The Maori Electoral Option will be underway soon. If you have registered on the electoral roll as being of Maori descent, you can decide whether to enrol on the General Roll or Maori Roll during the option run after each census. Once you do decide, you can’t change until the next option.

The higher the proportion of Maori who decide to enrol on the Maori roll, the more Maori seats there will be. Over the years they have gone from four to seven. It has remained at seven after the 2001 and 2006 censuses.

Some Maori decide to go on the Maori roll to boost the number of seats. Some may decide on the basis of which electorate they wish to vote in. They may prefer to vote in a marginal general seat where their vote can have more impact than say a safe Maori seat.

Research has shown attitudes are very different amongst Maori on the general roll and Maori on the Maori roll. In a very general sense, Maori on the Maori roll tend to identify foremost as Maori while Maori on the general roll tend to be more self-identifying as New Zealanders who happen to have some Maori descent. That far from applies to all, but previous research has shown this. Also the issues of importance vary too. Maori on Maori roll are more likely to cite Treaty issues as important while Maori on the general roll are more likely to cite jobs, economy etc.

Now we won’t know for sure how many Maori seats there will be for the 2014 election until we get both the census results and the Maori option results. Let’s look at what the calculations were in 2006.

First of all the South Island electoral quota is calculated and that was 57,562. The SI general electoral population was 920,999 and you divide it by 16.

The estimated Maori electoral population is divided by the SI quota to calculate the number of seats. It was 417,081 which means the quota for each Maori seat was 59,583. The fact it is higher than the SI quota makes it more likely there will be an eight seat in 2014 if more Maori transfer over.

How many would have to have been in the Maori electoral population in 2006 to get an 8th seat? In 2006 they would have needed 432,000 in the Maori electoral population. That means an extra 3.5% would have been needed or an extra 15,000.

The Maori electoral population is calculated on the basis of the total number of ordinarily resident persons of New Zealand Maori descent as determined by the census multiplied by the proportion of Maori who choose to go on the Maori roll.

from 2001 to 2006 the numbers on the Māori roll increased from 188,487 to reach 244,121. and the numbers of Maori on the general roll increased from 151,931 to 178,139. This means the proportion on the Maori roll increased from 55.4% to 57.8%.

The Maori descent population increased from 671,293 to 721,431 – a 7.5% increase. This means the Maori electoral population was in 2001 671,293 x 55.4% = 371,690 and 2006 721,431 x 57.8% = 417,081.

If the percentage who went on the Maori roll had been 60% instead of 57.8% then there would have been an eight seat.

It is hard to project what will happen this time as it will depend both on the growth rate of the Maori population to the non-Maori population and also how many Maori change their roll. But based on the change from 2001 to 2006, it looks like we could well see an 8th seat in 2014.  The proportion on the Maori roll increased 2.4% last time and they only need 2.2% transfer to get an 8th seat. However that does depend on the overall growth in the Maori population also since 2006.

If there was an iPredict stock on there being an 8th Maori seat I’d buy stock up to around 55c.

Today’s pic is of one of our native crab spiders (Sidymella sp).  It’s unusual to see them in their hunting pose during the day.  I got around this problem by photographing it in local bush, at night.  The trick was actually seeing it. You can see from the scale it is just a few mm across.

Click for larger, higher res image.

After the last few weeks of dealing with the elephants in the media, a changed of pace to the very minute was in order. 🙂

The best quote about the failed putsch against Julia Gillard I saw was along the lines that if you have the numbers you use them, if you don’t have the numbers you talk about it.

Gillard has now beaten Rudd three times in a row. Is this the end? Probably until they get wiped out in the election.

Rudd’s talk of how he will keep his word and not challenge is simply code for he did not have the numbers. If he did, then they would have no confidenced Gillard and he could have them declared he is not challenging but there is a vacancy. His supporters have been waging a destabilisation campaign with Crean meant to be the Kingmaker. Instead Crean’s career is now as over as Rudd’s.

Gillard comes out of this internally stronger, but the public must be even more wary of someone whose caucus is so divided.

Tony Abbott must think it is Christmas Time. He had a wonderful quote, which may resonate with the public:

“You deserve a government which is focused on you, not on itself,” he said.

Nice. Also true.

Stuff reports:

Greens co-leader Russel Norman has written an open letter to new Speaker David Carter urging him to return to the rulings set down by his predecessor Lockwood Smith or risk increasing disorder in the House.

Smith instituted a new regime that ditched the old requirement for ministers to merely ”address” a question in favour of a tougher requirement to answer a direct question where possible.

But opposition MPs have been frustrated at what they see as Carter’s shift away from that.

Norman is due to meet Carter soon to discuss the letter.

In it Norman said he felt compelled to write after sitting through ”another chaotic question time”.

He said Smith’s rules in summary were that “a straight question will get a straight answer” and that delivered a more orderly and effective question time.

I thought the straight question gets a straight answer rule was a very good one, so in that regard I agree with Norman.

What I’m not so sure about is whether that rule is or is not still being applied. I simply have not watched enough question time to judge. I would make the point that there remains a difference between a primary question and a supplementary. A straight primary question should get a straight answer. A supplementary question which is seeking very specific data may often be unable to be answered unless it was very tightly connected to the primary.

The Australian Labor Party is tearing itself apart. Great political theatre. News.com.au is doing a live update. Developments today include:

• Labor hid polls from their own leader so Rudd could be rolled in 2010
• A Labor MP has called om the Chief Govt Whip to resign for disloyalty to Gillard
• Rudd and Crean discussing a leader-deputy ticket to roll Gillard
• Simon Crean has both called on party to unite behind Gillard and also attacked her for “the class warfare politics she has waged”
• Labor has backed down and withdrawn their media regulation bills
• Crean has now called for a leadership spill and says he will not stand for leader, but will for deputy.

Glorious fun,

I’ve blogged at Curiablog the latest poll results – a Roy Morgan poll and a Herald Digipoll.

Oral Questions 2.00 pm -3.00 pm

Questions to Ministers.

1. DAVID BENNETT to the Minister of Finance: What reports has he received on the economy?
2. Hon DAVID PARKER to the Minister of Finance: Does he agree with Westpac economist Nathan Penny that the increase in the annual current account deficit to $10.5 billion, 5 percent of GDP, is a “worrying symptom of New Zealand’s two-speed economy and re-emerging imbalances”; if not, why not?
3. CHRIS AUCHINVOLE to the Minister of Labour: What action is the Government taking to improve work opportunities for young people?
4. Hon CLAYTON COSGROVE to the Minister for State Owned Enterprises: Does he stand by all statements he and his Ministerial colleagues have made regarding State-owned enterprises?
5. DENIS O’ROURKE to the Minister of Immigration: Does he stand by his statements made in Question Time on 12 March 2013?
6. JULIE ANNE GENTER to the Minister of Transport: Has he read the City Centre Future Access Study which found that, of the options for Auckland CBD’s transport infrastructure, the City Rail Link “has the highest road network speeds within the City Centre”?
7. CLARE CURRAN to the Minister for Economic Development: What contribution, if any, will the ICT sector make to the Government’s stated 2011 Budget commitment to 170,000 net new jobs being created by 2015?
8. Dr JIAN YANG to the Minister of Tourism: What is Tourism New Zealand doing to promote New Zealand as the first Hobbit movie is released on DVD?
9. Dr RAJEN PRASAD to the Minister for Social Development: Is she satisfied with the spending decisions made by the Families Commission in the last three financial years?
10. MIKE SABIN to the Minister for ACC: What is ACC doing to ensure that frontline staff are adequately trained to provide excellent customer service?
11. Hon PHIL GOFF to the Minister of Defence: Will he rule out “systemic health and safety issues throughout the Defence Force” being a cause of Defence Force fatalities, in light of revelations surrounding the non-combat deaths of Defence personnel over the last three years; if not, why not?
12. Dr KENNEDY GRAHAM to the Prime Minister: Does he have confidence in all his Ministers?

In today’s questions, Labour asking five questions, Nation four, the Greens two and New Zealand First one. Labour are asking about the current account deficit, SOEs, the ICT sector, the Families Commission and the Defence Foce. The Greens are asking about the Auckland Rail Link and confidence in Government Ministers. New Zealand First are asking about prior statements.

Patsy of the day goes to Mike Sabin for question number 10; What is ACC doing to ensure that frontline staff are adequately trained to provide excellent customer service?

Government Bills 3 pm – 6 pm

1. Local Electoral Amendment Bill (No 2) – interrupted debate on second reading
2. Crown Minerals (Permitting and Crown Land) Bill – second reading
3. Minimum Wage (Starting-out Wage) Amendment Bill – third reading
4. Families Commission Amendment Bill – second reading

The Local Electoral Amendment Bill (No 2) was introduced October 2012, in response to the John Banks donation saga. The Bill amends the principle legislation in regard to provisions for the conduct of local elections; transparency and accountability around electoral donations; and the integrity and efficiency of the electoral system.

The Crown Minerals (Permitting and Crown Land) Bill was first read in September last year. This bill is an omnibus bill and amends the Crown Minerals Act 1991, the Conservation Act 1987, the Continental Shelf Act 1964, the Reserves Act 1977, and the Wildlife Act 1953

The Minimum Wage (Starting-out Wage) Amendment Bill was introduced in October. This bill will permit Ministers to set a youth or starting out wage for eligible young people aged 16, 17, 18, or 19 years who are not supervising or training other workers, repealing the ability to set the current new entrant rate, and changing the criteria for setting the current training rate.

The Families Commission Amendment Bill was first read in July. This bill will amend the Commission so that it comprises a single Families Commissioner and other members, amends some functions of the Commission and provides for the appointment of a Social Science Experts Panel to provide academic peer review and guidance.

Arstechnica reports:

The importation of copyrighted goods made abroad has been an increasingly contentious issue in recent years. Easy access to Internet resale markets like eBay and Amazon have made it possible for a new breed of entrepreneurs to buy low and sell high in a wide array of areas. The Supreme Court handed these resellers a major victory today, issuing a decision [PDF] that makes it clear that the “first sale” doctrine protects resellers, even when they move goods across national boundaries. 

Those upstarts have peeved a lot of corporations, and some of them used copyright law to fight back. Textbook maker John Wiley & Sons sued a Thai student-entrepreneur named Supap Kirtsaeng, who had been buying cheaper (but non-pirated) versions of various textbooks in his home country, bringing them to the US, and selling them to his fellow students stateside on eBay. The price differentials were so big that there was quite a bit of money to be made; at trial, the publishing company’s lawyers hammered home the fact that they had counted up $1.2 million in receipts over the life of Kirtsaeng’s business.

Wiley argued those profits should be barred by copyright law. Their right to control prices abroad was actually part of their copyright grant, they argued. The textbook company won a jury verdict against Kirtsaeng, which was upheld by the US Court of Appeals for the 2nd Circuit, and Kirtsaeng appealed to the Supreme Court, arguing that his business was protected by the “first sale” doctrine.

Today’s decision vindicates the “first sale” doctrine, which allows the owner of a particular copy of a work to do whatever she wants with it after purchasing it. It overrides first sale losses in both the 9th and 2nd Circuits and makes it clear that digital commerce can flourish in the Internet era, even when it crosses borders.

This is good news. Once you purchase something you own it, and that ownership should include resale rights.

The world is increasingly becoming a global market. The days of different prices for different countries is crumbling under the Internet.

The Herald editorial:

It is always useful to get a global perspective on issues that are the subject of local political wrangling. Light is generally shed on areas that may be clouded by the heat generated by debate. In that context, the International Monetary Fund’s annual report on the New Zealand economy is timely. It casts an especially valuable eye over the two questions of most current angst and anxiety, the significantly overvalued dollar and the overheated Auckland housing market. Its conclusions should put an end to much of the irrational comment on how these issues should be addressed.

The IMF says there should be no “messing with” the monetary policy framework just because the dollar is temporarily overvalued. Indeed, that framework, including a flexible exchange rate, was one of the reasons New Zealand had been relatively resilient in the face of the global downturn. “Do you want to mess [with] the framework because the exchange rate at the moment is overvalued, and do potentially long-term damage? I would be very reluctant to go down that path,” said Bruce Aitken, the head of the IMF team.

We are a minnow. To think we can unilaterally change our exchange rate is silly. You can do it by printing more money of course, which is a great way of making the entire country poorer.

That represents a strong riposte to politicians who have sought to reap advantage from manufacturers’ grievances over the high dollar. It confirms the dangers inherent in, for example, the Greens’ call for the exchange rate to be part of the Reserve Bank’s mandate. The lower interest rates that flowed from this would, as the IMF notes, remove an advantage held by New Zealand’s central bank. Unlike its counterparts in several nations, it still has the scope to cut interest rates if the country were hit by another major shock. Greens co-leader Russel Norman has accused the Reserve Bank governor Graeme Wheeler of complacency and being stuck in the 1980s. This report confirms that Dr Norman’s credibility is under far greater threat.

The Greens are almost the only party in the western world calling for printing money, when the official cash rate is still well above zero. Quantitative easing is the last resort, not the first resort. They just want to print money to pay for their promises.

The problem is not so much the NZ dollar is too high. The US dollar and Euro are tanking because a generation of borrow and spend policies are crippling them. By contrast we are historically low against the Australian dollar.

Kate Chapman at Stuff reports:

As the second round of welfare reforms come back before Parliament Social Development Minister Paula Bennett says the 650 children born to women already claiming a benefit in January are reason enough for her tough reforms. …

There were 659 subsequent children born to parents already claiming a benefit this January, she said.Under changes introduced last October, they will have to return to work when that child is 12-months-old, if their older children are aged over 5.

Bennett said Work and Income staff used discretion to excuse 22 of those parents from the work requirement, largely because of timing around the announcement and implementation of the policy.

Meanwhile, in 2010 more than 7.5 per cent of live births – 4800 of 63,900 – were babies born to sole parents on the Domestic Purposes Benefit (DPB) and Emergency Maintenance Allowance.

And between 1993 and 2011, 29 per cent of sole mums on the DPB had another child.

”It does tell us that those that are already on benefits with children are still having subsequent children,” Bennett said.

I think there is a fundamental difference between having a child, and then ending up on welfare (because your partner leaves you, turns violent, dies etc) and already being on welfare and choosing to have further children.

Bennett admits work testing for sole parents was among the ”tougher” reforms.

But in 10 months of last year there were less people going onto the DPB that coming off. A feat which has only been achieved twice in the last 16 years, once when Working for Families was introduced.

A good start.

Stats NZ reports:

Gross domestic product (GDP) rose 1.5 percent in the December 2012 quarter, the strongest quarterly growth since December 2009, Statistics New Zealand said today.

“Fifteen of the 16 industries recorded increases in the last three months of 2012, reflecting the broad-based nature of growth in this quarter,” national accounts manager Rachael Milicich said. …

Economic activity for the year ended December 2012 was up 2.5 percent. This is the highest annual growth in GDP since March 2008, when the economic recession began.

It’s only one quarter, but hopefully the a start that can be sustained.

Also pleasing is private consumption is up 1.5% this quarter while government consumption is down 0.7%. Yay.

Exports went up 0.9% and imports dropped 2.0%.

The undisclosed bank account is posing some challenges for David Shearer, beyond just the transparency issue.

Stuff reports:

Shearer told Fairfax Media yesterday there was no advantage to having the account and there was “nothing special about it”.

Asked what that said about his financial expertise, given low interest rates in the US and the exchange rate losses he may have suffered from a rising New Zealand dollar, he shrugged and said: “The bottom line is it is there, and I have nothing more to say about it really.”

Banks today also questioned why Shearer would keep such a large amount of money in an account that paid such low interest – maybe 1.5 per cent – when he could earn more in New Zealand.

Shearer had also disclosed a mortgage in the register, which would charge a higher interest rate than the banks paid on deposits in New York.

“Why doesn’t he transfer some across and pay off his mortgage?” Banks asked.

How an MP arranges his or her personal finances should generally be of no concern to the public – it is a private matter. But when due to a stuff up, you force it into the public arena, people naturally get curious. You just can’t help it.

Now some people have got over-excited and have been saying that Shearer has a conflict of interest with Labour’s policy to spend billions of dollars pushing down the exchange rate, as that would allow him to convert his US dollars into NZ dollars at a higher profit.

I’m sorry, but that’s ridiculous and is the sort of paranoia best left to some of the extremists on the left who likewise allege that John Key was asking questions in Parliament on Tranzrail to help their share price, rather than because he was (then) Opposition Finance Spokesperson.

Labour want to waste billions of dollars intervening in the exchange rate because they think it will be popular, not to help their leader make money on currency transactions.

So I don’t think the public will have a bar of the conspiracy theories.

But what the public do understand is paying down your mortgage. It’s something common to most families. You pay much more on your mortgage than you get in a bank, so you always transfer surplus savings against your mortgage.

And what the public will be wondering, even though it is none of their business, is why would you have several hundred thousand dollars in an US bank account, and not use it to pay down or off your mortgage. I mean no one sensibly wants to pay more interest to your bank than they have to.

The only three answers I can come up with are:

1. You’re financially incompetent and it never occurred to you.
2. You’re so well off, that saving thousands or tens of thousands of dollars off your mortgage doesn’t matter in the bigger scheme of things.
3. There is some other reason to want to keep the money in the offshore account.

Have I missed a significant possibility?

Vernon Small also touches on the political side of the non disclosure:

The blunder shows a slackness and a lack of attention to detail unbecoming a prime minister.

Even having the account – rather than closing it quick-smart when he became leader – is problematic.

What of Labour’s views on economic nationalism? What about investing in local enterprises rather than leaving the money at low interest rates to be invested in the US?

And why not close it and bring it back now? Surely not because he is waiting for the exchange rate to move back in his favour? Mr Shearer, currency speculator?

It isn’t necessary to get overexcited by the ramifications of all this to see the potential for political harm for Labour and Mr Shearer.

By far the worst is that at a stroke he has neutralised attacks he could make, come the 2014 campaign, on John Key’s “brain fades”.

It is not hard to see how they will be turned back on him.

Which is worse: forgetting a swift mention of Kim Dotcom in a briefing by spooks or failing to remember for three years in a row your nest egg tucked away in a New York bank?

Labour had a very obvious campaign around Key having so called brain fades. It is now in tatters.

UPDATE: We have has some useful additional possible explanations. The list now is:

1. You’re financially incompetent and it never occurred to you.
2. You’re so well off, that saving thousands or tens of thousands of dollars off your mortgage doesn’t matter in the bigger scheme of things.
3. Deliberately not paying off the mortgage, so he appears “an everyday bloke”
4. Is writing the NZ mortgage payments off tax as an investment property
5. Waiting for the exchange rate to drop, before he moves the money back to NZ
6. There is some other reason to want to keep the money in the offshore account (US itunes purchases?)

Lois Cairns at The Press reported:

Simmering tensions between some Christchurch City councillors and senior staff are hindering the city’s ability to make progress on key issues, insiders say. …

Cr Barry Corbett, who is not seeking re-election in October, said some councillors engaged in political point scoring which was destroying relationships within the council and hindering progress on key issues.

“Some councillors, when they wake up in the morning, all they think about is how they can stick it to the council, how can they embarrass Bob [Parker], and how they can make sure that National doesn’t get elected next year,” Corbett said.

If they had issues with staff, they tended to raise them in a public forum rather than approach them directly.

Naturally, that created tension because staff felt they were being “hung out to dry”.

Asked if he felt the tensions between staff and councillors hampered the council’s ability to make progress on key issues, Corbett responded: “Heck, yeah.”

This is one of the weaknesses of the Council model. It works pretty well in smaller areas where there are not party politics. But party politics has infested the larger city councils and you get Councillors who are more interested in bad publicity for others than making the Council work well.

We solve this issue at national level by having the Government separate to and accountable to Parliament. Not all MPs are Ministers. We have an Opposition who don’t actually have to work with Government staff until they are in Government themselves. Their job is to oppose and scrutinise and propose alternatives – but not to govern.

At the Council level, all Councillors are Governors. They all sit on committees that make decisions and all have an equal vote at the Council. There is no Cabinet or Ministers. So when some Councillors have an agenda of trying to screw over others, of course you get dysfunctional.

As I said, I think the Council model works well for smaller authorities. It works less well when you have party politics. So one solution there may be to recognise the reality and move Councils to more of a parliamentary model. This means more executive powers to the Mayor and Councillors picked by the Mayor to chair committees. The other Councillors can then focus on scrutinising the executive Councillors, holding them to account, approving bylaws and budgets. And at electon time they can campaign as a team for a change to their team.

I prefer the model where there is no party politics, and Councillors focus more of the wellbeing of the Council, not their political interests. But the bigger you get the more inevitable it is you get the “necessary evil” of party politics. And party politics allows voters a clear choice. But if you have party politics then you need an executive and an opposition as we have in Parliament.

Tom Pullar-Strecker at Stuff reports:

Retailers are stepping up efforts to close a “loophole” that allows GST-free purchases of overseas goods costing less than $400.

They should give up their silly campaign to tax minor online purchases. It would cost the Government far more in administration than it would bring in, in revenue.

Retailers Association chief executive John Albertson said the import threshold was costing the Crown $300 million a year in lost revenue, far more than the $17m the Government had sought to raise through its ill-fated plan to tax employee car parking.

Well first of all I doubt that figure. They’re saying that $2 billion of sales are being made online from overseas retailers, which sounds way too high too me. But the compliance costs would be huge. Customs would have to intercept every single letter coming into NZ, open it, hold it, calculate GST, send an invoice for say $5 and then get it paid and then dispatch it on. A bureaucratic nightmare.

Labour revenue spokesman David Cunliffe said a low threshold for charging GST on overseas purchases would stop the Government “subsidising foreign commerce” and was a “no-brainer”.

Oh wonderful. Make sure everyone knows this. Labour Party policy is to tax your online purchases more. Buy a book from Amazon, and Labour will hold it up at the border until you pay the Government an extra 15% of the price.

Will Labour also block itunes? We can’t have people downloading music and not paying GST on it. So to implement their policy they’ll have to block itunes in NZ, and only allow people to purchase from a NZ located online retailer.

Labour grandstanded on the carpark tax (yet never had a clear policy on it), but have now trumped that with their e-tax. I look forward to detailed Labour policy on what they would reduce the threshold to so we know how many of our online purchases they plan to stop at the border.

Michael Field at Stuff reported:

The United States and New Zealand have announced they are planning to create the world’s largest marine protected area.

The 4.9 million square kilometre Ross Sea MPA in Antarctica would be nine times the size of New Zealand.

The plan has been announced in Washington by new US Secretary of State John Kerry and the New Zealand ambassador to Washington, Mike Moore.

They were speaking at the screening the National Geographic Museum of The Last Ocean by New Zealand film-maker Peter Young. …

The US, the European Union and 23 other countries including New Zealand will decide in July whether to approve permanent protections for the Ross Sea and for a second area in East Antarctica, or to allow large-scale industrial fishing to continue.

An attempt last November to create the MPA at a meeting of the Commission for the Conservation of Antarctic Marine Living Resources, failed. …

Key areas to protect include a full range of marine habitats; from the ice edge to deep oceanic basins. The proposal protects the ecologically important features and habitats, including winter ice-free areas, the entire Victoria Coast from McMurdo Sound to Cape Adare, the Balleny Islands, and almost the entire Ross Sea continental shelf.

The large bulk of the MPA, the general protection zone, will be a no-take area.

Under the proposal the toothfish fishery would continue in areas outside the MPA.

It is good to have the US and NZ in agreement, as previously there were different proposals.

And it is good they are proposing a vast marine reserve for most of the Ross Sea.

But there is still an issue of whether the marine reserve should include the entire Ross Sea – just as all of Antarctica is protected for scientific research, not just some of it.

I don’t think there is a shortage of other areas to fish. Some ecosystems should be left undisturbed, and Antarctica is one of them.

Some useful analysis by Chalkie at Business Day:

Meanwhile, in April 2009, Finance Minister Bill English and then SOE minister Simon Power summoned SOE bosses to a meeting and told them to sharpen up.

“We’ve got a recession and we’ve got a government that wants value for the taxpayers’ dollar,” English told reporters after the meeting. “They need to get better returns than they’ve got.”

Solid Energy was not singled out for dividend extraction and a dose of debt, but you can see why it might have felt the rebuke more keenly than others.

Chalkie has run the numbers on debt and dividend levels for a bunch of SOEs going back to 2005 and it’s clear that Solid Energy was slacking a bit. From 2005 to 2008 its annual dividends were zero, $20 million, zero and zero.

Such paltry returns are not what you want from a business deploying shareholders’ funds of $400m or so. No wonder English and Power wanted more.

If the state has to own commercial trading companies, it is not unreasonable to expect them to pay a dividend. Otherwise we’d be far better off selling them, and investing the money elsewhere.

We’ll come back to what Solid Energy did with its money in a mo, but it’s worth noting that the Government’s rev-up didn’t make a difference to all SOEs.

Comparing the four years from 2009 to 2012 with the previous four years, average dividends actually declined at Meridian and TVNZ, stayed roughly the same at Genesis Energy, while big dividend lifts were apparent at Mighty River Power and Landcorp.

Debt levels were also not universally increased after English and Power’s crackdown. Landcorp’s borrowing stayed in the same ballpark while TVNZ’s fell considerably.

The point here is not that debt and dividends at those companies should have been different, only that the outcomes support the view that decisions on these matters were ultimately made by individual SOE boards.

Of course. In fact it is a decision not just for the boards collectively, but individual directors. A Director has to sign a certificate or resolution they they are personally satisfied that the company can pay the dividend – and there are serious legal implications for a Director who gets it wrong.

Chalkie reckons the Government’s position in 2009 was only what you’d expect from a shareholder and how boards responded to that pressure, rightly or wrongly, was down to their judgment of what was best for the business.

Solid Energy’s judgment was that debt could be substantially increased, from $33m in 2008, to $62m in 2009, to $212m in 2010.

By June 2012 debt was $295m, which sounds like a lot but on a crude measure of gearing – debt/total assets – at 25 per cent it was well within the bounds of normal, around 50 per cent.

A better measure may be interest payments, which were also no obvious grounds for alarm. In the year to June 2012, Solid Energy had operating cashflow of $142m – a measure of basic business profitability – representing considerable headroom for its interest bill that year of $14.8m.

So the interest was around 10% of the operating cashflow surplus – reasonably conservative. The problem is that the surplus disappeared as the coal price dropped.

With 90 per cent of the world just starting up the prosperity ladder, the company said, there was only one way oil prices – and therefore coal prices, which are strongly correlated – would go.

In its best-case scenario Solid Energy saw coking coal prices at US$400 a tonne by 2020 and US$600 by 2030.

So what should an energy business do if it sees soaring demand and high prices into the future?

If you believed prices were going sky high, you might invest in more coal production, you might invest in coal seam gas and underground coal gasification.

If you believed in world energy hunger, you might invest in alternative energy sources such as wood pellets, biodiesel and lignite briquettes.

If you believed in ever-tighter oil markets and you were an ambitious, patriotic Kiwi energy company, you might want to secure big chunks of oil exploration real estate.

So in a sense, Solid Energy’s strategy in pouring so many millions into these projects had a sort of logic to it.

But only if you believed the price projection.

The current coal price is US$101 a tonne.

The Treasury’s assessment of the NRC scheme advised: “It is not clear why the Crown would wish to take such an exposure in commodity price movements based on price path analysis not shared by other experts.” The NRC idea got the brush-off from the Government, quite rightly.

But Solid Energy isn’t struggling today because it thought about getting into oil exploration. It is in trouble because a lot of the money it did invest turned out to be wasted when energy prices didn’t behave as it thought they would.

The Government was smart enough to see the implausibility of Solid Energy’s forecasts when it came to the NRC, but not when it came to wood pellets, underground coal gasification, lignite, Spring Creek, biodiesel and all the other things soaking up the company’s resources.

While all that was going on, the Government shareholder was busy getting Solid Energy to fill in its boiler-plate questionnaires seeking answers about how many credit cards it gives employees, how many staff have mobile devices and what it spent on office refurbishments.

If we wondered why state-owned businesses tend to under-deliver, just think about committees of MPs and bureaucrats poring earnestly over executive mobile phone bills. For all the good it does they might as well flag it and and go to the pub.

Chalkie reckons the Government is well aware its lack of oversight helped Solid Energy get out of hand and is doing its best to make Elder the fall guy.

There is a degree of truth to this, but this is part of the problems of the SOE model. The select committee is focused on how many credit cards a company has and shareholding Ministers are responsible for scores of companies – as well as all their portfolio responsibilities.

Of course you also have Treasury staff, and they did warn against some of the plans, but with no disrespect to Treasury, a 25 year old analyst can’t compare to the role played by professional company analysts.

If Solid Energy was listed on the stock exchange, then there would be a number of commercial funds that would have invested in it. And those funds would have an analyst whose job it would be to know everything possible about that company. They would live, breathe and eat that company. They would read every report, every statement, attend every AGM, and be constantly analysing the company’s strategy, worth and risks. The reason for this is because their job depends on it. If they get it wrong, their employer (and them) stands to lose millions or tens of millions of dollars. When it is your money at risk, you take much more of an interest in a company’s performance.

And you would have a share price that would deliver real-time daily feedback on how investors thought the company was doing.

That’s not to say Elder shouldn’t have gone – he should. But to Chalkie the main responsibility lies with Solid Energy’s board, which reviewed and endorsed the company’s strategy year after year.

I agree – the board sets and agrees to the strategy.

The Government, meanwhile, was well aware of Solid Energy’s approach but didn’t pay it much attention – complaining about it now is just hypocritical.

I think it is unrealistic to expect the Government to be second guessing the board.

Overall, Chalkie see this as another example of why SOEs are a bad business model. It’s just a shame the debacle means Solid Energy will remain 100 per cent state-owned for even longer.

I agree – the model is flawed, to say the least.

The Herald editorial agrees:

In 2010, when the Government was still forming the mixed ownership model it took to the 2011 election, this was too much to contemplate. It rejected the notion of the national resources company, encouraged Solid Energy to develop its existing resources, including lignite and “unconventional” gas extraction, but offered no additional investment.

Within two years, China’s steel production had slowed, coal prices slumped, Solid Energy’s investments were not paying off and a share float is no longer in prospect. The board’s plans might have been “off the bullish end of the charts” but private investors ought to be invited to make that judgment.

When global energy demand recovers, the Government should sell whatever stake it takes to make the most of the country’s untapped wealth.

It is indeed a pity that private shareholders were unable to invest in Solid Energy earlier.  They should be the ones making the judgement on whether the bullish plans to become a global resources company were worth investing in.

This graph from The Atlantic tells a powerful story.

Print advertising is dying (but more slowly than a few years ago) but it is not being replaced by online advertising.

This is partly I think because of online alternatives to advertising such as auction sites, social media pages and free sites such as Craig’s List.

Andrea O’Neil at Stuff reports:

Wellington Mayor Celia Wade-Brown has been a dysfunctional embarrassment during super-city talks, and her council is selfishly crippling the rest of the region, claims Porirua City councillor Ken Douglas. …

Ms Wade-Brown all but derailed this summer’s super-city working party, Mr Douglas said at a Porirua City Council meeting on Wednesday.

”The mayor is dysfunctional. I tell you she’s something to be marvelled at. It is a total embarrassment to me to work in a party where she continually changes her mind and throws up other options.”

Since January Mr Douglas has been chairman of an amalgamation working party comprising mayors and councillors from Wellington, Porirua, Kapiti and Greater Wellington councils.

Wellington City Council at first refused to engage in the working party, but since joining, Ms Wade-Brown has done little but frustrate the group’s progress, Mr Douglas said.

”As soon as she sat down she threw sand and sawdust all over the process.”

The mayor further enraged working party members by criticising its findings the day they were released, on March 8.

This is not a right vs left thing. Ken Douglas is the former head of the NZ Council of Trade Unions.

What will be interesting to see this year is who stands against Celia. Will Labour put up a candidate??

Peter Cresswell responds to my earlier blog on patent trolls:

He says:

Thomas Edison was a “patent troll.”

So was Nikola Tesla.

So was almost every great inventor in the last 200 years*.

So is any inventor who licenses their invention rather than produce it themselves.  Unlike the ignoramuses who attack them, these people aren’t trolls. They’re benefactors:

Not every person who patents something they don’t produce is a patent troll. But patent trolls don’t actually come up with inventive ideas. Their inventive idea is to just file a patent over anything they can think of, even if it is not a true invention. Once they get the patent, they’ll find victims who will pay them a fee rather than go to court to get the patent over-turned.

PC quotes a Judge:

Judge Michel,  former head of the CAFC, the US court that hears all patent appeals, points out that the number of patent suits filed each year has remained constant at less than three thousand.  Only about 100 of these suits ever go to trial.  In a technology based economy with over 300 million people and 1 million active patents this is trivial.

Of course they don’t go to trial. If you want to try and fight a patent claim you need US$1 to US$2.5 million generally. What small business can afford that?

The proposed law change mooted in the US doesn’t ban patent trolls. It just changes the economic incentives so that the trolls have to post a bond to cover the defendant’s costs in case they lose. So you can’t just set up a $500 shell company and threaten patent lawsuits. The problem for the defendent is that even if they win, they will never recover the cost of defending the lawsuit. So of course they settle.

Questions for Oral Answer.

Questions to Ministers.

1. DAVID SHEARER to the Minister for State Owned Enterprises: Has the Government met the five criteria the Prime Minister laid out for proceeding with asset sales?
2. Dr RUSSEL NORMAN to the Minister of Finance: Will New Zealanders have money taken from their bank accounts to fund a bank bailout under his proposed Open Bank Resolution scheme?
3. TODD McCLAY to the Minister of Finance: What reports has he received on New Zealand’s balance of payments?
4. Hon ANNETTE KING to the Minister of Health: Does he stand by all his statements regarding “Better, Sooner, More Convenient” health care; if not, why not?
5. MARK MITCHELL to the Minister of Police: What reports has she received from Police on the success of pre-charge warnings?
6. PHIL TWYFORD to the Minister of Housing: Why did he tell the House that, even if the Auckland plan took effect in September, new subdivisions would not be available until 2016-17, when the advice he tabled from Roger Blakely of Auckland Council shows that if the unitary plan takes effect in September new land would be available two years earlier?
7. ALFRED NGARO to the Minister for Social Development: How will the Social Security (Benefit Categories and Work Focus) Amendment Bill back people off welfare and into work?
8. GRANT ROBERTSON to the Prime Minister: Does he stand by all his statements on the actions and involvement of the Department of the Prime Minister and Cabinet and the Government Communications and Security Bureau in Operation Debut?
9. SCOTT SIMPSON to the Minister of Health: What is the Government doing to extend access to free flu vaccines?
10. METIRIA TUREI to the Minister for Social Development: Does she have an obligation, as Social Development Minister, to ensure all policy she is responsible for will be good for children and their families?
11. Hon KATE WILKINSON to the Minister for Primary Industries: What announcement has he made on the drought in New Zealand?
12. Rt Hon WINSTON PETERS to the Minister for Canterbury Earthquake Recovery: Have allegations of fraud and corruption involving Canterbury earthquake recovery and rebuild contracts been raised with him as Minister; if so, what specific steps has he taken to address them?

Today Labour are asking four questions, The Greens two questions and NZ First one question. Labour are asking about asset sales, healthcare, housing subdivisions in Auckland,  and the GCSB. The Greens are asking about bank bailouts and social policy for children. NZ First is asking about fraud in the Canterbury earthquake recovery contracts.

Patsy question of the day goes to Scott Simpson for Question 9: What is the Government doing to extend access to free flu vaccines?

General Debate 3.00 PM -4.00 PM.

12 Speeches of no more than 5 minutes in length.

Government Bills 4.oo PM- 6.oo PM and 7.30 PM – 10.00 PM.

1. Social Security (Benefit Categories and Work Focus) Amendment Bill – Second Reading.

2. Marine Legislation Bill – Second Reading.

3. Local Electoral Amendment Bill (No 2) – Second Reading.

The Social Security (Benefit Categories and Work Focus) Amendment Bill is being guided through the house by Paula Bennett. This bill amends the Social Security Act 1964. It is part of a package of reforms to shift the focus of the benefit system towards encouraging and supporting beneficiaries to move into paid work.

The Marine Legislation Bill is being guided through the house by Gerry Brownlee. This bill proposes amendments to the Maritime Transport Act 1994 and the Exclusive Economic Zone and Continental Shelf (Environmental Effects) Act 2012.

The Local Electoral Amendment Bill (No 2) is being guided through the house by Chris Tremain. This bill seeks to amend the Local Electoral Act 2001 and the Local Electoral Regulations 2001 with regard to provisions for the conduct of local elections; transparency and accountability around electoral donations; and the integrity and efficiency of the electoral system.

Summer evening fishing on the jetty at Lake Rotoma. New Zealand landscape photography by Todd Sisson.

A change of scene from all of last week’s mountainous drama-filled glory.  I made this image while taking my little guy, Jack, out for a spot of fishing in January – if you look hard  you can see his camo-clad figure at the end of the wharf.  We caught nothing, but we made a significant blood donation to the local sandfly population.

Free Wallpaper Download

You may download the large version of today’s image from this link:  Please note the new, shorter, Password = wwp

This image is up as a canvas print here and available for licencing here.

See you next week – and thanks for all the great comments last week!

Cheers – Todd [www.sisson.co.nz] 

Regan at Throng blogs:

Last Thursday, Seven Sharp ran a story about domestic violence in a staged enactment in an Auckland street.  This morning (five days later), the New Zealand Herald has a story that claimed“Women’s Refuge has criticised a Seven Sharp story on bystander reaction to violence against women which used the song Smack My Bitch Up as a backing track”.

The New Zealand Herald has a history of inciting anger when there is none and this latest escapade is no different.

We spoke to Women’s Refuge this morning and a spokesperson told us that they had been completely unaware of Seven Sharp’s story until the NZ Herald had contacted them for comment.  Colour me surprised. 

Getting upset over a backing track that features no lyrics on an issue that is increasingly problematic in New Zealand is incredibly petty and completely misses the point.  The fact that the issue is getting raised at all is something that should be congratulated, not lambasted for such trivial and inconsequential points.

If the track had included lyrics, then lots of people would be upset. But the reality is that no one watching the show was in any way offended. It was only five days later the “rage” was manufactured.