Twyford: 'We don’t intend to be reckless'

Property

Government to exercise 'caution' when deciding which private developments to underwrite as a part of KiwiBuild; Consultant says the real risk with the scheme is that not enough developers get on board

25th May 18, 9:27am by Jenée Tibshraeny

The government says it will exercise caution when it decides which housing developments it’ll underwrite through the KiwiBuild ‘Buying off the Plans’ (BOTP) scheme.

Further to interest.co.nz’s David Hargreaves raising concerns over the scheme leaving taxpayers too exposed to market risk, Housing and Construction Minister Phil Twyford says, “We don’t intent to be reckless about this.

“The KiwiBuild unit will be assessing all of these projects on a case-by-case basis.”

The Ministry of Business, Innovation and Employment, in the BOTP tender document it released on May 8, presented developers with two options:

- Backstop purchase of unsold KiwiBuild dwellings: The Government enters into an open option with the developer for the Government to purchase unsold KiwiBuild dwellings (or to pay the difference between an eventual sale price and pre-agreed amount). A backstop essentially provides the developer (and financier) a form of insurance against the ability to sell the KiwiBuild dwellings when complete.

- Outright purchase of KiwiBuild dwellings on completion: The Government enters into a sale and purchase agreement with the developer to purchase the KiwiBuild dwellings on delivery at an agreed-in advance underwrite price (as if it were a private purchaser) and subsequently on-sells these to eligible purchasers.

MBIE expects the BOTP scheme to see 800 KiwiBuild dwellings built in the 2019 financial year, 2,500 in 2020 and 4,000 in 2021.

Given the plan is for 1,000 Kiwibuild dwellings to be built in 2019, 5,000 in 2020 and 10,000 in 2021, the BOTP scheme is set to play a key role in programme.

Asked by interest.co.nz how concerned he is that if a development goes belly-up, the taxpayer will be left to pay the bill, Twyford says: “Property development is inherently risky. It’s just the nature of the business.

“The whole idea of KiwiBuild - using the Government’s balance sheet to stimulate the building of affordable homes that the market on its own is not currently building - is partly about sharing risk with developers.

“We’re not going to be reckless about that. Auckland at the moment is littered with developments that have stalled, partly because the market has cooled, but largely because the Australian banks have tightened up, so it’s a shortage of liquidity…

“[The BOTP scheme is] about trying to help those developers get over the line and incentivise the building of affordable homes that aren’t currently being produced in any significant numbers.

“So if we can do that, we’re going to increase the supply of affordable housing, we’re going to add to supply generally by de-risking and bringing forward quite a lot of development projects that otherwise would not get over the line.”

Prime Minister Jacinda Ardern had a similar response when asked earlier in the week how to prevent the scheme from becoming a licenced bailout for struggling property developers.

“We would exercise the same caution the Crown does in any circumstance when it’s entering into that kind of commercial arrangement.”

Ardern also clarified the scheme wasn’t a “bailout”.

The risk of developers not getting on board

Housing strategy consultant, Leonie Freeman, doesn’t believe the BOTP scheme presents any serious taxpayer exposure risks.

The real risk in her view is that not enough developers will put their hats in the ring to partake in the scheme.

She maintains many are cynical about government procurement processes, so won’t want anything to do with this one.

Speaking to interest.co.nz, Freeman likens the relationship between government and the private sector to a “master-servant” relationship.

“Everyone talks about building stronger partnerships, the reality is totally the opposite.

“Many of the developers have already been through government procurement processes. They take a huge amount of time, effort and money and then they go through this whole process and there’s been very little outcome…

“So it’s all done in big lights. All these projects identify huge potential and say, ‘Come, come, we want everybody.’ The reality has been something the total opposite.”

Freeman criticises the government for in the past going to market too quickly, before it has solidified plans.

Noting the deadline for the KiwiBuild BOTP tender being June 8, she says the other issue has been the government setting tight timelines it can’t stick to.

Furthermore, she says developers are still having consenting issues with councils and there’s uncertainty over the pipeline of construction.

“Prefabrication is a big thing, but a lot of the blockages around this haven’t been dealt with - with the banks, with the compliance, with the consenting.

“We don’t have any joined up leadership. There’s no reporting about performance, there’s nowhere to go if you’ve got a problem. There’s nowhere to hold anyone accountable. Everyone’s working in these silos…

“I really support the aspirational goals [of the new government].

“What I haven’t seen to date is any change from the previous government’s operations of how we deliver stuff. I’m not seeing the innovation and change yet. I’m ever hopeful, but I haven’t seen proof.”

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112 Comments

by xingmowang | 25th May 18, 10:09am 1527199742

Kiwibuild in essence:

Govt uses tax payers money to contract companies to build houses. IF the houses can be sold at a good price, then tax payers money gets recouped, perhaps make few profits. IF the house cannot be sold at a good price, more tax payer money will need to fork out to cover losses.

To me, the only winner for sure seems to be companies build houses. I have so many doubts about this scheme.

by the Joneses | 25th May 18, 10:26am 1527200804

Governments aren't there to make a profit. That is what private business exists for. In this case if the government makes money or not is not the point. More houses are built either way which is what they see as the problem they are trying to fix in this case.

Whether or not building houses and selling them will help the situation of extreme land prices is debatable. But nobody asks the government how much they are making from building a hospital or road. So why is this different?

by xingmowang | 25th May 18, 10:30am 1527201028

" But nobody asks the government how much they are making from building a hospital or road. So why is this different?"

Everyone in NZ can use hospital and road. Only owners can leave in their houses.

That is the key difference.

by RickStrauss | 25th May 18, 11:03am 1527203024

Not only the direct home owners benefit. Increasing supply increases affordability for many, as happened in NZ's past.

by Grendel | 25th May 18, 11:07am 1527203260

Your reaching with that argument. I suspect the few houses they manage to get across the line will do little to improve affordability of the many.

by Didge | 25th May 18, 11:13am 1527203624

That remains to be seen.

by Grendel | 25th May 18, 11:16am 1527203810

Exactly

by RickStrauss | 25th May 18, 11:57am 1527206238

Yes, it requires them to deliver, and - ideally - also deliver on reducing immigration in order to stall the growth in demand.

But the increase in supply that was achieved in the decades after WW2 benefited the many Kiwis who were then able to access more affordable home ownership stands, not just those who got access specifically to one of the houses built through government effort. Folk who bought in the 1980s and 90s of course benefited from the boosted supply that had made housing more generally affordable.

by Grendel | 25th May 18, 2:01pm 1527213664

Hi Rick, I don't disagree with the premise that increasing supply will impact Affordability, in fact I totally agree and this was the main reason for voting these clowns in.

My conern is magnitude of the increase in supply. What we were all told at the time was they they would build 100k houses in addition to what the private sector would build.

Now they are saying that they would will just buy them, "but its ok these houses count because they would not have been built otherwise" which sounds like a very convenient argument.

They promised a lot and I accepted at face value that they had a plan and was happy to overlook some of there other terrible policies to see houses get built. And here we are, no houses and immigration at 68k a year. Its time to get mad Rick, if we don't voice our objections to being lied too they will keep doing it!

by the Joneses | 25th May 18, 4:40pm 1527223223

But if they do as they say and actually build 100k houses, do you think that would be positive for NZ?

by Grendel | 26th May 18, 8:19am 1527279571

Do you not read any comments other than your own? There are fully articulated comments above that clarify all that in detail. Honestly, you should be ashamed.

by NorthernLights | 25th May 18, 4:02pm 1527220954

Dont think its affordable at all when just the cost of the city water meter connection costs a cool $15K for something that costs in real terms around $1000 including meter pipe & labour.
Laughable even using the word affordable when the paradigm in Auckland RE is $400K sections in Albany
This is a city of only 1.5 million yet it has problems like a city of 5 or 6 million population
Why ?
Worse still most cities of 5 to 6 million have a mass transit system not just buses & a few train carriages like Aucks

by Boatman | 25th May 18, 10:59am 1527202767

@the Joneses , I dont want my dog to lift his leg on your protest march , but Government is simply not able to "build houses "

They simply cannot embark on a massive Public Works Scheme , the likes of which was last seen after WW1 , the Depression and then WW2

We dont have 50% UNEMPLOYMENT ,nor do we have tens of thousands of returning soldiers with nothing to do

We have about 5% unemployment and we are scraping the oil drum bottom ( many of them dont really want to work )

The Government is not able to embark on something the Private Sector can do itself , and this poking around by Phil Twyford is an excercise in futility .

We were conned ( most voters ) in the run -up to the election , plain and simple

by Gillybee | 25th May 18, 11:04am 1527203093

"We have about 5% unemployment and we are scraping the oil drum bottom ( many of them dont really want to work )"

And your evidence is? My son is one of those 5% and he bounces from one short term contract to another, totally at the whim of his employer. In-between he signs on as he believes (and why not) that he's paying his share of tax too. The intractable unemployed are less than 1% if you actually look at the evidence.

by Grendel | 25th May 18, 11:10am 1527203459

intractable being 20% of the total unemployed is still a lot so "many" still applies. He's not wrong.

by Boatman | 25th May 18, 11:14am 1527203693

I had the same problem with one of my sons from shop assistant, to loading a delivery van to delivering pizza ............ he is now in an apprencticeship and doing well .

He had to learn that ( Unlike school ) he needed to be at work on time ( 6.45am ) and be sober and not hungover , with clean overalls and ensure he has his safety gear .

There is hope for him yet

by Pragmatist | 25th May 18, 1:30pm 1527211859

I do not what the relevant percentages are, but I know that in Auckland when we were last in need of simple labour (mechanical engineering workshop, simple jobs like peel the protective plastic off these parts and wipe down with this solvent, stand at this cold-cut saw and cut 200 pieces of steel type work) , most of those that the various labour hire companies sent our way were basically unemployable. I think some of them were victims of fetal alcohol syndrome. One would forget what you had asked him to do in the time it took to walk from the front of the workshop to the back. A couple were mostly okay, until payday, next day they called in sick (ie. hungover/wasted) three weeks in a row, they didn't get a forth week. We ended up doing quite well with a couple of backpackers, one Polish and one German, both eager, capable and reliable, and both would be welcome back anytime we had work for them.

by waymad | 25th May 18, 2:23pm 1527214997

Praggers, please don't try to confuse the common taters with actual Data. Anecdotes, blind suppositions and rants are the currency.

by Yvil | 25th May 18, 6:49pm 1527230992

So you're saying Pragmatist's tale of his personal experience is "actual data". I think that rather qualifies at "anecdote"

by pacifica | 26th May 18, 3:21am 1527261683

Look up the definition of anecdotal evidence, please. My sides hurt from laughing. How you did not know it. A good laugh, but still, you really should check once in your lifetime.

by Zachary Smith | 26th May 18, 4:39am 1527266360

When you tell people about an actual observation it's just an anecdote and when you notice a pattern it is stereotyping. Unless they agree with your point then you are totally on the money.

by Zachary Smith | 26th May 18, 7:08am 1527275301

Waymad, quickly invoke Poe's Law.

by NorthernLights | 25th May 18, 4:10pm 1527221409

Nobody was conned at all Boatman
People wanted something done about massive immigration into the country which NatNil refused to do much about
Im sure if I ever return to Auckland it will look like where I go each year in China
Auckland is now a satellite of China in many suburbs
Cant see my Chinese friends in Shanghai tolerating huge influxes of european migrants
Oh yes ! The CCP wont allow it

by Grendel | 25th May 18, 4:19pm 1527221994

But that's the con Boatman is talking about. They said they had a plan to deal with immigration and housing.
So 8 months later we have 68k net migration per/year and no houses built, doesn't that sounds like a con to you?

by Yvil | 25th May 18, 6:54pm 1527231251

NL but nothing has been done about immigration!

by Boatman | 25th May 18, 9:06pm 1527239219

No nothing has been done about immigration , in fact things are far far worse than 2017 .............. the awful truth is that 98,200 non-New Zealanders arrived here year to date , not the 60,000 they claim

The sixty-odd thousand is the nett figure after deducting those who left to go to OZ

by Rex Pat | 26th May 18, 6:09am 1527271758

Boatman voted for NZF so he has a right to feel conned.

As for the Chinese, interesting thoughts are coming out of the US. Has China been helping bankroll Labour? After all of the leftie fuss about Jiang this is going to be interesting watching the deflection. Almost as much fun as watching Winnie suck it up re the Russians. Even he wasnt tempted to deflect with the MH17 report

by the Joneses | 25th May 18, 5:02pm 1527224572

I aren't on a protest march, and have never been on one thanks.

My point was regarding a very narrow idea in a comment. That you cannot disregard an idea of the government doing something because they might not make money out of it. The government is there to do things for the good of the country as a whole. If they think 100K houses being built will make the country more productive and competitive and they get voted in on that policy, why should they have to make money while doing it?

I never suggested what the government was planning was likely to happen or not.

Not that you are bothered what I have to say, you just look for any excuse to launch into yet another vitriolic rant...

I will carry on trying to find intelligent conversation around your outbursts..

by Grendel | 25th May 18, 11:04am 1527203061

Public good vs Private good. Educate yourself.

by Boatman | 25th May 18, 11:48am 1527205700

@Grendel , I dont know who the public good vs private good remark was intended for, but would like you to expand your idea

Shelter is the most basic human requirement , along with food , water and clothing , and in a perfect socialist utopian world the Government would provide everything .

Problem is , it has never been done anywhere on the planet , not Russia , Sweden, Norway, Finland nor China .

So its left up to the individual to do for himself what he can , and the state takes care only of the most vulnerable.

by Grendel | 25th May 18, 1:39pm 1527212364

@Boatman,

Apologies for being unclear, my comment was in reply to 'the Joneses'. At the time there were not so many comments in between.

They commented "nobody asks the government how much they are making from building a hospital or road"

implying that it was not governments job to make a profit selling the houses by directing attention to hospitals as proof of this.

The problem is roads and hospitals are public goods, once built can be used and provide services to many at any one time and improve productivity in the economy due to improved transport and health for workers.
This is what governments purpose is, providing services to multiple people.

A house once sold on the other had is now a private good and mostly benefits the owner. So selling at a loss is just transferring wealth from the many tax payers to the few buyers, who could be anyone since there is no means testing.

by Boatman | 25th May 18, 1:28pm 1527211689

@Grendel , thanks , I was just trying to contextualize what you were saying , but you are right on with the remark ( in my opinion )

by Grendel | 25th May 18, 1:37pm 1527212233

@Boatman,

No problem at all, always happy to clarify

by NorthernLights | 25th May 18, 4:23pm 1527222180

Dear Boatman
There are other paradigms than tribalism capitalism communism
Nobody in government anywhere in the world seems willing to formulate policies for the new age fast aporoaching i.e- the age of AI robotics which will sweep the world and sweep away many millions of human jobs.
I noted with laughter the comments from a Ms Thalmar a expert in the field claiming it will take a few generations for AI to percieve like humans which is really only telling part of the story because she knows
that’s simply not true based on what’s happening already

by Boatman | 25th May 18, 8:54pm 1527238440

@Northern Lights , thanks for your insights into the future of work , I'll worry about it when I get to that bridge

by Boatman | 25th May 18, 10:51am 1527202269

Someone should tell Phil Twyford that the road to hell is not paved with tarmacadam and lined with those beautiful New Zealand South Island Lupins we see in summer .

Lets be objective about this

If a tiny section in Auckland costs about $400k to proclaim , purchase and establish in terms of services , compliance , DC Levies and all manner of delays and Council rorts and shakedowns plus $15k for a water meter , then here are the questions :-

1) How on earth is anyone going to build a house on top of that section for $250k and make a profit ?
2) Why on earth would a developer build a rinky-dinky little house/ unit and sell it for $250k when he can put a $400k structure up and sell it for $1,1 million ?

And this is the problem with academics like Phil who studied politics , became a Trade Unionist and worked for a charity (Oxfam )

1) He does not understand the risks or cut and thrust of business , nor does he understand the profit motive.
2) He does not have the foggiest clue as to the dynamics of our property market , that the costs of construction are out of control , and used house prices are simply tracking the costs associated with to replacing them
3) He is also clueless as to the very real risks faced by property developers , and for that risk they seek a very large reward .
4) He seems oblivious to the fact that rampant immigration has pushed demand for housing to uncontrollable levels , and we lack the workers to build more or quickly scale up to do so
4) In short he is an idealist , who needs to be told that the road to hell is paved with good intentions .

by Foxglove. | 25th May 18, 11:36am 1527204984

This is unpalatable but it was what Sydney, a similar harbour city had to resort to. Somewhere, say between Auckland and Hamilton, near a railway line and highway you build a Lane Cove. Build in stages, keep the cash flow positive selling the blocks off as you go. Agreed bloody awful concept architecturally, but when you go up 10 floors or so, it costs just the same area of land. Air space is still free, isn’t it? Lots of Sydney siders quite content to live in high rises. If planned properly, services and landscaped etc etc it does not necessarily become a tenement eyesore. Then again who can guarantee any government plans coming to a happy ending?

by Grendel | 25th May 18, 11:52am 1527205977

Agreed, a well planned high density community with adequate facilities and fast public transport into the CBD was the dream. That's what I and I'm sure many others were sold on when we voted labour. I hope beyond all hope that is where we end up. But (and its a big but) each day this idiot keeps changing goal post further down the road and calls the Treasury "children" for doubting his plans while he keeps promising houses tomorrow.

by THE MAN 2 | 25th May 18, 12:12pm 1527207153

Boatman, Twyford is not an idealist, he is an unrealistic!
He has no business acumen, no contacts and no experience and why on earth he got given the toughest portfolio apart from finance, I don’t know?
There are still the odd one on here that beleive that things will alter under this COL for the better, however the true realists know that will not be the case at all,

by waymad | 25th May 18, 2:30pm 1527215451

Let's add 5) - not the first clue about the time value of money. It's the 'carry' - accrued interest/opportunity cost - and far-out liabilities (GST and income tax, in particular) that does in many a developer, especially if they try to run their business from bank statements.

Now just think about the change of heart many Councils would have if they had to pay UOMI rates on the project value to applicants after the first 20 days of the consent period had elapsed....make them carry the carry, in other words.

I tend to agree with the consultant here: why would any developer get into bed with a Gubmint that is all over the park in terms of policy? That's the biggest risk of all - Uncertainty..

by Boatman | 25th May 18, 9:11pm 1527239473

Yes Waymad , thanks , we could likely come up with another 5 things not listed .

Greenlabour will not have a bar of any tinkering with the RMA for example , and expanding Aucklands city limits is 'off the table "

So the problem is not going to be fixed

by NorthernLights | 25th May 18, 4:28pm 1527222531

Yes Boatman it takes the business genius of a J Key to understand you can’t build affordable homes when it costs $15K for a water connection that really only costs $1K to put in
National sure had the answers to the housing problem
They put their best man on it that conservation guy Nick Smith wasn’t it ?
Everything went swimmingly didn’t it
So don’t you label Twyford either

by Boatman | 25th May 18, 8:52pm 1527238345

@Northernlights , you are wrong , John Key never ran Auckland , it was and still is effectively a Labour run council .

The $15,000 water meter is thanks to none other than Mr Fool Goff

by Nic Johnson | 25th May 18, 5:50pm 1527227429

Boatman.

You are right, the idea of funding purchases of new builds in the current market is a ridiculous waste of taxpayer money. If the government just waits 18 months and lets the credit collapse fall out continue, as we are seeing with falling prices in all major centres then they will be able to use their powers to purchase existing stock. In fact maybe we could give them first right of refusal on each repossessed buy-to-debt. That way the banks get re-capitalised (or at least most of their loan back - providing it wasn't a really silly one and I know there are a good few of those out there) . Housing is provided by the state and gambling is taxed, well sort of punished but they chose to take on the debt and it should discourage it again in the future.

https://www.barfoot.co.nz/search.aspx?searchmode=residential&kw=mortgag… - Here's the first 11. The banks are going to hit the government for a handout anyway so why not kill two birds with one stone.

Housing crisis solved.

by THE MAN 2 | 25th May 18, 10:57am 1527202639

Another day another lot of BS from our government in power!
The y were going to have all these extra houses built weren’t they? It was going to be so easy and National had done nothing in the previous nine years they said!
Well this continuation of flip flopping of what KiwiBuild represents is doing nothing but painting the picture that they haven’t got a clue which is the truth!
The Minister Of Housing is doesn’t even realise that he can’t use a cell phone on a plane, Perhaps he hasn’t flown much or doesnt follows instructions.
Seriously, if you continue to believe that this COL has got the ability to provide so called affordable housing to people that can’t afford them
, then keep dreaming!
There are houses under 650k in Auckland and yet they are not sold, so it is more about people being prepared to take opportunities themselves!

by Boatman | 25th May 18, 11:08am 1527203323

@the man .......Twyford is clueless , he studied Politics , became a Trade Union organiser , worked for a Charity ( Oxfam ) and then stood for an electorate ( which he lost ....... twice ) .

Now he thinks those skill-sets are going to enable him to embark on the biggest Public Works Scheme in our Nation's history.............. and do it all in just 36 months, all at a cost lower than the cost of building each home , when we do not have enough builders or enough workers right now to cope .

And , worst of all , he does not even have a Strategy Document setting out how he intends to achieve this .

by delboy | 25th May 18, 11:49am 1527205781

He appears to be suffering from the Peter principle. Someone who’s promoted based on the success of previous jobs until they reach a level where they are no longer competent.

He’s now a desperate man without a plan who’s chasing and latching onto every idea that comes along.

by NorthernLights | 25th May 18, 4:32pm 1527222766

Boatman so why are you still living in the end of the world ?
Such genius

by NorthernLights | 25th May 18, 4:31pm 1527222660

No ! All the BS comes from the sort of person who labels the self The Man 2 !
Can’t you see your folly boy ?

by mlpc | 25th May 18, 11:20am 1527204019

Reckless? perhaps not.

Brainless? probably (especially with Twyford in charge).

by Boatman | 25th May 18, 11:36am 1527205012

Reckless ... I certainly hope not , but he is certainly clueless

by Uninterested | 25th May 18, 7:10pm 1527232250

Remember South Canterbury Finance?

by Eco Bird | 25th May 18, 11:33am 1527204827

" Freeman likens the relationship between government and the private sector to a “master-servant” relationship"

The typical inherent Labour led socialist ideology and way to market, like the old Follow-Me utes guiding planes in the old airports .... what else is new ?

by Boatman | 25th May 18, 9:12pm 1527239554

Labour were not just in a time warp they were just not thinking

by bilbo | 25th May 18, 11:37am 1527205049

Seems like Twatford has been out playing golf with Ross Taylor, Nick Smith and Phil Goff.

Land costs / land development shakedowns / consenting costs/ monopoly building supplies / pathetic outdated building standards / incompetent trades people / clogged roads / immigration

What's the word for repeating the same "mistakes" and expecting a different result?

And my god Phil you haven't even cut immigration. We have chefs and chefs assistants. Unemployed is even on statistics for work visas by occupation.

With MPs like Raymond Huo (owns NINE auckland rentals) don't expect any changes.

Meet the new boss, same as the old boss. The young Labour voters should be rioting over this. Their futures have been violated. In 2050 Auckland will be like Londonistan or Hong Kong.

by xingmowang | 25th May 18, 11:41am 1527205296

hopefully, Singapore.

by Fritz | 26th May 18, 1:38pm 1527298722

The government build lots of houses in Singapore

by Jock Silver | 25th May 18, 12:21pm 1527207660

What's the word for repeating the same "mistakes" and expecting a different result?

Insanity!

by Boatman | 25th May 18, 9:07pm 1527239263

True

by Ex Expat | 25th May 18, 12:39pm 1527208742

Given their vitriolic posts over the last seven or so months, I doubt many if any COL supporters will change their votes based on performance to date. If the pixie dust is wearing off they may have no choice but to ride the tiger until 2020.

by Grendel | 25th May 18, 1:29pm 1527211742

You think COL supporters are susceptible to the sunk cost fallacy here Ex Expat?

by Foxglove. | 25th May 18, 1:53pm 1527213182

This new PM is no Helen Clark, who one would suspect is not all that far behind the curtain, as some sort of agony aunt. Think JA has come a long way in a short time. For instance her performance against Bennet in the house the other day, was pretty cool. But then again she wasn’t up against much particularly with Brownlee basooning in the background. But as talented and strong as JA maybe, does she though have the stamina and outright ambition as her predecessor Clark. These lapses by Curran and now Twyford are unwelcome obviously, but seem to be taking quite a toll, and it is only early days. Personally JA has surprised me with her capability and she seems to be a sincere and conscientious PM. I think she is naturally quite a kind & gentle person. If the job means she has to depart from that persona she may see that, if only from the perspective of a new parent, as being an unacceptable compromise. Grant Robertson is waiting in the wings, should she decide one day its time for the Lange cup of tea.

by Ex Expat | 25th May 18, 1:50pm 1527213028

I think we are all hard wired to overvalue sunk costs.

What gets me with this whole subject is that the economics with the existing paradigm have always been clear. Unless the COL brought something new to the mix the result was going to be the same. Now, I expect we will hear a lot about “at least they tried” all the while ignoring what the previous Government achieved, but that’s politics. The sad part is that we’ve lost another 3 years with this.

by Grendel | 25th May 18, 2:15pm 1527214503

Agreed, I vote for policies not parties myself. I feel somewhat had this time around and I hate the "but what about them" argument. It doesn't matter what was done before, I voted for change not a history lesson.

by Ex Expat | 25th May 18, 2:32pm 1527215577

"I voted for change not a history lesson". Nice catch phrase.

by Foxglove. | 25th May 18, 2:47pm 1527216428

Yes Grendel, completely agree. A lot of comment on this site is dedicated to partisan ideology regardless of the actual question or circumstances involved. It is counterproductive to an extreme to excuse one political party because it is thought that the other is worse. How are you to enjoy an apple, simply because it is less rotten than the other?

by steven | 25th May 18, 3:05pm 1527217548

ironic....LOL

by Patches | 25th May 18, 4:19pm 1527221974

As a Millenial myself, I have seen New Zealand get progressively shafted across all industries by excessive immigration - Do not get me started on the housing market. It is ironic that I went into STEM industries after graduation, only to find wages drastically suppressed and the national government had declared 'shortages'. Bullsh*t. Many engineers and other scientists couldn't find work, and if you did in NZ you now earn $20 an hour (for senior positions).

On this wage, I couldn't save a reasonable deposit. Most of my family died tragically or by natural causes years ago - who is going to lend me the money for that deposit? So I see the media say now 'go with friends'. My friends work in STEM mate. They don't have that kind of cash anyway!

I voted Labour for this ONE reason alone on immigration, and was willingly to swallow some huge dead rats to get it too (First year of University free with no KPI's for eligibility? Jeeeeeez)

To say I am disappointed is an understatement.

Recently moved to Wellington where the wages actually match skills and almost got that deposit now.
Funnily enough, there are far less 'skill shortage fillers' in the STEM's down here too. Go figure...No correlation there at all I am sure....

Is that why Wellington decision makers are so blind? Is Wellington a bubble for policy makers perhaps?

(Note, STEM now shortened to STM Only. Engineering is still a goer. Thanks for feedback everyone! )

by Pragmatist | 25th May 18, 1:44pm 1527212645

Which years was this? Because as someone thats been in engineering in Auckland that sounds like a massive load of horse manure to me.

by Patches | 25th May 18, 2:30pm 1527215414

Mechanical, Civil, Chemical, Electrical? Which field will dramatically change ones prospects. Also if you work for one of the major consultancies, they will pay you well too, if your lucky to get in! Those employers also adjust wages to cities - and Auckland is more expensive. If it is not a consultancy you work for, your doing well, and all the best to you! Well done!

As for those in the medical labs/ pathology /Micro biology labs, or other 'softer' sciences within the STEM group (think bsc techs, or researchers not at universities, which are themselves also bubbles of a sort), there was a sea change in 2011-2012. The market just blew up, immigration numbers peaked, wages were cut. Employers shouted 'Shortage!' to the government, and we went from having 20 applicants per position to over 120+ It was a dramatic time - and it has not gotten any better. Micro Bio was the hardest hit, as were the related medical laboratory fields. I counted myself lucky to not be in that particular category, but I was close enough to feel the heat.

I regret not studying Engineering actually, shame Calculus is not my forte, so I opted for statistics which was the closest thing at the time ;p

I apologies for making a blanket statement for Everyone in the 'E' of STEM. I retract this to 'STM'. Thanks for the heads up Pragmatist!

Cheers

by Jock Silver | 25th May 18, 2:45pm 1527216358

I thought you might be in the 'STM' category. Yep, that category is underpaid here, sigh...

by Pragmatist | 25th May 18, 2:52pm 1527216728

Ah, yes, lab techs might be a whole different ball game. Indeed a friend of mine that used to work in that field (Graysons Lab? in penrose) left and went to work as a dispatcher for the emergency services instead.
I work now for a very small private company, and haven't worked for large companies in the engineering field. Mechanical and Electrical are my area, and if you can be trusted to turn up to work, use a lathe, an angle grinder and can read drawings you won't find it hard to get work from what i've seen.

by pacifica | 26th May 18, 4:17am 1527265041

Funny I have seen some of NZ largest manufacturers fire workers on mass on the order of hundreds, get a few years of this before the GFC, how do you think the environment progressed? Now the largest engineering companies cannot even hire NZ graduates at all and the smaller ones don't even try. Over 300 mechanical engineers with no work. They shifted to other fields and greener pastures quickly enough but I don't think we want all the STEM staff to have to leave NZ for work. Some of the Phd level electrical engineers with long term work experience as well could not even get work for months. For example one guy gave up trying after a year so decided to become a school teacher, another a GE money genie, many mech guys took on low level IT roles, most left NZ. It is surprising the lack of understanding in the trade you have. Most have moved on to factory automation, CNC & automated saw machine programs, & even the design work is shipped overseas. Unfortunately the small tin shed shops cannot be bothered employing & training in this day and age either. At best if you are looking for a mech or elect eng job best and only way to get one is the Navy or other military services, (and isn't that on the borderline because NZ cannot afford many of those any more). Even getting training for many is a multi-thousand dollar debt, (with no guarantee or avenues for employment), which exceeds a house deposit. Saw one guy kit out his own full shop for small minor odd jobs but it cost the equivalent of an Auckland house even with the second hand old school equipment, (lathe, mill, drill models all second hand but still functional, a CNC, pneumatic tube bender, grinder, welding gear etc). But likewise just getting time on the tools is never enough any more. Even the trade certs cannot get a foot in the door.

(Easy calc for you, hundreds of new graduates each specialisation each year with 1-2 years experience to back them, hundreds with 5+ years experience looking for work from restructuring, plus thousands migrants, but only a few roles, less than a hundred actually available. How do you think it goes down? Many see more jobs offers from Australian & UK companies, and that is both from careers fairs, searching ads, recruiting companies, door to door knocking (cold calls, web apps included), linkedin, and networking. Career growth does not exist in NZ engineering as the rule with very few exceptions.)

by paashaas | 25th May 18, 3:12pm 1527217972

" .. if your lucky to get in! " - so basically you cannot compete and blame immigration , Trump and the tooth fairy for it ?

by Patches | 25th May 18, 3:27pm 1527218845

I think you misinterpreted my comment ; The consultancies in NZ don't have roles open for very often, and often also get many many applicants from all around, so of course if you have a good CV and got in luck had nothing to do with it, and neither does ones immigration status for that matter.

Problem is, its one of the most highest paying places to work, so if you want to earn more than $20 an hour for a few years work experience in STM ('E' retracted!), your hard pressed to get a look in, as due to the nature of the industry many many people are trying to get in at once to break the $20 barrier.

Do I blame immigration policy for myself not being able to work at a consultancy? Hell no! In fact, they need immigrants from overseas more than anyone due to their international work! Power to them.

Do I blame immigration policy for low wages in the STM sectors ('E' excluded!) - Yup!
This was a sector that had absolutely no need for any skill shortages to be declared, but the government bowed to pressure from the industry. This had a direct impact on peoples incomes, and hence their ability to save for housing. As this is an article on housing pressures and solutions for them, this needless immigration is of course a discussion point that the government must address, not only in my sector.

Framing me as a Trump Supporter as some sort of red herring/strawman argument in response to my comment is not helpful to this discussion. And no. I am not a Trump supporter ;)

by paashaas | 25th May 18, 3:39pm 1527219547

Apologies for Trump reference - that was an intentional absurdity , to go along with the tooth fairy.

I can see your point better but I do not really agree. The implicit assumption is that tightening skilled immigration would not actually affect the size and shape of the economy and the number of "good" jobs available , so they would go to the locals and their bargaining power would increase. I think the assumption is false and is a form of the "lump of labor" fallacy.

by Patches | 25th May 18, 4:06pm 1527221170

I actually agree with you on the 'lump of labour fallacy'. That is not how a global economy works. No one country is an island anymore.

I just cant work out, how, In fact, jobs in STM have been increasing (lots of demand from new services, brought on by higher immigration) but the wages have been dramatically flat, despite high company growth. Maybe it isn't the 100+ applicants per category, maybe its something outside my understanding. I am just commenting on my own experiences, which will be fill up with biases. I acknowledge that :) Maybe an economist can tell me what I am missing? ;p

I think we can both agree the government either has to build more houses, or reduce immigration to lessen demand on housing. Currently, as a Labour voter, I have not yet seen anything sadly.

by paashaas | 25th May 18, 4:54pm 1527224093

"I think we can both agree the government either has to build more houses, or reduce immigration to lessen demand on housing.."

I disagree on both point in fact.
The government should not build any houses at all - they should relax the regulations instead and ensure a competitive BM market.
Reducing immigration is a dead end idea ; let them come ; we will compete and all be better off in the wash-up.

by Patches | 25th May 18, 5:09pm 1527224947

Hahaha, Well as long as someone builds some damn houses, I don't really care if it is the government or private enterprise!!

by PocketAces | 25th May 18, 5:24pm 1527225865

Who wants to live in a heavily populated country, certainly not me. All I see with high immigration is unaffordable housing, crowded roads, environmental issues and not being able to find secluded spots anywhere anymore.
It is now time for the world (which includes us) to learn to live with a falling population as that is what is required if we are to get out of this alive.

by paashaas | 25th May 18, 5:34pm 1527226442

"if we are to get out of this alive" - not sure what your plan is ; me I think we are all dead in the longer run.

Implying that somehow the current immigration rate will quickly make NZ a heavily populated country in the foreseeable future is absurd - we live in an empty land and it would take a few generations to change that.

by PocketAces | 25th May 18, 6:35pm 1527230150

The human race, not just you or me. This isn't an empty land, only comparatively empty. Humans do not have to fill every available space, nor should they think that every square inch of the planet is here for our own purposes, we are only a part, and that is how we should remain.

by Patches | 25th May 18, 4:06pm 1527221175

I actually agree with you on the 'lump of labour fallacy'. That is not how a global economy works. No one country is an island anymore.

I think we can both agree the government either has to build more houses, or reduce immigration to lessen demand on housing. Currently, as a Labour voter, I have not yet seen anything sadly.

by Patches | 25th May 18, 4:15pm 1527221722

;)

by Jock Silver | 25th May 18, 2:39pm 1527215976

I agree, it's an odd sentiment. Always back yourself when negotiating pay, and never sell yourself short. Oh, and double down on your boss's satisfaction. If you automate a process, or integrate/develop a new software/hardware tool that delivers additional returns for the company, then use that as a reason for a bigger pay rise :)

by Patches | 25th May 18, 3:07pm 1527217623

The sentiment is from experience I am afraid, and it is a hard one to shake off. I may edit it later to soften it, as the lack of caffeine I had in my blood at the time probably made it sound harsher than I intended.

I tried repping myself in three pay rounds over three years, to be reminded that 100 people wanted my job and they could be in the door tomorrow. So I tried switching employers (vote with ya feet eh? ;p), only to get to the final stages of the interview, or to be offered the job, only to be told the same thing about why I could not get more $. I wasn't asking for a fortune either, $21.00 - $22.00 hour was my target with 4 years of Laboratory experience across 3 different subsets of the science industry (Environmental Contaminant Testing in Soil & Water, Statistics/ QA & Micro Biology). Some small positive wage pressures have come in since the law was changed regarding minimum pay scales, as a skilled immigrant now needs at least $24.29.

You are correct on the efficiencies side of things - some of the largest pay rises I have received were from such improvement projects. NZ has low productivity as is, so any projects you have been involved in with this is always a big win in a CV for employees. That is good advice for anyone entering the NZ workforce Jock :)

by Jock Silver | 25th May 18, 11:20pm 1527247222

It's a ridiculous situation for our country to be in, and with so many people in the same boat. I blame the fat cats in the administrative stratum, they really soak up a lot of our productivity.

Interestingly, another way to get a pay raise is to manage other people. The pay level then becomes proportional to the number of administrators you hire...

by pacifica | 26th May 18, 3:55am 1527263728

As someone who has been across the market he is on the ball. Engineers have been leaving NZ en masse and many have dropped even doing engineering if they have to stay in NZ. No jobs here for all those looking and certainly no work for those in training, graduates or even skilled staff with doctorates to boot. At best if you are from NZ best bet is to get out early now. Engineering jobs in NZ have become rarer than hens teeth to achieve for those looking. That tends to happen when you have thousands of applicants from overseas, offering to work for little to nothing, to throw their hats in as well. Having to review those CVs is so depressing you would be needing a stiff drink while doing so, especially since many eclipse NZders with reams of fraudulent info. There are actually CV & application services for this. Shame NZders cannot find jobs but the manufacturing market is just not there for skilled staff to find commensurate employment.

by i am not a nimby | 25th May 18, 12:10pm 1527207034

"we dont intend to be reckless". thanks mate.

by Foyle | 25th May 18, 1:46pm 1527212793

Inspires confidence doesn't it?

by THE MAN 2 | 25th May 18, 12:16pm 1527207364

The supporters of this COL have gone a bit quiet now, maybe they are believing that they have been wrong all along, after Mr Twatford’s use of a phone on a plane.
God help us! No he probably can not!

by BadRobot | 25th May 18, 12:30pm 1527208239

Perhaps they are sitting on the side line watching you make a fool of yourself. Just saying.....

Someone once said that I don't suffer fools gladly - and I don't. But people are very adept at making them selves look like fools. without any help from anyone else.

by THE MAN 2 | 25th May 18, 12:31pm 1527208317

No fool here Robot, name is not Stoner

by Houses Overpriced | 25th May 18, 12:37pm 1527208632

You're definitely a GONER

by BadRobot | 25th May 18, 12:49pm 1527209366

That's the problem - fools don't understand that they are fools - it's called the Dunning-Kruger effect.

by Houses Overpriced | 25th May 18, 1:21pm 1527211266

Lol. I wonder if a fool will understand your conclusion

by Grendel | 25th May 18, 1:35pm 1527212113

Nice!

by Shoreman | 25th May 18, 3:57pm 1527220657

HAHA how funny PT's name is 'STONER' How appropriate !!!!!!!!

by Hardly | 25th May 18, 1:03pm 1527210221

You know I’ve been a big fan of Kiwibuild but this is getting more and more off track.

Two problems here:
• Risk - what are we doing sharing risk with developers? If we want this risk of development we should do our own development. If you are buying off the plans guarantee the sale but all the risk of the development should sit with them.
• Where is the big picture greenfields development? Where is the innovative construction? Phil is losing focus.

by Yvil | 25th May 18, 2:37pm 1527215861

"Government to exercise 'caution' when deciding which private developments to underwrite as a part of KiwiBuild" and
Phil Twyford says: "we don't intend to be reckless"

Problem solved then, nothing to worry about, lol

by paashaas | 25th May 18, 3:14pm 1527218063

what he is saying is "apologies in advance - it was not intentional".

by Eco Bird | 25th May 18, 3:48pm 1527220104

No, actually what he is saying is : Don't worry we will dig deeper until we get to the bottom of it , and we are PRUDENT DIGGERS !

He is a determined diehard man - you have to give him that !

by Houses Overpriced | 25th May 18, 4:11pm 1527221489

He has to dig out the mess left by the useless National party. . I guess you know those folks. You aided them for 9 long wasted years

by Grendel | 25th May 18, 4:27pm 1527222428

It is accurate that we are in a hole and Twyford insist on digging instead of solving the problem.

by Boatman | 25th May 18, 9:14pm 1527239693

Twyford has not dug himself a hole , he has dug one of those massive open cast mines we can see in Australia and Astronauts are able to see from outer-space ...........

by Houses Overpriced | 26th May 18, 7:27am 1527276468

Maybe time for you to jump in and save the world with your rhetoric

by Badlad | 25th May 18, 7:03pm 1527231781

If we have a hole then one could backfill it or maybe put a tunnel in, build a foundation on top and build on that foundation. That takes time and will, it also takes planning, resourcing and leadership. It is still early days but lets hope the backfill option or simply putting a lid over it isn’t going to be the coup de maitre

by kane02 | 25th May 18, 8:18pm 1527236294

I’m waiting to see some data on all these new houses that Phil is building. Where is it?

So far it’s just been a talkfest.

by Boatman | 25th May 18, 8:44pm 1527237867

"we dont intend to be reckless " .............. bit late for that , they were extremely reckless promising the biggest Public Works Program in the country's history .

The Government has NEVER built 100,000 houses , in the entire history of the country .

What were they thinking ?

That we were all so stupid as to buy this ruse as do - able ?

by Property Leader | 25th May 18, 9:18pm 1527239910

These Kiwi build properties are being costed like HNZ rents. Rents for HNZ are not based on the cost of delivery. The minister has already decided what the sale price will be. (actually he has changed it a bit). He has set the price before the tenders have closed. Is he guessing or relying on the kids at MBIE who do not know which end of a hammer to hold.

by Boatman | 25th May 18, 9:24pm 1527240263

The Housing Ministry must be in a shambles right now with a Minister who it seems is running around naked in the sea, drinking rum and smoking crack., and thats apart from making calls on an aeroplane , silly bugger

They disagree with BOTH the Treasury AND the Reserve bank economists projections on Kiwibuild

They do agree with the MBIE projections

Do they have a clue ?

Does Twyford have a clue ?

by Alter Ego | 26th May 18, 10:17am 1527286660

I caution you.....read this..Mr Kiwi Builder bludget-errors..

Move all to Cleveland...do not build anything...way cheaper....mere 200K..US.....no where near 650K NZ.

I will help you pack......a sad.

https://www.zerohedge.com/news/2018-05-24/200k-you-can-buy-mansion-clev…