Thursday 27 January 2022

It's not a seizure?

Thomas Coughlan is great on the rapid antigen test seizure fiasco.

After months of talking down RATS and blocking their import, the Government then over-restricted their use, while faffing its own order. Now, it appears the Government wants millions of the things, and instead of getting its own, it's "consolidating" them from the businesses that it was blocking from receiving the tests just months ago.

And on that "consolidation" malarky - at least some distributors are concerned the Government applied its significant market pressure to force manufacturers to drop smaller orders in favour of the Government's large order.

If this is the case, there is cause for concern.

The Government seems convinced the clear benevolence of the Covid response is an excuse for common thuggery - it is not.

Gangs seize the goods they want - Governments procure them. Ends do not justify means, especially not now. Don't be surprised if the Auditor-General decides to go sniffing.

We shouldn't be surprised if another few predictable things happen.

Other companies will have tests on order, queued up from the same suppliers, for later on. If any of them expect their goods to be 'consolidated' by a thuggish government, they'll cancel orders and seek refunds now rather than see their orders taken into some pool to be redistributed by the state. 

As consequence, the government had better, right now, order a hell of a lot more RATs than they'd bargained on needing. Because if they'd previously expected that private companies were going to be taking care of their own workers and that the government only needed to order in enough for the public health response, they've just screwed that all up. Those fearing their orders will just be 'consolidated' will be cancelling orders in favour of begging the government for tests. 

Another bit of fun. The Director General of Health was interviewed by Heather du Plessis-Allan yesterday. At the very start of the interview, DG Health Bloomfield provided an interjection in rebuttal to something du Plessis-Allan had said before the interview started. It was not in response to a question; it was volunteered. 

Bloomfield stated, "I have no powers to seize the assets or the testing capacity of private companies...."

You can find it here at 0.42.

Loyal readers will recall that, last year, the Ministry of Health pushed very hard for a broad set of powers. The requisitioning powers were very contentious. They featured in the Select Committee hearings and in the report from the Select Committee.

Section 11 of the revised Act specifies Orders that can be made under the Act.

Part (1) of Section 11 allows either the Minister or the DG Health to make orders for one or more of a list of purposes.

Part (1)(g) reads as follows:

(g) requiring the owner or any person in charge of a specified laboratory that undertakes COVID-19 testing to—

(i) deliver or use, in accordance with directions given under the order, specified quantities of COVID-19 testing consumables that the Minister considers necessary for the purposes of the public health response to COVID-19:

(ii) undertake COVID-19 testing solely for the purposes of the public health response to COVID-19 while subject to the order, whether or not the laboratory is contracted by the Crown for that purpose.

So (1)(g)(i) allows the Director General of Health to require labs to deliver testing consumables that the Minister considers necessary. 

And (1)(g)(ii) allows DG Health to require labs to undertake testing only as part of the public health response - the testing capacity of the private labs, whether or not they are already under contract with the Crown.

It is ...difficult... to reconcile DG Health's assertion about his powers with the powers that his Ministry pushed for him to have only a few months ago. 

One could be charitable and assume that he forgot that his Ministry sought for him to have these powers, but remember that he provided this as volunteered interjection - not in response to a question. 

On a direct question, someone who doesn't think they have those powers might mistakenly volunteer that they don't think they do. 

Interjection suggests either a strong belief that he does not have those powers, which is odd since he just got those powers and they were very controversial, or that there is some nicety between "seize" and the way the Act is written. 

Tuesday 25 January 2022

I hate to say I told you so, but well

This week's column in the Stuff newspapers went through a few things that should have been obvious but only seemed to be recognised the next day.

I wrote:

The country’s Covid testing system is likely to fall apart, quickly, when case numbers rise.

Testing labs can bundle five to ten samples together for testing. If none are positive, all is fine.

If the pooled sample is positive, individual samples need separate re-testing. When positivity rates are low, the system works well. But when positivity rates are high, pooled sampling stops working. Testing capacity drops to a small fraction of what it had been, just when it is most needed.

Headline figures on testing capacity may be more than a little optimistic. Contracting now for greater capacity, focusing on the saliva-based PCR testing (which identifies genetic material from the virus) that catches Omicron cases earlier, matters.

Hopefully it is not too late.


If the PCR testing system fails under the load, a positive RAT result could confirm whether therapeutics are needed. But making sick and infectious people go to a pharmacy for testing while sick and infectious would be a terrible mistake. Policy will need to change.


Omicron has been ripping through schools abroad. Kiwi kids are at greater risk than children abroad because New Zealand was slow to start vaccinating under-12s.

Parents staying home to care for sick kids will likely also catch it. Sick leave entitlements will be burned through.

Making schools safer means hastening vaccination of children and allowing under-18s to receive vaccine boosters.

Better ventilation in schools, and air filtration in harder-to-ventilate places, also matter.

Late last year, the government announced air filtration units were being ordered, along with carbon dioxide monitors that help track whether a room has sufficient ventilation.

No progress has been reported.

Preparation at schools is bad enough that epidemiologist Amanda Kvalsvig recommended that the start of school be delayed.

Waiting for the government to get its act together may lead to disappointment. Parents could move faster in schools that are less well-prepared.

Carbon dioxide monitors are not hard to find online.

Buy one for some in-class experiments, after talking with your child’s teacher.

What is the carbon dioxide level at the start of the day, as children start filing in? By how much does it increase when the students have been in the room together for a while? Does opening windows help much?

A simple student experiment could help the school identify problem areas with poor air circulation.

If there are ventilation problems in your child’s classroom, a second classroom project might help.

Homemade air filtration units, called Corsi-Rosenthal boxes, are easy for older students to build and can help clear the air. Plans are easily found online, though parts can be harder to source.

The blizzard is coming. We had best prepare ourselves.

After I'd submitted the piece on Sunday morning, I saw that Omicron was properly upon us. And, thankfully, that the government was extending covid leave support. 

The Monday column attracted the usual amount of Twitter hate. 

I normally don't point to this stuff. Just par for the course in columning. Every columnist gets it. If you don't like it, don't write columns. 

But it was pretty funny given what happened in the very next day's news.

Let's have a fact check on whether I was right about air filtration in schools not being ready.

Here's The Spinoff, on Tuesday:

The government’s ordered 5,000 portable air cleaners for schools as children prepare to head back to the classroom. But, just 500 will be available in March with the remaining 4,500 due to be delivered by June.

How about that testing system and the problem of pooled samples. That that whole thing will fall apart when positivity rates go up: some right-wing misinformation campaign?

Dileepa Fonseca, on Tuesday:

However, even the 40,000 tests a day figure is likely to be a vast overestimate, because it is based on pooled testing.

Last year in an interview with Stuff, Asia Pacific Healthcare Group chief executive Anoop Singh (whose company is the largest single processor of Covid-19 tests), said “capacity for a large network like us is really not an issue” because tests could always be pooled.

“The pooling ratios will dictate your capacity.”

However, the situation in Australia shows how pooling ratios can drop away very quickly.

During a press conference on December 29, NSW Health Pathology director Dominic Dwyer admitted his state had lost the lab capacity it once had, because it could no longer pool samples.

“Now that the number of positive cases in the community is so high, the ability to do that pooling is limited because you have to go back and re-test them if they are positive,

“So we’ve lost that advantage to maximise our capacity through pooling.”

Igenz laboratory director Amanda Dixon-McIver, whose lab is contracted to process saliva tests for Rako Science, says pooling ratios in New Zealand can run from 1:2 to 1:8.

“In a scenario where you don’t have widespread community transmission then the use of pooling is perfectly OK because it does conserve your reagents.”

To get an idea of how the country’s testing capacity might be affected when pooling falls away, imagine a scenario where those 40,000 tests had been pooled at a ratio of 1:4.

If you were not able to pool it would mean you were suddenly only able to run 10,000 tests.

I've seen the occasional twitter conspiracy theories about Dileepa's reporting on this stuff, so here's another piece making the same point, also on Tuesday.  

The Ministry said labs were able to process 42,000 tests on a daily basis, with a surge capacity of 62,000, and plans were in place to ensure they continued to operate during community spread, but it declined to elaborate on what those plans involved.

Taylor said that processing even 40,000 tests a day was a stretch because a rise in positive cases prevented labs from “pooling”, the practice of processing batches of five to eight samples at once, and only doing individual tests if a batch returned a positive result.

“If you get a 30 per cent positivity rate, you can’t do that, so that instantly drops your ability to test really quickly.”

Funny that an obvious point made in an oped column attracts the hate, then reporters go and check on things, and find that we will indeed fall over in the same way that Australia fell over - which should have been really obvious to everybody much earlier. 

Wish I had been wrong. 

Meanwhile, bless poor Doug Hitchon from Mahana. 

He doesn't know that the government banned importing RATs until real recently, and now heavily restricts how they can be imported. So he blames private enterprise for failing to get them in. 

And he also doesn't know that the government, back in October, set legislation giving itself the power to requisition any equipment that testing labs might import - so it would be an awfully charitable company who would spend a lot of money expanding their lab capacity. 

Democracy's the theory that the common person knows what he wants, and deserves to get it good and hard. We're going to be getting it good and hard for pretending for far too long that the border system could never fail and so there was no urgency in getting anything else ready.

Wednesday 19 January 2022

Building materials

There's a bike path running through a forest. Thirty years ago, it had been well maintained. Now, it's an overgrown mess. A big branch across the path stops anyone getting past the first hundred metres. Clearing things that are past that branch won't do any good unless that first branch is cleared. Heck, if you start with stuff five hundred meters down the track, without addressing that first branch, people might even claim that there were never barriers in that next bit at all - because those parts just hadn't been hit yet.

The housing supply mess is a bit like that. Councils use zoning and consenting to protect their balance sheets against the costs of urban growth, so there isn't enough zoned land to build on. That's the first branch. But there are other branches past that one.

The Commerce Commission is looking into building materials supply; it's running a market study. 

That work should begin with a simple question. 

If I disassembled a perfectly good house or apartment tower in Vancouver, Seattle, or Toyko, and brought all the parts here on a ship, would anybody let me put them back together here? 

Whatever else is going on in the building supply sector here is almost irrelevant if you can just route around it through parallel imports. If parallel imports are de facto often impossible because councils won't sign off on plans that include them, because they buy all the downside risk of any building failures, isn't that going to be a really big problem?

This week's column in Newsroom, now ungated. A snippet:

Building materials supply seems like it should be far easier, at least in principle. If a construction company thinks that gib, or insulation, or nails, or any other building material is terrible value for money in New Zealand, there seems to be a simple solution.

During the import licensing era, Alan Gibbs urged JVC to disassemble perfectly functional televisions at the end of their assembly line so they could ship him the parts for reassembly in New Zealand. He undercut local suppliers while providing a better product. Could something similar be done with houses abroad, ideally before all the pieces were put together? Houses could be parallel imported, one piece at a time.

The developer able to do that would have a substantial advantage over others, if local building material costs really are out of line. And nobody has ever accused developers of not wanting profits.

If building material costs really are far higher here than they should be, why aren’t developers bringing in shiploads of building materials and ignoring local suppliers? Covid cannot be the answer; complaints about building material costs long predate the pandemic.

Framing the question properly would help the Commission decide where to focus its efforts. Imagine for the moment that there were some nightmare cartel arrangement among local building materials suppliers. Could it possibly matter if anyone could easily parallel import a few container ships of insulation and gib from Vancouver, or full kitset houses?

I probably should have said that Covid can't be the only answer. Covid is clearly wrecking supply lines. But that should be a transitory thing that should be looked through. The longer term issue is clearing the regulatory hurdles for the decade of serious building that's needed.  

Tuesday 18 January 2022

Morning roundup

The morning's worthies! And a couple shockers too. 

Thursday 13 January 2022

Sandwich cartels

A typically superb piece from Colby Cosh, looking at the real cartel villains standing between him and a decent sandwich. The Canadian Dairy Cartel strikes again. So, naturally, antitrust authorities chase after bread retailers instead.

My local grocer, without exaggeration, must now offer 40 or 50 different bread options perfectly suitable for sandwiches. There’s a mini-universe of rye breads now, and different varieties of sourdough. The whole-grain bread that children in my age cohort associated instinctively with disappointment has improved a thousand per cent. The best of these products would have seemed decadent and impossibly European if I had been handed them at age 11.

So, very well, grocers: I guess if some people are angry with you about an extra 12 cents on a loaf of Wonder Bread, or however much you’ve been clipping off unlawfully, you have no choice but to suffer the abuse and present a defence in court. I consider us square. The bread available to me as an urban shopper has gotten steadily, constantly better. Canadians can feed foreign guests without humiliation.

Unless, of course, someone intends to butter the bread. When it comes to supply-managed dairy products, price-fixing is not an abomination crying to God for vengeance, but the official long-standing policy of a long series of Canadian governments. As a result, it takes a wave of public outrage for our dairy oligopoly to rediscover the concept of quality control . Serious bakers have to engage in bootlegging to make a half-decent croissant, and our supermarket cheese aisles remain monuments to mediocrity and failure. And meanwhile, as you will have read in the Financial Post on Friday , our federal government is trampling U.S.-Canada free trade in defence of that same dairy cartel. This is, as of last Tuesday, the official finding of the dispute-resolution panel that oversees the continental USMCA trade zone. If you drill down into the dispute, you cannot help being shocked by the way Canada’s representatives have conducted themselves. 

Canada's been playing dodgy with American access to protected Canadian markets. 

Small American makers of cheese and butter thought they might have a chance to enter Canadian retail markets (free trade!), but we then did just what we promised not to do: we explicitly assigned most of the rising import quota to our own dairy processors, guaranteeing that the quota would be filled with U.S. commodity milk destined to be turned into “Canadian” value-added products.

Basically, the government acted so as to guarantee that you still won’t hurt yourself stumbling across any Wisconsin blue cheese at the grocery, and that you won’t inadvertently consume any American milk before Canadian Big Dairy has had the chance to squeeze a nickel out of it. If you argue with a dairyman about the supply management that keeps him fat and happy, by the way, he is almost guaranteed to assure you that U.S. milk is mostly white lead mixed with anthrax and filth. But the cartel he supplies is positively ravenous for that U.S. milk when a treaty requires it to be included in our import quota.

I'm not optimistic about real NZ access to Canadian markets, regardless of what Canada might have signed under CPTPP.  

Wednesday 12 January 2022

Breaking Bertrand

New Zealand's two large supermarket chains seem to compete with each other for market share.

Anyone who's done undergrad IO knows that if you have two competitors who can each take the whole market by having a slight price edge over the other guy, you can wind up with a Bertrand outcome. The duopolists behave as though they're perfect competitors. Taking the whole market is valuable. 

Now, if they could sign some cosy deal with each other, splitting up the market between themselves, that would be best from their perspective. Undercutting each others' prices to take the whole market is great and will always be in the interest of each of them in the moment, but Cournot rents are far higher. 

But they can't sign such a deal because it would be illegal under competition law. 

And that made this proposal ... interesting.

In a cross-submission following the competition watchdog's public hearings last November, Coriolis MD and founder Tim Morris said the only way to break the power of the two main supermarket owners in NZ – Foodstuffs and Woolworths/Countdown – is to force divestments when market share gets too large. 

“If you want competition in traditional supermarkets in any meaningful timeframe, you will need to force separation (at Foodstuffs) and or divestment (at WW/Countdown)," he wrote in a submission published by the commission as part of its inquiry into supermarket pricing. Foodstuffs operates as a cooperative whereas Countdown and its associated brands are part of the ASX-listed Woolworths company. 

Divest at 27% 

“As a strawman, I propose by January 2024, any food retailer with more than 27% market share in any region of NZ (eg Canterbury) shall be forced to divest stores until they reach 27%” market share", a level chosen by reference to European and North American regional peers.

Foodstuffs and Countdown wouldn't be able to sit down in a room together and make a deal requiring each to sell off some stores if it ever crossed a market-share threshold. But it's being pitched as an antitrust solution. 

I expect that they are far from perfect Bertrand competitors. But banning them from going past some market share threshold tells them, when at the threshold, to stop competing. That doesn't seem like any kind of good idea. 

I still think all of this is stupid when the regulatory barriers to new entrants are the first-order problem that haven't been dealt with.