Rod Oram: Full speed going backwards

17:00, Aug 17 2013
Key
NOT EVEN CRUISE CONTROL: Is damage control an economic development strategy?

Earlier this week, Transport Minister Gerry Brownlee was in California taking a ride in a driverless Google car.

If he found the experience disconcerting, he put a brave face on it.

He described it as "a very advanced form of cruise control".

Back home, we aren't so lucky. Our driverless Government is taking us for a ride. Guided by damage control, it is running amok over good governance, democracy and even its own policies and principles.

In the past 10 days alone, it has let rip with expedient decisions harmful to seven of its top priorities: housing, KiwiSaver, state-owned enterprise sales, revitalising the stock market, broadband, the Resource Management Act and trade with China.

Prime Minister John Key prides himself on pragmatism. But his quick fixes, shortcuts and deals are piling up in a mass of contradictory and counter-productive actions.

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First, the Government says it wants to help more first-time home buyers by expanding the Welcome Home programme it slashed in its first term.

It is also easing the rules for using KiwiSaver funds for deposits, even though KiwiSaver is meant to encourage people to broaden their investments beyond the housing market.

Those actions will increase demand for housing, thereby fuelling the damaging housing boom.

They will undercut the effectiveness of the loan-to-value-ratio rules the Reserve Bank is introducing to try to dampen mortgage lending and the housing market.

As a country, we were one of the pioneers of central-bank independence in the 1980s. But first Key put public pressure on the Reserve Bank to exclude first-time buyers from LVRs. Now he has done an end-run around it.

Second, the Government says it wants to help increase the supply of housing by allowing open slather on subdivisions. But that will only make it harder for councils to deliver good urban development and efficient infrastructure, two crucial factors in making housing more affordable.

Third, the Government says it has brought certainty to the workers of the Tiwai Point smelter and investors in Meridian Energy by paying Rio Tinto $30 million to agree to a new electricity deal with Meridian.

But the money, which breaks one of National's much-cherished principles of no subsidies, does neither.

The deal does nothing to secure the huge investment the elderly smelter urgently needs to regain its competitiveness.

Moreover, the deal allows Rio Tinto to give notice of closure only 18 months from now. If it did, Meridian's spare capacity would push down electricity prices and force some competitors to close less efficient generating plants.

Fourth, these uncertainties in the electricity market continue to depress shares in Mighty River Power. It has yet to recover to its $2.50 float price.

Despite investors sitting on a loss on MRP and the continuing threats hanging over the market, the Government is determined to float Meridian in October.

It says such SOE sales are designed to encourage new retail investors into the stock market, while bolstering its own finances. But the poor showing of MRP, and thus the need to sharply discount Meridian to attract buyers, undercuts both goals.

Fifth, ultra-fast broadband (UFB) is another flagship policy of the Key Government. It is stumping up $1.35 billion to help fund the rollout of fibre to deliver it, with Chorus the main corporate recipient.

One factor affecting consumers' uptake of UFB is the price and conditions on which Chorus offers broadband over old technology copper wires.

The Commerce Commission, as regulator, has proposed a sharp cut in copper prices based on local conditions and the experience of telcos and regulators overseas.

But Telecommunications Minister Amy Adams is planning to intervene with a price up to four times higher than the regulator's. Other telcos are complaining bitterly that this would inflate Chorus' profits and share price, and reduce their ability to compete.

The possibility of a sharp cut was identified in the Chorus float prospectus, so Steven Joyce, then the telecommunications minister, built in a three-year breathing space for Chorus. That is the only break Chorus deserves. Anything more is political interference, which makes a mockery of the fair and reliable regulation investors, companies and customers need to have.

Sixth, the Government has announced radical changes to the Resource Management Act. It says they will reduce uncertainty, legal wrangling and delays in the consenting progress. Some of the additional minor changes would be useful and are widely supported.

But it is carving the heart out of the act. It will remove from Part 2, the purpose and priorities of the act, any reference to environmental bottom lines or aspects such as public amenity.

This means the environment will take its chances alongside economic development, landowner's rights and other considerations. The Government says this will speed up the act and benefit the economy without accelerating environmental degradation.

It bases this on a flimsy discussion paper that relied on assertion and gossip rather than any hard facts and analysis. Indeed the Ministry for the Environment's own 2010-11 report on councils' RMA performance was omitted from the document. This shows councils have improved strongly. For example, only 203 applications, 0.56 per cent of the 36,154 processed to a decision that year, were declined.

Of the 14,000 submissions on the changes, 99 per cent were opposed to or had very strong reservations about the Part 2 changes.

A big majority of RMA lawyers say the proposals would so drastically change the act it would substantially invalidate its 22 years of case precedents. Councils and courts would struggle for a long time to interpret and restore some certainty to the act, which would only increase the time and cost of consents.

Seventh, Key says that, once the Fonterra-tainted whey inquiries are completed, he will "travel to China and look down the barrel of their television cameras with the answers as to why this happened, give consumers confidence that it's been fixed and all issues have been identified".

But imagine how frightening that will be for the Chinese. The unprecedented public appearance of a foreign head of government apologising for his government, his country and its largest business will persuade the Chinese the botulism issue was far, far bigger than ever admitted at the time.

He will damage, not rebuild, confidence in New Zealand.

If Key feels like apologising, he should start at home.

Having ditched its roadmap of policies and principles, the Government is taking the public for a scary ride. It is getting more reckless by the day.

Sunday Star Times