Here's my Top 10 links from around the Internet at 11 am today in association with NZ Mint.
As always, we welcome your additions in the comments below or via email to bernard.hickey@interest.co.nz.
See all previous Top 10s here.
My must read is #6 from Reinhart and Rogoff, which I'll leave as the last word on this topic for the week. They make some great points about debt, Keynes, investment and interest rates.
1. China's slowing growth - Peter Hartcher is an old hand when it comes to looking at China from an antipodean point of view.
He has a good look here at SMH.com.au at what the new leaders are up to.
Now that China is our largest export partner, we should care too.
Growth is slowing, and quite quickly.
And it's what their leaders want.
And they often get what they want.
The new era of moderation shocked the world when it turned up in China's economic growth figures two weeks ago. After three decades of extraordinary economic growth, and after a decade at the breakneck pace of 9 per cent a year, outgoing premier Wen Jiabao declared such growth was ''unbalanced, unco-ordinated and unstainable''. The new growth target he announced for last year is 7.5 per cent a year. Yet when the statistician announced two weeks ago that China grew at an annualised rate of 7.7 per cent in the first quarter of this year, share markets worldwide slumped.
The Australian dollar, seen in global markets as something of a proxy for Chinese growth, fell by US1.13¢ against the US dollar. So the economy was doing what China wanted, doing what they had announced, yet investors were shocked and disappointed.
Why? The world investment community had talked itself into expecting that China's new leadership would start a fresh investment binge. But it did not. ''As a result, fears of a hard landing once again regained momentum,'' says Yiping Huang, an economist at Peking University and the ANU.
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2. An Aussie banking bubble - FTAlphaville reports on a UBS research note saying Australia's banks are over-valued.
Here's UBS:
The Aussie banks are very good companies. They are profitable, resilient, well capitalised, well managed, shareholder focused and have a very strong industry and regulatory structure. However, following the significant leveraging of the Australian & NZ households over the last thirty years they are now low growth and remain heavily exposed to housing, funding markets & unemployment risk.
As with all asset bubbles, they can go higher and for longer than many expect. With a solid near term earnings outlook there is nothing stopping the market bidding dividend yields in to ~4.5% (historical lows) implying about 10% share price upside. As Chuck Prince (former CEO of Citi) famously said “As long as the music is playing, you’ve got to get up and dance”. All we can say is buyer beware.
3. A bubble, but not just yet - Here's Shane Oliver from AMP quoted in the Sydney Morning Herald that it's not quite the right time to jump off the bank shares bandwagon.
Yet.
He has a point when saying the banks are very profitable and getting more so by the day...
Careful with that timing though...
For Shane Oliver, chief economist at AMP Capital Investors, there is a risk of its becoming a bubble but "we are not there yet". The banks are well managed and increasing their profits. One risk would be if interest rates were to rise. But markets are expecting the next move in interest rates to be down.
Oliver said economic activity remained weak. Further weakness could increase the banks' non-performing loans and defaults as well as slower lending. But the rise in bank share prices was not even remotely like the bubble in dotcom stocks in the US in 2000, Oliver said. Those technology companies were not even making profits and their shares were trading at astronomical valuations.
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4. Lots of Ms Moneypennies in Takapuna - The Daily Mail has an interesting article about a Welsh phone answering service that has sent four of its workers to live in Takapuna to work the night shift.
It seems there should be a huge opportunity for New Zealand to be a location for these sorts of overnight call centres for British speaking Northern Hemisphere countries.
When customers asked for a 24-hour service, the firm asked its employees to work nights but nearly all proved reluctant. Out of 280 staff members, only four said they be willing to work after hours - but 40 were prepared to relocate abroad.
Bosses also realised that having all employees work in the daytime meant they would stay healthy and have a better attitude to work, meaning they would serve clients better.
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5. Leakage - The Australian Tax Office has issued a research paper on the problem of 'tax leakage' from multinationals using techniques such as the Dutch Sandwich.
''The global reach of multinational enterprises, along with the developments in information and communication technology … provides them with a high degree of flexibility in how to structure their affairs.''
The impact of the global financial crisis on government tax revenues around the world had triggered greater attention to elaborate tax minimisation strategies, such as the so-called ''double Irish-Dutch sandwich'', which companies such as Apple used to avoid corporate tax rates in Australia.
However, it admitted it had insufficient data to measure the scope of tax avoidance committed by multinational firms, which are able to exploit gaps in the international tax system through complex ownership structures. ''These developments raise serious concerns about the efficiency, equity and sustainability of the income tax system.'' It called on submissions that addressed possible solutions to tax erosion and any data that would assist the Tax Office identify profit shifting.
6. The last final word - Here's Reinhart and Rogoff with their final last word at the FT on the government debt debate in the wake of their spreadsheet error. They say they don't mind governments borrowing to invest.
And they make some good points about debt restructuring.
Given current debt levels, enhanced stimulus should only be taken selectively and with due caution. A higher borrowing trajectory is warranted, given weak demand and low interest rates, where governments can identify high-return infrastructure projects. Borrowing to finance productive infrastructure raises long-run potential growth, ultimately pulling debt ratios lower. We have argued this consistently since the outset of the crisis.
Economists simply have little idea how long it will be until rates begin to rise. If one accepts that maybe, just maybe, a significant rise in interest rates in the next decade might be a possibility, then plans for an unlimited open-ended surge in debt should give one pause. What, then, can be done? We must remember that the choice is not simply between tight-fisted austerity and freewheeling spending. Governments have used a wide range of options over the ages. It is time to return to the toolkit.
First and foremost, governments must be prepared to write down debts rather than continuing to absorb them. This principle applies to the senior debt of insolvent financial institutions, to peripheral eurozone debt and to mortgage debt in the US. For Europe, in particular, any reasonable endgame will require a large transfer from Germany to the periphery. The sooner this implicit transfer becomes explicit, the sooner Europe will be able to find its way towards a stable growth path.
“There is a huge tax saving for Apple in borrowing the money rather than bringing it back to the US,” said Kevin Phillips, international tax partner at Baker Tilly. “The company will keep getting that $100m or so tax credit every single year.”
Gerald Granovsky, an analyst at Moody’s, said: “If you assume the statutory 35 per cent corporate tax rate, based on the data available and on a back of the envelope calculation, to generate in the US the equivalent of $17bn the company would need to repatriate $26bn.
“That is less attractive than paying the $300m in interest attached to this bond sale,” he added.
9. Still too big to fail? - Matt Taibbi reckons the momentum may finally be shifted to regulate or break up the really big US banks.
52 Comments
About Auckland's future transport needs/problems- and then extrapolating the simple solution to the rest of NZ.
Why are McDonalds playgrounds free? Why are McDonalds toys for kids free? Why do they provide clean bathrooms? Because they give things away and provide free services in order to ultimately do well financially. And they do, do well financially
The roads and bridges in Auckland (and NZ) already exist. They are crowded because people are misusing their cars. (Cars should be used for trips to out of the way places or for picking up or delivering goods or for travel at odd times of the day or night, for going on holidays or adventures). Cars should not be used for commuting. It is stupid.
Building more rail lines, roads and bridges- or bulldozing housing/bush/farmland to build rail-lines, roads and bridges, JUST because we are misusing our wonderful cars (for a purpose that they are hopeless at, commuting), is compounding an error
so
(1) Buy/build thousands of modern buses. The seating must be as comfortable as the front seat of a modern car. We could look at hybrid buses for the inner city (diesel electric). The bus ride is now as comfortable as a car ride.
(2) Make all fares a gold coin donation, (we are a South Pacific culture) thrown into a funnel. No mucking around with tickets. No one is excluded. Taking the bus suddenly becomes way cheaper for everybody than driving. (It is much cheaper for me to drive my car that to take the buses in Dunedin)
(3) Have fast, free wifi on every bus. Taking the bus is now relaxing and entertaining
(4) Have bus company vendors get on and off of buses with coffees, sandwiches, pastry, sushi, cold drinks etc. There could be depots along the main bus routes so the vendor could get on the bus, ride for so many stops, get off at another depot, replenish supplies and catch another bus back to the original depot. The bus company could make the majority of its income from selling food and drink and bits and pieces. The bus is now a place to have breakfast or lunch or even dinner or late night food.
(5)People still have to walk to the bus and from the bus to their destination- so the use of buses becomes a key in the battle against obesity, diabetes and heart disease (metabolic syndrome)- ALL of which respond positively and quickly to regular physical exercise. Design exercise into our daily lives- do not make it extraneous! The savings in health care costs will be billions of dollars. Also, there is a correlation between exercise and increased productivity (It helps the NZ curse of brain fade).
(6)Our present digital culture is increasingly isolating people. Watch the hundreds of thousands of people sitting alone in their cars, listening to the radios, getting frustrated and wound up in traffic, as they commute to work/activities. Increased use of buses will decrease isolation and stress. We are social animals.
(7) We will use our fuel stocks more efficiently, our balance of payments will improve, CO2 emmisions will decrease (delaying the Appocolypes) helping us meet any climate change promises we have made, air quality in cities will improve, (decreasing lung disease)
I read that Government were projecting spending something like $60,000,000,000 for Auckland's transport needs. Why not spend $1,000,000,000 (2000 $500,000 buses (very nice buses!) and we could use some of the saved $59,000,000,000 to rebuild Christchurch.
This is my proposal. If anyone has anything to add or to question, please pipe up!!! Everyone can still have their cars for tasks that a car is good for (holidays- adventures- pick up delivery). When we do use our cars, it will be more enjoyable- because the roads will be uncrowded (except fopr the beginning and end of big holidays)
Send this to Len Brown
http://www.telegraph.co.uk/finance/comment/10028288/HS2-is-already-obso…
Very interesting article. Some of the commentary is even more so. The writer seems oblivious to the notion that exponentially increasing the number of passenger cars on the roads might not be seen as a great idea by some people.
Nevertheless he points out some interesting consequences of the technology. If it could be combined with a move toward communal car ownership, and if the complex problem of transitioning from the current chaotic mess to a computer controlled network is overcome it could be the future.
The key is too make the bus trip as comfortable as a car, more relaxing, experiencially richer and much much cheaper than driving. Who wouldn't want to get driven to work as they drink coffee, munch on a donut and watch youtube on their tablet? What a life! And it costs bugger all!
L to S,
A well thought out piece.
For Auckland, which really does have some bad traffic issues, the intelligent debate I think is buses vs trains; and I confess to not knowing the answer. The buses we have in Auckland are already pretty good quality, and I'm not sure that people are not using them because of cost. Indeed they are relatively well patronised I believe. Your donuts are tempting, but probably not necessary. The main pluses for them are flexibility of route and probably lower capital cost (unless new roads and tunnels are required for them); the downside is they have to use the already clogged roads. And as those roads become more clogged, both the buses and cars using them don't work.
Other large cities with traffic issues seem to have trains as a core part of the solution; and if we are going to end up there, better start sooner rather than later, or we will never get there.
Am not sure where you got the $60 billion from; maybe a full systems of roads, buses and trains would cost that over time.
At present the government is building one road in Auckland- linking the SW motorway to the NW one; and I believe that was committed to under the previous government.
Otherwise on all things Auckland the government seems determined to spend as little as possible. Smith wants to ignore the new City Plan, and open up lots of farmland, that we Aucklanders would then have to pay to have connected. Adams wants to wait three years before it can start, clearly hoping the Council are kicked out and replaced with National cronies in the meantime. Both would make Humphrey proud. And not a cent for transport issues. The big government money is going into provincial roads, which are far more important it seems.
Well said Stephen L too. I think Labour/ Greens need an integrated housing, land and transport plan for Auckland and Christchurch (our two biggest cities experiencing the most housing inflation). This plan needs to co-operate with the respective councils and city residents. Basically Wellington needs to do a deal with Auckland and Christchurch residents. So far Key has not been interested
The big government money is going into provincial roads, which are far more important it seems.
The big government money going on the National Roads of Significance:
- Puhoi to Wellsford – SH1
- Completion of the Auckland Western Ring Route – SH20/16/18
- Auckland Victoria Park bottleneck – SH1
- Waikato Expressway – SH1
- Tauranga Eastern Corridor – SH2
- Wellington Northern Corridor (Levin to Wellington) – SH1
- Christchurch motorway projects
The first three benefit Aucklanders and even the Waikato Expressway has benefits for Auckland so, I fail to see how Auckland is missing out on govt roading money. I would love my gravel road to be tar sealed. ;-)
Casual Observer,
Fair comeback; I had forgotten about Victoria Park. Was it a National government initiative?
Am sceptical of the business or even social case for a new motorway from Puhoi to Wellsford, and if that is being done to win over Aucklanders, then I suspect it is an ill conceived project. Especially if there is an opportunity cost in constraining development of solutions to traffic congestion in the City.
That aside, although I don't understand the details, am personally comfortable the roads on the list are progressed. I do believe that traffic congestion in Auckland will need addressing at some stage; and the government seems determined to kick for touch on that.
By the by, why does Transport New Zealand seem to deliberately keep the cost of each of these roads very opaque?
This website merely seems to list each of them as costing more than $100 million.
Hi Stephen L.
I was thinking about using what we already have effiiently- and we already have lots of roads. When I drive into Dunedin from Port Chalmers in the morning, there are hundreds of cars with one driver heading to work/University. Comfortable, cheap and regular buses would entice most people to leave their car at home. A bus can hold 50 to 70 people- so that is theoretically 40 to 60 cars off the road for every bus at rush hour?
It is like removing incandesent light bulbs and replacing with energy efficient bulbs. It is simple and scalable. Replace the most used bulbs first. (Start putting the modern near-free buses on the busiest routes first- and work outwards- ironing out problems as the plan is rolled out
It all comes down to how you do the accounting. For instance, do you view a well-used gym membership as an expense, or an asset? It is an asset when you account for greater enjoyment of life, longer life expectancy and better health (all with a monetary value). If you figure out how much encouraging people to use virtually free buses will save the country- then it is not a cost, but an asset. (the Government can then sell it to an Aussie Superanuation Fund, NOT).
Road repairs will diminish. New road builds can be delayed or scrapped.
What is the value of all road crashes that won't happen? The people who won't die?
I cannot understand what is attractive to anybody about light rail? The railcar is stuck on the rails (can not go around congestion, crashes), the rails/stations do not yet exist, the technology is exclusive- (there are hundreds of bus manufacturers). If a bus does not work on one route, you change the route. If the bus does not work in one city or suburb, just drive it to another city or suburb. When the buses get worn out, sell them to house busers for mobile homes.
Tokyo has a good rail system, but it is already an intregal part of the city- Large swaths of Auckland would have to be bulldozed to put in light rail. why would you en=ven consider that? We should efficiently use what we already have!
In general a well thought out idea. The one concept missing though is mixed use. Rather than worry about roads you condense living, working, shopping, entertainment, shools etc into the same area, walking distance same area!. The research has been done and people don't like to walk more than 2 blocks (200m) or 2 1/2 at the outside. You do this you keep the density of people in the sweet spot for a greater portion of the day and brings a community closer together. This has immediate spin offs in the reduction of crime and other anti social behaviour. Heck it even brings about greater accountability from leaders.
Hi
Scarfie
I completely agree with you. I read a book called "a Pattern Language" by Christopher Alexnder, a Prof at Berkeley Uni. He is saying the same thing as you are.
http://en.wikipedia.org/wiki/A_Pattern_Language
It is a beautiful read!!
Having a robust public transport system is absolutely key to approaching the future, what ever may occur,- prosperity, stasis, decay or collapse! It is very important that what we do is scalable, flexible and affordable. What seems to be on the table is expensive, all or nothing, and inflexable- a recipe for disaster! (study the economics of the Dunedin Stadium- a slow motion train wreck for our lovely city)
You are preaching to the converted there LtS. I have paused my Architecture studies to concentrate on other things so I have Urban Design under my belt as well. I have "A Pattern Language in my bood shelf and it should be mandatory reading for anyone involved with housing (listening Hugh?). Note that I designed and built a highly efficienct house design before I started my studies so my award winning performance at uni wasn't all theory.
I consistently see a cognitive shortcoming with you Kimy and you do it here again. What has property developement got to do with good design? In fact property development is generally the nemisis of proper design as it is motivated by a quick buck. Good design is egoless but property has become about ego.
Have a read of the Alexander book recommended above Kimy, you might enjoy it. Start with Part 1, "A Timeless Way of Building". The books are available in the library system although they are popular so you may have to wait your turn. Honesty would prevent me from working "for" a developer because they do have cognitive shortcomings, and there would be no pride available from working for one. I suspect this line of thinking is a step beyond you for the moment but I do hope you truly engage.
My kids are grown up now (thank God), but how many cars could we get off the roads with free school buses for kids again??? Lines of parents lined up in their cars, dropping kids off, picking kids up from school, crazy
We are infected with the mentality that insists on saving $10, which results in the loss of $10,000. Make all of the school buses free!
This gets roads clutered with buses. The contribution of rail (with similar levels of comfort as you suggest, perhaps even a cafe car included) is that it shifts commuting people, whether in buses or cars, off the roads. You will still need buses but a lot less of them.
@No 1 WTF is really going on ? Our biggest trading partner, China , is slowing, and because if this , the Aussie $ has weakened , but the Kiwi $ is getting .... stronger .
Our fundamentals have not changed , in fact our budget deficit is worsening , our trade surplus position is tenuous , Private debt levels remain too high , and are manageable only because of a record low OCR , we have decade high unemployment , our exporting manufacturers are being gutted.
Can someone explian why the Kiwi $ keeps going up?
The PM mentioned something about a seesaw and heavy weights. Read article
The media keep telling us that the Kiwi is going up when mostly it's the $US, the pound, the yen and the Euro going down.
Also doesn't help that the older farmers are farming capital gains.
Stop all non-residents buying land and we might get somewhere. Isn't going to happen though, too many politicians doing very nicely out of property.
Sorry to disappoint mate , I am a Thatchertie- right- winger to the core , but that does not blinker me to what is going on around us.
We still have some serious problems that JK seems unwilling or unable to tackle , and the Labour/ Green solutions and ideas mostly lack any logic or sense
And yes the strong Kiwi $ is hurting many businesses.
Boatman,
Ah Maggie,
If I'd lived in the UK in 1979, I think I would have voted for her. The unions had gone way too far. In my opinion it was Labour here who enacted many of the similar reforms.
Now I think the shoe is on the other foot in terms of balance of power in society, and am not sure that's good for anyone long term. And am not sure the Nats have any real reformist zeal, or ever have had. They are conservative with a small c. ( I actually quite like the work Paula Bennett has done, but not too many others). Labour probably needed to be out of power for a term to get their reform mojo back.
Anyway, good to see you are not totally blinkered.
Yup Boatman, as most others on here are either ignorant of, or conveniently forget, others are doing way worse (US, Europe, UK), and others are coming down from inflated highs back to more normal levels (Australia). Its all a cycle and if the AUD really does start to really head lower, as is being increasingly forecast, we'll come down to, but probably go up against the AUD - but any downside is limited unless we can out-underperform the management of our economy, and I think it's going to take an election to achieve that, so there's always hope ?
On #2 regular readers may recall previous comments from UBS along similar lines, albeit focused primarily on CBA - links below.
http://www.interest.co.nz/bonds/62697/ubs-analysts-downgrade-shares-asb…
http://www.interest.co.nz/news/60706/rise-and-rise-asbs-parent-commonwe…
And I put these issues to CBA CEO Ian Narev in an interview earlier this year. Here's what he said -
"There are clearly forces in the equity markets at the moment that suit the profile of our stock, which is globally there is a low interest rate environment, you've got investors searching for yield. They're searching for yield with equity stocks with defensive characters," Narev said.
"CBA and the other major banks in Australia are attractive. That is creating a dynamic underpinning the performance of the stock at the moment. Do we expect that dynamic to continue for ever? Of course not. Can I say when it's going to end, what's going to happen after it? I don't know and you can't manage the bank to that."
Full story here - http://www.interest.co.nz/property/63583/boss-cba-asbs-parent-says-grou…-
HG,
Possibly a Freudian slip on Bernard's part. I suspect they do want a British accent, and with a genuine knowledge of the UK.
There are plenty of English speakers in Bangalore and Mumbai, or Manila; and while there are many good call centres there, for some industries, I know from experience, a local acccent and knowledge are helpful.
Would a Kiwi accent work? Probably. We would not be a low cost option though; while management visits to gee up the troops, or improve the systems, or whatever would not be straighforward.
Worth pursuing, though.
This sort of stuff has been commonplace in the IT world for 15+ years.
- Buy a set number of application licences - enough for one country
- Run 'em on a Citrix or similar server farm
- As the sun rotates around the globe (or is it t'other way round?) move your staff logins around the world.
- Clevver businesses can get 3x the bang for the buck....and 2x is just sooo common.
Old news.
"Australia fundamentals deteriorate rapidly"
http://globaleconomicanalysis.blogspot.com/2013/05/australia-manufacturing-collapses-as.html
http://globaleconomicanalysis.blogspot.co.nz/
Worlds Oldest Joke:
Did you hear the one about the New Zealand Exporter who won Lotto Big Wednesday, the one with all the prizes.
When asked what he would do with his winnings he said 'of course I will invest them in business until they are all gone'.
Exporters do what they do because they do not know any better. These are stupid stubborn people.
Synlait share trades: Press release must still be on the way
http://www.unlisted.co.nz/uPublic/unlisted.mt_public.securityDetail?p_p…
http://www.unlisted.co.nz/uPublic/unlisted.mt_public.quotesheet
Beijing: China has detained 900 people for meat-related crimes including selling rat and fox meat as beef and mutton, the public security ministry says.
News of the three-month operation added to a string of scandals that have galvanised public concern from recycled cooking oil to dangerous chemicals in baby milk powder.
Read more: http://www.smh.com.au/world/china-arrests-900-over-rat-meat-scandal-20130503-2ixyw.html#ixzz2SH5JWsVn we dream of horse.... they say..
Each to their own, but not us
We see immigration more good than bad. Good Dutch came here, Bad Dutch went to the republic...
As international exporters we need be "men/women of the world" better to read up on the classics in order to appreiate the human condition...
Your point of dealing with issues within (usually of our own making) is valid and requires ever vigilence.
We are flooding NZ with 3rd Worlders to replace our collapsed birth rate. A very poor solution to the problem.
We would be better putting a program together for our kids to go study at the tertiary or even high school level in China, Europe, USA.
They should learn the language, do business, engineering stuff with a component of that to do with the classics - The Illiad, The Art of War, Heart of Darkness, Discourse On Method etc.
Wymmins Studies and Feminist 'Science' definitely not.
Our beef is all the import of herd workers. Its like the $ results of the great increase in production is blocked at the banks.
We don't count using 3rd world worker (with large herd experience from saudi = cause the enthusiastic borrower is a poor systems/process manager) as being more productive..
Having paid so much 4 land, no one has capital to make machine milking work.
And then there is the strain put on sharemilking path that has been the real underpin of productivity. Until it became an exercise in banking.
And when we hear folk with profile such as mr king will tell you he's more a scheduler of debt than....
Must be a worry as its our biggest market for sheepmeat. Rat Meat Sold as Lamb Highlights Fear in China
Hope he knows how the supply chain works:
Cooper said China's importance could not be under-estimated in meat trading.
"They have been important to us over the years and they have identified products that may have been rendered or downgraded, and now these items have been upgraded."
New sales have maximised the value of the sheep carcass.
Sales were made in 12 product categories including skins, offal and meat casings, as well as meat from sheep, deer and cattle. Beef and lamb cuts ranged from diaphragms, tendons and testicles to high-end lamb racks.
Meat cuts such as legs and shoulders were beginning to look like the "dinosaur" part of the carcass, compared to previously less valued carcass products.
http://www.stuff.co.nz/business/farming/8367234/Meat-exports-thrive-in-…
Sounds beyond MRM.
Henry, at least you would have a better chance of distinguishing the difference between rat and fox, and mutton and beef. Horse might be a bit harder to pick. One would think they would be trying to pass the former two off as chicken. Hell if you think rat is mutton, best leave the cooking to someone else.
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