Friday's Top 10: NZ profits rose NZ$15 bln in 2012, while NZ wages rose NZ$4.2 bln; Foreigners come first in China; Michael Porter's new happiness index; Clarke and Dawe; Dilbert

Here's my Top 10 links from around the Internet at midday today.

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 #5 from Michael Gordon the macro-prudential policy experience overseas. The current 10% speed limit in New Zealand may have to be lowered, it seems.

1. Boomtime for capitalists - I love the smell of a fresh Statistics NZ release in the morning.

The latest Annual Enterprise survey is a doozy. 

It shows total business pre-tax profit rose 33.4% or NZ$15 billion in 2012, while salaries and wages rose 4.5% or NZ$4.2 billion.

This explains, somewhat, the surge in tax receipts over the last year from corporate tax.

It also begs the question: why is profit growth not being restrained by competitive or wage pressures?

Why aren't consumers and businesses competing away that profit margin? And where is the pressure from unions (remember them) and workers trying to get more of their share?

Shareholders were definitely the winners in 2012. Let's hope it gets reinvested to create new jobs. It hasn't yet, but the business confidence surveys continue to show increased hiring intentions.

The most profitable sector was banking and insurance, where profits more than doubled. So borrowers and savers should be demanding better interest rates and workers should be demanding higher wages. At the moment the only people demanding (and getting) more are shareholders.

Here's Statistics NZ:

The industry with the largest increase in surplus before tax was financial and insurance services, reporting a $15,337 million (122.5 percent) increase, largely due to inter-company dividends received.

Other industries with large increases in surplus before tax in 2012 were:

• rental, hiring ,and real estate services – up $1,127 million
• public administration and safety – up $610 million
• retail trade and accommodation – up $393 million
• manufacturing – up $162 million.

2. Out of the shadows? - Moves are afoot in the global financial regulatory system to try to pull in the shadow banks that helped bring the system to the brink in 2008 and 2009.

Here's Reuters:

The $60 trillion "shadow banking" sector has been given until 2015 to fully comply with its first set of global rules, after an international regulatory task force unveiled plans to curb risk without strangling economic recovery.

Leaders of the group of 20 economies (G20) meet in Russia next week to endorse the rules written by their Financial Stability Board (FSB), setting out requirements for the sector and how it must be supervised.

3. Fast food strikes - CNN reports workers at fast food joints in 60 US cities walked off the job overnight. The movement for a near doubling in wages to US$15/hour is gathering force.

Here's an NPR article about what life is like for one single mom, Losia Nyankale, who works in fast food restaurants in Washington DC.

Traditionally, the food and restaurant industry has been an entry point for young people, who then move up. But today, according to government figures, the average such employee is 29 years old. And, like Nyankale, nearly a quarter of them are parents.

Nyankale has tried working more. When the kids were very young, she juggled two part-time waitressing jobs, routinely getting off at 1 or 2 a.m. To find cheap child care at that hour, she went on Craigslist, but the women offering to watch kids in their homes were hit or miss.

"You'd show up at the door and they're not home," Nyankale says. "And then if you're trying to potty train [the children, the sitter's] not doing anything, or you pick up your child and your hand's soaked because their diaper hasn't been changed."

5. Modest, shortlived and maybe not the last word - Westpac economist Michael Gordon has written a useful research note on how macro-prudential policies in other markets have affected house prices and whether the Reserve Bank's LVR limits are the last word. The 10% limit could just be the start. 

The effects of macroprudential tightening tend to be modest and short-lived, with most of the impact occurring in a three- to six-month window.

The downward impact has been on the rate of growth, rather than the level, of house prices and household credit. Households have generally continued to leverage up after restrictions were introduced, though perhaps less than they might have otherwise.

The use of macroprudential policy has rarely if ever been a one-off; there tend to be multiple tightenings over the course of several years. That doesn’t prove that these tools are ineffective; rather, it suggests that they’re difficult to calibrate and that regulators have probably erred on the side of caution.

6. How computers took over trading - This is a great backgrounder from Bloomberg on the rise and rise of nano-trading. It started as a desperate attempt to avoid clerical errors...

As paper -- and paper-pushers -- disappeared, the error rates dropped. In the succeeding decades, computers infiltrated every corner of Wall Street, becoming as commonplace as the harried scribes of old.

But all this progress has paid some perverse dividends. The computers that banished the file clerk and more recently, the trader, have become so powerful that their mistakes can lead to market meltdowns. It almost makes one nostalgic for the clerical errors that bedeviled Wall Street nearly a half century ago.

7. A new health and happiness index - Here's Michael Porter's new thing to replace GDP, courtesy of a piece in the Guardian.

For some reason NZ is not on the list.

The creator of the shared value concept, who has the ear of both big business and governments, has unveiled a "rigorous" new Social Progress Index (SPI) that hopes to put social and environmental considerations at the top of the policy and corporate agenda.

He believes that a strong foundation of knowledge and analysis is essential if government, business and civil society are going to be able to collaborate to create new measures that look beyond gross domestic product (GDP), which has dominated the post-war global economy.

Porter hopes that the SPI will become as prominent as the World Economic Forum's global competitiveness report in driving best practice and a race for the top.

8. 'Foreigners come first' - The Diplomat reports a lot of foreign companies are getting worried and grumpy about various crackdowns on corruption and price fixing in China that seem to target them, and not the locals.

During the early years of reform, foreign companies received special incentives for investing in China, and the few nice hotels in the country were reserved for foreign visitors with their foreign currency—no ordinary Chinese allowed. Even today, if a crime is committed, many Chinese will argue that the police are more likely to take action if a foreigner is the victim than a Chinese. Foreigners also may come first however, when Beijing needs a scapegoat for the ills of the country.

Witness the recent crackdown on price fixing. The Chinese government has targeted the pricing policies of a number of foreign firms in a wide array of industries, such as powdered milk, pharmaceuticals, medical supplies, and now apparently autos. 

9. Totally a moment of hubris - An ironman competitor almost loses a Brazilian ironman.

10. Totally Clarke and Dawe on Tony Abbott trying not to enumerate his chickens before the 'enumeration festival'