We see the government coming out in March and saying the OCR is still the same as it was in 2017.
When this government was elected in 2020, the first thing the government did was shut down any further oil and gas exploration. What were the consequences of this action?
We are now facing a shortage of gas and with this shortage we see horticulturists in the greenhouse sector either changing to other more expensive energy sources to heat their hothouses or shutting down parts of their businesses due to the heating cost increases making them un-economic.
The government then decided to change all industrial processes from coal fired energy use to sustainable energy which has effectively closed down the majority of the coal industry in New Zealand.
Given the current New Zealand government’s moves away from the use of fossil fuels for generation of electricity, the ban on any further oil or gas exploration and the ban on any further hydro-electric generation we will need to develop much more capacity for renewable fuelled generation from solar and wind power.
With the benefit of hindsight and looking back a couple of years to the situation where New Zealand was almost totally reliant on fossil fuelled generation, caused by the lack of hydro generation capacity due to drought conditions, and taking into account current global warming effects we are going to need to develop a significant increase in renewable generation if we are going to keep the lights on in the future.
Just recently we came very close to having rolling power cuts as a regular thing due to the lack of supply from hydro generation or wind generation. There was one incident in August 2021 where power cuts were instigated due to a lack of availability of electricity supply.
While we have stopped mining coal in New Zealand for power generation we haven’t actually stopped burning coal for generation. We have just exported the detrimental environmental effects of mining by sourcing coal imported from Indonesia.
Not only have we sent the problems off shore by importing supply our government has in effect been hiding the fact that although they have made a decision to stop mining coal in NZ for power generation we are still carrying on burning coal because without doing so the lights would rapidly go out.
We are importing millions of tonnes of dirty coal from Indonesia so that our thermal station at Huntly can continue to supply the power required to keep the lights on.
We need to not only count the cost of transportation of this from Indonesia by ship, offloading it into trucks and transporting it from Auckland to the Huntly Power Station, we also need to look at the level of GHG emissions coming from this when there is coal next door to the Huntly Power Station.
So the consequences from stopping gas and oil exploration and wanting New Zealand to exit fossil fuelled electricity generation is a factor driving up inflation here.
The Associate Finance Minister David Parker recently stated that inflation comes from overseas and he denied any government responsibility for inflation. The claim was that the main cause of inflation in the price of food was related to both the Covid pandemic and the current war in Ukraine.
It might have a part to play but a study of the Consumer Price Index shows that most inflation in New Zealand is from domestic causes. Actions such as printing $55billion and government deficit spending have pushed up prices far more than the influence of either fuel price increases or supply chain congestion as a result of the Covid Pandemic or the war in Ukraine.
Another factor that has had a large influence on the price of food/cost of living has been the lack of numbers of RSE workers available since the outbreak of the Covid pandemic with many horticulturists unable to harvest their crops due to a serious lack of seasonal workers meaning their crops have gone to waste.
The closing of Marsden Point Oil Refinery will have huge consequences for New Zealand. First we become more dependent on other countries to supply our fuel whether it be; Petrol, Diesel or oils.
It has recently been acknowledged that the Marsden Point Refinery also supplied New Zealand with its bitumen and its CO2 gases which we will now have to import from other countries. What happens if these countries say sorry we can’t supply them now; especially if we have become dependent on those countries to supply us?
We have other companies here that as part of their processes, produce by-products that are in demand in New Zealand with one example being a company that produces paper and as a by-product produce Chorine which is used here.
Our Government seems to have been pushing the idea that globalisation is the way to go and saying we can import products but once we stop producing them in our own country we then become dependent on someone else to supply us. If for some reason they decide they can’t or won’t supply us then we are left in a precarious position particularly if it is a product that is essential to the public good such as fluoride which is used in our water that we drink.
Globalisation was thought to be the way to go but as we see the world now, it is obvious that we should be using our own resources not relying on other countries resources as this can have a very detrimental effect on our cost of living.
We see new policy initiatives being developed at break neck speed from this government which are also driving up spending in the public sector which in turn is a cost that is passed on to the public through things such as increased local body rates; higher medical costs; increases in food costs; increased transport costs; emissions trading scheme costs etc. The government departments say they use science to decide on the policy initiatives but one has to wonder with how the science is verified before use, given some of the recent examples of sudden policy reverses. Again all of this has a direct bearing on our costs of living.
With many regulatory changes making it harder for the Primary Producers of New Zealand to maintain a safe secure supply of food for both internal consumption and also export markets. And since the Covid 19 Coronavirus came along and our country’s debt levels have spiralled up to approximately 57% of GDP.
We have also seen the government sector bureaucracy grow by approximately 40,000 extra staff members since this government came into power and what has this achieved, you tell me except to put more bureaucrats into the public sector for them to spend more time writing reports instead of being productive.
A classic example of this increase in the public sector bureaucracy is the increase in the number of official communications specialists (spin doctors). Under Jacinda Ardern’s Labour Government, the number of communications specialists has risen significantly. Each minister has at least two press secretaries. (Ardern has four).
When Labour was first elected, the Ministry for the Environment had 10 Public Relations staff. It now has 18. The Ministry for Foreign Affairs and Trade has more than doubled its Public Relations staff – up to 25. MBIE blew out from 48 Public Relations staff to 64.
But it is the New Zealand Transport Agency that beats the rest: employing a staggering 72 Public Relations staff, up from 26 over five years.
The cost of living or as we call it inflation has been driven by the government and its policies over the last 3 years. Realising that during Covid some industries and other sectors needed support but they needed policies that allowed for financial support but also allowed these sectors to get back producing the services required to make them self sufficient sooner?
Given all of the above it is no surprise that the OCR has been raised and that interest rates have risen as a result of that and that this will lead to further raises in the costs of living/inflation. Currently the average wage has not kept pace with the cost of living and those at the bottom of the socio-economic lists are the ones that are hit the hardest by this.
As discussed earlier it only takes a quick study of the Consumer Price Index to show that most inflation in New Zealand is from domestic causes. In most cases these domestic causes have their roots in government policies and associated decision making.
Peter Buckley