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S&P: National on negative watch (part II)

Posted by David Cunliffe on November 23rd, 2010

Part one of this post showed that S&P placed NZ on negative watch because of the savings gap, the huge (mainly private) net international debt and our under-diversified export profile (and consequent vulnerability).  It all adds up to lenders perceiving potentially greater risks and seeking compensation through higher interest rates.

How did the Government react to the news?  Did it front the issues and explain its “plan”?  Not in your life.

Alex Tarrant at interest.co.nz did a great job of covering John Key’s rather bizarre, meandering post-Cabinet press conference here.  Interest.co.nz’s coverage if the political debate is here.

Mr Key manages to contradict himself three ways in two paragraphs:

“Nothing has changed from our point of view, in fact if anything, our position looks stronger from our point of view (really?)…

We accept that we’ve had to take the earthquake on our balance sheet, accept tax revenues have been a bit weaker this year than we had anticipated…(corporate was 22.4% below 2010 forecasts, gst 15.8% below!)”

So… nothing has changed, we are stronger, but we are weaker.  Classic.   He must have been eyeballing three different journos and guessing they wanted three different answers, so why not try to please all of them at once?

The coup de grace is his attempt to pass it all off as Ireland’s fault.  True, the Irish are in a bit of a bog, but lets assume S & P can tell the difference between the land of the long white cloud and the emerald isle. 

Back in the real world, one thing is for sure, S&P won’t be amused if Messrs Key and English try to talk their way out rather than addressing the fundamental issues: how about trying to grow savings, diversify and lift exports, and reduce private international debt?  Who knows, they could even turn it into a plan?

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Filed under: Investment, Tax, Uncategorized, bank, business, economic, economy, international, monetary policy
37 Comments

S&P: National on negative watch (part I)

Posted by David Cunliffe on November 23rd, 2010

National’s counter-spin on yesterday’s placement by Standard and Poor’s of New Zealand’s sovereign credit rating on negative watch shows increasing desperation, the latest of a torrent of bad economic news.  I comment in two parts: the announcement and the counter-spin.

First the announcement’s overview:

  • “We perceive New Zealand’s projected widening external imbalances and the country’s weakened fiscal flexibility as increasing risk to the sovereign.
  • New Zealand’s vulnerability to external shocks, stemming from its open and relatively undiversified economy, also raises risks to the country’s economic recovery and credit quality.”

The S&P Report’s rationale makes the drivers even clearer:

  • widening external imbalances
  • weakened fiscal position
  • under-diversified economy
  • high external liabilities
  • a return to high current account deficits averaging 5.9% of GDP over the next three years.
  • and crucially, that “net external liabilities … predominantly reflect dependance by households on foreign capital to fund consumption and property investments”

In other words: New Zealand does not save enough, it has too much private debt, and that debt was used to fund the wrong things (property speculation not real business investment).  New Zealand’s exports are under-diversified and New Zealand will continue structural bleeding on our external accounts after the immediate recession.

The logical repsonse to these problems should be;

  • strong action to close the savings deficit (if possible by building good household saving behaviour)
  • diversify and increase exports (presumably moving beyond a narrow range of bulk commodities)
  • managing the fiscal position to encourage sustainable growth, employment and healthy tax revenues without blowing the fiscal deficit.
  • ensuring monetary policy supports the direction of reform rather than acting against it.

It obviously should NOT include:

  • borrowing more for tax cuts to upper income earners that neither create powerful stimulus nor correct the underlying imbalances
  • reinforcing exisitng bulk commodity exports while reducing investment in innovation and R&D to divesify and add value to the export base
  • cutting back Kiwisaver; cancelling prefunding for the NZ Super Fund; and taking two years to set up a Savings Working Group (and even then proscribing a range of strong policy options)
  • pretending monetary settings are ideal when exporters face extreme currency volatility

Bill English and John Key declared S&P lifting their previous negative outlook as a” verdict’ on Budget 2009.

They should be straight-up enough to accept that S&P has now reversed its verdict.

After 18 months of National Government policies National can have only itself to blame.

In part II of this post we’ll check whther their rhetoric matches this reality.

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Filed under: Budget, IRD, Investment, Tax, bank, business, debt, economic, economy, finance, international, monetary policy
15 Comments

Currency Wars: Seismic Shift Approaching?

Posted by David Cunliffe on November 18th, 2010

There is a very interesting article carried by today’s Dom post from Edmund Conway at the Telegraph: “Lurching between extremes at epoch’s end”

Conway argues that the failure of the recent G20 meeting to resolve the current impasse on currency imbalances might be seen as an important marker point of the century -a moment when the global financial system tipped from order to instability.

Underlying this are several crucial factors:

  • US and Chinese inability to see a middle path on quantitative easing (”QEII” -driving down the value of the dollar to rebalance the US economy away from its yawning trade deficit) vs Chinese determination to hold the value of the yuan down to maintain export competitiveness (and the resulting buildup of surpluses available for reinvestment in Western assets).
  • The increasing strain faced by the largely (but not entirely) free floating exchange rate system as more countries explore altrernatives.  Conway likens this to the end of the Bretton Woods system – a once-in-50-year-shift.
  • The underlying shift in economic power from West to East, from the US toChina.
  • The increasing polarisation in US politics as it tries to cope with adjustment – notably the anti-free trade positioning of the Republican Right “Tea Party”.

He predicts two possible endgames;

  • another financial crisis leading global leaders to forge a new economic concensus (a ‘coherent international monetary system”).
  • or a period of chaos as “hegemonic stability”underpinned by the US breaks down.  That would indeed make the GFC look like a tea party.

If Conway is right, and there is a non-zero chance that he is, then New Zelanders must ask the question “what is our plan B” on international finance?  What if the assumptions of normality no longer hold?

Labour has already proposed a moderate but definitive programme of monetary reform, including a rewrite of the Reserve Bank Act, complementary monetary policy tools and more tactical exchange rate intervention (a “dirty float”).  This is predicated on continuity of something like current international conditions.

If chaos breaks out and the tradeability of our dollar is in jeopardy, or if there were huge capital flows into NZ (as a safe haven or a punt outside the USD), or of capital flight as risk averse traders retreat to the greenback or gold, what forward planning has been done to anticipate this?  I would guess, none in the Beehive and not much at the RB.  At the very least some transparency would be helpful.

Once again it looks like it is left to Labour to ask the tough questions and come up with some answers.

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Filed under: Budget, commerce, economic, economy, finance, international
12 Comments

Currency intervention: Two clips

Posted by David Cunliffe on November 11th, 2010

As the Kiwi dollar rises past 80c US and  70c TWI to unsustainable levels, the debate about currency intervention will become white hot.  Our manufacturing exporters are being killed out there.   Here is John Walley (MEA CEO) from TV1 Breakfast this morning.

Labour is calling for the Govt to get off its butt and use its armies of bureaucrats to get thinking about options.  It is not OK to cry “TINA” – ‘there is no alternative’.  There has to be, or manufacturing is finished in New Zealand and farmers are in for a rude shock when the commodity price spike ends.  

In this interview on TV1 Business (at the bleary hour of 6.10 this morning!) I advocate for tactical currency intervention by the Reserve Bank to knock the top off the spike, and monetary reform to help chart a manageable adjustment path.  That must be done alongside a clear stratagy for domestic industry adjustment – investment in the jobs of tomorrow and transitional assistance for displaced workers.   I wouldn’t usually post one of my own clips, but as no-one watched it and at that hour and as TV1 called it a stinging attack, RA viewers might find it interesting…

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Filed under: Uncategorized, bank, economic, economy, finance, international, trade
50 Comments

Prisoner Voting UK Style

Posted by Grant Robertson on November 3rd, 2010

As Parliament debates Paul Quinn’s ill-conceived private members bill on prisoner voting, the UK government is being forced to go in the other direction. The UK bans voting by all convicted prisoners. The European Court of Human Rights has ruled that the blanket ban on prisoner voting in place in the UK is discriminatory and breaches European human rights conventions.

Now its important to remember that in NZ the law as it stands says that if you are in prison for a conviction of more than three years you can not vote. So the arguments around murderers etc do not apply here. Paul Quinn’s bill would see that cover all prisoners in prison on the day of an election, including those on remand. (Actually the way it was re-drafted as Andrew Geddis has pointed out, the Bill actually gives the vote to anyone who is in prison before the Bill is enacted.)

The arguments being tossed around in the UK are of course similar tho those here. You can listen to a slightly odd interview on Morning Report (today, 8.48am) with the former prisoner who took the case to the European Court. Odd because he leaves the interview part way through to answer the door!

We will be back onto Paul Quinn’s Bill next Wednesday. Apart from the drafting stuff up, the bill is a waste of space. As said here before, It will do nothing to make our communities safer, it will not reduce our appalling imprisonment rate, it creates inequities between those on home detention and in prison, takes in people before they are convicted, and will do nothing to support rehabilitation or reintegration. People convicted of crimes of three years or less will be back in society, and we need to try to help them be part of society again, not exclude them from it.

Last word to Juliet Lyon from the Prison Reform Trust in the UK. She said ” people are sent to prison to lose their liberty not their identity.” That is a challenging notion for some people, but it is one that we need to remember if we want to start to reduce recidivism.

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Filed under: democracy, international, law and order
31 Comments

The madness continues

Posted by Darien Fenton on November 1st, 2010

The sorry saga of the Hobbit has lent itself to a union bashing frenzy the like of which hasn’t been seen in many years. In some ways, it reminds me of Don Brash’s now infamous Orewa speech on race, which unleashed a tide of unexpected racism.

The madness continues, with Matthew Hooten writing in the NBR that perhaps the law around good faith needs to be reviewed :

Good faith is meant to be a mutual obligation, requiring parties to interact constructively. It covers the whole relationship between employer and employee, not just formal bargaining, and includes not only current but intended employers and employees – including those working under commercial contracts who want to become employees. … .

Not even in their fevered imaginations could it be considered good faith to conspire with militant union thugs across the English-speaking world to organise a global boycott of a vitally important project which already pays above industry averages – and all without even giving prior warning to the employer of their intention to do so.

Matthew Hooten isn’t known for his well balanced views on unions and workers’ rights and as a commentator, he can be a nasty piece of work – for example, he says in the piece that :

Australian unions are overbearingly powerful and notoriously corrupt, with historic links to organised crime.

And then he’s into more conspiracy.

Actors aren’t alone in making a mockery of “good faith.” Similar conduct is under way in secondary schools from the PPTA, a union with a history of communist connections. It has no intention of dealing in good faith with the Ministry of Education because its true objective is industrial havoc in election year. The primary teachers’ union will no doubt also find a pretext for havoc in 2011, probably over national standards – a policy which, like few others, has received overwhelming mandates from parents and voters. Other unions plan to sabotage the Rugby World Cup.

The whole piece is misleading, especially as (duh) performers employed as independent contractors in the film industry aren’t covered by the Employment Relations Act. Either Hooten completely misses the point, or is flying a kite for others. Watch this space.

I wouldn’t mind good faith being beefed up a it more. The government continues to maintain that its 90 day no rights law still has the protection of good faith.  Of course there are no remedies available to a worker if good faith is breached, so it is pretty meaningless.

But to suggest that good faith could encompass prevention of global solidarity by and between unions is bizarre.

Next someone will saying that it’s a breach of good faith for global corporations to dictate labour laws in New Zealand!

Filed under: international, union, workers rights
36 Comments

Key caught lying……..again

Posted by Trevor Mallard on October 26th, 2010

John Key said he helped arrange the meeting between Julia Gillard and Phil Goff.

Nonsense.

Arranged through Labour Party contacts. Some of us have known her since before she was a Minister.

Update

From morning report :

John Key says Phil Goff let him know he was heading across the Tasman and he provided all the support Mr Goff would need to make sure it’s a successful visit

and

“Phil Goff spoke to me yesterday to let me know that he’d be in Australia tomorrow and, y’know, we’ve given him all the support that he would need to make sure it’s a successful visit

Just to reiterate Key provided no support whatsoever.


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Filed under: Labour Party, international
66 Comments

Labour Day or Halloween?

Posted by Darien Fenton on October 25th, 2010

It’s leading up to Halloween in Ottawa and the kids are already out on the streets in some pretty impressive costumes. Older kids have painted their faces black or ash grey with dripping faux blood and are parading about the town. While I feel irritated that Halloween was imported to NZ as another commercial opportunity to cash in on, I am amused that an ancient pre-Christian rite has become mainstream.

labor-dayMeanwhile it’s Labour Day in New Zealand. Now I do care about that and what it stands for.

I hope while people are enjoying the day off (at least those who get a day off) will remember that Labour Day is about Samuel Parnell’s struggle for an eight-hour working day.

Irony is there’s no longer any eight hour day regulation in NZ anymore (apart from an old reference in the Minimum Wage Age that a truck could be driven through.

In fact there is almost no NZ regulation around working hours, apart from the meals and rest breaks legislation, which National is in the process of decimating and paid leave laws, which are also under attack.

Canada celebrates Labo(u)r Day in September.  It goes back to 1872, when the Toronto Trades Assembly organised Canada’s first significant demonstration for worker’s rights to demand the release of the 24 leaders of the Toronto Typographical Union who were imprisoned for striking to campaign for a nine-hour working day.

Difference is that like  most other developed countries, Canada still has working time regulation including an 8 hour day, with provisions for flexibility and extended hours provided overtime is paid.  Mealbreaks apply after five hours and there are prescribed periods of rest between shifts. Workers must receive at least 24 consecutive hours off work in each work week, or at least 48 consecutive hours off work in every period of two consecutive work weeks.

So I’m happy to give Halloween a miss (if I can hide) and celebrate the day that reminds us that workers’ rights issues are still out there and needing attention.

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Filed under: Employers, Holidays, Meals and Rest Breals, international, workers rights
13 Comments

Six facts about Canadian politics

Posted by Darien Fenton on October 22nd, 2010

Now into the fourth full day of briefings, discussions and meetings. Melissa and I getting on well with an interesting group of pollies from the Commonwealth.

Not much time for blogging,so some quick facts :

  1. Members of the Senate (the upper House) are appointed on the recommendation of the PM and can stay in office until the age of 75 (!).
  2. Question time (they call it question period) in the House of Commons allegedly has 35 second Q & As.  I watched it yesterday and yes, the question must be 35 seconds or less, but it is preceded with a long preamble (speech) about the issue and what’s happening.  Lockwood would rule that out in our parliament. Also, didn’t see any points of order or political debate – it was just back and forth, although they clap themselves silly and give standing ovations.
  3. The two official languages are English and French and many questions and speeches in the House are in French.  I hadn’t realised how strong the Parti Quebecois still is and their on-going determination to secede from Canada.
  4.  According to a conservative presenter to our group, their caucus limits contributions to 60 seconds per member in their caucus meetings.  Can’t see that happening anytime soon in our caucus.
  5.  Opposition spokespeople are called “critics”.  For example, I met with the Liberal Critic for Labour (and btw, a really impressive woman).
  6. Select Committees are televised.  Good move and a big discussion going on here about Open and Transparent Government.

And Canadians really do say “eh” after their sentences.  I keep hearing Margy, the Canadian actress from Fargo everywhere.

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Filed under: international, parliament, politics
16 Comments

Hobbit not simple

Posted by Trevor Mallard on October 21st, 2010

As a former Minister of Economic Development and someone who has had discusssions with Warner in the past I think it is worth recording that these matters are never simple. Used to do annual trip to LA just before Oscar time to help maintain relationships, identify issues etc. Was generally on plane on way home the night of the Oscars. Good promotion for NZ both film and tourism. This government has cut it and I would be surprised if the current Minister had gone to see Warners in the last two years.

Gordon Campbell has almost certainly got it right. Either the Hobbit is gone or it is in the bag. If it was neither the government would be sweetening the deal to keep it here because of its importance to the economy.

Take Avatar as a case in point. For that film, the New Zealand Large Budget Screen Production Grants Scheme paid out $44.69 million to Avatar’s producers. Yet that rebate (do the math and the final sum comes out slightly below a 15% rate) was in return for a direct spend of $307 million within New Zealand. On top of that economic activity directly contributed by the production, there would have been multiplier effects downstream, with considerable amounts clawed back in tax. Now, if we were offering 20% rebates, the Avatar payback would have been at most, $61.4 million. At a 25% level, they would have topped out at $76.75 million. By any measure, that’s still a bargain for getting a $307 million direct spend, plus loads of additional intangible benefits from the association with James Cameron and his team. Again, why isn’t the government at least thinking about raising our production rebates, to keep us in this very lucrative game?

If such a response truly isn’t being considered by the Key government, this must mean either (a) The Hobbit production is already in the bag for New Zealand, thanks mainly to Jackson or (b) the location shoot is as good as lost, and the government will be more than happy to blame the unions for it. In either case, the government may as well come clean and change the name of the Large Budget Screen Production Grants Scheme to the Sir Peter Jackson Screen Production Grants Scheme because in future, it seems highly likely that only major productions either directly or indirectly linked to Weta will be coming to New Zealand. Disney’s pullout this year from the Waitakere studios looks like a sign of things to come.

There is no doubt that the US film industry like working in NZ and with NZers. Rule of Law, English language, great locations, good light are all major advantages. Our tax deal has always been important but not close to the most attractive in the world. We used to keep it under annual review. Government hasn’t.

And they do like working with Kiwi workers – not because we are cheap – but because we are good, skilled and adaptable.

They might have been a bit spooked by the events of the last few weeks – but that can certainly be fixed pretty easily if Sir Peter and the government decide to do so. Frankly some of the nutty comment by the likes of Tau Henare are more likely to frighten the horses than capture the hobbits.

Update English clarifies tax agenda.

Tax Agenda Possible In Hobbit Dispute Says English
By Political Correspondent Marie McNicholas  at  4:52 pm, 21 Oct 2010
Taxpayers already face a bill of about $60 million if “The Hobbit” movies are made in New Zealand, and Finance Minister Bill English acknowledges the Hollywood studio threatening to take them overseas could be trying to extract a bigger tax break.

Mr English is refusing to discuss whether the Government is prepared to offer more tax subsidies to keep the movie here but is stressing the generosity of the current tax rebate.

Pull the other one Bill – we all know that is what Key will do next week.


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Filed under: economy, international, workers rights
158 Comments

What are those MPs doing in Canada?

Posted by Darien Fenton on October 19th, 2010

Good question and fair enough. So here’s a shot at answering this.

All NZ MPs belong to the Commonwealth Parliamentary Association (CPA), as do most MPs in the Commonwealth. We pay membership fees to the CPA and have a New Zealand Branch and a representative on the Executive Committee.

The primary role of the CPA is to focus on the needs and interests of ordinary Parliamentarians to enhance their contribution to parliamment through development and educational programmes, like the one Melissa Lee and I are currently attending in Ottawa, Canada.

There’s no training required to be an MP. There’s no degree course or qualification required and there’s a large amount of learning on the job. Anyone can stand for Parliament and that’s a good thing for our democracy. After all, our Parliament is a House where MPs are elected as representatives of their peers, which means most, if not all, MPs come into parliament with little direct experience in parliamentary democracy and practice.

That’s where the CPA comes in. It is the only means of regular consultation among Members of Parliament from Commonwealth countries. It provides the primary source of education and discussion about the role and practices of Commonwealth Parliaments, which are often similar to, but different to New Zealand’s.

The CPA is the membership organisation for Commonwealth politicians, providing education and support for its members. The basis of the organisation is that our countries have all followed similar parliamentary pathways, with some divergences, whiich are worth studying.

In a place as large as Canada, with both provincial and federal governments, there are lots of challenges. The focus so far is on how the Canadian Parliament works, but we’ve got another four days work ahead.

We had a fascinating presentation today on the challenges facing Canada’s democratic system, which is worth a separate post tomorrow.

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Filed under: Foreign Affairs, international, parliament, politics
17 Comments

Melissa and Me

Posted by Darien Fenton on October 18th, 2010

Red Alert’s been a regular visiiting place for me over the past 24 hours as I flew for many hours across oceans and deserts to LA and then Canada.  If I had to miss most of the Labour Party conference, it’s been some compensation to be able to read about it on your posts and comments.  It’s coming through loud and clear that people at last see that Phil Goff can lead Labour to victory. Never doubted it myself.

I’m in Ottawa with Melissa Lee attending the 8th Session of the Canadian Parliamentary Seminar at the invitation of the Commonwealth Parliamentary Association (CPA) Canadian Branch and the CPA Secretariat.

The theme is, “Strengthening Democracy and the Role of Parliamentarians: Challenges and Solutions”.

This is an annual event that provides an opportunity for professional development of parliamentarians to strengthen their understanding of the principles of democracy. There is a wide range of countries represented at the seminar but it will also be interesting to find out more about the Canadian political situation. From what I’ve read so far, the challenges are very similar to our own.

I guess some of you will see this as a junket, so I’m coming clean and will endeavour to be accountable and keep you up to date with the discussions – even although I’m in that bizarre universe where your today is my yesterday (it’s Sunday here).

To be honest, I would rather not have missed the action over the weekend, or the Fairness at Work rallies on the 20th October. But maybe its a good thing for MPs to occasionally step outside of the day to day politics of their own country and immerse themselves in the bigger picture.

And as for me and Melissa – we’ll be a team while we’re here. 

I can cope because after all, it’s only for a few days!

(Just kidding – Melissa’s okay).

Filed under: democracy, international, politics
14 Comments

Taste of Japan in New Zealand

Posted by Raymond Huo on September 26th, 2010
Opening the Taste of Japan 2010 festival in Auckland, we had the opportunity to firstly taste the pure and fresh Japanese sake (??). Photo credit: Paul Stevenson

Opening the Taste of Japan 2010 festival in Auckland, we had the opportunity to firstly taste the pure and fresh Japanese sake (??). Photo credit: Paul Stevenson

Congratulations to the New Zealand Japan Society of Auckland on its 50th anniversary!

Thousands of Aucklanders enjoyed the Logan Campbell Centre event on Saturday, where the organisers “walk you through a unique time” from Oshougatsu (New Year) through to Oomisoka (End of Year).

I conveyed Labour Leader Phil Goff’s regards in my speech by starting with “Go sh?tai itadaki arigat? gozaimasu!”

My efforts to try to deliver a short speech in Japanese seemed to have met the approval of both the Consul General Ishida and the Society’s President Stephen Duxfield.

Special features of the one-day event included visiting musicians, dancers and calligraphy artists from our sister city in Japan, Haiku (poetry) competition, Japanese art exhibition and Tatami workshop to make our own miniature tatami mat.

The Society was established in March 1960 in Auckland by the former Ambassador of Japan S. Ishiguro and A.G. Hardy Hon. Consul of Japan. Mr Hardy was known as Captain Hardy a member of the Northern Steamship Co, which was an agent of Nitto Line (later Nippon Line). Mr Hardy was Hon. Consul for Japan for a long time until the appointment of the first Consul of Japan, Mr Isaburo Mukumoto in 1968. The first President of the society was Mr Owen Rainger (see www.nzjapan.net).

As Mr Duxfield said that “the society stood the test of time and gained credibility as we adhere to our core aims to serve the broader community.”

Arigat?gozaimashita!

Filed under: Arts and Culture, Auckland, asian, community, events, international
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Morale suffers while McCully makes the cuts

Posted by Phil Twyford on September 2nd, 2010

A telling excerpt from a document released under the Official Information Act quotes Foreign Affairs CEO John Allen telling staff:

I understand the impact on morale of the challenges that staff have faced in the past year. I understand that the decisions that have been made are tough and they impact on people, on organisational identity, and on staff morale. It is legitimate for people to have strong feelings and views on these issues. Given that these decisions are unpopular and impact on morale then why have they been made? Cabinet mandated a change from a stand alone agency to closer integration with the Ministry….Allen goes on to explain the changes.

Morale is low at the aid programme formerly known as NZAID.  In what was once an energetic and innovative organisation staff now spend their time trying to stay out of the Minister’s way and repackaging work so it fits within the Minister’s narrow prescription for economic development.

They are embarrassed by his continuing campaign against the NGOs.  By all but ending the $900,000 a year funding to the NGO umbrella group Council for International Development. By changes to the funding arrangements for NGO projects made without consultation. And by the recent cut to the excellent Wellington-based Global Focus which provides information resources on development issues.

The latest casualty of the Minister’s red pen is a Pacific regional programme doing village-based disaster risk-reduction work in four countries. It helps communities reduce the impact of cyclones, floods and tsunamis through preparedness training and working with local government. It is run by the Foundation for the Peoples of the South Pacific out of Suva.

The three-year $2.5 million effort was set up in close collaboration with NZAID, with a commitment of $500,000 a year from New Zealand. McCully has pulled the funding after one year, with no assessment of its impact.

No wonder MFAT aid staff are suffering from low morale. They are the ones who have to deliver this sort of news.

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Filed under: Foreign Affairs, international, overseas aid
11 Comments

Keeping the peace

Posted by Phil Twyford on August 25th, 2010

Kiwi cops play an increasingly important role in our foreign policy. They are working alongside diplomats, aid workers and peacekeepers in Afghanistan, Timor Leste, Bougainville (in PNG), Tonga, and in the Solomon Islands.

I was in the Solomons recently in a UN election observer team and caught up with some of the 35 New Zealanders deployed there on six month stints. They are part of a bold experiment in post-conflict state building, helping the Solomons get back on its feet after years of civil conflict.

Keeping citizens safe is the first duty of the state but in 1999-2003 things went bad in the Solomons. Ethnic tensions turned violent and the local police force splintered along ethnic lines with some personnel joining in the fighting. RAMSI, the Regional Assistance Mission to the Solomon Islands, was deployed in 2003 with police and defence personnel from NZ, Australia and other Pacific nations charged with getting rid of the guns and keeping the peace.

The police-led mission was remarkably successful at restoring order. However the regional aid effort has found it more difficult to make progress in getting the economy growing or strengthening government.  As well as contributing police, New Zealand is leading an excellent multi-donor aid programme helping rebuild the country’s primary education system.

The regional mission is unusual: invited in by the Solomon Islands Parliament but exercising an extraordinary level of influence on the government with foreign advisers in key line ministries. Few people in the Solomons, locals or expats, think RAMSI could pull out tomorrow without the country facing problems. Yet Solomon Islanders rightly want to control their own destiny, and the donors don’t want to keep pouring such large amounts of aid in indefinitely.

Meanwhile on the streets of Honiara, Kiwi police are backing up the local police, advising mostly and taking action when needed. The Kiwis I spoke to were up for the job and full of  sympathy for their counterparts but told me how lack of basic equipment makes it difficult for Solomon Islands police to do their job. How would you feel being asked to sort out crime incidents without vehicles, boats, radios, truncheons or handcuffs?

I saw RAMSI police on the streets of Honiara, and on the outer islands. I was impressed by the way they went about their work and got on with the local community. The Solomons faces hard development challenges and it is not clear how soon its regional partners will be able to withdraw with confidence.  In the mean time our police are great ambassadors and helping deliver what Solomon Islanders want most: peace and security.

Kiwi cops in Solomon IslandsKiwi cops serving with the Regional Assistance Mission: (from left) Pauline Jones, Dean O’Connor, Brendan Thomson, PT, Michelle Seager, Aaron Bunker.

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Filed under: Foreign Affairs, international, overseas aid, police
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Elections Solomons-style

Posted by Phil Twyford on August 24th, 2010

All eyes are on Julia Gillard and Tony Abbott as they try to cobble together a majority. But just as close to home the Solomon Islands are in post-election negotiations, and if anything their task is even more complicated.

Political parties in the Solomons are little more than loose groupings. For the past two weeks groups of MPs have camped in Honiara’s top hotels, in shuttle negotiations to form a majority and choose a Prime Minister. The country has been watching nervously mindful that in 2006 the announcement of a new PM sparked rioting that saw the capital’s Chinatown burnt down.

I have just returned from a UN election observer mission to the Solomons. Nine Kiwis took part including my Labour colleague David Shearer, several other MPs and a city councillor, MFAT staff, and led by former deputy PM Wyatt Creech.  We were part of a 60-strong contingent coordinated by the UN.

I was deployed to Makira, a relatively undeveloped province in the east. It is the real Solomons: not much town to speak of, most people living from subsistence agriculture and a bit of fishing, a reliance on open motorboats to travel between villages because of a lack of roads. And sadly the Malaysian logging companies are ripping the guts out of the forests as fast as they can go.

On election day, my colleague (an American from the East-West Center) and I visited polling stations in 10 villages. We travelled with the two police officers, one Aussie and one Fijian, stationed on the island by the Regional Assistance Mission (RAMSI). Without their old 4WD we’d never have been able to travel the unbelievably pot-holed road.

It was quite something observing the elections. Churches, school rooms, health clinics and in one case even a private dwelling had been converted into polling places. Well trained and equipped polling staff ran them like clock work. Briefed by the UN and with a clipboard in hand we looked for even the slightest irregularity, and mostly found none. (more…)

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Filed under: democracy, international
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Hiroshima Day

Posted by Grant Robertson on August 8th, 2010

DSCF0027I spoke at the annual Hiroshima Day commemoration in Wellington today. It was great to see two former Parliamentarians who have worked hard on this issue, Gerald O’Brien and Graham Kelly, pictured above.

This is the day that reflects on the atomic bombing of Hiroshima and Nagasaki in August 1945. The scale of both the short term and long devastation in these two cities was horrific. 92% of the buildings in the city were destroyed, between 140,000 and 160,000 people died. The health effects of radiation were felt immediately, killed many over the following months, and the legacy of illness and disability has stayed with descendants over generations.

Hiroshima Day has become not only a day to reflect on the horror of the bombing, but also to mobilise support for ridding the world of nuclear weapons. In my speech today I talked about the hope that many people have for progress towards that goal. In New Zealand we now have cross party support for abolition. Phil Twyford sponsored a resolution in Parliament this year that had support from all parties. Both Ban Ki Moon and Barack Obama have committed themselves to the goal of a world without nuclear weapons. But of course hope is not enough. There are still 28,000 nuclear weapons in the world, and an enormous job to be done to move the major nuclear powers.

NGOs and governments are working together on this. As I looked at the likes of Dame Laurie Salas, Gerald O’Brien and Alyn Ware and some of the younger folk present today, I know that this is a campaign with a huge history and a desire to carry on.

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Filed under: Foreign Affairs, disarmament, international
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Downright ungrateful

Posted by Darien Fenton on July 12th, 2010

Well, PM Key said it :  Pete Bethune is “downright ungrateful” for the support he had from NZ when he was locked up in a Japanese jail.

That’s a question that has already been hotly debated on Red Alert.  But it set me thinking, especially after a day out in the community (that’s Key’s, McCully’s, Coleman’s, Mapp’s and Lockie’s (electorate) community) about what we should be downright ungrateful for:

  • We should be downright ungrateful for having a PM that no-one challenges (much) because he smiles and waves and everyone forgets to ask the hard questions;
  • We should be downright ungrateful for having a government that is attacking ACC, but hardly anyone notices, because after all, we’re just talking about the injured, the sexually damaged and older people;
  • We should be downright ungrateful that our older people have had their home care and/or their meals on wheels cut, even although it meant they could continue to live at home, rather than costing a fortune elsewhere;
  • We should be downright ungrateful for Anne Tolley, who is the worst Education Minister ever, and who has left the early childhood education sector completely bemused about why her government thinks it’s more important to spend money on prisons than our children;
  • We should be downright ungrateful for the PM’s exhortation that we should all learn Mandarin, even although his government has cut Adult and Community Education – and there’s now no chance to learn anything, let alone Mandarin;
  • We should be downright ungrateful for the vehicle regos going up on 1 July, the increase in ACC levies and power and petrol prices on the up and up, and that’s before we factor in the GST increase coming our way;
  • And we should be really ungrateful that most middle and  lower income people won’t get tax cuts that go anywhere compensating for all of the cost increases either here or ahead of us.

I don’t want anyone to get the wrong message.  There’s a lot I am grateful for, but that’s nothing to do with John Key and his NAct government.

How about you?  Are you an ungrateful b*st*rd too?

(PS, glad Pete’s home safe).

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Filed under: humour, international, national, protest, whaling
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The Naked Economist: Part 2

Posted by David Cunliffe on June 30th, 2010

So what does the end of the Washington Consensus mean for economic policy?

Firstly, borne out of the Great recession, there are no certainties – including whether the recession is yet over or, as increasing numbers of pundits from Krugman and Stiglitz on down are warning, we are in for a further deflationary spiral. 

Assuming no immediate major further meltdowns, we can probably draw some interim conclusions.

First, stable inflation will continue to matter, but should not be the only policy target.  It follows that monetary policy cannot rest on one tool, the OCR.  The number of tools should always exceed the number of targets.  

The OCR is a poor tool to target excess risk taking or asset bubbles.  IMF Chief Economist Blanchard recommends combining monetary and regulatory policy, such as countercyclical liquidity and prudential ratios, and directly targeting problem sectors such as housing. 

If this sounds familiar, no wonder.  The Governor of our own Reserve Bank has been quietly moving towards this in line with the other G20 central banks.   Isn’t it ironic that in New Zealand the only institution really defending the old status quo is the Beehive. 

Second, realistic stable exchange rates are crucial to small, open, trading economies.  This is what our export sector has been saying for years.  Now the IMF recommends central banks use reserve accumulation and sterilised intervention to do just that.  Labour has pledged to investigate reasonable means to help reduce the volatility of the NZ dollar, one of the most outrageously over-traded currencies on the planet.

Third, when investors desert key markets, the case for publicly supplied finance (liquidity provision) can be compelling.  However that implies that there is monetary and/or fiscal headroom available to offset a major recession (not necessarily true of some of the major western economies, worryingly).

It also implies that once recovery is firmly in place stimulus can be eased off in a way that is scially and economically sustainable.  Arguably Cameron’s Tory Budget violates that principle with slash and burn polices that could tip the UK back into recession, and even deflation.

Finally, Blanchard recommends counter-cyclical fiscal policy, augmented where appropriate by automatic fiscal stabilisers such as cyclical investment tax credits or enhanced transfers to low-income households. 

Counter-cyclical fiscal settings are not new to us and were used successfully under the last Labour Government (which reduced net debt to zero alongside full employment).  But automating that process would require careful thought.  One option used in other small open economies like Singapore is a countercyclical savings policy.   

This is all food for thought.  It is high time for our government started thinking.  But increasingly New Zealanders are looking for fresh ideas in the absence of a Beehive that seems capable of new thinking.

In Part 3 I will point to some of the areas, post Budget 2010, where Labour believes a new emphasis is needed.

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Filed under: Budget, economic, economy, finance, international, monetary policy, social democracy
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It could never happen here…….

Posted by Darien Fenton on June 12th, 2010

The International Trade Union Confederation released its annual survey on Trade Union and Human rights this week. The record’s not pretty.  101 unionists were murdered – 48 in Colombia, 16 in Guatemala, 12 in Honduras, 6 in Mexico, 6 in Bangladesh, 4 in Brazil, 3 in the Dominican Republic, 3 in the Philippines. Many unionists were imprisoned and many arrested in Iran, Honduras, Pakistan, South Korea, Turkey and Zimbabwe.

I know some people think it could never happen here – but actually it has. New Zealand has some brutal history when it comes to workers’ fighting for their rights and while we don’t see this kind of violence these days, we still see open hostility and harsh economic action against workers who try to form unions and collectively bargain.

I’m concerned about the widespread repression, intimidation, imprisonment and even murder of trade unionists in our region, including China, the Philippines, Thailand, Burma and India. During, 2009 ten workers were murdered, some 300 were injured, and over 2000 workers lost their jobs in the course of defending their rights.

This is our region.  This is where New Zealand workers compete for jobs, pay and conditions.  It’s up to New Zealand to use its influence to try to bring an end to this brutality.

Filed under: economy, international, trade, union, workforce
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