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Insights 36: 30 September 2022
The Australian: Oliver Hartwich on the Govt's legacy project
RadioNZ: Eric Crampton on competition and antitrust laws
NZ Herald: Michael Johnston on whether MoE is fit for purpose

Russia’s war against the West escalates
Dr Oliver Hartwich | Executive Director |
The war in Europe is entering its most dangerous phase yet. Over the past week, we saw 300,000 Russian soldiers mobilised, scam referenda in Russian-occupied territories, and apparent bombings of the Nord Stream pipelines.

It is a European war, not just one against Ukraine. Ukraine is the battlefield, but Russia’s war is with all of Europe and its Western allies.

The war is not new, either.

For Ukraine, it started in 2014 with the annexation of Crimea and the Donbas region. And for the West, Russia has been actively sabotaging its politics and economy for many years.

It is both an escalation and a continuation.

US intelligence reports show Russia spent hundreds of millions of dollars destabilising Western democracies. The beneficiaries included groups and parties that polarise societies.

France’s far-right, for example, received a ‘loan’ from a Kremlin-affiliated bank. The funding helped Marine Le Pen, who was runner-up in the last two presidential elections.

Russia’s interference in the 2016 US presidential election is well known. The only question is whether Russia’s preferred candidate, Donald Trump, was complicit.

Russia also backed many environmental pressure groups in Western countries. These then opposed fracking in Europe. That way, Russia helped maintain the continent’s dependence on its gas.

Russia’s secret and not-so-secret interference in Western affairs was highly effective. There has never been a more fractured political landscape: from Brexit to populist parties everywhere to a possibly radical new Italian government.

This pattern of psychological warfare fits the latest developments.

It hardly makes a difference whether the two pipelines exist. Gas was unlikely to flow through them again. Blowing them up was the only value the two pipelines still had. To do so on the same day the Norwegians and Poles opened their own new pipeline increased the shock.

The fake referenda leading to the annexation of Ukrainian territory will justify Russia’s nuclear weapons use. Its new military doctrine justifies the use of nuclear bombs to protect Russia’s “territorial integrity”.

Claiming Ukrainian territory as Russian provides the Kremlin with an excuse to escalate. It does not even need to act on it to create even more fear in the West. The same applies to partial mobilisation. The terror comes with the announcement.

We should let go of the illusion that normality will return once the war in Ukraine is over. Russia’s war on Western democracy preceded its military aggression on Ukraine. It will continue as long as the Russian leadership remains in power.

That is not an optimistic assessment. But a realistic one.

Let the FPA battles begin
Roger Partridge | Senior Fellow & Chairman |
Businesses should brace for next week’s return of the Government’s Fair Pay Agreements Bill. The Bill had its first reading in April. It then faced a battering from business groups before the Select Committee in June.

But the smart money is on the Bill returning to parliament largely unchanged. With Labour desperate to deliver on a key 2017 election promise, the Bill looks set to pass into law before Christmas.

Despite the Bill spending five years in gestation, the case for returning to 1970s-style compulsory collective bargaining across entire industries or occupations remains missing in action. Neither the Jim Bolger-led Fair Pay Agreement Working Group nor legions of officials have found convincing arguments for upending New Zealand’s flexible labour market settings.

The folly of the new policy will now have to play out in practice.

The first hurdle will be defining an “industry” or “occupation.” Retail NZ CEO Greg Harford has volunteered his organisation to negotiate with unions on behalf of “retailers.”

But just how many different retail “occupations” or “industries” exist? Is a computer software salesperson in the same occupation as a worker in a fast food outlet? Is a rural farm store or a supermarket in the same “industry” as an upmarket High Street clothing boutique?

Demarcation disputes addressing issues like these have been absent from New Zealand’s industrial relations for three decades. By introducing individual employment agreements in place of sector-wide industrial awards, the Employment Contracts Act 1991 ended this type of productivity-sapping debate. No longer.

Before the ECA, the number of separate industrial awards exceeded 1,900. This is more than 20 times the 97 “occupations” Bolger’s working group identified in its 2018 report. Whether simplistically or deceptively, the working group treated all 107,000 retail “sales assistants and salespersons” as members of a single occupation.

But the larger the group of employees covered by a Fair Pay Agreement, the less workable will be the outcomes for businesses needing terms and conditions tailored to their individual workplaces.

Even by the 1970s, cracks were emerging in the compulsory centralised wage bargaining system that had dominated New Zealand’s industrial relations for most of the 20th century. It was proving insufficiently flexible to cope with the increasing sophistication of the New Zealand economy.

In New Zealand’s more complex 21st-century economy, the one-size-fits-all approach to collective bargaining will be even more unworkable.

You can almost hear the armies of employment lawyers getting ready for battle.

An (almost believable) new brief for the Environment Ministry
Dr Michael Johnston | Senior Fellow |
The Prime Minister has announced a new strategy for tackling inflation. The announcement follows recent legislation transferring responsibility for fiscal management from the Reserve Bank to the Ministry for the Environment.

Explaining the rationale for the new approach, the PM was at pains to point out that she maintains confidence in the Reserve Bank and its Governor. “He has been doing a top job”, she explained. “He has my full confidence. It’s just that the Reserve Bank has so many other things on its plate at the moment.”

The workload of the Reserve Bank began to increase in 2018 when the government handed it responsibility for maintaining maximum sustainable employment. That was in addition to its long-standing brief to keep inflation between 1% and 3%. More recently, the Bank has burnished its environmental credentials with commitments to “mitigate and manage” risks associated with climate change.

“These new responsibilities,” the Prime Minister explained, “have made it difficult for the Bank to maintain a full focus on inflation. So, we thought that the Ministry for the Environment could help them out.”

The PM said that cabinet had discussed simply merging them, together with Education, Police and Health. However, while that would have created a smooth acronym (MERBEPH), there was concern that a merger may have created unjustified efficiencies. “We didn’t build the public service up to record numbers just to slash it again,” the PM explained.

She went on to unpack the new strategy for controlling inflation. “The Ministry of the Environment will oversee the planting of one billion trees by 2050, the same year that New Zealand has committed to attaining net zero carbon emissions. Consultants have assured me that this will be a far more effective tool for controlling inflation than manipulating the cash rate.”

The Reserve Bank Governor has been quick to scotch criticism of his own organisation’s new goal, to keep global temperatures within 1.5°C of pre-industrial levels. Dr Bryce Wilkinson of The New Zealand Initiative has suggested that the official cash rate might not, on its own, be a sufficient lever.

“That’s just defeatist talk”, said the Governor. “Anyway, those guys don’t care about the environment. They’re just …“, he pauses, a look of disdain crossing his normally sunny visage, “… a pack of economists. We got rid of all of ours. What would they know about climate change? Or inflation for that matter?”

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