90 seconds at 9 am with BNZ

90 seconds at 9 am with BNZ: Deutsche Boerse buys NYSE Euronext; Bernanke sticking to QE II and suggests may need QE III; Nagging inflation fears

10th Feb 11, 8:58am by Bernard Hickey

Bernard Hickey details the key news overnight in 90 seconds at 9 am in association with Bank of New Zealand, including news that Deutsche Boerse, the owner of the Frankfurth Stock Exchange, has launched an all-share bid to buy NYSE Euronext to create the world's largest stock exchange group.

The combined operation would have control of America's biggest stock market and many of Europe's largest markets.

The deal followed hard on the heels of a London Stock Exchange announcement of a deal to buy the Toronto Stock Exchange in Canada.

See more here at Bloomberg.

Meanwhile, US stock markets fell slightly overnight as nagging fears about inflation continued to drive longer term interest rates up.

The yield curve for US Treasury bonds steepened again overnight, with the spread between the 2 year and 10 year yields rising to a one year high of 291 basis points.

The steepness of the curve indicates concerns about future inflation.

See more here at Bloomberg.

In Washington, US Federal Reserve Chairman Ben Bernanke testified before Congress.

Bernanke said jobs growth continued to be frustratingly slow and he indicated it may be necessary for the Federal Reserve to pump yet more stimulus into the world's largest economy.

He gave no indication that the current round of money printing known as QE II (Quantitative Easing II) would be wound back despite growing signs of recovery in the US economy and amid signs that low US interest rates are pumping cash around the global economy, pushing up inflation outside the United States.

See more here at Bloomberg.

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99 Comments

by Muppet King | 10th Feb 11, 9:03am 1297281781

I think 2011 may be the year everyone realises we are actually in a depression. Once we have acceptance then we can move forward I believe. If I were the government I would be raising taxes.

by Kate | 10th Feb 11, 9:19am 1297282770

Many would agree with you. Here's the zerohedge take on yesterdays UST auction;

http://www.zerohedge.com/article/stunning-10-year-auction-closes-indirect-bidders-coming-all-time-high-directs-disappear

I liked this comment;

Simple really. Try not to make too much of Bid/Cover, Direct, Indirect or price and rates, as the primary is the Fed. All these auctions are mostly decided days before the date of actual reporting.

Go to the Treasury web site, add up on a month by month basis all amounts on instruments sold. Some work is required, but if you did the work you will notice the amount of bills sold in last year which is about 70% of all debt sold which requires average roll over of about 3 month time frame. The current POMO is attempting to move some of this debt into longer term parking, but with nearly 9 trillion in short term bills the 600 billion of QE by the Fed is barely able to keep up with the increase and if rates rise at the short end, the Fed will sink.

This means that QE2 is on a long voyage into territory it is not designed for and no matter what the Bernanke or other Fed people say, they do not have a chart or navigator.

by Muppet King | 10th Feb 11, 9:38am 1297283917

I'm telling you Kate, we are going to see unemployment a lot higher and taxes a lot higher, interest rates a lot higher, house prices a lot lower, and then even though the prices are lower, a lot of people still won't be able to afford them, thats what I reckon anyway.

by Kate | 10th Feb 11, 10:17am 1297286251

Yep to all that - but the other thing I see coming our way is the appalling trend of the working poor which (to my reckoning) is the intended outcome of globalisation.

Of the 1 out of 8 Americans on the food stamp programme - 40% are from working families. Look at WFF here - no difference - and the families collecting it work in our banks, our supermarkets, our insurance companies, our fast food outlets, our security firms, our hotel chains, etc. etc. All multinational corporations. Why are we (the taxpayer) subsidising their wage bill? Because it is the intended outcome of globalisation.

There was a doco about Manilla on yesterday - the living conditions were beyond belief, and these people had jobs.

It is not only the unemployed who will be affected by this financial take over (we need to stop calling it a "crisis", as that terms fails to ascribe blame). The intention is akin to slavery. You work for us, you eventually lose all your accumulated capital, and we feed you from the tax you pay to our political patsies.

by kin | 10th Feb 11, 10:28am 1297286924

Because it is the intended outcome of globalisation.

Yes Kate, this is the result og "globalisation" The BS that neo-classical economist spinned about globalisation is finally revealed.....Western Developed Countries are supposed to grow into higher level of development while the developing countries grows into their place.

We now knows that it is all BS. How can developed countries compete with labour rates that is a fifth or less than their lowest labour wage? Wait till this "globalistaion" gets into Africa.

The Globalisation BS only worked for the financial industry. It's the axe western (esp US) bankers use to break into developing countries for market share and new business...and boy were they successful !! Even now developing countries has become the growth engine (not to mention profit) for western banks.....As for western countries labour ?? "Let them eat cake"....

by Muppet King | 10th Feb 11, 10:47am 1297288050

Yeah thats exactly right, I think it kind of sucks how at the end of the day we all work for the man, I mean, even if you're self employed, 30% of your work is still for the government. I see the gap between rich and poor stretching far and wide, until it snaps and the poor outnumber the rich by a lot and then just take over by sheer numbers.

by David George | 10th Feb 11, 10:57am 1297288634

Spot on Kate.

The business Rountable, want the minimum wage lowered so the working poor carry the can again. Ireland has done this - the people impoverish themselves to bale out the banks!

We have a median wage of $27k per year that's not beneficiaries if that's what half the adult poulation are getting. Meantime power, fuel costs and stealth taxes rob them of what little purchasing power they have left. The unions have been kneecapped so like it or we send your job to Asia.

It is difficult not to believe that this is an organised assult on the Kiwi workers as the share of the economy going to the well off and the banks grows bigger every year.

by Wolly | 10th Feb 11, 11:27am 1297290441

Quite right KD...the minimum wage should be raised to $50 an hour...that way the "poor" "unskilled" "unqualified" will earn heaps of money and spend it to create a zillion more minimum wage jobs......doh

See the thing is KD...you have bought the socialist line, hook and sinker!...the envy game...buy votes by promising equality of wealth in a world where equality does not exist...tell them they are "poor" because the wealthy are stealing from them...don't let on that real employment demands investment and that demands capital...hell that way they would come to understand how they have been rorted by Labour for decades.

Asians have taken the manufacturing jobs because they will work for less. They understand the game.

by Elley | 10th Feb 11, 11:46am 1297291568

Wolly, how do you explain that NZ salaries are so much lower than European salaries (eg UK, France, Germany) and also Australia while our COL is pretty much the same (or higher when it comes to basic food)? Don't they have to compete with Asia as well? Is the "game" to work for peanuts and for many people in work to barely be able to make ends meet?

When I was an employee for a large US company here in Chch, pay rises were frozen several times (before 2008, company was making big profits). I was told it was because "if the American stop seeing us as a low-wage country they might close us down" (this being an R&D centre with people having a great deal of expertise, it wouldn't have been that simple to do that). Why on earth do we want to be a low-wage country and compete with low-wages country? Why can't we achieve the same as those other developed countries mentioned above, ie wages in line with COL and that reflects the fact that we are a developed country?

by Wolly | 10th Feb 11, 11:53am 1297292037

Look again Elley...the odd one out is Germany...the others are broke and going nowhere fast and loaded down with labour liabilities and likely to see riots and mayhem Greek fashion. Salaries are lower here for the same reason they are lower still in Vietnam and Turkey.

Also it is wrong to claim they are all lower here. Hate to think what Peter Jackson is 'earning'! and the top rungs in the state sector receive bloated salaries thanks to the higher salaries old boys club rort.

by Elley | 10th Feb 11, 12:03pm 1297292634

OK, top sportspeople and celebrities are paid huge amounts wherever they live.

The difference between developing countries with low wages and NZ with low wages is that their COL is a lot lower than ours. Low wages are all right so long as it's in line with the COL (and don't fancy travelling). But it seems many NZers who do work find it hard to even pay bills/feed their family (which is probably why we need to keep paying huge amounts of benefits each week). It just seems something is wrong.

by Gummy Bear Hero | 10th Feb 11, 12:10pm 1297293022

Germany does not have a minimum wage .

by Elley | 10th Feb 11, 12:13pm 1297293228

And...?

Regarding the fact that France is "broke", I'd argue that it's got a lot more to do with the welfare system than with higher salaries in private companies. Just imagine, dole paid for 2 years at 90% of salary, maternity leave = 90% of salary, completely free healthcare (imagine never having to pay a cent for doctors, dentists, glasses, contact lenses etc), and a huge amount of other benefits that like here, get abused.

by Wolly | 10th Feb 11, 12:18pm 1297293523

Jeez Elley not so loud...you want to see half a million Kiwi migrating to France?...or the unions here demanding French benefits!....

by Elley | 10th Feb 11, 12:27pm 1297294031

lol :)

by Wolly | 10th Feb 11, 12:14pm 1297293296

Yet it has strong unions!...is it possible the German union leadership understands more about economics and what it takes to be competitive, than the "British" unions which NZ remains stuck with?

by Wolly | 10th Feb 11, 12:11pm 1297293067

"their COL is a lot lower than ours."...that's a myth Elley!.. some stuff is cheaper and other stuff dearer...taxes vary greatly.....and in France the unemployment rates are up up and awaaaaaay. Check out the minimum wage in the usa...how does it compare with NZ?

by Elley | 10th Feb 11, 12:26pm 1297293991

"some stuff is cheaper and other stuff dearer..." OK. Examples?

I don't know if having a minimum wage is a good thing and that's not what I'm talking about. I'm talking about the average Kiwi wage! It just seems to be a badge of pride that we can advertise ourselves as a low-wage country. When we start employing people I'll be proud if I can say the average salary is 80K, not if I can say I pay them the minimum I possibly can get away with.

When I was in the UK, I had the best boss ever. Not only was he a brilliant businessman who had started his business, developed it, and set up seven offices worldwide but he was also incredible from a human point of view. Regardless of what the contract said, he always took into account people's circumstances and had time for them (admittedly, it was only 70 of us in the UK but that's still quite a few people to look after). He had also made it almost company policy that people were hired at the higher end of the market salary for their experience and that pay rises would be no less than 8% per year. The staff turn-over was pretty much nil, expertise stayed in the company and people were actually happy to work for him and motivated to work well. The business kept growing, is still very successful now and I am still in touch with many of my former work colleagues - none of them have left. All this to say that just because you pay your staff well doesn't mean you are doomed to failure.

by Wolly | 10th Feb 11, 12:34pm 1297294472

Check out the cost of putting a vehicle on the road in aus, getting and keeping a license, the cost of wof and cofs...the distances between home and work.

I think you are getting hung up on the "low wage" bit. Lower wages result in more employment heading to asian nations. That is a fact. So you need to decide whether you want an economy where those on higher wages hand over heaps to a socialist state that dishes out the loot to raise the lower paid incomes, which is what we have but need to be rid of and which leads to what...benefit dependency...reduced effort and the very benefit corruption you know exists in France.

Far better to have an economy where personal effort can raise incomes which will not be stolen by thieving politicians out to buy themselves power and fatter salaries in wgtn. The lazy and indifferent are given the help if they bother to seek it. The damaged and seriously ill receive the free care they need.

Ask school kids if they expect to have to work hard to be able to afford what they might want.....you will get a shock.

by Elley | 10th Feb 11, 12:51pm 1297295460

"Far better to have an economy where personal effort can raise incomes" - but I completely agree with that! Unfortunately it doesn't seem to me that personal effort is raising anything. As you say, if wages rise then we lose employment due to factories etc being moved to Asia, and that's regardless of how hard these employees might have worked. I just don't really see a solution and in the meantime, food & petrol costs keep rising. Fine by us when we can both be on 6-figure salaries but it's not the case for the majority of NZers and I think that's a worry (or should be anyway).

As for the last bit, well at least my kids understand that, including the preschoolers. We've been ramming the message into their heads for a while now :)

by Wolly | 10th Feb 11, 1:09pm 1297296550

"it doesn't seem to me that personal effort is raising anything.".....nah that's not correct Elley...thing is you have to accept the economy is in the shite thanks to poor govt for too long...and to climb from that shite is not an overnight task even though BE and JK have been suggesting that for two years...in fact BE continues to spout drivel about the tradeable sector generating heaps of jobs to save the nation of splurgers.

We have approx 345ooo on benefits that we know of!....how many of them could find work in aus if they bothered to cross the ditch?....how many have been on a benefit for more than a decade right through the era of Clark madness...!

I had a grandparents who lived in a tent in Otago and hunted Rabbits to make a living..they would laugh like hell at what you call 'personal effort'. The other week a bloke tells me he gets 50 Possums a night...the fur from 5 making a kilo...and a kilo selling for $100. Too much like hard work for too many Elley. Maybe this economy needs a bloody good depression.

by Elley | 10th Feb 11, 1:18pm 1297297137

Re-your last paragraph, it made me think of a series of books I read when I was little and that I've started reading to the kids - "The little house on the prairie". Lots of hunting and sweating just to have basic shelter and food. It's amazing how resourceful men could be when they had to be to survive. Also a big reality check to see all the stuff that we expect to have, and "need", these days in comparison. Maybe it should be compulsory reading at school! It might make children pause and think.

by Wolly | 10th Feb 11, 1:31pm 1297297868

I doubt but a few would pause and think...most will be too busy texting to read the first page.

by Elley | 10th Feb 11, 1:34pm 1297298066

Sadly, you're probably right. Shame.

by Kate | 10th Feb 11, 1:43pm 1297298607

Hahahaha, Wolly - the fur from five making a kilo? I only wish - we've got hundreds in our forest - get about an 80% strike rate on our traps.

More like 50 furs make a kilo, though - and that's not "from a friend" - that's from the traders mouth, so to speak.

by Wolly | 10th Feb 11, 1:57pm 1297299450

Just reporting what I was told...kaikoura Possums Elley...he said they were huge with heaps of fur on them...slopped some goo on the flesh side of the skin and next morning off came the fur...hey why don't you see how many it takes to geta kilo!

Just found some NZ made export items...you could make your own Elley!

Possum Fur G String, Nipple and Belly Button Warmer Gift Set NZ$48.65 ...

by Casual Observer | 10th Feb 11, 2:11pm 1297300304

What do you do with all your dead possums, Kate?

The number reqired to get a kilo varies according to districts/regions. Our kids have been selling fur for years, ever since they needed $ for things like scout trips/school trips etc. Even now on their visits home from overseas they will go out and hunt a few and sell the fur. They see it as recycling a pest. ;-)

In the Central Plateau they needed around 12-15 possums to get a kilo. If they were shooting them in the deep south they need around 8. So there is quite a variance. Time of year also makes a difference.

by Kate | 10th Feb 11, 2:25pm 1297301156

Ooops - the hunter/gatherer here tells me its more like x15-20 of the pesties for a kilo at the moment (how would I know, I just bank the money :-)) - and he expects an improvement once they get winter coats. We throw the carcasses down ravines where we don't trap - altho' the son prefers to throw them in the open for the hawks.

by Wolly | 10th Feb 11, 2:30pm 1297301406

I guess this bloke must have been talking about his winter job...hey but even at 15 to the kilo and 50 a night...that's like good money right...so how come so few are doing it....why is there no rush of unemployed to hunt Possy?

by Kate | 10th Feb 11, 2:37pm 1297301823

Our son used to contract to monitor the population numbers for the various pest control authorities. Can be quite dangerous work and the level of fitness needed is high. Many individuals are crying out for access to land to trap, but they just can't get it. Private property rights prevent all sorts of enterprise. DoC argue that trapping becomes uneconomic well before the population is reduced enough to make an ecological difference - hence their use of 1080.

by Casual Observer | 10th Feb 11, 2:55pm 1297302933

Agree Kate, access can be an issue, but that can be more to do with location than property rights. Here in the Eastern BoP there is a lot of trapping going on - some here are pretty much professional trappers. At one time son had permission to set trap lines on DoC land about 45mins from where we live but results were patchy due to the number of trappers trapping in the area. I know some farmers who won't allow trappers on to their places because they or family members trap/shoot on/from their land. So it isn't always about private property rights, but 'protecting their own income'. Have a friend whose land borders bush reserve. They have eight trap lines and catch up to 15 possums on each line. Goes quite a way towards their kids education/uni costs.

by iconoclast | 10th Feb 11, 3:29pm 1297304986

Wolly, please, I need to know, what do you do with headlights?

by Wolly | 10th Feb 11, 3:54pm 1297306481

You have to get a number one haircut icon and they sell this special cream that has to be slopped on regular like...I'm told the UK PM is into this sort of thing right now. Nothing to be upset about you know.

by Casual Observer | 10th Feb 11, 2:42pm 1297302133

Hope there's no waterways at the bottom of those ravines, Kate! :-)

by Philly | 10th Feb 11, 12:25pm 1297293941

Yeah I agree on the COL for foodstuffs. A couple of years ago I spent some time in France, was startled at the cost of basic foods. Lived on crusts & water as a result! Glad to get back to affordable food in NZ.

by Elley | 10th Feb 11, 12:34pm 1297294453

lol, you must have gone to the tourists' supermarket. Don't you like our good & cheap wine ;) I was back there 2 years ago too. Some food stuff were more expensive but a heck of a lot of other things were cheaper. Spent the same amount to feed our family than back here...

Anyway, I was talking about the COL of other low-wage countries, and I think that's what Wolly was refering to as well. France is not a low wage country and I do expect the COL to be higher over there.

by David George | 10th Feb 11, 12:12pm 1297293160

Wolly "real employment demands investment and that demands capital''

Essentialy capital is surplus directed to productive investment. The problem that dogs our economy is we have households and businesses that are using the capital of others because they are either not producing a surplus or consuming it instead of productively investing it. Let's comare two extremes where the workers are getting $2/day (India) or $200/day (Germany). In the first case the workers wage can be driven down to the point where they can barely feed themselves but won't have enough to invest in their own economy and it's companies. Not a good result any way you look at it. Further there is no need or means to improve productivity so the whole economy suffers - $2/day workers can actually compete with heavy machinery.

I don't believe I am envious and have no reason to be. The neo feudalism being being promoted by the likes of our Roundtable would be a disaster for all but the very few. I'm with Kate a fair go for all, that's all.

by Wolly | 10th Feb 11, 12:38pm 1297294734

And what do you mean by a "fair go" KD?

by Kate | 10th Feb 11, 11:29am 1297290549

I've posted it before - but will link it again;

http://mams.rmit.edu.au/es4cefpg6ifj1.pdf

As its worth understanding the concept from a political ideology perspective.

So far my assessment of both Labour and National is that they are core promoters/participants in the ideological platform.

NZ Greens are yet a wild card. They need to bring a scholarly perspective to their economic platform - "the green economy" as the model economy they are promoting presently just doesn't tell me where they are theoretically and philosophically on the ideology of globalisation.

NZ First, by even the nature of its name, seems to have recognised the growing effect of this ideology from its grass roots. It has been trying for years to say neo-liberalism as a policy prescription was pernicious to sovereignty and society at large.

ACT - well hopefully they're toast - and no guesses anyway where they are.

Maori - trying so deperately to deal with the effects of globalisation on their people/constituency such that they (other than Hone) can't see the forest through the trees.

"Partnering" politically with persuasions of this political ideology only draws you further within its tentacles. In other words, just as National have done: you can have this hand-out (e.g. whanau ora etc.) and we'll pay for it from an increase in your constituents' tax burden : a rise in GST.

by David B | 10th Feb 11, 11:43am 1297291387

Thanks for that post and the link, Comrade Kate. It's always good to have a hearty laugh in the morning!

by Kate | 10th Feb 11, 11:49am 1297291748

A pleasure, DB.

:-)

by Colin Riden | 10th Feb 11, 2:44pm 1297302280

From your link:

"Polyarchies not only limit democratic participation to voting in elections, but also require that those elected be insulated from popular pressures, so that they may ‘govern effectively’".

Are we there yet? Start with something like determining MPs salaries.

by Les Rudd | 10th Feb 11, 1:01pm 1297296082

Kate - whether intended or not, it seems to be a natural outcome of the key economics premise of efficient allocation of resources by price. A premise that is flawed once various context and realities are considered, eg. price manipulation by grossly manipulated exchange rates - does anyone really think Western corpos that benefit from the undervalued Yuan, really want the playing field levelled?

It is good for the borderless corporate nations of the world, but will be bad for many sovereign nations. Evidence accrues by the day.

by Matt S | 10th Feb 11, 9:41am 1297284116

If I were the government I would be raising taxes.

Why? Because we don't already pay enough taxes? Income tax, Goods and Services tax, fuel levies, road tax, ACC, local council tax, tax on interest etc not enough for you ?

Sheesh !!!!!

by Muppet King | 10th Feb 11, 10:52am 1297288340

lol Matt I know we pay a lot of taxes, but to be honest I think we need to be taxed more, I mean sure I would love to have more money by way of less taxes, and I know that the average kiwi is finding it tough at the moment, but I believe that as a country we can't afford not to be taxed more as we can't keep borrowing. Its a fragile balancing act, I reckon more taxes on consumption would be a great idea, and more taxes for the higher income earners, with maybe an extra point taxed on lower income earners, everyone has to pay their way.

by Matt S | 10th Feb 11, 1:12pm 1297296778

@ M.K .. or, the govt could reduce spending. Does our Govt really need to be taxing its citizens, borrowing from overseas creditors, and then spending $70 Billion dollars this coming year?

In terms of GDP, our Govt is a gigantic inefficient unproductive monster consuming nearly 60% of our total productive output (based on 2009 GDP of $119 billion), and indebting future generations for years to come.

Are you still sure raising taxes is the right thing to do?

by Gummy Bear Hero | 10th Feb 11, 1:24pm 1297297486

Labour & the Greens still see the economy as a pie , which never grows larger , and must be carved into ever smaller pieces , to ensure that every citizen gets a fair share ( they're " entitled " . ) ........

...... Even National don't get it , that reducing government in size and scope , will allow the economy to grow . Bill English is spending more than Michael Cullen did . And we pillorize Cullen for being a wastral with tax-payers' munny .

In terms of government " services " , healthcare and pensions being two , we are living beyond our means .

The economy is stifled by taxes and by onerous bureaucracies .

by Matt S | 10th Feb 11, 1:39pm 1297298349

Spot on Gummy Bear, shame more people can't see it.

by Philly | 10th Feb 11, 12:35pm 1297294546

Matt: One notices the gaps in your list of taxes: capital gains tax and/or land tax. Unlike virtually every other OECD country. And would fill the gap as needed. So its not necessarily about increasing tax. It should be about spreading the tax net more fairly.

Cheers to all

by Matt S | 10th Feb 11, 1:06pm 1297296364

Philly, the gaps were filled by an "etc", too many taxes to list. Besides, taxation, however you colour it will not address the root causes of the imbalances in our economy, and only serves to justify and fuel an ever increasing government and public sector.

by Philly | 10th Feb 11, 2:24pm 1297301064

Matt: D'ooohhh!

etc doesnt cover CGT as we don't have one! Or have I missed something?

I know most who post on this site hate the idea of a CGT to death, but it is still a huge gap in our taxation system.

by Casual Observer | 10th Feb 11, 2:36pm 1297301802

Philly, we don't have a general capital gains tax, but capital gains are taxed in certain circumstances:

Capital gains and income

Some property schemes are described as producing capital gains, which aren't taxable, rather than producing income, which is taxable. A number of factors need to be considered when determining whether profits from property sales are capital gains or income.

These include:

your intentions when you bought the property; what you actually used the property for, and
if you have a regular pattern of buying and selling property.

Go to Mistaking property dealing for property investment

Dealers and speculators must pay income tax on any gain they make from reselling their property. If they declare a loss, it may be tax-deductible. They must also pay tax on rental income they may earn from the properties.

http://www.ird.govt.nz/property/property-common-mistakes/investment-bec…

by Philly | 10th Feb 11, 2:55pm 1297302904

Yeah, with gaps you could drive a Mack truck thru. I meant a real CGT, not one which exempts the vast majority of capital gains. How many farmers pay CGT when they sell the farm?

Cheers

by Casual Observer | 10th Feb 11, 3:00pm 1297303230

If you have owned the farm for less than 10 years farmers can get hit with it.

by Casual Observer | 10th Feb 11, 3:08pm 1297303733

The problem with a cgt as I see it Philly, is it has to be very clearly defined, there will probably be some form of exemption, and is usually expensive to implement. As we are supposed? to be in a falling housing market, the horse has bolted on the opportunity to really make revenue on that. Stamp duty in comparison is very simple to set up - every property purchase liable for it, except perhaps first home and is less costly. Whether property is on a falling or increasing market, it will always be payable, so no losses to carry over as in cgt. It is much 'cleaner' than a cgt.

by iconoclast | 10th Feb 11, 3:40pm 1297305601

Surprised Labour haven't cottoned on to this one .. charge stamp duty .. slow the market down .. and use the proceeds to offer "first home owner grants" .. help the young family get into their first home with a $50,000 FHOG .. that'd be a winner .. has to be a first home .. registered as a joint family home .. can't be sold for 10 years etc .. bring the young vote inside the socialist camp

by Murray | 10th Feb 11, 10:39pm 1297330764

Australia charges stamp duty and gave out "first home owner grants"...... did it make houses more affordable there?.....

by Philly | 10th Feb 11, 3:57pm 1297306673

Casual Observer: Sure, I did put in my original comment that could be a CGT or land tax or similar. CGT being less than perfect. It may be expensive to implement, but is that enough reason to forgo billions in revenue, & give a tax-free benefit to those who are usually at the wealthy end of the spectrum? Other countries seem to be able to manage it ok. However, as you say, stamp duty or some such may be the better alternative.

Thanks for your comments, cheers to all

by Matt S | 10th Feb 11, 3:45pm 1297305943

Philly, so explain.. if we had a real CGT, then what would that achieve exactly?

I'm assuming that people who like tax would be happy since the opportunities for the government to tax us was increased. I'd guess they'd say its more "balanced", less loopholes, so therefore it must be fair. Right?

Then the people who like more taxes would then presumably be happy because the govt would be getting more money to spend on itself, and we the people would have less 'wealth" because of it.

Really, I am genuinly interested to hear why more tax is a good thing? I am also equally interested to hear why people wish to avoid talking about reducing government spending? Do you work in the public sector, or benefit in some way from our welfare system by any chance Philly?

by Philly | 10th Feb 11, 4:03pm 1297307011

Matt S: the govt is borrowing $300 mill a week, if u hadn't noticed. As I discussed earlier, sure, some is wasteful - but much isn't. I think you do want hospitals to be there for you.

More tax in one form can lead to reduction in other forms, as we saw with GST increase recently. So levelling the tax playing field doesnt necessarily mean more tax.

"Those who like tax". Well! Who likes tax? But most salary & wage earners have no choice. So why should others get the benefits and not pay like others? Talking about "those who like tax" is meaningless.

I have no problem with reducing govt spending. I just feel that you can rationalise spending AND make the tzx system fairer at the same time

Cheers to all

by Andrewj | 10th Feb 11, 3:58pm 1297306724

Philly, I sold land we had owned it for 35 years. Hard to put GGT tax on it as the inflation of the 80's distorted things so much. I then sold another block we only owned for 3 years and IRD went after me, it took two years before they admitted they had no case, as I was not after capital gains but simplly shifting assets around.

I think if CGT can be used to stabilise land bubbles then its fine, if its seen as a revenue gatherer then its going to be a disaster. Dont forget that MAF is saying that even this year with record prices many sheep and beef farms will only be returning %1 ROI.

by Philly | 10th Feb 11, 4:15pm 1297307740

Andrew: In fact, CGT can gain revenue, and allow other forms of tax to be reduced.

Note the excellent series on CGT in the Herald recently

http://www.nzherald.co.nz/business/news/article.cfm?c_id=3&objectid=10699125

As a farmer, I can understand CGT is anathema to you. Turkeys don't vote for Xmas (I'm not calling u a turkey here, Andrew!).

Most CGT is set at quite a low rate eg 15 or 18%, to allow for the effects of inflation etc. Its still going to be a blunt instrument. Just like all forms of tax.

Cheers

by Wolly | 10th Feb 11, 9:42am 1297284179

That's tinkering MK...the problem is the dependence on the wrong sectors to provide employment...both housing and state...Govt needs to stop the bullshit and cut the splurge. The stupid expansion of the state under Clark has yet to be wound back to the level that revenue can afford. There will be no end to this recession and shite until the govt chops away the waste. To date Key and English have been counting on the GFC being a blip on the markets...how wrong they have been.

The property sector is the NZ economy....it would take a govt with real balls to bash the speculation from the economy. Don't expect that anytime soon. Neither Bollard nor English have the guts to go head to head with the banks which in truth are the managers of the economy.

It is the banks to which Key and English turn when they need to borrow to feed winz and buy another term in power...so policy will always prop up the banks operating in NZ because the banks are a cartel on world markets.

Forget the BS about NZ being a nation of Kiwis all working together etc etc...it's pure spin. Look to being in control of your own finances and avoid the banks at your own peril.

The rural sector is as much in debt to the banks as the urban. Bernake's commodity bubble is fattening the banks. Those who told the banks to effoff and to shove their credit in an earhole are now getting returns to counter the many years of receiving bugger all. They will not be splurging that income.

So the rural job creation spin is pure BS. Ask English how many jobs have been created in his rural electorate!

by Philly | 10th Feb 11, 12:45pm 1297295130

Wolly: The "chop away the waste" in government is overdone, there are limited returns there. It is true that there was a splurge (an obvious example is WFF). However pretty quickly the cutting is going to reduce your health services & education for your grandchildren. I doubt that govt provided services have as much fat as you might think.

I think the real answer is to grow the economy, & get away from one built on property & speculation. Brian Gaynor (as always) had another excellent heads-up on this in Saturday's Herald.

http://www.nzherald.co.nz/business/news/article.cfm?c_id=3&objectid=10704199

eg: "New Zealand's overseas debt has surged from $75 billion to $253 billion since 1995 and now represents 132 per cent of GDP compared with 81 per cent 15 years "ago.

by Nicholas Arrand | 10th Feb 11, 9:11am 1297282301

..."zombie households" ...the ...numbers of home owners trapped by excessive debt. ....As things stand, there is no mechanism for proper price discovery in the UK housing market, with potential borrowers holding off in the expectation of lower prices and sellers trying to hold onto to inflated pre-crisis prices. Transactions are at a standstill. The whole housing market needs to be rebased at affordable levels. Until that happens, you won't see any durable recovery in household finances....

Nice article, Jeremy! And quite applicable to NZ, as well.

http://www.telegraph.co.uk/finance/comment/jeremy-warner/8314423/Housing-is-in-need-of-some-shock-therapy.html

by andyh | 10th Feb 11, 9:18am 1297282701

Meanwhile back in Realitytown the US housing market continues to disintergrate; a staggering 27% of US borrowers now owe more on their loans than their house is worth (ie are in negative equity)

http://www.cnbc.com/id/41483676

And the rate of house price falls is accelerating again - that negative equity figure will soon be over 30%

'Zillow found home values posted their largest quarter-over-quarter decline, 2.6 percent, since the beginning of 2009'.

by Cleo | 10th Feb 11, 9:38am 1297283882

Australia and SIngapore, UK and Canada and now Germany and the US. NZX is looking ever so irrelevant........

http://www.telegraph.co.uk/finance/newsbysector/epic/lse/8312759/London-Stock-Exchange-and-Canadas-TMX-agree-4.2bn-merger.html

by fmr ca | 10th Feb 11, 9:47am 1297284453

Who was the plonker commenting on Radio NZ this morning? Re the economy " it won't pick up until house prices rise and home owners spend on the back of increasing house vaues." With this sort of old thinking reasserting itself I have little hope of NZ ever becoming a productive country, or reducing its liabilities to foreign banks.

by Wolly | 10th Feb 11, 9:55am 1297284917

The good oil on oil

http://www.marketoracle.co.uk/Article26178.html

by powerdownkiwi | 10th Feb 11, 7:45pm 1297320309

I didn't see oil anywhere.

I saw $$$$$$$$$$$$$$

by Matt in Auck | 10th Feb 11, 10:23am 1297286607

Yeah, but its true, sadly

The NZ economy IS housing

I'm sure there is a very strong causative link between house price growth and GDP growth

by Matt in Auck | 10th Feb 11, 10:27am 1297286839

re my last comment

actually there will be a bi-directional relationship between house prices and GDP. That is, GDP growth fuels house price rises (at least in the NZ setting with its stuctural issues). as well as house prices fuelling GDP growth.

I suspect the influence of house prices on GDP is greater than vice versa though

by Murray | 10th Feb 11, 11:10am 1297289453

Yes, Matt, you are quite correct.

Re: VFs comment below, yes farming and tourism are large parts as well, but housing and it's associated businesses make up a large part of any economy.....

by Nicholas Arrand | 10th Feb 11, 11:46am 1297291594

A property prices fall is then, a matter of impression ( feeling poorer) rather than a reality. Lower home prices do two things to make most people wealthier.(1) the acquistion cost of the home is less; therefore accumultaed savings go further, or debt assumtion is lower, making the household nett better off, and (2) the servicing cost of any debt is nominally lower at whatever interest rate is in vogue, than it otherwsise would be. Those who have, what for them is, an affordable sole home remain neutrally effected as 'they are buying and selling their home in the same market', however up-grading will be at a lesser cost for them.

Property price falls make all but those who are speculating on further rises, wealthier. Those speculators who have just entered, or have remained in, the game will loose, just as many associated financiers ( or their shreholders!) have also just lost. That is a function of any speculation based on capital gains. Those who are in when the end comes...loose. It is just a question of 'how much' versus their entry point.

by Vera Fayed | 10th Feb 11, 10:47am 1297288068

"The NZ economy IS housing"

Gosh. Nothing else at all eh Matt? Here's silly old me thinking there was a spot of farming going on out there, a tad of tourism, a bevy of boatbuilders, some software developers and more. Some silly sod even tried to convince me we have 2 billion pa in exports of scrap metal. Obviously didn't know what he was talking about. Only housing here in NZ. Saw on the interweb that there are 26 working oil fields in NZ and a spot of gas as well , but apparently it was all just hot air. Only housing here mate. Very concerning this 'cause I'm informed by the genii on here that houses are absolutely useless things.

Thanks for informing us Matt. We need educated positive people like you. I herd you been to skool and have tuns of kerwollyfuckayshuns so you must be right.

by Billy | 10th Feb 11, 3:40pm 1297305648

The past few days the media is all about the rents going crazy and property prices stabilizing/recovering. Surely things are going to be fine.

by rp | 10th Feb 11, 11:02am 1297288924

here's a good link showing the impact of QE on inflation.

http://www.europac.net/commentaries/cause_and_evidence_inflation

It is driving commodity prices up. Yet there's now a plethora of stories everywhere how food / oil / commodity prices going up because of other reasons....e.g. shortages, weather, move to bio-fuels, lack of new production....

by Bernard Hickey | 10th Feb 11, 11:15am 1297289731

Guest nights flat in December from November.

Tourism not kicking on. As we saw with Tourism Holdings' profit warning.

See the interactive chart here.

The Americans and Brits aren't coming. The Aussies are getting jumpy too.

We'll see. January is always the best month so it may have been better then.

http://www.interest.co.nz/charts/industry/guest-nights

What is everyone else seeing?

cheers

Bernard

by Philly | 10th Feb 11, 2:18pm 1297300693

Bernard: my brother operates a small tourism business in Chch. He says there is a noticeable decline in numbers of Yank & Brit tourists. He says where there is an increase it is in Chinese tourists etc. He said the Chinese have less benefits for the local economies as go on quick all-up package tours rather than using a range of local services. He is suffering, & says a lot of similar operations are in the same boat.

Cheers

by Wolly | 10th Feb 11, 11:38am 1297291091

"40pc of property sellers cut their asking prices"

http://www.telegraph.co.uk/finance/personalfinance/borrowing/mortgages/8313213/40pc-of-property-sellers-cut-their-asking-prices.html

by Wolly | 10th Feb 11, 11:40am 1297291237

Harrrrrrrrhahahahahaha

"ANZ says a rejig of its regional management structure is aimed at getting the bank ready for a pick-up in the economy and is not about cost-cutting."herald

by Vera Fayed | 10th Feb 11, 11:41am 1297291262

"The Americans and Brits aren't coming"

What, none? Or do you mean that those that do arrive are suffering impaired libidos?

"What is everyone else seeing?"

I'm seeing you dear Bernard, doing what you so often do. Taking any statistic with a negative conotation, spinning it into a portent of catastrophe and waving the headline around like a trophy. So a price dip becomes a "crash", and a price rise is automatically a "bubble". On here bad news is good and good news is "spin", (or BS.)

by FCM | 10th Feb 11, 11:52am 1297291921

Tourism not kciking on, why would it with the xrate being so strong. NZ is not the cheap destination it used to be. Tourism and exports getting hammered...no wonder there is no growth our two biggest employers.

by rp | 10th Feb 11, 11:57am 1297292242

a friend in the business told me tourism bookings from Aussie well down in the last two months (with all their disasters up there). Doesn't bode well for the wider industry as that was where all the growth has come from in the last couple of years

by David Chaston | 10th Feb 11, 12:24pm 1297293843

December tourism struggled - another big sector that won't be helping Q2 GDP

http://www.interest.co.nz/charts/industry/guest-nights

by Neville C | 10th Feb 11, 12:40pm 1297294851

Re the earlier posts about why we have lower incomes than other countries. Its to do with the capital (machines) employed per worker and by extention the revenue per worker. If a miner in OZ can use a $1m machine to dig a 1000 tonnes of coal a day, the money left to pay the miner (after the machine is paid for) is far more than there is for each of 1000 miners with spades digging 1 tonne each per day.

Peter Jackson has 2 or 3 of the most powerful computers in the world (in the top 50) to create his special effects. So instead of 1000s of people hand painting each effect, he has a couple of 100 doing the same work and sharing the same revenue, thus far more income per person.

People think automation loses jobs (and they are right for those jobs) but it creates more income per person in society to share.

by KW John | 10th Feb 11, 1:45pm 1297298749

But where to get the widgets from?

Should I buy the parts/one off assembly from overseas, or try my hardest to source them locally?

I remember reading about this NZ site before - No affiliation.

ponoko 'the world's easiest making system'.

Should similar approaches be tried for larger projects before buying overseas?

There seem to be a lot of very capable engineers/manufacturers in this country and many light engineering workshops / software developers.

Is it about supply chains?

Build the robots here! (meanwhile we wait for the trains to come from overseas).

damn... I forgot the oil bit again, and that selling is easier than making.

by Gummy Bear Hero | 10th Feb 11, 12:47pm 1297295220

170 or so of the Vector Energy shareholders who stupidly gifted their shares to the slime-ball Whimp , at a 34 % discount to the market price of VCT ( NZX ) ....... Will be given an opportunity to recant their decision , before the shares are re-registered in a scummy Whimp " company " .

Irregularities in the forms sent by the mud-sucking Whimp , allowed Vector to offer these duped shareholders a second chance ............

....... Have those shareholders learnt their lesson ?

by David Chaston | 10th Feb 11, 12:46pm 1297295169

New online job ads posted (on Seek) in December and January were better than a year ago, although still at fairly weak levels.

http://www.interest.co.nz/charts/labour/new-job-ads-posted

by FCM | 10th Feb 11, 12:58pm 1297295937

We just had two BNZ mortgage lenders pop into the office trying to give away some money to the staff. They must be under some pressure to meet there targets if they are walking the street to sign people up. We declined there offer, but managed to get them to buy two chocolate bars on behalf of the kids fund raising.

by walker janette | 10th Feb 11, 8:58pm 1297324705

Were they riding push bikes maybe they need to carry around the watch tower as well with god on their side they would be hard to resist. Got to keep working that bonus cheque.

by Wolly | 10th Feb 11, 1:23pm 1297297387

"Expat New Zealanders hit by Tropical Cyclone Yasi have joined a growing number of disaster victims denied recovery payments by the Australian Government" herald

Way to go Jewleya..that's the ANZAC spirit.......Let's hear you tell the bums on seats the NZ Parliament why the spirit is so strong in you.

by Gummy Bear Hero | 10th Feb 11, 1:46pm 1297298779

Oliver Marc Hartwich has written " A housing market whodunit " for the Business Spectator .

For some excellent theories on why the housing markets of Germany and Switzerland have barely ticked above the general rate of inflation since the 1970's , this is an absolute " must read " .

[....... Hugh P. : Love to hear your take on this article ]

by iconoclast | 10th Feb 11, 2:40pm 1297302050

The problem highlighted by that article is the constant competition for growth and constant increase in the population and attracting migrants. The one beauty (from a NZ standpoint) is it makes New Zealand and Australia an unattractive place to migrate to in the event Germany and Austria should go into recession. The arbitrage cost of selling a property and relocating to NZ, (or AU) and buying an equivalent property is impossible. I'm not convinced by the "growth is good" proposition (the gordon gekko style argument) which is the Hugh Pavletich philosophy in support of the ever-expanding urban-sprawl model based on highways and motorways and opposes rail transport. In earlier posts I have suggested that until NZ can adequately provide for the existing population "in all respects" (in other words fix the existing problems) it should close the doors to immigration and work on solving those problems. A number of recent posts and articles have demonstrated that migration is compounding the current problems and creating future problems. Uncontrolled growth is not good.

by Vera Fayed | 10th Feb 11, 3:23pm 1297304615

Very interesting reading thanks Gummy. Here's the link:

http://www.businessspectator.com.au/bs.nsf/Article/Australian-house-prices-property-Germany-pd20110208-DUW53?opendocument&src=rss

by KW John | 10th Feb 11, 5:45pm 1297313119

Hugh,

What work has been done to assess the 'turnover' rate of housing (poor phrasing)? Could this affect the speed with which the price increases (in the presence of easy credit / (in)appropriate incentives).

The comment below could suggest that there isn't much housing turnover in Switzerland, or that people are happy to simply 'swap', without expecting profit or....

"The chief reason for the situation would be that Switzerland has punitive taxes on property profits in order to stamp out speculation. If you sell within five years of purchasing, the tax rate is 90 per cent of the profit, regardless of your (low) income tax situation. This tapers off after five years, but after 50 years it's still in the order of 10 per cent of profits. (And there is no adjustment for inflation!)" - Markus Auf der Maur (one of the commenters).

Thanks in advance.

by Gertraud T. | 10th Feb 11, 3:03pm 1297303436

Unrelated but important post by Chris Martenson:

EGYPTS WARNING - ARE YOU LISTENING

with relentless math.

http://www.chrismartenson.com/blog/egypts-warning-are-you-listening/525…

by Kate | 10th Feb 11, 4:08pm 1297307339

Yes, 400m2 of arable land per person in the country - scary indeed. And I smiled at his comment that;

... it's not at all clear to me how the poorly defined concept of 'democratic change' will really change the equation much, as limits are immune to which 'ism' you happen to be running, but I am sure there are some in Washington DC who think ideology can trump reality.

BTW, surprised the multimillion dollar cost to Aucklanders for their Auckland City Council Maori Advisory Board didn't make the 90 at 9. That city hasn't got a hope.

by KW John | 10th Feb 11, 5:46pm 1297313193

sorry meant to post as reply.... correct now