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Insights 22: 22 June 2018
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Housing reform vs populist gimmickry
Dr Oliver Hartwich | Executive Director | oliver.hartwich@nzinitiative.org.nz
It is hard to introduce populist policies without hurting the economy.

That is the takeout from the Government’s decision to water down its planned restrictions on foreign property buyers. Because the new rules would have been detrimental to new residential development, we will now have a law that is tough and permissive at the same time.

Unfortunately, it will also be a highly complicated piece of legislation.

Where previously foreign-based buyers would not have been allowed to own any residential property in New Zealand at all, they shall now be able to do so in multi-unit housing developments. This probably means apartment blocks.

However, not just any apartment blocks but only those with a minimum of 20 units. And only when the foreign owners do not occupy the units themselves. And only if not too many of these units would be sold to foreigners. Any questions?

Well, I actually have a few. Why would any foreigner want to jump through such bureaucratic hurdles? And why the minimum of 20 units? Why not 15 – or 25? And why would it matter if any or all such units are owned by foreigners? Would that make them any less inhabitable? Considering that their foreign owners would not be allowed to live in them, they would all be let to residents anyway.

The foreign buyers ban has always been a piece of symbolic activism. Rather than fixing the underlying causes of our housing crisis, the ban only pretends to do so by scapegoating foreign buyers.

So in a way it is a sign of progress that the Government is now at least allowing foreigners to increase the housing stock by developing new property. Hooray for not shooting ourselves in that foot!

But seriously, what the Government should do is to come up with some real policies that would make a genuine difference to housing development. Simplifying planning processes, incentivising councils for development, allow greater private funding of new residential infrastructure: These are measures that would have a massive impact.

Instead what we are getting is a piece of populist activism from which only the most offensive elements are now pulled. It will also require more bureaucracy to monitor compliance. Should we be grateful for that?

Or should we not rather remind the Government that they were elected on a platform of promising radical housing, planning and infrastructure reform, not populist gimmickry?


Sovereign risk and the divine right to rule - at a whim
Dr Bryce Wilkinson | Senior Fellow | bryce.wilkinson@nzinitiative.org.nz
Last week a long-standing geologist friend chewed my ear about the government’s irresponsible ban on new offshore oil and gas exploration.

I call it irresponsible because on the evidence no meaningful consideration was given to the interests of New Zealanders. Industry was not consulted; Cabinet was reduced to a rubber stamp. The ban was not prior Labour Party policy.

Respected New Zealand Herald columnist Fran O’Sullivan wrote that it was rushed through by the three coalition party leaders “so it could be announced on April 12 just before the Prime Minister headed for Europe”. On this trip she could “make her debut as a climate change warrior”. How nice.

The Government has made no case that the ban will have environmental benefits. The Ministry for Business, Innovation and Employment had pointed out that it could increase global emissions.

Nor has the government provided an economic justification. Why whimsically destroy a successful and skilled energy industry cluster in Taranaki?

Presumptively, the most efficient policy for reducing emissions and encouraging carbon sinks is a uniform price on carbon. A ban on gas implicitly subsidises coal.

The damning evidence of indifference to New Zealanders’ interests is the absence of any supporting cost-benefit justification.

Minister Megan Woods reportedly said one was not done because no one knows how much gas is in the ground! As a reason for banning exploration regardless, this is beyond farcical; it is deeply unnerving. Why the haste anyway?

My friend pointed out that the resilience of electricity supply currently depends on backup from quick-fire gas turbines. On current estimates New Zealand has 10-11 years of gas left.

To target 100% renewable electricity generation without a cost-benefit assessment is additionally irresponsible. Our renewable proportion is already extraordinarily high.

The political and economic costs of achieving electricity resiliency in the absence of fossil fuels could be eye-watering. At vast expense, we could cover the country with windfarms as largely idle backup, and still not achieve the resilience of gas backup.

Investors in long-term capital projects need to be confident that future governments in coming decades will provide a stable and predictable investment environment. 

The government’s dreadful decision process has told them, irreversibly, that this government cannot be trusted to do that.

Risk from unpredictable government is called “sovereign risk”. It makes a country poorer.


An assault on our senses
Ben Craven | Project Coordinator | ben.craven@nzinitiative.org.nz
A couple of years ago we got the lads together and set off on a South Island road trip. It was a great opportunity to get away from the rat race and show some of my North Island mates around the South Island. Beers, banter, and beaut scenery.

On day three we pulled into Westport. “What’s that smell?”, asked one of the blokes.

Bemused, I responded to my North Island friend, “Coal, mate. It’s what they do here.”

The West Coast is synonymous with mining. And that’s why the recent decision to refuse a new mine is a kick in the guts for their local economy.

Last week Conservation Minister Eugenie Sage and Energy Minister Megan Woods declined an application for a new coal mine just out of Westport. Perhaps, like my friend, they both have a fastidious sense of smell.

On the West Coast, mining is a way of life that goes back well over a hundred years. Just down the road in Blackball is the spiritual home of the Labour Party. A party founded by miners.

Just as back then, Coasters know that mining means jobs. Well paying jobs. The Te Kuha proposal would have directly created 64 full-time jobs, and another 24 indirect full-time jobs throughout the region.

But can you imagine if that smell got any worse?

With Minister Sage approving the Otakiri Springs water bottling decision a few weeks earlier, West Coasters may have got their hopes up that the Te Kuha mine decision would go their way.

The Minister and government quite properly faced a backlash from their party members over the water bottling decision. It would give small town locals jobs and upset the sensibilities of the city dwellers who vote based on decisions affecting an environment in which they don’t live.

Public submissions to the Department of Conservation on the mining decision largely treat the interests of West Coasters as being as important as the comments section on the Stuff website.

Coasters may have thought that the mine would provide them with high paying jobs and more money in their regional economy.

But they really ought to be thankful for this decision. It shows that the government truly cares about the welfare and wellbeing of New Zealanders.

Yes, it might be a kick in the guts for the local economy. But how else could city-based yuppies pass through Westport without an assault on their senses?
 
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