Sunday, 6 December 2015

OECD on KiwiRail

It seems the OECD agrees with me (partially at least):
In rail, liberalise entry, separate infrastructure ownership and service delivery and privatise KiwiRail. Remove legal exemptions from competition policy in international freight transport. Use tolls and congestion pricing to manage demand in road, energy and water sectors.
To my mind separating the infrastructure ownership and maintenance from the rest of KiwiRail doesn't in itself justify opening entry to other operators. However, it's worth remembering at the moment we already have multiple operators - just in different sectors (e.g. AT Metro owning commuter trains in Auckland, Dunedin Railways owning tourist trains in Otago).

My view is that it makes sense to first separate the infrastructure and KiwiRail as operator. KiwiRail would remain an SOE, required to make a profit, and pay for its use of the network in the same way that trucking companies do (i.e. freight carried over distance traveled) to use the roads. According to KiwiRail's own books it would be profitable on this basis.

I wouldn't go for total privatisation though - the model provided by the mixed ownership model could be applied, along with TVNZ and NZ Post, which are both profitable (at the moment). The more important point is getting KiwiRail on its feet.

Wednesday, 28 October 2015

Super Fund contributions

An unpublished letter to the editor:

Gordon Campbell's assertion that Bill English has "ruled out" restarting contributions to the New Zealand Superannuation Fund "even in the medium term" is factually incorrect. Budget 2015 makes it clear that contributions to the fund are to begin again in fiscal year 2020/21. In the short-term the goal is to reduce the government's debt to a net 20% of GDP.

This is in line with the original aims of the Super Fund. When he introduced the New Zealand Superannuation Bill in 2000, former Minister of Finance Dr Michael Cullen made this clear: governments would not be required to fund the Super Fund when they had deficits.

Thursday, 1 October 2015

EECA report on solar energy

Here's the EECA report I referred to in my letter to the editor of the Upper Hutt Leader:

Background information on solar PV

1.    This paper summarises the economics of grid-tie solar photovoltaic generation. The key finding is that while solar photovoltaic generation may be viable in future, it is currently a net cost from a national and consumer viewpoint. Further, there are many better energy related investments and behaviours that consumers and businesses can undertake to achieve cost savings or greenhouse gas reductions (i.e. pending their motivation).

Current Situation

2.    The price of solar photovoltaic panels (or PV panels) in New Zealand have decreased (see Appendix 3) due to four main factors, namely:
-       on-going technological improvements
-       increased scale of manufacturing
-       temporary global oversupply of PV (due to combined effect of overseas subsidies being removed, expanded production facilities and the recession reducing global demand for PV), and
-       foreign currency exchange rates.

3.    The current installed retail cost of PV in New Zealand residences is about $3-$4 per Watt. This equates to about $10,000 installed cost for a 3kW system[1] . These prices have many ‘exclusions’ such as building consents, metering, and often only applies to the main urban areas in the North Island. Therefore, in practice, average PV system prices are likely to be higher. These PV capital costs equate to a delivered PV electricity cost of about 30c/kWh. Consumers will only save money with a PV system if their electricity tariff is greater than about the 35c/kWh (and they use most of the PV generation themselves, with little exported).  From a national viewpoint, solar PV is currently about three to four times more expensive than the grid-scale renewable generation it offsets.

Key Issues Affecting the Consumer Economics of Solar PV

4.    There are four main issues that affect solar PV economics are discussed below.

·         The system installed cost and any on-going maintenance or equipment replacement costs (as noted above, installed costs are currently about $10,000 for a 3kW system);
·         The proportion of solar PV generation used in the home versus exported to the distribution network (and what you get paid for exported electricity);
·         The future price path assumed for grid sourced electricity (i.e. the counterfactual);
·         The cost of financing the system (e.g. extending a mortgage for 20 years).

5.    The proportion of solar PV generation used in the home depends on a household’s daytime summer electricity demand (typically low), and the size of the PV system installed. A hypothetical scenario is shown in Figure 1. Analysis indicates that 50% of solar PV generation exported over a year is not unusual – but there is significant variation. This factor is important because a unit of PV generation used directly in the home offsets the full retail electricity tariff (from a consumer’s viewpoint), but an exported unit of PV generation only earns between about 4 cents/kWh and about 17 cents//kWh (i.e. electricity Retailers buy PV generation for less than the residential retail electricity price).

6.    The future price path of electricity is a key variable in the analysis, because it is the counterfactual to solar PV (i.e. the electricity costs faced without an investment in PV). There are significant differences between the solar PV industry’s view of the future electricity price path and that of government (i.e. MBIE’s Energy Outlook scenario). These differences are shown in Appendix 5. The PV industry’s extreme electricity price increase forecast is based on a short period of non-representative historical electricity price information.

Perceptions of Solar PV

7.    Regardless of the economics of solar PV, householders, businesses and Councils are installing PV anyway. This appears to be because there is an emotional attachment to solar PV because of perceived independence from the grid, and because they perceive financial and environmental benefits. In general, these benefits do not exist. For example, a grid-tie PV system will stop generating if there is a grid blackout. Further, there is no greenhouse gas abatement arising from solar PV under the current circumstances of grid-scale renewables being the counterfactual.

Inefficient Investment in PV Generation (public versus private benefits)

8.    The above discussion indicates that PV is currently a more expensive option for consumers than simply purchasing electricity from the grid.  The economics are even worse for PV on a national basis. PV appears close to being viable on a consumer basis only because of wealth transfers between electricity users. On a national basis, PV only avoids the base ‘generation and losses’ components of the delivered electricity cost (i.e. about 8-9 cents/kilowatt-hour (c/kWh) generation cost of the full 26-28c/kWh delivered electricity price), PV generation does not reduce the need for transmission or distribution or other infrastructure on average.
9.    The typical residential peak demand, for which most distribution network capacity is sized, is on winter evenings at about 6pm (i.e. after dark when there is no PV generation, see Figure 1). The residential owners of grid-tie PV are wholly reliant on the grid for their peak electricity demand (i.e. winter evenings).  PV is much more suited to climates such as Australia where there is a summer daytime peak electricity demand due to air conditioners.

10.  This is potentially very economically inefficient; from a national viewpoint, we are investing in PV generation at a cost of about a cost of 30c/kWh, with the sole effect of displacing cheaper renewable generation at a cost of about 8-9 c/kWh (e.g. geothermal and wind generation). 

Figure 1 – Schematic of single household electricity demand and PV generation

Figure 2 - Schematic of electricity price structure, cost structure, and value of PV generation.


Residential Electricity Price Structure and Cost Structure
11.  Grid-tie PV would have to be lower cost than ‘grid-scale generation plus transmission losses’ to be nationally cost-effective. This means that its value is of the order of 5-9 c/kWh as the comparable options are relying on the wholesale market (see Figure 2 above), or wind or geothermal generation. It is expected to be some time (perhaps decades) before residential PV costs reduce from the current 30 c/kWh, down towards 9 c/kWh. This is because the PV price is artificially depressed at present due to favourable exchange rates and an over-supply of product arising from the global financial situation. Therefore, we are not on the edge of a ‘break through; we do not expect PV to be economic on a national basis any time soon.

12.  There is potential for technological breakthroughs in the area of solar PV; graphene[2] is one example. However, graphene is still being investigated at laboratory level, and we are not aware of it being prototyped or trialled as a viable solar PV technology. Therefore, given development lead-times, any advances are expected to be at least a decade away from wide spread deployment at the earliest.  

There Are No Other Material Benefits Arising From PV
13.  Consumers are led to believe that PV generation is a great benefit to the environment. In reality, PV generation is far from the best greenhouse gas mitigation a consumer can effect. PV is simply displacing cheaper grid scale renewables projects[3], and therefore has no material greenhouse gas abatement benefit over the business as usual scenario. There is more than 3,500MW of renewable generation consented and ready to be built – all much cheaper than PV generation.
14.  PV does have a role in off-grid electricity generation, and perhaps in the very few atypical instances of summer daytime peaking load on distribution networks e.g. Auckland CBD air-conditioning load – this is not considered here as it is not the typical case (it is a separate piece of work). See diagram above (Figure 1) for the typical pattern of solar PV generation and household demand of one individual home. 

Opportunity Cost
15.  There is a view that consumer investment in solar PV does no harm. However, this view ignores the opportunity cost of investment in solar PV. The opportunity cost arises because there are many better investments and actions consumers and businesses could take that give rise to real benefits such as cost savings and greenhouse gas reductions. While some people will always invest in solar PV, it may be possible to improve energy choices and redirect some investment to more productive energy-related outcomes (for the consumer and for New Zealand).

[1] PV can be used in conjunction with the grid (a ‘grid-tie’ system), or it can be used ‘off-grid’. Similarly, the grid-tie system can be used with or without batteries (the off-grid system needs batteries). This paper focuses on grid-tie systems without batteries; these are the lowest cost and most common systems.
[2] Graphene is effectively graphite (i.e. hexagonal planar carbon rings), but in an extremely thin layer of only one molecule thickness. It has electrical properties that may have potential in photovoltaic cells.
[3] It is often incorrectly assumed that by installing PV, the consumer is causing Huntly (or similar fossil fuelled) power station to generate less electricity. The actual impact, due to increasing demand overall, is that PV generation is simply delaying the construction of the next new power station. As new generation is predominantly renewable, there is no greenhouse gas abatement benefit. 

Sunday, 23 August 2015

The problem with memes

Jerome Mika, a former Labour candidate posted this meme on Facebook... I don't even know where to begin. This emphasises the problems with memes...

For starters, great as Michael Joseph Savage was, the New Zealand economy was in recovery mode by the time the first Labour Government was elected in 1935 (the nadir of the Great Depression, in terms of economic and employment growth, was 1932). We certainly didn't come out of the Great Depression with "no debt" - although we did have the Reserve Bank and State Advances Corporation, both creations of the United-Reform Coalition which preceded the first Labour Government (a fact strangely forgotten).

Savage's Government did introduce free milk in schools from 1937 to improve nutrition, but certainly didn't introduce free school meals. The greatest achievement of the Savage Government was the Social Security Act 1938, but strangely that gets no mention. In terms of giving hope, that wasn't too hard to do after the tough years of the great depression. Labour's own version of New Zealand's history feeds its own wonky recollection of this time exactly because of its ability to claim credit for the post depression recovery. No-one recalls, for example, that Labour actually initially supported the United Party in government from 1928-30...

Secondly, there's the statement on John Key; of course this is the negative contrast with Michael Joseph Savage. Well, straight away the claim that New Zealand now has the "biggest debt on record" is nonsense. That award (in terms of public debt to GDP) goes to the Lange Government in 1987:

Since then New Zealand's public debt to GDP has tracked downwards, although did tick upwards again post Global Financial Crisis and Christchurch Earthquakes. I'm pretty sure no-one in Labour would seriously argue the Key government shouldn't have spent up post GFC or earthquakes; in fact the opposite is true - for all their complaints about public debt, they wanted to spend even more than this government did, irrespective of the outcomes.

Now it is true that there are homeless people in New Zealand. A recent parliamentary research paper notes the plethora of statistics on the issue - it's not clear if homelessness is getting worse or better. What is clear though is that there's plenty of statistics on poverty; what's interesting though is that the numbers in "absolute" poverty, according to recent Ministry of Social Development reports, is falling. However, relative poverty - i.e. the number of children growing up in homes below the medium income - is apparently increasing.

Then there's free school meals. In this case, the Key government has actually gone further than the Savage government did through the Kickstart Breakfast programme. Sure, the Government voted down the "Feed the Kids" Bill, but that was bad law and would only have helped disadvantaged children if they went to a school within particular decile bands, and helped kids who didn't need it but happened to go to lower decile schools. I would much rather we increased the family tax credit and benefits so that families could afford to feed their children in the first place - you know, as the government did in the 2015 budget just passed.

Then there's the tax switch. The "tax cuts for the rich" meme is a well-worn canard. But the fact is one-third of all income tax comes from the top 6% of taxpayers. And anyway, at the same time as reducing income tax, the current government got rid of a whole host of income tax exemptions, such as depreciation on property and abolished Loss-Attributing Qualifying Companies (LAQCs) which means it's harder for wealthy New Zealanders to reduce their income tax. Unfortunately the centre-left is obsessed with the top tax rate rather than actual tax policy that's equitable.

As for hope under this government - I'll let voters decide.

Friday, 21 August 2015

Flag change conspiracies

There's plenty of conspiracies about as the flag debate heats up and we head into the first referendum.

On the right is one of my favourites. It repeats a common thread that the reason why we're having referendums on the flag changing is to give "due authority" to the enactment of the Trans Pacific Partnership Agreement (TPPA).

This is nonsense. To enact the TPPA, parliament must pass legislation ratifying the agreement. This is exactly the same as for every other free trade agreement; the most recent one being the New Zealand-Korea Free Trade Agreement which is currently before our parliament.

Recently the conspiracies seem to have shifted to telling people to waste their votes in the first referendum. This would be funny if it weren't so ironic. An informal vote will be counted as such, but they won't affect the final result. So they're a wasted vote. If you're skeptical of change but still have a preference for what the flag might change to, the smart thing to do is to rank your next favourite alternative as "1" - that way your vote won't be wasted. Nothing about changing the flag has anything to do with the TPPA - so don't waste your vote.

Tuesday, 14 July 2015

Trotter jumps the shark

Chris Trotter's latest column really jumps the shark. It's a pitiful attempt at reclaiming the moral high ground Labour had thought it stood on until Sunday.

Take the central claim Trotter is making, that China has replaced Britain as our "imperial" power. Labour, in its clumsy attempt at directing the narrative on housing affordability to blaming foreign buyers the Chinese, is simply reflecting on this.

You just cannot seriously argue that China now occupies the same place for New Zealand economically as Britain did up until 1972. That is autarkist nonsense that doesn't stand up to analysis.

For starters New Zealand's exports to the UK were a massive proportion of our economy, right up until the 1960s - where they averaged around the 55% mark. They've now fallen so low Statistics NZ count them as part of the EU. For this past year, China accounted for 23% of exports and 17% of imports. While growth has been strong it's highly unlikely to continue at the pace it has, with growth tapering off this year to May.

Then there's foreign investment. Despite what you might think watching or reading the news, the biggest foreign investors in New Zealand are still Australia, the United States and the UK, in that order.

Monday, 13 July 2015


For my generation and many others, housing affordability is a major issue. It's an issue that is multi-faceted and like anything, no one change can bring the market more into line with people's ability to buy a home. As someone who believes in a property owning democracy I see it as vital to the functioning of our system of government that we all have a tūrangawaewae- a place to stand.

I'm genuinely frustrated by the oppositions' attempt to reduce this issue to the foreign buyers facet, as if a ban on foreign buyers is all that's needed to fix the problem. Putting aside how difficult it will be to enforce such a ban (just look at New South Wales experience) it's the easy way out. And I really do wonder if Labour would be pushing for the ban if data from 2013 (showing that possibly the greatest number of foreign buyers are from the UK) is correct.

Friday, 10 July 2015

A new track for KiwiRail II

In the document dump from the Treasury this week comes the revelation that they advised the government to shut down all or part of KiwiRail's network and services. The government wisely rejected this advice. Once again, this emphasises that the way we've structured rail transport in New Zealand is not working.

Here's the way things work at the moment:

  • New Zealand Railways Corporation, now a statutory corporation, owns the land underneath the railway lines and a lot of other land leased to KiwiRail's customers. This is to keep the value of the land off KiwiRail's books.
  • KiwiRail, which is a 100% State-owned enterprise. KiwiRail owns all the railway infrastructure network, locomotives, wagons, workshops, ferries, signalling and control systems to run the rail network. While freight and ferries are the mainstay of KiwiRail's business, KiwiRail has two business units running passenger services as well - Tranz Metro in Wellington and KiwiRail Scenic Journeys for the remaining (three) long-distance passenger services. Tranz Metro receives subsidies from the Greater Wellington Regional Council (GWRC) which also owns a lot of its rolling stock.
  • TransDev, which runs Auckland's metro commuter network on KiwiRail's tracks using their electrification; it receives subsidies from Auckland Transport to do this.
  • Dunedin Railways, which runs the famous Taieri Gorge Railway out of Dunedin and other services. It owns the remaining portion of the Otago Central Railway from Taieri to Middlemarch, and runs trains on KiwiRail's network.
  • A host of other smaller non-commercial operators, mainly in the heritage space.
  • Regulatory oversight is by the New Zealand Transport Agency, which issues rail licenses to rail operators. The Transport Accident Investigation Commission (TAIC) provides investigatory services in the event of accidents.
In my view, it would be much better if we took a leaf from Queensland's book. In Queensland the state government has retained ownership of the state rail network (which incidentally is built to the same track gauge as New Zealand, and manages to operate high-speed trains - showing that the claim so-called "narrow gauge" is slower is nonsense), for which it charges the freight operators a fee to use. The State of Queensland then privatised the rail freight operations but kept rail passenger services in public ownership. We probably don't need to go quite as far, but I do think you could apply the mixed-ownership model to KiwiRail once we've got the model sorted.

How could a future model for rail transport in New Zealand look, if we adopted the Queensland model? Here's what I think:
  • KiwiRail retains the rail freight and ferry operations, owning locomotives, wagons and workshops to provide these services. At some later date, 49% of KiwiRail could be floated on the NZX.
  • The Railways Corporation is dissolved and merged with NZTA.
  • The entire rail network - including track, train control, communications, maintenance, and signaling, is transferred to NZTA. NZTA charges all rail licensees for using the network on the same basis as Road User Charges (RUCs).
  • Tranz Metro could be contracted out to a new operator, probably at GWRC's choosing, much like Auckland's commuter network.
If KiwiRail no longer operates on part of the network, NZTA will be able to lease lines to other operators, and facilitate interchange of wagons.

Thursday, 2 July 2015

"It's time Kiwis had a say in nation's top job"

It's that time again - time to select a new Governor-General. In 12 months the current Governor-General, Sir Jerry Mateparae, term in office will end.

In my view, the Governor-General should be elected by a super-majority vote of parliament (yes, technically, the appointment would be by parliament making a recommendation to the Queen). It seems ridiculous to me that we appoint members of the Electoral Commission using this process, yet the Governor-General, a much more powerful role constitutionally, is simply appointed by the Prime Minister of the day.

Here's an article I wrote back in 2011, and published in the New Zealand Herald:

Some time this month the Prime Minister will announce who New Zealand's next Governor-General will be. While they represent the Queen in London, constitutionally the Governor-General is the highest office a New Zealander can aspire to.

The appointment is entirely the choice of the Prime Minister of the day. The Queen merely rubber-stamps the appointment.

The new Governor-General will take office in August for five years. He or she will receive a salary of around $180,000, live in two palatial mansions in Wellington and Auckland, be driven around in late-model Jaguars and have a host of other privileges. For the first time, though, he or she will have to pay income tax like the rest of us.

After the infamous comments by TVNZ's Paul Henry last year, it is likely the appointee will be someone who "looks and sounds like" a New Zealander.

In fact, since 1967 we have had someone who looks and sounds like us in the role, including two women (Dames Tizard and Cartwright) and New Zealanders of Maori (Sir Paul Reeves) and most recently Indo-Fijian ancestry.

Yet no New Zealander can aspire to being our head of state - that position is reserved for a family in the United Kingdom. However, we recognise that we have to start somewhere. The Governor-General's office is an obvious candidate for reform.

The Republican Movement believes nominations for the job ought to be made by the general public, instead of the Prime Minister's office sounding potential nominees.

The public's nominee should be subject to approval of three-quarters of MPs and a majority of party leaders in the House of Representatives. It should not be up to the Prime Minister to appoint the officer able to dismiss his or her government from office.

The Government has already passed legislation to ensure members of the Electoral Commission are appointed by a resolution of the House of Representatives following nominations to a committee of Parliament.

Similarly, Ombudsmen and the Auditor-General are appointed by the House. Members of the Electoral Commission are nominated to the House by a special committee of Parliament.

There is no reason why the Governor-General should not be nominated to the Queen in a similar way, albeit with additional requirements to ensure the appointee is neutral, and acceptable to all sides of politics. That is why we propose a "super-super majority".

In the Pacific, Papua New Guinea and the Solomon Islands elect their Governors-General. This is a consequence of both countries gaining independence about the same time in the 1970s.

Since 2007, Samoa has elected its head of state. The first such election took place in 2007, after the death of the last Malietoa who was a king-like figure under the 1962 independence constitution - written by New Zealand legal experts.

Elsewhere within the Commonwealth the republics of India, Malta and Trinidad and Tobago elect their presidencies via parliament with no problems.

This change would be a first step towards reforming the Governor-General's office into a full head of state. Dr Michael Cullen recently proposed such a change in his paper to the Reconstituting the Constitution conference.

Dr Cullen proposes that following the end of the Queen's reign a referendum is held to either make the Governor-General New Zealand's head of state, or for Prince Charles to carry on as our "Sovereign" in London.

In any event, Dr Cullen - a self-described "token-monarchist" - believed that Parliament should debate the appointment by way of a parliamentary order. This does not require legislation, although Victoria University constitutional lawyer Dean Knight, who also spoke at the conference, has prepared a potential members' Bill to amend the Governor-General Act.

There is much secrecy around the appointment process. The Republican Movement has made numerous Official Information Act requests to the Prime Minister's office to clarify the process and framework for the nomination process. All they have confirmed is that the appointment is made in secrecy.

The Prime Minister's office advises the Prime Minister on the framework for appointment, but the exact details of this advice remain shrouded in the official secrecy that surrounds the monarchy.

The changes we propose will clarify the vague and undefined conventions around the appointment and dismissal of the Governor-General. It is often claimed the Prime Minister must consult with the Leader of the Opposition, but this appears to have rarely been the case.

In 1977, when former Prime Minister Sir Keith Holyoake was elevated to the position, then leader of the Opposition Bill Rowling learnt of the Prime Minister's choice by a radio announcement.

If the House of Representatives debate the nominees it will further our constitutional evolution. It could be the first step to a New Zealand republic with an independent head of state.

* Lewis Holden is chairman of the Republican Movement

Tuesday, 30 June 2015

Constitution (Election of Governor-General) Amendment Bill

Jerry Mataparae's term will expire in about a year. So it's time to dust this off...

Constitution (Election of Governor-General) Amendment Bill

Member's Bill

Explanatory Note

Constitution (Election of Governor-General) Amendment Bill

The Parliament of New Zealand enacts as follows:

1. Title
This is the Constitution (Election of Governor-General) Amendment Act 2015.

2. Commencement
This Act comes into force on the day after the date on which it received the Royal Assent.

3. Principal Act Amended
This Act amends the Constitution Act 1986.

4. Amendment of section 2

Section 2 of the principal Act is amended in the manner indicated in Schedule 1

Schedule 1

Insert after section 2 of the principal Act:

2A. Governor-General to be nominated to Sovereign by House of Representatives

(1) The Prime Minister will advise the Sovereign of the appointee to the office of Governor-General elected by the House of Representatives, as determined under section 2C.
(2) A person shall not be qualified to be elected to the office of Governor-General if-
(a) They are not qualified to be elected as a Member of Parliament subject to section 47 of the Electoral Act 1993; or
(b) They are a Member of Parliament; or
(c) They have previously been removed from the office of Governor-General under section 2D.

2B. Term of Office of the Governor-General and re-election to office

(1) The term in office of the Governor-General shall be for a period not greater than 5 years;
(2) On the expiry of the term of office of the Governor-General, a subsequent Governor-General must be elected, who shall only serve one term in office.

2C. Election of the Governor-General

(1) If the office of Governor-General becomes vacant, the Speaker of the House of Representatives shall call for the nomination of candidates to be elected for nomination to the Sovereign.
(2) Any person shall be deemed to be a candidate for election as Governor-General who, subject to section 2A(2), delivers a letter signed by themselves and at least two Members of Parliament to the Clerk of the House of Representatives, after the Speaker has given notice under subsection (1).
(3) Five days after the notice of the Speaker in subsection (1), the Clerk of the House of Representatives shall inform the House of Representatives of the nominations received.
(4) If only one candidate is nominated, the Speaker shall declare that candidate to be elected, and the Prime Minister shall advise the Sovereign to appoint that person as Governor-General.
(5) If more than one candidate is nominated, the Speaker shall appoint a day, being a day not more than ten days after the notice in subsection (1) for the House of Representatives to vote on candidates.
(6) On the day appointed in subsection (5), the Speaker shall conduct a ballot in which each Member of Parliament present shall vote for one of the candidates nominated for election.
(7) No candidate shall be elected unless they obtain a majority of two-thirds of the votes of those Members of Parliament present and voting and at least half of the parties represented in the House.
(8) If no candidate obtains an majority of two-thirds of votes in the first ballot, the candidate with the lowest number of votes shall be eliminated, and a further ballot shall be held, after the elimination of the candidate who received the lowest number of votes in the preceding ballot, until one candidate receives a two-thirds majority of votes.
(9) When a candidate receives the required votes under subsection (7) or subsection (8), the Speaker shall declare him or her to be duly elected, and the Prime Minister shall forthwith advise the Sovereign to appoint that person as Governor-General.

2D. Dismissal of the Governor-General

(1) The Governor-General may be dismissed from office by the Prime Minister advising the Sovereign, following a resolution of the House of Representatives passed by a majority of not less than two-thirds of its members.
(2) The Governor-General shall not dissolve, prorogue or otherwise interfere with the business of the House of Representatives if such a resolution or vote specified in subsection (1) is before the House of Representatives.

Tuesday, 23 June 2015

We're no fools, Winston

It's Bush v Clinton for the White House, a film about dinosaurs is tops at the cinemas... and Winston Peters is banging the anti-immigration drum. It's like the 1990s never ended!

Peters is referring to the recent release of net migration figures by Statistics NZ. What do those numbers show?

In the year to May 2015 there was a net gain of 57,800 people to New Zealand. This is made up of:

  • 7,516 applicants for residence visas
  • 17,515 student visas
  • 27,957 work visas
  • 4,812 New Zealand or Australian citizens
Student visas are a critical part of our $2.3 billion (2009 est) education export industry, which despite his alleged desire to expand New Zealand's exports, Winston First opposes. Likewise with work visas. In the industry I work in, the reality is that New Zealand is often too small to train technicians in every facet of IT. 

Nor should we attempt to - we only have a handful of multi-nationals with global reach (sadly) who require some of the skills that are more common overseas. So it's common sense that we should enable workers from overseas to come to New Zealand. In IT, there's also a huge skills transfer component.

Peters bangs on the anti-immigration drum because he knows it wins him votes. Sadly only a small number of New Zealanders see the great - if not critical - contribution immigrants make to New Zealand economically and socially. Luckily I think most do see it - and welcome new New Zealanders.

Sunday, 21 June 2015

The New Labour Party and 70s thinking

Chris Bishop gave a speech recently pointing out the inversion in New Zealand politics:
Historically in New Zealand politics, the Labour Party has liked to think of itself as the party of progressive, even radical, social change.
Conversely, it is sometimes claimed National is the traditional party of conservatism – the party that manages the status quo; that builds on social changes already made.
Whatever the truth of these claims, today’s political situation differs markedly from these perceptions. National and Labour’s traditional roles have reversed.
Labour is now the real conservative party – fearful of innovative social policy, afraid of new ideas – in short, the party which says “No” to everything.
Meanwhile it is National that is the genuine reformist party, determined to enter social policy realms that Labour has selfishly and oddly assumed it owned for itself, such as the welfare system, social housing and education.
The responses to this speech (and subsequent NBR article) have been intriguing. One in particular caught my attention. It wasn't the expected response from the centre-left, which has been "No", they do in fact have all the answers to long-term social problems.

It's the response from the wingnut right faction (no, I'm not going to link to it) the accusation has been leveled that in the speech and article Chris was "...lay[ing] out his and National’s credentials as the New Labour party…approaching Muldoon’s for its left-ness."

It's this response that I find laughable. Firstly, Muldoon was clear right from the start of his premiership that his goal was to "leave New Zealand no worse off than he found it." While I think he was genuine in this goal, it was clear by 1984 that he hadn't achieved this unambitious goal. In swept the Lange-Douglas government and the rest is history.

Muldoon's "left-ness" was his expansion of the government's intervention in the economy. But he kept to usual centre-right policies of the day otherwise. And no-one can accuse the Key government of the sort of Think Big, wage-freeze or exchange rate interventions Muldoon brought in to shield New Zealand from the world.

Secondly, and this is a point missed by the wingnut faction, the goal of the Key government has been to deliver better social outcomes and better value for money for taxpayers. The point Chris made more broadly is that better social outcomes are not left-wing in nature, nor does the opposition have a monopoly on them.

What is becoming obvious though is that the opposition are conservative in the sense that most of their solutions seem to date from the 1970s. Take their broadcasting policy for example: spending millions on regional television stations; spending further millions bringing back a fully public broadcaster combining radio and television. You know, much like the New Zealand Broadcasting Corporation of the 1970s. Completely at odds with their own admission that the internet is radically changing the way people access and view content. That's 70s thinking - the sort of thinking that won't move New Zealand forwards.

Tuesday, 16 June 2015

OECD: time for port reform

The OECD report on New Zealand's economy makes for very interesting reading. There's been plenty of analysis of the points it makes so there's no point in going over them again here.

One area I'm particularly interested in, highlighted by the New Zealand Initiative, was the OECD's call in 2013 on government to "Consider reducing local government ownership of port assets to bring more market discipline to the sector". This seems like an odd thing for the OECD to talk about (yes, I do all the time, but let's be honest, I'm pretty odd) but it has major downstream affects on the economy.

What's the status quo of New Zealand ports? I crunched the numbers - in terms of total seaport export and import value for the year 2014-15 - and looked at who owns each port:

Port Share of exports (NZ$)* Share of imports (NZ$)* Ownership
NorthPort (Whangarei) 1.66% 8.87% Port of Tauranga (50%), Northland Regional Council (25%), Ports of Auckland (10%) plus other investors.
Ports of Auckland 14.29% 57.86% Auckland Council
CentrePort (Wellington) 3.26% 4.76% Wellington Regional Council
Port of Tauranga 37.56% 11.01% NZX listed; Bay of Plenty Regional Council (54%)
Port Napier 9.26% 1.44% Hawke's Bay Regional Council
Port Taranaki 4.68% 0.60% Taranaki Regional Council
Eastland Port (Gisborne) 0.82% 0.00% Eastland Group Ltd, owned by Eastland Community Trust
Port Marlborough (Picton) 0.19% 0.00% Marlborough District Council
Port Nelson 1.55% 0.84% Nelson City Council (50%), Tasman District Council (50%)
Lytellton Port Company (Christchurch) 11.13% 10.83% Christchurch City Council
Port Otago (Dunedin) 9.04% 1.03% Otago Regional Council
SouthPort (Bluff) 2.99% 1.85% Southland Regional Council (65%); NZX listed 
PrimePort (Timaru) 3.56% 0.91% Port of Tauranga (50%), Timaru District Council (50%)

*YTD 2014-15

As you can see, local government dominates the 13 major port businesses in New Zealand. Two of our ports are NZX listed - Port of Tauranga and SouthPort, which most are either directly or indirectly owned by local governments. Port of Tauranga has been active in seeking joint ventures; it now has two - NorthPort (Marsden Point, new Whangarei) and PrimePort (Timaru). Tauranga now dominates exports, while Auckland dominates imports.

Ports of Auckland was publicly listed from 1993-2005 (due to Waikato Regional Council selling 20% of its shares), and as most Aucklanders now know is currently 100% owned by Auckland Council Investments Limited. Christchurch City Council is considering selling a stake in the Lyttelton Port Company.

These complex ownership structures underlines the many problems for sea ports in New Zealand: with the exception of Auckland and Tauranga, our port companies are small and unable to expand to gain economies of scale. The multiplicity of ports makes it easy for the major international shipping lines to play ports off against one another. As smaller entities, our ports are price takers. This, as the OECD points out, makes life harder for New Zealand exporters.

Meanwhile, Tauranga's strategy appears to be to take business off both Auckland and Lyttelton (Christchurch) ports through its two joint ventures. Ports of Auckland doesn't appear to have much of a strategy other than filling in more of the Waitemata Harbour, and a joint venture with Port Napier, outside of Palmerston North, which appears to be a play at taking business off Wellington's CentrePort.

Add to this the looming problem of "mega" ships, which the Ministry of Transport recently argued should mean that the number of international container ports is significantly reduced, from 10 to 5. The Ministry of Transport suggested Auckland, Tauranga, Napier, Lyttelton and Otago would be the survivors, while other ports simply become "feeder" ports.

All of this points to a major restructure of how ports operate in New Zealand. My suggestion is that the ports are consolidated into two main companies - one consisting of Auckland, Wellington, Napier and Lyttelton, the other Tauranga, Taranaki, Marlborough, NorthPort, SouthPort and PrimePort - to create competition (both groups would have roughly 50% of all trade between them). The local authorities could band together to own a stake in each of these consolidated companies, which would be NZX listed.

The expectation would be that the port companies would consolidate their investment to achieve economies of scale in servicing larger TEU ships. Smaller ports would become "feeder" ports to the larger hubs (Auckland, Tauranga, Lyttelton and Timaru).

Tuesday, 21 April 2015

A new track for KiwiRail

Recent news has emphasised again to me the need to separate KiwiRail as an SOE and the provider of railway infrastructure in New Zealand. KiwiRail has a proposal that could lead to the removal of the electrification of the North Island Main Trunk. This is in the context of the Minister of Finance confirming KiwiRail was seeking further funding in this year's budget, on top of the $1 billion already spent since the renationalisation of rail and sea ferry operations in 2008 - not including how much was spent by Labour buying it back. The biggest mistake Labour made in this process, in my view, was combining the infrastructure with rail operations again.

The electrification itself was implemented as one of Rob Muldoon's "Think Big" energy projects during the 1980s (although proposals for electrification dated back to the 1950s), a project that was eventually completed under Labour in 1987. Its main purpose was to lower the cost of imported fuel, at a time (just after the 1979 oil shocks) when it was expected fuel prices would remain high. They didn't, and to top it off the railways lost their monopoly on freight transport when the sector was deregulated in 1981. The locomotives purchased as part of the project, the EF class, are now coming to the end of their economic lives and are in need of replacement. Apparently KiwiRail only has six of the original 22 available for use, when they need 17.

While it is only one of three options allegedly "on the table" (the other two being either refurbish the EFs or buy new electric locomotives) a proposal to shut down the electrification has attracted a predictable campaign against such a move. Under the current model though, it's understandable that KiwiRail is considering shutting down the electrification.

KiwiRail made a headline loss of $248 million in the past financial year 2013-2014. But, take out the cost of providing KiwiRail's infrastructure, and KiwiRail made a profit on its operations before tax of $77.5m. In the 2013-14 year KiwiRail moved 17.1 million tonnes of freight. If KiwiRail were instead charged for infrastructure the same way commercial road operators are - both through fuel taxes and by the weight of freight carried over the distance it was carried - the balance sheet would look different.

Under such a model, the infrastructure - which is treated as a public good by commuter rail users - would be a public good nationwide, much the same as the roading network is. You wouldn't have KiwiRail contemplating removing parts of the infrastructure to keep costs down, nor investing limited capital in its right of way.

Saturday, 18 April 2015

Crunch time for CIT

The Dominion Post reports that the end date for tenders on the old CIT is 12 May. I understand there are a number of very different proposals in the pipeline, and it will be interesting to see what comes to pass.

I hope that we see some of the interested parties working together for the best outcome. CIT has a lot of empty land (9.7 hectares) around it that might be able to be used for housing development, while the buildings themselves are retained.

The article itself mentions either retirement villages, a growth area with New Zealand's ageing population, or - disturbingly - "national retail brands" which they say represents an "excellent opportunity" for a "bulk retail development." This appears to be a suggestion for turning some of CIT into retail, an idea which I wouldn't support.

My view remains the same that the best thing for Upper Hutt, given the growth in investment in innovation through the likes of Callaghan Innovation, would be for the CIT campus to become a technology park.

Thursday, 9 April 2015

Long Term Plan season in the Hutt

UH Mayor Wayne Guppy at the public consultation.
It's long term plan season - when our local councils put together their plans for the next ten years. Both Upper Hutt City Council and Hutt City Council have their ten-year plans under way and open for consultation now.

In Upper Hutt, there's a number of projects:

  • Reconstruction of Fergusson/Main/Gibbons St intersection (increased demand) $6.5 million 
  • Rural roads upgrades (improve services) $6.1 million 
  • Stormwater - Pinehaven Stream project (UHCC 50% cost share) $5.8 million
  • Fergusson/Ward/Whakatiki intersection upgrade (increased demand) $4.5 million 
  • Water supply - new Cruickshank reservoir (increased demand) $4.1 million 
  • Akatarawa Cemetery development (increased demand) $3.7 million

Overall it's a pretty balanced - the water and roading projects are pretty standard. The key thing for me though is that the council's debt remains below the Local Government Cost Index (LGCI) while a spending a bit more on extra projects to help Upper Hutt grow. They are:

  • Boosting economic development $500,000 
  • Cruickshank Rail Tunnel walkway/cycleway $452,000 
  • LED street light upgrade $431,000 
  • Upper Hutt City walkway/cycleway network $281,000 
  • Hutt River Trail upgrades (Rimutaka Cycle Trail) $253,000 
  • Harcourt Park paddling pool upgrade $245,000

It's pleasing to see local businesses are behind these plans. The investment in cycleways is good, especially the Cruikshank Rail Tunnel. Developing the tourist and recreation potential of Upper Hutt in this way is definitely a good think.

I'd question the rate of return from the half a million in economic development. If the rate of return is better than the cost incurred by the council of borrowing the money, then potentially more could be spent; on the other hand if its worse then this item of expenditure could be trimmed. We have seem a lot of positives in this area - but are we getting value for money?

The LED street light upgrade is another good idea. LED lighting looks better, and more importantly it uses much less electricity, so over time there's a net benefit to ratepayers.

Consultation on Upper Hutt's LTP closes on 20 April.

Meanwhile in Lower Hutt, Hutt City has its LTP up for consultation. Along with the key projects, they have a number of additional projects:
  • Eastern Bays Shared Path between Lowry Bay and Days Bay $9 million
  • City-wide cycle network upgrades. $3 million
  • Regional Bowls Centre in Naenae, funded through asset sales. $2 million
  • City-wide science and technology projects. $500,000
  • Viewing platform at the top of Wainuiomata Hill. $200,000
  • Petone and Wainuiomata Sportsville projects. $200,000
The regional bowls centre in Naenae is controversial, especially since it's funded by asset sales. Again, the rate of return on science and technology projects is debatable, but pleasing to see it forms a part of Hutt City's future plans.

There are also a number of projects from last year's plan that are underway:
  • Civic Centre development- scheduled to be completed by mid / late 2016
  • The construction of the Taita Community Centre – scheduled to be completed mid / late 2015
  • Fraser Park developments (in three phases), phase two – new multi-purpose clubrooms scheduled to be completed by late 2015 / early 2016.
  • Construction of new Learn to Swim and hydrotherapy facilities at Huia Pool – scheduled to be completed mid / late 2016
  • Significant Avalon Park developments - scheduled to be completed mid / late 2017.
  • Work on the Hutt River Trail to complete walkways and cycleways – completed mid / late 2015
  • Riddiford Gardens development - scheduled to be completed mid / late 2017.
Consultation on Hutt City's plan is open through to 30 April.

Monday, 30 March 2015

Northland implications

David Farrar has the best analysis I've seen on the reasons why National lost the Northland by-election. I think reason 3 - Mike Sabin's departure - is the strongest. The feeling I picked up from National supporters in Northland was that the vacuum of information about Sabin's departure - which inevitably was filled with rumour and conjecture - really irritated even the most loyal supporters.

The question now is what happens in 2017. The preliminary results point to Peter's win being made possible by a large number of Labour voters giving Peters their electorate vote, as Andrew Little essentially instructed them to do.

It was a smart move by Little, and a clear demonstration that he understands MMP. But it creates a two-part problem for Labour that will be a headache in 2017: firstly it means they lose the ability to whack National over deals in Epsom and Ohariu. Morally their position is degraded - the media will simply point out they accommodated Winston where it suited them, to stick it to the government. But I suspect the public understands this is part and parcel of MMP anyway.

Secondly it means that the deal will need to be repeated in 2017 to ensure a similar result. This will be even more imperative if the rumour (Peters wanted to capture an electorate seat to guarantee NZ First's survival, similar to Act's win in Epsom in 2005) that Northland is part of Winston Peters exit strategy are true. If Labour wants an alternative to the Greens (and they should) then NZ First is their best bet. That means Willow Jean Prime will need to take another loss on the chin for Labour - and that risks a Margaret Hawkeswood style melt-down.*

My prediction is that Winston will now work to position himself alongside National, to keep Little and Labour on their toes. That way he might be able to extract more - perhaps even the baubles of office - if he finds himself as Kingmaker again in 2017.

*Margaret Hawkeswood was Labour's candidate for Coromandel in 1999; she was very unhappy when Helen Clark told Labour supporters there to give their electorate vote to Jeanette Fitzsimons (Greens co-leader) to get the Greens into Parliament. On election night that worked; however after the counting of the special votes the Greens got enough votes to get over the 5% party vote threshold.

Thursday, 26 March 2015

CIT's future options

Picture from the Upper Hutt Leader.
The CIT is now on the market (Upper Hutt Leader, 26 March). The ongoing saga since the closure of CIT in 2001 may be drawing to a close. JLL has been appointed to sell the buildings and land which has a council valuation of $13 million.

With the Treaty of Waitangi claim now resolved, there seem to be a number of future options for CIT:
  • The site is cleared and turned into a housing development.
  • CIT returns to some form of tertiary institution. WelTec may have to spend millions on earthquake strengthening its Petone building, it would make sense for WelTec to instead purchase CIT.
  • A technology park, hosting high-tech companies and creating high value, well-paid jobs in Upper Hutt.
My personal preference (as you can probably guess) would be for CIT to become a technology park. There could be a mixture of both a tertiary institution and technology park (or an "incubator" for new high-tech ventures) which would get optimal use of the site.

Wednesday, 25 March 2015

Alan Bollard and the Smiling Curve

Last week I went to a presentation by former Reserve Bank Governor Alan Bollard hosted by the New Zealand Initiative. The key concept Dr Bollard used was the "smiling curve", a way of emphasising where value is created in a modern economy. In years past, the curve was flatter - it was the fabrication of products that created the lion's share of the value in the economy.

The relentless expansion of technology and growth of the service economy has changed all of that.

Keep on smilin'
Now, more value is created at the start of the production process - patents, technology, research and development - and at the end of the process - brand, service and marketing. Dr Bollard then related this to New Zealand's economy and specifically to the dairy industry, using figures from the FMG Institute. The numbers showed that the production of milk power had a return on capital of 9%, where as marketing had a 17% return, and 29% for research and development. Oliver Hartwich, Executive Director of the New Zealand Initiative, asks:
...what would it mean for a New Zealand dairy company that is seeking to do increase its business in Asian markets? They might be aware that the return on assets is only 7 percent for farming, 9 percent for powder plants whereas it is 17 percent for marketing and even 29 percent for R&D and processing.
Which is where it gets interesting. There seems to be agreement that increasing our R&D spend is a good thing, but we need to make sure we take advantage of it. On the other hand, there are also lots of people who seem to think New Zealand should focus on the middle of the curve.

Sunday, 22 March 2015

CentrePort's "Big Picture"

Carrying on my recent obsession with seaports and their future for New Zealand, last week I sent a letter to the editor of the Upper Hutt Leader on CentrePort's expansion. I was responding to an earlier letter raising environmental concerns about the expansion:
CentrePort's response in last week's Leader was intriguing in its lack of justification for the dredging of Wellington Harbour. As well as the environmental concerns, ratepayers - as owners of CentrePort - should be concerned.

A recent Ministry of Transport report on the future of New Zealand's ports put forward a scenario where larger and larger container ships soon to be calling on New Zealand ports lead to fewer, bigger ports. CentrePort features in not one of the reports potential options, instead being relegated to a "feeder" port to the others.

Meanwhile, two of the "hub" ports the report identifies are moving in on CentrePort's business. Ports of Auckland and Port of Napier are opening a new logistics hub in Longburn, south of Palmerston North. They plan to rail containers there to their own ports, in direct competition with CentrePort's services.

If the Ministry of Transport's report comes to pass, we could end up with an environmentally degraded harbour that is bypassed by the major shipping lines. CentrePort needs to make its case clearly for the dredging to ratepayers.


Lewis Holden
CentrePort have a website explaining what they're planning on doing in Wellington's Harbour, appropriately called "The Big Picture". But there's nothing in The Big Picture that addresses the underlying message of the Ministry of Transport's future scenarios for container ports: there will be fewer ports visited by these mega ships, with smaller container ports relegated to "feeder" status. That includes CentrePort.

Tuesday, 17 March 2015


Here's a media release that seemed to have sunk below the radar... a half-year surplus:
This is the first time the Government’s books have shown a part-year surplus since 2009.
Oddly most articles focused on the February on the lower than expected deficit. But nothing on this news...

Tuesday, 10 March 2015

Anglophiles will be the death of the Commonwealth

A Union Jack and a service in an Anglican Church... hardly the future of the Commonwealth (2011).
Today is Commonwealth Day, a day meant to celebrate the modern Commonwealth of Nations. Hardly anyone in New Zealand - or the rest of the Commonwealth - knows about it.

The day has passed with very little to celebrate it, apart from a few stereotypical events: a service to mark Commonwealth Day a Holy Trinity Cathedral in Auckland (Anglican only, of course, yet still billed as a "celebration of diversity"!), the Royal Commonwealth Society in Auckland raising the Commonwealth Flag (I suspect much to their disappointment, not the Union Jack), and another flag being raised at the Wellington waterfront.

This is all very frustrating to me. The Commonwealth is a very useful organisation for New Zealand to be a part of. As Don McKinnon pointed out in his book In The Ring (on his time as Secretary-General of the Commonwealth) the organisation provides New Zealand with a number of advantages in terms of international connections and opens doors for us. It is in our national interest to be a member. It does a lot of good work for democracy, education and human rights internationally as well - work which gets very little coverage in New Zealand.

I'm sure there will be some who think it is hypocritical of me to support the Commonwealth while being a republican. That's exactly the source of my frustration. The monarchy sits too close to the Commonwealth, to the point where many people associate the positives of the Commonwealth to the monarchy (the common argument I heard while campaign chair of New Zealand Republic was opposition to a republic on the basis that New Zealand couldn't then compete at the Commonwealth Games). This is of course deliberate on the monarchy's part, as part of a wider strategy to promote itself. But the reality is that apart from the Head of the Commonwealth, the monarchy has little to do with the organisation, of which the majority of members today don't have the Queen as their head of state.

Back in 2009, the Royal Commonwealth Society in the UK - ironically much more forward looking than other Royal Commonwealth societies across the globe - warned that the Commonwealth was fading from the public's consciousness, even in Great Britain, and that this is undermining the future of the Commonwealth in the long-term. In its 2010 report, following an extensive public consultation under the "Commonwealth Conversation" banner, the society pointed out that the Commonwealth:
"...risks appearing to be little more than an imperial relic."
The report recommended greater engagement with more people. Five years on, that hasn't happened. Instead, the same Anglophiles who dominate the monarchist scene also run the Commonwealth groupings. Commonwealth Day emphasised this fact again: the celebrations, such as they were, were heavily Anglo-Saxon and protestant in nature. This is a tragedy, because without broader support, the Commonwealth will eventually die an unlamented death. If it does go, it's clear that ironically at this stage it will be the fault of the Anglophiles.

Friday, 6 March 2015

Re-writing Rob Muldoon

I've recently been re-writing the Wikipedia article on Rob Muldoon. It had been in bad shape for some time, with gradual and random additions being made, so I thought it was time to give Muldoon a fair hearing, an article written from a "Neutral Point of View" in Wikispeak. It became even more relevant with the recent passing of Dame Thea Muldoon, the former Prime Minister's late wife, the other week.

Muldoon was a complex character to say the least. I think the most accurate description of him came from his biographer Barry Gustafson who said he was an "enigma", and remains either the most hated or loved Prime Minister in New Zealand history. No-one else seems to have been as polarising or manipulative. To me, Muldoon was genuine in his intentions to make sure New Zealand was "no worse off than when I found it", in the 1960s. That explains his attitudes to a lot of things, he was essentially stuck in the 1960s and carried forward policy from there into the mid-1980s.

A number of things though were re-emphasised to me during the re-writing process:
  • The wage and price freeze, which caused so much damage to New Zealand's economy, was a last ditch attempt by Muldoon to flight rapid inflation. His original plan was an accord with the trade unions for tax cuts for workers in exchange for lower wage demands (essentially what Bob Hawke did in Australia from 1983, which worked very well). However, the plan faltered on Muldoon's poor relationship with Jim Knox, who took over from Tom Skinner (who Muldoon clashed with, but had been able to work with). Had Muldoon got on with Knox, or Skinner stayed on past 1979, New Zealand would be a very different place.
  • There was an acknowledgement by Muldoon of the need to deregulate the economy as early as 1978, and plans to do so. In my view had this happened much of New Zealand would've been spared the pain that reform from 1984 inevitably wrought. However, a recession and the 1979 oil crisis put paid to that.
  • Muldoon's style of leadership - to dominate the key portfolios - was very reminiscent of Richard Seddon. However by holding both the premiership and Minister of Finance portfolios, Muldoon clearly had far too much power and control, that combined with his bullying personality created a major currency crisis, that could have been averted had he acted sooner.
 And now's there's a dispute over the name of the article... sigh.