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Image: A metaphorical representation of how some businesses enjoyed the high trust model (Getty Images)
Image: A metaphorical representation of how some businesses enjoyed the high trust model (Getty Images)

The BulletinSeptember 17, 2020

The Bulletin: Reckoning comes for wage subsidy

Image: A metaphorical representation of how some businesses enjoyed the high trust model (Getty Images)
Image: A metaphorical representation of how some businesses enjoyed the high trust model (Getty Images)

Good morning and welcome to The Bulletin. In today’s edition: Reckoning comes for wage subsidy, house prices no longer tipped to fall, and second death in the same family from Covid-19.

It was a policy conceived in an emergency, was deployed rapidly, and prevented a total economic disaster from crashing over the country. But now serious questions are being asked about the wage subsidy, whether it was abused by some of those getting it, and what should be done about that now. To give some context around it, around 1,650,000 jobs were covered by the original scheme, and just under half a million covered in the extension. Stuff recently reported the views of an economist who said it had “completely masked” the state of the labour market, but that was sort of the point – it was always meant to prevent unemployment rates going over a cliff.

It was announced earlier in the week that the office of the auditor-general would be looking at the management of the scheme. In a release, the OAG said “our work will provide the public and Parliament with an independent view on how well the Scheme has been managed. We expect to identify the challenges in operating high-trust models and lessons for decision makers.”

Audits have been taking place of some claimants – see for example this One News story from July. And several hundred million dollars have been paid back. Many businesses who initially feared being wiped out by Covid-19 received the wage subsidy, only to discover that the hit to revenue was not nearly as bad as expected, so paid it back to the government. A disclaimer I should include here – the Spinoff was one of them.

But that point about high-trust models is a crucial one, because from one point of view, some massive businesses may have abused that trust. As Duncan Greive reported earlier this month, some major businesses have announced seriously massive profits for such a difficult year, all propped up by the fact that they got millions in wage subsidies. Regardless of what the OAG finds, it is unlikely to result in that money being paid back – rather it will just be a transfer of wealth from the public purse to large and profitable businesses.

Business leaders are now starting to speak out about it as well. I’d highly encourage you to read this devastating argument from Zuru co-founder Nick Mowbray, who puts into context how in his view some of the country’s biggest businesses abused the spirit of that trust. Here’s an excerpt:

In what world is it ethical for companies to take a government handout and then declare profits and pay dividends a few months later? Not only have they levied an enormous burden of debt on the country by needlessly taking borrowed money, but they have shamefully contradicted the way they usually behave when things are going well.

When times are good, these companies choose to privatise profits and keep their earnings for themselves. But as soon as things turn bad, they’re more than happy to take a government handout and socialise their losses, making it society’s problem. Only, these companies didn’t even make losses – they continued to make profits, and in some cases even increased them. Capitalism is not meant to be a one-way street. You shouldn’t get to take profits in the good times and put your hand out and have hard-working New Zealanders pay for it in the bad times.

House prices probably aren’t really going to fall after all, despite an economic crunch being seen in pretty much every other indicator. Interest has reported on comments from Westpac economists, who note that a combination of the recession not being as bad as expected and very low interest rates have forced a revision of the forecasts. That’s just swell for property investors, who will continue to make out like bandits as a result. Industry publication Good Returns reported last month that the market share of purchases being made by mortgaged investors was on the rise – to quote: “While mortgaged investors share of property purchases increased, existing owner-occupiers share of purchases dropped to 24% in July.”

A second tragic outcome for a family hit by the latest Covid-19 outbreak. Nigel Huirama Te Hiko, aged 54, has died in Waikato hospital after a long period in ICU. Stuff’s Florence Kerr described him as a revered leader and historian. He was in a coma when his brother Alan Te Hiko died of Covid-19. It brings the nationwide death toll to 25. In better news, health officials increasingly believe the Auckland cluster has been contained, reports Stewart Sowman-Lund.

The pre-election fiscal update (PREFU) has been released, showing a large increase in debt to GDP ratios due to the Covid-19 hit. Radio NZ has wrapped the reactions to it all from parliament, and what parties intend to do about it. In broad terms, the heart of the matter is spending and tax – Labour and the Greens argue that increases in both are necessary, to both cushion the blow and pay for the recovery. The other parties in parliament say spending needs to be cut back to avoid tax rises. In general terms as well, the long term outlook for the economy is pretty tough, even with a quarter of bouncing back now forecast.

Battle lines have been drawn up over the proposed spatial plan for Wellington. As the NZ Herald’s Georgina Campbell reports, there are now competing campaigns, particularly around the place of so-called ‘heritage suburbs’. One of those campaigns is being fronted by Isla Stewart, who wrote this piece for The Spinoff about the need for much more urban density. The context of it all is the massive projected growth for Wellington, with as many as 80,000 more residents expected in the next 30 years.

The Māori Party wants to see an end to expulsions of students under the age of 16, reports the NZ Herald. A wildly disproportionate number of these exclusion cases are Māori kids, and co-leader Debbie Ngarewa-Packer says this often puts them on a pathway towards gangs and prisons. The policy package also calls for 25% of educational funding to be put into Māori models of delivery, and for much more primary school content to be taught in te reo.

This excellent local reporting is being shared entirely for the headline alone: Hooning disturbing the peace, reports the Wairarapa Times-Age. Hoons are out and about in Masterton, they’re hooning around, and they’re disturbing the peace. In all seriousness though, it looks like some nasty damage has been done to Queen Elizabeth Park, which is very sad to see. Bloody hoons.

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(Photo: supplied)

Right now on The Spinoff: Intelligence expert Paul Buchanan writes about the Chinese spy database, and how it is little different in spirit to those run by other countries. Susan Wardell analyses some uncomfortable truths about who gets medical crowd-funding, and who doesn’t. Tax expert Geof Nightingale lashes Labour for their unimaginative and weak efforts to make the tax system more progressive. On a similar note, Justin Giovannetti answers a range of questions around how the tax system works. Leonie Hayden reports on protests in Avondale aiming to save some old native trees. Māori language revitalisation expert Dr Rachael Ka’ai-Mahuta explores what lessons can be learned here in Aotearoa from the current explosion in popularity of Korean culture. Sherry Zhang writes about an attention grabbing New Zealand instagram-news account that has gone global. And Alie Benge reviews the insightful take on obsessive love in Rose Matafeo’s Netflix show Horndog.

For a feature today, a dramatic piece about the oil and plastic industry overhyping the benefits of recycling. The article from NPR has been widely shared since being published, because it gets to the heart of something a lot of people probably instinctively felt, but didn’t know for sure. Here’s an excerpt:

NPR and PBS Frontline spent months digging into internal industry documents and interviewing top former officials. We found that the industry sold the public on an idea it knew wouldn’t work — that the majority of plastic could be, and would be, recycled — all while making billions of dollars selling the world new plastic.

The industry’s awareness that recycling wouldn’t keep plastic out of landfills and the environment dates to the program’s earliest days, we found. “There is serious doubt that [recycling plastic] can ever be made viable on an economic basis,” one industry insider wrote in a 1974 speech.

Yet the industry spent millions telling people to recycle, because, as one former top industry insider told NPR, selling recycling sold plastic, even if it wasn’t true.

In sport today, a much funnier piece about an issue that has dominated the back pages over the last week. Hayden Donnell has looked at the failure of the government to make it possible for the Rugby Championship to go ahead here, and writes that while public health is somewhat important, clearly rugby is much more so.

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