in comparison. Yet this seemingly obvious piece of development infrastructure for Auckland is almost never mentioned in polite circles. If planned for, it could be a perfect ‘shovel-ready’ project for New Zealand’s next Great Depression (probably in the late 2020s); as the Sydney Harbour and Golden Gate bridges proved to be in the 1930s.

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Across the Ditch: NZ Housing Minister Looking More & More Out of Touch + All Blacks V Wales Looms

In this week’s Across the Ditch bulletin Australia radio FiveAA.com.au‘s Peter Godfrey and EveningReport.nz‘s Selwyn Manning discuss how the National-led Government is looking more out of touch with the real impacts of a hot ballooning housing market.

Also discussed is sport with the All Blacks set to take on Wales in a three test series in New Zealand.

First up: Weather comparison and a Headlines roundup.

ITEM ONE

Politics: The National-led Government looks increasingly out of touch, especially over housing with its Housing Minister Nick Smith stating Wednesday that homes in Auckland are more affordable than they were when his party became the government in 2008.

Smith, who two weeks ago was interviewed on television standing in front of a roaring warm open fire, had insisted homeless people sleeping rough had options, even as winter descended on New Zealand.

This week, the Minister who once had to resign from Cabinet over inappropriately expediting a friend’s challenge for Accident compensation (a portfolio he was responsible for), told reporters: “In the debate around housing affordability, I do challenge people to not just look at house prices, but also look at interest rates that are at the lowest level for 50 years.”

“In 2008 you had interest rates of about 11 per cent, and now they’re 4 per cent. And that has a really strong impact on the capacity for people to be able to service mortgages.”

As the New Zealand Herald reported: Smith was citing a report by Massey University that scored housing affordability by comparing the average weekly earnings, with the median dwelling price, and the mortgage interest rate.

Auckland’s index in February 2008 was 38.73, compared to 33.8 in February 2016.

Smith conceded that some home owners were paying up to 100% of their wages toward their mortgages and that the market was not affordable for first home buyers. But he insisted the Auckland housing market is more affordable than it was when Labour was Government in 2008.

What Smith clearly doesn’t realise is people are not stupid, they weigh up what is affordable based on their disposable income. Auckland voters are also intolerant of a small town politician trying to tell them how things are for them in a big city. And it seems almost everyone is tired of this career politician attempting to score political points against his opposition in a pathetic beltway scrape.

http://www.nzherald.co.nz/politics/news/article.cfm?c_id=280&objectid=11653048.

ITEM TWO:

Sport: All Blacks take on the touring Wales side in the first of a three test series beginning on Saturday at Eden Park in Auckland.

There is a mix of experience and new talent lined up to take on Wales. There is anticipation on who will lead the Haka as the teams square off on the field. And an uneasy excitement over whether the All Blacks will roll out a new style of play to challenge their northern hemisphere rivals.

While Wales are competitive and respected here in New Zealand, they have not beaten the All Blacks since 1953. Can they break that spell?

Across the Ditch broadcasts live weekly on FiveAA.com.au and webcasts on EveningReport.nz LiveNews.co.nz and ForeignAffairs.co.nz.

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Bryce Edwards’ Political Roundup: The illusionary Labour-Green alliance

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Political Roundup by Dr Bryce Edwards. The illusionary Labour-Green alliance

[caption id="attachment_4808" align="alignleft" width="150"]Dr Bryce Edwards. Dr Bryce Edwards.[/caption]

Is it a step forward or backwards? The newly announced Labour-Green alliance is being sold as an important milestone on the way towards the 2017 general election. But rather than creating certainty and clarity about voting options at the next election, the Memorandum of Understanding is rather deceptive. 

Do we really know anything more about what we are voting for if we choose Labour or Greens at the next election? The Memorandum of Understanding has been sold as a big new deal, and a major change in how Labour and the Greens will operate. But because it is actually incredibly limited in scope, with few real commitments for either party, it actually raises more questions than it answers. It could make the electoral landscape more confusing and misleading.

A deceptive MoU

Many commentators have pointed out that the new MoU doesn’t tell us anything new, and lacks any real substance. For instance, Patrick Gower says it’s “purely cosmetic.  It is all about image” – see: The Labour-Green fuzzy-waffle alliance. He points out the limited nature of the agreement, saying that “It means the Labour-Greens can’t say how a Cabinet would work”, and that in reality “the Memorandum of Understanding is designed to be torn up”, especially when Labour comes to negotiate with Winston Peters.

Similarly, Tim Watkin characterises the agreement as “mostly window-dressing” – see: The Opposition dating game

The extremely limited nature of the MoU is also emphasised by Vernon Small: “But the big contradiction inherent in the MOU is the agreement to change the Government and present a real alternative. Trouble is, the MOU expires at the election – not even a few weeks after, as the Mana-Internet party one did in 2014. So at the very point an alternative government is being formed, all bets are off. The certainty of that ‘real alternative’ expires as the votes are counted” – see: Labour-Green deal a tricky juggling act, but on balance a boost for Opposition chances

The New Zealand Herald is quite sceptical about the MoU achieving anything, with its editorial saying, “So what has been agreed, besides the decision to hold a joint press conference and photo opportunity? In the absence of anything more substantial from them, it can only be concluded the occasion was designed to show the two parties are getting along very well these days” – see: Agreement serves dose of reality.

The editorial makes the point that in 20 years of MMP the public has only seen one election that “presented the voters with a pre-conceived coalition”. And that’s a good point – surely voters are better served by political parties being clear about who they would work with after the election. But this agreement is quite the opposite. Labour is still saying that the Green might be cut out of their government, and the Greens are still saying that they might choose National over Labour. This is farcical stuff for voters who want more certainty about what a vote for Labour, the Greens or New Zealand First might mean. People won’t know what they are getting if they vote Labour or the Greens. Do they get a Labour-Green Government? Not necessarily. 

Arguments against pre-election coalitions

In arguing against a commitment to a full pre-election coalition, Labour and the Greens have essentially asserted the need to “let the people speak first”, arguing that it’s not the role of leaders to tell voters what they will do after the election results are in. This has always been Winston Peters’ line, too. 

It’s deeply anti-democratic. It allows voters to be misled and confused about what they are voting for. Democratic principles dictate that parties should be crystal clear about what they would do after an election. And to make matters worse, the parties – and Peters especially – dress up their anti-democratic position in a populist and nonsensical line about letting the “voters speak”. 

Such notions are propounded by Labour’s spin-doctor Rob Salmond, who says “Ultimately the voters deal the cards when they vote, and it’s tricky for a party to play its hand when there’s so much uncertainty over who’ll get which cards” – see his blog post explaining why his party has chosen against a full pre-electoral coalition – see: Labour and the Greens in a tree…

But without a clear pre-election coalition there is public confusion about what personnel and policies are likely to eventuate after election day. On the left, blogger No Right Turn is therefore frustrated that the two parties won’t be clear about spokespeople for the prospective new government: “The other problem is that it is difficult to present as a credible government-in-waiting when you are steadfastly unwilling to talk about who will be filling which Ministerial chair” – see: That alliance

He elaborates on why this is a problem: “We all know that Jonathan Coleman speaks for the government on health, and Hekia Parata on education, but who speaks for Labour-Greens on these issues? Annette King or Kevin Hague? Chris Hipkins or Catherine Delahunty? Who gets what jobs is the sort of thing people judge a potential government on.”

A bolder agreement?

So should Labour and the Greens come up with a bolder commitment to being in government together? Both parties could have gone for a more honest and useful coalition agreement whereby they promise to work in government together after the election. They could say that they are a “left bloc”, and will work to form a government together, along with any other parties that want to participate, including New Zealand First.

Labour and the Greens are obviously wary of the Winston Peters factor. He will want to negotiate without pre-existing agreements, and Labour and the Greens appear to have given into this type of electoral blackmail. 

The left parties would be smarter to establish their commitment to working together after the election, and invite Peters to join them. And he could like it or lump it. For their own sake, Labour and the Greens need to start this narrative at this early stage, saying that they won’t negotiate any notions of cutting the Greens out of government.

The Dominion Post’s verdict on the agreement stresses that the Labour-Greens MoU allows Peters to get his way: “He brags that he won’t be party to any backroom-deals before the election. What this means is that the voters who back him are buying a pig in a poke. Peters will decide the government after the election, presumably on the basis of sheer party-political self-interest, egotism and ambition and all the other unknowable preoccupations of this most exasperating politician” – see the editorial, A Labour-Greens deal is worth trying, but what about Winston?

Likewise, the Greens need to be unequivocal that they would not support or allow a National Government to continue after the next election. At the moment they won’t rule it out – a point made on RNZ by co-leader James Shaw. In fact the Greens co-leaders are reportedly at odds on whether the party might still align with National – see Dan Satherley’s news report and eight-minute video: Greens’ cracks exposed under Paul Henry onslaught

In lieu of Labour and the Greens being more specific and clear about possible post-election arrangements, there will be others who are willing to speculate. Patrick Gower has come up with a very interesting mock-up of the 20-person Labour-NZF-Greens Cabinet that could eventuate – see: The 2017 Labour-Green-NZ First Cabinet.

Enthusiasm for the “Grabour” MoU

Despite the very limited nature of the Labour-Green MoU, there’s been plenty of positivity about the logic of such a deal. Toby Manhire points out its goal of making the opposition less vulnerable to National’s accusations of being a wobbly and unstable vessel – see his column, All aboard the Laboureen. Manhire had, after all, been an original advocate of such an agreement, writing about it in his April column, Time to huddle for next election

He also covers some of the (amusing) social media reactions, and even includes a colourful mock-up logo of the new “Grabour” brand in his Spin-off column, Labour and the Greens get into bed, Winston prepares his pyjamas, and other bad metaphors

[EDITOR’S NOTE: Also, Toby Manhire, Selwyn Manning, and Kevin Milne took a favourable view on Radio New Zealand’s Panel with Jim Mora.

ALSO: on EveningReport.nz Selwyn Manning argued in his Across the Ditch bulletin on Australia radio FiveAA: “If at the 2017 General Election the Labour-Green bloc attracted a higher percentage of support than the National Party, then, Winston Peters may just consider the merits of a black-red-green government.”]

Martyn Bradbury has had some criticisms – suggesting, for example that the more colourful title of “The People’s Revolutionary Grand Alliance” should have been used – but mostly celebrates the major impact the MoU could have on how the media and public understand the electoral race. He also argues that the new alliance could have a vital impact in electorates such as Ohariu, Auckland Central, and Waiariki – see: How the Labour Green MoU wins the 2017 election

You can also watch Bradbury’s 27-minute discussion about the deal from last night with Laila Harre, Robert Reid, Wayne Hope, Keith Locke and myself – see his Waatea 5th Estate TV programme, Left Wing Jedi Council debate the Labour-Green MoU

Who wins from the new alliance?

There are plenty of different verdicts on which politicians and parties benefit or lose from the new MoU. Claire Trevett suggests that “Labour may also effectively have handed the 2017 election to National on a platter” – see: Labour-Green Party deal a historic agreement, but who wins?

The Greens – and the environment – are the losers according to Rachel Smalley, who argues that New Zealand needs a green party in the centre of the political spectrum – see: The Greens should be prepared to work with both the left and the right.

Others say that Labour loses from the agreement, and it represents Andrew Little’s desperation. For example, Chris Trotter lists his problems with the deal: “the Labour and Green parties have announced their new “Understanding” far too soon; without preparing the electorate or priming the news media; without securing real and valuable gains for both partners; without carefully gauging the reaction of both their members and their voters; and without having straightforward answers to journalists’ straightforward (and entirely predictable) questions” – see his blog post, Unconvinced: Why Chris Trotter Is So Sceptical About The Labour-Green “Understanding”

And Matthew Hooton, writing in the NBR today, says the MoU represents a major loss for Labour, with a boost for the Greens. In his paywalled column, Peters biggest winner from red-green pact, Hooton says that in making the deal, “Little was publicly acknowledging that there will never again be a Labour-dominated government in the mould of the Clark, Lange, Fraser or Savage regimes.” 

Hooton lays out the problems for Labour in the deal: “the pact has at least five likely electoral effects, all of them disadvantageous to Labour.  It licenses left-wing Labour voters to tick Green, drives centrist Labour voters to National, prevents centrist National voters from crossing over to Labour, sends a few Green-voting Remuera doctors’ wives back to National, yet solidifies the vast bulk of the Greens’ existing support by eliminating fears the Greens could coalesce with National. Labour is also now at risk of losing MPs from what could be called its Shane Jones faction to NZ First.  The Greens can anticipate a net increase in their polling, as can National, but the pact is all downside for Labour.”

There’s been a lot of speculation about how the MoU could lead to electoral deals that change the political landscape in key marginal seats, especially the Ohariu seat – see, for example, Dan Satherley’s Does the Labour-Greens alliance spell doom for Peter Dunne? But such a scenario seems unlikely, as David Farrar points out in his blog post, Will Labour not stand in Ohariu?

Finally, for satire on the strange agreement that didn’t really change anything, see Andrew Gunn’s The leaked Labour/Greens pre-nup

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Across the Ditch: Greens + Labour Announce Engagement But Can They Do It? + Dodgy Auckland House Sells For $1.1 million

Across the Ditch: Australian radio FiveAA.com.au’s Peter Godfrey and EveningReport.nz’s Selwyn Manning deliver this week’s Across the Ditch and discuss: Politics with the Labour and Green parties announcing a MOU that they will campaign as a pre-election coalition to kick the Nationals out of Government in 2017. Also discussed was how a dodgy Auckland house sold for $1.136 million, despite it having been tested for methamphetamine and with tests actually showing it had elevated levels of lead contamination. Recorded live on 2/06/16.

* Round up of the morning’s main headlines.

ITEM ONE

New Zealand Labour  and the Green parties have signed a memorandum of understanding that they will work as partners to get rid of the Nationals from Government at the 2017 general election. In essence it is New Zealand’s centre-left version of how Australia’s centre-right parties position themselves when campaigning to become the government.

In NZ, the centre-left is fragmented with NZ Labour attracting percentage support ranging from the mid 20s (at the 2014 General Election) to the low 30s as shown in this recent Newshub/Reid Poll. The Greens poll just above 11 percent. Together they attract a respectable vote, almost… just almost on par with the National Party, that the Newshub/Reid suggested hovered around 47 percent.

This Red-Green political de facto marriage presents a legitimate claim to develop policies under a Government-in-Waiting umbrella.

BUT… to become government in 2017, both… the Labour-Green bloc (and the incumbent National Party) need the support of the centrist and nationalistic New Zealand First party, and its leader Winston Peters.

So which way would Winston Peters swing?

If… if at the 2017 General Election the Labour-Green bloc attracted a higher percentage of support than the National Party… then, Winston Peters may just consider the merits of a black-red-green government.

But if the National Party maintains its supremacy (even if by just a percentage point of the popular vote/party vote), then Peters may insist that the people have spoken and assist John Key to enjoy the spoils of a fourth term in Government.

Interesting times.

ITEM TWO

Auckland’s average home sale price is on target to pass the $1 million ceiling within a year. And some fairly dilapidated houses are already selling for over $1 million… Like this train-wreck of a house, that has some walls missing and was tested for methamphetamine contamination, and discovered to have elevated lead levels.

http://www.nzherald.co.nz/business/news/article.cfm?c_id=3&objectid=11648953

Across the Ditch broadcasts live on Australia’s FiveAA.com.au and webcasts on EveningReport.nz, LiveNews.co.nz, and foreignaffairs.co.nz.

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Keith Rankin’s Chart for this Month: The World’s Most Prosperous Countries

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Analysis by Keith Rankin.

[caption id="attachment_10398" align="aligncenter" width="977"]Economic League Table. Economic League Table.[/caption]

The most common way to represent a country’s prosperity is through Gross Domestic Product (GDP) per capita. While this measure has its limitations – mostly arising from differences in inequality – it remains an important measure of comparative economics.

The $US measure of GDP (blue) tells us the value per person of marketed output priced in the world’s reserve currency. The $International measure (black) – using ‘purchasing power parities’ – tells us what that countries marketed output would buy, on an average per capita basis.

The countries where the $US measure is greater than the $Int measure are countries that travellers would regard as ‘expensive, such as Switzerland and Norway. On the other hand, countries for which the $Int is higher have relatively low domestic prices.

The table excludes four countries with populations below one million: Luxembourg, Macao, Iceland and San Marino. Being very small, these countries tend to have (or have had) specialisations relating to areas of international business and finance which, when divided by their low populations, artificially boost their GDP per capita statistics. The table also excludes some other countries ranked above New Zealand on the international dollar measure: Brunei (which has less than one million people), Saudi Arabia, Bahrain, Taiwan, Oman, Puerto Rico, and South Korea.

There are many points of interest in this chart, not least the dominance of Qatar and other small countries. On the international dollar rankings, the top seven countries are all small countries with specialisations in oil or business/financial services. The United States is 8th on the chart.

For European Union (EU) countries, those in the Euro Area (except Finland) have higher international dollar values whereas non-Euro EU countries have higher $US values. This reflects the substantial deflationary pressures in place in the Euro Area.

Of particular interest is Ireland, which (ignoring little Luxembourg), comes out top of the Euro Area, top of the EU on the purchasing power ($Int) measure, and second top (after Denmark) on the $US measure. This seems hardly credible as a measure of typical living standards in Ireland, a country with the same population as New Zealand, a large emigrant labour force, unemployment (albeit falling) at eight percent, and deflation. As my previous Chart for this Month suggested, Ireland’s national accounts reflect that country’s position as an overt facilitator of trans-national corporate tax avoidance.

By the purchasing power measure of living standards ($Int GDP pc), New Zealand comes in at 28th (33rd if you include the rich little countries included in the IMF statistics – many of the tax haven countries, including those in the British Isles such as Jersey, are not covered by the IMF), well below Australia at 14th. Arguably the most prosperous country in the world 150 years ago, and very much in the top ten 50 years ago, New Zealand hangs in there, with average living standards comparable to Pacific Rim neighbours Japan, Korea and Taiwan.

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