Bernard Hickey details the key news overnight in 90 seconds at 9 am in association with Bank of New Zealand, including news that Prime Minister John Key's meeting with Warner Brothers executives failed to produce a decision on whether The Hobbit movies will be made in New Zealand or elsewhere.
Warner Brothers is reported to want a change in the industrial relations law to clarify whether an actor is a contractor or an employee, but Key also said the strong New Zealand dollar vs the US dollar was a factor in the decision, which was now likely later this week.
The currency has risen from 50 USc to 75 USc during the planning stages of the movie and with the US Federal Reserve set to start printing more money from next week the producers are no doubt worried about further currency strength.
Meanwhile Neil Craig from Craigs Investment Partners has called on the NZX to joining some form of alliance to boost flagging volumes in the New Zealand stock market.
His comments follow the Singapore Stock Exchange's agreed takeover bid for the Australian Stock Exchange.
Craig said there was 'some urgency' for the NZX to boost liquidity.
However, the Singaporean takeover of the Australian market may not go ahead as Prime Minister Julia Gillard said 'national interest' would be the decider in the bid and marginal MPs in the nearly hung Australian parliament are agitating against the foreign takeover.
Meanwhile, South Africa has said it will move to weaken the rand to protect its currency amid the Currency Wars.
No chart with that title exists.
29 Comments
The NZ$ always has been the reason for Warners trying to get out.
The union fiasco was always a smokescreen and JK is totally sucked in with a nice easy option to union bash!
Totalitarianism is a term, which has been used in this blog seldom. What I can see is as long as we keep traditional pattern the way we deal/ work in our economic and social environment, the sooner we are experiencing unwanted development towards totalitarianism - where the state or single group of people are taking control.
Interesting - the NZMEA and other organizations in support of free market ideology are opposing strongly any form of authoritarianism, but have a blind eye for fundamental structural changes in economics. Go figure.
As I wrote many times the only way out of this misery and to make progress is to demonstrate unity between the private sector and government. What is happening right now in the world is too big to handle alone for any sector of our economy. Internally our economy needs far more strength.
We cannot and should not compete on wages. Like a few countries in Europe (e.g. Germany/ Switzerland/ Sweden) we should compete on quality. The product makes the wages. There are plenty of opportunities as far as production concern, including for exporters, but only on the basis of a structured economy.
In the current economic situation productivity preferable manufacturing, building our own infrastructure needs should go hand in hand with science, eg similar to NZagriculture.
As a small, but smart nation we do need a NZnational industrial & science park http://www.highbrook.co.nz/default.asp?s1=Business where major NZmanufacturers and NZscience are based and work together. A number of important facilities need to be included such as a distribution & supply centre ( incl. Logistics) for widgets. A centre of advanced technology where talented Kiwis go to engineering collage, research institute and other youngsters have a change to learn skill in trades to become leaders of the future - a future for our economy and for the next generation.
The administration of a NZ Industrial & Science Park should work regularly with the media. Creating awareness among the public what sustainable production and its positive potential mean for the nation is essential. Such educational developments lead over time to fundamental changes in our political and social environment – a culture change - away from consumption to a rather productive society.
Please, read and understand this article in context with many others I have written here.
After years - finally I have another mate – thanks Basel Brush III !
Great to see people, who have an idea about economics and can see where real, sustainable production and quality jobs are coming from – a great way to safe this country from a social and economic collapse.
Count-of-Christov : I think that Walter has just put the boot into you & me .............. Geeeesh , and you think you know some people ! ...... .. ........... " finally I have another mate " ............ No more of my netted dolphins for the Kunzie Kaikoura Cannery !
Rogie, finally I have another mate next to others such as Gummy, Christov etc. of course.
.........and the NZMEA ????????? ........top topic for them (Basel's links and my comments (earlier) ........they didn't even reply ??????????........shows how ???????????
OK Walter , I'll fire up the 18-wheeler ; dolphins on the way !
I noticed that Less Rude and Johnny Whale weren't replying to your posts . Good questions you asked of them , too .
Did you find a watch repairer for Wolly ? I lost track yesterday , we went deep south , down into Mindanao ........... Seems that my Muslim friends live here in abundance . Better button the Gummy lip , don't wanna get a suicide balm !
About 12 months ago I was mentioning how important such a technological/ scientific national hub is for NZ. By that time I had not much response from the NZMEA and others. Obviously such a plan is in the making with constant developments as link below is suggesting.
http://www.aucklandcity.govt.nz/council/documents/tamakiprecinct/features.asp#visit
It also demonstrates how government and the private sector together achieve positive results. I cannot see any commitment or comments about it from the NZMEA and no mentioning here on this blog. Please Les John, tell me in case I’m wrong.
We'll do what we always do, which is give more money to farmers, and less to everyone else (unless they are mates of MPs...)
Warners has other cost pressures in play with the structure of things I understand...they really need all the cutting of costs they can get...come on NZ tax payer...I sure they also would like to stay in NZ given their sunk costs todate..... wonder how much politically it is worth to the Government and also the opportunity to change employment law as a spill over benefit...
They are looking in a short sighted manner. Presumably they pay more because the US$ is low but the final product has a worldwide revenue stream against a low future US$.
So what. Get on with it and stop complaining.
On second thoughts maybe a non-recourse loan based on cost recovery and a piece of future profits would be attractive.
Good call Basel, I too was wondering what the fuss was over the NZ/US$ cross rate. It's a huge benefit to Warners to have a weak US$, they're a company that generates the bulk of it's revenue overseas - guess they want it both ways.
They also want to write NZ labour law. Hell why don't we just do away with Parliment and have multinational corparations take over the whole outfit.
I think this whole thing is a big try on to get our Government to slip them a few more tens of millions. Is this same deal available to our farmers, fishermen, tourist operators, manufacturers etc etc and if not why not?
Label it gross % of revenue....otherwise the buggers throw in lots of "expenses" to make the net profit lower...or even nil.
regards
Purely FYI. I just spoke to Signature Homes Executive Director Gavin Hunt. An emailer asked me if any of the Franchise Homes franchises were having any financial problems because he had heard of one staff member being laid off.
Gavin told me the Karacrombie Enterprises Ltd franchise in Palmerston North had laid off one staff member, but he was confident it would be able to trade its way out from under its debt. A new General Manager had been appointed 18 months ago as part of the turnaround efforts, he said.
"We don't anticipate it to go into liquidation," he said.
Hunt said the new home building industry was the toughest he had seen it since he entered the industry in 1983.
Signature Homes has 16 franchises around the country and builds around 200 homes a year.
August and September had been good months but October was less certain, he said.
cheers
Bernard
An Australian politician "get's it"
http://www.debtdeflation.com/blogs/2010/10/23/seconding-llewellyn-smith…
He must be on to something.
…Treasurer Wayne Swan confected outrage and labelled Hockey’s musings ”an attack upon the very pillars of our prosperity and therefore an attack on prosperity itself”
But his solution is not necessarily the right one (going by some of the comments on Steve Keen's blog).
And a great graph in here http://www.zerohedge.com/article/project-weimar-why-qe2-could-be-more-i… for Andrew in Finland
Hot off the PEC press.
It’s not the unions. It’s the dollar.
In December 2007 when the Hobbit was announced we all celebrated quietly. We assumed it would be business as usual for Peter Jackson and New Zealand. Why wouldn't Warners spend their US dollars here?
Perhaps we should have asked: why would they? There are only four reasons for large overseas corporates to invest in New Zealand.
1. Access to raw materials (land, water, minerals, food etc)
2. Access to low cost labour,
3. Access to unique intellectual property
4. Access to our tiny 4 million person market.
We can assume Warners weren’t after access to our tiny market nor were they really after access to unique intellectual property. After all, they can get Jackson to work elsewhere and Weta Digital already does work for off-shore projects from its New Zealand base. Of the remaining drivers, access to raw materials -in this case our scenery - is secondary since there are many other scenic places in the world. That leaves access to low labour costs as the big deal maker back in December 2007.
At that time the global film industry was in good shape; work was plentiful and people charged accordingly. Even though our dollar was high then, I'm sure the producers factored in a lowering of our dollar over time to get a cost model they were happy with. However since March 2008 the exchange rate has been near one way traffic to over US75 cents.
When you are competing on price it’s never in isolation. Others want the business as well. Now the world is a very different place and our dollar is no longer enough to sway the decision as the competition globally for such work has sharpened.
So we now have the negotiations with the government and tax breaks to try and swing the business our way. Why?
We have an edge with vertical integration of Peter Jackson, Weta and our scenery, that Warners no doubt find very attractive but ultimately it’s still about cost in USD and that's about our exchange rate.
The two parts of the Hobbit are each budgeted at US$250 million, for a total US$500 million cost. However, the fluctuations in our exchange rate means the cost over the last two years to make the movie here has varied by 50 percent and with our no intervention policy and the US printing money (quantitive easing) the producers know it’s likely to go higher still, costing them more money. It’s that potential variation in cost that is the real issue here.
So Warners are trying to mitigate the risk of that by off loading responsibility for the exchange rate risk to the government - by seeking additional tax breaks and so would I if I could.
What the public needs to understand is that New Zealand is losing this amount of work from our exporters every day while the exchange rate sits at US75 cents compared to it being at say US65 cents. No one other than the exporters being crunched appear to notice or care. Our exporters certainly do not get emergency meetings with the government and talk of changes to legislation and compensation.
The irony is that while the Hobbit debacle has gained a level of visibility for a problem that hard working New Zealand exporters have failed to achieve, it is for all the wrong reasons. The media are portraying this as dispute born from the actors’ actions. It’s not. The industrial dispute may have been a catalyst, but the real issue is the dollar. Our dollar.
Key will sweeten the pot as this has become a political not economic issue. But given the potential lift in the NZ dollar with no intervention from the Reserve Bank it will need to be a big sweetener.
I would not like to be the PM that does that for $500 million in export earnings and not the other $40 billion in exports. If he is prepared to change New Zealand employment Law on the fly to comply with a US corporate’s demands and throw tax payer dollars at an exchange rate issue then the race to the bottom is truly on, with John Key leading the way.
http://www.pec.org.nz/2010/10/it%e2%80%99s-not-the-unions-it%e2%80%99s-the-dollar/
Excellent Les. I particularly liked
"If he is prepared to change New Zealand employment Law on the fly to comply with a US corporate’s demands and throw tax payer dollars at an exchange rate issue then the race to the bottom is truly on, with John Key leading the way"
.
KD - It was penned by Selwyn Pellet and PEC. I think they nail it well and I support that view. I like speckles 9.51 comment too. Cheers, Les.
When other countries intend to destroy their own currency as they competitively de-value and send un-employment offshore (and will keep doing so as indeed they race to the bottom) then what exactly are our options?
The financial speculators need curbing, sure....that with a tobin tax would seem quite do-able....beyond that its fire up the printing presses.
Also the costs is $500Million USD,
a) what is the delta in cost for going somewhere else? ie if the US depreciates then sure making it in NZ costs more, but making it somewhere else outside the US will also cost more.
b) What % of income generated is in USD v foreign exchange? So the USD price wont change ok that is bit of a loss but if other earnings in other currences when exchanged give them more USD, then that cancels out. Indeed since earnings the outside the USA will be greater than $500million the benefit will dwarf the costs, they have a bigger win...
regards
Its all political....
Would Key want to be the man who lost The Hobbit??
Can see the Labour election ads now......
My guess is he will stump up to help keep his job at the next election.
Goofy Phil lost his hobbit , 'bye 'bye Chrissie !
So what are Warners choices? How are they going to get stable prices (in US$) over several years. well they could make they movie in the US or take out a currency hedge.
I'm sick to bloody death of this bullshit from Warners, they're a worldwide company with revenue streams in all currencies, how is their problem differant from our exporters for example, except, perhaps, they choose to be based in a country with a money printing madman in charge of the central bank.
Lets see, ship $500million USD out....have to pay somewhat over the odds but nothing too bad to convert it, then get many times that back in where you win back on the exchnage rate conveeting to USD...and in fact as the USD rate is going to drop over time so thats an even bigger win...
hardball at its best.....if Key loses the Hobbit he takes the can right up his....um popularity....if he bribes for it....he takes a hit anyway as Opposition Pollies have a field day....lose or um lose...
regards
Julia Gillard must've taken a leaf out of Michael Cullen's NZ Labour Party manual . Else why would she be so stupid to propose stomping over shareholders' rights to earn a profit , because of " the national good " .
Cullen cost shareholders in Auckland Airport hundreds of millions of profit , in his personal decision that it was a key asset , and therefore couldn't be sold , even a 40 % chunk .
Our less sheepish cousins in Oz may well be more vocal to Gillard's mooted blocking of the ASX-SGX merger . I hope they give her hell .
How the heck can capital markets be expected to work efficiency , to produce profits , or to clear out the dead wood and to punish the miscreants , when politicians keep leaping in to block or to prop up !
Its funny they are concerned about the currency because its their own Government doing it to them, go lobby Congress is my answer.
Also isnt that a red herring anyway? ie unless they do it in the US, then US currency collapse would have a similar effect no matter what currency they buy....all else being equal, like unless they are going to latvia where the local currency might end up being really worthless.
regards
It's such an insult that warner brothers, a mere foreign company, can have such power that the Prime Minister of NZ have to pay homage and negotiate with them. It's not like they are state dignitaries or head of states.
Hello?
The corporations own Govns now....why let an idiot of a US Pollie get in the way when you can come here and negoitiate for hard cash bribes directly?
regards
http://www.telegraph.co.uk/finance/financetopics/financialcrisis/808826…
So we seem to swing from one disaster/inflamation point [back] to another.....
Back to Greece....
Europe's debt woes have returned to the fore after Greek premier George Papandreou threw open the door to fresh elections and vowed to liberate the nation from "slavery and surveillance".
So he might throw the debt off (default), but if the opposition gets in, it might default...anyway....boom go the French and German Banks...unless they can unload that onto the voter of course.....while the resppective govns look on....
"Spreads on 10-year Greek bonds jumped 31 basis points to 9.57pc and the euro tumbled 2 cents to $1.385 against the dollar as investors awoke to the risk of political upheaval in Greece, not helped by warnings from bond giant PIMCO that Athens will default within three years."
A Barclays survey found that 82pc of clients expect the eurozone to face a debt restructuring, a sovereign default or even a full break-up by 2013.
Good news eh Gummy?
Does your money feel safe?
regards
The government had to change that law, it was ridiculously ambiguous, even the court ruling said that.
If you have signed a contract, why is that different from any other contract you signed in your life?
It's not, you're a contractor.
The US dollar is falling against almost all currencies not the the NZ$.
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