Reserve bank governor Adrian Orr (Image: NZ Super Fund)
Reserve bank governor Adrian Orr (Image: NZ Super Fund)

The BulletinFebruary 12, 2020

The Bulletin: Coronavirus and the OCR

Reserve bank governor Adrian Orr (Image: NZ Super Fund)
Reserve bank governor Adrian Orr (Image: NZ Super Fund)

Good morning and welcome to The Bulletin. In today’s edition: Coronavirus fears loom over OCR announcement, Salvation Army release annual SOTN report, and the PM does actually trust her deputy PM.

Will the coronavirus have an effect on the Reserve Bank’s interest rates announcement today? There’s been a fair bit of speculation in the past week about that, particularly as it is the first update since the crisis really broke out. China’s economic growth forecasts are rapidly being revised down, and that has flowed through to New Zealand. The NZ Herald’s (paywalled) Liam Dann reports that the consensus among economists is that the previously predicted ‘watch and wait’ approach (holding the OCR at 1%) is expected to continue.

But it’s not quite unanimous. Writing on the Croaking Cassandra blog, former Reserve Bank Head of Financial Markets Michael Reddell argues that the OCR should in fact be cut by 50 basis points to 0.5%, similar to the response taken in relation to the 9/11 attacks, and Christchurch earthquake. His thinking is basically that we know with absolute certainty that coronavirus will affect the economy, but the question is by how much, and whether and how far the Reserve Bank should move to get ahead of it. Bernard Hickey at Newsroom agrees, saying that with inflation low, a sharp cut would “stimulate inflation and drag unemployment significantly below 4.0 percent in a way that fires up wage inflation and expectations.”

And there is some serious nervousness and pessimism creeping into the markets, reports Business Desk’s (paywalled) Jenny Ruth. The dollar fell yesterday, and finance minister Grant Robertson acknowledged that the economy would take a knock, though insisted the government’s books were in the right sort of shape to withstand it. A call will be made on the OCR later this morning, but the bank’s forecasts will be equally illuminating. And speaking of the coronavirus, the official death toll is now above 1000, with more than 40,000 infected.

One of the major news planks around the start of the year is the Salvation Army’s annual State of the Nation report. They give an overview of a range of issues, particularly with how they relate to the country’s most vulnerable citizens. The Spinoff’s Madeleine Chapman has looked over this year’s edition, picking out areas where the Sallies have noted wins and losses have been made. In particular, the report gave credit for small steps being made in areas like minimum wage increases, or combatting predatory lending. However, it also noted the increasing presence and prevalence of meth, and declining rates of housing affordability.

On the latter point, Interest’s Jenée Tibshraeny has drilled into more detail. The report argues that housing supply is now catching up with demand – it’s just that it’s not being targeted to the parts of the market that need it the most. There have been various suggestions that some sort of government announcement will be coming this week on social housing, so keep an eye out for that.

The PM can now assure the country that she does in fact trust the deputy PM. Newshub reports Jacinda Ardern said yesterday that she “couldn’t operate this Government without a trusting relationship with Winston Peters,” and that she thought her comments on Monday said the same thing implicitly. Ardern also says that she doesn’t want to pre-empt any decision by the Serious Fraud Office of whether or not to investigate the NZ First Foundation. Winston Peters welcomed the statement, and agreed that “we have a very sound, stable working relationship leading to the political stability of this country.”

Meanwhile, the latest story about NZ First Foundation donations from the Espiner-Newton coalition at Radio NZ has been released this morning. It shows tens of thousands of dollars came in as donations from the horse racing industry – a sector which has benefitted handsomely from Winston Peters’ highly active and attentive tenure as Minister for Racing.

A drought has formally been declared by the government in Northland and Auckland north of the harbour bridge, reports Farmers Weekly. The declaration unlocks government support for tax relief, emergency grants and income loss compensation. It hasn’t exactly been the easiest month for the farming industry, what with coronavirus worries, flooding in some areas and fire risk in others. Agriculture minister Damien O’Connor encouraged those who need it to reach out to Rural Support Trust services.

Several National MPs will be stepping aside at the next election, and a general reshuffle has been announced. David Carter, Nicky Wagner and Sarah Dowie will not be returning, and former New Lynn candidate Paulo Garcia will be going list-only. One News has details of who is taking on what, and a list of other National MPs who have decided to retire at the election.

A glimpse of the sort of medical workforce shortages that are right now causing problems in the regions: The Wairarapa Times-Age reports that the local hospital is now desperately short of surgeons, after an 18-year veteran resigned, just weeks after another surgeon retired. There will now be investigation of whether services can be shared with neighbouring regions, particularly around orthopedics.

There are concerns that country of origin labelling for pork will give consumers a misleading picture, reports Stuff’s Esther Taunton. Basically, imported meat could be processed in New Zealand, and then sold without being identified as being grown overseas. The changes being sought by NZ Pork are small and quite technical, but it speaks to a wider concern – that the animal welfare and farming standards can be a lot lower in other countries, and as such consumers should have a right to know what they’re buying.

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Weta head Sir Peter Jackson, left, and Rocketwerkz gaming studio CEO Dean Hall

Right now on The Spinoff: Katie Pickles suggests that it’s time a new name was found for ‘mufti days’ at schools. Dunedin gaming company CEO Dean Hall issues a furious response to the news of how much government largesse Sir Peter Jackson’s Weta Group gets. Julie Hill looks into quorn, in a wider essay about the growing food group of fake meat. Josie Adams marks Taika Waititi’s wonderful Oscar winning speech by collecting all the other times his words have made us think. Xero’s David Bell suggests three necessary approaches to turning around small business confidence in the economy. And epidemiologist Allen Cheng explains what coronavirus does to your body, and why it can make you so dangerously sick.

For a feature today, a piece I read over the summer that has stuck with me since. Stuff’s Charlie Mitchell has effectively profiled Meola Creek in Auckland, a small stream which effectively acts as a drain for getting the city’s waste into the harbour. But when it’s really stormy, it doesn’t all stay in the drain. Here’s an excerpt:

For people like Walker who live near the creek, the regular overflows have become untenable. Early in 2017, then local MP Jacinda Ardern posted a video on her Facebook page after meeting with Walker and her group.  Ardern speaks to the camera in front of a sewage outfall behind the St Lukes mall, one of the single biggest contributors of sewage into Meola, and likely among the biggest overflow points in the country.

“It just demonstrates how ill-equipped we are for weather events when it comes to sewage management in Central Auckland and Mt Albert,” she says in the video.

She proceeds further up the walkway, continuing to speak to the camera: “I can see, with my naked eye, right along this stream, condoms strewn around from when we’ve had heavy rain events,” she says.

“We need to clean this up.”

The Breakers’ season goes on the line this weekend, with both skill and a bit of luck needed. A win alone might not be enough to get them into the finals, and there’s a huge crush of teams in contention. The NBL website has a list of all the possible permutations. The Breakers play South East Melbourne on Friday night at the Horncastle Arena in Christchurch, but afterwards will be waiting to see how other results fall. A big win and they’re almost certainly home, a narrow win and it gets dicey.

That’s it for The Bulletin. If you want to support the work we do at The Spinoff, please check out our membership programme.

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