Red Alert

Archive for August, 2012

Choice not Chance

Posted by on August 31st, 2012

Tomorrow is Gamblefree Day. In Christchurch, we have a celebration event at Aranui High School (in Lianne Dalziel’s electorate) and I will be heading over there at about midday to support the fun. Come along if you are in Christchurch and support efforts to end harmful gambling! There are events in many parts of the country so hope you can get to something if you are not in our town. Check out

The theme is Choice not Chance – and there is a great website with really thoughtful videos from people who have suffered as a result of a family member’s gambling addiction. There are few more powerful messages than those who are directly impacted by these issues. Have a look on

It helps people to look for signs if you are concerned you or someone you love has a gambling addiction. If any of these sound familiar, it could point to a problem with your gambling. Things like spending more time or money than you planned; making excuses or being secretive to friends or family about how much money and time you spend gambling; feeling guilty or worried about your gambling; thinking you can gamble your way out of debt; losing interest in your friends, family or other activities; borrowing money for gambling

There’s lots more information – well worth a look. And there is a 24 hour information and support line. 080065465

So hope you can find an event in your town to get along and support Choice not Chance.

By the Numbers

Posted by on August 31st, 2012

1010 – Dollars well spent.

80 – The number of MPs that voted for marriage equality.

60 – Dollars per week. The pay rise my members bill would give someone working 40 hours on the minimum wage.

35 – Per cent of children living in poverty are from families where at least one adult has fulltime work or is self-employed. This report – the third in as many weeks – reinforces that we must act on child poverty.

1 – Embarrassing uncle two steps behind again.

How did the banks get away with it?

Posted by on August 31st, 2012

I am travelling to the US and UK to discuss my ideas on monetary policy with some of the best economic minds in the world, including former World Bank chief economist Joseph Stiglitz, Harvard academic Jeffrey Frankel and IMF chief economist Olivier Blanchard.


“Banking system is fraught with moral hazard,” says former Kiwi regulator.

“Inevitable that regulators will push retail banks to core functions

I met yesterday with David Mayhew, currently a London barrister working briefs regarding the scandalous manipulation of the Libor rates by Barclays.

David was born and raised in New Zealand before embarking upon a successful career in London. You may know him as a former member of the New Zealand Securities Commission, and he was the Commissioner for Financial Advisors.

He has fascinating insights on what has gone wrong with banking in many parts of the world.

He summed it up by saying that the authorities around the world went along with retail banks fusing with merchant banks, then gobbling up ever larger proportions of income and wealth, because they believed banks were creating value in the economy for the benefit of nations.

Events in recent years show they were not. The profits were fictitious. In the end, many of the banks managed to privatise large increases in profits and then socialise the losses which had been disguised.

He believes the current system is fraught with moral hazard, probably caused by retail banking services being subsumed by the ostensibly more profitable investment banking arms of major banks. The dominance within banks of interests loyal to the investment branch, rather than depositors, meant the fortunes of the banks were divorced from the interests of their depositors. The hazard they caused to retail depositors by investment banking practices was small beer to those who were in control of the banks.

Given that the privileges and profits enjoyed by the big banks from investment banking were allowed based upon the erroneous view that value was being added, it seems inevitable that regulators and economies will push retail banks back towards their core functions, and require them to avoid the moral hazard that bank bailouts have shown arise from highly leveraged and risky investment banking practices.

New Zealand has to date been spared the worst excesses of banking practice around the world, but the fresh look overseas at what separation there should be between retail and investment banking may translate to rules internationally that have relevance in Australasia too.

This is yet another dent in the increasingly discredited “efficient market hypothesis” which underlies National’s economic management. They say let markets rule themselves and a thousand flowers will bloom. Sell off SOEs, deregulate the RMA and all will be okay.

Yet the economies that have done the best in recent decades not only regulate where necessary but also use the power of the state in concert with private enterprise to ensure their economy thrives. The ‘voodoo economics’ derided by Mr Joyce have worked in economies which are now more successful than New Zealand.

Education & Inequality #4

Posted by on August 31st, 2012

Early childhood education costs have risen 4 times faster than wages since June 2010.

Education @ Inequality #3

Posted by on August 30th, 2012

Kids from low income households are only half as likely to achieve university entrance as those from high income households.

Red Alert Today’s Members’ bill ballot

Posted by on August 30th, 2012

Today at midday there’ll be a ballot for members’ bills, with four places available on the Order Paper.

You can see the full list of bills in today’s ballot after the break. I’ll post the results just after midday.

Update: the following bills were drawn:

53. Oaths and Declarations (Upholding the Treaty of Waitangi) Amendment Bill – Te Ururoa Flavell

43. Local Government (Public Libraries) Amendment Bill – Darien Fenton

39. Land Transport (Admissibility of Evidential Breath Tests) Amendment Bill – Scott Simpson

2. Care of Children Law Reform Bill – Jacinda Ardern


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What helped the UK bring back manufacturing?

Posted by on August 30th, 2012

I am travelling to the US and UK to discuss my ideas on monetary policy with some of the best economic minds in the world, including former World Bank chief economist Joseph Stiglitz, Harvard academic Jeffrey Frankel and IMF chief economist Olivier Blanchard.

Evans-Pritchard says: “Inflation targeting is dead”

“arbitrage opportunity of New Zealand well known in the UK”

Today I met with Ambrose Evans-Pritchard.  He is International Business Editor of The Daily Telegraph. He has covered world politics and economics for 30 years, in Europe, the US, and Latin America.

I have followed his writing for a number of years. For a period his by-line was ahead of the curve, and his analysis of the GFC and its consequences certainly has been.  So I was keenly looking forward to meeting with him today. I was not disappointed.

We primarily discussed the topic which my study trip concentrates on – monetary policy, and its effects on exchange rates, current account deficits, growth in the real economy and private debt.

Ambrose said the credit inflows from the carry trade caused by New Zealand’s comparatively high interest rates must be a concern. He said that in the UK the arbitrage opportunity in New Zealand was well known.

I said that, in my view, for a number of years the Reserve Bank underplayed the seriousness of this, despite the fact that those credit flows fuelled the consumption binge and asset price bubble that higher interest rates were meant to curb.

I was struck when Ambrose commented that “inflation targeting is dead”. He was interested to know why it has persisted in New Zealand. I said maybe it was because of our experience with stagflation in the 1970s and early 1980s.

Ambrose said Great Britain would be in a far worse position if it had not been able to adjust to its decline in circumstances via a drop in the pound, which has led to resurgence in manufacturing, especially in the car industry. What a boost it would be to New Zealand’s modern manufacturing industry to have a dollar unaffected by arbitrage.

We traversed my view that competitive devaluation is alive in the world. Ambrose said he does not know whether it was an objective of the USA’s quantitative easing, but a consequence has been a 12% pa narrowing of the terms of trade gap between USA and China.

Ambrose believes UK and the USA will embark upon further quantitative easing that will have flow-on effects to the New Zealand dollar. We discussed whether concentrations of wealth born of the huge trade imbalances and settings in some countries means there is a need for greater care or attention to asset price bubbles and whether the globalisation of investment flows  (as opposed to trade flows) is desirable.

We discussed the contrast between New Zealand under Clark/Cullen and the UK under Blair/Brown. Cullen ran budget surpluses, leaving low government debt and countercyclical tax cuts, whereas Brown ran deficits of 3% of GDP when he should have been running a 2% surplus.

That 5% pa of GDP stimulus, and slide in the UK government books, has left a government debt hangover for the UK reminiscent of the debt burden Muldoon left for New Zealand in 1984. I told Ambrose that it took New Zealand a generation to overcome that debt burden, and that my impression, as an outsider, is that the likely length of the consequences of government debt levels in Europe does not appear to have fully sunk in.

Extremely insightful thoughts overall, especially the death of inflation targeting, the carry trade knowledge in the UK and the consequences for asset prices, eg housing, of free flow of investment funds (as opposed to free trade) given huge wealth concentrations of wealth and the trade and current account imbalances in the world.

Next I’m off to the OECD.


I’m going to be sending a few emails about the discussions I’m having while overseas. If you’d like to receive them, please click here.

The uncomfortable truth about inequality

Posted by on August 29th, 2012

The Ministry of Social Development’s latest analysis of household incomes should make uncomfortable reading for the government. It shows that real equivalised median household incomes dropped by almost 3% from 2010 to 2011.

Now that’s some fine economist-speak, but in English it means that ordinary Kiwi families are $900 per year worse off than they were a couple of years ago.

$900 is a huge amount of money. It could buy all the kids’ school uniforms, or pay quite a few power bills. It’s enough for a whole neighbourhood to set up vegetable gardens!

But it’s $900 that your average family doesn’t have anymore. And National’s economic mismanagement is to blame. Their top-rate income tax cuts and GST rises saw top earners boosted up, but the middle and bottom went backwards.

Today in Parliament I asked the acting finance minister, Steven Joyce, about the MSD report. I wanted to get to the bottom of how National can possibly think that it’s fair for ordinary Kiwi families and the poorest New Zealanders to be much worse off under this government, while at the same time the richest New Zealanders have gotten huge tax cuts and are much richer now.

The minister was clearly uncomfortable, and in light of the facts he should be.

As expected, Mr Joyce trotted out the usual list of hollow National excuses.

But it was astonishing to hear him arguing (as the Prime Minister did yesterday, incidentally) that the 3% decrease was actually an increase!

Joyce’s reasoning:

“The point is over what period of time the median household incomes have increased…. The Member has selected a period from 2009/10 to 2010/11.”

Obviously I chose that period because it’s the period that National have been the government.

If we follow Steven Joyce’s logic it’s not important to rationally analyse the success or failure of the government of the day and its policies. It doesn’t matter to him that struggling families are getting poorer.

All that’s important to National is finding any historical comparison point which might make today’s disastrous economic figures look better. Evidently our acting finance minister doesn’t even understand inflation.

This is what National’s “brighter future” means. It’s an unfair and unequal society where the government helps its rich mates to get richer while making everyone else poorer.



Education & Inequality #2

Posted by on August 29th, 2012

National cut $114M from public schools and increased private school funding by $35M

Education & Inequality #1

Posted by on August 29th, 2012

15 December 1975: National Day!

Posted by on August 28th, 2012

15 December 1975 is a day that will continue to haunt National.

It was on that date when the newly elected, powerful and undoubtedly popular Prime Minister Robert Muldoon abolished the compulsory New Zealand Superannuation Scheme which was initiated by the previous Labour Government.

If only Muldoon and the National Government of the day hadn’t terminated the scheme it would now be worth more than $240 billion and “transformed the NZ economy into a world beater over the past 30 years.”

According to Brian Gaynor and other leading economists, Muldoon’s “dreadful” political decision instead transformed New Zealand from the potential Switzerland of the Southern Hemisphere into a low-ranking OECD economy. And it was the worst economic decision in the past 40 years.

The ripples of that decision are still being felt to this day. In fact, if the scheme wasn’t squashed then New Zealand would be much better positioned economically, would be able to own many more assets and would not incur that much Crown debt.


Crimestoppers – a new minimum wage enforcer?

Posted by on August 27th, 2012

One of the issues highlighted by the recent stories on migrant worker exploitation was a reluctance to complain about breaches of employment law because of fear around visa issues.

Examples are international students working in excess of their allowed hours of 20 hours a week and those here on work visas that are tied to the business, so they are effectively bonded to that employer – even if they are being paid less than the legal minimum wage.

How does Immigration NZ deal with migrant workers who want to complain about breaches of NZ employment law and minimum wage, but are fearful about the consequences.

They refer you to Crimestoppers and there seems to be no other way to complain. Immigration NZ advertises Crimestoppers up front under  “Report Immigration Fraud“.  You can either fill out an online complaint form which apparently goes to the on line site in the UK or ring their call centre, which is also in the UK.

Crimestoppers is also used by the Police, and probably very effectively, but is this the best alternative for migrant workers, who want to complain about breaches of minimum wage, but who are worried about being stung over their visa?

I’m not sure. Would be interested in your views.

Awarded more than $8000 when she was sacked for bad breath

Posted by on August 27th, 2012

I promised to provide an update on real-life struggles and challenges the NZ workforce was experiencing on the ground under present conditions. Did you hear about the Auckland beautician who refused to work on clients and had complaints about her bad breath? What appears to be trivial on the surface was actually quite substantial when the Employment Relations Authority dug into the case. Her employer made suggestions to the beautician that she should perhaps chew mints or receive some assistance from a dentist.

Later she was told by her employer, “If you don’t attend these clients, don’t come back tomorrow”. She managed her workload and left according to her planned departure time, and when she returned the next day, she felt she may have been fired, then asked for a formal letter of termination, and got it.

The Employment Relations Authority (ERA) said that the employer had other options available to him, such as he could have suspended the employee on pay while an investigation was carried out, or conduct a formal meeting into the incident.

In any case the Employment Relations Authority (ERA) awarded her $8022.45 in wages and compensation.

NB: Just pointing  to this case to show how important it is for employers to treat their staff with respect.

Residential special schools

Posted by on August 26th, 2012

I understand the Minister of Education is going to be making an announcement this week on the future of the country’s four residential special schools. Over the past few months the Ministry has been consulting on a new ‘wrap around’ service that their official consultation document suggests will cost about a third of the cost of accommodating a pupil at one of the residential schools (but of course, this isn’t about cost saving…)

From the outside, it very much looks like the whole consultation has been skewed towards a pre-determined outcome, the closure of the schools. Having visited all four schools, spoken with some of the kids, the principals, teachers, parents, boards of trustees and many others with an interest in this process, I can firmly say that I think closure is the wrong option.

I believe in an inclusive education system. I don’t think kids with special needs should be shunted out or ‘institutionalised’. But that’s not what residential special schools do. In effect, they’re the most intensive ‘wrap around’ service out there. Kids don’t stay there forever, usually no more than 18 months to two years. In that time they often make huge progress, and a lot of effort is put into ensuring that their reintegration back into their original school and home life is as smooth as possible.

At one of the schools I spoke to a kid who’d come from a pretty unfortunate background. Drugs, crime, and dysfunction were all a constant feature of his life. Taken away from all of that, he was allowed to be a kid again. He was catching up on a lot of the education he’d missed out on, and plans had been put in place to ensure that the environment he returned to wasn’t the one he’d come from. Quite frankly it was inspiring.

Far from closing them, if anything, we need to look at increasing the number of special residential schools, and make them ‘centres of excellence’ that can provide advice, expertise and assistance to other schools so that we end up with fewer kids needing the highest level interventions in the first place.

Before Hekia Parata signs off on any final decision, I would urge her to take the time to visit these schools and see first hand what she is doing. It would be wrong for her to simply sign-off on the recommendations of her officials without taking the time to develop her own understanding of the issues.

By The Numbers

Posted by on August 26th, 2012

21 – Per cent of New Zealand children living in hardship.

5 – Soldiers in our hearts and minds.

3 – Per cent drop in median household incomes.

1 – Economic reality check for the government.

1 – Weak Government response to child poverty.

Kiwirail blocks new work for Hillside and Hutt workshops

Posted by on August 24th, 2012

Click on the image to enlarge. Here is the link

KiwiRail bullying

Posted by on August 23rd, 2012

If you watched Question Time today (see Clare’s post below) you will know Kiwirail have taken out an injunction to stop Radio NZ reporting the contents of a leaked Kiwirail report on the effects of their planned $200 million cuts to network maintenance.

The rail company owned by the people has put a gagging order on the media to stop the public finding out what is going on in the rail company they own. There’s something not right about that.

Gerry Brownlee has accused me and journalists reporting this issue as scaremongering. We’ve simply quoted a Kiwirail report on the impact of the cuts to network maintenance. The cuts have been forced on Kiwirail by the Government’s unrealistic Turn Around Plan for rail.

See the latest communication from Kiwirail to Labour’s team at Parliament. (Click to enlarge)  Honestly this an inappropriate way for a State Owned Enterprise to behave and the sooner Gerry Brownlee tells them that the better it will be for everyone.


Filed under: transport

Govt on ropes over Kiwirail

Posted by on August 23rd, 2012

Worth watching the whole question. Government squirming. Kiwirail on ropes



Government assistance = 0800 PLEASE WAIT

Posted by on August 23rd, 2012

My column on the RadioLive website this afternoon highlights how the government have failed in their promise to deliver better public services. Think how many work hours are lost every day as people ring govt 0800 numbers and wait, and wait, and wait…

Despite National’s promise to move resources ‘from the back office to the front line’ we’ve seen local frontline public services scaled back or closed, while the never-ending list of government 0800 numbers continues to grow.

Take Housing New Zealand for example. The Government has closed the doors of local branches and directed people to an 0800 number where they can wait over an hour just to have their call answered.

Housing New Zealand are a bit better than the IRD though. If you’re calling the govt to make sure you’re paying all your taxes, you could be up for a wait of several hours!

Work and Income call centre statistics aren’t that much better either. Last year some poor soul spent one hour and 10 minutes waiting for their call to the government “job line” to be answered. 6,500 people gave up trying to get through. No doubt Paula Bennett will try to argue that they’re lazy and unwilling to work when actually what they weren’t willing to do was sit around for hours waiting for the government to answer the phone.

I think it’s good that the government is providing a greater range of ways to access public services, such as through 0800 numbers and improved use of online communications, but they need to be properly resourced. New technology isn’t always cheaper, in fact sometimes it costs more to realise the full benefits of it.

National haunted by Department of Statistics

Posted by on August 23rd, 2012

Clare Trevett reports:

Each month, the relentless tread of Statistics New Zealand’s updates on migration echo through Parliament, haunting National with the ghosts of campaigns past.

As Labour’s Spokesperson for Statistics I want to salute Statistics NZ for their indepth data which gives us valuable information on the state of the country.

This year, the innocuously titled “International Travel and Migration” tables have told a tale of ever increasing numbers heading to Australia.

So this week National was again hoping its 2008 campaign billboard – “Wave goodbye to higher taxes, not your loved ones” – had faded from the collective memory.

Migration to Australia has reached record levels and excuses from the PM are wearing thin. I am curious on one thing though.

Following on from the latest reshuffling of departments and ministries where the Department of Building and Housing (among others) was absored into Mobie, does the Government intend to merge Statistics NZ into the so called ‘Super Ministry’ also?

Then Portfolio Minister Maurice Williamson will become a Minister who has the portfolios but no ministries.

And the Super Minister Steven Joyce will have all the ministries but has no portfolio responsibilities. National has just created another precedent of business efficacy! No wonder he IS the minister who is in charge of “innovation (new ideas – reshuffling at a regular pace) and employment (reshuffling does keep everyone, including the media, busy)!