The 2012 Australian Budget institutes a raft of new measures to raise revenues, especially revenues from activities that damage the environment. These new eco-taxes will help balance the Government’s books and shift their economy onto a more sustainable footing. Here’s how:

1. A carbon pricing mechanism
Receipts from the carbon pricing mechanism are expected to be A$24.7 billion to 2015/16. The revenue raised is being recycled used for tax cuts for those on lower incomes and a clean energy fund.

2. Resource Rent Taxes
These include a petroleum resource rent tax and a minerals resource rent tax expected to raise A$31.4 billion to 2015/16. These new eco-taxes recognise the one-off nature of resource extraction and will share the benefits a little more fairly across the country.

3. Cancellation of the company tax cut
The Aussie Government will save A$4.6 billion to 2015/16 by not proceeding with the company tax cut scheduled for the 2013/14 income year. The National Government here cut company tax rates here assuming Australia would follow suit as part of a race to the bottom that we can ever win, as IRD have recently argued (p36).

4. Cutting tax concessions for wealthy Australians
By cutting the tax concessions on superannuation contributions for individuals on income greater than A$300,000 the Australian Government will save A$1.4b to 2015/16 which they can recycle into new saving incentives for those on lower incomes.

Of course, the Budget wasn’t all good news. Education and unemployment benefits were ignored, along with a commitment to the cleantech manufacturing sector. But when you compare this Budget to ours, you start to see how poorly the National Government are managing our economy.

National’s programme of deep cuts to public services, poor quality spending on motorways, and collapsing tax revenues means they’re leaving us vulnerable to further economic shocks. And as for the actual economy, they’re not going to leave it any more resilient or sustainable from when they took office.

Russel

Dr Bollard made those comments in June 2009 to his Board when the kiwi dollar was worth US$0.63 and the Trade Weighted Index (TWI) was at 60. Since this time, the kiwi dollar has appreciated 28 percent against the US dollar to US$0.81 while the TWI is up 21 percent to 72.6.

The New Zealand economy has been seriously unbalanced for years. It has had large current account deficits and, in order to pay for those deficits, it has built up high levels of external debt and overseas ownership of the economy. The only way out of this downward spiral is to rebalance the economy towards the tradeable sector so that it can perform much better, but that needs a lower exchange rate.

As I showed last week, the Business Operations Survey provided plenty of evidence of how the high and volatile exchange rate is hurting our export industry with close to half of all New Zealand export companies saying it is the most important factor constraining their exports.

We need to have a national discussion on measures that can stabilise our exchange rate at levels our export industry can thrive in. Overseas governments have been taking this issue very seriously.

For example, in Switzerland, their Reserve Bank has been using quantitative easing to keep their franc lower, their export industry in business. The IMF recently backed the Swiss move to effectively “print money” saying the measure was “appropriate” in the circumstances.

So there are practical steps a small trading nation like New Zealand can take that can help.

Besides empowering the Reserve Bank with a mandate beyond inflation control to include managing exchange rate levels and volatility, we could also institute a tax on capital gains (excluding the family home) which would also act to ease upward pressure on the exchange rate.

It’s way past time to start having the conversation.

Russel

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If the tax changes were not fiscally neutral, then it undermines National’s credibility and it undermines their whole argument that we have to cut government services because there isn’t enough money. And it also means that the Government is having to borrow to pay for upper income tax cuts.

So I questioned John Key in the House yesterday over this repeated claim that the 2010 tax cut package was fiscally neutral.

The exchange ended with the two of us waving around different pieces of paper: I had a series of numbers from Treasury. John Key had a memo from his Finance Minister.

Let me present my evidence in three steps:

1. Treasury have consistently reported that the 2010 tax cut package – the package that cut taxes for those on high incomes, lowered company taxes, and raised GST to 15% – is not fiscally neutral in the short-to-medium term.

When announced, Treasury estimated that the static four-year cost of the 2010 tax cut package would be $1.1 billion. (See the original table on page 8 of the Minster’s Executive Summary in Budget 2010.) You will see that the projected cost in just the first financial year was expected to be about half a billion.

2. Just nine months after the tax cuts had taken effect, Treasury had significantly revised their initial estimate of the fiscal impact of the tax cuts. Within nine months, the net cost of the 2010 tax package was close to $1 billion, or double the initial estimate. (You can see the original table here on page 8.) The gross cost of the tax cuts was $2.7 billion but this was offset by a $1.6 billion increase in GST.

3. Yesterday, the Financial Statements of the Government of New Zealand for the Eight Months Ended 29 February 2012 were released showing tax revenues had collapsed even further due to the weak economy. Treasury reports a further $369 million shortfall in GST revenue, a $200 million shortfall in income tax, and a $193 million shortfall in corporate tax. This indicates that the cost of National’s 2010 centrepiece tax cut package has crashed the Government’s budget even further.

This is not a smart way to manage the Government’s finances. What household would slash their income sources when times are difficult, thus throwing themselves deeply into debt?

Here’s what’s happened to Government revenues (as a percentage of GDP) over the last few years.

And here, likewise, is what’s happened to Government debt.

It is true that the difficult economic conditions have put downward pressure on the tax take. But that is not the issue. The issue is, given the economic conditions, are the Government’s books in a better or worse position as a result of the 2010 tax changes? The answer is very clear: The deficit is much worse because of the 2010 tax changes. They were not fiscally neutral and the Government is having to borrow to fund the tax cuts to upper income earners.

In many ways, the Government’s dire financial position was of their own making.

Russel

(1) Note that they try to reduce the projected cost in the line in the table “adjustment for macroeconomic effects” by claiming that tax cuts cause GDP growth which increases the tax take (think Reagan’s J curve), but given what actually happened to the tax take, we can safely ignore their Reganomics.

Benmore dam up for sale?

The National Government has used the government deficit and debt to justify the privatisation of assets. As I pointed out in an earlier blog, the deficit and debt problem has been made much worse as a result of this Government’s very poor revenue and spending decisions.

But does privatising the assets really help the deficit and debt anyway? The short answer is no and the reason is very simple.

Our energy assets get very good returns and the Government can borrow very cheaply. This means that the return on the Government’s investment in these companies is much higher than the cost of government debt. So selling assets to reduce debt actually costs the Government money.

Treasury’s Budget Policy Statement 2012 (page 6) quantifies the cost to the Government of proceeding with the partial privatisation at $94M per year by 2016.

They come to this by projecting that lost dividends from the partial sale of the companies will be about $360M and the reduced interest payments if all the proceeds were put to paying off debt would be $266M.

So the privatisation will actually make the deficit worse because the lost dividends are greater than the reduced interest payments.

But it is actually worse than this. If you look at the assets from the point of view of an investor, then the return on the assets is a combination of the dividends they pay out and the appreciation in the value of the assets. This is called Total Shareholder Return. This is the standard approach taken by the Crown Ownership Monitoring Unit in Treasury to measure company performance.

If you take this approach, as the Minister for State-Owned Enterprises, Tony Ryall, admitted in Parliament recently, then Genesis, Meridian, Mighty River Power, and Solid Energy returned 18.5 percent per annum on average over the last five years.

That’s a staggering return if you consider the period includes the full impact of the global financial crisis on results. From a shareholder’s perspective, our energy companies are enormous cash cows.

How does the National Government justify selling assets returning 18.5 percent a year? Not easily, as Steven Joyce demonstrates in Parliament yesterday.

Treasury estimates the one-off capital injection of $5-7 billion will enable debt to be reduced and on-going interest payments on the remaining debt to fall. But the cost of government borrowing is currently only 4%, so the lower debt payments won’t cover the lost income from the partially privatised companies.

Put it this way, if you could borrow money at 4% per annum to secure infrastructure assets returning 18.5% per annum, would you invest? It’s a no-brainer.

Or looked at from the point of view of a potential buyer of shares in these privatised companies, would you really invest in companies that have a lower rate of return than 4%? Of course not; they won’t have that low a rate of return.

It doesn’t make practical fiscal sense to privatise these assets. It only makes ideological sense.

Russel

P.S. To make your own submission on the Government’s legislation to partially privatise the last of our best state-owned assets, click here.

[Note: This blog formerly contained an image of Clyde Dam mistakenly put up. Clyde Dam is clearly not for sale. Russ]

Yet the debt and deficit have been made much worse as a result of the decisions of this Government.

Our debt situation has worsened considerably since National became Government. Partly this was due to factors beyond the Government’s control: the global financial crisis and the Canterbury earthquakes reduced revenue and increased costs.

But the Government’s own policies have made the deficit worse.

On the revenue side, as the Inland Revenue Department (IRD) recently pointed out, Government tax policy measures have accounted for a much greater proportion of falling tax revenues than the global financial crisis.

As part of its Briefing to the Incoming Minister, IRD disclosed that tax revenue as a percentage of GDP has fallen significantly – from 35 to 31 percent of GDP – and is now below the OECD average. Of this 4 percent decline, 2.5 percent is “attributable to the cumulative effect of tax policy measures undertaken by successive Governments since 2008”. Part of this was Labour’s expensive tax cuts and part of it was Nationals’.

IRD get even more specific in their recent financial review when they state: “In the short term, particularly 2010–11, the [Budget 2010 tax] package is revenue-negative because some of the revenue-positive aspects of the package take time to transition in.” The Government said its so-called ‘tax switch’ was ‘broadly fiscally neutral’, but it was no such thing; it was a tax switcheroo that threw the Government books into a further $2 billion deficit.

Beyond the revenue-negative actions of the Government, there were the revenue-positive things they failed to do. The Government decided to turn down the Green Party’s proposed temporary levy to help pay for the rebuilding of Christchurch. That’s an additional $1 billion of lost income per year.

A comprehensive tax on capital gains (excluding the family home) would also have helped raise additional revenues while helping to shift the economy onto a more productive footing. A CGT would take maybe a decade to come fully on stream, but the Tax Working Group estimated that once it did, it would raise $4.5 billion per year. A charge on commercial water use would raise $500m per year.

All these elements make the one-off gain of $5 billion from privatising state-owned assets look like pretty small bikkies.

Then on the expenditure side, the Government is spending like a drunken sailor on new motorways (without positive economic benefits) to the order of $2 billion per year, and on-going subsidies of carbon polluters of around $1.2 billion this year.

On both the revenue side and the expenditure side National has created their own deficit and debt problem. And then they are using the deficit and the debt that they created in order to justify privatisation.
Russel

P.S. To make your own submission on the Government’s legislation to partially privatise the last of our best state-owned assets, click here.

The first is at apparently unsurprising – there is a lot of opposition to nuclear power in Japan now, both in Fukushima and Tokyo (and apparently more broadly). But given the past assurances from authorities that nukes were totally safe, this is an interesting development.

Secondly, and correspondingly, people are very very interested in renewable energy options, of which Japan currently has very little. I spoke to a hastily organised forum at the Diet building about renewable energy and everywhere I went people wanted to know about renewables. Geothermal is an obvious option for Japan, as like NZ it sits near an active tectonic plate boundary.

Thirdly, there is a deep and growing skepticism towards authorities. The failure to ensure the safety of the Fukushima plant from tsunami in spite of warnings, followed by the bungling of the response, really does seem to have engendered a new and broadly held skepticism. These come on top of the ousting of the LDP Government which had been in power for half a century. This skepticism is good but also means the political system is quite unstable and leaves open the option of the rise of populist politicians like Hashimoto.

At a personal level I was surprised by the scale of the disaster. I shouldn’t have been, but it is really big. The restricted zone, in which no-one is allowed entry without permission, is a 25km radius semi-circle. This is a pretty big place, especially in crowded Japan. The empty villages and towns and fields were really quite disturbing. Outside of the restricted zone there is a further evacuation zone in which people can pass through but not live or harvest crops. This area is essentially the main radioactive fallout zone outside the 25kms. Outside these two zones there are many areas that have recorded high radioactivity readings.

There is now a debate about what is a safe level of radiation. When should people be able to move back? What to do about the food?

And of course the shakes are continuing. We had another last night which seemed to go for ages, it felt like a regular Wellington kind of shake up on the 9th floor of my hotel.

Anyway they intend to (re?)launch the Japanese Green Party in July.

9.23 AM Heading up to Fukushima on bullet train.

Boarding the bullet...

North of Tokyo, similar to NZ?

Photo of tsunami on wall of Mayor's office, Minamisoma

Tsunami impact on steel reinforced concrete building

Used to be 60 houses here before tsunami in Fukushima zone

10.51 AM Fukushima nuke plant has 20km radius exclusion zone plus lge fallout shadow to NW that you can pass thru but too contaminated for food prod

10.53 AM We’re heading out towards Fukushima fallout exclusion zone where Govt is trying to decontaminate soil by scraping off top few cms

Abandoned greenhouses in Fukushima fallout zone

11.05 AM According to IAEA scraping off top 4cm results in 400 ton radiation contaminated soil to dispose of per hectare.

11.20 AM Eerie driving thru Fukushima evacuated zone seeing empty shops and curtained houses, no cars parked outside

11.34 AM Fukushima fallout zone -Paddy fields no longer can grow rice

Paddy fields in Fukushima fallout zone. No paddy last spring.

1.17 PM Geiger counter just doubled as we head towards restricted zone at Fukushima

1.18 PM Crossing police lines at 20km radius from Fukushima

1.21 PM Abandoned houses and farms. No-one is allowed to live inside 20km radius from Fukushima

1.41 PM Geiger counter goes up over 6 micro sv inside zone

1.59 PM Visiting farms inside Fukushima restricted area where universities studying animal decontamination

2.40 PM Some farmers defied Govt orders to kill stock after Fukushima nuke disaster. Can’t sell them but protest Govt and power co, Tepco

Me with protesting farmer Yoshizawa and Tomoko Abe MP. Fukushima zone.

3.24 PM We’re driving around the more urban parts of the Fukushima 20km restricted zon, a ghost town

6.17 PM Cascading problems of nuke accident. Radioactive concrete ended up in buildings. Who pays to demolish? and what of radioactive golf green?

6.18 PM And how to decontaminate lake beds that accumulate sediment and hence radioactive caescium?

9.43 PM Quite a quick drive from Fukushima to Tokyo down expressway. Now I know why the speedo has all those extra numbers..

10.34 PM At a bar, the great thing about Japan is most people are monoglots like me so I don’t feel inferior. The terrible thing about Japan…

The report is a timid acknowledgement of the growing global and domestic green economy and the opportunities and risks that creates for New Zealand. As such we have welcomed it. Here are a few thoughts about the full report:

Positives
1. The report recognises that our ‘clean green’ brand is essential to our economy and that any damage to that brand will damage our economy — damage in terms of market access and the premiums received for our exports. It points to risks to the brand from water pollution, waste management, and greenhouse emissions where we are performing poorly.

2. The report acknowledges that some of our traditional exports have very high carbon emissions per dollar, or high carbon intensity. And that is a major problem.

3. The report recommends government procurement to put a greater emphasis on sustainability. The government procures about $30 billion of goods and services a year so greening this enterprise would be transformational for the economy.

4. The report recommends that the ‘innovation system’ (i.e. science, research & development etc.) should also be greened up by the Government introducing sustainability criteria into the work of CRIs, universities, and policy providers.

5. It wants greater support for small and medium-sized enterprises embracing green economic opportunities.

Missing in action
1. The really big missing element in this report is the cleantech sector. This has been identified globally as the critical fast-growing green sector. The report even has a graph of carbon intensity by sector that shows our traditional sectors such as meat, dairy, and the Government’s favoured sector, minerals, have a high greenhouse intensity while another mysterious sector called ‘Other’ has low greenhouse intensity. ‘Other’ of course includes cleantech and high value manufacturing but the report doesn’t dwell on this very significant finding. NZ Trade & Enterprise have identified cleantech industries as having huge potential but not so the GGAG.

2. The consideration of green pricing mechanisms was explicitly forbidden in the Terms of Reference of the GGAG, so they couldn’t make recommendations about the huge subsidies found in the ETS or the glaring lack of a price on the commercial use of water.

Negatives
1. The extensive section on mining is quite odd in the report. It recommends that we need a conversation about the benefits and costs of mining to see if we can find a national consensus. This is fair enough so far as it goes, but it ignores the huge environmental risks with some of the Government’s favourite projects like deep sea drilling. When Nick Smith was asked what this recommendation meant, he said that it meant that people needed to be educated about the benefits of mining. National have turned a ‘conversation’ into ‘re-education’ effectively saying, “Mining is always good, and if you don’t think so now you will think so after Straterra and National have educated you”.

2. The biodiversity offsets section is another surprising addition and a sop to the mining sector. Offsets have traditionally worked like this: There are two pieces of high biodiversity real estate — one on conservation land and one on private land. A mining company says if you let us destroy the biodiversity on the conservation land then we will offset this loss by giving to the conservation estate the biodiversity on our private land leaving the net biodiversity changes on the conservation land about the same. However, from the point of view of the environment, at the end of the day there is only one piece of high biodiversity land remaining where originally there were two. And that is somehow good for the environment?

Contradictions
The Government’s economic agenda is at complete odds with the direction of this report. National are subsidising intensive agriculture, through irrigation and ETS subsidies and low water quality standards; mining, through mapping information paid by Government, very low royalties, and light environmental protections with little liability for miners; road freight, through free use and extensive investment in new motorways. Yet intensive agriculture, mining, and road freight have very high greenhouse and environmental footprints. The report specifically says it doesn’t think we should pick cleantech as a winner but has nothing to say about the Government picking intensive agriculture, mining, and road freight as winners instead.

Conceptual gaps
And the big conceptual lacuna is how to match GDP growth with reductions in our economy’s environmental footprint. Because growth is a religion for National (and Labour), it is not possible in this report to have a rational discussion about the ability to decouple GDP growth from increases in resource use and pollution production.

The Crafar Farms went bust a few years ago and are now being sold by receivers Korda Mentha on behalf of Australian banks and finance companies owed around two hundred million dollars.

New Zealand investors are keen to buy some of the farms but Korda Mentha has decided to sell the whole package as a going concern.

A Chinese Company Shanghai Pengxin has been keen to acquire the farms but their argument that Chinese ownership of New Zealand dairy farms would somehow benefit New Zealand was entirely negated by the High Court saying that the Overseas Investment Office applied the wrong test.

Justice Forrie Miller’s decision noted the Overseas Investment Act was intended to allow overseas investment in farmland only where that investment was likely to benefit New Zealand.

In his decision he said the benefits of Shanghai Pengxin’s ownership of the land were likely to accrue no matter who owned it.

An overseas purchaser must show that they are bringing significant economic benefit to New Zealand.  The fact that Shanghai Pengxin may pay the creditors – who happen to be Australian owned banks – more than a New Zealand bidder is not counted as an economic benefit.

In the High Court it was successfully pointed out that Shanghai Pengxin’s argument that they would bring the farms up to working order was simply not good enough.  By that test any New Zealand business that had gone bankrupt could be purchased by an overseas investor arguing they would get the business back into profit.

One of the best things to come out of the High Court decision is that the Overseas Investment Office and its decision making processes are finally getting some much needed scrutiny.  In the wake of the High Court’s decision  it emerged that the Overseas Investment Office – which is happy to support all manner of dubious arguments regarding the benefits of overseas investment to New Zealand – never bothers to check if there is a downside.

RNZ interviewer Simon Mercep : When you look at the benefits, to what extent do you take into account any disadvantage coming from the sale of foreign land going overseas that affects the New Zealand current account deficit and its international liabilities ? Do you look at that?

OIO manager Annalies McClure: No… the benefit to New Zealand test is framed in very positive terms. So we don’t take detriments into account.

Mercep: Shouldn’t you have an overall view that takes into account [the] detriments?

McClure: We have looked at this question previously, and interpreting the Act that’s certainly the view that our legal advisers have taken.

This is the same Office that considered they would be able to get a new application for the Crafar farms sorted in days.  It now turns out that this will be a few weeks away at least.  The Ministers who signed off on the Overseas Investment Office’s advice and the Prime Minister have suffered a big setback in their plans to get this important issue out of the way quickly in this part of the political cycle.

The issue of New Zealand’s economic sovereignty and ability to prevent losing control of our productive farmland is now shaping as one of the big issues of 2012.

The Fund’s stake in Hong Kong-based property development company Sun Hung Kai is the tenth biggest investment the Fund’s made in an international company, according to their December performance report.

Is China the next big property bubble on the brink of collapse?

The Chinese Government has spent much of its massive export revenues on building brand new cities. Trouble is, not many Chinese people can afford the prices of new apartments and some of the cities have become ghost cities — their emptiness visible on Google Earth.

If you find the satellite images interesting, this SBS Dateline report (Australian TV) takes you there on the ground and leaves you wondering how all this building activity could possibly end well.

Russel

Horizons Regional Council Chairman Bruce Gordon reacted angrily to my suggestion that there was a conflict of interest. However the Manawatu Standard’s Grant Miller has written an opinion piece in support of the Green Party’s view.

This is the second time in this month that a conflict of interest has arisen between the dairy industry and Horizons regulatory independence, with criticism being voiced last week regarding Horizons intentions to invest in the dairy sector.

And in yet another situation of conflict of interest, the Auditor-General released a report in September in which she was critical of some regional councillors involvement in decisions on whether or not to prosecute environmental offences. While Waikato Regional Council quickly recognised that compliance and enforcement matters should be left up to experienced staff to decide, and disbanded their council advisory group, Horizons continued to argue that they saw no problem with elected officials being involved in enforcement matters.

They finally disbanded their prosecution advisory group yesterday although the decision was far from unanimous. Chairman Bruce Gordon voted against the disbanding of the group. So did Cr Greg Cox who, not content with voicing his stance against the decision, went on to call his constituents stupid with the statement,

“I see nothing wrong. It’s the perception that’s been put out there by people with a biased opinion too stupid to come and ask the question about what is happening.”

It’s no small wonder Horizons is facing questions about its credibility.

Previously Fonterra farmers were encouraged to fence off their waterways as part of the voluntary Clean Streams Accord. But it’s great to see Fonterra acknowledging voluntary measures don’t work for everyone. Some people require rules with consequences for non-compliance to convince them to do the right thing.

Fencing cows out of streams improves water quality by limiting river bank erosion which leads to sediment getting into waterways. Sediment is bad for rivers because it clogs up the spaces in between rocks where fish and insects live, and introduces phosphorous into the rivers which can lead to toxic algae growth.

However, fencing does not address the problem of nitrogen seeping into groundwater. Nitrogen − along with phosphorous − causes the growth of algae and the loss of freshwater habitat.

In order to control the amount of nitrogen in the groundwater it’s necessary to control the amount of nitrogen-based fertiliser going on the land and also stocking intensities. The Green Party would do this with a National Environmental Standard for Intensive Agriculture, which is part of our plan to make our rivers and lakes clean enough to swim in again.

Clean rivers and lakes was a priority for the Green Party for the general election campaign, and it continues to be a priority as we seek to sign a Memorandum of Understanding with the Government.

While it is great that Fonterra has taken this positive step of mandatory fencing of waterways, we need a comprehensive plan that addresses other sources of pollution.

The workshop attendees raised many of the same concerns that the Green Party has surrounding the degradation of our precious waterways. You can read the letter and our response below – Green Party response in green italics.

Open letter to politicians and the public on New Zealand’s freshwater policies

The state and management of New Zealand’s lakes and rivers has been the subject of much recent debate: from Dr Mike Joy challenging our clean green image, to the National Policy Statement for freshwater, to recent political party policy statements. This discussion reflects the importance of freshwater issues to the lives and livelihoods of New Zealanders. Concerns around the future of our country’s freshwater prompted a recent ‘Freshwater Geographies’ workshop, held at the University of Auckland’s School of Environment. The workshop, attended by over thirty environmental researchers and practitioners from across New Zealand, highlighted four key concerns. We ask that the political parties and the public give careful consideration to the following questions in the run‐up to the November election.

1. Visions for freshwater

New Zealand requires clear visions for freshwater to guide management and governance. Currently, economic visions dominate the freshwater discourse – freshwater is viewed as a resource (e.g. irrigation) or a constraint on the development of other resources (e.g. dairying). National’s 2011 policy statement reinforces this image of an economic resource: “Water is our most plentiful natural resource. It gives us a competitive advantage over our trading partners, particularly in our primary and tourism industries.” Labour and the Green Party provide vision statements for freshwater that emphasise the need to protect water quality for drinking, recreational, spiritual and biological reasons. We believe New Zealand needs holistic visions for freshwater that go beyond an emphasis on water quality and water uses. Such visions must encompass the multiple dimensions of freshwater systems and the associated values these systems provide for local and national communities. This will require the integration of visions for freshwater with those for social and economic change.

● To what extent do party policy statements articulate a vision for freshwater systems and communities? What are the motivations that underpin these visions? Are these visions achievable, meaningful and relevant to local and national interests?

The Green Party envisions an approach to our freshwater in which natural biodiversity is maintained and enhanced, the recreational and spiritual values of water are provided for, and communities have adequate supplies of safe, clean water to use. We would like our grandchildren to be able to enjoy healthy waterways, to fulfil recreational, spiritual and health needs. We would support communities to ensure these values are protected through the use of standards, setting a fair price on the use of water to encourage efficient use, and a by providing support to both rural and urban communities to invest in the future health of our freshwater. The details of these policies are outlined here: http://www.greens.org.nz/cleanrivers

In contrast to this, the National Party has an outdated, ‘resource extraction’ approach to freshwater.

While we emphasise the biological, recreational and spiritual values of water, we are acutely aware that there is an economic imperative in protecting and cleaning up our freshwater systems. Our rivers contribute to the perception of New Zealand as a clean, green country and underpin our 100% Pure New Zealand brand. This brand is worth a lot to this country, in particular to our primary production and tourism industries.

2. Investment in freshwater

Freshwater management has been portrayed as representing a trade‐off between economic growth and environmental quality. This has implications for the nature of investments in freshwater. The National Party address this balance by focusing on economic growth while setting aside money to ‘clean up’ freshwater bodies. By investing in irrigation, National intends to increase land productivity while promoting efficient use of freshwater resources. Labour and the Green Party highlight the importance of a high quality environment for maintaining New Zealand’s international reputation and therefore a strong economy. This will be achieved through environmental bottom‐lines, including minimum standards and controls on industry impacts. Both parties intend to implement resource use charges to fund investment in infrastructure and restoration (Labour) and sustainable land management practices (Greens). While these approaches focus on environmental health, they continue to tie investment in freshwater to economic outcomes – e.g. “The health of our waterways is at the heart of how we promote ourselves to the world and earn a premium for our exports” (Labour). They therefore do not challenge the assumption that we should continue to invest in degrading activities, or address the implications for investment in other values associated with freshwater systems. *

● To what extent do these approaches challenge the notion that economic growth must result in environmental degradation, and do they provide opportunities for investment in wider freshwater values?

As outlined above, the Greens reject the notion that we need to achieve a ‘balance’ between our environmental responsibilities and economic objectives. And while we believe there are compelling economic as well as environmental arguments for protecting our water, this does not equate to an acceptance of the notion that we must accept some degradation as the price of economic growth. We know that the environment is the economy, and that our competitive advantage lies in our safeguarding our natural resources.

We are coming up against the ecological limits of our planet. We clearly cannot keep following the same economic model. But economic development can protect and enhance our environment, while creating the jobs we need. We would diversify our primary sector and our economy generally to take advantage of the global demand for clean, green technology. A key solution is our Green Jobs initiative, outlined here: http://www.greens.org.nz/greenjobs. In the primary sector, the Greens would incentivise sustainable farming, the transition to organic production and value added products, and the planting of riparian and high erosion land for carbon storage and biodiversity.

We also challenge the notion that growth in GDP is the best way to measure of the success of our economy. It counts as a positive growth in ‘bads’ like pollution and waste, but does not measure at all the depletion of our resources, or the sustainability of our economy. We will draw on various international models, such as the Genuine Progress Index, to measure our economic success better.

3. Improving the state of freshwater in New Zealand

Environment Minister Nick Smith has responded to recent public debate around New Zealand’s ‘100% Pure’ label by highlighting New Zealand’s high ranking on an international index and suggesting that consistent national monitoring will help to solve this problem. This focus on measurement and the use of minimum flow and water quality standards is reflected in all three main parties’ policy statements, with National also proposing the national ranking of rivers. However, such national scale measures and rules fail to take into account the natural diversity and variability in freshwater systems, and the different problems, potential for improvement and values associated with different freshwater systems throughout the country. Just as water quality is not the dominant issue in all rivers, neither is ‘swimmability’ the priority for all freshwater communities. Standardised measurement and ranking tools treat all rivers the same, ignoring the spatial variability in ecosystems and community values. Moving beyond the current focus on freshwater quality and quantity will allow recognition of the multiple and spatially contingent elements that contribute to ecosystem function. Despite this, the Greens are the only party to highlight “the ecological, hydrological and geomorphological functioning of the ecosystem”, or the need for integrated catchment management to improve the state of freshwater.

● Are you happy with the state and trend of freshwater systems in New Zealand, and standardised approaches to their management? What is your plan beyond measurement?

The Green Party is deeply concerned about the state of our freshwater systems, and sees it as a top priority. Current management has clearly failed to serve freshwater biological systems, and the human communities that use them. Our approach is twofold. Firstly, we do need better monitoring and reporting on the health of our rivers and we support this function being given to the independent Parliamentary Commissioner for the Environment. We agree that monitoring and reporting needs to be taken into account the diversity of freshwater systems. Secondly, we want to overhaul the way we manage our freshwater systems. A Green Government would set clear standards for water quality, introduce a fair charge for the commercial use of freshwater, and clean up our degraded waterways.

Setting national standards for water quality and minimum flows doesn’t mean that natural variability is not accounted for. For example, minimum flows would vary between rivers, but a national standard means that councils would have consistent rules about how to set them. Clear guidance from central government in the form of a stronger National Policy Statement on Freshwater Management, such as the draft version recommended by the Board of Inquiry, would give councils a tool box from which to work from rather than relying upon the ad hoc approach we have seen across the country in the past.

We take a ‘whole of catchment’ approach. We would ensure regional councils and unitary authorities implement integrated catchment management plans which sustain the ecological, hydrological and geomorphological functions of the ecosystem. We would also promote and incentivise the adoption of sustainable land use practices across the catchment, such as the planting of catchment headwaters.

Another way to look at the health of freshwater systems is through the lens of conservation policy. The Greens would ensure the Department of Conservation develops and implements recovery plans for threatened freshwater species and ecosystems, and that all threatened native fish (e.g. giant kokopu and short jawed kokopu) are legally protected. We would increase funding for DoC to 1% of GDP, to ensure they are adequately resourced to carry out their conservation functions.

4. Participation in freshwater governance and decision making

Equitable, locally meaningful governance of catchments and freshwater bodies necessitates the incorporation of local perspectives, knowledge and values. This requires that we move beyond ‘representation’ of community values, as advocated by Labour, which “wants communities to decide which schemes are appropriate via the processes of democratically‐elected regional councils.” Relying on processes of representation does not provide for meaningful community and stakeholder participation in decision making. Community‐based freshwater initiatives provide an opportunity for participatory, integrative freshwater management, and require government support. The collaborative structures advocated by the Greens provide mechanisms for these forms of local governance. We note that participation does not feature in National’s environmental policy statement.

● Are contemporary approaches to public participation in environmental decision‐making in New Zealand inclusive and effective?

The RMA was designed to allow for public participation in environmental decision-making, but this principle has been significantly undermined by the National Government, first through the weakening of public participation provisions in their 2009 RMA amendments, then the sacking of the democratically elected ECAN councillors over water management issues in Canterbury. It is the view of the Green Party that public participation in water management needs strengthening, not weakening.

However, it is clear that the ‘first in, first serve’ approach embodied in the resource consent process hasn’t worked to protect our rivers from pollution and over-allocation. We need a more strategic approach. Strategic tools contained in the RMA – the ability to set standards for water quality through National Policy Statements and National Environmental Standards, have been woefully underutilised by successive Governments. As outlined above, the Greens would use these tools to better regulate intensive agriculture.

In catchments that have become over-allocated, or where nutrients are nutrient load limits are already being exceeded, we would encourage councils to adopt a collaborative approach, to get existing and future water users to work together to find acceptable solutions. The agreed upon solutions, such as adoption of industry best management practice, and fencing and planting stream edges, could then become resource consent conditions, or conditions for permitted or controlled activities in regional plans.

The damming of wild rivers for hydroelectricity is one area where environmental decision-making is particularly ineffective. Currently our wild rivers are being picked off one by one by electricity companies, and it is up to local community groups and NGOs to mount expensive legal challenges to save them. The Green Party would protect our remaining wild rivers, by making it easier to obtain water conservation orders, and elevating the status of water conservation orders to that of National Parks.

These four points synthesise the concerns raised by more than thirty New Zealand freshwater experts. Improvement of the state and management of New Zealand’s freshwater requires strong leadership from central government. We therefore invite political parties to respond to the questions in this letter, and ask that the New Zealand public think carefully about each party’s position on freshwater in the upcoming election.

Sincerely,

Participants of the Freshwater Geographies workshop*.

* Freshwater Geographies workshop: http://www.nzgs.co.nz/component/content/article/58‐latest‐news/232‐reimagining‐freshwater‐geographies

Authorised by Russel Norman, Level 15, Bowen House, Parliament Buildings, Wellington

There have been eight prosecutions in the past year in the Bay of Plenty regarding breaches of dairy effluent disposal rules and conditions. This is eight too many.

Meanwhile in the Waikato, an Otorohanga farmer has been fined almost $50,000 for two deliberate breaches of effluent rules in March and November 2010.

The Green Party has a plan to clean up our lakes and rivers. We would provide better support to regional councils to work with farmers to ensure that they have all the tools they need to comply with rules and regulations. We would also enable and encourage dairy companies to impose harsher financial penalties upon operators who break the rules.

We need to send the message loudly and clearly: No one has the right to gain personal profit by destroying the common good, that is our precious rivers and lakes.

Of course Fed Farmers would. Damming rivers to store water for irrigation means farmers can convert more land to dairying, which is highly profitable at the moment.

But Fed Farmers pretend that damming rivers to store water for irrigation won’t hurt the environment.

This is wishful thinking. Nearly every study on water quality shows that land use intensification leads to water pollution.

Fed Farmers say that no water storage or irrigation project will go ahead unless it stacks up environmentally, and they go on to give the example of the Opuha Dam as a project with increased economic performance and environmental benefits. However, in January, the principle surface water quality officer at Environment Canterbury linked the Opuha Dam to an increase in toxic algae blooms in the Opihi River.

National and Fed Farmers want to pretend we can have more cows and cleaner rivers. Unfortunately science shows we can’t.

If they have to resort to citing a river with toxic algal blooms as an example of environmental benefit, then we are in trouble.

Indeed, science shows we have a freshwater crisis on our hands. More than one half of our monitored rivers are unsafe for swimming, one third-of our lakes are unhealthy, and two-thirds of our native freshwater fish are at risk or threatened with extinction.

But there is hope: we have a plan to make our rivers and lakes clean enough to swim in again. We will introduce standards for clean water that deal with the causes of pollution, as well as a charge for irrigation water that will fund water clean-up initiatives.

The report, entitled A Profitable & Resource Efficient Future: Catalysing Retrofit Finance & Investing in Commercial Real Estate, recommends practical steps government leaders can take to stimulate investment in energy efficiency upgrades to commercial buildings enabling job creation and green growth. The retrofit market has an estimated value of US$400 billion in the United States alone, creating 600,000–900,000 new green jobs while reducing energy usage by 29% by 2020.

The report recognises that, like the home insulation sector, there is a general market failure to price and incentivise the retrofitting of commercial buildings. Government leadership is all that is required to unlock the business potential of the commercial retrofit industry.

One of the key recommendations of the report is for government-mandated and standardised energy consumption reporting – an efficiency rating system for buildings. When combined with additional policies such as tax incentives, loan guarantees or credit enhancements, the information generated by such a reporting and rating system can help potential investors make better decisions to invest in energy efficiency projects.

Australia was found to have the most mature retrofit market as a result of a long-standing reporting and rating system, coupled with government-led action, including tax deductions and a third party institution to host demonstration projects.

The Green Party has taken the lead in the residential sector with our Heat Smart home insulation programme. We’ve announced new policy to energy rate rental properties, make this information publicly available, and then implement minimum energy efficiency standards to help drive investment. The World Economic Forum’s report rates this approach as best practice.

The potential for green job creation retrofitting our commercial building stock here in New Zealand is huge, but if we don’t move quickly, it will be Australian companies that secure a lion’s share of the market here and abroad.

Russel

World Economic Forum graphic

Dear Mayor and Councillors,

I have to say that I was a little bemused by the Chairperson’s actions with regards to the peaceful presence of the Te Arai crew at the Town hall meeting yesterday. In a democratic society it is appropriate that everyone should be polite and take in to account the democratic right of others. However, that cuts both ways. There are a much more significant number of people who support Te Arai the way it is than those who want sub division The placards were private property and you could have asked the group to move to the back to allow others still seated to be able to see.

The “polite” thing for council to have done was to acknowledge the protest and show respect for the community at large via a “due process” that culminates in what is appropriate for Te Arai. Just to remind you of the beauty of Te Arai I took this photo last Saturday while I was there. A photo taken at Mangawhai or Black Swamp looking south is just as breathtaking. It is as close to paradise as one would find anywhere in the Auckland area. Don’t spoil it. Please read on.

I don’t think any of you would have seen the Te Arai supporters and their families outside the meeting yesterday so here are a couple of pix of them. Many of them travelled from the area to show you their passion for it and all of it’s current inhabitants (rare birds included).

The word ‘development’ is used most widely today (ironically) to describe real estate ventures. The strongest definition for the word is about progress and growth. I don’t believe that we as a society are making progress anymore. All we are doing is killing the earth and making many of it’s inhabitants extinct – what a legacy!

Te Arai could be a natural place where can we can say we have helped to address natural balance. At the moment we are just smothering nature with our capitalist style blitzkriegs. Omaha started as a happy little place with a few baches. Look at it now! it’s just another suburb of Auckland with a black SUV uniform. A small sub division at Te Arai is just the thin end of the wedge. Smart lawyers will argue precedent for future expansion.

Make the decision for nature and the huge public amenity value Te Arai has now, not the profit wants of a few.

Finally, to those of you who support Te Arai as is, thank you for your visionary position.

Yours sincerely

John Shaw, Aucklander and surfer.

Lake Rotorua is seriously degraded and a huge reduction in the amount of nitrogen going into the lake is needed into order to clean it up. While land management practices such as fencing waterways and planting riparian margins play their part in cleaning up our lakes and rivers, the elephant in the room is the diffuse pollution that comes from inappropriate land use and high stocking rates. Much of the farmland in the Lake Rotorua catchment sits on porous pumice soils, and nutrients from fertilizer use and animal effluent drain through the soils rapidly making their way into waterways. Some of this land should never have been allowed to be converted to intensive agriculture in the first place.

A key part of the Green Party’s Clean Rivers Plan is to adopt a minimum standard for intensive agriculture that would give regional councils better tools to regulate intensive agriculture. It is great to see regional councils such as the Bay of Plenty taking the initiative themselves to recognize that we cannot achieve continued land use intensification and growth, whilst improving water quality.

Key elements of the policy position includes:
• Recognition that land management changes alone will not achieve water quality targets for Lake Rotorua
• Acceptance that the Council has an obligation to consider land use changes to reduce nitrogen loads to the lake long-term
• Prioritising of Council resources towards making land use change over actions to make land management changes in the catchment.

I was lucky enough to go on a helicopter flight this morning and see the Rena up close.

Earlier in the week Metiria was on Motiti Island and got these pictures.