John Armstrong: Ardern's freeze on MPs' pay defused a political time-bomb - but praise was unjustified

No politician has ever lost votes by blocking Parliament's 120 MPs from enjoying a hike in their pay or perks.

So it was no surprise that Jacinda Ardern received applause aplenty for this week imposing a freeze which will see current salary levels and other entitlements remain unchanged for the next 12 months.

The praise was unjustified, however.

True, the freeze has defused what was a political time-bomb thrown into her Government’s midst in the form of the Remuneration Authority’s draft recommendation of a 3 per cent rise in MPs’ salaries.

The Prime Minister’s flagging of the almost certain scrapping of the current formula for setting those salaries amounts to a failure of leadership, however.

There isn’t a lot wrong with the current formula. It is based on the change in ordinary time weekly earnings for full-time employees in the public sector as determined by Statistics New Zealand’s Quarterly Employment Survey.

It will be difficult to come up with an alternative which better ensures that movements in MPs salaries adjust in line with overall movements in wages and salary levels in the state sector.

Now Ardern wants to dump that formula merely because it did not deliver the outcome she wanted.

She is embarrassed because a 3 per cent rise in her salary would see her pocket an extra $14,000 a year before tax on top of the $471,049 that she currently earns.

Well, she is Prime Minister. It might be argued that the current size of the prime ministerial pay packet is peanuts in terms of what is paid in the private sector for a comparable job.

It is most definitely a disgrace that some chief executives in the public service are paid more than the Prime Minister. But that is another story.

Ardern’s gripe appears to be that the Remuneration Authority is hampered by it announcing its salary adjustments solely in percentage terms — rather than having the option of increasing pay rates in dollar amounts.

Taking on board the latter option would be a means of avoiding the wage gap between those at the top of the parliamentary pay pyramid and low and middle-income earners expanding even more than has been the case in recent years.

In the big cities and in small towns teachers turned out in force. Source: 1 NEWS

Or so Ardern would argue.

The only consequence, however, would be the easing of Labour Party consciences. Placing limits on the pay rise awarded to the Prime Minister would have absolutely zilch impact on the wages and salaries of those employed outside the parliamentary precinct.

The Prime Minister’s argument may be bogus, but it serves another, more nefarious purpose. Arden has sought to pull the wool over the eyes of the populace by claiming the salary freeze was motivated solely by Labour Party "values" and her Government’s focus on helping low to middle income earners.

She has insisted that there was no connection between Monday’s announcement of the freeze and ongoing and pending wage talks across the state sector, along with the lingering threat of further industrial action by school teachers.

That assertion is frankly laughable. It makes it hard to take what she has to say seriously.

It is absurd to suggest the freeze had nothing to do with pay negotiations.

Cabinet ministers would have been close to being in a state of shock after being made aware some weeks ago of the Remuneration Authority’s draft recommendation.

There would have been a collective sharp intake of breath followed by observations that "draft" must not become fact given the already huge pressure on the Labour component of the Government to deliver significant wage relief to the party’s core supporters.

The thought of being handed close to $9,000 on top of their existing salaries of just under $300,000 while simultaneously telling nurses and teachers that their wage claims were unaffordable is the stuff of nightmares.

You can guarantee that none of those worries ever found their way into the subsequent Cabinet papers which set the freeze in train.

Such "ring-fencing" of the authority’s recommendation enabled the Prime Minister to be emphatic in denying the freeze was related to the pay rounds in the state sector.

Had the authority’s recommendation leaked into the public domain, however, the Government would have been completely on the back foot.

In taking the initiative this week and declaring that the pay rise was utterly unacceptable at the same time as she was making it public, Ardern made a virtue of a necessity.

It was akin to turning water into wine.

In that respect, she has been helped by the relative quiet of the other parties in Parliament. They have wisely taken stock and followed the dictates of the aforementioned basic law of politics — that no politician has ever lost votes by slamming an increase in MPs pay scales. Likewise, no politician has ever gained any votes by defending any rise in such salaries.

One awkward question lingers in the aftermath, however.

Would Ardern and her colleagues been so adamant in rejecting the authority’s draft recommendation had state sector pay negotiations been long completed and the industrial relations landscape in that quarter of the workforce consequently been far more settled?

The Prime Minister says there is a widening gap of inequality in New Zealand. Source: Breakfast

Fonterra's interim CEO admits performance must improve as $196 million loss announced today

New Zealand dairy giant Fonterra has just announced a massive $196 million net loss, after tax.

The Fiscal Year 2018 results come after a tumultuous year for the company that saw CEO Theo Spierings announce his resignation in March and chairman John Wilson step down after a health scare in July.

Interim CEO Miles Hurrell, who was appointed last month, said of the results that the co-operative's business performance must improve.

"There's no two ways about it, these results don't meet the standards we need to live up to," he said in a statement announcing the loss. "We needed to deliver an outstanding third and fourth quarter, after an extremely strong second quarter for sales and earnings - but that didn't happen."

The company's woes over the past year have also included a $232 million payment to French food giant Danone following years of legal wrangling over the 2013 botulism scare. The international arbitration tribunal decision last December first prompted Fonterra to cut its earnings forecast.

The botulism scare stemmed from Fonterra quarantining several batches of whey protein concentrate after there were concerns they could have been contaminated with clostridium bacteria.

Danone, then a buyer of Fonterra products, began a large-scale recall which they said cost about $610 million, and ceased doing business with Fonterra. It was later confirmed there had been no food safety risk to the public.

"We have learned from this experience and as a result have made improvements to our escalation, product traceability and recall processes, and incident management systems," Mr Spierings said in December.

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"Fonterra is in a strong financial position and is able to meet the recall costs," he added.

Mr Hurrell said today that there were four other reasons, in addition to the Danone decision, for the gloomy year-end results. The company's forecasting was "too optimistic", butter prices remained higher than anticipated, there were increased operating costs in some parts of the business and the company was hurt by an increase in the forecast Farmgate Milk Price late in the season, he explained.   

However, the silver lining of the report today was the business' performance in China, Mr Hurrell said.

"Of particular note, our Consumer business in China broke even this year, two years ahead of schedule," he said. "A big contributor to this success is the popularity of Anchor, which is now the number one brand of imported UHT milk in both online and offline sales in China."

Fonterra's Darfield plant.
Fonterra's Darfield plant. Source: Fonterra

Photos: Sneak peek at the 25 new KiwiBuild homes announced today for Auckland's Onehunga

Construction on 25 new KiwiBuild apartments in the Auckland suburb of Onehunga starts today. And balloting for the highly sought after dwellings begins next week, officials announced this morning.

Apartments priced up to $600,000 are available, but the opposition says it’s not the kind of housing families want. Source: 1 NEWS

"This is a unique opportunity for those who have been locked out of the property market to buy a modern, new home in an increasingly popular area that might otherwise have been out of reach for first home buyers," Housing Minister Phil Twyford said in a statement.

An artist's rendering of the @340 Onehunga KiwiBuild development planned for Auckland.
An artist's rendering of the @340 Onehunga KiwiBuild development planned for Auckland.

The homes, which are expected to take a year to build, include six studio apartments, 12 one-bedroom apartments and seven two-bedroom apartments. They will range in price from $380,000 to $600,000, and include washer/dryers and dishwashers – "high quality fittings" described by Mr Twyford as "often hidden costs for first home buyers".

The Government has set a goal of building 10,000 KiwiBuild homes, targeting first time homebuyers or people deemed
"second chancers", by June 2021.

The planned interior for apartments at @340 Onehunga KiwiBuild, a new KiwiBuild development in Auckland.
The planned interior for apartments at @340 Onehunga KiwiBuild, a new KiwiBuild development in Auckland.

Earlier this week, the ballot began for the first 18 homes in Auckland – stand-alone dwellings in Papakura selling for $579,000 for three bedrooms and $649,000 for four bedrooms.

The 18 homes at the McLennan development in Papakura will be sold through a ballot. Source: 1 NEWS

"Our Government is opening the door to families locked out of home ownership by building affordable starter homes where the market failed to do so," Prime Minister said earlier this week.

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The latest development, named @340 Onehunga, has been praised for its central location and it's proximity to public transportation – including a planned light rail route.

Open days at 340 Onehunga Mall begin this weekend. They will remain open from 11am to 2pm daily until the ballot closes on 15 October.

Those who win the ballot will be required to pay a 10 per cent deposit while the homes are being built. Only those who have an income of less than $120,000 for a single buyer, or no more than $180,000 for more than one purchaser, are eligible.

An artist's rendering of @340 Onehunga apartments, a KiwiBuild project in Auckland.

They must also be a New Zealand citizen or permanent resident, or a resident visa holder who is "ordinarily resident in New Zealand" and must intend to own and live in the home as their primary place of residence for at least three years.

Construction has started on 25 apartments in Auckland’s Onehunga. Source: 1 NEWS


Water meters likely for all New Zealand households in the future, expert says

New Zealand may be blessed with a plentiful supply of fresh water, but our system for getting it to our taps leaves a lot to be desired.

In places like Wellington, our pipe system has a water leakage rate of roughly 15 to 20 per cent, Water New Zealand CEO John Pfahlert told TVNZ1's Breakfast today.

"It's a fairly aging piping network, quite leaky," he said, adding that the situation isn't any different in "many, many communities" throughout Aotearoa. "You compare that, for example, to places like the Netherlands where you'd probably have less than 3 per cent leakage - a much higher investment in their reticulation network."

And as scientists predict more extreme weather events in coming decades, including extreme drought, that inefficiency paired with our "excessive consumption" throughout the country will have big consequences if we don't prepare for it now, he predicted.

Mr Pfahlert's warnings come as a report in Wellington suggests demand for water there will outstrip supply by 2040 if residents keep consuming at their current rate.

While replacing the piping networks throughout New Zealand is expensive, there is one way to dramatically cut down our consumption, Mr Pfahlert said. Install water meters and charge for it.

The measure is already in place in Auckland, where it costs about $1.80 per cubic metre of water.

"When those meters were introduced, there was an immediate reduction in water consumption by people of about 30 per cent," he said.

"When they did the same thing on the Kapiti Coast a few years ago, they were facing the necessity to build a water treatment plant at a cost of something like $50 million," he added. "They installed water meters, and (there was) an immediate 30 per cent drop in consumption in water by locals.

"It does drive behaviour."

There has been some opposition to installing meters in Wellington, with fears - unfounded, officials say - that it could lead to privatisation of the water supply. But the measure seems inevitable, not just for Wellington but for all of New Zealand, Mr Pfahlert told Breakfast.

"As we approach a world where the weather's going to be drier, I suspect it's going to be something that most communities are forced to do," he said. "It just makes good common sense. It's not only a means of conserving water, it's just a good way to behave in terms of treating the environment."

Our water supply might be abundant, but our pipe systems are inefficient and leaky, says Water NZ CEO John Pfahlert. Source: Breakfast

Greenpeace wants Government to use funds for solar panels instead of oil and gas

Greenpeace is calling on the Government to kit out New Zealand homes with solar panels by using the funds currently subsidising the oil and gas industry.

Earlier this year the Government banned offshore exploration, and Greenpeace said the $88 million used to subsidise it could be used for solar panels and batteries for 1.5 million New Zealand homes over the next ten years.

Greenpeace climate and energy campaigner Amanda Larsson said a report on the future of energy from the national grid operator showed that energy systems were increasingly shifting to electricity, and she said that meant New Zealand needed to increase the amount of electricity that was produced.

"One of their forecasts is that 1.5 million households will need to go solar, and what we're saying is that it's time to kick start that right away by getting 500,000 homes kitted out with panels and batteries over ten years," she said.

Going solar would be financially beneficial for homeowners who would not have to deal with any upfront costs and would provide zero interest loans, she said.

"The plan would provide additional support to 100,000 lower income homes through a Government grant that would cover at least half the system cost. The zero interest loans would be attached to the house that receives the solar panels and batteries, not to the individuals who own it or rent it. They could be administered through Regional Councils, and paid back through rates."

The plan was launched yesterday as the organisation's flagship, Rainbow Warrior, arrived in Auckland to celebrate the Government's April announcement banning offshore oil and gas permits.

Solar Panels Source: 1 NEWS