A Green Dream: Executing a Vision for Christchurch.

My last post on rebuilding Christchurch produced some interesting feedback. Most were excited, the odd one horrified and a few came through with some alternative thoughts and modern examples. The videos I put up were meant to provoke people into thinking and questioning: what is a city, what do we need from it and how can we make it work for each other? I wanted people to release themselves from previously held beliefs and challenge them, test them out: does it really make sense, does that really work, does it enable, does it support?

It’s one thing to have fantastic futuristic designs but are they practicable? maybe, maybe not. They are certainly buildable. We should not forget that we are moving into a resource challenged time. By 2050 we could have 9 billion people living on this planet. So we do need to build smart, we do need to think about the nature of the built environment as well as the type of city people want Christchurch to be. We have a wonderful brand being well known as the Garden City, as well as being a city with a strong record in technology, manufacturing and the arts. It has a strong farming hinterland and wonderful natural assets reaching from the sea to the snow.

It can easily build on all of those strengths. Here’s a recent example of a city flattened by an earthquake.

On January 17th 1995, Kobe, a city slightly larger in population to Auckland, was hit by a massive 6.8 earthquake, which shattered the city and killed nearly 6,500 people. The total cost was $102 billion. The rebuild process was difficult but according to this 2005 report, the economy eventually recovered to about 75-90% but with the loss of much of its port business. The government was the major funder of the rebuild and tried to focus on specific industries such as biotechnology. Whilst it’s not particularly known as an eco-city or rebuilt along sustainable principles, Kobe was ranked no 9 in the list of world eco cities in a 2010 Mercer report (Wellington was no 5). The lesson Kobe offers are that rebuilding takes time, the economic impact is major and recovery is a long term process.

But Christchurch is very different to Kobe. It is really a very low rise city and should no doubt remain that way. We don’t need some gargantuan high rise marquee building though there is certainly room for some interesting design structures. The human-building interface is very important to the people of Christchurch and that is probably were the focus should be. I agree to some extent with Gerry Brownlee, the Earthquake Minister, that we should only keep the very best of our heritage buildings (The Cathedral, the Arts Centre, the Provincial Buildings and other key sites) and build around them. How we define the best of them and which ones to invest in will no doubt be a heated topic. It’s important to keep the fabric of the city in place whilst recognising that a new layer will emerge.

How we execute this is the tricky bit. There needs to be representation and there needs to be leadership. We will need input from outside especially from people with expertise in sustainable design, both buildings and urban planning. The demolition bit is easy. As Gerry says

“As I’ve said repeatedly, heritage is both forward and back and from this point on, we decide what the heritage of this city will be“.

That’s a good start as long as we know who the “we” will be. Perhaps a good place to start is to set out a wish list and work from that. So here’s some of my wishes for how we approach this:

- People first: This must be a people centered process both in design, form and function. We want a living, breathing, vibrant and safe place to live and work with buildings and green spaces that sing to us.

- The Garden City: This is a wonderful brand but needs updating. We can incorporate ideas related to the Garden: permaculture, hydroponics, leisure, tranquility, beauty, shelter.

- Zero waste: We can make Christchurch the greenest city in the world. Recycling is great but true efficiency is in designing wasteless products and systems.

- Ecological clustering: We can create business clusters where organisations can leverage off each other. We can focus on our core strengths and build around that expertise as well as minimising waste streams

- Hagley Park: This could become our Central Park. Surrounded East, North, West and South by business and residential areas. This could help the CBD spread but keep itself anchored at the same time.

- Trains: This is a bit of a long shot. But we have train tracks going through key areas in the city and a train station in a potentially key area. With the current rebuilding we could look at a city loop to connect into the north south line from the central station. If there was ever a time to look at light passenger rail then this is it. We could also fit cycling into this work as well.

- Energy: All new buildings to be fully fitted for solar and small scale wind and then be connected to an integrated grid for feed in tariffs.

As people start to put their wish list together, we will start to see common themes appearing. That may be the best way to get a bottom up blueprint for rebuilding and redevelopment. So I invite readers to list their 5 top wishes below.

Then we can bring in the experts to make it all happen

A Green Dream: Rebuilding Christchurch as a Sustainable City

170 years ago Christchurch was just a dream, a utopian vision of a green and pleasant land, planned out in England and transported by boat,

“the London-based Canterbury Association envisioned Christchurch as an English utopia in the South Pacific. They planned an orderly, tiered society (the first settlers had to brandish a reference from an English vicar attesting to their ‘sobriety and respectability’), with an aristocracy and the Church of England as its head and an underclass of artisans and minions to serve them. They named their fledgling city after an Oxford college (Christ Church) and laid it out like an English city, complete with a Cathedral, University and a boy’s school, Christ’s College, modelled on Eton”.

170 years later it’s been challenged by natural forces and has come off second best: down but not quite out. The CBD has seen between 25-30% of buildings completely destroyed and another 25-30% seriously damaged. The Eastern districts, long known to be built on land of dubious quality, are in serious distress. How does a city recover from this type of disaster?

Well the first thing to remember is that cities have been completely leveled before and have been rebuilt. Lisbon is a fine example of this. On November 1st  1755 an earthquake and tsunami pretty much flattened the city killing tens of thousands and causing damage that reverberated Europe wide. The people of Lisbon responded in an incredible fashion. Wasting no time

“On December 4, 1755, little more than a month after the earthquake, Manuel da Maia, chief engineer to the realm, presented his plans for the re-building of Lisbon. Maia presented five options from abandoning Lisbon to building a completely new city. The first plan was to rebuild the old city using re-cycled materials; this was the cheapest option. The second and third plans proposed widening certain streets. The fourth option boldly proposed razing the entire Baixa quarter and “laying out new streets without restraint”. This last option was chosen by the king and his minister.^[13]“

I would like to consider option 4: razing the entire city and starting again.

Why don’t we demolish the whole CBD and start again, create another utopian vision, this time for a sustainable city: a living breathing system with an integrated energy grid, hi technology buildings in an urban landscape designed for people, creativity and innovation. Of course, we could and should repair and keep our finest historical buildings: the Arts Centre, the Cathedral, the Museum, Christ’s College and any others of a similar standing. There may be some key sites we will have to rebuild but let’s get real: many buildings in Christchurch are/were a complete eyesore; many streets are not that exciting to walk down (for example Colombo Street); many tired shops with very average retail offerings. Many will not be missed and as the most over shopped city in the universe, we can surely survive the loss of many of these. The key challenge will be in how we managed our old heritage with our future one.

So let’s dream a little, not so much as think big but dream big. This is a chance for a new beginning just as it was 170 years ago. We have the opportunity to shape a new future, to create a world leading city and environment, to lead the way and to create new jobs in a hi technology based ecosystem. Our CBD could be smaller and nestled into and around Hagley Park. We simply need better, smarter and healthier buildings, not bigger ones.

I’m going to share some design thoughts just to give people a taste of what dreams can generate, what imagination can create. We want to create something amazing out of this…to somehow make those we have lost proud of what we chose to attempt, to make good out of bad.

Start dreaming now. Lisbon managed it in 1755. I’m sure we can.

Christchurch Quake: Time for Public Money and a New Deal

I was at University when the quake struck, eating my lunch and reading a paper on “Native Rights”. I didn’t hang about and immediately dived under the table as I didn’t like the look of the walls and ceiling lights flailing about like paper decorations. When the first shake had finished I headed outside quickly and sat down whilst the two big after shocks rocked the surrounding buildings. The University seemed reasonably unscathed……nothing like the CBD which is 5 kms to the East.

The damage of the Feb 22nd 6.3 shake is way worse than the Sep 4th 7.1 quake. No doubt this is due to the depth and the proximity of the epicenter. But this post is not about the earthquake, it’s about the economic impact and the re-building to come.

The cost of this disaster is only guessable at the moment. Numbers from $10 to 16bln have been thrown out but it could be anything. There is no doubt that this is a complete rebuild of the city’s infrastructure and central business district. Added to that is the viability of the eastern suburbs. They were affected badly and there will be questions over ground issues when it comes to re-building.

I want to go back to 1936 and the First Labour government which introduced low interest loans as part of a system of public finance to rebuild the country’s post-war economy. Think of it as New Zealand’s New Deal. The Reserve Bank governor can direct this at any time. This is certainly one possibility.

What I would like to see is fresh new money being injected directly into the economy by the government. The Treasury can action this at any time. The New Zealand economy has been struggling for a few years now since the GFC hit and deleveraging started. Business is struggling and cash is constantly tight. This latest quake will have finished off many business hanging by a thread.

I am proposing the Treasury create $5bln of new interest free money and credit it to the Government Earthquake Department for use in the rebuilding of public infrastructure. This is real money (not debt) and it will flow through into the economy thus giving it a boost as well as providing liquidity to the economy.

The money supply will increase by $5bln but I don’t believe there will be any inflationary risk. We are currently in a period of deflation and deleveraging with falling house prices and economic stagnation. NZ needs all the help it can get and there has never been a greater need nor a better time for this proposal.

It’s time for a New Deal. Please pass this on if you can.

Savings (Working Group): There aren’t any.

I’ve finally finished wading through the paperweight (as is the norm) aka the Savings Working Group report. Having read the initial commentary, I wasn’t that excited about the prospect but often in these reports there are useful nuggets of information. The main noise is around saving more and adjusting savings incentives especially to promote Kiwisaver.

What is not clear though is to what extent we have an actual savings problem. Our gross saving is at the low end of the OECD with Portugal and Greece below us along with two nations that might surprise: The US and the UK (page 121). There is also difficulty in analysing the differences between household and business saving. NZ is a country of small businesses and often business and household financials are closely interlinked. There is no definite conclusion around this issue and the report asks for further research into this topic, especially around data collection.

The macro level is really where the problem can be seen. When looking at the growth in national wealth, it’s clear to see that housing revaluations are the key driver (page 127) of growth since 1999. In fact “property revaluations explain nearly all changes in household net worth since 2001 (page 130). This is another way of demonstrating that we haven’t actually created any productive wealth: we’ve simply revalued our housing base and used that to fund increased consumption. That consumption has been funded by debt and that is why we have a serious debt problem.

So can we save our way out of this problem? Looking at the data on household incomes one would have to say “no chance”. Market incomes have fallen (yes fallen) for the bottom half of the population between 1988 and 2007 (page 140). That is simply astounding. This at a time when house prices have risen 490%. This is the cause of the deepening inequality between the owners of property and the renters. Even with benefits added in income for the first four deciles has remained largely the same (page 141).

Poor choices? Or simply no income with which to save. I think we must face the fact that half of our population is existing on meagre income. They cannot save and are likely to be in debt simply by virtue of not having enough cash to afford purchases or expenses outside of the simple basics of living. Those who have managed to get on the property ladder have prospered primarily because their asset has risen substantially in value. That is where their  savings lie. It should be noted though that, for many, this increased wealth is purely on paper.

At this point it might be worth looking across to data from Australia (page 128. Aussies actually have more of their wealth in residential property than Kiwis do (50% vs 46%). Investment in shares in much the same (8% vs 9%). The big difference is in long term assets. Aussies have 19% in Pensions and Superannuation whereas Kiwis have 2%. To balance that out Kiwis have 22% in business and farm assets against Aussies holding just 9%. So for Kiwis businesses and farms are their pensions. This is not an exact comparison but it’s clear that there is not much to separate the two countries other than Aussies invest in public companies and Kiwis keep it private. It also shows that Australia may have the same debt problem we do though they have benefitted more from the commodities bubble than NZ.

The oft quoted statement (from Ministers, the RB and other officials) that Kiwis should save more is somewhat optimistic. Save more from what exactly?

So what can we do? Well we can look at the other side of the savings coin and that is our expenditure. As a country we have essentially borrowed our GDP for the last 20 years. This is reflected in our current account position which has left us with a Net Foreign Liability (NFL) of 85% of GDP. Poor investment and low labour productivity (not sure where the NZBR gets its numbers from) has left is with nearly 40 years of negative current account balances (pages 20-24). The simple explanation is that we have consumed more than we have sold (plus all that accumulated and compounding interest). This consistent deficit should have seen NZ with a consistently weak currency (to allow the balance of payments to correct) but this has not been the case. NZ’s high real interest rates have been attracting overseas investment looking for a high yielding home (page 26). NZ is seen as a safe place to invest and, in an era of low global rates, has seen major inward flows which have not just funded the current account deficit but also the major revaluation in house prices.

The accumulated current account deficit has pushed interest rates thus forcing up the currency . This in turn has made imports even cheaper fueling the spending boom and embedding the circularity of higher prices in the economy (page 39). The bottom line here is that our currency is too high. This has been noted for some time but successive governments have chosen to ignore the problem, hoping that regular comments will help keep a lid on its appreciation. A 2010 IMF study estimated “that stabilising NFL would require the real effective exchange rate to depreciate by 20%”….that’s to just keep NFl where it is now. To reduce “NFL to 75% of GDP over 15 years would require the real effective exchange rate to depreciate by 25%” (page 36).

That would put the NZ$ at between $0.55-0.60. Ouch!

That is the real story to come out of this report. To summarise:

- We don’t save much because half the population has had no increase in income for 20 years.

- The other half have increased wealth due to large revaluations in house prices.

- The top 2 deciles have seen increases in wages and this is where most of the real saving is coming from (if any).

- Debt funded consumption has seen interest rates rise thereby sucking in more investment flows and boosting the currency.

- We have borrowed to live and really have no spare cash to save.

- The best form of saving is paying down debt, both private and public.

- The only way to improve our position is to export more and import less.

- The primary way to export more and import less is to engineer a significant and lasting depreciation in the currency.

- The second option is to develop and invest further in export based industries.

Adjusting tax incentives and boosting Kiwisaver are not going to help us out of this malaise. Only strong and decisive action can help us from here. So what would I recommend? That’s too much for this post but at a high level some of the following (most of which I have written about previously).

- Lower the exchange rate by direct intervention.

- Cut interest rates as well as bringing down the cost of mortgages which are still very high.

- Restrict bank credit by raising asset requirements.

- Build a self-sustaining energy sector.

- Introduce a basic income to replace welfare and superannuation.

- Liquidate the overseas portion of the Cullen Fund (now whilst markets are at 30 month highs).

- Invest more in the productive export sector.

- Oh and let’s have a land tax whilst we’re at it (this was ruled out by the government in the terms of reference!).

Next week: The Welfare Working Group reports…..can’t wait!

ANZAC$: Back on the Parade Ground

Yesterday Julia Gillard became the first foreign leader to give a speech in Parliament. It was full of mateship and the usual joshing that is a theme for Australian-New Zealand relations. Beneath the jovial tone lay the theme of integration. This has been around for a long time, probably since the CER was first implemented back in 1983. It’s been somewhat on the backburner over the last 12 months as Australia has gone through a political shift but now the same theme is back on the table.

Is complete economic union likely? I addressed this back in September 2009 when it was last on the table. What has changed since then?

There has been a major shift in global political alignments. As the shift of economic power has moved from West to East, so has the political spotlight. Back in 2008 I noted cross border acquisitions from the East and that these signaled a major shift to a post-imperial world. That shift has continued apace with China rising to the fore, now the second largest economy in the world. For the ANZAC brothers that has major implications.

Being connected to the ASEAN has helped both Australia and New Zealand define its geo-political position in a post-Empire world, specifically post European Community integration. Asia is quite clearly the major focus in terms of trade and this has seen some interesting reaction from the old allies. This year we had a visit from William Hague, the British Foreign Secretary, along with his Defence colleague, Liam Fox. It was the first visit in almost 20 years and indicated that the UK was taking this shift East a little bit more seriously. Suddenly old friends were very much worth getting to know again. Previous to this we had a semi-royal visit from Hilary Clinton, the US Secretary of State, down under to sign the Wellington Declaration which put NZ back in the very, very good friends corner. And today we see the Treasury heads of the UK and Australia in town to meet with their NZ counterpart. This is of note as it is the first time they have met together.

So what does this all mean? Simply it’s a jostling for position and a reaffirming of old ties in  a very new world. This puts Australia and New Zealand in a very strong strategic position. We are friends of the old and the new world. We are well located geographically…out of the way but close enough. For the ANZAC buddies that poses some interesting questions. Stronger together, weaker alone or carry on as is?

We can see that the CER is being re-negotiated to allow of higher levels of non-reviewed investment which could mean a lift for corporate activity as well as a loss of company control. And this is really the crux of the matter. Do we want to control our own destiny? Lessons from Europe are all too stark in this regard. Sinking economies have no room to lower their currencies and so swing in the wind, completely reliant on bailouts.

Ultimately the people will decide on this, though its clear that further integration around common borders, regulations and practices is likely to continue. At what point does having separate currencies become a pain? Well ask anyone trying to transfer money between the two countries. You would imagine you could shift cash at minor spreads but actually you pay through the nose. Travelex is one the worst players in this market. Even market spreads are quite wide. So there is definitely a cost to doing business which might add up to 1-2% of overall activity.

A nation’s currency is ultimately a reflection of its sovereignty. The ability to issue your own coin is one the the most recognised symbols of nationhood and has often been as an economic weapon in the colonisation process. If you lose that ability then you lose control. It’s as simple as that. The way to overcome that is to just recognise that you are part of something bigger (in this case Australasia) and take the good with the bad. Personally I think it’s a tough decision to make. History tells me that having control over your own affairs is a good thing. But perhaps the mateship bond will swing views the other way. Perhaps it’s already happened. I’ll leave the final word to Peter Costello, the former Australian Treasurer, at the second Australia New Zealand Leadership Forum in April 2005 (“Crisis”, Bollard, 2010, 26):

“You guys in New Zealand have to get real. If you want to be part of a single economic market with us you can forget having your own banking system. Remember, you sold your banks to us: you don’t own your financial system any more. Leave the regulation to us”.

Strewth!!

“

Eat Well: Building a healthy society

On a weekend where The Green Party laid out its vision for NZ, I came across an article in the “Weekend” magazine section of the Press about junk food, schools and kids eating poorly. The article, by Paul Christensen (I’ll try and get a link to it), reports on concerns about child obesity and how some schools are taking action by growing and cooking their own food.

As Russel Norman noted in his address to the Green Party,

“There are 20,000 New Zealand children going to school each day without food, or shoes or raincoats”

This is a major issue facing NZ. Poor health and nutrition impacts hugely on the ability to learn and on general outcomes in life. As Jamie Oliver has shown with his Food Revolution, starting early in schools can change behaviour before it becomes embedded and beyond repair. The Sustainable Kids Programme has been a real winner so far but we need more of this. Sadly the National Party over turned a previous policy on health eating in schools. It’s these types of programmes that are being slowly squeezed in the name of cutting spending. This is the classic mistake many governments make when trying to cut costs….they don’t realise that this ends up costing us all more in the long run.

We should be investing hugely in our children. In an employment constrained world, in an outsourced world, in a world of highly competitive manufacturing, we need our people to be as well as possible. They are our future. If we are going to develop a hi-tech, productive and efficient economic system then we need smart kids with good habits and a good understanding of how systems work. Food and nutrition is a perfect example of where this kind of learning can come from. If you ever seen the faces on children who have grown their own food and then cooked and eaten it then you will know what I am talking about.

We are in severe need of new jobs. Well here is a start: get every school a food and nutrition specialist, with a garden alongside. Make it a core part of the curriculum. It’s as important as P.E. (if not more important according to research). I would love to see all schools with a canteen, cooking and supplying a healthy lunchtime meal. For some children this may be the most important meal of the day. Now imagine how many jobs that could generate (with 2000 primary and secondary schools in the country).

The main argument against this approach has been of interfering in what should be a parental responsibility and also taking away to choice to eat crap, unhealthy food. Well my response to that would be to argue that schools have the advantage of scale: they can teach many kids at once. Scale is the pathway to efficiency. The most efficient way to get healthy eating into our society is through our schools and our children. They children will then take that back home and slowly change will take place.

It’s this type of vision that we need to see. Hopefully the Green Party will be the ones to bring it to the Parliamentary table.