Project Auckland: Reducing plastic bag waste first on Goff’s agenda (NZ Herald)

Tim McCready

Auckland Mayor Phil Goff has expressed a strong desire to see “assets sustained and protected for generations to come”.

In line with this, many of his campaign policies in the lead up to the election were environmental, including protecting Auckland’s marine environment and the Waitemata Harbour, planting a million additional trees in three years, reducing the city’s waste, addressing global warming, and reducing carbon emissions from transport.

The new council may have only been in place for a couple of months, but many of these policies are already underway.

Reducing waste
Goff wants to increase the city’s recycling efforts, implementing initiatives that will work towards an aspirational goal of zero waste to landfill by 2040, set out in the Auckland Council’s Waste Management and Minimisation Plan.

Of the initiatives, one expected to pass fairly quickly is a charge on plastic bags.

“The truth of the matter is that we all know we shouldn’t use them. But we are all lazy,” says Goff.

“Unless we’re pushed, we won’t do it. We could probably cut 500 or 600 million plastic bags a year out of the waste stream in Auckland when we do it.”

Governments around the world have been taking action to ban plastic bags or charge customers for them, beginning with Bangladesh in 2002.

Even some supermarkets in Myanmar are now promoting “No Plastic Bag Day Fridays”, and instead pushing reusable and recycled bags.

California is one of the most recent regions of the world (and the first US state) to ban all retailers from handing out single-use plastic shopping bags at the checkout.

California Proposition 67 — or the “Plastic Bag Ban Veto Referendum” — was included on the ballot in the United States election last month, and passed with 52 per cent of votes.

But rather than an outright ban, a more likely model for Auckland is a plastic bag charge similar to that implemented in Britain in 2015.

British retailers with more than 250 full-time employees are required to charge 5p per plastic bag, which has resulted in a reduction of around 80 per cent.

There is an exemption on certain products (such as uncooked meat, poultry or fish), and small business in England are also exempt as the administrative burden is considered too high for them to manage.

“It’s simple,” says Goff. “Focus on your supermarkets — New World, Countdown, Pak’nSave, which already does it, as does The Warehouse.

“We would allow exemptions for meat, fish and vegetables, and encourage people to use reusable bags.”

Goff has two options for implementing charges on plastic bags.

“I can get an agreement from the supermarket chains to do it voluntarily,” he says.

“I have ready talked to both Foodstuffs and Progressive Enterprises.”

Alternatively, legislation could be passed through a local bill in Parliament.

Outgoing Prime Minister John Key was ambivalent about introducing any national policy to force a behavioural change.

But assuming New Zealand is serious about living up to its “100 per cent Pure New Zealand” tourism slogan, rolling out a policy throughout not only Auckland but the rest of the country must surely be just a matter of time.

Goff points to a 1 NEWS Colmar Brunton poll conducted last month, which found that 78 per cent of those polled thought it was a good idea to charge for plastic bags, and use the money raised to go towards reducing plastic’s impact on the environment.

“It’s a no brainer. I’ll be pushing hard on it,” says Goff.

A Million Trees programme
On the campaign trail, Goff announced an urban forestation programme for Auckland, aiming to plant a million, predominantly native, trees and shrubs across the region during his first term with council — in addition to those already being planted.

His goal is to “green our city”, offset carbon emissions, protect Auckland’s water quality by planting along rivers and coastlines, and improve our living environment.

The transformation of Te Auaunga Awa (Oakley Creek) is already underway. It is Auckland’s longest stream, and is undergoing a transformation to replace the concrete channel and underground pipes with a wider, natural flowing stream with cycle paths, walking trails — and 50,000 new trees.

Goff wants a formal plan for the Million Trees programme to be in place in autumn, in time for the start of next year’s planting season.

The programme has a budget of $1 million a year, which will fund practical support and help provide an overall strategy around which tree species to plant and where.

Local boards, schools, service and social sector groups, private entities, farmers, the Department of Conservation, New Zealand Transport Agency and developers are among the organisations which already plant trees and shrubs around the region. Council will work alongside all of these groups, and offset costs through partnerships.

“We have also got the potential to use nurseries within prisons and those used for training purposes,” Goff says. “Things are underway.”

Addressing global warming
Reducing carbon emissions from transport was a key priority on the campaign trail for Goff’s mayoral bid. Extending beyond an ambitious tree planting exercise, Goff plans to increase public transport use with non-polluting electric trains and light rail, and by building more walkways and cycleways.

“We’re more than a third of the country’s population, we have to demonstrate that we can pull our weight as well,” he says.

Interestingly, in the lead up to the byelection to appoint his Mount Roskill successor (which Labour’s Michael Wood won convincingly), Goff wouldn’t commit to paying half the $1.36 billion cost for Labour’s pledged light rail service from Mt Roskill to the CBD — instead disclosing he would negotiate hard to protect ratepayers.

“It will be carrying far more passengers than many other roads around New Zealand that are funded 100 per cent,” he said.

“We’d want to negotiate between the Labour Party position of 50 per cent funding and what would currently be paid for a road of national significance by central government, which is 100 per cent.”

Goff has said he would like to reduce the council’s 800 cars, and convert those that remain over time to electric vehicles.

Changing his own car has been something he’s quickly acted on.

“I don’t believe that council needs 800 cars, just like I didn’t believe the Mayor needed two chauffeurs and a big Holden — I have neither of those things now.”

Goff is now driving a Toyota Prius, and makes use of an electric bike.

“It’s fantastic because I can peddle up Albert St and look like I’m really fit — and it’s quicker.”

Dynamic Business: Is NZ having a Trump moment? (NZ Herald)

Tim McCready

Issues of social mobility rather than inequality may be to blame for the current rise in anti-establishment politics

As anti-establishment politics continues its seemingly unassailable rise, the concept of ‘inequality’ is often invoked to explain it.

While there is no doubt inequality has driven many to the polling booths in support of Donald Trump, Brexit, Pauline Hanson and others, arguably what is at stake is more an issue of social mobility.

People will tolerate inequality. Many accept it as a natural by-product of an economy that encourages entrepreneurship and growth. Indeed, Americans have voted in as their president a man who embodies that inequality.

But that tolerance comes with hope; a hope that they, or their children or grandchildren, can reach the upper echelons of the economy if they continue to work hard, make prudent long-term decisions, and have a little bit of luck.

Circuit breaker
Increasingly, Western economies have represented a closed circuit of economic enrichment.

Alan Krueger coined the term ‘The Great Gatsby Curve’ to describe the way inequality affects social mobility.

As Krueger summarised in a Brookings Institution blog, “greater income inequality in one generation amplifies the consequences of having rich or poor parents for the economic status of the next generation”.

Once the working class gets the sense that their prospects of upward mobility are waning, they are willing to turn to a circuit breaker.

The left
For decades, the left have adopted the rhetoric and policy that implies the economy is a ‘zero-sum game’.

Specifically, the consistent premise of their arguments has been that something that benefits the rich must automatically, and equally, cost the poor. A gain to one is a loss to another, they argue.

This is simply not the case when it comes to economic growth. But that is beside the point in relation to the present climate. The bigger problem is that such a paradigm becomes easily transported to the flow of people. Priming voters to see the economy as a zero-sum game makes it very easy for the nationalist right to argue that immigration is likewise a zero-sum game. It becomes difficult for the left to then argue that immigration is the one area where a benefit to one (the migrant) is not a cost to the other (the destination economy).

Immigration
Perhaps that is why we are beginning to see some New Zealand’s political parties tentatively embracing anti-immigration policy.

The Greens recently released a new, population-based immigration policy, stating they would cap overall net migration at one per cent of the population — including returning New Zealanders. “We know that immigration is becoming more of a concern for people and in my experience the vast majority of people aren’t concerned about immigrants, they’re concerned about the impact on house prices, and infrastructure,” says James Shaw, Green Party co-leader.

“Others around the world think as New Zealand First does,” said New Zealand First leader Winston Peters this year, at the party’s 23rd anniversary. “They were tired of being fobbed off about issues like immigration.”

Much has been made of a potential ‘Trump moment’ occurring in New Zealand in the future. Already, we may be falling into the same trap of the establishment in the US: being paralysed, fascinated even, by the phenomenon; musing over, sometimes analysing with impressive depth, its causes; but in doing so, failing to consider its remedies.

Inequality
But viewing inequality through a predominantly economic lens — incomes — fails to account for all the other things that make for an upwardly mobile life.

Anxieties do not only stem from income levels, but from not being able to get your child into a good state school, poor health, intolerance, a lack of social support, or few opportunities to progress.

Income is not everything. Indeed, it is everything aside from income that matters most for social mobility. From upward mobility, higher incomes follow.

Flawed measures
This is partly the reason why existing measures of inequality are flawed.

The Gini coefficient is the most used measure of inequality and looks through the lens of wealth at the income distribution of a nation’s residents. The number ranges from zero to one, where zero represents perfect equality — where everyone has the same income, and one represents perfect inequality. A higher Gini coefficient means greater inequality.

New Zealand’s Gini coefficient of 0.33 ranks New Zealand at 22nd — below the Netherlands but ahead of Norway.

However, aside from the fact that the measure cannot tell the difference between a society where everyone is equally poor and a society where everyone is richer, but incomes are more unequal, it is also deeply flawed as it fails to reflect the fact that inequality is about far more than simply income.

If the measure cannot reflect differences in health and social support and education outcome and opportunity and job quality, it means that you miss the root malaise that is behind Brexit, and to a certain extent Trump.

Prosperity
The Legatum Institute released its 10th annual global Prosperity Index last month — a huge study that measures the prosperity of 149 countries based not only on their wealth but also on a series of other factors including education, personal freedoms, how safe people feel and how strong community networks are.

This year, New Zealand topped the world for prosperity, and ranked first in the Index’s measure of economic quality, first for social capital, second for business environment, second for governance and third for personal freedom.

Harriet Maltby, head of policy research at the London-based Institute’s Prosperity Index team says that it is important to look at all inequalities combined, through one measure (prosperity), otherwise you miss the very reinforcing nature of deprivation.

“The problem is that traditionally, national success and related issues such as poverty and inequality, have been looked at from a purely economic perspective. While we recognise that wealth matters, so too does wellbeing.

“Income measures miss so much about what makes for a good life. That’s why the Prosperity Index looks at wealth and wellbeing combined.

“It is opportunity — real life chances — that drives prosperity, not money,” says Maltby. “This all feeds in ultimately to a country’s long-term success, which matters to business.”

Maltby, who is visiting New Zealand over January, explains that we need to shift our perceptions of what inequality looks like. “Making people richer in itself is not the answer”, she says. “We need a measure like prosperity that can look at wealth alongside all the other things that matter in life, and make policy decisions based on that. The New Zealand Government is already thinking like this, and other countries should do the same.”

“Britain is achieving what it achieves with a significant proportion of its population totally left behind in a whole load of dimensions. Imagine the potential and prospects for a nation if it could use and develop the talents of all?”

Globalisation
While it is useful to analyse the impact of globalisation on America’s rust belt, too much time spent examining the causes of those anxieties allows the establishment to feign intellectual interest in the winds of change, while making little or no progress in harnessing them for the good.

At last month’s Apec leaders’ summit in Lima, the leaders of the Pacific Rim pushed back against the creeping global protectionism, promising to continue to strengthen economic ties.

“If the United States doesn’t want to participate in free trade, [president-elect] Trump needs to know that other countries will,” said John Key at Apec.

“We hope he is part of the programme.

“But if not, we are going to continue doing things.”

Meanwhile, Australian Prime Minister Malcolm Turnbull warned that protectionism is the way to poverty. “We have seen this film before, the world did this in the 1930s after the Great Depression and made it much worse,” he said. “It’s not only missing out on a positive but risking a very big negative in terms of destabilising the global trading and strategic system.”

What is often overlooked is that businesses, particularly those that benefit most from a globalised world, can play an important role in helping to find the solutions, and will benefit from operating in a country that offers up the talents of all its people.

Dynamic Business: We must plan ahead for our communities (NZ Herald)

Tim McCready

Maintaining a balance between economic and social progress is a key part of investing in our country

Should businesses provide more opportunities for employees to share in their firm’s governance, and ensure communities benefit more from their profits? These ideas appeared briefly on the radar in Britain recently.

British Prime Minister Theresa May appeared to suggest employee representation on company boards may be mandated while campaigning for the Conservative leadership, and mooted the idea of lump sum payouts (thought to be up to 10,000 ($17,746) per household) to communities affected by fracking.

The commercial end of town might also reconsider hiring policies.

Much resentment arises from a sense that upward mobility is limited for the working class. A significant driver of this is the growing norm that a university degree is essential to gain a corporate job. In the past, aspirational individuals from low income backgrounds could pursue an apprenticeship at prestigious firms in financial, administrative, or legal areas. Now they cannot without taking on three years (or more) of university fees and foregone income.

EY have already removed their GPA-threshold for screening university graduates in the UK, stating their research had “found no evidence to conclude that previous success in higher education correlated with future success in subsequent professional qualifications undertaken.”

It would also be helpful — though, granted, high risk — for some businesses to enter the political sphere when it comes to issues that affect their bottom line and, in turn, their workers. Being willing to more staunchly defend out-sourcing and its benefits — both to foreign workers and domestic consumers — would be helpful. Radio silence on globalisation implies shame about globalisation, and allows its opponents to steal the narrative.

This isn’t limited to the Trans-Pacific Partnership (TPP) debate.

Before New Zealand signed the much lauded China free trade agreement in 2008, protests were held up and down New Zealand, with claims that “so-called free trade with China has cost tens of thousands of skilled jobs in New Zealand manufacturing industries” and “under such an FTA the negative impacts will be felt by working New Zealanders and their families while the profits of transnational corporations will soar”.

The outcome was benign.

New Zealand’s trade relationship with China has nearly tripled over the past decade. Two-way trade has risen from $8.2 billion in the year ended June 2007 (the year before the free trade agreement was signed), to $23 billion in the June 2016 year.

At Apec last month, New Zealand and China announced they will upgrade the historic agreement to ensure it remains one of the highest standard agreements ever negotiated — particularly now that e-commerce has become increasingly significant for bilateral trade.

Like the Trans-Pacific Partnership, this deal received much support within the business community. Yet most businesses remain silent on why they think it is good for New Zealand. Some will argue it is for selfish reasons — that it allows the rich to get richer — but these arguments will be levelled by opponents regardless.

And very few business leaders actually made the argument for why the TPP could benefit their workers, New Zealand consumers, and citizens overseas (who, yes, are deserving of our consideration).

This will become more important as the negotiation of the Regional Comprehensive Economic Partnership (an Asia-Pacific agreement that includes China instead of the US alongside a range of other countries), gathers momentum after the breakdown of TPP.

Opposition may become vehement, with widespread public scepticism of Chinese trade potentially dwarfing that of the US, making the political cost of New Zealand’s participation high. Unless the success story of the China free trade agreement is told — and not just by politicians — our participation in this key part of the region’s future trade architecture may be hindered.

It may also be prudent for businesses to bear the costs of retraining when jobs are displaced.

Maintaining a balance between economic and social progress is a key part of investing in the future. Building strategies to invest in society will create better, brighter and stronger communities. What’s more, an investment in social change is difficult to reverse — once it takes root, it can only grow.

It is more important now than ever that New Zealand’s top businesses take a serious role in this, and consider whether certain protection measures are necessary to minimise disruption. What these companies say and do could ultimately help — or hinder — New Zealand’s ability to solve those issues that will impact the future of the country.

Mood of the Boardroom: CEOs fear children won’t own homes (NZ Herald)

Tim McCready

We fear our children won’t own homes, say the nation’s business leaders. Housing is one of the biggest issues in New Zealand at the moment — that was the response from CEOs in this year’s Mood of the Boardroom survey.

Cathy Quinn, chair of law firm Minter Ellison Rudd Watts, says “New Zealand is a comparatively good place in the world and our economy is doing well. But like many New Zealanders, I worry about housing affordability in Auckland for our staff and our children.”

When asked whether the Government should be doing more to dampen house price inflation, 70 per cent of CEOs agreed, while 18 per cent think the Government is doing enough, and 12 per cent are unsure.

Chris Gudgeon, chief executive of Kiwi Property, says the Government has been “lazy, naive, and negligent”.

He thinks it has lost sight of the crucial societal role that affordable housing plays.

“The Government has allowed housing to move from becoming a social good (when affordable) to a tax-effective investment that has only served to enrich investors at the expense of the next generation of talent we need to retain and attract,” he says.

The Government’s refusal to use both the demand lever as well as the supply lever has exacerbated the problem, Gudgeon says.

“The continued labelling of the problem as purely a supply issue is disingenuous, and blaming the Reserve Bank and Auckland Council is pure politics.

“Government should be imposing restrictions on non-resident investors until supply issue is resolved, and imposing a stamp duty on domestic investors to raise revenue to fund the infrastructure investment needed to support new supply and to disincentivise speculation,” he says.

The boss of one of New Zealand’s major banks thinks that “the Government has been far too hands-off around Auckland housing and the stresses and strains that the city’s infrastructure is under”.

Deloitte CEO Thomas Pippos says “while it is healthy for asset values like property to increase over time, the rate of recent change is unhelpful on a number of fronts, including exacerbating wealth and income disparity that will continue to raise challenges”.

Independent director Dame Alison Paterson says all the initiatives announced are worthwhile, however they take too long to have an impact. “While the incentives are to invest for capital gain and not in productive industries, the position will not change.”

Another CEO suggested: “Get Nick Smith off the (housing) portfolio. The man is clueless and disinterested.”

Although most CEOs agree the Government must step up and do something to curb housing inflation, there is considerable debate over what that action should be, and an appreciation that perhaps there is no silver bullet.

“This is clearly not an easy issue to fix — otherwise it would have been done,” says Quinn. “Collapsing the housing market and having people lose their equity does not seem right.”

Pippos cautions that “what is unhelpful is that property will become even more of a political football that may result in populous measures rather than those that are effective in the long run.”

The chief executive of an Auckland law firm says “we need to assess what has and hasn’t been effective elsewhere. Australia has massive taxes and stamp duties, but rather than blindly follow we need to assess and tailor make something sensible”.

Many CEOs see housing as a personal issue. Not necessarily because of the effects it will have on them, but because it will affect the ability of their children or grandchildren to own property in Auckland. Just over 70 per cent of those surveyed are concerned that the New Zealand “dream” of owning property is becoming out of reach for younger generations, and 73 per cent are concerned that younger New Zealanders are being priced out of the Auckland residential property market.

“I think it is really sad to see so many young people — many of whom are well-educated and in good jobs — that don’t believe they will ever be able to afford their own home,” says one CEO.

Though only a third of those surveyed worry that the Auckland property market will stall, there is concern that any fall in property prices will most severely impact first-home buyers who are more at risk of falling into negative equity.

“I wouldn’t want to see my house value deliberately dropped by 20 per cent, but it’s not me that would hurt,” says one CEO. “It’s my niece, for example, who just climbed on to the property ladder with an ‘affordable’ first home in Avondale.”

Though CEOs think that the lack of supply is the most significant contributor to the rapid increase in Auckland house prices, the majority of those surveyed agree increased net migration, low interest rates, domestic speculation, foreign investment, and the absence of a full capital gains tax are all important factors.

Finding solutions
NZ Council for Infrastructure Development CEO Stephen Selwood thinks the Government should assist development by aggregating land and providing development opportunities to the market. “This will deliver subdivisions at scale adjacent to transport services,” he says.

The head of a real estate company thinks the supply of homes is the fundamental issue, and is not convinced that any new bans, taxes, or regulation will provide a solution. “The biggest issue is a lack of supply. All other issues add to the situation, but not as significantly as supply.

“We need to encourage developers and investors (both local and foreign) to acquire land and redevelopment projects and get on with building homes and apartments,” he says.

“Taxing residential investors and imposing LVR restrictions just discourages them from increasing supply to the rental market — this simply diminishes supply further and pushes rents upwards,” says the real estate boss. “Fix the supply issue and the value equation will begin to balance out.”

Beca chief executive Greg Lowe, says “empty houses owned by people who don’t want to either live in them or provide rental homes, or are being held by short-term speculators (if the reports are correct), creates an unhelpful distortion of demand”.

Although house price inflation is a supply issue, Mazda NZ’s Andrew Clearwater says the real issue is a lack of skilled tradespeople. “There needs to be a curb on foreign investment where it is at the expense of first time buyers.”

Lowe agrees, believing more skilled labour is needed in New Zealand — skilled migration will help meet this need, and also add to growth in domestic demand.”

The boss of an agricultural company says until supply catches up with demand, the Government needs to implement fairly drastic action in terms of immigration. “It needs to be Government-led, as immigration is a national choice, but Auckland is wearing most of the consequences.”

Other CEOs agree New Zealand needs much lower and far more targeted immigration — “we need a smaller number of highly skilled migrants.”

Auckland Chamber of Commerce chief executive Michael Barnett says: “We need to address the foreign buyer advantage.”

The chairman of an investment management firm says there should be no sales of existing homes to foreigners, and an energy company chief executive says the Government must contemplate new building rules for overseas buyers.

“I support a Government housing programme, but only for permanent residents who take up occupation and do not use the property for investment purposes,” says a real estate boss.

Are taxes the answer?
The Government has notably avoided an effective capital gains tax, instead implementing the two-year “bright line” test. Whether capital gains and other taxes should be implemented remains a contentious issue, with CEOs unsure whether it will make a difference.

The boss of a real estate company says “if we look overseas to countries that have capital gains tax, house prices have continued to increase”.

On the other hand, a manufacturing chief executive thinks “a capital gains tax is needed now on property other than the family home. Shifting speculative property investment into investment in productive capital markets would be a better economic outcome.”

Don Brash, chairman of ICBC (NZ), says if metropolitan urban limits were scrapped, and infrastructure on the fringe of major cities appropriately funded, local authorities wouldn’t have to do much else. “Bill English understands this, and so does Phil Twyford”.

Yet most chief executives believe the solution to the housing crisis shouldn’t be the sole responsibility of the Government, and that local authorities need to step up and take action. Just over 80 per cent of those surveyed think local authorities should establish satellite towns or cities to service major metropolitan areas, and 57 per cent think local authorities should apply a substantial differential rate to “banked land”‘ to incentivise owners to make it available for housing.

Port of Tauranga CEO Mark Cairns says “unoccupied land tax seems to be a no-brainer”.

Lowe says that there is plenty of land already in Auckland, but housing density is too low for the current and expected population.

“We waste the land we have on inefficient and unnecessary section sizes. Urban intensification, particularly around transport and retail hubs, has been a common solution overseas and provides for more efficient use of land that still allows a good urban lifestyle,” he says.

The head of a government agency agrees: “We must embrace intensification, and tackle the Nimbys in the leafy suburbs of Auckland.”

Another CEO suggests: “Build along the Auckland rail corridor. This will allow at least part of the growth to not impact on the roading network if rail continues to improve.”

Yet most CEOs agree that any intensification should not be at the expense of Auckland’s green space.

“I agree with selling off golf courses, but would not like to see all green areas gone,” says a real estate chief executive.

“We must not compromise the desired quality of life that Aucklanders are after, including parks and golf courses.”

CEO solutions:

  • 81 per cent want to see satellite cities/towns established to service major metropolitan areas
  • 39 per cent find it more difficult to attract staff to relocate to Auckland
  • 70 per cent believe Govt should do more to dampen house price inflation in NZ
  • 70 per cent are concerned the NZ dream of owning your own house is becoming out of reach for younger generations
  • 62 per cent are not concerned the Auckland housing market will stall

Mood of the Boardroom: Will this be Winston’s finest hour? (NZ Herald)

Perhaps the real winner of the opposition in the current climate is NZ First Leader Winston Peters, writes Tim McCready

There are striking similarities in the motivations behind the United Kingdom’s vote to leave the European Union, the incredible rise of Donald Trump (and Bernie Sanders) against all odds, and what have consistently been Winston Peters’ policies.

At the heart of the Brexit campaign — passionately supported by Nigel Farage’s UKIP — the closest comparable UK political party to New Zealand First, was strong rhetoric around the “deterioration” of the United Kingdom and the unrecognisable, rapid change resulting from globalisation (and the mass migration that has come with it). Notably it was the lack of control felt by ordinary people over the direction of their country that most resonated.

The UK’s financial markets rose sharply in the final stages of the referendum campaign, reflecting the confidence that “Remain” would prevail. But when the quiet majority rose against the prevailing voice, Donald Trump himself used the victory as his own platform, tweeting: “Just arrived in Scotland. Place is going wild over the vote. They took their country back, just like we will take America back. No games.”

Trump ignored (or missed) the fact that the majority of Scotland backed a continued membership of the European Union.

Farage consistently and successfully directed his anger towards the “establishment”, including politicians in Brussels and Westminster who had long ignored resentment toward closer political integration and immigration, particularly in traditionally working class areas.

Sound familiar? Earlier this year, marking 23 years of New Zealand First, Peters used both Trump and Brexit to boost his own platform.

“The rise of Donald Trump in the United States against all predictions and the chord Bernie Sanders struck with many Americans can be attributed to ordinary citizens stepping up to the mark and saying — we’ve had enough.

“Others around the world think as New Zealand First does,” he said. “The people of Britain decided they had put up with enough of being ignored or talked down to from Brussels. They were tired of being fobbed off about issues like immigration.”

In stark contrast last week, Prime Minister John Key addressed the UN General Assembly, speaking out against creeping protectionism — “borders are closing to people and products, to investment, to ideas. Many states are turning inwards.

“The politics of fear and extremism are gaining ground. We cannot turn inwards.”

Though we cannot yet speak for the United States, the early signs are at least that the Brexit vote may well turn out to be a force for global free trade rather than protectionist interests.

There is a great opportunity for New Zealand and the UK to ally closely on this, but no outcome is guaranteed for either nation — particularly with Winston Peters on the march.

In this year’s survey, 40 per cent of CEO respondents thought New Zealand First would hold the balance of power following the next election; 14 per cent think he won’t and 46 per cent aren’t sure.

None of the respondents seem particularly thrilled with the prospect:

  • “Winston seems to be the obvious winner of the disenfranchised voter. I never thought I would say it but I am glad we have MMP — it may prove to be a good moderator in this new political environment.” — A manufacturing chief executive.
  • “Watch out: Winston’s coming!” — A chief executive of a government agency.
  • “I would like to see Winston Peters prosecuted for treason.” — A FMCG boss.

Peters aims to mobilise those one million “forgotten New Zealanders”, and those that have become disillusioned with politicians.

He has positioned New Zealand First to be anti-political, anti-immigration, and anti-capitalism.

He has had his own successes this term at the expense of the Government: the failure of Key’s flag referendum, and a landslide victory in last year’s Northland by-election.

Farage has said that the British people conclusively fired a stone at their Goliath earlier this year. Perhaps, in 2017, Winston Peters will strike his.

Mood of the Boardroom: Goff rated best for mayoralty by CEOs (NZ Herald)

When chief executives consider the candidates vying to lead Auckland, political experience seems to win out, as Tim McCready explains

Experienced national politician Phil Goff is rated by 43 per cent of respondents to the Herald’s survey as having the best attributes to be the next Mayor of Auckland.

Survey responses indicate there is a sense of inevitability in the senior business community that Goff will take the title of mayor come the October 8 election.

Goff has, by far, more name recognition than any other candidate, and has been in the public eye since he entered Parliament 35 years ago as a Labour MP, rising to be party leader before being trounced by John Key at the 2011 election.

His campaign has focused on using his experience in central Government to solve Auckland’s housing affordability problems and public transport.

Westpac NZ boss David McLean had qualms about Goff’s plans to bring back trams saying that was genius for Melbourne — but Melbourne was designed for it. He questioned whether Auckland streets were wide enough: “It would take a huge change to put them back.”

Goff’s connectivity to Wellington — he is a former Foreign Affairs and Defence Minister — was consistently noted among CEOs as a capability that will help things get done. “Collaboration with government agencies will be critical to ensure government support”, says Hawkins Group CEO Geoff Hunt.

But with support at just 43 per cent of survey respondents he still has to build broad credibility with senior business.

The chief executive of a major bank says although Goff is far from perfect, he’s “the best of the lot”.

“He’s got plenty of substance but little flair — he’ll do a great and competent job and Auckland will progress.”

Vic Crone is ranked second by CEOs, with 19 per cent support. Crone is the centre-right front-runner; she has the backing of senior National Party MPs, and her corporate experience, including senior leadership roles with Telecom, Chorus, and Xero, provides a clear point of difference from Goff. Former National candidate Mark Thomas comes in third with just over 2 per cent.

Not one of the more than 100 survey respondents thinks businessman John Palino has the best attributes to become mayor. Palino was a mayoral candidate in the 2013 election coming second to Len Brown.

Cooper and Company chief executive Matthew Cockram says Crone and Thomas have robust and thought-through policy platforms that deserve a better airing.

But Cockram says Goff is “by default” the best politician of them all: “hopefully some of what they have suggested and pushed for will be picked up and developed by Goff.”

An energy company boss expressed dismay that the mayor and councillors hold such a vital role in creating and sustaining a successful economy, and yet on the whole fail to attract quality leadership.

Perhaps most surprisingly at this late stage of the campaign, 22 per cent of CEOs have indicated they don’t yet know who they will vote for — though some of this can be explained by respondents feeling uninspired by the candidates, and concern that no one has the depth of skill required.

The boss of an energy company expressed dismay that the mayor and councillors hold such a vital role in creating and sustaining a successful economy, and yet on the whole fail to attract quality leadership.

A further 16 per cent suggested other candidates should have emerged with one nominating Auckland Chamber of Commerce CEO Michael Barnett, who has previously been flagged as a potential mayoral candidate. Another business respondent nominated former New York mayor Michael Bloomberg — who earlier shied away from contesting the US presidential election as an independent candidate this year.

Top 5 priorities for next mayor
Chief executives overwhelmingly want the next Mayor of Auckland to improve public transport in the increasingly congested city,

Among their other top priorities for the mayoral agenda are getting large infrastructure projects funded; bringing Auckland Council spending under control; improving how council works alongside the government and implementing the Unitary Plan.

The New Zealand Council for Infrastructure Development says Auckland’s transport system is at a tipping point. Significant progress has been made since the mid-2000s, with record levels of investment. The completed western ring route, rail electrification, City Rail Link and other projects will make a difference, but in order to meet the needs of a further one million people by 2050, Auckland must accelerate progress.

NZCID chief executive Stephen Selwood says that Auckland’s current transport problems will be much worse unless we make a step change in investment into transport infrastructure. “Density must be strongly targeted around rail and bus way corridors, and future urban areas will need to be concentrated where new transport capacity can be provided with urgency. Additional funding through road user charging will be fundamental to achieving the level of investment required.”

“Are we spending enough? How can we finance the infrastructure we need?” questioned a company chair. “I would support the sale of local assets on the basis that money was used for infrastructure — the spend needed in Auckland is massive.”

Mayoral candidate Phil Goff’s own policy planks — city infrastructure bonds, expanding the Government’s $1 billion infrastructure fund, and public private partnerships to fund growth — obviously resonated with chief executives’ belief that rates and debt cannot be the only funding source for transport and infrastructure. There are also clear concerns that morning and afternoon gridlock in Auckland on main arterials are increasing to the point where it is significantly impacting on productivity.

ICBC (NZ) chairman Don Brash says there isn’t a problem with the adequacy of electricity or water infrastructure, but “roading in Auckland is seriously deficient — or, perhaps more accurately, is being inefficiently used because it is not being appropriately priced.

“There is also a huge need to improve our transport infrastructure and selling, for example, shares in the port would both provide funds for that purpose and improve the efficiency of the port (witness the Port of Tauranga).

“Why Auckland Council continues to own a minority stake in the airport also defies understanding — it is a purely commercial business, and the council should sell out now while the price is very high.”

Auckland Council is also seen by some as severely bloated with too many staff — and as a consequence those staff find myriad ways of obstructing development with pointless regulations and endless delays.

For her part, mayoral candidate Vic Crone sees public private partnerships and other investment tools as the way forward for Auckland’s infrastructure. She also wants to see the port moved to make better use of waterfront land.

Several of those surveyed — including Precinct Properties chairman, Craig Stobo — agree the best use of Port of Auckland’s land is for residential and commercial use, and not for shipping. “The next Mayor needs to lead the shift of the harbour port to an inland port serviced by other harbour ports,” says Stobo.

A consensus is unlikely in the short-term. Port of Tauranga chief executive Mark Cairns says it is simply unrealistic to move the port in the medium term.

“If ports simply priced and invested to achieve a cost of capital return, then a natural hierarchy of ports (international container hub, regional feeder, regional bulk) will emerge quite quickly.

“Ports are multi-million (often billion) dollar long-run infrastructure assets, not regional Economic Development Agency playthings.”

There is mounting concern among CEOs that without significant improvement in Auckland’s infrastructure — along with improving housing affordability — the city will lose staff to other centres around New Zealand where the cost of living and lifestyle are becoming more attractive.

  • 4 per cent of CEOs indicated they have had to increase salaries and offset the higher cost of living in Auckland in order to attract and retain talent;
  • 39 per cent have found it difficult to find staff willing to relocate to Auckland, and 17 per cent have already considered relocating some of their operations away from Auckland.

A media boss noted it has been difficult to attract staff even at the senior management level because of reduced quality of lifestyle that would be offered.

“While ‘quality of lifestyle’ can reflect access to amenities and communities, the biggest factor is ability to afford to provide a comparable property to live in for their family.”

But Beca’s Greg Lowe said Auckland tended to provide good career opportunities and the scale of the market seemed to attract people to work there. “Those who place higher value on lifestyle than career opportunity, that is, considerations such as lower housing/living costs, easier transport, perhaps phase of life such as young children) may choose other locations.”

An exporter says salaries need to be higher and there are definite skill shortages in accounting and finance. “Perks like car parks are now gold.”

Another suggested Auckland had potentially become too dominant in New Zealand and would encourage some businesses to move out of Auckland — “some form of government programme?”

Mood of the Boardroom: Praise for Len’s Legacy (NZ Herald)

Tim McCready

Outgoing major Len Brown has been largely praised by CEOs for bringing together an amalgamated Auckland, passing the Auckland Unitary Plan, pushing rail to the forefront of a solution for Auckland’s transport, and persevering with the City Rail Link in the face of central government opposition.

  • The CEO of an Auckland Central law firm says “a big tick to Brown for persevering with the Rail Loop project in the face of central government opposition and playing a big role in getting it under way. That will be his legacy.”
  • “Despite his shortcomings he has been a force in helping to bring together Auckland,” says Joanna Perry, non-executive director for several large New Zealand businesses. “We are way better off with the amalgamated Auckland than we were before.”
  • The CEO of a telecommunications company says “to give him credit, he targeted the trains and he got the commitment needed to get going.”

Despite these accolades, more than 57 per cent of CEOs surveyed think Len Brown has performed below average for Auckland, and 63 per cent feel he has performed below average for business.

  • “Len has presided over a council which has helped drive the price of housing well below the reach of most New Zealanders who don’t already own property,” says ICBC NZ’s Don Brash.
  • “He has committed the city to an exorbitantly expensive piece of underground railway which does almost nothing to ease serious traffic congestion.”
  • “Len Brown lost all credibility when it was revealed that he was not as he had portrayed himself. He should have stepped down immediately,” says a chair of several major New Zealand companies. “It has been self-interest which has kept him in the role for the past three years.”
  • A real estate firm CEO summed up the general consensus that it is time for a change: “Aside from Len’s publicised incident, he has been a good mayor who took over the Super City concept and brought it together. But now is the time for a new mayor to start, and to deliver major changes required for Auckland.”

Korean reunification – Bonanza or Bust? (NZ INC)

Tim McCready

This year marks the 70th anniversary of the end of World War II, and also the 70th anniversary of Korea’s division into North and South. Last month the World Journalists Conference was held throughout South Korea under the theme ‘the 70th anniversary of the division of Korea: Thinking about unification on the Korean Peninsula’.

Na Kyung-won, Chairperson of the Foreign Affairs and Unification Committee of the National Assembly, posed the question: What is North Korea for South Korea? Her response – “On the one hand, a serious security threat, but on the other hand, a partner with which we have to work together on the way leading to the unification of Korea.” This stance isn’t surprising – the requirement to seek peaceful unification is included in the South Korean Constitution.

South Korea established a Ministry of Reunification in 1998, which works to establish North Korean policy, coordinate inter-Korean dialogue, pursue inter-Korean cooperation, and educate the public on unification. In Korea there is an old saying, ‘ten years can change even the rivers and the mountains.’ However any progress on reunification to date has been largely non-existent.

From 2000 until 2008 liberal governments in South Korea put in place the Sunshine Policy under the leadership of President Kim Dae Jung. The policy resulted in greater political contact between the two countries, two Korean summit meetings in Pyongyang, several business ventures and brief meetings of some Korean families separated by the Korean War.

Kim Dae Jung was awarded the Nobel Peace Prize in 2000 for his successful implementation of the Sunshine Policy. However, following nuclear and missile tests and the shooting of a South Korean tourist at the Mount Kumgang Tourist Region, the Sunshine Policy was deemed a failure and wound up in 2010. The Sunshine Policy is dead, and so are the key players on both sides.

Sadly there are an estimated 6,700 people from separated families living in South Korea. The tragedy of the division is most prominently seen through those people who have not seen, spoken to, or even sent letters to their family members. Those people with the closest ties to the North are getting very old. Koreans, who are extremely family-centric, are very conscious of the fact that there is not much time left. The older generation passionately long for reunification, and believe it is imminent. Younger Korean’s seem to be agnostic about the prospect and worry about the economic cost.

Aside from reuniting disrupted families, South Korean government officials frequently spoke about ‘hitting the jackpot’, or the ‘bonanza’ that would come with reunification. The Korean Peninsula would be thrust into the role of an Asian hub. China, the world’s second largest economy lies to the West. Japan to the East is the world’s third largest. The virtual island of South Korea that is so evident from nighttime satellite photos would become connected through rail, road, and pipelines through to Eurasia.

South Korea’s population of 50 million combined with 25 million in the North would develop an entirely new market. North Korea has 20% more space geographically than South Korea and an abundance of natural resources including coal, iron ore, gold, rare earths, hydroelectric and seafood. South Korea would suddenly become resource rich, and South Korean companies would gain access to a pool of hardworking, inexpensive North Korean labour.

On the flipside, Andrew Salmon, an author and high-profile journalist based in Seoul had a more pessimistic stance. He noted that if you look at North Korea through only the lens of the leadership, nothing much has changed. His view is that the most exciting and underreported story in Asia is that North Korea is becoming a de facto capitalist state.

During the 1990s North Korea suffered from horrific famine. The State distribution system imploded and North Korea had no choice but to go across the border to China, start trading, and run primitive markets. These markets have not gone away and have instead expanded nationwide to the extent that you can now buy almost anything – food, consumer goods, even electronics. Instead of North Korean currency the traders use international currencies and communicate with each other to set exchange rates. While it may be primitive and unofficial, for the first time in history change is coming from the bottom up.

Salmon believes there are rewards just ahead. Under Kim Jong-un, we have seen incentives and autonomy for factories, agricultural and fishing industries. A real estate market is becoming established in Pyongyang and even a venture capital market is becoming established.

The Kaesong Industrial Zone was established and is run by the South Koreans. While it has been open for ten years, there are only 123 small South Korean companies operating there and is unlikely to get any bigger. The original plan was for this to be the first step for South Korea’s economic recolonisation.

On the flipside, North Korea are establishing additional special economic zones. They are seeking foreign trade and investment, with China moving in very aggressively. The Rason special economic zone is in the far northeast bordering Russia and China and serves as a warm-water port for both countries. Foreign currency is permitted, and there are no poor people there.

Salmon’s view is that there is some hope in the future. But it doesn’t lie in the hands of the generals, the politicians, or the diplomats. It is up to business leaders. The Sunshine Policy wasn’t instigated by a politician, but by Chung Ju-yung – the founder of Hyundai conglomerate. Salmon argued that South Korea needs to get rid of sanctions that prevent any trade or investment in the North outside the artificial Kaesong Industrial Zone and stop the incessant focus on denuclearization – because it won’t happen. He argued that we should instead separate business from politics so that we can all have a stake in the North Korean economy.

As a country that assisted in the Korean War, I was invited to take part in a panel discussion on reunification, and share lessons that could be learnt from a New Zealand perspective. With speakers from powerful economies of Russia, China, the UK and South Korea, this was formidable, but the Korean’s were interested in hearing about New Zealand’s much admired strong relationships with nations around the world.

Reflecting on Korean reunification from a New Zealand perspective, our close partnership with Australia in particular offers a number of lessons instructive to prospects for such a future partnership between North and South Korea.

Despite our entwined history and combined military efforts, it would be fair to say that our relationship with Australia has remained strong due to our successful economic and trading partnership. Although the countries have their differences – cultural, political, nuclear, and commercial – they both represent an important trading partner to the other, supported by what is often referred to as “the world’s most comprehensive, effective, and mutually compatible free trade agreement”.

New Zealand’s close relationship has endured with Australia because we are stronger together. If New Zealand can share something with the world, it is that careful navigation of trade issues is something that can strengthen relationships, and over time build trust.

Word from the officials is that unification will be a jackpot not only in Korea, but for the rest of the world. Whether that is right or wrong, a divided Korea is a very sad reality. Progress has been slow, but ultimately the key to resolving conflict and division on the Korean Peninsula will come down to demonstrating that the interest in reunification is mutual and that benefits long term will extend the potential – for both economies.

From Soju to Sauvignon blanc – Korean FTA (NZ INC)

Tim McCready

When the New Zealand – Korea free trade agreement signed in March enters into force, tariffs will be eliminated on 48% of current goods. New Zealand’s exports to Korea current attract $229 million every year in duties.

In the first year alone the free trade agreement will save an estimated $65 million in duties, and within 15 years of establishment the remaining tariffs will be largely eliminated. The industries that will see the most benefit are those exporting dairy, red meat, kiwifruit and wine.

The current tariff on wine exports to Korea is 15%, and this will be wiped immediately as the agreement enters into force. This tariff concession will provide a good boost to exporters, but despite the removal of tariffs, exporting wine to Korea remains a challenge for New Zealand.

This is largely due to the tax and distribution system. When wine arrives in Korea, a liquor tax of 30% is applied, along with an education tax of 10%. This is even before it hits the distribution networks, a value-added tax of 10%, and retailer markups.

Korea produces and consumes a large amount of liquor locally. Beer and Soju make up 86% of locally produced alcohol. Wine makes up approximately 20% of imported alcohol. Wine is considered to be a luxury product and is consumed by only a small fraction of the population. Red wine is dominating wine imports at 71%, but white wine is beginning to gain more traction.

With the removal of tariffs, New Zealand wine producers will now be placed on an equal playing field with major international competitors in the market including the US, EU, Chile and Australia. However, the rest of the taxes that make up the total cost of wine are payable whether a free trade agreement is in place or not.

The combination of taxes, high distribution costs and mark-ups can make New Zealand wine significantly more expensive in Korea than in many other countries. And because New Zealand wine is typically sold as a premium product, and tax is applied as a percentage of price rather than a cost per unit, this can increase the markup on a bottle of New Zealand wine significantly when compared to budget brands of wine. This differs to Japan where tax is applied per bottle, and education tax doesn’t exist.

In the year ending June 2014, South Korea accounted for just $2 million of New Zealand’s $1.3 billion wine export business globally. That said, New Zealand wine is increasingly becoming of more interest to South Korea. Until 2001, only one New Zealand winery had a presence in the Korean market. The number grew to 38 in just six years. Demand for New Zealand wine is growing as consumers become more aware and curious to try white wine.

But we still have a way to go.

I visited three cities during my visit to Korea, and one thing that surprised me is that I was frequently asked if New Zealand produced any alcohol. High-end restaurants had New Zealand wine on their wine list, but my experience demonstrated that the average consumer was largely unaware of our ranking in the wine world.

The free trade agreement will undoubtedly be great for New Zealand’s dairy, meat and horticultural industries. But the wine industry will be one to watch. Chile had a noticeable boost in wine exports after their free trade agreement was signed with Korea, and it is likely that New Zealand will see a similar lift.

But it could be that the free trade agreement gives New Zealand the impetus it needs to boost the recognition and acceptance of our wine brands in Korea. And if that occurs, the benefit of the free trade agreement would vastly exceed any reduction in tariffs.

APEC 2012 CEO Summit – Vladivostok, Russia

In 2012 I was asked to represent New Zealand at the APEC (Asia-Pacific Economic Cooperation) summit in Vladivostok, Russia.

The summit is the Asia Pacific’s premier business event, with the Asia-Pacific’s political leaders and the regions leading CEOs in attendance. The theme this year was “addressing challenges, expanding possibilities”, and with it being held in the Russian Far East, delegates were shown an impressive country with bold ambitions – many embedded in the Asia-Pacific, that dispelled myths and stereotypes.

Video 1: APEC 2012 Overview

Video 2: Behind the scenes in Vladivostok

Political Leaders
One of the biggest highlights of attending APEC was the opportunity to attend the plenary addresses from global leaders, as they outlined their visions, experiences and perspectives on issues of discussion. Leaders included:

  • His Excellency Mr. Hu Jintao, President of the People’s Republic of China, who spoke about the challenges and opportunities China has in their relations with Russia. He also outlined the measures and leadership China is aspiring to take on intellectual property, and inward and outward foreign direct investment throughout the APEC economies.
  • The Honorable Hillary Rodham Clinton, Secretary of State of the United States of America, addressed the importance APEC plays with members accounting for 54% of world GDP. She spoke about the potential of the platform for economic growth, and the responsibility we have in areas such as security, and assistance for women and minorities in small business in developing countries, so they can also reap these benefits.
  • His Excellency Mr. Vladimir Putin, President of the Russian Federation, spoke of opportunities in Russia and outlined measures being taken to ease logistics through upgrades to the Trans-Siberian railway. He fielded questions into Chinese investment in Russia and the on-going negotiations into a New Zealand – Russia/Belarus/Kazakhstan Free Trade Agreement. President Putin acknowledged that developing regions will continue to grow far more quickly than traditional markets, and that the former Soviet-era port of Vladivostok is poised to become a gateway for Russian trade and investment with Asia. Russia has finally joined the World Trade Organisation after an 18 year wait, and having Vladivostok chosen as the APEC venue marked an exciting time as Russia becomes more integrated into the global economy.

I formed part of the Small and Medium Enterprises working group at APEC, and was elected by my working group to present the declaration back to the wider APEC community – which included Russian media and APEC officials.

Tim_McCready_APEC

Meeting with New Zealand Prime Minister John Key

The New Zealand Voices of the Future delegates were fortunate to have twenty minutes with New Zealand Prime Minister John Key. Meeting their leader wasn’t possible for every Voices of the Future delegate, and spoke volumes to the accessibility and transparency of the New Zealand government. The meeting offered a great opportunity to hear more personally about New Zealand’s priorities at the APEC Summit, and openly discuss topics ranging from:

  • New Zealand’s place at the APEC table and what is being done to ensure the voices of smaller developing nations are being heard at forums like APEC and at trade agreement negotiations such as the TPP
  • recent calls for the strengthening of the Waitangi Tribunal, and where the government thinks the Treaty of Waitangi stands in New Zealand’s future.
  • how to best harness business opportunities in Russia, given New Zealand’s limited capacity of SMEs and the current focus on opportunities in China, India and other parts of Asia
  • the Prime Ministers upcoming meeting with Russian Federation President Vladimir Putin, and the status of the New Zealand – Russia free trade agreement.

Tim_McCready_John_KeyNew Zealand Prime Minister John Key, Tim McCready

Business Leaders
As well as leaders from the APEC economies, the Summit had addresses and panel discussions into many critical areas of focus for the Asia-Pacific from prominent CEOs and business leaders throughout the region. These sessions included:

  • Food: Feeding seven billion people. Speakers including Sergey Polyakov (General Director of United Grain company) and Samuel Allen (Chairman, John Deere & Co), who discussed the challenges we have with a growing global population and depleting resources.
  • Health is wealth. Panelists included the CFO of Johnson & Johnson, the Chief Research and Strategy Officer of Microsoft, as well as New Zealander Ian McCrae (CEO, Orion Health). The changing landscape of healthcare was discussed, and it was noted that we have reached a time where medical knowledge has surpassed what healthcare practitioners can know, which creates a discontinuity in how medicine is practised around the world. One of the most inspiring moments was when the panel discussed how investment in health can provide a significant social and economic return to economies. The panel agreed that people should be thought of as an investment, not as a cost – because without people, you won’t have a company.

Tim_McCready_working_group

Concluding thoughts
The theme of APEC this year was “addressing challenges, expanding possibilities”, and the summit did a great job of covering these topics. On a more personal level, having the opportunity to attend APEC as a Voices of the Future delegate has encouraged me to reflect on my own challenges and possibilities within the Asia-Pacific region. I have previously done business with major Asian markets, but my eyes have truly been opened to the opportunities within emerging APEC economies. Business and political leaders from those regions are excited about their potential – and they have good reason to be. That excitement has been infectious, and the experience and insights I have left Russia with will stay with me always.

Tim_McCready_debate