A Case of the Vapours for All Parties Bridges's

HUGO Assessing the economic and political environmentvision in New Zealand Confidential to August 24 2018 HUGO members A case of the vapours for all parties Page 2 All four main political parties are experiencing different cases of the wobbles as we head towards spring. Labour is masking how bogged down its major reforms are becoming with a string of populist announcements and PM Jacinda Ardern has yet to show a return to form after coming back to work last month. The apparent willingness of the Provincial Growth Fund to back projects dear to NZ First’s ministers’ hearts is becoming dangerously apparent, and the Greens remain internally fractious, despite some headline-grabbing wins of their own recently. Bridges’s leadership Page 2 The belief, if not the proof, that the leak of Simon Bridges’s national tour travel expenses was an ‘inside job’ is starting to erode the National Party leader’s standing, as much because of his willingness to give the issue media oxygen as because of what it says about disunity in his caucus. The return of TOP Page 2 Geoff Simmons is a more personable, youth-attracting leader for The Opportunities Party than Gareth Morgan, but he will need to assert his leadership sooner rather than later. While he continues an extended OE, elements of the party appear to be opening discussions with new, potential major donors that could come back to haunt the party. The politics of trees – natives vs pinus radiata Page 3 The govt has made a surprising call by targeting 2/3 of the nearly $500m from the Provincial Growth Fund for tree planting at native afforestation. While politically more appealing than swathing the countryside in pine, native forests are much more expensive to establish and take far longer to mature. Their contribution to meeting carbon sequestration goals by 2030 will therefore be much smaller than exotic forest planting, increasing the size of NZ’s fiscal challenge in meeting Paris climate change treaty goals. Public sector productivity Page 3 The Productivity Commission’s final report on public sector productivity makes depressing reading and suggests the scale of the challenge is far greater than the reorientation envisaged by State Services Minister Chris Hipkins’s reforms to shift focus from ‘outputs’ to ‘outcomes’. Fonterra’s ructions play out on DIRA canvas Page 7 Fonterra’s big changes at the top – with both a new chairman and an acting CEO and a cancelled CEO search – are coinciding with the expected timetable for public consultations on its future structure and legislative arrangements under the review of the Dairy Industry Restructuring Act, key elements of which are timetabled to occur in the third and fourth quarters of this year. Kiwi dollar – how low can it go? Page 6 Plausible scenarios exist for a further depreciation of the NZD against the USD to perhaps as low as US63 cents, although the kiwi is expected to hold up against the Aussie dollar. Text finalised August 24 Contact: [email protected]. No responsibility is accepted for acts or omissions by clients as a result of items herein. © The Hugo Group 2018 HUGOvision August 24 2018 POLITICS AND POLICY Fragile times Parker’s ‘water tax’ policy before the last election, the govt is drifting into that territory again, with the All four major political parties are showing signs of same potential as the foreshore and seabed issue fragility as the winter wears on. in the mid-2000s to wound Labour’s recovering Labour’s response to a wider sense of drift and a relationship with Maori voters. The Maori Party is grumpy business sector has been a string of recent banking on such godsends for its revival. populist announcements – an MPs’ pay freeze, axing public sector CEO bonuses, action on wheel- Bridges misjudges the spending clamping, funding the cycleway across the Auckland leak Harbour Bridge and banning single use plastic After a reasonably sure-footed start, Simon Bridges bags (the latter two also claimed by the Greens). has let himself be spooked by the leak of the travel However, they do little to mask the sense that the expenses for his national roadshow earlier this year. administration is struggling with a combination of By allowing the issue to dominate the news agenda slow implementation, unready policy, and pratfalls. for several days, Bridges has played into the hands There is no threat at all to Jacinda of whoever leaked the information. The forthcoming CEO Retreat 2019 Ardern’s leadership, but the PM is inquiry, led by Mike Heron QC, will only keep Thank you to all who less visible after returning from the issue alive, as will the latest reports alleging attended the CEO Retreat at maternity leave and is facing an anonymous appeal from the supposed leaker, Millbrook last week. We’ve mounting pressure to make stoke had great feedback, with a National Party MP. All this achieves is to substantive policy advances to highlights including Simon speculation about whether his position is safe. match rhetorical skills that play Moutter’s discussion of An investigation that requires parliamentary Spark’s ‘Agile’ journey, Helen well to her base but may wear thin, colleagues and staff to make their computer files Clark’s frank views on global especially if trade unions are seen available is already hurting his stocks internally. politics, and the intersection to be exploiting the govt’s labour of privacy and bio-ethics relations agenda. from Kings College London’s TOP – partner for National or Bronwyn Parry. Whether justified and accurate or Next year’s Retreat is not, anecdote is rife among firms Greens spoiler? already in planning and that unions have been throwing Rather than treat The Opportunities Party, which will be held at Millbrook their weight around, demanding re-emerged this week under new leadership, as a from August 15 to 17. access to workplaces on the basis potential ‘blue-green’ coalition partner, National is Mark your diary now! that the political tide has turned in primarily hoping it will assist with a vote-wasting their favour. That is stoking fears, strategy that could see it win 2% of the vote and particularly among small and medium-sized firms, pulling the Greens under 5%. In that scenario, about both less flexible workplace arrangements and National would probably still need NZ First, the potential for large public sector pay settlements although senior figures continue to dare hoping to flow into higher private sector wage demands they can win outright as a single party. At the last than previously anticipated. election TOP competed for the same inner city vote as the Greens. However, its future is precarious. It Whether firm profitability is strong enough to is understood to be living off $100,000 from Gareth absorb such costs is less important than the impact Morgan who has said he will donate no more. That is of these fears on business sentiment. setting off an apparently uncoordinated scramble for The perception that NZ First is making too many funds from elsewhere. For example, some elements policy gains is also hurting Labour, although NZ from TOP are understood to be talking to Owen First itself is in danger of reaching a high water Glenn as an alternative funder, but the party’s new mark for pork-barreling with the nakedly political leader, Geoff Simmons, knows nothing about that. funding for three all-weather racecourses from the He is in Europe at the end of a long overseas holiday, Provincial Growth Fund. spending time in Germany and Finland over Labour is also in trouble on freshwater policy. Its coming weeks to examine their education systems. antipathy to engagement with the Iwi Chairs Forum Simmons is a useful antidote to Morgan’s divisive, is political rather than practical and could lead if newsworthy personality. He is smart, phlegmatic sooner or later to court. Many of ICF members will and telegenic, and noted in a recent article on the have to be part of consultation on David Parker’s 2017 election that “a delicate cocktail of money, proposed reforms, whether or not they wear ICF inspiration and fun” – and a willingness to work hats when they do so. Despite vowing that it social rather than mainstream media to reach wouldn’t repeat the self-inflicted damaged done by 2 younger voters – is the key to electoral cut-through. HUGOvision August 24 2018 POLITICS AND POLICY The politics of trees Change Minister James Shaw raised the prospect of a highter cap in releasing the terms of reference for the Devoting two-thirds of govt-subsidised forest long-signalled review of the scheme. While it is less planting to native species is both unexpected and pressing in the current environment, examination of problematic for the initiative’s capacity to help a floor for carbon prices should not be ignored in this mitigate the multi-billion dollar carbon emissions process, given the farcical prices NZUs reached when liability the country is likely to face after 2030, and so-called ’Ukrainian credits’ flooded the market. the cost of establishment. Meanwhile, the Productivity Commission’s final report Native forests are far slower-growing than mono- on achieving a low carbon economy is due on Sept 4. cultural pine plantations, so absorb far less carbon in their early years of growth. They are also far costlier Change of heart on PGPs to plant – native seedlings cost around $5 vs 50 cents for pine – and plantings cannot be monocultural. A Agriculture Minister Damien O’Connor got media variety of species is required and plant failure rates mileage in Opposition by criticising the Primary are higher than with pine.

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