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Newshub report, "The Health Minister [Ayesha Verrall] is in another political neutrality mess after Te Whatu Ora paid for a puff profile of her in a southern newsletter". [That is, an article about how great she is]. Verrall called the piece an "inappropriate use of public funding" & "ordered the advert of her taken down after questioning from National".

She misses the point, as does Newshub when it states, "The cost of the profile didn't incur an extra cost".

So what is the point? In an important article, my old economics co-author Rafael Di Tella at Harvard Business School discovered how government advertising in the media causes those same outlets to refrain from exposing bad things about politicians.

As we reported in a previous blog, his paper, "Government Advertising and Media Coverage of Corruption Scandals", quotes from a non-government organization which wrote a report on the issue, saying: "We found an entrenched culture of pervasive abuse by provincial government officials who manipulate distribution of advertising for political and personal purposes … The effects of such abuses are especially insidious when public sector advertising is critical to the financial survival of media outlets".

What has been exposed in the present case is that the monthly costs of just Te Whatu Ora's publications in a few outlets we now know about (Otago Daily Times, Star Dunedin, Clutha Leader, Southland Express, Oamaru Mail, Wanaka Sun) is $14,000. Those outlets know that if they criticize that agency, the advertisements may be pulled. The issue of "puff profiles" is a red herring. The economics evidence supports the idea of a dark threat underlying such ads: don't attack me, or else you will go hungry. Hence the link to media bias.

I tried finding out the extent of such public advertising, with help from the Taxpayers Union, but gave up. Why? Since it is so vast, spans so many government departments, agencies & God knows what else, and the information is so hidden, it would require thousands of Official Information Requests. We will never know how much bias it has created.


This blog is comedic. Newshub report that "Banks are back under the microscope as the Government faces mounting pressure to investigate their eyewatering profits. The PM has confirmed a market study is being currently considered". The Reserve Bank said banking should be a focus for a market study similar to what occurred for supermarkets.

I'd like to ride the consulting gravy train so will offer my assistance to help answer the PM's question. My fee is ten bucks. Here's the answer to why bank profits are high: Adrian Orr.

It works like this: the past month our private banks have held $53.97 billion in their cheque accounts at the Reserve Bank (which calls them "settlement accounts"). Where did it come from? The Governor's Quantitative Easing (money printing) program. He claims those who say QE caused losses are making "noise" over an "accounting" entry.

Well, I will let you in on a secret - the interest rate on those settlement balances is now 4.75% (the Official Cash Rate). That's $2.6 billion per annum. Meanwhile the trading banks are paying you 0% on your Cheque a/c (whilst getting 4.8% on theirs). It's a $2.6 billion annual wealth transfer from the public to the banks. Enough to rebuild Gisborne.

Easy money if you can get it. Unfortunately you need a banking license from the government to be in on the scam.


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Robert MacCulloch

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