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Insights 20 : 5 June 2020
NZ Herald: Roger Partridge warns that Shane Jones' Forestry Bill will strangle forestry investment
Podcast: Oliver Hartwich on the importance of economic institutions
Stuff: Eric Crampton explains why water is too precious to be sold so cheaply

No sign of strategic thinking
Roger Partridge | Chairman |
With Alert Level 1 approaching, there are few signs the Government has shifted its thinking towards capitalising on New Zealand’s coronavirus-free status.

On Wednesday, Minister for Economic Development Phil Twyford fielded yet more criticism, this time for refusing to let an overseas fishing vessel undergo repairs at a Nelson shipyard.

Like the well-publicised obstructions facing Americas Cup syndicates trying to enter the country, the Nelson shipyard blockade is symptomatic of the Government’s ongoing “Fortress New Zealand” mentality.

Yet opportunity beckons.

The country’s Covid-free status is a drawcard for multinationals, international students, researchers, film studios and sports teams. Subject to a protocol of user-pays, “gold standard” quarantining, all could be safely allowed entry to New Zealand. And what a boon they would be to a Kiwi economy ravaged by the war on Covid-19!

The New Zealand Initiative has previously highlighted overseas ski teams clamouring for permits to train on the South Island’s ski fields ahead of next year’s Winter Olympics. Yet following an enquiry from New Zealand ski team head coach Nils Coberger the Initiative’s supportive overtures to Sport and Recreation Minister Grant Robertson were swiftly rebuffed. The response from Sport New Zealand claimed “Opening our borders too early would present an unacceptable level of risk to our country and may lead to more infections and deaths.”

This pessimism is revealing. A strategic, well-managed­ reopening of New Zealand’s borders should not present an unacceptable level of risk. With strict quarantining, Kiwis can be confident of containing any imported infections. And provided visitors are required to pay an appropriate bond against both quarantining and health costs, New Zealand taxpayers would be immune from economic risks too.

The Government’s reticence suggests a lack of confidence in its ability to implement “gold standard” quarantining. The low-tech contact tracing app the Government released last month suggests its doubts might be justified. So too do shocking reports over the weekend of Avatar film crew mingling with other hotel quests in Wellington when they were supposed to be in quarantine.

Yesterday, Phil Twyford explained that New Zealand had limited quarantine capacity and that “the bar is set very high” for essential workers entering on economic grounds” but his “hope” was that “over time we're going to be able to build our quarantine capacity.”

New Zealanders deserve better. Fighting off Covid-19 came at a great cost to all Kiwis. It is now time for the country to benefit from everyone’s efforts. The Government must step up.

Taking carbon and housing seriously
Dr Eric Crampton | Chief Economist |
Minister for Climate Change James Shaw this week announced substantial strengthening of New Zealand’s Emissions Trading Scheme (ETS). Total emissions will be capped, and carbon prices allowed to increase to help reduce New Zealand’s overall greenhouse gas emissions.

The Government still needs to broaden the regime to account for emissions from international travel and to establish frameworks for international carbon credit tradeability. Both require international agreement. The latter measure would go a long way towards ensuring that every dollar’s worth of effort New Zealand puts into emissions abatement does the most good possible.

A well-functioning ETS, or comprehensive carbon tax regime, must be at the heart of any serious response to climate change. Prices in those markets not only signal the value of the next bit of emission reduction, they also provide incentive to reduce emissions for those best placed to do so. Emissions reductions then happen without need for central government direction about who is allowed or required to do what. Prices coordinate activity instead.

Because petrol is in the ETS, there is no additional need to encourage people to buy electric cars. Since emissions from electricity and heating are in the ETS, there is no additional need for regulations on household carbon use and green building design – or at least none based on greenhouse gas emissions. At best, those regulations do nothing beyond what is already encouraged by the ETS. At worst, they force people into ways of reducing emissions that are more costly than simply buying and retiring credits in the ETS.

But it can be even worse. Regulation risks working at cross-purposes to other Government objectives. The Government’s proposed changes to urban planning would require councils to consider how consents might effect climate change. While councils should consider the robustness of new infrastructure near sea level, councils should not need to consider the carbon emissions inherent in a new subdivision or cement plant. The emissions are already accounted for in the ETS.

The Government’s broader urban growth agenda seeks to enable more housing. Councils stymie development because they face all the costs of growth while enjoying few of the benefits. Requiring carbon accounting in consenting gives councils another lever to block new housing while doing nothing to reduce emissions – any emission reductions would simply free up credits for other uses.

Getting serious about emissions, and about housing, requires taking the ETS seriously too.

Local Experience
Joel Hernandez | Policy Analyst |
An Overseas Experience is almost a rite of passage for Kiwis.

Unfortunately, Covid-19 is likely to keep borders mostly shut for another year or two. Until a vaccine is developed and dispensed, the Kiwi OE birthright is on pause.

For those with the travel bug (no, not that kind) an international travel quarantine might not be a bad thing after all – it might even be an opportunity in disguise.  

The Leaning Tower of Pisa is great and all, but have you seen the Gumboot Capital of the world, featuring… wait for it… a giant gumboot?! What about the legendary Big Carrot of Ohakune? Or the spectacular oversized L&P bottle of Paeroa?

Sure, Canada has the Rocky Mountains in British Colombia and the US has a cliff called El Capitan in Yosemite National Park, but have you every been to Mt Eden or Mt Wellington?

In all seriousness, Kiwis now have an opportunity to see more of what their country has to offer.

How many times have you chatted to tourists visiting New Zealand about their visits to wonderful places in the North and South Island?

Worst yet, how many of this country’s world-leading National Great Walks have you recommended over a beer in London, but which you have never walked yourself? Likewise, the Fox Glacier, Te Puia Geothermal Mud Pools and the Coromandel’s Cathedral Cove are just a few popular local attractions often without a Kiwi in sight.

Yes, the collapse in overseas travel isn’t so great. You won’t be able to taste the exotic cuisines in East Asia, see the historic landscapes in Italy or visit the vast National Parks across North America.

But, with Covid-19 uprooting everyone’s life Kiwis must make lemonade out of virus lemons.

Go and see hairy feet at Hobbiton, line-up for a selfie at Roy’s Peaks or strap on a pair of tramping boots for a hike through the picturesque Marlborough Sounds. The Hundertwasser Toilets in Kawakawa sound great too – if you need a nature break.

Besides, with the exchange rate so low you are better off spending your hard-earned lockdown dollars here anyway. The thousands of local Kiwi businesses would love to see you, I am sure of it.
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