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Labour Leader Hipkins today said that Winston Peters' remarks about the government bribing the media "weren't acceptable" & "potentially in breach of legislation". The bribery claims relate to the $55 million Public Interest Journalism Fund. However that fund has little to with the true extent of the bribery. The evidence shows it works primarily through the vast amount of advertising which the government pours into the media on a daily basis.

So how does scientific research contradict Hipkins? In one of the world's top economics journals, Harvard Professor Rafael Di Tella shows there is a direct link between media outlets receiving government advertising revenues and the biasing of their stories in the government's favor.

His article is called, Government Advertising and Media Coverage of Corruption Scandals. Di Tella writes, "... We construct measures of the extent to which the four main newspapers in Argentina report government corruption on their front page during the period 1998-2007 and correlate them with government advertising. The correlation is negative. [That is, a greater dependence on advertising reduces the extent to which the media outlets focus on misdeeds by the government]. The size is considerable" ... "Overall, our findings are consistent with a model where newspapers bias reporting in favor of the government in exchange for transfers".

Take just one example of government advertising spending in NZ, namely related to Covid. An Official Information Act (OIA) request showed that "A total of $87,657,993 has been spent by DPMC on public information campaigns in support of New Zealand’s COVID-19 response between 1 March 2020 and 31 December 2021". Add that $90 million to the $55 million journalism fund and you're on your way to $145 million. That is the tip of the iceberg - huge numbers of government job advertisements are also placed in the media. By the way, the OIA above also stated, "I am therefore refusing your request to have this information broken down by medium", so "they" have made it impossible to get the data in NZ linking the ads to outlets that are government friendly.

Is Hipkins arguing that the truth is not acceptable?


In NZ's old first-past-the-post political system, we knew what the government would be on election night. The winning party assumed power based on a bunch of promises, most of which it was free to dump in the future with the defense that "circumstances had changed". And that may have well been true. Maintaining flexibility can be a virtue since it allows one to adjust policies as new information arrives.

However under MMP, once a coalition agreement that binds all parties has been drawn up, it becomes difficult to renege on the plans made in that document. Since if one party tried to dump a part of it, then the other coalition partners would be affected and may not agree.

The upshot is that the coalition agreement which National, ACT and NZ First are about to sign effectively binds them to a committed course of action over the next three years. Renegotiation would be hard. Let's say, for example, the fiscal situation is found to have weakened in a few weeks time and inflation is up again, making National's tax cuts less tenable and its original desire to raise revenues from foreign buyers more important. It could hardly renegotiate the agreement with ACT and NZ First that may have locked in the those cuts and dumped the foreign buyer tax.

Is commitment good or bad? Whether policymakers should commit to a certain course of action or have flexibility to change is a central question in economics, particularly regarding monetary policy. Reneging on a promised route can lose you credibility, but having one's hands tied so you can't change course depending on incoming information can also be dangerous.


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Robert MacCulloch

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