Bernard Hickey details the key news over the weekend in 90 seconds at 9 am in association with Bank of New Zealand, including news that Finance Minister Bill English thinks it's likely the government will have to increase its borrowing to help pay for the Christchurch earthquake rebuild.
See more here from Alex Tarrant.
The government pledged in December it would borrow NZ$13.5 billion in the current fiscal year.
The government must now decide whether to borrow overseas to help rebuild or impose an earthquake levy on local taxpayers.
English has said he would prefer not to impose a levy, but has not ruled one out.
He also said the government would struggle to handle a third such 1 in 500 year earthquake.
Meanwhile, chaotic scenes are being reported in Libya with tens of thousands of refugees rushing the borders.
Some western airforces have flown in to evacuate their citizens from oil installations.
Oil production has almost halved.
Meanwhile in Ireland, voters wiped out the ruling Fianna Fail government and appear to have replaced it with a coalition of Labour and Fine Gael, which has pledged to renegotiate bailout loans from the European authorities. See more here from The Telegraph.
This could cause turmoil on international markets.
The New Zealand dollar was steady around 75 USc over the weekend, but continues to be near record lows vs the Australian dollar.
See more here from David Chaston.
No chart with that title exists.
58 Comments
Dont know about the 1in 500 year bit. From Memory, Wellington got hit in 1840, this quake lifted the present airport out of the sea and leveled the hills enough at Petone to build on. Napier quake was in 1931 and now Christchurch. In between some good quakes in other areas without as much loss to human life. Looks like a once in every 80 to 100 years we get a good quake.
AJ- repeat after me "We must not frighten the horses"
They already know most people can't count - look at the teeming hordes who hocked thenselves for 100's of thou, adding to the number of loos in their houses, and installing planned-to-be-obsolete weet-bix kitchens/bathrooms.
Or who dominoed 10 houses levered off one, hoping for an 'income' long term.
They'll accept three 1-in-500 year events in a year, if announced in soothing tones, and the announcement contains a promise of everlasting life - sorry - endless economic growth (I keep forgetting the religion changed).
The government must now decide whether to borrow overseas to help rebuild or impose an earthquake levy on local taxpayers.
No, there is a third option - which requires neither of the above and is interest free;
Time we stood up as a nation and did this our way.
With all the major damage covered by insurance and even EQC well covered by reinsurance, let's hope all donated money to relief funds actually goes to the people most in need - how this will all be allocated will be interesting to see and let's hope very little is swallowed up with administration costs. Would be good to see some big donations from more of the nations rich listers - only one I have heard of is Owen Glenn. Has Sam Morgan donated yet?
No need for a levy according to EQC chef. EQC is very well funded and reinsured, City council infrastructure damage is insured, so are the assets of the lines companies, etc, etc so an call for a levy is premature and most likely unecessary.
The EQC stil has $3 billion of assets as well as reinsurance contracts to cope with future disasters. The fund is expected to pay out $1.5b on residential homes and reinstating the land under them - after it has met the first $1.5b international reinsurers pay for the next $2.5b of claims.
EQC chief Ian Simpson says that despite calls for a rapid recapitalisation of the Natural Disaster Fund, the cover in place means that a recap is not an immediate priority.
http://www.stuff.co.nz/national/christchurch-earthquake/4709216/EQC-holds-funds-for-two-more-quakes
and the City Council is also well and truly covered:
http://www.stuff.co.nz/national/christchurch-earthquake/4709213/NZs-biggest-insurance-claim-ever
Civic is the trading arm of New Zealand Local Government Insurance Corporation (NZLGIC), which is owned by 59 local authorities spread from one end of the country to the other.
Civic and the Local Authority Protection Programme Disaster Fund, an associated entity within NZLGIC, have insured Christchurch City Council's above-ground assets such as buildings and their contents, and below-ground assets such as sewerage and water reticulation networks.
Civic specialises in providing local authorities with all manner of insurance cover and although the cheque it hands over to the Christchurch City Council as a result of damage caused by Tuesday's quake is expected to be the biggest payout made by any insurance company to a policyholder in this country, most of the money is likely to come from overseas. Civic reinsures its business with overseas insurance companies that are expected to pick up most of the bill for claims arising from last week's tragedy.
Civic Assurance general manager finance Roger Gyles said he did not expect there to be any problems with the overseas reinsurers meeting their payment obligations because the companies Civic reinsured with all had A (excellent) or better ratings.
and government etc:
Utility providers also covered for earthquake damage and the government no doubt covered for damage to schools, Housing NZ properties, infrastructure etc.
What will be needed is at least a 0.5% to 1% cut in the OCR and maybe further tax cuts in order to stimulate us out of recession 2.
I think government needs international help as JK said as the costs is going to be far too much for NZ. Here is an example..no insurance in CHC for at least 6 months (Car included) , 18 Schools with serious damage (will they have NCEA in canterbury this year?) , 50 thousand workers displaced, a number already told there jobs have gone, estimate 8 thousand homes completely gone (where do they go in between), thousands Kilometers of roading gone , two major Malls destroyed, to try and get your head around this and the cost is mind blowing.
A third earthquake in large magnitude is highly likely. It appears NZ is now entering a time of great tectonic activity. The chances are high. Like domino's one serious event can lead to many others. I think Key and Bill and Bob better start getting real about this situation.
Imagine how much better CHCH would of been had every home been as independent of city infrastructure as possible. From independent power sources to independent sewage (composting loos) and water collection or water wells. Too constantly spend billions on primative infrastructure that will only fracture everytime we have these events just seems utterly stupid. Off the grid homes make so much sense in such prone places do they not?
As for liquifaction,building a city on what was originally wetlands and old river bed was not the best idea in hindsight.
Completely agree - innovation and difference; an entreprenurial approach. But entrepreneurs need capital to make new visionary living spaces happen, and we have the opportunity in light of the GFC and the general fiscal mayhem worldwide to look to ourselves for a solution to create that capital on an interest free basis.
The world is "broken" - no sense in asking other broke nations and overtaxed, overworked, overstressed, overleveraged citizens to help us out. We need to just get on with a sovereign solution whilst we still have a semblance of sovereignty.
Create our own interest free capital. By pass the banks. Gvie the finger to the squids and vampires.
I agree Kate. There is so much that could be done with interest free loans. I have always thought that interest free loans could be made to households to install solar heating. A lien could be placed on the house and when the house is sold the Government gets the money back. Before anyone laughs and talks of Australia. It was the implementation of the idea that was wrong not the idea itself. You have to have certified tradesmen doing the work and certified tradesmen inspecting the work.
FCM - we cannot let the government get away with a levy when the bulk of the quake damage is covered by insurance. Even the EQC chief and City Council are quoted as saying they have ample insurance.
If they keep talking about a levy then less people will be inclined to donate funds.
Perhaps they should reverse last years tax cuts or not have created them in the first place?
It's the infrastructure that has been smashed, it will costs billions, and with 50 thousand people not working, 18 State Schools are badly damaged , the lost revenue will be huge, let alone the SME's that need cashflow will be letting people go they will go on a benefit if there are no jobs here (which there wont be-unless you are a builder, admin staff) , insurance for houses is one thing but there are a lot of other big issues that will effect all NZers one way or another.
The levy i believe is a ploy to fund other things. Like every event of this nature governments around the world look to exploit the taxpayers during such fearful times . Look around at the coverage and you will notice the 'stage managing' going on. Don't think for a second that Bob & Co has not got a public consultants firm standing right behind him helping control the messages. Pike River included
So......... you believe such events aren't stage managed? Point taken. That's all you had to say. As for your insults they roll right off. I think it's sad you can't remain objective during such times. Too impose or even peddle the idea of a 'levy' on the whole country is simply a stupid idea when private insurance should cover the majority of costs. Isn't that the purpose?
The only evidence required Rob is to look at the banking system, mmm lets see lets create some invisable nonexsistent stuff based on nothing sell it ie: naked positions, on a global scale....whoops looks like that fell over, still the tax payer can bail out my PRIVATE BANK and ill give myself a million dollar bonus...?
Logic says this is endemic in all professional walks of life, most if not all big business and part of the staus quo approach used by all elites and that includes the bankers number one man down here Key.
Remember the last thing any corporatist model wants is change especially if it means a decentralisation to a local level rather than the present consolidation with illusionary competition...
It would seem to be fact rather than conspiracy!
The other thing Rob fails to accept is that many insurance companies have very rich shareholders, some of which hold public office, hint hint, who care very much about those investment portfolios, hence the reluctance to make these firms pay too much now or in the future. No... lets steal a few more pennies from taxpayers first.
Agree but its not just Rob it's a majority. It comes down to a failing to understand the true nature of the systems they havn't really signed up to such as the fiat banking model + interest imo. Insurance under its current guise is just another off shoot of banking for parasite CEO's and there gang of henchmen
"did you read the fine print under the small print!"
why do people fail to see the ulterior motives when some are so blatantly obvious? It's like they just don't want to admit to being played like 'pawns'. We fail to recognise liars, cheats and crocks every election and THEN all act surprised when they fail us term after term. People seem to vote on the basis on who has the nicest brochure, they read it, But fail to read 'between' the lines.
the humorous thing about you conspiracy nutters is you can never produce facts to back up your arguements...just your own weird interpration of things and websites you've read....quite what all this cant about global banking has got to do with my original objection to your comments about Mayor bob parker and johnny key being glove puppets for some PR group during this current calamity, is a mystery.
but then you Illuminati/ New World Order freaks are always seeing shadows ,aren't you.
i know how the Bilderberger group, the Trilateral Commission, CFR etc works and they are a pack of dangerous, self serving greedy bastards as is that private organisation known as the Federal Reserve....but to extrapolate this down to Chch is a bridge too far...
FYI, a statement out from Perpetual Group this morning:
"As a consequence of the Christchurch earthquake on 22 February, Perpetual Group’s Christchurch offices have been destroyed with 10 team members trapped inside.
Our first priority remains the health and safety of all our team members and their families. We are actively working on full support for those people.
New premises have been secured and will be operational from Monday 28 February. The Premises are alongside PGG Wrightson in Waterloo Rd, Sockburn, Christchurch.
Perpetual’s business continues with fully operational backup systems for records and business systems. Our eight other offices nationally have been allocated service tasks to remove the load from Christchurch until the local office is fully operational again. These offices have teams of client consultants and advisors that will provide full services to Perpetual’s Christchurch clients.
Perpetual has been in business for over 125 years and our team are very determined to overcome this dreadful experience."
Justice - you are onto something there - rainwater collection tanks, solar water heating, large twinpack bottled gas systems instead of mains, composting toilets, etc should all be mandatory in the rebuild process along with steel framing and lightweight roofing (ie no more tiles) in homes and limiting the CBD to two or three storey construction. Maybe a generator should also be part of every home.
And Fraemohs homes which are just about earthquake proof:
The 1/4 acre dream was really about necessity to grow some food for your self. Not only that its far better to have a bit of space around living conditions. Who wants to cramped up in rat cage size apartments in hard times these places become inner city slums...
Anything that removes you from the GRID is not part of the economic growth model or what you could call hydraulic despotisism " you want our power you pay the bill"
If everyone had solar water heater, photovoltaic's with a invertor (forget the batteries) and could manage on there own up to a point, how would the CEO's of Mighty River power etc afford the flamboyant life style of the rich and parasites, and trophy wife with a wardrobe full to overflowing of $500 pairs of shoes?
AJ, a guy in our neighbourhood installed a domestic wind turbine on his roof, installed LED lighting throughout his house together with 2x12 volt car batteries and got all his lighting for free. The batteries were only for excess storage when the wind wasnt blowing. Cost of turbine $355. A bit of vibration, but he was solving that last time I spoke with him. That was with a 1 metre mast. http://www.jaycar.com.au/productResults.asp?keywords=wind+turbine&keyform=KEYWORD
AJ- PV panels are getting cheaper by the day - I've seen 100 watters for $650. Generic but so what? (So watt?)
I don't use inverters - the only argument against low voltage is that it loses volts in transmission (correct) but thick wire - we use 3x 10mm wires up from the pelton wheel, and into the house, 6mm twin branch distribution, smaller from there.
Inverters are cheap too - Jaycar (online if not local), Super Cheap Auto. No need for sine-wave, but the squared-off ones (simulated sine) tend not to do chargers and alarm-clocks well.
I guess you're looking at running your existing house, just from alternate means - what about a secondary system - say a 12/24 volt fridge out on the garage, and LED lights?
We bought out LED's loose in bulk (10mm super-brights, from BESTHONGKONG.COM.
They arrive by the hundred, couriered and tracked, less than a week. Nary a dud yet. As they're 3.2 volts apiece, I solder 4 in a 'chain', and make up a ladder, using multiple 'chains' (series parallel) with each side of the ladder being a bare wire (12v + and -.
Anything below 50 volts doesn't need a permit - and it's a lotta fun.
Alternatively .. A bit of electricity trivia .. mention it because haven't seen it mentioned anywhere, and usually when a loophole exists everyone is soon onto it exploiting it .. A friend in AKL hasn't gone solar, but gets his power costs down substantially by using http://www.powershop.co.nz constantly monitoring their special offers, buying heaps of kw/h when prices are down around the $0.10c per kw/h .. they install a smart meter which measures the power consumption by the quarter hour .. you can buy in arrears, or buy in advance .. if you buy in advance you can sell unwanted kw/h back at the higher price when the specials expire .. he is, in effect, a defacto urban electricity trader
Andrewj photovoltaics and invertors are the the same system with or with out batteries. So any good solar place. The batteries are the most expensive thing to set up so flag them. It means though at night you need mains to still run your house. Just google nz solar and you get quite a list...
Interesting to consider if every other house was contributing to the power supply during the day with everybodies meters running backwards supplementing the power usage during the day? Drawing off the hydro at night when required its called resource management.
Straight away many become energy providers, there are many obvious spin off benefits...
Simple stuff and would have been a nice nich industry and R&D project for NZ.
Imagine some people in CHCH at the moment would perhaps have some power during the day the list of positives would perhaps out weigh negatives which i cant really think of at the moment....
End Rant: lol.
Exactly, hence we have governments and councils who purposely discourage self reliance until such events as this in the short term. Eventually they will go back to doing closed door deals with all the big parasitic companies making slaves of ever more people. "Off the grid" is such a dirty word to capitalists
Well, prices asked and paid for apartments in city centres around the world suggest that quite a lot of people do indeed want to live in that way!
Yes, if every individual was completely self-sufficient in power, clothing, food, healthcare, carpentry etc. there would be no exchange of goods or services, no specialisation or technological advance, no economy, no tax, no public services and nobody would get rich. In fact we'd all be grindingly poor and life would be nasty, brutish and short.
Speaking for myself, I prefer it that you are free to live in that way if you want, while I am free to engage with the rest of society and avail myself of others' expertise at food growing, power generation, clothes manufacture, medical care etc. if I want.
meanwhile across the ditch
"RBA's McKibbin warns on global price bubble
Published 7:17 AM, 28 Feb 2011 Last update 7:17 AM, 28 Feb 2011
QUICK SUMMARY | FULL STORY | ECONOMY
Reserve Bank of Australia board member Warwick McKibbin has warned Australia might be caught in a global bubble that could inflict more damage than the global financial crisis.
According to The Australian, Professor McKibbin says the current bubble in Asian property and commodities markets – once burst – could end Australia's record high terms of trade and push down the dollar. This would see the central bank under pressure to fight inflation by raising the official interest rate despite falling export prices.
"This is shaping to be much bigger than 2004 to 2007," he said in comparing the new excess of global liquidity with the recent bubble, which led to the worst global financial crisis since the 1930s.
Professor McKibbin further suggested that the bursting of the bubble could challenge the government's budget.
The RBA holds its monthly policy meeting tomorrow and is expected to keep the official cash rate on hold at 4.75 per cent, following the surge in oil prices after a week of political instability in North Africa and the Middle East.
The CHCH earthquake is another to add to the pile...let's look at it together...somehow the Govt has to fund leaky homes, SCF & two earthquakes..ouch it's not looking good, especially when the fiscal deficit is running at $13 Billion per annum..taxes will have to increase and this years budget will be a tight one...and throw in the fact that China and Aus have unbalanced economies and will most likely cause problems in the medium term...Interesting times.
Now add too that the price of milk! ;-) Your 100% right, this is not looking good at all, hence I believe this government MUST be watched incredibly closely. The free trade talks with the US for one. I know the likes of Monsanto want in here big time to control our seed production and take control of our agricultural 'IP' .
People must stay alert. FT with the US is only going to make us poorer
They are going to try it on regardless CO. All this talk about Pharmac is only the tip of the iceberg. NZder's are about to get shafted by this bigtime, hence the secrecy of the meetings where even the media are banned. i urge everyone who has trade connections to become whistleblowers ASAP on this!
CO, I was talking to a mate who works in the meat industry, he thinks we are only 2 years off all cutting being done in China or Korea(Talleys who own Affco already get their fish prcessed in Sth Korea). Its the only way we can stay competitive, he thinks the move may start quite soon. Think of the job lossses. Would invole thousands of people. Idiots like Acc charging Affco 1 mil to cover the 'work related' injury to a gang member shot in the car park, come home to rost and we all get a little poorer, untill we get to a tipping point.
Maybe by then Aj the effects of Ireland defaulting, the Middle East becoming a killing ground, China facing the first serious revolution this century and basically the world turing to c..p may also come quicker than anyone realised.
Christchurch events may just be the catalyst for a rethink of how we do things that is needed. But I won't hold my breath. I don't see any group of Pollies having enuf guts to do what needs to be done. Job losses will be great if meat processing shifts offshore - and in the very sector of society that can least afford it. As you say a tipping point will be reached.
Got the grandkids here from the UK. Their mum is trying to convince their dad to relocate. Living here would have many advantages she reasons - not least of all an assured supply of food from dad! I stay out of it, but am inclined to agree with her. If the world goes in to a depression family support here is much better. Meantime, I will just enjoy the littlelies while I can. :-)
"He also said the government would struggle to handle a third such 1 in 500 year earthquake."
Go back to school Bill....at least try to learn some history on quakes in NZ....
....1 in 30 sounds more accurate.
These events are the very reason several decades of govt ought to have done a dam sight more than set up the EQC and make sure they were safe inside the Beehive built to cope with an 8.2. Bugger all else in wgtn will be left standing.
It is also the reason why this economy should not have been allowed to deteriorate to the point where a disaster threatened the entire country....we have Beehive buffoons to thank for that.
So where are we now....already deeply in private debt and being farmed by the banks....with a govt hell bent of borrowing heaps....risking a downgrade and higher rates as a result...leading to a deeper recession....a fiscal hole into which the economy is falling fast....but heaps of spin about the tradeables sector saving us all....great things to come....just round the bend....chin up....stay cheerful. Then along came the Chinese with austerity and a decision to put the dragon's boot on the brake. Bugger.
No worries right Bill....just hype the spin....change the wording....and carry on dishing out the half million dollar salaries paid for by taxpayers....Where would we be without our very own club of Sir Humphreys?
BH...please could you post the list of civil servants on the top three pay scales showing what they collect.
Wolly, you're firing at the wrong target. Big spending Government is what New Zealanders have been voting for (and they're not the only ones). Frugal Governments get thrown out.
Civil service salaries are an easy targets but they're gnatspiss in the context of what the Government spends on WFF, NZS, KiwiSaver subsidies - large amounts of which go to people who don't really need them but who nevertheless vote enthusiastically for them, and squeal like pigs when they are threatened.
This is the conundrum: How can politicians win an election if they cut back on the lolly? And how can they cut back on the lolly if they don't win the election?
Ms de M - quite right.
This - in the big picture - points to the fact that we're a doomed species.
Every time we have a financial set-back, we will sideline everything else to fix it first.
This was actually an episode entirely brought to you by Mother Natrure, and the laws of physics.
We're worrying about money - an entirely artificial, man-made, energy-underwriting-requiring, construct.
And we're according it top priority.
On that basis, we're history.
I see comments on BH's article in the Herald that call on Bollard to cut and cut big...to save the economy!...so little is understood by so many on this score....targetted govt aid to Chch is required...not a free for all burst of cheap credit for all who would get some...most wouldn't...the banks would not cut by the same amount and only those on floating would benefit...yet everyone would cop a thrashing at the pump and in the shop as prices jumped because the Kiwi$ would drop and imports cost more...
A cut would steal from those who saved...those who didn't do a credit based splurge...and encourage savers to move capital offshore whenever the Kiwi$ blipped up....already the rates in aus are better than here....
So who would gain....the exporters would see more Kiwi$ but many hand it directly to a bank and the ones with "lazy balance sheets" would invest it...probably offshore.
I suspect the reason for the way many people think is they read the word "cut" and they translate that into a better deal for them on their debts...while not thinking about the extra cash they will give the petrol companies plus gst and carbon tax on top....
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