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The BulletinNovember 14, 2019

The Bulletin: Another unexpected Official Cash Rate move


Good morning and welcome to The Bulletin. In today’s edition: Another unexpected OCR move, NZ First Foundation donations under scrutiny, and End of Life Choice bill passes pending referendum.

Reserve Bank governor Adrian Orr seems intent on giving as many surprises as possible with the OCR. After slashing it in August when it was expected to be lowered more slowly, it has been held in place yesterday when the expectation was for another cut.

For individuals, the unexpectedness of the hold could impact mortgage rates, as discussed in this Stuff story. As seemingly every bank had been predicting a cut, they had priced that in, and so now may bring rates up a bit again. That could be a risky move from the RBNZ, and according to ASB Chief Economist Nick Tuffley in this Interest story, there will now be a three month summer hiatus before another move happens. He said that “crucially, a lot of mortgage rate re-fixing will be happening in coming months.” Some who bought property on the assumption of continually lower rates might now be feeling a bit nervous – though there is a strong likelihood that they’ll stay low for a while, and even potentially be cut further still.

Analysing the wider economic effects for the NZ Herald, Liam Dann says it is a sign Orr has decided to have a breather. The earlier cut is still taking time to be felt, and the economy doesn’t necessarily need any more of this sort of stimulus right now. As was outlined in comments on this NZ Herald (paywalled) story by Hamish Rutherford, that’s not a sign that Orr has backed off on calls for the government to spend more to act as that stimulus. In his view, “they will do what they will do, and we’ve made our message clear.”

It reflects the fact that the economic outlook isn’t super clear right now. This Politik story goes deeper into that – “that the economy is precariously balanced between a sort of a boom and a sort of mild bust.” Economists at the Reserve Bank think the outlook is less bleak than it looked in August, with domestic economic activity expected to increase next year. But those blustery international headwinds are still blowing, so the situation remains complicated.

The first thing to note on this story on how the NZ First party gets money is that it doesn’t appear to be illegal. However, as Radio NZ’s Guyon Espiner reports, there is certainly concern that the NZ First Foundation isn’t in the slightest bit transparent. What’s more, when questioned by Espiner about it, figures within the party refused to discuss it at all. Professor Andrew Geddis says the big concern is that large donations might be being hidden (again, in a legal way) that obscures their source, and thus deprives the public of possibly relevant context for why a party might have made a decision.

The End of Life Choice bill has passed through parliament, and now will go to the country in a referendum. It went through 69-51, and the NZ Herald has collected a final tally of how each MP voted. We marked the third reading at The Spinoff by going back to the range of voices we had published on the top previously, and it underlined how complicated the issues the public will now grapple with are.

National have floated the idea of education savings accounts, to replace the fees free policy. It would theoretically include Crown contributions that could be spent on tertiary education, professional development or even just lumped in with Kiwisaver. At the NZ Herald (paywalled) Derek Cheng has analysed how this might work in practice, and how it sets up a political battleground with Labour. Meanwhile, we intended to publish a lot of reactions to the government’s reforms of Tomorrow’s Schools, but this piece from principal Claire Amos captured a lot of the most salient arguments. Thanks to everyone who sent in feedback all the same.

Wool is being rejected in concerningly large quantities at the scouring stage, reports Farmers Weekly. Contamination with raddle or spray markings means the wool can’t be exported, dramatically lowering its value. That’s a problem for the wool market, which is already fairly low return by farming standards, and doesn’t have much room to move on margins.

A win for TOP in an entertaining minor skirmish with the new Sustainable NZ party, with both occupying similar political space. Interest’s Jenée Tibshraeny asked both parties a series of questions about their environmental policies – the relevance being both say it’s a top priority, and both say they could work with National. Well, despite repeated requests for comment, Sustainable NZ never even got back to Tibshraeny (they may still do so) while TOP answered the full suite. I’m fascinated to see what the dynamic becomes in these sorts of minor party contests (like New Conservative vs Vision NZ, or Legalise Cannabis vs the Outdoors Party) and how they end up influencing the election.

Two world news pieces to share: Duncan Greive has been in Sydney over recent days, and has now witnessed first hand the absolutely wild rhetoric being thrown around about the fires there. Reading it, I was very glad to live in a country where the politicians haven’t completely gone off the deep end. And Catherine McGregor has written about the live Trump impeachment hearings, happening right now (and you can watch a live stream in the story.) Basically, the legal and political stuff around impeachment probably needs to be backed by public opinion to be successful, and the televised hearings are an attempt to build that up.

A brief message from Sam Brooks, culture editor at The Spinoff:

“The Spinoff is one of the most unique places I’ve ever worked. Part of that is the working environment, part of that is the opportunity to write passionately about what matters to me, and part of that is the engagement we get from our audience. The Spinoff Members is a way to turn that passion into a real tangible action. What we write about won’t get written without your support.”

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Right now on The Spinoff: Josie Adams meets an Auckland startup looking change the way that carbon offsetting works to make it more effective. Tulia Thompson talks to artist Lema Shamambam, ahead of their first solo show at the Objectspace gallery. We’ve published an extract from NZ Herald journalist Frances Cook’s new book about money and finances – the extract is a really interesting exploration of ‘lifestyle creep’, and how the financial rug can suddenly be pulled from underneath a lifestyle. Internationally influential feminist Gloria Steinem spoke to the On the Rag podcast about her new book, and life in activism.

And there are two, absolutely, totally, must read pieces to share today. The first is a continuation of Maria Slade’s investigation into Crimson Consulting, the company that promises to get kids into elite schools. This one is based on what it says in a leaked copy of the tough contracts parents have to sign up to. The other story of the day is by Madeleine Chapman, who has gone dived deeper than anyone thought possible into one of the shortest, strangest stories of the year – about an axe flying through a car windshield and being blocked by a passenger’s book.

For a feature today, a remarkable piece on how the world was convinced of the illusory power of digital advertising. Published on The Correspondent, it takes in the author’s journey through trying to test whether or not it actually works, and how it came to account for such a massive share of total advertising spend. The results probably won’t inspire you with much confidence in the industry, but it sure is a fun ride getting there. Here’s an excerpt.

Economists refer to this as a “selection effect.” It is crucial for advertisers to distinguish such a selection effect (people see your ad, but were already going to click, buy, register, or download) from the advertising effect (people see your ad, and that’s why they start clicking, buying, registering, downloading). Tadelis asked how exactly the consultants made this distinction.

“We use Lagrange multipliers,” one of them said. And for a second, Tadelis was astounded. What? Lagrange multipliers? But Lagrange multipliers don’t have anything to do with …”Then it hit me,” Tadelis recalled. “This guy is trying to out-jargon me!”

Top Kiwi squash player Paul Coll is on the verge of something special. Radio NZ reports he’s made the semifinal of the Men’s World Squash Championship, the first male NZ player to do so since 1988. It has been a long road to get to this point for Coll, who turned pro almost a decade ago, but continues a rich run of form that included a Commonwealth Games silver medal last year.

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