Here's my summary of the key news overnight in 90 seconds at 9 am, including news new-home construction in the US unexpectedly climbed to a four-year high in October, more evidence of a revival in the industry that’s helping propel the American economy.
There was mixed news in Europe however. On the downside, Moody's stripped France of its coveted Aaa credit rating, cutting it one notch.
The French reaction was interestingly different this time. Rather than whining, they took it on the chin and said they will respond with reforms to turn their flagging economy around. It will be the Swiss central bank that may be sweating though - it holds enormous volumes of French official debt and the downgrade may involve it with big losses.
On a better note in Europe, rumours are building that there will be a positive signoff on the Greek debt restructure. 'Greece has delivered' an EU official has said.
In China, not much to report there overnight. But there was an interesting editorial in the official Communist newspaper urging the new leader to seek closer ties with the US. This is a marked change in rhetoric from a source which is regarded almost as an official mouthpiece.
US stocks are off 0.5% in mid-day trading on a big writedown by Hewlitt Packard, which has overshadowed the good US housing-start news. Oil is down sharply, off about US$3 per barrel, and gold is down US$10 per oz.
And in the latest Fonterra auction, dairy prices are up again, up +0.7% from the prior auction. That makes it seven of the last eight auctions that have seen dairy prices rise.
The NZ$ opens today at 81.6 USc and the TWI is at 73.3
No chart with that title exists.
15 Comments
The same jokers that gave Junk CDO's AAA you mean.
You'll be lucky...
Again with the 'rising animal spirits' on every little blip on the algo-rigged 'markets'....
For real insight to US West Coast housing, I follow Doctor Housing Bubble, who has a long track record in the RE biz. He's not one to gush over blips.
For main US stats, I like Maxed Out Mama - she is one of the better analysts around and has a healthy disregard for cheerleaders.
And for amusement and shrewd market insight, Reggie Middleton is hard to go past. His take on the French Affair is a leetle different....
If there was one report this entire year that you should read in entirety, Central Bankers'
Potemkin Village by Kyle Bass at Hayman Capital is the one.
PPP for Transmission Gully
Transport Minister Gerry Brownlee says Cabinet has approved an application from the NZ Transport Agency to pursue a Public-Private Partnership (PPP) to finance and build the Transmission Gully highway, part of the Wellington Northern Corridor Road of National Significance.
“A Board of Inquiry appointed by the Minister for the Environment approved the resource consents and notices required for this project in June, and in August I requested the NZTA to assess the suitability of using a PPP procurement model to design and build the highway,” Mr Brownlee says.
“Following an extensive business case analysis, the NZTA determined that the project meets Treasury’s criteria for a PPP procurement model, and on that basis Cabinet has given the NZTA approval to finance and build the Transmission Gully highway using a PPP.”
Mr Brownlee says the decision will bring certainty to a project that has been on the books for many years, and allow the NZTA to move ahead to begin construction of the Transmission Gully project in 2014 and open the road by 2020, delivering the economic and safety benefits to New Zealanders within eight years.
“PPPs have a proven track record for delivering great results for large-scale infrastructure, and using a PPP makes good sense for Transmission Gully.
“The size and complexity of the project means it will benefit from the innovation the private sector will bring to the task.
“Because a private consortium will finance construction and the NZTA will repay the cost over 25 years, the road can be built now and the costs can be shared by those who will benefit from the project in the future.”
Mr Brownlee says the Government had signalled the likelihood of using a PPP arrangement to progress Transmission Gully as early as March 2009, when the Roads of National Significance Programme was first announced.
“An alternative state highway route into the capital through Transmission Gully has been talked about for decades, and this Government is committed to making it a reality.
“Today marks another step towards fulfilling that commitment and providing a safer and more reliable route in and out of the capital.
“The Wellington region has been waiting for Transmission Gully for over 70 years.
“Wellington is currently reliant on a two-lane highway that has trouble coping in peak times, and is vulnerable to closure in the event of crashes and natural disasters.
“Our capital city deserves better if it’s to reach its full economic potential, and the Transmission Gully route will help to unlock that potential.
“Transmission Gully will provide a safer, more secure strategic route in and out of Wellington that will cater for the increased traffic and freight demands that come with a growing city, and as part of the Wellington Northern Corridor it will dramatically improve travel times between Wellington and the lower North Island.”
Mr Brownlee says that while tolling will not be part of the PPP contract for Transmission Gully, he has requested the NZTA investigate the merits of tolling the route in order to offset some of the costs of construction.
“The NZTA will look into the details of a tolling scheme in the New Year, and a decision on tolling will be made separately; progressing Transmission Gully as a PPP is not dependent on tolling the route.”
Transmission Gully is part of the Wellington Northern Corridor Road of National Significance, which stretches from Wellington Airport and up the Kapiti Coast. The Wellington Northern Corridor is one of seven roads of national significance which the Government has identified as essential state highways which require upgrading to reduce congestion, improve safety and support economic growth.
For more information visit www.nzta.govt.nz/projects/transmission-gully/ppp.html
I'll be nice and not use the word best to decribe Mr Brownlee....DavicC cant get upset with me then.
So if we dont toll, it will be for us to re-pay the PPP party at a specific rate/amount? while in fact the Govn could borrow at 3.5% over 10 years? I can see the maths working...
regards
Mr Brownlee says that while tolling will not be part of the PPP contract for Transmission Gully, he has requested the NZTA investigate the merits of tolling the route in order to offset some of the costs of construction.
So we can overpay twice or more than a straight NZ Government Stock borrowing program could finance the deal - I dare Brownlee to post the Internal Rate of Return (IRR) estimates that the preferred PPP agents proposed to make it meet Treasury approval.
Why is this government obsessed with low level roadwork/earthworks infrastructure? - how does this get an unemployed, undereducated population up to speed with our high tech foreign competitors? - I would have thought Christchurch has easily absorbed the road construction population cohort.
Yep, well it depends. Historically we have more than enough examples in the UK and elsewhere showing PPP and tolls booths is pretty much a disaster financially for a Nation. Last time I looked we could borrow at 3.5% over 10 years? that is dirt cheap...simple and a known low risk...
The only reason I can see Pollies suggest PPPs is to allow the present Govn to stay in budget or keep costs down for its term....later Govn's and the voter have to pay....more...
Conclusion, no matter the evidence, pollies of Brownlee's / JK's caliber will do the stupid thing (in terms of NZ), if they think we are even more stupid, sadly that may be true.
Now if like me you believe in Peak oil then letting a PPP shoulder the pain/loss when cars go bye bye is A OK....of course I bet the PPP company will have stiched up teh contract anyway....
Clauses like, we expect the sum of 100,000 transaction per day, we reserve the right to charge greater fees if this number is not exceeded 95% of the time.
Pollies will of course look at the stats and see that that has never happened in the past...so shoulder the risk thinking its negligable.....
regards
Public-private partnerships have fundamentally been about giving private investors and financiers high returns with low risks, at the long-term expense of taxpayers and the public. The financial backers of P3s were able to borrow capital at lower rates of interest, thanks in large part to unregulated and often fraudulent activities in financial markets. This narrowed the interest rate spread between private and public sector borrowing rates, allowing P3s to appear more financially attractive than otherwise. They were still a bad deal for taxpayers, but low private sector costs of borrowing meant that faulty accounting didn’t have to cover up as much.
http://www.policyalternatives.ca/publications/monitor/problem-public-pr…
http://americancity.org/daily/entry/the-problem-with-public-private-par…
This page and it's contents should be mandatory reading for those with the slightest interest in NZ PPP's and their negative impact upon taxpayer's wellbeing.
A choice excerpt from one of Dr Sue Newberry's contributions highlights the reality:
Despite public reservations about PPPs, we are finding ourselves pushed into them. Apparently, the government cannot afford to purchase the assets involved outright, and the level of public debt is such that we cannot borrow to purchase the asset outright. Actually, this is because the governmental budgeting system is arranged to make it so.
In economist-speak, the government budgeting system has “incentives” designed into it. Unlike the more usual understanding of incentives, these incentives may be defined as biases and distortions intended to prompt a particular outcome. In plain English, the government budgeting system is rigged.
The level of public debt that is represented as such a worry is confined to that reported on the public sector balance sheet. No one mentions the off-balance sheet debt. A PPP contract might extend over 30 or 50 years. It will involve an agreement to pay fees for that time and guarantees, typically of a particular income or return on assets for the whole of that time. Legally, the obligations involved in these agreements is public debt, but it is public debt that does not appear on the public sector balance sheet. PPPs only seem to solve our debt problem because off-balance sheet debt is conveniently ignored.
The rigged budgeting system and deceptive off-balance sheet accounting tricks involved in privileging PPPs raises the spectre of Enron and its disgraced auditors Arthur Andersen. Interestingly, Enron was involved in very early PPPs in the UK, while Arthur Andersen was deeply involved both in the development of PPPs and in promoting and developing the idea of trade in services. However, the other major accounting firms, and accounting standard setters, are also involved.
A key worry about PPPs is their potential to expose New Zealand’s taxpayers to an accumulation of hidden off-balance sheet debt. Unlike shareholders in a company, our liability for public debt is unlimited. Regardless of whether that debt is reported on the government balance sheet or hidden off-balance sheet, we guarantee it. Because of this we should insist on control over its incurrence. This is Parliament’s role.
The Constitution Act 1986 attempts to protect us from a negligent or plundering Crown. It requires that all proposed Crown expenditure of public money and all borrowing be subjected to prior parliamentary scrutiny. The Public Finance Act 1989 undermines the Constitution Act, and the latest proposed changes in the Public Finance (State Sector Management) Bill make matters even worse.
The Public Finance Act 1989 allows the form of debt represented by PPPs to evade prior parliamentary scrutiny. However, it does at least specify reporting requirements which allow Parliament to find out about such debt afterwards. This might be only a small consolation, but the requirement to present to Parliament a statement of commitments and a statement of contingent liabilities does at least force disclosure about off-balance sheet debt.
Exactly. A PPP contract is still a legal liability on the government to pay and if overseas contracts are anything to go by, pay through the nose and assume most of the risk.
No one mentions the off-balance sheet debt. A PPP contract might extend over 30 or 50 years. It will involve an agreement to pay fees for that time and guarantees, typically of a particular income or return on assets for the whole of that time. Legally, the obligations involved in these agreements is public debt, but it is public debt that does not appear on the public sector balance sheet. PPPs only seem to solve our debt problem because off-balance sheet debt is conveniently ignored.
So Mr Brownlee thinks ....
“PPPs have a proven track record for delivering great results for large-scale infrastructure, and using a PPP makes good sense for Transmission Gully.
Whilst admitting this ....
"I didn't do my research at all. I'm just deeply embarrassed I was anywhere near it," Brownlee said of his short tenure on the board of NZ Casino Services, a company said to be run by alleged fraudster Loizos Michaels."
http://www.stuff.co.nz/the-press/news/7867325/Brownlee-was-on-fraud-acc…
What motivates a cabinet minister, who in a personal capacity becomes a director of a casino company, and what did he expect to get out of it?
This guy shouldn't be left in charge of a stapler, let alone a Govt Ministry dispensing taxpayer dollars.
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