This post is by PaulL, a regular commentor and occasional contributor. It is the fifteenth post in a series on the financial incentives to work and the impacts of our tax and transfer system on household formation, and the eighth post on the “what could we do” subsection. The index to all posts in the series can be found here.

We’ve established that the gap between welfare and work is relatively small in financial terms. We’re asking people to go out to work instead of staying at home, and the increase in household income associated with that is low. 

We’ve also established that it can be expensive to change the financial arrangements to address the effective marginal tax rates.

In the eighth post I canvassed our options, and noted that there are a set of non-financial changes that we can make to encourage people into work.  This post will cover those in more detail.

A guest post by a reader:

A major obstacle for getting back to work. We have a pretty high bar – carer/child ratios, teacher (carer) qualifications, floor area/child, outdoor area/child and a raft of others. High quality stuff, expensive but subsidised and over-subscribed. Waiting lists and all that. Even the creche at a gym has to meet all the ECE standards including qualified “teachers” and all that.

On the other hand, you could get lucky and have a parent or auntie or other family member or friend where you can park the little treasure. No requirements about qualifications, space or anything like that. Just acceptance of the arrangement by the parent and caregiver. No money changes hands.

Once upon a time, in-house baby sitting (as it was called) was unremarkable.  The kids were fed, watered, changed and entertained – probably in front of a TV for some of the time. If your kid was not happy or you were not happy you found someplace else to take him/her. Willing buyer/willing seller and all that. Noone called it “early childhood education”

Such an arrangement is obviously not as good as the full-service bells-and-whistles stuff found in an ECE establishment. On the other hand it might be a bit more econmically feasible and be the difference between Mum/Dad staying home or getting back to work. I guess there would have to be some minimal standards about space etc and probably some finagling of the subsidy arrangements. Details. What’s not to like?

These days ECE is big business and popping up all aver the place. Sort of recognised as part of the education system except for the 100% private (ie for profit) ownership with significant government subsidy bit. Just an observation. We don’t run the primary, intermediate or high school system like that ….

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Bono in the NY Times:

I ended up as an activist in a very different place from where I started. I thought that if we just redistributed resources, then we could solve every problem. I now know that’s not true. There’s a funny moment when you realize that as an activist: The off-ramp out of extreme poverty is, ugh, commerce, it’s entrepreneurial capitalism. I spend a lot of time in countries all over Africa, and they’re like, Eh, we wouldn’t mind a little more globalization actually.

Great musician and economist!

Capitalism is a wild beast. We need to tame it. But globalization has brought more people out of poverty than any other -ism. If somebody comes to me with a better idea, I’ll sign up. I didn’t grow up to like the idea that we’ve made heroes out of businesspeople, but if you’re bringing jobs to a community and treating people well, then you are a hero.

Bono for PM!

A guest post by Clive Bibby:

A recent announcement that Stuff journalists are investigating the background of some of this year’s local body candidates as purveyors of disinformation and as such, a threat to democracy, rings hollow against their refusal to scrutinise the government’s own revisionist campaign.

You don’t have to be an Oxford scholar to recognise the duplicity of their actions which lays them open for criticism as being an extension of the Labour Party propaganda machine.

It is somewhat surprising that this group of journalists is being led by one of Stuff’s senior scribes – none other than Andrea Vance who has an earned reputation for accuracy which ironically is a diminishing quality amongst members of the Parliament Press Gallery.

Things must be becoming desperate when the big guns allow their names to be associated with such dubious digging to find dirt on individuals of no consequence.

Meanwhile in the corridors of power where things are happening that will have lasting effects on the nations understanding of our true history, revisionist narratives are being peddled unchallenged as the gospel truth about the nation’s birthing pangs.

In reality, our history is going through a makeover that bears little resemblance to what actually happened all those years ago and nobody seems to care.

One would think that at least the opposition parties would see this development as the real threat to democracy and be promising to add the eradication of these false doctrines to the list of those “must do” jobs when it takes over the treasury benches.

Yet we see only a relatively small handful of priorities from those who must make it happen. Apparently, the insistence of truth telling isn’t amongst them.

And what of the disinformation that is being promoted as the truth?

You need go no further than the popular narrative promoted by academics and wannabe leaders that Maoridom continues to suffer as a result of colonialism and consequently requires compensation on a never ending scale in order to regain its original status as proud tangata whenua.

The truth is that during the musket wars, pre the signing of the Treaty of Waitangi, the Maori race suffered more than anything else from self inflicted wounds. It is a sad fact that the Iwi population dropped by approximately 40,000 (mainly innocent bystanders) from an estimated high of 100,000 able bodied men and women.

The ravages of tribal conflicts in the years pre 1840, in an environment where the winner takes all, had the single most damaging effect on the population of our earliest settlers. The wilful slaughter was only brought to a halt with the arrival of the first colonial missionaries who promoted a message of peace that changed the lives of warrior chiefs like Tamati Waka Nene and Hone Heke for ever.

The negative effects of colonialism, the part that the academics selectively identify as the root cause of Maoridom’s struggles in modern society, were not a factor until much later when assurances given in the Treaty were either ignored or only partially honoured. It is fair to say and should not be forgotten, that the mistreatment of Maori by some of the colonial settlers did immeasurable harm to a race of people trying to adapt to the new authority, much of which was foreign to a lifestyle based on survival of the fittest.

However, the facts are that this nation has evolved in spite of those setbacks, building into a multi cultural society that is the envy of the world. We have achieved this status by learning from and acknowledging our true history. We now enjoy a system that accommodates retrospective claims of misdeeds by the Crown and allows for compensation that can help to re-establish tribal authority and future prosperity.

The real danger to our democracy is the deliberate distortion of these historical facts that would, if allowed to take root, set our development back for no good reason.

We must insist that the complete record (warts and all) is included in any state sanctioned revision of our history curriculum.

Failure to do so will result in a division from which we may never recover.

If it is not the full truth – it is a lie.

This post is by PaulL, a regular commentor and occasional contributor. It is the fourteenth post in a series on the financial incentives to work and the impacts of our tax and transfer system on household formation, and the seventh post on the “what could we do” subsection. The index to all posts in the series can be found here.

This post picks up a comment that many people have made. Reducing the benefit level would give the ability to reduce abatement rates without costing more or increasing the income levels at which people receive welfare.

If we reduce the benefit by 30% we can also reduce the abatement rate from 70% to 40% and still have the benefit cut out at about $40,000, about where it was before.  We can also reduce the family tax credits by 30%, and the abatement rate on those to 18% instead of 27%.

Jamie Mackay writes:

Would it be unkind to say you’ve got to go back to the days of David Lange and Rogernomics to find a government so reviled by the rural sector?

And it’s rather ironic that Labour finds itself in a unique electoral situation because of the support it garnered from the provinces in the 2020 election. A case of be careful what you vote for. A perfect storm of Covid, an empathetic PM, fear of the unknown, the fear of the Greens and a totally dysfunctional National Party, combined to produce the first majority government in MMP history.

The Government’s recent response to He Waka Eke Noa (HWEN) and the resultant modelling was an abrupt wake up call to rural New Zealand and those self-same provinces that swept Jacinda Ardern into power.  …

And we may never see the likes of 50,000 Kiwi farmers again if we lose 20 per cent of our sheep and beef production and six per cent of dairy. The numbers being modelled are frightening, even if they’re only half correct. …

So, apparently, we’re staring down the barrel of a 24 per cent drop in sheep and beef revenue. That’s nearly $3 billion a year. That pays for a heck of a lot of health and education. It will be the death knell for provincial NZ. We will become the pine plantation of the South Pacific. That’ll be good for tourism (and hay fever)! A dumping ground for wealthy offshore polluters who want to offset their emissions.

Take the President of Federated Farmers, Andrew Hoggard’s, recent comments on India’s dairy industry and the resultant ‘carbon leakage’ if we reduce production and less efficient nations take up the slack.

India’s currently at 23 per cent of world milk production, with ambitions to keep growing at six per cent per annum to be at 43 per cent in 20 to 30 years. They’ve got a carbon footprint per litre of milk that’s about 10 times ours. And when questioned on what sustainability meant to them, they said: “a full belly”.

Hoggard, quite rightly, questioned whether New Zealand’s place in the world is “cutting our own production, cutting our own throats, or is it about taking our know-how and can-do attitude to other agricultural systems in the world?”

The past two years have been the most divisive of my lifetime. We’re all rowing in separate directions. I think it’s called being up the creek without a paddle.

Mackay is right that there is huge anger in the provinces.

Worth reading ACT’s paper on the choice between democracy and co-government. An extract:

• Māori language and culture have been decimated, from being totally dominant in 1840 to nearly disappearing completely, before recovering gradually over the past few decades.
• Māori New Zealanders are statistically worse off in practically every measure from incomes to incarceration, including education, health, and home ownership.
• The Treaty of Waitangi, which was supposed to protect Māori property rights, was breached many times. These breaches can only ever be partly compensated, as much former Māori land that might be subject to a claim is now in private ownership and therefore unavailable for settlements.
• New Zealanders, being fair-minded, caring people, want the above three problems solved. They want to see the Māori language and culture preserved, every child have genuinely equal opportunity, and any wrongs of the past put right.
• Due to a combination of confusion and some deliberate deception, New Zealanders are being told that constitutional change is necessary to. solve these problems. This is not only untrue, it is a dangerous development.

I like this summary. You can care greatly about fostering Maori language and culture, supporting Maori property rights and reducing the inequities in key outcomes, while rejecting abandoning equal suffrage democracy as the solution.

Any constitutional system that gives different people different political rights is incompatible with universal human rights. ACT believes that universal human rights are essential for peace and prosperity.
Whenever people are given different legal rights, they inevitably fight to regain their rights and dignity.

Political rights must be based on citizenship, not ancestry or race.

Geoffrey Miller writes:

New Zealand’s relationship with India is not in good health.

That’s the underlying message from a rare visit to New Zealand by India’s external affairs minister, Dr. Subrahmanyam Jaishankar.

Jaishankar met with his New Zealand counterpart, Nanaia Mahuta, last Thursday – but only for an hour.

At a press conference with Mahuta in Auckland, Jaishankar was publicly critical of New Zealand’s unwillingness to renew visas for Indian students who had left New Zealand during the COVID-19 pandemic and called for ‘fairer and more sympathetic treatment’. …

Despite the usual pleasantries, there was a sense that India had lost patience with New Zealand – a sentiment that was underlined by Jaishankar’s later observation in Wellington of ‘there is a larger world out there’.

Even more troubling from New Zealand’s perspective was the extraordinary admission by Mahuta that a free trade agreement was ‘not a priority for New Zealand or India’.

Instead, Mahuta could only point to potential economic cooperation in ‘niche areas’ such as digital services and ‘green business’ – a seemingly underwhelming approach that was endorsed by Jaishankar.

It is a far cry from the bold and ambitious India strategy that was launched by New Zealand to much fanfare in February 2020, when the then foreign affairs minister Winston Peters travelled to India.

The strategy, called ‘Investing in the relationship’, listed a free trade agreement as one of the major goals. …

Trade figures demonstrate the difficulties New Zealand’s relationship with India is facing.

While New Zealand’s exports to India were approaching $NZ2 billion annually in 2017, they have since collapsed to under $NZ800 million.

The impact of COVID-19 – which stopped Indian tourists and students coming to New Zealand – explains much of this slide, but by no means all of it. The initial decline actually began in 2018.

In fact, the deterioration has been so dramatic that India now ranks only 15th place in the list of New Zealand’s biggest trading partners.

As recently as 2016, India was New Zealand’s 10th biggest trading partner.

For comparison, New Zealand now sells less to India than it does to the United Arab Emirates.

This is great analysis which I have not seen elsewhere in the media.

India is a country with 1.3 billion potential consumers and we sell less to them than the UAE!

They are expected to overtake China next year as the world’s most populous country.

To find a contrast with New Zealand’s experience, one only needs to look to Australia, which hosted Jaishankar this week.

A press conference between Jaishankar and Penny Wong, Australia’s foreign minister, seemed particularly warm.

Wong was keen to point out that she had already met her Indian counterpart some seven times since she became foreign minister in May.

And from the Indian side, there was no parallel in Canberra to the criticisms Jaishankar had expressed about New Zealand’s government while in Wellington and Auckland.

We need to fix the relationship.

The Spinoff reports:

In his first public appearance since losing the Auckland mayoral election to Wayne Brown, Efeso Collins has spoken about the campaign and the uphill battle created by a swathe of racism in the electorate – as identified in research that he commissioned. 

Collins was appearing as one of a group of speakers in a session yesterday on diversity in democracy at He Whenua Taurikura Hui, the annual conference on countering terrorism and violent extremism. He was relieved to make an appearance after “three weeks locked in my house” since the campaign ended, he joked. 

At the outset of his campaign, an independent consultant’s assessment of the electoral landscape and perceptions of the two-term south Auckland councillor’s candidacy returned some bleak findings, he said. “The biggest challenge for Efeso [stated] in the report was: the colour of his skin.”

“We are a diverse, egalitarian society, I’d been taught at university,” said Collins, “Except when you get research groups that tell you what the challenge is. Somebody even put a number on it. They said, ‘Efeso, this will cost you between 20,000 and 30,000 votes’. You think about that for a minute. Brown boy, Ōtara born and raised, standing for the highest office in the city – and I can talk about it now – I had to find 30-odd thousand voters who are at least going to be kind to me given that I’m brown. That’s what diversity and democracy looks like in our city, perhaps in our nation today.”

I’m puzzled. When John Tamihere lost to Phil Goff, did anyone claim that was because John has brown skin?

Collins lost because he was perceived as the status quo candidate at a time when dissatisfaction with the status quo was very high. And it wasn’t close – he lost by almost 60,000 votes.

Collins is confident, however, that his own run for the mayor will have made some positive impact. Speaking to media at his election day event in Ōtara, he said: “I hope that young people and young brown kids in particular look at my candidacy and go, ‘Wow, it’s normal now.’” 

Again, did he miss the Tamihere candidacy?

Or are you only a role model for young people when you stand for Labour, rather than against Labour?

This post is by PaulL, a regular commentor and occasional contributor. It is the thirteenth post in a series on the financial incentives to work and the impacts of our tax and transfer system on household formation, and the sixth post on the “what could we do” subsection. The index to all posts in the series can be found here.

If moving tax rates and thresholds is an expensive way to make little different to effective marginal tax rates (EMTRs), would it make sense to instead directly address benefit abatement rates? The Jobseeker benefit has two abatement rates – 70% for most people, but 30% for sole parents over a small income range, so clearly there is recognition that the abatement rate can be a problem.

The advantage of directly working with benefit abatement rates is that it is targeted to the exact people you want. Changing tax rates impacts a lot of people up and down the income scale, and is therefore a more expensive way to change the EMTR.

Changing abatement rates results in benefits being paid to people on much higher incomes. Our sole parent family with two children continues to get at least a small amount of Jobseeker Benefit until they are working 28 hours a week, and earning $700 a week or $37,000 a year from paid employment.  If we adjust the abatement rate to 50% instead, the benefit is now payable out to 37 hours of work, $900 a week or $47,000. 

The Herald reported:

A man who raped a 94-year-old woman during a brutal and prolonged home invasion later told a psychologist he intended to kill his victim.

Hawira Duncan, 26, was prevented from doing so when two ambulance officers turned up at the woman’s Napier house, alerted by the victim’s personal alarm.

If not for that, she would be dead.

Duncan was jailed last month for 15 years with no chance of being released before 2032, for rape and a raft of other charges involving three victims.

So he could be out in 10 years, and definitely out in 15.

By the age of 25, he had received two strikes under the now-repealed “three strikes” legislation.

If the Government had not repealed Three Strikes he should have got a 20 year sentence with no parole. And for raping a 94 year old, that would be entirely appropriate.

During the attack, the elderly woman managed to push her St John alarm, connecting her by voice to an ambulance control room.

Duncan calmly told St John that she was his mother and the call was made in error.

However, St John sent two officers after the alarm was pushed a second time. When they arrived at the house, Duncan walked past them, calmly saying, “It’s okay, she’s asleep in her bedroom”.

They noticed he had a knife in his hand.

After the attack, Duncan went to a dairy and calmly ordered a pie before catching a taxi.

This is who Labour is letting out early. He will no doubt reoffend within weeks or months of being released.

It is now widely known that our education system is a mess and many schools – etc – are simply not fit for purpose.

When questioned in the House on Term 1 attendance figures Associate Minister of Education Jan Tinetti deflected by saying that it is Term 2 figures that matter and will show the effects of government policy.

Well … the Term 2 statistics are out today and are much worse.

• less than 40% of students regularly attending across all deciles.
• decile 1 full attendance at 23.4%.

Tinetti blames covid but Asian full participation is above 50% whereas Maori or Pasifika is at 27% or less. Is covid that racist?

This is a monumental failure that should result in Tinetti’s resignation and those at the top of the Ministry of Education whose email footnote states: “We shape an education system that delivers equitable and excellent outcomes.”

Add to this the results from the new NCEA Literacy and Numeracy credit that show just 2% of Decile 1 students passing the writing standards. Keep in mind that this is after approximately 12,000 hours of funded schooling per student. 33% of Maori students are leaving school in South Auckland without even Level 1 NCEA.

It is time for all parents across NZ to ask the hard questions about school leadership, school quality, teacher quality and to demand a LOT better.

And how trivial for the ERO to says that schools should make attending more “enjoyable” (aka fun). How about – inspirational, aspirational, high quality, demanding … Is it any wonder NZ’s school attendance is at least 15% behind Australia’s.

Additional note that is simply stunning: “It does appear there’s a bit of a problem that we’ve got to address,” said Vaughan Couillault from the Secondary Principals’ Association.

Alwyn Poole
[email protected]

The Government promised its Cost of Living payments would go to 2.1 million New Zealanders. In fact it only went to 1.35 million – so less than 70% of those it claimed.

The Government also said that only 1% of the payments went to someone ineligible.

In fact 75,000 payments were made to people overseas and not eligible, which is closer to 6%.

We expect them to be incompetent at large scale projects like Kiwibuild and Light Rail, but you would have thought something as simple as sending eligible people some payments would be within their capability. It seems we were wrong.

Roger Partridge writes:

Writing in the Journal of Monetary Economics in 2015, Boston University’s Professor Robert King assessed the value of central bank credibility empirically. A bank that has lost its credibility has to impose far greater costs on an economy than one with its credibility intact. A credible central bank’s retaliation against inflation does not also have to convince people that it is serious about fighting inflation. People already know it. That allows its response to be comparatively moderate. …

Recent survey data released by the Reserve Bank reveals just how much of a battering the Bank’s inflation-fighting credentials have taken. On 12 October, the Bank published the results of the first round of public consultation on its monetary policy remit review.
Survey respondents were asked how much confidence they had in the Reserve Bank to get inflation back within the target range of 1-3% by 2024. The respondents fell into two groups of “representative” and “self-selected” survey recipients. Of the respondents expressing a view, close to 60% of the representative and 70% of the self-selected groups said they had only “a little” confidence or were “not at all” confident in the Reserve Bank getting inflation back within the target range. Meanwhile, only a respective 23% and 28% of the two groups were “somewhat” or “extremely confident.”
The results suggest the Reserve Bank’s once fearsome reputation as an inflation fighter has been squandered.

This has real world consequences. If there was greater trust in the Reserve Bank, then you wouldn’t need to lift interest rates so much, and fewer people would lose their jobs (and homes). But 60% to 70% don’t think the Reserve Bank will get inflation down to under 3% by 2024.

This should come as no surprise. In combination, Orr and Robertson have beleaguered a once single-minded Reserve Bank with a raft of ancillary policy targets and diversions. Where once the Bank had a steely-eyed focus on price stability, its formal remit now includes maximum sustainable employment and house prices. And then there are the Bank’s other contemporary areas of focus, including inequality, climate change and Māori culture and language.

And the price for this lack of focus will ironically be more jobs lost.

Karen Chhour writes:

As Act’s Children’s spokesperson and as someone who grew up in state care, I’m starting by fighting against what I view as racism within Oranga Tamariki.

I know a couple in Auckland who took on the huge responsibility of becoming foster parents. They took in a little girl, who for the sake of this story and to protect her identity, I will call Mary. Mary is part Māori. By the age of 7, Mary been put placed with different family members eight times, only to be removed again.

Mary’s foster parents took her in and loved and cared for her. They believed they would be providing Mary with a home for life, giving her the stability she so desperately needed.

After two years of caring for Mary, they were told they had to prove they had Māori heritage, or she would once again be placed back with her whānau.

Oranga Tamariki claimed that the most important thing for Mary was being raised in a “culturally appropriate environment”.

I’d say the most important thing is to be raised by loving parents.

I was a Māori child in state care. I could have only dreamed of a loving home like the one Mary was placed in.

What I needed was what every child needs. To be loved, cared for, clothed and fed.

I bounced between the system and family for years. I still carry the physical and mental scars from that time. It didn’t matter to me whether the adults I relied on were Pākehā, Māori, Chinese or African. I just wanted to be loved and cared for.

Love is universal.

Mary’s foster parents traced their family tree back far enough that they could find enough of a link to say they were Māori. This twist also shows how bizarre the law is, Mary’s foster parents are the same people, but something that happened centuries before they were born made it okay for them to parent.

Mary still lives with them. She has come out of her shell, she is doing well at school, she has a home for life where she is safe and is thriving. Thank goodness for that branch they found on the family tree, or Mary’s story might have been very different.

So if you have a great great great grandparent who was Maori, then you are ok to foster, but if not, you are not. Madness.

I think cultural knowledge etc should be part of what you look for in placing a child with a foster family, but it shouldn’t be a non-negotiable aspect that over-rides everything else.

The Electoral Commission has received 12 nominations for the Hamilton West by-election.

The Greens are not standing, and ACT is, which helps Labour in their efforts to retain the seat.

There are quite a few candidates from parties on the right or anti-government. And even if they only get 1% each, that may make a difference. You have:

• National
• ACT
• New Conservative
• NZ Outdoors and Freedom
• Vision NZ

There are no real left parties standing except maybe ALCP.

TOP are standing, and may take votes off both sides.

And of course Dr Sharma is standing again. Will he attract people who voted for Labour last time, or will he split the anti-Labour vote?

Most people were expecting Ron DeSantis to be re-elected Governor of Florida, but not by a massiv2 20% margin. Florida is (or was) a swing purple state.

In 2018, DeSantis won by 0.4%. In 2014 it was a 1.0% margin. In 2010 just 1.2%.

DeSantis won all but five of the 60+ counties. He won in rural areas by 39%, in suburbs by 17% and in cities by 11%,

He won with men by 27% but also won women by 5%.

But what makes him so attractive to the GOP as a whole is he won Latinos by 15% – 67% to 42%. And he won with both Latino men (14%) and Latino women (17%). This wasn’t just Cuban Americans. He won Puerto Ricans in Florida by 11%.

He did narrowly lose with under 40s, but his margin with over 50s was 25% or so.

And finally he won college educated voters by 9% and non college educated by 20%.

The GOP would be nuts not to select him as their presidential candidate in 2024.

This post is by PaulL, a regular commentor and occasional contributor. It is the twelfth post in a series on the financial incentives to work and the impacts of our tax and transfer system on household formation, and the fifth post on the “what could we do” subsection. The index to all posts in the series can be found here.

If a tax free threshold isn’t a solution to incentives to work, are there changes to tax rates and thresholds that could improve incentives? The two biggest contributors to the effective marginal tax rate for those coming off a benefit are the benefit abatement itself, and the tax rate that they’re on. Today we look at the tax rates and thresholds.

For our sole parent with two children, their taxable income is in the $18K to $52K range (from 0 hours of work to 40 hours of work). The tax brackets we’d look at are therefore the 17.5% rate and the 30% rate. The thresholds for these are due for inflation indexation, which would change the picture a little.

I am embedding my Twitter feed below, which I will tweet results and analysis of interest. Add your own comments and analysis in the comments section.

Judith Collins has been doing a great job in her role as Spokesperson for Innovation, Technology and Artificial Intelligence. Almost every day she is meeting and championing various companies active in this space, and this Friday she is hosting a tech summit whose purpose is to look at how to create a policy environment where successful companies can scale up and what the challenges and opportunities are.

I understand the venue is already at capacity but those interested can follow a livestream here.

The summit is in Parnell on Friday 11 November from 1200 to 1715. They have some amazing panelists from the Agritech, Fintech and AI sectors. It’s a great example of how to be an effective opposition spokesperson – bringing stakeholders together like this.

A guest post by John Mitchell:

Reading the most recent piece by Otago University’s Nick Wilson and Richard Edwards reminds of how Socrates wrote “when the debate is lost, slander becomes the tool of the loser.”

They claim the industry-commissioned (KPMG) studies that estimate New Zealand’s illegal tobacco trade at 11.5% of total consumption are exaggerated and discredited.  

Such claims, while good for a headline, are quite frankly mischievous and rely on ad-hominem arguments.  The KPMG studies haven’t been discredited.  Nor do they claim to be the sole arbiter of truth on the matter.  What they do provide is some useful longitudinal information, using consistent methodology, on an issue that isn’t all that well understood in New Zealand.

Over successive years, the report shows the illicit tobacco trade is growing.

It is not a perfect measure. As Customs NZ recently told the New Zealand Herald, the illegal tobacco trade is, by nature, very difficult to quantify.  But it is some of the best data available to New Zealand right now.  

In fact, the cited Otago University study’s number for imported illegal cigarettes via litter pack surveys (5.4%) is not far off the figure found from the same surveys in the KPMG reports (6.3%).

What the Otago study excludes, as Professors Wilson and Edwards correctly note, is sales of roll-your-own, homegrown tobacco. 

They claim this would be very modest but offer no empirical basis for that claim.  Their papers also doesn’t include illegal imported roll-your-own tobacco, which the KPMG report shows is growing over time particularly from Pasificka nations.

The latest information from the KPMG reports is that 5.6% of smokers reported using both types of illegal roll-your-own tobacco.  This is the highest level we have measured since we started these surveys.

Ultimately this isn’t a question about data, it’s about the evidential basis for making the claims Otago University has.

Claims must be challenged on the evidence they stand on and stand up to scientific scrutiny.  Peer-review is a very established way to test hypothesis and methodology and, when needed, correct claims. 

Most recently, Professor Wilson and his colleagues had their own 2021 study on vaping peer-reviewed after it claimed users were exposed to 30% of the toxins from smoking combustible tobacco.  The claim was wildly at odds with international scientific consensus.   Peer-review of this study found vaper participants included current smokers, methodology which contaminated the results.

Imperial have a vested interest to prevent growth in the illegal tobacco market and for proper enforcement actions to punish those that profit from it.  It is also in New Zealand’s interest to avoid the problems a black market brings and keep New Zealand smokers operating inside a legal, regulated system for tobacco control.

That is why we commission the research from KPMG to determine the size of the illegal tobacco in countries like Australia, the European Union and New Zealand. 

The KPMG report over many years should give cause for concern.  The growing illegal tobacco trade in New Zealand is not about a few packs of cigarettes in the bottom of a suitcase.  It is large scale with increasingly sophisticated sales and distribution networks.   

New Zealand Customs acknowledge there’s complexity behind importation by criminals who have honed their skills on harder drugs.  Customs has been doing an excellent job with the limited resources it has.  It has made notable seizures at the border in the past 12 months, but acknowledge the trade is growing and getting harder to control.

So what can New Zealand do?

First, we need to acknowledge the problem exists and that it is worthwhile solving.  It requires recognition that an unfortunate downside of well-intentioned tobacco control policy has been the creation of a black market for tobacco.

And just like policies and laws for drugs, an effective policy response must deal both with both demand and enforcement. 

Demand is important as Parliament considers the Government’s Smokefree Environments (and Regulated Products) Bill.  In what amounts to de facto prohibition of tobacco, we have cautioned MPs about the likely growth in demand as smokers seek out more easily available illegal tobacco.

No one can accurately predict how much this could grow by.  What we do have is close to a centuries’ worth of scientific studies on the behaviour of addicts from forced withdrawal.  As ASH NZ have told MPs, the market will always find the consumer. Common sense tells us demand for illegal tobacco will increase.

The other side of the equation is tougher sentencing and enhanced surveillance and enforcement.

In New Zealand illegal tobacco is a high yield, low-risk enterprise for criminals.  Customs NZ have said in news media interviews that they have anecdotal information that profit margins from tobacco are eight times that of cocaine.  The maximum punishment in New Zealand for importation of illicit tobacco is 5 years imprisonment.  In contrast, supply and manufacture of Class A drugs is punishable with a maximum life sentence.

New Zealand could learn from Australia.  In 2018, they expanded enforcement and increased criminal penalties for all activity relating to the sale and supply of illicit tobacco.  Since then, by treating illicit tobacco trade as a law-and-order matter, Australia have substantially curbed the flow of profits to organised crime syndicates.

Despite this, the illegal trade has continued to grow exponentially.  Senior Australian Border Force figures describe the illegal tobacco trade as close to uncontrollable and that the Federal government was too late to act. 

To their credit, the New Zealand Government is acknowledging there is a problem and has started to dedicate resources into combatting the illicit trade.  The worry is that it is likely too little.  

It would be a mistake to assume New Zealand is different from Australia.  New Zealand can avoid the same problems if it commits resources to combat the illicit tobacco trade now.

John Mitchell is the Corporate and Legal Affairs Manager for Imperial Tobacco