Archive | Forward thinking

Trump, China, and what’s it got to do with us?

This article is a summary about position-taking, influences, and the broad impacts on New Zealand. It doesn’t quote anybody, but contains conclusions derived from wide reading. That’s time-consuming, but I figure this is a valuable exercise if you’re looking beyond your nose for pointers of economic direction & property market changes.

Donald Trump’s role in both his campaign for the US presidency and as president has been to disrupt the status quo.

Although he’s hired many people with experience in “deep state” roles, their tasks have been to support his disruptive campaign. Some failed the adjustment.

Mr Trump’s additional roles have been to pump up the US’s prospects as an economic performer, and to continue the US’s insistence on holding hegemonic international power.

Mr Trump has had a privileged upbringing, and in business he’s used other people’s money. Where there’s been failure, as in business bankruptcy, he’s loaded the consequences on to his lenders.

He’s taken the same approach internationally, hence his battles with China, and he’s in the process of changing the economic rules.

The US had a public debt mountain when he took office, and he’s grown it, even before you count the huge expansion in military spending. The US Federal Reserve wants to reduce the debt it created through quantitative easing and has been slowly clawing back treasury stock, and cautiously lifting its target interest rate.

Neither of those practices suits Mr Trump, who wants a low interest rate to keep public debt repayments down, which also keeps asset prices up, and wants plenty of money available for business to thrive.

Since Mr Trump started his trade war with China, the suggestion has frequently been made that China might slash its holdings of US treasuries to spite him, but that prospect looks less & less likely. China has already found it doesn’t have the same volume of exports on which to place tit-for-tat tariffs, has seen its international reserve decline and faces a worsening economy at home. One thing it has achieved is to shift some international transactions into other currencies – its own & Russia’s in particular.

China is in the middle of a transformation from mass exporter of low value goods to a more intelligent economy based on greater skilled input, but on that journey it has to deal with performances by local government entities which have spotted investment opportunities, both locally & internationally, only to find the glitter can wear off.

Like many Chinese investors keen to shift cash offshore and into assets, Chinese corporates went shopping around the world, outbidding each other as they searched for chest-thumping acquisitions, only to find that the return on overpriced assets tends to be unsustainable.

New Zealand developers have employed Asian investors for 2 decades as seed investors in apartment projects, which wouldn’t have been built if local investors were the only source of funds. But market downturns, as is happening now, mean the off-the-plan investor is more likely to lose (or make much less) with a sale on project completion. Apartment developments are still being planned, but their timing will depend to a large extent on how these bigger international manoeuvres work out.

China has used devaluation to combat the Trump trade war manoeuvres. US commentators are loud in describing devaluation as currency manipulation, but not calling out the strong-arm tariffs as equal manipulation.

Both these countries – and many others, including New Zealand – want their currencies down to encourage exports and discourage imports, but devaluations only work if other countries you trade with aren’t doing the same thing.

As this currency battle spreads, trading relationships will change. China can end the Trump trade war by conceding on intellectual property allegations – the most likely outcome, although it will take some time to occur as China looks for ways to circumvent the concessions – or it can look for alternative markets.

In that alternative pursuit, China & Japan have become friendlier, China is looking to conduct more trade with South-east Asia, and China & India are looking at stronger relations, replacing their animosity.

China’s Belt & Road initiative, a project with long-term structural consequences for international trade and also for political power strategies, is winning initial positives despite allegations of abuse of debt positions. But the Belt & Road enters the hegemony fray: while the colonial & subsequent western dealing with Africa was largely a matter of take with little give, China is going in offering sorely needed infrastructure development.

The same difference is going to apply in the Pacific Ocean, where western support for small island nations was begrudging. Now those dots in the ocean are becoming important spots in the hegemony struggle, and support will switch from donations to highly priced access fees.

All of these battles will have serious impacts on New Zealand’s economy – some positive, some negative.

Although New Zealand is big compared to the other island nations, this country will also become a target in the hegemony battles. We are never going to be a military power, so we will need other means of defence. One of those is likely to be to trade with both sides in other battles. Another will be to grant access without allowing domination. Our moralistic streak may have to be subdued and our historic allegiances further tested.

If you look at the international & New Zealand pictures as I’ve painted them here, you will see potential for very good times – and also harrowing periods if we get it wrong.

One of the big questions in international finance at the moment is the worldwide bubble in investment, pumped up by national debt, along with negligible interest rates which encourage asset price escalation. How long can it last? And what happens when the merry-go-round stops?

Factors affecting the answers to those 2 questions are numerous, but those you can most rely on are the outcomes of 2 elections – the pending mid-term vote in the US, scheduled for next Tuesday their time, and the 2020 US presidential campaign.

The mid-term vote could see the Democrats locked in a power struggle with the president, or Mr Trump set free to continue as he pleases. Whatever the outcome internally, US dealings with the rest of the world are unlikely to change radically in the short term. No matter who is in power in the US, it is a country that fronts the world with a self-belief that nobody matches; it’s a nation born to be in charge, no matter that so often it does this badly.

New Zealand is likely to become a sanctuary, and therefore a target for investment. That will place New Zealand in a positive light, at least for the short term.

Feel free to disagree, open my eyes, suggest other options.

Attribution: Bob Dey.

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Argument erupts over speaking rights on marinas

Auckland Council’s management of its non-existent marinas policy is going from bad to worse.

At the council planning committee’s meeting a fortnight ago, chair Cllr Chris Darby allowed opponents of marina sales time to speak in the public input slot but rejected the speaking request from Empire Capital Ltd property & development manager David Boersen for being too late with his request.

Anyone wanting to address that committee on marinas was going to be late with their request, because the council didn’t post the relevant material on its online agenda until the morning of the meeting.

One group that did provide input to the planning committee, the Auckland Marine Users Association through chair Richard Steel, applied the previous Thursday to speak, but had less than 24 hours to prepare its presentation because of the lateness of the marinas report.

At the weekend, Mr Boersen was listed to address the council’s finance & performance committee tomorrow about the planning committee’s marinas recommendation – and the Marine Users Association has fired off a letter to the mayor & all committee members, arguing that his request shouldn’t have been granted.

Mr Steel said in his objection it was inappropriate for Mr Boersen to address the finance meeting without an opportunity for input by other interested parties because the first part of the recommendation (to hold a workshop) was a planning committee matter, and the second part (not to proceed with the sale of any marina land pending completion of the forward plan) wasn’t a finance committee agenda item.

Mr Steel wrote: “If the finance & performance committee meeting wished to consider this recommendation on 18 September there is no reason why it should not have been on the main agenda and other interested parties given the opportunity to speak as a part of public input.”

Against the association’s less than 24 hours to prepare, Mr Steel said Mr Boersen had been given a fortnight.

Mr Steel said the finance committee should decline Mr Boersen’s speaking request, or allow other interested parties to speak at the same meeting.

My comment:

  1. Public input at the council isn’t confined to what the council has on its agenda.
  2. The 2 committees are essentially the same people (all councillors, a possible change in Independent Maori Statutory Board representation). People wanting to provide public input are sometimes sent to a committee which the council thinks is more relevant, but not always.
  3. The public input section of council meetings is not about debate, although more than one side might address the same topic at the same meeting.
  4. Auckland Council owns marinas and needs policies & strategies on both ownership & operation, and therefore on sale.
  5. Separately, the council needs policies & strategies on waterfront use, including marinas it owns & those it doesn’t own.
  6. Empire Capital, as an owner of marinas, has been advancing development scenarios for several years. It’s sensible for the company’s position to be understood.

Earlier story:
4 September 2018: Council wades into deep water in marinas debate

Attribution: Committee agenda, Marine Users Association.

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Assessment of north-west community facilities shortfall nears decision time

An Auckland Council report on community facilities in the north-west – and recommended action – will go to the 4 relevant local boards this week.

The area investigated covers 150km2, represents just 3% of the region and had an estimated population of just 34,230 last year.

But that population is expected to balloon by 350% through to 2046. In the east at the moment, the new Millwater subdivision out from Silverdale is hemmed in by the Northern Motorway. From there to Kumeu at night, all is pitch black, but that won’t last much longer.

The council investigation area included parts of the Rodney, Upper Harbour & Henderson-Massey local board areas.

Report authors principal policy analyst Antonia Butler & southern community policy team leader Elizabeth Fitton-Higgins said the north-west’s population was growing faster than the Auckland average, which would put pressure on existing community services & facilities and create demand for new services.

Council staff investigated the provision of community facilities across the north-west over the last financial year to identify gaps now & likely in future.

Their key findings:

  • The baseline population is aging but new developments are bringing in younger people, families & increasing ethnic diversity, which will impact service needs
  • Economic & geographic disparity restricts access and creates barriers to participation for some residents, particularly those in rural areas and in lower socio-economic areas such as parts of Westgate & Massey
  • A pool & additional sport & recreation space are priorities for many residents, and
  • There is some capacity within existing facilities and opportunities to better target services to increase participation in low user groups.

The recommended key moves to address the findings are:

  • Address condition issues at Kumeu Library to maintain service levels
  • New aquatic provision from 2026, ideally near Westgate
  • Additional recreation/leisure space in Rodney by 2026 and further recreation space in the longer term (2036) in the Henderson-Massey or Upper Harbour area to support 4 additional indoor courts
  • Potential additional multi-purpose community space in Whenuapai from 2026 and Kumeu from 2036, subject to the impact of new provision in Westgate, the rate of growth across the area and the needs of emerging communities.

The local boards will be asked to endorse the report’s findings & consequent next steps – to assess options, start strategic cases for change and develop an indicative business case.

Links:
Rodney local board agenda item
North-west community facilities provision investigation summary report
Bob Dey Property Report diary, week 17-23 September 2018

Attribution: Council committee agenda.

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Corrected: Council asset disposal policy up for Penlink-related argument

Published 16 September 2018, corrected 17 September 2018 (it’s not a reserve):
20 years after a Whangaparaoa Peninsula section was acquired for widening of the peninsula’s main road, nearly 3 years after the Auckland Transport board determined it was no longer needed for that purpose and 2 years after the rationalisation process began, an Auckland Council committee will determine on Tuesday whether the site will be sold.

That’s the easy question. The more difficult one – which the council’s finance & performance committee is most likely to reach to maintain consistency – is that the return from the sale should go into the general council pot, not to a local preference.

Through the 8 years of the super-city Auckland Council, the council has determined that funds from asset disposal should be assigned to priorities wherever they occur in the region, not necessarily to the locality of the disposal.

The property up for a disposal decision on Tuesday, 8 Hiwi Crescent in Stanmore Bay, was bought by the former Rodney District Council in 1998 to enable widening of the main peninsula road. It’s 100m uphill from a busy new supermarket – and from the start point for the long-mooted Penlink crossing of the Weiti River, which gets on to transport infrastructure priority lists from time to time and then gets knocked off again.

Correction: I wrote initially that the vacant 809m² section was declared a reserve while the roadworks were awaited. That’s been questioned and I can’t find any reference to the reserve status tonight. Council property arm Panuku Development Auckland has a disposal budget to meet ($24 million by 30 June next year), has undertaken consultation and has concluded it’s time for this asset to go. A neighbour has expressed interest.

The Hibiscus & Bays Local Board endorsed its sale, but asked that any sale proceeds be allocated to a relevant Penlink transport infrastructure budget, and will make a presentation to the council committee’s Tuesday meeting to argue that point.

The committee’s advice is that such an allocation wouldn’t accord with council financial policy.

Links:
8 Hiwi Crescent, Stanmore Bay property information    
Finance & performance committee, Tuesday 18 September at 9.30am, Town Hall:
8, Disposal recommendations report September 2018
Recommendation
30R Birmingham Rd, Otara, property information 
8 Hiwi Crescent, Stanmore Bay, property information 
Bob Dey Property Report diary, week 17-23 September 2018

Attribution: Council committee agenda.

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Council wades into deep water in marinas debate

Published 5 September 2018
After receiving a brief report on a marinas strategy on Monday, Auckland Council’s planning committee shambled through a debate yesterday on 3 recommendations & how to replace them with something more appropriate.

Writing resolutions by committee, on the trot, is a no-no for good governance. And planning does, as the word hints, involve aforethought.

Auckland Council has had nearly 8 years to put some thought into marinas policy, and some of its predecessors had plenty of time to ponder policies on them too.

The Bayswater marina’s original developer, the late Martin Jones, spent over 25 years developing the basin and working on plans & consents for a village beside it.

Now Simon Herbert, who bought the Bayswater marina from Mr Jones and has since acquired the Westpark (now Hobsonville) marina and Pine Harbour marina at Beachlands, is pursuing apartment plans for all of them.

Sale opponents form group

In June, users of 5 marinas (including the 3 now controlled by Mr Herbert through Empire Capital Ltd) set up an organisation to oppose what they saw as Auckland Council’s agenda to sell community-owned waterfront land at the marinas.

The Auckland Marina Users Association drew support from users at Pine Harbour, Bayswater, Hobsonville, Gulf Harbour & Westhaven.

Association spokesman Euan Little said in June that Panuku Development Auckland, the council development arm, was operating as the council’s agent and had already begun the sale of marina assets using “highly questionable legal & subversive tactics…. All of these activities are being conducted under the guise of council extracting value – undisclosed cash settlements – from ‘non-strategic land assets’.

“How can Auckland Council justify a ‘non-strategic’ classification for marina waterfront land in the City of Sails?”

At the council committee meeting yesterday, Marina Users Association chair Richard Steel

Users group says define the scope first

Marine users association chair Richard Steel said in the public input section of the meeting the council had come up with a token strategy to enable Panuku to sell marina land.

He said boat use had doubled in New Zealand in the last 20 years, and the new association believed the council should stop marina land sales until it had completed a strategy.

“There’s been a significant erosion of trust in the boating community because of the approach taken so far. Serious consideration should be given to the independence of those scoping because both the council & Panuku are conflicted.”

He said scant consideration had been given to feedback, and this feedback from users wasn’t reflected in reports before the council.

Mr Steel said the council’s first task should be to define the scope of its inquiry, then set a timeline. He said Auckland had 12 marinas, all community assets & paid for by users, and they had waiting lists for marina berths, but the council was only looking at how to deal with those in which it had an interest, although the council had control of waterfront activity: “How can you rule out 50% of the marinas in Auckland and call it a strategic plan when council has control of all these functions?”

Mr Steel said Nelson City Council had formulated a marina strategy in about 6 months last year, and it was a good document: “It actually combines marina strategy with placemaking strategy. It’s quite a visionary document. It was also conducted by an external supplier. Interestingly in Nelson, they concluded there was a better outcome for Nelson if they retained ownership of the marina.”

Council debt iceberg in background

Perhaps with the council’s high debt level, and the requirement on Panuku to achieve $100 million/year of land sales, mayor Phil Goff asked Mr Steel where the costs should lie if facilities for marina users were intensified. Mr Steel: “I think that’s an issue really to be addressed by the strategic plan.”

A second question from the mayor: “To the extent there is a private use of marinas, to what extent do you think the users are prepared to bear a fair share of the costs of that development?”

Mr Steel said that, under lease arrangements, berth holders paid for parking and would be responsible for redevelopment of the marine infrastructure.

Newman says start with empowering acts

Cllr Daniel Newman added, during debate, that the overlay of empowering acts for marinas hadn’t been revoked: “The first thing I want is what Parliament said. One, you can’t dispose of boat harbours unless for the purpose of providing boat harbours. Secondly, we have a quite unhelpful situation re these marinas, we have a unitary plan which contradicts what Parliament said in the first place. Third, I do have an issue about the role & scope of Panuku. I don’t engage real estate people necessarily to devise masterplans.”

Deputy mayor Bill Cashmore asked Mr Steel how important the public transport role was at marinas. Mr Steel said one reason put forward for developing apartments at marinas was to get ferry users, but the ferries had plenty of passengers without those apartments.

Cllr Mike Lee said the answer was to consult before a strategy was formulated, and Cllr Desley Simpson tried to get the debate on track toward developing a strategy.

From a workshop on 22 August (council workshops are closed affairs, although at least one local board has recently opened the workshops it holds), staff set out the scope for preparing a strategy, and Auckland Plan strategy & research general manager Jacques Victor said direction could be drawn from the Auckland Plan.

Mr Victor said in his report for yesterday’s committee meeting that “a new set of principles/criteria may require a relaxation of Panuku’s imperative to extract monetary value from these assets, in exchange for broader community & other outcomes”.

As there was a December timeframe for completion, he said there would be limited ability to engage on the approach, so council staff would work with Panuku & Auckland Transport on it.

As the committee scrapped the first 3 recommendations on how to go about this, Mr Victor proposed a committee workshop “to develop a forward programme using the process proposed by staff, the input from the Auckland Marina Users Association and work done by Panuku Development Auckland as a starting point”.

He said no 2 marinas were the same: “To think you can resolve this in one workshop is just not realistic. Decide what you want to see on a marina, that context is set by you and then we get public input. If you do that once, then all the development plans, masterplans, it’s something you don’t have to do 6 times over for each marina. Panuku then have to show how they will accede to those outcomes.”

The point of the exercise: marina land sales

The mayor felt there was no need to write in a clause preventing sales while a strategy was written, as several on the committee were suggesting, “because any sale has to come to the finance committee (the same people as on the planning committee) anyway, and we’d look pretty stupid if we sold anything before having a strategy”.

But that was the precise point which brought the whole question to the fore. Some at the council, and the berth users, saw negotiations underway which would lead to apartment development. So, a full circular argument had been achieved.

Cllr Simpson suggested the council form a steering group with stakeholders, then bring the question back to the planning committee within 6 months.

Cllr John Watson said the council had “sustained some reputational damage” through this whole process, including during public engagement sessions at the Westpark & Gulf Harbour marinas: “At Westpark over 90% of the public who’ve engaged have opposed the sale process & what’s proposed by Panuku. At Gulf Harbour it’s been unanimous opposition of the sale of the marina. The public, the berth holders, the ferry users all saying the same thing, and that’s a very unusual thing.

“Nelson have got a very good strategy. Surely the super-city can come up with a strategy (for council-owned marinas & otherwise), but let’s start with owned.

The outcome of it all is that the committee will hold a workshop to discuss a strategy & a forward plan regarding the future of Auckland’s marinas, and to stall land sales until that work (which mean writing a final strategy) is done.

Links:
29 November 2017, Nelson City Council marina strategy

Earlier stories:
27 October 2015: Herbert buys Pine Harbour business & land
7 February 2014: Herbert freeholds Bayswater reclamation, says development becomes more viable
6 August 2012: Bayswater hotel – harbour’s business edge or backwater anomaly?
11 March 2009: Court rejects intensive residential development for Bayswater marina land
12 June 2006: Intransigent opposition stops Bayswater marina workshops
27 March 2006: Herbert agrees Bayswater access strip, talks new design round marina
9 April 2003: Council environmental specialist responds to Bayswater judgment article
7 April 2003: Judge uses bizarre reasoning to keep Queen’s chain at Bayswater
2000: Boutique hotel, more apartments in redesign

Attribution: Council committee meeting & agenda.

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Council funding inquiry terms released, and Selwood questions their constraints

The Government released the terms of reference yesterday for a Productivity Commission inquiry into local government Funding & financing arrangements, and Infrastructure NZ said they’d constrain an objective assessment of all options.

Finance Minister Grant Robertson.

Finance Minister Grant Robertson announced the inquiry at the Local Government NZ annual conference on 15 July, saying it would investigate the drivers of local authority cost pressures and provide recommendations for how councils can maintain & deliver services & infrastructure in cost-effective ways.

In the terms of reference, Mr Robertson & Local Government Minister Nanaia Mahuta said local government cost pressures had grown significantly since the Shand inquiry report was issued in 2007, and that rates & payment increases had outpaced increases in the local government cost index.

They said some high-growth councils – Auckland is the most notable – were coming close to covenanted debt limits, constraining their ability to finance further infrastructure investment, while other councils took on very little debt.

Broad scope, but….

The scope of the inquiry seems wide: “Where shortcomings in the current system are identified, the inquiry is to examine options & approaches for improving the system of local authority funding & financing.”

Among other approaches, the Productivity Commission is asked to “bring new & innovative thinking to these issues”, investigate cost pressures, examine funding & financing models and how to manage transition to new models, and consider regulatory changes.

The ministers ruled out of scope some aspects of council finance which had already been well canvassed – mechanisms for rating Maori freehold land & Crown land, the valuation system & practices, and substantial privatisation.

The final report is due by 30 November 2019.

Inquiry director Steven Bailey said: “The commission has previously completed inquiries into local government regulation, better urban planning, using land for housing & housing affordability and is looking forward to assessing & analysing this sector further.”

He said the commission would publish an issues paper in October, outlining its proposed approach, the context for the inquiry and a list of key questions to be addressed.

So, what’s missing?

Stephen Selwood.

Infrastructure NZ chief executive Stephen Selwood saw ruling privatisation out of scope as precluding an inquiry into asset recycling, which had been a big success in New South Wales and has been started on a smaller scale by Auckland Council through its property agency, Panuku Development Auckland.

Mr Selwood also questioned leaving rating Maori freehold land & Crown land out of the inquiry.

Mr Selwood said: “It is particularly disappointing that ‘asset recycling’ – the process of selling down public shareholding in one public asset in order to invest in another more valuable asset – has been precluded from the terms of reference.

“Asset recycling is enabling Australia to respond faster & much more effectively to their growth challenge than New Zealand.

“New South Wales alone will spend $A14.7 billion on transport improvements this year compared to around $3 billion across New Zealand – twice what we are on a per capita basis. It has been able to do this by selling down nearly $A50 billion of underperforming assets in the last 5 years and using the proceeds to deliver heavy rail, light rail & roading, as well as urban redevelopment, schools & health investment.

“With better services and fewer public funding constraints on development, the Aussies are addressing homelessness & deprivation whilst investing tens of billions in road & rail transport infrastructure.

“Research has shown the asset recycling programme in New South Wales has very high public support – 61%, with only 9% opposed – when people understand why the programme is in place and where the money is going.

“High growth councils around New Zealand would provide a much better public service by selling down shareholdings in ports, airports or low-performing assets and ‘recycling’ the proceeds to invest in core transport & water.

“In Auckland, partial or full sale of Watercare would enable the council to release billions in capital to invest in stormwater, floodwater & transport infrastructure and would allow the company to leverage its balance sheet to invest in water infrastructure to support growth.

“The opportunity cost of having public money tied up in non-essential services is worse congestion & a prolonged housing crisis.

“If, for some reason, New Zealand is different than Australia and if advice from the OECD, World Economic Forum & others on good capital management is misplaced, the Productivity Commission is best placed to make that call.”

Rating exclusions

“The same can be said for the rating of Crown & Maori land. It is extraordinary that the Crown considers councils to be core infrastructure providers, but will not pay them to deliver services to Government assets like schools, nor even take advice on the issue.

“It is encouraging that the Government has launched this inquiry, but given the constrained terms of reference that the Productivity Commission has been given, the potential outcomes of the study have been compromised at the outset.”

Links:
Terms of reference, local government funding & financing.pdf
2007 Shand Report – local government rates inquiry documents
Department of Internal Affairs: Local government funding project

Earlier story:
16 July 2018: Finance minister calls Productivity Commission in to examine local body funding

Attribution: Ministerial & Infrastructure NZ releases.

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Putting change in context

Over the last 3 days the Government has provided context for change.

Finance Minister Grant Robertson made the change in direction from the previous National-led government distinct yesterday in a speech to the Local Government Association’s annual conference in Christchurch.

His central point is to move away from the purely economic measure of gross domestic product (gdp): “We are taking a broader view of success, by looking at how we improve the living standards & wellbeing of all New Zealanders.”

He also wants to replace the broken local council funding system, but that at the moment is a more complicated story.

Housing & Urban Development Minister Phil Twyford’s aims & preferred methods are distinctly different from those of predecessor Nick Smith, as he made clear in a visit to Mangere on Friday for the start of the programme to regenerate Housing NZ stock: “This is a first for a total joined-up approach for transitioning infrastructure & regeneration.”

And in tertiary education, Education Minister Chris Hipkins advanced his thinking on Friday on appointing a commissioner to replace the board at Unitec. From what I can see in board documents, Unitec’s problems were more about national governance than what Unitec itself was trying to achieve, but the outcome ought to be a vast improvement in handling education for trades, particularly those related to construction. The aim: to prioritise vocational education & training after a period when funding clearly didn’t match that aim.

I’ve posted separate articles on Mr Robertson’s speech and Mr Twyford’s visit to Mangere. You can also check the links below to Mr Robertson’s speech and Mr Hipkins’ brief statements on Unitec (no story on that one at the moment).

My own view:

I haven’t analysed the wellbeing & living standards framework methods of calculation, but I know gross domestic product is a poor measurement which was being misused. For some time I’ve preferred to calculate GDP per capita to see if New Zealand’s economy was actually strengthening, given that 4 years of high migration inflows ought to lift overall production, but not (at least immediately) raise growth/head.

Related stories, 16 July 2018:
Putting change in context
Robertson outlines focus shift from GDP measure to wellbeing
Demolition starts on Mangere regeneration project
Finance minister calls Productivity Commission in to examine local body funding

Attribution: Government announcements.

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Robertson outlines focus shift from GDP measure to wellbeing

Finance Minister Grant Robertson outlined yesterday how the Government intended to revert to the 2002 version of wealth as a target for the nation – wellbeing, instead of gross domestic product.

In a speech to Local Government NZ’s annual conference in Christchurch, Mr Robertson said the coalition government elected last year recognised that it faced major challenges, and couldn’t tackle them alone. He outlined how central & local government could work together to achieve better outcomes for all New Zealanders.

The central focus of Mr Robertson’s address:

“For us in central government, this means doing things differently and measuring success differently.

“Previous governments have measured success in terms of economic growth – simple measures such as GDP (gross domestic product). But while measures like GDP remain important indicators of economic activity, they do not paint a full picture of people’s wellbeing or living standards.

“Many of our international peers have been envious of the GDP growth New Zealand experienced in recent years. But we’ve also seen increases in statistics that suggest that growth did not result in real tangible improvements to many people’s lives.

“For example, our levels of homelessness have been described as the worst in the OECD; the number of children living in poverty is not something we can be proud about, and tens of thousands of our young people are not in employment, education or training. This is not success.

“We believe that economic growth is a means to an end, not an end in itself. We are taking a broader view of success, by looking at how we improve the living standards & wellbeing of all New Zealanders.

“By placing wellbeing at the heart of what we do, we will be able to measure the extent to which our policies & investments are making real improvements to people’s lives.”

The living standards framework

Enter the living standards framework (LSF), which Treasury is developing: “The LSF uses a set of indicators for the current wellbeing of New Zealanders, and for their future wellbeing, based on the stock of the 4 capitals which determine intergenerational wellbeing: financial/physical, natural, human and social.

“This work will underpin our world-first Wellbeing Budget in 2019. This budget will be the first major step for the Government in applying a wellbeing framework to strategic decisions.

“Wellbeing is not only driven by central government actions. We recognise the crucial role local government plays in maintaining & enhancing New Zealanders’ wellbeing through the services, infrastructure, regulations & placemaking you provide to your communities.

“This was factored into the original Local Government Act 2002, by requiring local government to focus on promoting the social, economic, environmental & cultural wellbeing of communities, in the present & for the future. However, in 2012 the previous government removed these 4 wellbeings from the act, arguing that local government needed to be ‘streamlined’.”

Wellbeing bill before select committee

The Local Government (Community Wellbeing) Amendment Bill, which is before a select committee, is intended “to restore the wellbeing needs of communities to their rightful place as a central focus of local government decisionmaking, recognising the important role local government plays in ensuring people’s wellbeing.

“There is an obvious overlap with the 4 capitals of the Treasury’s LSF, meaning that both local & central government will soon be working with a closely aligned core focus on improving the wellbeing of our people.”

The power game

The Robertson line also shifts the use of power, which was firmly at the centre under the previous government, until long negotiations wrought change in the Auckland transport alignment project (ATAP) between the Government & Auckland Council.

That revised project was in sharp contrast to the approach of former housing minister Nick Smith over Auckland Council’s questioning of aspects of the government-council housing accord & special housing areas, where the minister told the council that, if it didn’t act quickly, the government would take over the housing area approval process.

Mr Robertson: “The relationship cannot be Wellington telling you what to do. Rather, we want to work with you to help deliver local solutions to local issues.

“For example, with our Provincial Growth Fund we aren’t taking a top-down approach. We aren’t interested in coming to tell you what you’re good at and what you should invest in.

“The ideas are better generated from the ground up. We want you to tell us what would benefit your region. That’s the only way such an initiative will work.

Funding solution required

“But we understand that for local government to be in a position to provide local solutions, you need the ability to finance them.

“We know there has been a huge increase in demand for investment in infrastructure all across the country.

“The previous government did not recognise the scale of development, maintenance & replacement of infrastructure needed to support a rapidly growing population and a surge in international visitor numbers.

“Infrastructure investment plays an important role in increasing housing affordability, by allowing for new developments to take place and catering for increasing demand on existing systems.

“We recognise there are some constraints that are preventing local authorities from effectively funding their obligations and from financing community expectations. Some of these can be described as ‘hard’ constraints, while others may be ‘soft’:

  • Hard constraints could be regulatory or legislative barriers that prevent local authorities being able to fund or finance infrastructure;
  • Soft constraints could be factors that influence the behaviour & practice of local authorities.

“Addressing the challenges of infrastructure funding & financing (IFF) is a key pillar of the urban growth agenda (the UGA). The UGA is an ambitious & far-reaching programme designed to improve housing affordability for New Zealanders by addressing the fundamentals of land supply, development capacity & infrastructure provision.

“IFF is specifically about reforming the existing system to provide a broader range of funding tools & mechanisms, as well as creating alternative financing models. The underlying question is whether there are funding or financing constraints hindering the timely rollout of infrastructure.

“Efficient construction of infrastructure in support of urban developments is, of course, a key determinant of the rate of land supply & therefore housing affordability.

“Different councils face different issues, yet affordability, availability of funding streams & appropriate pricing are key to any solution. We acknowledge that some high growth councils are up against their debt limits, so financing is the key constraint. That’s why we are also exploring the potential for diversifying the available sources of project financing.

“Project financing requires a dedicated revenue stream to service that capital; a revenue stream derived from charges for the provision of the infrastructure.

“The ability to identify & charge beneficiaries influences the viability of those projects, and so provides an important signal as to which projects should proceed & when. So, there is an efficiency element to this work as well.

“Central government will be exploring ways to get past funding & financing barriers. Yet we cannot do this in isolation. This is about partnering with local councils to ensure that you have the tools to provide the much needed infrastructure for your communities.”

Link:
Finance Minister Grant Robertson, 15 July 2018: Full speech to Local Government NZ conference

Related stories, 16 July 2018:
Putting change in context
Robertson outlines focus shift from GDP measure to wellbeing
Demolition starts on Mangere regeneration project
Finance minister calls Productivity Commission in to examine local body funding

Attribution: Robertson speech.

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Finance minister calls Productivity Commission in to examine local body funding

Finance Minister Grant Robertson.

Finance Minister Grant Robertson said yesterday the Productivity Commission would hold an inquiry into local government funding & financing.

The inquiry will investigate the drivers of local authority cost pressures and provide recommendations for how councils can maintain & deliver services & infrastructure in cost-effective ways.

Addressing the Local Government NZ annual conference in Christchurch, Mr Robertson said: “The Coalition Government has highlighted right from the outset our determination to help local government address the varied increasing cost pressures they have faced in recent years.

“The Coalition Agreement between Labour & NZ First stated that we will hold a public inquiry ‘a decade after Shand’ to investigate the drivers of local government costs & its revenue base.

“Cabinet has agreed the terms of reference for the Productivity Commission inquiry. The commission will be able to build on its previous inquiries into urban planning, housing affordability & local government regulation.”

Mr Robertson said the terms of reference would be released shortly. They require the commission to investigate cost pressures, funding & financing models & the regulatory system for local government.

These include investigation into:

  • Cost & price escalation for services & investment, including whether this is a result of policy &/or regulatory settings
  • Current frameworks for capital expenditure decisionmaking, including cost:benefit analysis, incentives & oversight of decisionmaking
  • The ability of the current funding & financing model to deliver on community expectations & local authority obligations, now & into the future
  • Rates affordability now & into the future
  • Options for new funding & financing tools to serve demand for investment & services. This will appraise current & new or improved approaches for considering efficiency, equity, affordability & effectiveness, and how the transition to any new funding & financing models could be managed, and
  • Constitutional and regulatory issues that may underpin new project financing entities with broader funding powers, and
  • Whether changes are needed to the regulatory arrangements overseeing local authority funding & financing.

Mr Robertson said: “Since the Shand report into local government rates in 2007, local government cost pressures have grown significantly and by more than other costs faced by ratepayers.

“The pressures faced by local councils vary significantly, whether it’s the provision of infrastructure due to growing resident populations, or provision of tourism infrastructure against decreasing rating bases.

“The scale of this issue means an in-depth look is needed into whether our current structures are fit for purpose, and to identify how central government can help by cutting red tape, improving regulation and taking pressure off local government.”

The Shand Report

The Funding local government report resulted from the local government rates inquiry conducted by chair David Shand, Ernst & Young national real estate group head Graeme Horsley & Massey University associate professor Christine Cheyne. They made 96 recommendations in their 2007 report.

Links:
2007 Shand Report – local government rates inquiry documents
Department of Internal Affairs: Local government funding project

Related stories, 16 July 2018:
Putting change in context
Robertson outlines focus shift from GDP measure to wellbeing
Demolition starts on Mangere regeneration project
Finance minister calls Productivity Commission in to examine local body funding

Attribution: Ministerial release.

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MBIE publishes guide for managing buildings in emergency

The Ministry of Business, Innovation & Employment (MBIE) has published a guide to help territorial authorities manage buildings in an emergency.

The guide describes the roles & responsibilities of central & local government and of other agencies for managing buildings in an emergency using the 4Rs framework – Readiness, Response, Recovery & Reduction.

It explains what is required for managing buildings in an emergency and provides detailed steps & checklists to help territorial authorities plan for & carry out rapid building assessments.

The guide is in 3 parts:

Part A: How buildings are managed in an emergency and who is responsible
Part B: Preparing for and managing buildings in an emergency
Part C: Appendices – references and resources for managing buildings in an emergency, including readiness and response checklists.

Link:
Managing buildings in an emergency – guidance for decision makers and territorial authorities

Attribution: MBIE release.

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