Conference roundup

My column at Newsroom last week gave a roundup of the sessions I attended at the NZAE meetings where the results might be of interest to a broader audience. 

It's ungated now, so folks can catch it there. Along with the usual band of sad old grouchy leftists in the comments section who hate economics and economists. 

I think this was my favourite of all the sessions - but that'll largely be because of my own particular interests. I didn't name the presenter or the shop that did the work as they seemed to want to hold that back until the work is finally ready for public release. But credit really is due. 

There was a superb presentation on problems in cost-benefit assessment, or rather in not using it, when deciding on major projects. Here we can consider ourselves lucky not at the outcome, but that someone is checking.

Economists prefer to rely on cost-benefit analysis when assessing projects – CBA. Some others like to use what’s called Multi-Criteria Analysis – MCA. On that latter kind of assessments, projects get scored across a variety of categories.

Cost-benefit assessment tries to put a monetary value on all kinds of different costs and benefits – some of which are harder than others to turn into dollars and cents. But Treasury maintains a comprehensive spreadsheet (called CBAx) listing the costs and benefits of many things, all of which then provide a standardised basis for assessment.

Multi-Criteria Analysis does not try to do that at all. Instead, a project gets a score within each category, the categories are weighted by their perceived importance, and the project gets an overall grade.

Suppose that you wanted the government to adopt your project proposal, and you knew it didn’t do well on a value-for-money basis. It would have a tough time under CBA. But under MCA, there’s a neat trick. If you add more categories for assessment, the weighting on cost declines automatically. If cost is one of two categories, each category gets 50 percent weighting. If cost is one of 10 categories, then the project’s poor ranking on cost can be outweighed by whatever other categories are added in.

Of course it is possible to require cost to have a high weighting. But it’s rarely done. And then we wind up being surprised by all of the expensive projects that get approved. Cost-benefit assessment is underrated – or, at least, MCA should require that rankings on cost carry a lot of weight. In the assessment exercise described, fewer than 5 percent of evaluated project proposals had a robust cost-benefit assessment.

I am very glad this work is being done, and I expect to provide a more detailed column when the authors are ready to release it into the wild.

In questions after the session, I noted that I've seen a few cases where boosters have tried to claim that their clearly-infrastructure proposal is really a social-type investment warranting Treasury's preferential 2% discount rate. I was annoyed that Treasury seemed utterly indifferent to that risk when they put up their proposal, and hoped that it didn't turn out as badly as I feared. 

The presenter noted that there'd been a full slide on that issue that had been pulled so they wouldn't blow out the time constraint for the session. It is a real and bad issue. As expected. And something that prior better versions of Treasury would have been alert to. 

Refugee sponsorship

About a decade ago, Canada's Counsellor for Immigration at the High Commission in Canberra came to Wellington to explain how Canada's refugee sponsorship programme works. 

His discussion of it at The Initiative's event is here. 

The basic deal: whenever communities can get together to raise the funds necessary to support a refugee's start, Canada will open the door to another refugee. Outcomes have been very good - or, at least, sponsored refugees have better outcomes than those arriving through the government's quota.

The previous Labour government here set up a trial programme. And it's now being made permanent. 

The Government has announced the Community Organisation Refugee Sponsorship (CORS) programme will become a permanent part of New Zealand’s refugee resettlement system.

Associate Minister of Immigration, Casey Costello said the trial of the CORS programme shows it can deliver strong outcomes for refugees in employment, housing, education, and community connection.

“Making it permanent means we can build on the skills, partnerships and knowledge developed through the pilot. This is a positive step and provides a programme that we know works,” Ms Costello says.

The permanent CORS programme will begin 1 July, with organisations able to apply to become approved community sponsors from that date. The introduction of the programme will be scaled, with 50 places available in the first year.

But there are a couple of substantial differences as compared to Canada's regime. Hopefully New Zealand's can evolve towards Canada's in time.

Canada has a high nominal cap on the number of allowed sponsored refugees. 

New Zealand will cap the number at 200.  

Canada's sponsored route sits on top of the government's route. However many refugees the Canadian government is prepared to support, communities can fundraise to support more. Those sponsored refugees are additional. 

New Zealand's will be subtractive. The total number is capped, so whenever a community gets together to sponsor a refugee, one will come through that channel - with no effect on the numbers allowed to come here. 

CORS will be delivered alongside New Zealand’s Refugee Quota Programme, maintaining an overall number of refugee resettlement places available at 1,500. Places will be progressively allocated to the community sponsorship pathway as it scales up, with the Quota Programme adjusting accordingly. This allows CORS to be funded from within existing baselines.

The Refugee Quota Programme will remain New Zealand’s primary humanitarian pathway, and any allocated CORS places that are not taken will return to the Quota Programme. 

“In the current environment, this is the best way to ensure a programme that we know works well can continue into the future,” Ms Costello says.

“The Government remains firmly committed to an overall resettlement intake of 1,500 people per year. New Zealand currently takes the third largest number of UNHCR mandated refugees internationally, behind Canada and Australia.” 

If the concern is resourcing, because the government covers some of the cost in a refugee's travel here, it could make more sense to increase the amount of funding that a community group must raise so it covers the total cost, and then allow it to be additional to the government's quota. 

During the Syrian refugee crisis, Canadian communities could work together to help support more arrivals while Kiwis instead had to lobby the government to increase the quota. I'd hoped that the sponsorship regime could provide flexibility that the government's quota can't. It will not do that job under this setup.  

Assorted budget bits

A few minor bits I noted in looking through the budget - won't bother going through the headline stuff that will have been well covered elsewhere.

• They expect to save $1.97 billion by 2029/2030 through the public sector transformation project reducing staffing numbers. There will be pressure on that figure despite the substantial increase in public sector staffing, both in absolute numbers and as fraction of population, over the past six years. 
• Statistics New Zealand gets a large budget increase, both opex and capex, to modernise the IDI. At the same time, it will be held to baseline savings like the rest of the public sector. The Minister for Statistics might want to watch that SNZ doesn't siphon IDI money out for other activities. 
• They're fixing part of the FIF regime as it faces domestic investors, to match the fixes made for those moving to NZ. Taxing unrealised gains was always dumb; good that they're fixing this.
• The Proposal for Reducing the Risk of Online Harm to Children puts $30.75m over four years "to develop policy and possible regulatory options to improve children's online safety, subject to future policy and funding decisions". This is just for the policy development work. It seems like far more money than necessary for a project that shouldn't be being undertaken in the first place.
• They've set a Defence Technology Accelerator as part of the Defence Capability Plan. Sounds neat; only gets $16.1m over 4 years. Maybe if its first year looks promising, funds from the online harm thing could be shunted over here.
• Customs is getting $15.3m opex and $19.5m capex to respond to "increased smuggling", text says it's aimed at illicit drugs. And $35.9m in third-party levy revenue. Could affect tobacco excise too.
• A whole page of the BEFU Supplementary Materials goes through the weaker outlook for tobacco excise. They've sharply reduced forecast tobacco excise revenue as compared to the HYEFU forecast: $1.58 billion over the forecast period. They note a weakened demand profile - but they don't get into whether it's a drop in smoking or a shift to illicit markets. It's a drop in demand for excised tobacco in either case. But they do note an offsetting minor increase in forecast tobacco revenue over the same period. And this is kinda funny.
  

  "The excise rates for heated tobacco products (HTPs) were reduced by 50% on 1 July 2024. Recent data show that the decline in duty from the lower HTP duty rates has not been as large as was expected. Furthermore, subsequent research suggests that future HTP take-up will not be as large as was previously assumed."

  Remember the giant beat-up on Casey Costello in 2024 for the "Tax break for big tobacco"? It was all based on that very stupid estimate that Treasury stuck in the forecasts. Nobody should have believed the figure at the time - it was ludicrous. I don't know whether Hon Verrell actually believed it, or whether it just gave her a convenient line to beat up on the government for its changes to tobacco policy. Neither's great. My column on the stupidity of that figure is here.

• I think Treasury is likely overestimating alcohol excise returns. Recall that SNZ reports very sharp reductions in per capita alcohol available for consumption - those figures are based on excise returns. Treasury has applied a one-off drop to current levels, but then a reversion to prior pre-Covid trend growth in excise. I think Covid and GLP-1 inhibitors and general trends in youth risk-aversion have caused a structural break. Total alcohol available for consumption, on the SNZ figures, peaked in 2021 at 36.3 million litres and have declined since despite population growth - 2025 was only 31.3 million litres.  

• Overall, it'll take a heroic effort to stick to the plan they have, and that'll only get us to structural surplus by 2029. 

Afternoon roundup

Closing the tabs so I can find the ones I really do need...

• Using hoards of ancient coins to trace out historic trade networks
• Left-wing populism is also risky
• ACT won't be supporting National's proposed social media age limits
• Meanwhile, Meta and Google battle over who's going to be stuck trying to verify user ages. I really don't like options that require OS-level ID verification.
• NZ needs more investable propositions
• "It will come back to bite you", but if partisans have very high discount rates....
• BBC's More or Less on the relative risks of vaping and smoking
• Happy 50th Birthday to the Layfield Report. I'm still unconvinced of the merits relative to a combination of user/beneficiary charges, uniform general rates, and land-value apportionment of council rates. I'll have to properly go through the thing though. 
• I'll be helping out on the Advisory Group for Te Kura Taka Pini. 

A bit less shit

Hayden over at The Spinoff asked me what the government can do to make the economy 'a bit less shit'.

I sent an overlong reply; he excerpted some choice bits along with contributions from others.

But this is what I'd sent through. 

I don’t think there are any quick fixes from where we are. 

Imagine you’re 50. You haven’t been taking care of yourself properly for a while now. You’re recovering from a hangover from a ridiculous bender that you should not have gone on. Yes, you had to have a couple of drinks given the event, but nobody forced you to finish the bottle. And you’re starting to realise that the burrito you had last night was probably very dodgy. 

How can you feel a bit less shit? In the short-term, you can take some Gaviscon and hope for the best. But it’s still not looking good. A lot of the pain is locked-in. The bits that have largely just passed were definitely your own fault. The bit that’s about to come isn’t your fault but would have been easier to weather if you’d taken better care of yourself. And the long-term stuff still needs to be dealt to. 

We have been in the hangover brought on by the fiscal and monetary binge we had in 2021-2023. And that was starting to come right - though the fiscal binge is still ongoing. 

There were good signs. Despite the downturn, Auckland building consenting was still higher than pre-AUP. Unemployment still is far below GFC-peaks. There’s reasonable, but not solid, cross-party consensus on reforms to how housing is regulated so that a lot more building can happen and so housing costs can come down. 

But we're now in an ongoing severe energy shock where high prices are combined with supply risk. On the plus side, economies overall aren't as tightly tied to oil prices as they were in the 1970s. But it's still not good. 

At the same time, the government's accounts are in poor shape - and the real fiscal consequences of population aging haven't hit yet. The rating outlook downgrades mean that goodwill and reputation from NZ’s prior commitments to fiscal responsibility (balanced budgets on average) are eroding. Debt servicing costs will go up with credit downgrades unless it's sorted. Folks on the right would prefer it be sorted by getting core government spending down to pre-Covid levels. Those on the left would prefer tax increases. Either one will be painful. A Parliamentary Budget Office running routine value-for-money scrutiny of spending would make it less painful. 

Unfortunately, it's hard to point to shorter-term options that would provide substantial improvement - and really easy to point to options that would make things a whole lot worse. 

We still have fuel *because* prices are high. Otherwise, tankers would go elsewhere. High fuel costs worsen all kinds of things for everyone. People have less money to spend; business costs are higher. And there’s still risk it could get worse. 

Policy cannot do much to help, beyond what it already has done with targeted household support and attempts to bolster international supply arrangements. 

Making it easier and faster to put up new power generation would help bring down electricity costs and provide more alternatives. But that's not really a short-term fix. 

I do not believe that there are any policy moves that can provide substantial benefits in a hurry. There are lots of small, incremental things that could be addressed in the short-term, but they wouldn’t have large effects quickly. 

It would be better to stop looking for short-term fixes, and to start addressing the more foundational problems. 

Longer-term stuff requires finally updating NZ Super, getting a workable version of resource management through that can maintain cross-party consensus and make it easier to build houses and businesses, local government reform to make it easier for them to accommodate and even welcome growth, and civil service reform to help central government work better regardless of whether Labour or National is calling the shots. If proper competitive urban land markets form the cross-party core of resource management reform, that will be highly beneficial over the longer term. 

It would also help if NZ started being more realistic about what is possible on small scale. We too often try to replicate regulatory functions of larger countries when we could instead lean more heavily on determinations from overseas. If you would have no qualms about taking the medicine a British doctor would prescribe, and a French doctor would prescribe the same thing, why require Medsafe to duplicate those regulators’ work? And why wait for foreign pharmaceutical companies to get around to applying here, when our small market isn’t a priority? It only creates delay. 

Shifting toward unilateral recognition of overseas standards would make it faster and easier for households and businesses to access products and services from overseas. It’s worth considering beyond medicines. Not as important as RM reform, but lots of small bits could add up. 

Good doormen and good bouncers

I'm not convinced that there's a real problem to be addressed by ACT's immigration policy. 

I also don't see it doing much real harm. And I can see how it could do a lot of good for public perceptions around immigration. And those perceptions, held only by a very small minority as of the 2023 survey data (2025's will be released later this year) could turn into a real problem. 

ACT wants to make it easier to deport residents. The government is already shifting policy so that someone who has been resident here could be deported for crimes committed within 20 years of being granted residence. I miss that window by a couple years. ACT suggests removing the time limit entirely. 

So if I don't bother going for citizenship in the interim, and I get convicted (innocent people do get convicted from time to time) when I'm 70 years old, and have basically no remaining connection to Canada, and wouldn't be eligible for pension there either for lack of residence over the prior half-century, I could be sent off to the arctic. Very nice. 

They've also proposed a stand-down period for access to benefits - fair enough. Even Clinton had that in his 1996 welfare reforms. ACT ought to consider other parts of that policy, including the term limit on lifetime access to the equivalent of Job-Seeker Work-Ready benefits. 

And they've suggested greater enforcement against overstayers. People who overstay their visas but don't cause any other trouble aren't a priority for Immigration New Zealand - for pretty obvious reasons. Increasing enforcement would mean diverting resource from other activities, or staffing up. They're going to require platforms like Uber to do more checking that driver-partners have valid visas; hopefully the regulatory burden won't be substantial. I don't think there's any real problem here - overstayers will have particular incentive to not do crimes because drawing attention would mean quick deportation. But also fair enough where perceptions of system integrity matter. 

I worry more about what ACT's policy is responding to. A pile of people on the right have been encouraged to believe that the immigration problems evident in Europe and the UK will soon manifest in NZ - or that they already have. ACT hasn't encouraged this false belief. Some others have. 

Viewed as a suite of measures designed to help everyone have confidence that bad people would be kicked out quickly, so that NZ can maintain the kinds of high levels of support for migration seen in MBIE's surveys over the past decade, it's good. 

But a bit depressing that it may be necessary.

My column in Monday's post (ungated here) covered it. The online version of the article has links to the surveys etc that I used as source. 

I used a bar analogy. A bar ought to have at least one of a good doorman or a good bouncer. Unwillingness to have either could be risky. NZ has a decent doorman and a pretty good bouncer. Strengthening both won't do much harm, and could let the bar accommodate more patrons.

Thank a migrant

Combine a points-based migration system that welcomes higher-earning younger people with progressive tax systems and you get a result like this, from Tim Hughes at Treasury:

The central finding of this paper is the simplest. In aggregate, the foreign-born are becoming increasingly important for the country’s tax base. Foreign-born people made up 24% of the population in 2000, also paying 24% of individual tax on market income. Since then, the foreign-born’s share of the population has grown, and their share of tax paid has grown even faster. In the tax year ending March 2024, the foreign-born made up 32% of the population, and paid 38% of the tax.

As Lewis Holden put it on Twitter: 'Goddam immigrants coming to our country, paying all OUR taxes'.

Failure can be overdetermined

Last week, on The Platform, Auckland Uni's Prof of Macroeconomics blamed my shop for the government's not adopting his proposal to completely overhaul the health, welfare, and retirement system.

Robert MacCulloch debates Oliver Hartwich from the New Zealand Initiative following the Nicola Willis interview.

Watch the full video at https://t.co/cXDdwFy9gF pic.twitter.com/HjFK0G77W1

— The Platform NZ (@theplatform_nz) September 22, 2025

About a decade ago, Prof MacCulloch and Sir Roger pitched their proposal. 

It looked like it would take considerable effort to see whether the numbers added up. 

It also seemed like something that would be difficult to convince anyone to implement. 

We declined to weigh in. We've neither endorsed the policy nor recommended against it. 

No conspiracy is needed to explain successive governments' failure to pick up the Douglas-MacCulloch proposal. Just the usual inertia. 

The default path for a good policy proposal isn't implementation. The default path is failure. 

Most proposals fail. 

And especially for large changes that are complicated to work out and that the civil service isn't likely to support and that politicians are likely to see as risky. 

I don't think that proposal could have succeeded without enormous amounts of work being put into demonstrably ensuring the numbers stacked up, public comms on explaining it to voters, work with officials so that they'd understand what the thing involved and in hope that they wouldn't wreck it, and work with MPs so they'd see the merits. 

It probably would have required hiring an actual lobbying shop to help. 

Anyway. Bottom line here: we didn't do anything to help or hinder Robert's proposal. 

And it is weird to think that the thing could only have failed due to nefarious influence. 

That isn't how anything works. 

In the video, Robert notes having had a meeting in Bill English's office in which Matt Burgess argued against Robert's compulsory savings scheme - and suggests it's part of the Initiative's push to kill his policy. 

Matt didn't work with us until after his time working in Minister English's office. I was sad when Luxon's office later stole him from us.

Success happens through weird mixtures of luck and timing and work and skill. Failure is the norm, and is generally overdetermined.

We've been successful with a couple of our policy ideas. But we work on and pitch lots of policy ideas, and have for a long time. Failure is the norm, particularly in the short term. 

Think about the number of papers that turn up in NZ Economic Papers that have a policy recommendation and that aren't obviously crazy. What fraction of those turn into actual policy change? Half a percent? Less?

And who knows. Maybe MacCulloch and Douglas's proposal will get a re-airing with long-term superannuation costs again being salient.

But failure is the norm, even for meritorious proposals. No conspiracy is needed to explain failure. It's just what happens. 

Breaking the internet

There are a lot of metrics folks can use when evaluating policy.

"Will this policy break the internet" is an important one. At least for me and the handful of folks who were online in the 90s. 

Age-gating social media, or otherwise making platforms/sites liable if kids see sensitive content there, is one way of breaking the internet.

It has not been going well in the UK, where making sites liable if kids see 'sensitive' content has meant geoblocks on content that could be considered sensitive, pending Know Your Customer verification that the person on the other end of the web browser is an adult.

My column in today's Post went through some of those issues. New Zealand Prime Minister Chris Luxon seems very keen on setting age gates on social media. Any policy putting liability on platforms if kids access the platform will require others to prove that they're adults - the same kind of KYC mess that the UK is getting itself into.

Depressingly, a proposed bill in the biscuit tin, from Labour, suggests fully following the UK in penalising sites that don't do enough to keep kids from viewing sensitive content. 

Breaking the internet should not be a vote-winner. C'mon. 

Social media slippery slopes

Yesterday, I went through what I see as a trilemma for age-gating social media access. 

A system putting obligations and liability on social media providers to keep kids off the platform will have at least one of the following three problems:

1. Easily worked around by those under the age limit;
2. Cumbersome for those over the age limit;
3. Ends internet pseudonymity. 

I think the proponents of the proposed Member's Bill that National has endorsed envision the system being light-touch and consequently leaning on the first part of the trilemma. It's about 'sending a message' as much as it is about developing a workable regime. 

The Bill is broad enough to encompass all kinds of ways of running it. It depends what you think counts as "reasonable steps". 

Consider the lightest-touch version. 

The Minister designates only Snapchat, Instagram, Facebook and Twitter - leaving everything else alone. And the Minister signals that they don't want the platforms going overboard on what's 'reasonable'. 

The platforms then require users to confirm that they are over the required age. They use various AI tools to watch for accounts that might be under-aged. Some of them, like Instagram, already do this - they try to push teenaged users onto a teen-version of the platform. 

If they suspect a user is under-aged, the platform will issue a challenge. "We think you're actually under the age limit. If you can't prove otherwise, we'll suspend your account or punt you into the kids' version (if that kid version is still legal)." 

For users falsely identified by the automated tools as being under the age limit, the trilemma applies. Either the challenge is easily worked around, or it is cumbersome for those over the age limit, or it's the end of pseudonymity. Being a light-touch regime, it leans on the former.

This does not seem like a political equilibrium. 

People will forget about the tradeoffs when it is obvious that kids are still on the networks. The Minister will put the platforms "On Notice!" that they have to do more to close loopholes. 

That pushes the designated platforms to tighten up. More users will face cumbersome checks confirming that they are over the age limits. It will be harder to maintain pseudonymity if those accounts need to be verified with a real ID. 

The more the regime is successful in keeping kids off of the regulated platforms (at cost to adult users), the more that kids will be pushed onto platforms that have not yet been designated. Those platforms will then be designated. Discord. WhatsApp. Various videogames that have chatrooms or that enable chat. 

Compliance burdens continue to rise, except on platforms outside the reach of New Zealand regulators, like 4Chan. 

The stable equilibrium at the end of that? Substantial hassles for users over the age limit and/or the end of pseudonymity, some kids deterred from using platforms, others out on forums that are far worse than where they are now. 

Recall that John Key's ban on pseudoephedrine-based cold medicines remained in place for more than a decade after it was very obvious that it had done nothing to stop meth while inconveniencing everyone with a cold. 

What planet are they on?

New Zealand's newspaper chiefs' views on how the Fair Digital News Bargaining Bill works is somewhat at odds with the text of the Bill. 

Google today, admirably, said they'll stop linking to New Zealand news outlets in search if the Bill goes ahead. 

News Publishers' Association's Andrew Holden and Stuff's Sinead Boucher aren't happy about that. But contrast what they say with what the legislation says. 

News Publishers' Association spokesperson Andrew Holden said Google had deliberately misrepresented the legislation in its blog and demonstrated “the kind of pressure that it has been applying to the Government and news media companies”.

The bill would create the environment for media companies to “sit down and have a proper commercial negotiation with ‘big tech’ companies about their use of our journalism”, he said.

The Bill creates an environment for a proper commercial negotiation? Let's look at the Bill.  

Clause 21 lets news media companies apply to the Authority to have a platform registered as an operator. A designated operator must comply with the bargaining code (26), under a duty to bargain in good faith (27), and a duty to participate (31). If the negotiation period ends without agreement it moves into mediation (34, 35). It moves then to final offer arbitration if they fail to reach agreement (39), they submit final offers (45), and the arbitration panel selects its preferred final offer (49). There are matters to which the Panel must have regard (50) but there's no way of forming reasonable expectations about what that Panel might decide. 

Does any of that really sound like 'proper commercial negotiation'? 

If I would like to buy your house, and you do not want to sell me your house at the price I've offered, would proper commercial negotiation mean that it ends there, or that I get to drag you into arbitration where you might be forced to sell me your house at the price I've set as my final offer if the Panel thinks that that number seems fair?

Has Andrew Holden read Section 49 of the Bill or is he deliberately misrepresenting the Bill?

Let's move on. 

“To make it clear, no one is asking Google, or anyone else, to pay for linking to news,” Boucher said.

Oh really?

Here's the preamble to the Bill - the explanatory notes. 

The Authority may only register an operator in respect of a news media entity if, in the Authority’s opinion,—

the operator’s digital platform makes the news media entity’s news content available; and

there is a bargaining power imbalance between the operator and the news media entity that favours the operator and is more than minor or insignificant.

Let's check Clause 22: 

22 Grounds for registering an operator

(1) The Authority may register an operator in respect of a registered news media entity only if, in the Authority’s opinion,—

(a) the operator’s digital platform makes news content produced by the news media entity available to people in New Zealand; and

(b) there is likely to be a bargaining power imbalance between the operator and the news media entity in respect of the terms on which the news media entity’s news content may be made available by the operator’s digital platform; and

(c) the imbalance is—

(i) more than minor or insignificant; and

(ii) in favour of the operator.

(2) When deciding whether to register an operator, the Authority may take into account the following matters:

(a) the size of, and resources available to, the operator and the news media entity:

(b) the extent to which the news media entity is reliant on the operator’s digital platform to carry on its business:

(c) the extent to which the operator is reliant on the news content produced by the news media entity to carry on its business (including the extent to which the operator can substitute content produced by the news media entity for content produced by another news media entity):

(d) an estimate of the benefits and detriments (monetary or otherwise) for the operator and the news media entity of the news media entity’s news content being made available by the operator’s digital platform:

(e) the extent to which the news media entity has been able to negotiate the terms on which its news content is made available by the operator’s digital platform, including—

(i) whether the operator has subjected the news media entity to unfair pressure or tactics or otherwise unfairly influenced the news media entity in respect of news content made available by the operator’s digital platform and, if so, the nature and extent of that conduct; and

(ii) whether, taking into account the particular characteristics of the news media entity, the news media entity is able to protect its interests in respect of the news content it produces:

(f) any other matters that the Authority considers relevant.

If the Authority views a link to a news site with a short fair-dealing snippet of what the story is about as "making news content produced by the news media entity available to people in New Zealand", the platform can be designated.

If there is no intention to capture a platform that simply provides links, it would have been easy to specify that in the legislation. Simply put in a 22(1)(a)(i) that reads something like:

(i) for clarity, linking to a news site by a search engine, or by users of a platform, with or without a short snippet describing the linked story, cannot on its own be sufficient basis for designation as an Operator.  

Without that kind of restriction, I can't see how linking to a news story on its own is guaranteed to be insufficient basis for designation. It doesn't matter whether Boucher says she doesn't want to force Google to pay for links. What matters is whether the legislation precludes that as being sufficient, on its own, for designation. 

Shayne Currie, over at the Herald, also doesn't seem to like Google's offer to stop stealing from them by linking to their news stories. 

But his summary of the state of play in Canada is a bit jarring for those of us who've been following the state of play in Canada. 

Here's Currie. 

What happens in other countries?

Google has been ruled exempt from the Online News Act in Canada, after agreeing to pay an annual sum of money – $C100 million ($119m) – to be shared amongst news media companies.

The Google money will be allocated on a formula based on the journalist headcount at each company.

The money will be administered and distributed by the Canadian Journalism Collective, an organisation set up of independent publishers and broadcasters.

The collective was committed to distributing the funding in a “fair, transparent, and inclusive manner”, said CJC independent board director Sadia Zaman.

“We look forward to working with the full diversity of the Canadian news ecosystem, including traditional print and broadcast organisations, and independent local news publishers, including those who serve indigenous, black and racialised communities and francophone communities.”

It is understood Google would want a similar arrangement here, but for the minister to administer the pool of money.

Any pool of money is likely to be well short of what the media industry believes it should be paid, and even what it receives now.

Media industry representatives have previously stated Google should not be exempt.

You might have noticed a few things missing. 

First, Facebook's withdrawal from news hit small news outlets kinda hard. There's no mention of that at all, but he could argue that this is just about Google's side.

But on Google's side, a lot of what they're paying to avoid designation is recycling of funds they'd already been putting into journalism development. 

If you want to know what is happening in Canada on this stuff, you just have to read Michael Geist. He's the expert in it. He's the Canada Research Chair in Internet and E-commerce Law at the University of Ottawa and has been on this file from the beginning.  

Here was his summary as of 25 September. 

The disaster that is Bill C-18 is by now well known. Blocked news links on Meta platforms have had no discernible impact on Facebook traffic, but it has sharply reduced referral traffic to Canadian news sites and led to the cancellation of millions of dollars in previous agreements with publishers. Meanwhile, the Google money remains in limbo as the sector awaits CRTC approval over the governance of its distribution. With prior Google agreements folded into the new $100 million contribution, some organizations will garner less than they did prior to the legislation. Moreover, as demonstrated by the recent response to a controversial tweet from Heritage Parliamentary Secretary Taleeb Noormohamed or the backlash against a CTV report that stitched together comments from Conservative leader Pierre Poilievre to create a fake clip, the government’s policies have only exacerbated public mistrust of the media with every error viewed through the lens of government funding for the media. Far from preserving an independent press, the policies have actually placed them at greater risk.

 

Afternoon roundup

The closing of the browser tabs:

• The Commerce Commission blocks NZ DJ software company Serato from selling out to Japanese DJ product company AlphaTheta. One lesson: don't do tech startups in NZ if your exist strategy is selling out to a larger company.


• New Zealand's bureaucrats have apparently been considering a harmonised set of plain packaging rules on infant formula with Australia, which would force an important part of dairy processing overseas. Hopefully the government stops this one while issuing a pretty hard "please explain" to the officials involved. 


• Aaron Smale's reporting on the Inquiry into Abuse in Care has been superb throughout, and is great again this morning at Newsroom. He asks the right questions about state accountability. I expect that those who helped cover up the state's abuses are more likely to earn knighthoods than to face charges. 


• Gas shortages have Huntly importing more coal. 


• The Department of Conservation has more opportunity than any other part of govt I can think of to realistically improve its own finances through user charges and concession auction. Newsroom reports this morning that they're facing "huge financial pressure". There is an obvious solution here.

Shakedown finances

There are a lot of problems with the Paul Goldsmith / Willie Jackson media bargaining bill. 

I hit on some of those over in the Stuff papers this week.

A snippet:

If the bill goes ahead with only that change, some things are predictable.

Meta will exit news in New Zealand, as it is set to do in Australia. Australia’s government has been mulling over whether it ought to compel Meta to continue providing news in Australia – which is a bit odd. This all started from a notion that Meta was stealing news. One normally doesn’t encourage thieves to keep at it because of the benefits of the fines assessed against them.

When Meta leaves, outlets where Meta provides a lot of free distribution and links will take a substantial hit. They will appear at the minister’s door asking why he has done this to them. They will be right to do so. He will have to come up with an answer despite the fiscal situation and explain to his Cabinet colleagues why he needs to boost media subsidies.

Moreover, New Zealand’s reputation among tech investors will decline. What should they think about places that shake down the tech sector to subsidise other industries?

There is a completely defensible case for public support for journalism. This bill fails to help and causes substantial additional problems.

I wish Minister Goldsmith luck.

The more I think about it though, the more the tax policy aspect of it really bothers me.

NZ has had a decent tax policy process overall. Some bits are incoherent - depreciation settings on commercial buildings and interest deductibility for rental property businesses seem to flip on political whims rather than on any sound basis. But overall, the generic tax policy process is good.

What Minister Goldsmith and National are setting up here is an end-run both around the generic tax policy process and the vote allocation process. 

The legislation that Minister Goldsmith wishes to progress would set the Minister as decider on whether to designate a platform for compulsory bargaining. A Minister could tell Meta/Google/Twitter/Microsoft that if they give some specified amounts to whichever media companies, that would be enough to avoid designation. 

Whatever the resulting de facto tax is, it will not have gone through any kind of IRD tax policy process. Nobody will have checked whether it makes sense, how it interacts with other taxes, what it does to BBLR norms. It won't have to be voted on by Parliament, except in the legislation enabling the Minister to act as extortionist. 

Normal drill in spending measures is that different Ministries put budget bids up to cabinet. Those bids fight against each other for scarce public funding. There's an implicit evaluation of all of them against each other - ideally via cost-benefit assessment, but often also against political considerations. 

None of the money handed over to media companies through Goldsmith's extortion bill will go through that process. Nothing will adjudicate whether the money is appropriately allocated across media outlets/objectives, or whether spending in that area is more important than in other areas that normal vote bids have to compete with.

It is an end-run against both IRD and against the normal vote allocation process. We wind up with tin pot funds for different things, contributed to 'voluntarily' by sectors heavied to make the contributions. 

It is terrible precedent. 

If Government learns that it can avoid all manner of fiscal and procedural constraints by heavying a disfavoured industry to fund a favoured sector through regulatory impost or through promise of regulatory forbearance if the heavied sector does 'enough' to pay off the favoured sector, do not expect it to stop with tech platforms and news media.

Other applications are obvious.

The Grocery Regulator could be instructed to go hard against supermarkets in areas that are of little public benefit but massive cost to the sector, unless the grocers 'voluntarily' agree to do enough to supply food banks free of charge. Who could object? Anyone who does would be painted as either being in the pockets of Big Supermarkets, or as hating the poor, or both - good policy be damned. 

It isn't hard to come up with more of these. 

It's a terrible path. 

I hope Paul Goldsmith comes to his senses. 

Morning roundup

A selection as I read through the morning papers.

• Twenty-three MPs claim an accommodation allowance to stay in their own Wellington properties.  Well, consider the alternatives, which the story doesn't.
  • You could pay all MPs much higher salaries and tell them to sort their own accommodation, which would mean higher effective pay for Wellington-area MPs who wouldn't need to pay for a second residence.
  • You could means-test access to accommodation support which would basically scale MP pay by prior wealth. It would also tilt things to discourage candidacy of middle-to-higher wealth MPs from outside of Wellington.
  • You could raze Premier House and put up halls of residence for MPs and the Prime Minister (and maybe have a reality show based there).
  • Or you could provide non-Wellington MPs who have a Wellington property with a strong incentive to sell off any Wellington properties by not providing the payment to MPs who don't live in Wellington but who have a house here.
  What do you think sucks least? Because I'm not sure there are other options.


• The Government is to run a Parliamentary inquiry into rural banking.

  The Federated Farmers’ campaign for an inquiry was led by farmer Richard McIntyre.
  “I have been inundated with phone calls and emails from farmers, and even some former bankers, wanting to tell their stories,” he said.
  “And there’s been some pretty harrowing stories.”
  The worst of those involved farmers losing farms that their families had owned for generations, he said.

  Parliament might consider whether difficulty in foreclosing on failing farms, because of this kind of response, provides a strong disincentive to lending on rural properties.


• I love that Xero is now putting out productivity data. The data is depressing. But great that Xero's doing it!


• My gawd people. We have a competitive electricity market. New supply can come in if demand increases - though we need to make consenting for it easier. Emissions from mining and from electricity are in the Emissions Trading Scheme. If you want fewer emissions, reduce the number of unbacked units the government will issue or allocated between now and 2050. But wanting to block a gold mine because it will use energy and might have CO2 emissions is nuts.

Afternoon roundup

A closing of the browser tabs:

• New Zealand's space industry keeps growing. Here's BusinessDesk on Dawn Aerospace. So neat. 
• America's economists are very sceptical about the latest round of tariffs on imports from China.
• Ancient bugs hiding in NZ amber.
• Statistics New Zealand is shifting out of central Auckland because of increasing levels of 'intimidating behaviour' in the neighbourhood. Police victimisation stats had a surge in crime in Auckland Central West in 2023 that's since abated, but the number of victimisations there remains far higher than in the Lambton area around the SNZ Wellington office. 
• Easy to find claims that public ownership is better than private because private operators are too short-term oriented. Meanwhile, half the board of Christchurch City holdings has resigned. Why? "...the decisions council has subsequently taken over 2024 to maximise short-term dividends at the expense of paying down group debts and investing in the future of its companies has caused us to lose confidence in council's ability to responsibly own core strategic infrastructure."
• Satya Marar at Mercatus on America's populist turn in antitrust policy. 
• Modern desalination is pretty cheap. The energy required for desalinating a household's water is roughly on par with the power needed for its refrigerator.
• Whenever you're depressed by NZ problems like deteriorating council infrastructure, messes in government IT systems, and crises in public media funding, always worth checking over at Canada's seemingly worse problems in the same areas.
• Concrete is neat.
• There is no good version of a central bank digital currency.
• Eli Dourado wants floating cities.
• Worried about the de-banked - people who can't reasonably access normal banking serives? Fix AML.
• If I were still teaching Public Choice, this would be added to the syllabus. If you want the implicit models behind critiques of the left's shift into identity politics from folks like Chris Trotter, it's a good read.
• Cass Sunstein's 'Economic Constitution of the United States' would also hit the syllabus. I've viewed the Public Finance Act and Reserve Bank Act as being part of New Zealand's economic constitution. Sunstein here makes the case around the rules around regulation and regulatory impact assessment.

Deeply unserious country

Every bit of this seems insane. And people wonder why productivity is falling through the floor. 

Energy News reports that the Environment Court finally threw out Allan Crafar's appeal against a solar farm.

From the story:

• Consent was granted in 2022.
• Crafar appealed November 2022. On what grounds? That turning a dairy farm into a solar farm would mean the effort of turning it into a dairy farm would have gone to waste. In his view, there would be a $30m annual loss to the country.
• Competing experts provided evidence about whether there would be a net national benefit. I don't know why this was a consideration.  
• Bryan Leland, for Crafar, insisted that solar farms ought to have their own backup energy storage.
• James Findlay, for Crafar, claimed that agricultural returns are commonly believed to 'have six-times multiplier effects'.
• Crafar claimed the Paris Agreement means a dairy paddock (in a country that doesn't have a carbon price on ag emissions and in a part of the country trying to push down nutrient load from runoff from dairy farms) can't convert to solar panels because of effects on food production. 
• Judge Tepania dismissed the appeal.

It isn't crazy to object to a land use change that would have substantial adverse flow-on effect on your land use. 

It's nuts that the system entertains objections like this one where there is zero reported real effect - only what amounts to a view that the outfit putting in the solar farm might lose money as compared to keeping it as a dairy farm. 

It's nuts that Todd felt they had to commission an economic analysis to prove net benefits.

It's nuts to invoke Paris Agreement as a reason to block a reduction in dairying. 

And it's darned weird to say that, at current system balance, a solar farm ought to have its own specific backup. When the sun is shining, solar is low-cost power and the hydro lakes spin less water through the turbines, saving it for when the sun isn't shining. 

Deeply unserious system. And environmentalists wonder why National is pursuing a fast-track consenting process that cuts all this crap out (along with potentially less unreasonable objections). 

Despair - construction consenting edition

Kainga Ora is the government's house building agency. It's been building a lot of social housing.

Kainga Ora has its own (but independent) consenting authority, Consentium. 

It's a neat idea. Rather than have to deal with building consents across each different territorial authority, Kainga Ora can run building consents, inspections, and Code of Compliance Certificates through Consentium. 

I really really like the idea of making building consenting contestable. 

Councils have local monopolies on this stuff. Having alternative sources of building consents and certificates that follow a national standard rather than whatever bespoke view councils might have introduces some competition. If councils are being weird about approving something, developers could seek consents instead from the alternative agency. 

And an outfit like Consentium signing off on new building methods with innovative materials might help other building consenting authorities have confidence in approving similar things. 

And then I read Brent Melville's piece in BusinessDesk. You really should subscribe to BusinessDesk. It's regularly and reliably very good. 

But despair. 

I'll snip from it here as the piece is now more than a week old and hope that they don't get too mad at me for it. 

In what's been described as a win for common sense, and after an exhaustive 18-month process, the building regulator has determined that water tanks are "unlikely" to be a fire risk. 

The Ministry of Business, Innovation and Employment (MBIE) clarified this week that an external water tank proposed under a consenting application for a Kāinga Ora development in Henderson, West Auckland, didn't represent a fire risk to neighbouring properties.  

The determination, announced on March 28, was sought in July 2022 by the housing agency's dedicated consenting consultancy, Consentium, was in reference to a new, two-storey detached dwelling and whether an above-ground stormwater tank near the property boundary complied with C3.6 and C3.7 of Clause C3 of the Building Act. 

At the time, Consentium, as the authority, held the view the stormwater tank didn't comply with part of the Building Code concerned with limiting the spread of fire between properties.  

The application was accordingly changed to specify a metal tank to replace the 2.95-metre-long plastic tank supplied by Thin Tanks. 

The regulator duly entered into a year-and-a-half of discussions, consultation, independent fire reviews and deliberations.

Go read the whole thing. If we'd written this as a satirical column in our Insights newsletter, it would have seemed too harsh on officials. 

And yet. 

Even more competition in provision of building consents would be a good thing....

Net tax

Stuff's Federico Magrin does a whip-round on the updated Treasury estimates of net fiscal impact by income decile. 

An early version of that paper had been presented at a workshop last year January or February, but for whatever reason wasn't able to be released until after the election. Bit of a shame where there were a lot of claims floating around about who was paying how much. 

The work uses 2018/19 tax and income data. Key charts:

Households below the sixth equivalised disposable income decile receive more in transfers than they pay in tax. The sixth decile is a wash. The top four deciles pay net tax, with the bulk of the burden on decile 10 households who each contribute about $75,000 per household more in tax than they receive in transfers and government-provided services. 

The tax and transfer system sharply reduces the Gini inequality measure. If you're hearing someone citing market Ginis in arguments for higher transfers, know that they either do not know what they are talking about, or are hoping that you won't understand what they're doing. Inequality in final income is much lower than inequality in market income.

There wasn't space in Federico's column for everything that I'd sent through in response to his questions, so I'll include the full answers here (nothing wrong or misleading in how he presented anything; just like keeping track of what I've said about things). 

Treasury’s work really helps us understand that tax and transfer have to be viewed together. It would be easy to damn GST or income tax for not being progressive enough, in isolation, for those who support a lot of redistribution. But where other countries rely heavily on a lot of tax exemptions or preferred tax status for particular groups to achieve redistributive outcomes, New Zealand largely does it through transfers and government-funded programmes. Tax and transfer, put together, sharply reduce income inequality as compared to inequality before taxes and transfers. And the work clearly shows that households in the top ten percent of earners bear a very heavy proportion of the cost of our tax and transfer system.

Treasury’s work relies on data from 2018/19. Since then, a new top marginal tax rate of 39% was introduced for earnings above $180,000, which will have increased the amount of net tax paid by top-earning households. However, inflation will have pushed a lot of lower-earning households into higher tax brackets, reducing progressivity at that end of the distribution. Finally, overall government spending on transfers increased substantially. In 2018/19, government was not in massive structural deficit. In 2024, we are. Far fewer households will now be net taxpayers, because far more government spending is being covered by debt that will fall on future taxpayers.

The tax and transfer system is redistributive by design. Households that are outside of the workforce or that are on lower earnings receive direct transfers to increase their income, and government provides a lot of services in-kind that those households would not be able to afford on their own if they had to pay for them. We all have different views on fairness, and mine is no better than anyone else’s. But what I don’t think is fair is commentary around tax that points to differences in before-tax income as reason to increase taxes and redistribution, while forgetting just how much work the tax and transfer system already does to reduce inequality and poverty.

[And, in response to request for clarification:] You will often hear commentators point to the amount of income earned by the top 10%, and use that as justification for higher tax rates. But that ignores the effects of taxes and transfers that are already in place. Treasury’s work provides that better context. People can come to different views on how much redistribution is enough, but they should at least start by understanding the extent of existing redistribution from the current tax and transfer system.

Afternoon roundup

The afternoon's worthies:

• Immigration restrictions on spousal work rights are dangerous.
• 28 months jail for tobacco smuggling
• Pseudoephedrine is legal. Now we just have to wait for pharmacies to stock it.
• Really neat stuff on NZ board directors. 
• When Wisconsin school districts got to decide how to pay their teachers, shifting to flexible pay "raised salaries of high-quality teachers, increased teacher quality (due to the arrival of high-quality teachers from other districts and increased effort), and improved student achievement." HT: John Dickson.
• RBNZ's estimates of the neutral interest rate
• Rocket Lab's increasing success in landing US DoD contracts. 
• Ikea is spending just over $400 million to open its NZ shop.

Afternoon roundup

More bits as I clear through the tabs. 

• Kevin Rudd's view on south Pacific security.
• 20,000 hard refusals on the 2023 census, up from 6000 in 2018.
• Andrew Heaton talks with Zach Weinersmith about space settlements.
• General Practitioners really ought to be allowed to prescribe for ADD/ADHD. 
• TVNZ in financial trouble, but still doesn't offer a subscription-version of its streaming offering for those who can't abide the ads. 
• The demographics of Parliament
• Climate Commission recognising potential for carbon sequestration through reinjection in geothermal wells. Excellent. 
• The Gods of the Copybook Headings always slouch up to explain it once more. They've been explaining it in education system results. Good that we're starting to recognise it. 
• If there's a right to be protected from the effects of climate change...
• Infrastructure Commission doesn't mince words on Auckland light rail.