Archive for May, 2012

NZ caught between legacies and opportunities

It’s not a direct quote so I’m not sure if ANZ economist Cameron Bagrie actually said it, or the journalist reporting his speech made it up, but I like it.

NZ was caught between legacy issues and opportunity.

The legacy issues:
• “In 2008, the global economy’s old school, debt-driven economic model blew up.”
• Net external debt of 72% of GDP. “That is world class, at the Spain end of the spectrum.”
• “In close to four years after we had a global financial crisis, NZ still runs a current account deficit of 4% of GDP so every $1 we earn, we spend $1.04.”

“If you are waiting for the economy to go back to the way it was in 2005 and 2007 to rescue your business, sell it, because we’re not going to be back there for a long time.”

To get to opportunity, Bagrie says we need a “fundamental change in the DNA of society because the economic model that people have been used to (is gone)”.

The opportunity:
• Business sector success determined by microeconomics, not macroeconomics.
• The winning plays would come from leadership, adaptability, governance, management foresight, strategic planning, leveraging unique points of advantage and going after market share.
• “Rip the guts out of the competition… That is the reality in terms of where New Zealand sits today.”

The next five to 10 years, Bagrie says are going to be defining – “We’re either going to make a meal of it, or make a bucketload of money, and I think it will actually be the last one.”

admin, 31st May 2012 | Filed under: Uncategorized

New economic slow lane “normal” threat to bigger cake

I can’t let this pass without commenting. It’s personal.

When I chose the name BigCake for this blog, I was clearly pinning my hopes on economic growth being able to solve NZ’s ills, or at least the ills that could be fixed by having more money.

Growth was “normal”.

Implicit in this of course was the idea that growth was not only desirable, but possible.

Desirable goes without saying. Possible because NZ, with a wealth of resources compared to other countries, could outperform the world if only we could get our act together.

And the world bought our stuff.

Environmentalists have always been dubious about the staying power of the global economic growth vehicle, but BigCake believed NZ was so blessed we could expand where others couldn’t.

Well, now I’m thinking maybe.  (And maybe I’m making a late move from the age of opportunity to the age of anxiety).

As’s Bernard Hickey, after a déjà vu moment at the Budget lockup, points out promises of growth are beginning to wear thin. We are taking a very long time to get back to “normal”.

Global economic growth is stuck in a lengthy limited speed zone, and that’s slowing our economy.

Endemic high debt levels look to be the handbrake.

Hickey says:
“Something is broken, and it still hasn’t really sunk through into the economic models and thinking of bureaucrats and politicians in the developed world, who are still forecasting that their economies will bounce back to pre-2008 averages.

“These policymakers are like the Energiser bunnies. They keep bouncing up and down on the spot, hoping to move, but just go around in circles.

“Accepting that growth will be lower for decades rather than just a few quarters is scary.”

Damn right!

admin, 28th May 2012 | Filed under: Uncategorized

More benefits for schooling local

Following up on my earlier post on schooling local.

A story in the New York Times has made me realise I was being a little bit self centred about who benefits from schooling local. It’s not just white middleclass kids from the likes of the BigCake household.

It’s also probably going to be Pacific Island and Maori kids, and maybe their benefits are even greater.

They too are not being prepared for the real world in schools that are cocooned from demographic realities. As one kid interviewed in the NYT said: “You see one race, and you’re going to be accustomed to one race.”

The NYT comments:
“Decades of academic studies point to the corroding effects of segregation on students, especially minorities, both in diminished academic performance and in the failure to equip them for the interracial world that awaits them.”

One ticklish issue here is teachers as role models – most teachers are white.

admin, 18th May 2012 | Filed under: Uncategorized

What have journalists got against home buyers?

Falling house prices are reflexively editorialised in news stories as a bad thing.

It is if you are selling, but not if you’re a buyer, particularly a first-home buyer.

On top of this, the media regularly run stories on how NZ house prices are over valued in terms of people’s ability to pay for them, so surely falling prices are a good thing on this score as well.

The latest example of a journalist slanting a housing story is a Dominion Post piece on latest median prices in the Wellington region.

“Median house prices in Wellington hit the skids in April, but there is some good news – the national median has risen 1.4 per cent from a year ago.”

Maybe the journos writing about falling housing prices own homes and see the value of their investment falling, so from their perspective it is bad. It also probably reflects Kiwis’ unrealistic belief in housing as an immutably positive form of investment.

Or maybe the journalists are wannabe real estate agents who like seeing their commissions ticking up.

More neutral coverage would be good.

[Declaration of interest – Own a home and not planning to sell. Have two children who I’d like to see being able to afford to buy their own home.]

admin, 14th May 2012 | Filed under: Uncategorized

Dollar volatility number 1 worry for exporters – survey

Exporters are more worried about the volatility of the NZ dollar than its actual level, though not by much.

The exchange rate as a barrier to exporting figures strongly in a 2011 Stats NZ survey of Kiwi businesses.

Of businesses that currently generate overseas income, 37% said exchange rate volatility was a barrier. Only slightly lower was concern over the exchange rate level.

The next highest worry, and still over 30% of  these respondents, was low demand and increased competition, followed distance from markets.

It’s a different picture for businesses that do not currently generate overseas income, but are interested in doing so.

The biggest barrier for half this group was limited experience in expanding beyond NZ, followed by limited market knowledge and limited access to finance.

As Stats comments:

“[This group is] hindered by internal factors they have some control over, but businesses that currently generate overseas income are hindered by external factors they have no control of.”

admin, 9th May 2012 | Filed under: Uncategorized

Key plays Captain Sensible

I guess John Key was reminding us that he heads a conservative Government.

In his pre-Budget speech to Business NZ, he said:
“…the most important thing we as the Government can do for the economy, and therefore boost jobs and incomes in New Zealand, is to be responsible managers of the public purse.”

This would be a bit of a shock to those of us with more aspirational ideas about how a government can lift economic growth (and therefore jobs and incomes).

It’s in stark contrast to the previous Labour Government’s transformational rhetoric and to a lesser extent the aims of National’s original Economic Growth Agenda and current Business Growth Agenda.

But really National’s “modest and sensible” approach is just the party being true to form (and itself).

And perhaps the times.

admin, 1st May 2012 | Filed under: Uncategorized