The NZ Initiative – Insights

Building for the Future

Leonard HongLeave a comment

Everyone knows that the status quo with respect to housing is “unsustainable”. The Prime Minister now seems to recognise the need for fundamental change and the opposition has recently offered to work with the government to find non-partisan solutions. 

While many people in the public assume that a key driver of house price growth is migration, recent trends show that even without migration rapid house price inflation can occur.

Because of Covid-19, the government closed the border for international travel early last year. As a result, monthly net migration was close to zero for most of 2020. Nevertheless, over the last year, both rents and housing costs increased by 12% and 20%, respectively.  

Migration is only one part of the story. A myriad of factors contribute to housing dynamics in both the short and long-run, but not all of these receive equal attention.

Discussion of the effects of demographic change and an ageing population on our housing markets is limited. Yet, these drivers are also set to contribute to our housing woes over the coming decades, especially if the housing supply does not respond. That is because ageing populations require more homes for the same number of people.

For instance, when the typical group of a hundred people consists of 20 couples, each with two young kids, and ten retired couples, those hundred people fall into thirty households. Thirty homes might be needed. When the hundred instead are 15 couples with two kids each, and 20 retired couples, 35 homes might instead be needed.

In New Zealand, the average household size has fallen from 3.2 in the 1970s to 2.6 in 2020 (like other OECD countries). According to Statistics New Zealand’s projections, it could fall even further in the next two decades or less.

So, are we gearing up to build the additional housing that our changing demographics require?

Policies that target land supply and infrastructure bottlenecks are key. However, the asymmetry of political and economic incentives between councils and the government has created a frustrating gridlock.

Growth and economic expansion in areas bring little revenue to councils but impose upfront infrastructure costs, such as water pipelines. This adds to councils’ reluctance to free up land for development.

Restrictions on density further add to housing supply issues.

The housing market is bad enough already, even without considering the effects of demographic change that will only worsen the problem. The government’s proposed policy responses must address the root of the problem rather than tinkering around the edges.

Military Theatre

Leonard HongLeave a comment

These days, even the German army cannot afford to neglect its green credentials. Pity if that’s the only thing it is good at.

German military manufacturer FFG just presented its latest tank. This is not your usual combat vehicle, not just because of its deep blue livery. It’s a hybrid.

The Genesis, as they call this beast, is a modern field general’s Prius. Except it runs on eight wheels, weighs up to 40 tons and has a 30mm automatic cannon. No Tesla can compete with that.

And it’s a technological miracle. The Genesis reaches speeds of up to 100 kilometres per hour. In silent mode, the only thing you can hear is the gun, and it can drive submerged under four metres of water.

The tank’s green credentials excite Germany’s military strategists. Pity that the rest of the German military is no longer fit for purpose.

The past decade has been terrible for Germany’s armed forces. And this time, it did not even lose a war. Hardly a week goes by without new absurdities from the Bundeswehr. It is hard to imagine how this country ever threatened anyone but itself.

A couple of years ago, only four out of 128 Luftwaffe fighter jets complied with NATO’s basic requirements. But that was still a better percentage than the German submarine fleet back then: all six U-Boats were out of commission.

Maintaining marine equipment is not exactly the Germans’ strength.

The pride of the German navy is a three-masted barque, the Gorch Fock. Though it looks like a relic from the Crimean War, it was only commissioned in 1958. It should have undergone a €10 million repair job in 2015, but five years and €135 million later, the Gorch Fock job is still unfinished.

The list goes on. Airforce pilots losing their licences because their helicopters don’t fly. Soldiers complaining they need to bring their own thermal underwear on exercises and deployments. And the army apparently only has enough ammunition for two days of fighting should the country ever find itself at war.

Maybe the Bundeswehr is just a sign of the times. It virtue-signals some modern values and guarantees that no country ever need to fear the Germans again.

Even their electric tanks would need to be recharged shortly after crossing the border.

Riding into the political sunset

Leonard HongLeave a comment

Winston Peters will exit politics for the third time in his career. I spotted his ghost at Parliament the other day. He looked unusually grumpy.

Maybe it was just my hallucination, but after decades of observing him it was incredibly lifelike. After all, his mannerisms have become predictable. So, I sidled up to the apparition and asked if he found the election outcome a bit depressing.

“No, no. No, no. No, no. There’s no need for you to go into a fit of gloom and doom at this point in time,” he replied curtly.

Ok. But perhaps he had some thoughts on Ardern’s campaign?

“Can I finish? Can I finish? Look, Mr Hong, you’ll do much better if you listened for a second.”

I began to apologise, but he must have thought I was interrupting — “No, no, no, no, stop right, stop right there. Stop right there, Leonard.”

Instead of carrying on, he just glared at me. After a few moments I asked if this was the true end of his political career.

“Look, look, this is just now speculating on what neither you or I or anybody else, including the experts, could possibly prognosticate this far out.

“Why would you make a statement like that? Try and be neutral and unbiased. If you are going to ask questions back it up with some certainty.”

Now I understood what it’s like to be a press gallery reporter. Poor things.

“I’m not giving you my comment on that,” Peters continued. “But I do believe in a thing called commercial accountability, as we also believe in political and journalistic accountability.”

I gave him one final chance to say something nice to say about David Seymour and Gerry Brownlee.

“If Nelson Mandela can walk out of Robben Island after 27 years and forgive his oppressors, so can I.

“I could’ve been the Prime Minister years ago if I was prepared to suck up to the right-wing ideology for the National Party. I think that we’ve covered the subject as comprehensively as we can possibly do it.”

I raised my eyebrows. Again, he must have thought I was about to ask a question.

“I’ve got a message for my friends in the media, and it’s all bad. Most of them have been arrogant, quiche eating, chardonnay drinking, pinkie finger-pointing snobbery – and fart blossoms.

“I have never heard such obsequious, subservient grovelling, kowtowing, palm-kissing nonsense.”

And so, the inimitable, Right Honourable Winston Peters walked into the political sunset. Generations of journalists will miss his wordy ways of not answering questions.

We wish him unexcited calm in retirement. It would be a New Zealand First.

Political Distraction

Leonard HongLeave a comment

If the Covid-19 pandemic had happened in a non-election year, would this or any Government’s response have been different?
 
At the best of times, election campaigning can be a distraction for politicians. But supposing the Government’s first decision early this year after it learned of the approaching pandemic was to postpone the election by perhaps six months, might leadership decisions have been more focused?
 
After all, it is hard to see how a fragmented parliament spending precious energy on politics as Kiwis struggle to recover from a major crisis is the best situation for New Zealand.
 
Without an election in the back of their minds, Ministers would be solely focused on protecting the country from Covid-19. A postponed election may even encourage – and make it possible for – members of the Opposition parties to pitch in and help with the recovery effort without anyone concerned about others making political gains during that time.
 
Such a process has existed before. For example, prior to the Second World War, the United Kingdom maintained an all-party coalition War Cabinet under Sir Winston Churchill. The Brits knew normal politicking was a distraction that only drew precious mental energy away from the greater national effort.
 
So, assuming that political distraction is partly to blame for some recent scandals and mishandling of border quarantine, had New Zealand adopted a similar War Cabinet model it could have avoided much of the political drama. Then again, other scandals might have replaced these stories. In other words, it is hard to tell if the election distraction is part of the problem or not.
 
Yet a mechanism to set up a War Cabinet in times of national crisis is worth considering for the future. Such a mechanism must include all MPs with the best and most relevant leadership experience across parliament and clearly outline a sunset clause when the election process can be resumed.
 
After all, an effective government must be able to deal with emergency circumstances with as few distractions as possible. In Select Committees, parties already cooperate on a broad consensus basis when debating new legislation. Temporarily connecting them as a solid front during a crisis would not be too much of a precedent. 
 
The last few months have proven that a distracted Government, like a tired driver, makes mistakes which can put the country at greater risk. Should Kiwis expect that elections are to be delayed by default in times of natural disasters? Perhaps.  

Card games in a post-truth world

Leonard HongLeave a comment

When in the US earlier this year, I came across many souvenirs mocking the country’s leader, including a card game called, Trump Cards: The Wackiest Game of Fake News.

It looked like a fun party card game in which players tried to pick out ‘Fake News’ from real quotes by President Donald Trump. A player receives one point for a correct answer and zero for incorrect answers.

So, let’s break out the card game and test your abilities. Did the US President really say these things or is it ‘fake news’?

“I will make Mexico pay for a wall on the border.” Ah yes, the infamous wall. Bingo! That’s an easy guess. The Donald definitely said this. 1 point.

“Bambi’s mother was clumsy. She deserved to die.” Nope, this one was completely fabricated. Good try. 0 points.

“To the fake Pocahontas, I won’t apologise.” A classic! Pocahontas was one of his nicknames for political rival Senator Elizabeth Warren. 1 point if you guessed the quote was real.

Right, now for something a bit harder:

“For anyone that has money, they know the first rule is to use other people’s money.” Sounds like Trump, doesn’t it? Well, it was really a quote from American rapper Kanye West.

“Sorry losers and haters, but my I.Q. is one of the highest — and you all know it!” Yup, Mr Trump again.

“I’m a perfectionist.” Was that the US President? No, it was our Prime Minister Jacinda Ardern on the decision to drop to Alert Level 3. But it looked like a Trump quote, didn’t it?

If you miraculously got all six points, congratulations, you are immune to fake news… well, so you think.

Comedians and rappers are meant to have great one-liners, that’s their job. I guess politicians also make a regular appearance on “History’s Greatest Quotes Vol 1-59.” In this world of fake news, it’s not only difficult to tell what the truth is, but increasingly, what the original context was.

‘Trump Cards’ is fun for the whole family, but games like this are only possible because we are so used to quotes being pulled out of context by newspapers. In isolation, any line can sound terrible but clipping a few quotes from thousands of hours of speech doesn’t help solve the problem of fake news. Even Ardern can sound like a buffoon out of context.

I can live with a fun card game, but I don’t think anyone is sure how to live in a ‘Fake News’ world that destroys context almost as a matter of course. You can quote me on that.

East Asia – Role Model for Covid-19

Leonard HongLeave a comment

29 May, 2020

Singapore, South Korea and Taiwan deserve praise for fighting Covid-19.

While Singapore and South Korea were hit with a second outbreak, their robust containment measures have kicked back in to stop rapid spread of the virus once more. As New Zealand ponders how to prepare for a future pandemic, it should look to East Asia.

Vietnam and Hong Kong also showed early success against the coronavirus, but the New Zealand Government has focused its attention on those first three countries.

The common factor for their success was their experience with the SARS pandemic in 2003 and MERS in 2015. They built better epidemiological and quarantine systems along with border controls, high-level diagnostic testing and rapid contact tracing capacities. They also regularly disinfect public spaces and encourage the public use of masks.

In the last few weeks, another outbreak of Covid-19 makes it appear Singapore’s performance was a complete failure, but it was not. These new community cases constitute only 7% of the total count and more accurately reflect human error in monitoring a handful of migrant dormitories than a systemic failure of the city-state’s response plans.

Further north, South Korea recovered quickly from an initial outbreak in March. The government’s ‘smart-city data hub’ allowed it to quickly locate cases again after a second outbreak occurred in Seoul bars. So far, a total of 1982 possible cases have been rapidly traced by this system, keeping the average number of fresh daily cases low at 23.

Stanford University’s Jason Wang said Taiwan’s response was among the best in the world. Its timely border controls for flights coming from China began on December 31, 2019 – a full month before other nations thought about similar controls. By March 20, Taiwan only had 27 new cases. Once again, a digital surveillance system was critical in tracking down and isolating individuals with the virus.

New Zealand’s Covid-19 containment performance was impressive. But, as Kiwi epidemiologists have emphasised, its contact tracing system still has plenty of room for improvement. As South Korea and Singapore have shown, there is still a real risk of a second outbreak from even one new superspreader.

That’s why it is an imperative that New Zealand take this opportunity to repair and prepare its contact tracing capacity to ensure the country holds onto its hard-won gains. Those three East Asian states offer plenty of great examples to get this done.

Why Taiwan is winning against Covid-19

Leonard HongLeave a comment

Taiwan is one of the few countries to “flatten the curve” while maintaining an open domestic economy. Earlier this week, Taiwan only had 104 active cases of Covid-19. Even more impressive, given its geographic position, is the state only had 27 new cases on March 20.

The key to its success was early action, far earlier than many other countries including New Zealand. While most only reacted to Covid-19 after the first confirmed case (between January and February), Taiwan started its epidemic response on the last day of 2019.

Before the first confirmed case outside China was reported, Taiwan’s Centre for Disease Control immediately set up border restrictions for arrivals from the province of Wuhan. This was followed by a suite of further restrictions on both incoming and outgoing travel and strict mandatory quarantine.

Taiwan’s response was not only quick, it was highly efficient and effective. It had prepared exceptional epidemiological and health infrastructure as a key lesson from the 2003 SARS epidemic. Screening tools such as temperature monitoring, track and trace technology and protective equipment was already in place for the next pandemic.

Moreover, to ensure its healthcare system did not collapse, Taiwan mobilised greater hospital ICU capacity with 20,000 isolation rooms combined with 14,000 ventilators. With Taiwan’s population of 23.8 million, this would be the equivalent in New Zealand of 3400 isolation rooms and 2400 ventilators. Presently, New Zealand only has 520 ventilators.

It is no surprise then that Bloomberg’s 2018 Healthcare Efficiency Index, ranked Taiwan’s healthcare system in the top 10. New Zealand is just behind at 15.

In contrast to South Korea, Taiwan did not implement high-volume testing. Instead it concentrated on efficient track and tracing that utilised a nationally integrated database between the Immigration Agency and the National Health Insurance Administration in combination with GPS tracking on smartphones. Taiwan’s CDC has tracked 2761 close contacts related to Covid-19.

As a result of Taiwan’s response to Covid-19 the IMF estimates its economy will contract by 4.0% over 2020. This compares with contractions of 5.9% for the US, 7.2% for New Zealand and 7.0% for Germany.

While New Zealand appears to have Covid-19 under control, Taiwan provides lessons on what to do to prepare for the next pandemic. Taiwan was able to avoid lockdown and maintain an open domestic economy because it acted quickly and effectively because it learned from previous crises.

New Zealand must do the same to ensure the next pandemic does not catch the system off guard again.

Lessons from South Korea: Looking 40 days into the future

Leonard HongLeave a comment

South Korea has quickly become a model country for effectively containing Covid-19 without needing a national lockdown.

Given that the liberal democracy of South Korea is 40 days ahead of New Zealand on the epidemiological curve, it offers important lessons on how to balance an increase of economic activity with continued efforts towards virus elimination as New Zealand leaves Alert Level 4.

Despite the initial outbreak of the Shincheonji cluster in Daegu, South Korea has successfully ‘flattened the curve’ in its second phase.

Its robust ‘all-of-government’ attitude and deep coordination between the private and public sectors was boosted significantly by its experience with the MERS epidemic. That virus in 2015 taught the South Korean government it needed better medical infrastructure to deal with future pandemics.

This time around, South Korea implemented early and effective contact tracing made possible by its advanced digital infrastructure. Taking only 10 minutes per person to complete the test, South Korea’s contact tracing is now among the fastest in the world.

And it has conducted a lot of tests. With a combination of various drive-through and walk-through testing clinics, managed by its centralised public health care system, the East Asian nation has the capacity to do 20,000 tests each day, and has already conducted about 580,000.

Yet it still managed to facilitate a relatively open economy. It did this by sending teams to fumigate and disinfect public spaces while the government encouraged the use of face masks. Both measures have been widely lauded as key in preventing rampant community transmission.

The Korean governments early response to the outbreak, made possible by its own diligent lessons from previous pandemics, meant the country largely avoided a public health and an economic catastrophe.

President Moon Jae-in’s administration proved to be transparent with excellent and open communication to citizens which helped solidify great public cooperation and compliance to get the job done.

As New Zealand opens its economy a bit more next week, possibly down to Alert Level 3, it can learn from South Korea’s success. The Government must ensure it has rapid contract tracing and continue with high-volume testing while Kiwis continue to carefully comply with lockdown rules.

If South Korea is a model for what New Zealand can expect 40 days from now, then the Government should pay attention to avoid exacerbating the public health and economic catastrophe.

The unexpected winner of Covid-19 – China

Leonard HongLeave a comment

9 April, 2020

Two centuries ago, Napoleon Bonaparte called China a sleeping lion and advised to “let her sleep, for when she wakes, she will shake the world.” Bonaparte’s prophecies are relevant again today. The lion is now awake and she is becoming increasingly assertive.

Early in the Covid-19 crisis, there was a view that China would be weakened by it. Some even pondered the downfall of President Xi Jinping and the Chinese Communist Party. With the Hong Kong revolts, the death of Wuhan’s whistle-blower Dr Lee Wenliang, the looming global recession and economic confidence deteriorating within China, those predictions were not surprising.

But the coronavirus may just be a hiccup and Mr Xi’s government appears to have regained its domestic legitimacy. Instead of falling victim to the virus, the party could be deemed the victor in the international system. The losers seem to be the United States and the wider liberal international order. The balance of power has shifted in favour of China.

China covered up the origins of the virus to the World Health Organisation. As a result, Western countries such as the US, Spain, Italy and Germany have far more cases and deaths than China.

China is using the crisis to extend its geopolitical reach. In the last few weeks, it has sent additional masks and medical supplies to help the Italians and French. As President Xi pledges more support to Europe, he is using it to further legitimise his ambitious $1.4 trillion Belt and Road Initiative.

The virus has become useful for Beijing to add an element of soft power, which is necessary to become the so-called benevolent global force. By repairing the serious reputational damage caused to it by the pandemic, China is framing itself as a responsible power.

The United States led the international system since the end of the Second World War, but under President Donald Trump, its diplomatic efforts have changed tack and are now more nationally focused. China, by contrast, appears increasingly determined to fill that global leadership void.

Great power politics is still a ruthless business in the international system, and Covid-19 has resulted in a new phase of security competition between the US and China. Covid-19 unsettled the balance of power in a way few would have predicted just a few months ago.

What I won’t miss in quarantine

Leonard HongLeave a comment

The gloomy headlines say New Zealand just flagged its 28th case of coronavirus. Great.

But as Twitter inevitably explodes again about nation-wide self-isolation policies, I’m starting to think the outdoors isn’t all it’s cracked up to be.

Most of us will miss seeing friends over a weekly Starbucks coffee, walks on the beach, being in the sun and – my personal favourite – golfing. But as the outside temperature drops and the normal flu season kicks in (yes, other types of flu still exist), to be honest, it’s hard to think of anything good about sweaty gyms and crowded coffee shops.

Besides, winter means more rain. I hate the rain. The upside of working from home is that it’s cosy, dry and it’s always the perfect time for hot chocolate. What’s not to like?

Walking to work is also literally a pain in the backside. I certainly won’t miss travelling to and from the city every day, up and down hilly streets with a sweaty back.

And if I’m not in the office, there’s no need to look ‘civilised’ in a suit. I can wear pyjamas from 9 to 5 and it’s not as if the cat will complain to HR. Besides, the best thing about casual clothing is the lack of ironing, giving me more time for Netflix in the evening.

But my advice is to keep a collared shirt and a blazer within arm’s reach if you can’t rule out surprise Skype calls. Just make sure to lock the door: the last thing you want is a toddler bursting in during a video chat with the CEO.

The home office is also way cheaper. No more unnecessary $4 morning coffees or expensive $15 Pad Thai for lunch. And the commute from couch to spare bedroom will cost pennies (depending on the size of the house, of course). Bonus: the lower emissions of trudging across the hallway will also be far cleaner for the environment. Again, depending on what was eaten for dinner last night…

I do expect a lack of vitamin D to boost my immune system. But pulling my laptop closer to a north-facing window will probably solve that problem. Also, we humans are social animals and since no one will be walking the streets then not even a window will help fill that need. That could be an issue.

But it’s only for a few weeks. The outside world will still be there when I get out, right?