CHRIS TROTTER: Kaipara – a struggle for political legitimacy and cultural power.

The question dividing Kaipara’s electors, and the rest of New Zealand, is one of political legitimacy and cultural power. Whose protocols should prevail: the standing orders of the local council or the tikanga of the local iwi?

In strictly legal terms, the standing orders of the Kaipara District Council, as interpreted by the elected head of the council – Mayor Craig Jepson – must prevail. The order of business, and the manner in which that business is conducted, is for him – and for him alone – to determine.

Except, in the rolling maul that is New Zealand’s racial politics, the letter of the law no longer counts for very much. As events in Kaipara have proved, it’s all about who can mobilise the most outrage – especially in the news media and online.
On that score, the woman at the centre of the controversy, the woman representing the Te Moananui o Kaipara Māori Ward, Pera Paniora, is well ahead on points.
At the heart of the controversy lies Ms Paniora’s attempt to begin the first meeting of the newly-elected Kaipara District Council with a karakia, or prayer.
According to standing orders, it is the Mayor who has the responsibility for opening the Council’s inaugural meeting. This he was attempting to do when Ms Paniora interrupted the proceedings with a request to recite a karakia, and upon being refused permission, protested, and had to be brought to order by the Mayor.
Continue reading “CHRIS TROTTER: Kaipara – a struggle for political legitimacy and cultural power.”

Ardern wins world headlines again, but this time for being less than kindly with words enshrined on Hansard’s official record

Prime Minister Jacinda Ardern has once again won international headlines — but perhaps not in a way her colleagues would have  relished.   

Still,  the reports that raced around the globe have given foreigners a  fresh perspective of the NZ leader.

  As the NZ Herald reported, Ardern was heard calling the Act Party leader David Seymour an “arrogant prick” as she took her seat in Parliament yesterday afternoon, following questions in the House of Representatives.

Seymour told the media afterwards that the Prime Minister had apologised to him via text message.

The Herald referenced other reports.

The Guardian’s Eva Corlett called her “the latest leader to fall victim to a hot microphone” after US president Joe Biden and South Korea president Yoon Suk Yeol, who had also recently been caught out swearing on a live mic. Continue reading “Ardern wins world headlines again, but this time for being less than kindly with words enshrined on Hansard’s official record”

Windfall taxes on power companies may not be a good idea when advancing towards decarbonising the economy

Meridian Energy has chosen Australian resource firm Woodside Energy as its preferred partner to develop a green hydrogen project in Southland.

Meridian CEO Neil Barclay expects  broad, future economic gains from the project.

“We believe a large-scale hydrogen and ammonia facility in Southland, focused on the export market, will accelerate the development of a domestic hydrogen economy and strengthen NZ’s platform to contributing to decarbonising our transport and industrial sectors”.

The production of hydrogen and ammonia from renewable energy in the South Island has been touted as a suitable use of power whether or not the Tiwai Point smelter closes after 2024.

Observers  might have thought such a project would have drawn  applause from the Green movement. The Green Party in contrast  has been attacking what it calls the “excess profits”of the big energy companies and proposing windfall taxes on them, along with other major  corporates.

Some critics contend the big electricity companies are profiteering, and paying out high dividends as a result of  elevated  market prices, but as one authority pointed out, defining excess dividends in terms of net profits does not adjust  for “front-loaded” depreciation charges, which are non-cash items. Over the past five years, the industry dividend payout ratio relative to free cash-flow is about 80%.

 It should also be noted, major companies are investing in new energy plant,as the government sets the target of  becoming 100% renewable.

So it appears Meridian wants to push ahead with the hydrogen project, even if Tiwai Point keeps  operating.

Woodside was shortlisted, along with Fortescue Future Industries, to put forward proposals for large-scale hydrogen and ammonia production using renewable energy.

Barclay said Woodside had been selected because of its established track record.

“In addition to its operational and marketing expertise, Woodside has demonstrated climate change ambitions, and as we are a 100% renewable energy company and committed to sustainability, that was a key focus for us in selecting a partner.”

Contact Energy originally joined Meridian in the investigation, but has now opted out, although it would be available to supply electricity to the project.

However, Japanese industrial conglomerate Mitsui has joined the project to develop the potential market for ammonia. It is the largest importer of ammonia into Japan.

The three companies will now start the engineering design for the project, which is targeting the production of 500,000 tonnes of ammonia a year.Woodside CEO Meg O’Neill says the project is “right for the time”.

She added “Woodside brings the technical skill and operations experience to develop this project at pace to meet customer demand for hydrogen, which we expect to grow in the energy transition.”

F&P Healthcare lights up market, as its hefty R&D programme spurs fresh growth

Few listed companies on the NZ sharemarket can report a 60% decline in net profit, yet find investors reacting by bidding up the shareprice 13% in initial trading.  Yet that was the achievement of Fisher and Paykel Healthcare this week.

The company lit up the market, reporting revenue of nearly $700m for the half-year to September, most of it earned abroad and  ahead of guidance. It expects second half revenue for the 2023 financial year will be higher than in the first half. Net profit after tax for the first half was $95.9m, a 57% decline from the prior comparable period, or a 65% decline in constant currency.

F&P Healthcare experienced a surge in demand for its products during the pandemic, selling 10 years’ worth of devices in two years. However demand has now slowed as hospitals are overstocked and fewer patients are requiring treatment, which has seen profit retreat closer to pre-pandemic levels.

Undoubtedly one of the reasons for F&P Heathcare’s success  is its dynamic R&D programme, on which it is  spending $84m. CEO Lewis Gradon said it had been pleasing  to see a strong reception for the new Evora Full mask, which the company began selling into the US in April. “Initial feedback from clinicians and end users has been positive, and this provides added momentum for the team working hard on a robust product pipeline.”

Gradon is one of NZ’s outstanding business leaders, steering the  company on its  upward path. He reported the company reached a number of infrastructure milestones over the half to support continued growth. This includes an agreement to purchase a 105-hectare site for an additional campus in Karaka, Auckland.

Like other companies, F&P Healthcare has had to battle the “triple squeeze” of rising inflation, scarce and expensive talent, and global supply challenges.

Gradon  told the market while revenue was down 23% on the first half of the prior year (or 27% in constant currency), this was a 21% increase on the comparable pre-pandemic period, being the first half of the 2020 financial year ($570.9 million).

In the Hospital product group, which includes humidification products used in respiratory, acute and surgical care, revenue for the first half was $438.7m. This marks a decline of 35% on the prior comparable period, or 37% in constant currency. It represents an increase of 24% on the first half of the 2020 financial year. Of total Hospital product group revenue, 87% was from the sale of consumables and 13% was from the sale of hardware.

“Customer stock levels of hospital consumables continued to reflect purchases of considerable amounts during the prior half, in preparation for an Omicron hospitalisation wave which proved less severe than originally anticipated,” Gradon said.

“Through the first half, there are positive signs that our hospital customers are working through their excess inventory holdings, and total group sales of our hospital consumables have increased sequentially on a month-by-month basis since May. This trend has continued in the second half to date.

“While we believe the number of hospitals which continue to be overstocked is declining, ultimately, these stocking dynamics are short term, and the fundamentals of our sales strategy remain the same. Our teams are committed to helping improve clinical practice and ensuring the hardware our customers have purchased during the pandemic is used to benefit a broader range of patients requiring respiratory support.”

In the Homecare product group, which includes products used in the treatment of obstructive sleep apnea (OSA) and respiratory support in the home, revenue was $249.9m , a 10% increase over the prior comparable period, or 4% in constant currency. OSA masks and accessories revenue increased 16% on the prior comparable period, or 10% in constant currency.

Gross margin was 59.8%, down from 63.1% in the prior period and below the company’s long-term target of 65%. Although global freight rates are seeing prices soften, legs in and out of NZ lag this trend, which continues to weigh on margin. The company has also been impacted by manufacturing inefficiencies, as it carefully balances demand fluctuations while managing manufacturing throughput and higher rates of sickness-related absenteeism in the manufacturing workforce.

“Our second half will be impacted by a number of factors, including:
• The rate of COVID-19 hospitalisations and the related intensity of respiratory support required;
• The severity and duration of a Northern Hemisphere flu season;
• The magnitude of RSV (respiratory syncytial virus) hospitalisation surges currently experienced in some regions; and
• The impact of ongoing hospital staffing challenges on the surgical procedure backlogs in many countries”.

 Gradon  said the company expected second half revenue for the 2023 financial year will be higher than in the first half.

“In our Hospital product group, pre-COVID-19 seasonal patterns have typically resulted in higher sales of hospital consumables in the second half compared to the first half.

The company is now targeting constant currency operating expense growth of approximately 8% for the full year.

“We remain committed to sustainable, profitable growth,” said Gradon. “Our confidence in the future is unchanged, evidenced by the significant level of investment in new product development, our global sales force and our infrastructure.”

 As Point of Order sees it, F&P Healthcare is  an exemplar of business of which the rest of NZ can be proud.   

Despite Labour polling below 30%, party strategists believe it can win Hamilton West, and general election next year

Although recent opinion polls have shown Labour’s support dropping below 30%, suggesting it is now the underdog going into election year, party strategists still nourish  the belief the Ardern government may  emerge from the general election  able  with allied parties to hold on to office.

They are convinced  the National  Party has  not won back the degree of support that would indicate it is  a shoo-in at next year’s poll.  This, they believe, will become clear after  votes are counted in the Hamilton West by-election on December 10.

They have taken heart, too, from the result of the elections across in Victoria at the weekend, where the premier Daniel Andrews swept aside the challenge of the Coalition, though with a reduced majority. Andrews, like Ardern here, had been ruthless with his lockdowns during the Covid pandemic, but although that incurred  some hostility, a majority thought he did a good job.

Back in Hamilton West Georgie Dansey, the Labour Party candidate, herself doesn’t believe the by-election will be a referendum on the government’s performance as much as a contest won or lost on local issues.

“Every electorate is different,” she says.Dansey is the chief executive of the Independent Schools Education Association and a small business owner. She  has  impressed in early campaigning and in defending a majority gained by Labour in 2020 of 6000, has a solid cushion.

The government, with plenty of cash  in its back pocket, has made sure some of it is earmarked to be spent in Hamilton West.

National candidate Tama Potaka has a  daunting task to shrink Labour’s majority to vanishing point, even if  he taps into a rich vein of dissatisfaction with the government.  The difficulty he faces is that National has not articulated clearly enough  the kind of solutions it would apply to resolve the range of economic problems that have enveloped the  country.

Of the other candidates, Dr Gaurav Sharma already has a high profile in the electorate, as the MP  who secured  the 6000-vote  majority for Labour in 2020, but then fell foul of the party for his criticisms of Ardern, and the party’s administration.  He seems to  think the voters who gave him such a resounding majority will support him again. Almost certainly he will discover politics  doesn’t work the way he thinks it  should.  

The ACT party has nominated a sitting MP Dr James McDowall to contest the by-election, and though he  attracted only 5.4% of the vote in a neighbouring electorate in 2020  the experience he has gained as a list MP  in the  House has  given the party’s leadership confidence in his candidacy. The former owner of an immigration firm in Hamilton, Dr McDowall has been ACT’s immigration and defence spokesman this term. He’s contributed to the party’s regular policy documents, including calling for more occupations to be placed on a fast track to residency and for defence spending to be increased to 2% of GDP.

McDowall’s performance in Hamilton West may give  some indication whether ACT can lift its support to the point in 2023 where it  could demand  as many  as  four ministerial places in a right-of-centre government.

The TOP party also has a candidate Naomi Pocock running  in Hamilton West.  Under a new leader Raf Manji, TOP has invigorated its policy position. Manji stood in 2017 in the Christchurch electorate of Ilam, coming second to National’s Gerry Brownlee,beating  the Labour candidate.

Notable absentees in Hamilton West are the Green Party and NZ First which may make  strategic  sense, but gives no clue on how  either will perform next year.

The by-election campaign  would have been enlivened  by a NZ First candidacy, particularly if it had drawn Winston Peters out of  his Northland lair.

 Despite lying low for over two years, there was little doubt  Peters would be  sniffing the political breeze again and deciding he could once more become the ringmaster he was in  2005 and 2017.

He shares  with Donald Trump the belief he has been the wronged victor, and voters will barely be able to wait to restore him to high office. The difference as he prepares for 2023 is that he is ruling out working with Labour again.  

Whether that is a message that may resonate with Hamilton West voters will not be known until December 10.

New chapter for Fonterra as Parliament passes DIRA amending bill, but a fresh climate challenge looms

NZ dairy giant Fonterra expects to have its  new capital structure in place by March after Parliament gave a final reading  this week to the Dairy  Industry Restructuring Amendment Bill. It had the support of Labour, National, and Act, with the Greens and Te Pati Maori  voting against it,  as they did during the first two readings. 

It marks a new chapter for the big co-op at a time when the industry has been hit by soaring inflation-driven farm costs and the Ardern government’s move to tax farm methane emissions.

Fonterra  as a key element  of the dairy industry  has made significant progress with its turnaround 2030 business strategy; and the proposed capital restructure is designed to  ensure its many processing  sites remain full in flatlining, and predicted to decline, national milk production.

The  restructure needed Parliament’s approval because  Fonterra was created by enabling legislation in 2001, and because  a feature of it, delinking the farmer share market and the unit market, could have faced legal challenges.

Even though  the DIRA amending legislation  attracted  criticism in the Select Committee  hearings that it would  weaken competition  in the industry, Agriculture  Minister Damien O’Connor pushed it through Parliament. In the process, he took the  opportunity as he saw  it  to improve the transparency and robustness of the governance and operation of the current base milk price-setting regime.   

Meanwhile  Fonterra is  moving ahead with investment targets for sustainability, higher value  products  and research  and development. Its milk payment for last season totalled $13.7bn and after the sale of its Chilean asset Soprole, plans a return of capital to shareholders  and unit holders.

 As CEO Miles Hurrell told the company’s  annual meeting, the last financial year was a year like no other.

 Now, there  is  a new  challenge  looming. Fonterra has indicated it may set itself a target for scope 3 carbon emissions. Scope 3 encompasses carbon emissions not produced by the company itself,but by those it is indirectly responsible for, including  farmers.

Chairman Peter McBride points out that in setting  a scope 3 target Fonterra  can help itself to maintain competitive access to key international markets. “For example, the EU  has proposed a carbon border adjustment tax on certain carbon-intensive goods. They are  subject to a carbon-emissions price via  the EU’s Emissions Trading Scheme. Agriculture  is not currently in scope  but it is  possible  it will be brought into the scheme”.  

McBride  expects such barriers to become more frequent  as governments  respond to their own climate commitments.

(With acknowledgement to Andrea Fox  of the NZ Herald for material  in this comment).

Banker’s job as chairman suggests the co-governance model has been eschewed for Kiwi Group – but there are more posts to fill

Buzz from the Beehive

When David McLean retired as Westpac New Zealand Chief Executive in June last year, he said it was the right time, both for the business and for himself personally to step down.

The industry was going through a period of change and that was an appropriate time for a new leader to take the helm.

His future?

He didn’t mention golf, bowls or a sea cruise, but did say:  

“.. I am looking forward to thinking about the possibilities and challenges ahead. I’ve just finished two weeks touring the country on my Vespa in a charity rally, which gave me plenty of time to reflect and consider what retirement might hold for my family and I.”

Actually, there’s plenty to  keep him busy. Continue reading “Banker’s job as chairman suggests the co-governance model has been eschewed for Kiwi Group – but there are more posts to fill”

Bitter medicine for NZ economy:is it a poison pill for Ardern administration?

The  cost-of-living crisis in NZ has become ugly. And  it could  get worse.

The Reserve Bank is telling us the country will dive into recession from the middle of next year and  stay there for a  year. Plus there will be 8% mortgage rates and 6% unemployment.

For Finance Minister Grant Robertson, it’s all turning to custard. He  appeared to lose his cool in Parliament as the Reserve Bank in effect might have been writing a poison pill for the Ardern government to swallow.    

In the summary of its meeting minutes, the Reserve Bank’s monetary policy committee noted inflation pressure from fiscal policies was skewed to the upside.
“They’re quite clearly saying there that the government is contributing to inflation, or certainly not helping the case to get it under control,” said Brad Olsen, principal economist at independent consultancy Infometrics.

“If households are being hit with those higher costs and having to readjust their spending, then the government also needs to quite seriously consider its spending priorities and how it can best support efforts to rein in inflation.”

As  Point of Order sses it, the possibility of Robertson writing a budget next year that could rescue the Ardern government from annhilation at next year’s poll have been effectively snuffed  out  by the  man  that the Finance Minister had reappointed this year for another 5-year term.

As  the Dominion-Post headlined its report: “Bank lines up Labour’s  nightmare scenario”.  

The NZ Herald began its front-page report: “Struggling Kiwis are in for even more pain after the Reserve Bank yesterday lifted the official cash rate by an unprecedented 75 basis points to 4.25%, forecasting a year-long recession. The hike  pushed the OCR to its  highest level in 14 years and is expected to tip fixed mortgage rates over 7%—causing some home loan  payments to jump by over $8000 a year”.

The Herald  went on to say  that Reserve Bank governor Adrian Orr had urged Kiwis  to “think harder about spending”.

Orr said  inflation is nobody’s friend.

“To rid the country of inflation we need to reduce the level of spending in the economy. Think harder about saving rather than spending. Cool your jets”.

At that point Orr might have shouted  across the road: “Can you hear me, Grant?”.

The Reserve Bank sees four consecutive quarters of negative GDP growth from June 2023 onwards. It also sees house prices  falling 20% from peak to trough.

The  75-point move announced on Wednesday is a record increase, the previous largest having been 50 points.

Some experts see irony in the RBNZ’s tough talking, as  it played a  key role in the loose money regime  while the  Covid pandemic  was at its  height. That of course lit the fire of  inflation which hit an annual rate of 7.3% in the June quarter and reduced only very slightly to 7.2% as of September. The central bank’s job is not being helped by a super-tight, red-hot labour market, with the unemployment rate just 3.3% as of September, while annual hourly private sector wages soared in the 12 months by 8.6% – beating all forecasts.

In the MPS, the RBNZ    is forecasting annual inflation to rise again in the December quarter to 7.5% and stay at that level by the end of March 2023 before slowly dropping.

The RBNZ does not see inflation getting back into its 1% to 3% target range again till the September quarter in 2024. Another insight into how the NZ  economy is performing—and how hard Robertson should  toughen up on government spending—will come in Treasury’s fiscal update next month.   
Meanwhile the NZ Herald’s political correspondent Thomas Coughlan offered a comment on the RBNZ’s performance on the day which should be absorbed both in the  offices at 2 The Terrace and across the road in the Beehive: “The podium lacked the sobriety you’d expect from an institution  that plans to strangle the economy of credit to the extent that unemployment rises to levels not seen in a decade.  The fact that the Bank’s own mismanagement now means it has to move harder only adds to the sense of frustration”.

Government claims to be moving NZ ahead, but is it one step forward, and one back?

The  government has welcomed  a High Court ruling, with a group of activist lawyers  losing a  bid to have New Zealand set deeper and steeper cuts in its carbon emissions for the rest of this decade.

The group, Lawyers for Climate Action NZ, went to the High Court challenging advice given to the government by the Climate Change Commission.

Climate Change Minister James Shaw says:“I have always regarded the advice it (the commission) has provided the government as exceptionally high quality – based on rigorous science and expert analysis. Today’s ruling confirms that.”

The non-profit group of about 350 lawyers, law students and legal academics said the current decade is crucial to the global effort to limit climate change to 1.5 degrees above pre-industrial levels, as set by international agreements.

It did not contest the government’s target of reaching zero emissions by 2050 but said the commission’s recommendations for getting there did not do enough in the shorter term.

The lawyers said net emissions in 2030 had to be half what they were in 2010, but that the commission’s recommendations would see NZ emissions continue to increase in the current decade to 2030.

They wanted the government to move faster toward the 2050 zero emissions target over the next eight years and sought a judicial review of the commission’s advice in the High Court.

The group said the budgets and advice given to the commission “lack ambition”.

On receiving the court decision Shaw  puffed out his chest, declaring the  High Court had confirmed the legality of the advice provided by the commission to inform NZ’s nationally determined contribution (NDC) and the first three emissions budgets.

Shaw says  he doesn’t believe the intention of these proceedings was ever to slow down or derail the response to climate change. “Rather, it was a way of testing the system, making sure we had the settings right. And I think that’s actually very healthy.

“This particular case has highlighted some potential points of confusion in the way we have set our targets, and that’s something I will be looking into regardless of the outcome.

“Having just returned from COP27 in Egypt, where progress was as frustratingly slow as ever, my focus is now squarely on the need for urgent domestic action to cut emissions, limit warming, and prepare for the climate impacts we cannot avoid.  

“The transition to a low-carbon, climate-resilient future is a one-in-a-generation opportunity to build an Aotearoa that is cleaner, fairer and more prosperous than it is today – we just need to get on and make it happen,” Shaw said.

The government  may have less to congratulate itself on with another decision in what some might regard  as a related field: a decision to make changes to the Crown Minerals Act,  which lobby groups   say “send the wrong message”.

Here, any claim the government might like to make that it is creating greater prosperity  is  dubious.

Under the  changes the government will no longer be required  to promote the exploration and development of Crown minerals.

Energy Resources Aotearoa CEO John Carnegie says: “Throughout the world, countries are competing with one another to shore up their energy security. We are in a global contest to attract inward investment and skilled individuals that work to keep the lights on.”

Carnegie says the announcement “comes at a time when we need more investment in gas supply – not less – to support our increasingly renewable electricity system when the wind doesn’t blow, or the sun doesn’t shine”.

Carnegie says the argument that we need to phase out fossil fuels to meet  climate goals is “simplistic and misguided”.

Straterra CEO Josie Vidal points out while

 most countries with mineral deposits are gearing up to create supply for batteries, to build wind and solar energy production, and to build the infrastructure for a fully electric future, NZ is going in the opposite direction.

“NZ has minerals and can make a valuable contribution to the low emissions future, but we need enabling law.

“The government is conflating mining and emissions, when not all Crown minerals are fossil fuels. In fact, mining is less than 0.5% of NZ’s emissions.”

Straterra is the industry association representing NZ minerals and mining sector. Straterra will submit on the Bill when it goes to Select Committee.

In justifying the move to change the legislation, Energy and Resource Minister Dr Megan Woods says requirements in the CMA for the government to actively promote fossil fuel exploration are out of date.

“ It’s time we changed our laws so that they are consistent with our climate change commitments to phase out polluting fossil fuels and transition to net zero by 2050.”

She says the National government added the legislative requirement to promote mining activities in 2013.

“This is now out of step with the direction the world is going.

“The CMA sets out how the government allocates rights to mine Crown owned minerals for NZ’s economic benefit. While this role won’t change, these amendments will bring the act up to date, allow us to respond to the evolving needs of Aotearoa, and give the sector greater certainty about the future of minerals decision making.

“ Fossil fuels will be phased out in a way that ensures energy remains secure, reliable, accessible, and affordable for all”.

 On  that  assurance from the minister, Point  of  Order suggests there may be  a  degree of  scepticism in the light  of  the Ardern government’s failure to deliver on so many of its election promises and commitments.