90 seconds at 9 am with BNZ

90 seconds at 9 am with BNZ: AMI was close to receivership; Over 12 firms wanted govt support; US avoids shutdown just; Oil up again

11th Apr 11, 8:58am by Bernard Hickey

Bernard Hickey details the key news over the weekend in 90 seconds at 9 am in association with Bank of New Zealand, including news this morning from Prime Minister John Key that AMI Insurance would have gone into receivership if the government had not given it a letter of support in mid-March to take to its ratings agency.

See Alex Tarrant's article here on Key's comments on AMI, including Key's view on the (short term) future of CEO John Balmforth.

Meanwhile, Finance Minister Bill English said over the weekend that a dozen companies had approached the government for support, but the government was only able to bail out the 'Too Big To Fail' companies. See more here from Alex Tarrant.

Meanwhile, English also said New Zealand needed to make a virtue of its low wages relative to Australia, suggesting the government had given up on closing the gap of 30-40% in wages between Australia and New Zealand. See more here at NZHerald. See our poll here: Should New Zealand give up on closing the wages gap?

Meanwhile overseas, America only just avoided a shutdown of its government over the weekend after Congress approved a temporary spending bill. 'Tea Party' Republicans want to reduce government spending dramatically and cut taxes, while Democrats want to avoid such cuts. See more here from Bloomberg saying Obama plans to announce a new deficit cutting plan this week.

Meanwhile, the world faces a struggle out of recession as just as the global economy gets going, monetary policy is being tightened with higher interest rates, and fiscal policy is being tightened with moves to reduce deficits.

Also, the oil price's rise over US$112/bbl for West Texas Intermediate over the weekend may take some of the shine off the global recovery. See more here at Bloomberg.

The New Zealand dollar remains strong too as commodity prices hit record highs. It was firm over 78 USc over the weekend.

No chart with that title exists.

We welcome your comments below. If you are not already registered, please register to comment

Remember we welcome robust, respectful and insightful debate. We don't welcome abusive or defamatory comments and will de-register those repeatedly making such comments. Our current comment policy is here.

28 Comments

by Wolly | 11th Apr 11, 9:02am 1302469344

GUMMMMMY...we know what's wrong with you....it the rice porridge Gummy...you gotta stop eating that stuff.... http://www.nzherald.co.nz/nz/news/article.cfm?c_id=1&objectid=10718482

by Gummy Bear Hero | 11th Apr 11, 9:28am 1302470932

........That's nae the way tae make rice porridge , Wolly !

Fry off some garlic . Then biff in a litre or two of fresh chicken stock ( liquor , not cubes ! ) . A cup or so of glutinous ( sticky rice ) . Season to your palate , salt & pepper .

.........Simmer awhiles . Add some pre-cooked chicken , small pieces . Stir in some spring onions before serving .

Enjoy !

by Christov | 11th Apr 11, 9:42am 1302471727

Thanks Wally....I'll tell the wife it's a new and tasy gruel I dreamed up....that oughta learn her one.

By the way ...what about the rubber thingy ...whats the go !! are you looking for development capital...? of course me n the Gumster would need more info to ground floor this one.

by Gummy Bear Hero | 11th Apr 11, 10:00am 1302472834

....... the rubber thingy morphed into an insurance contract signed by AMI ........... Doi-ng , doi-ng , doi-ng ........... All con , no tract !

by powerdownkiwi | 11th Apr 11, 9:20am 1302470459

Bernard - is anyone tallying the debts being accrued - globally, public and private?

Supplementary question: Is that included in your definition of 'recovery'?

by Wolly | 11th Apr 11, 9:35am 1302471309

The liars crooks and bankers are going to solve the debt crisis PDK by using the Japanese approach.......they'll bury the debts in concrete never to see the light of day and tell us all that the GFC is over finished all gone.....

by steven | 11th Apr 11, 9:49am 1302472165

and the japanese ppl were happy with Nuclear power until it blew up on them.....

Ditto the 30 years of the free market / laissez faire fantasy....

regards

by Gummy Bear Hero | 11th Apr 11, 9:53am 1302472429

Nothing wrong with a lazy-fairy-fantasy , buddy ......... Where would the modern Labour Party be without them .

by steven | 11th Apr 11, 11:31am 1302478318

Well I can sure see where WE are with it.......

regards

by Bernard Hickey | 11th Apr 11, 11:49am 1302479394

I'm as sceptical as you are about a debt-fueled 'recovery'.

cheers

Bernard

by rc | 11th Apr 11, 10:07am 1302473250

re NZ Inc wages. No way to compeat with wages. Was in Sydney last weekend, OZ apparently has a skills shortage, people previously earing $150k were asking for $180k and getting it. The mining boom is in full swing (so long as China keeps buying).

Meanwhile we have Greenpeace claiming victory for halting the seismic survey off the East Cape. No way we'll ever be a high wage economy with that sort of economic sabotage from a bunch of hippies no doubt funded by the NZ taxpayer via WiNZ.

by Kunst | 11th Apr 11, 10:17am 1302473840

rc – ever heard of sustainable, productive industries or are you just into milking the planet - leaving the financial burden for the clean up/ damage to the next generation - BB ?

by powerdownkiwi | 11th Apr 11, 10:29am 1302474547

rc - that's silly.

Those finite resources are one-offs.

Ask the question : what then?

And anyone - I suspect you're one - who listens to the "300 years of" type comments, fails to understand simple maths. Hoe into a finite resource faster and faster, time gets shorter and shorter.

The oil resource withing NZ may even be two billion barrels recoverable, although that's very unlikely. That would keet the planet going for about 23 days. Excellent. Then what?

You think you'd be 'wealthier'? What would that mean, exactly, post oil?

And which country carries life better, post extraction? Not the sunburnt country, that's for sure.

by cam | 11th Apr 11, 11:38am 1302478709

Once everything is dug up in Oz just shift back to NZ

by Plutocracy | 11th Apr 11, 1:08pm 1302484089

Hey PDK,

I'd love to know your thoughts on the future of shale gas being used in place of oil (where it's applicable). There's an article in Time magazine touting it as the solution to the worlds energy crisis (well, temporarily at least).

Could this help soften the coming energy crunch?!?

by powerdownkiwi | 11th Apr 11, 8:28pm 1302510507

Pluto - good question.

The shale is poor EROEI - I think the accepted figure is 2 barrels of oil equivalent, to produce three. Put another way, 2/3 of it goes turning it into what we call 'oil'.

It also takes a lot of water, and leaves an awful mess. The water will be counted in the EROEI (pumping etc), the mess won't.

You can therefore divide by three, and at least by two (presuming they get more efficient over time) the claimed numbers.

Always remember this: we go through 85-6 million barrels per day of oil (all liquids, including biofuels, shale, gas-to-oil) so a billion barrels every 11.7 days.

Every time you hear "3 billion barrel field found" just think 'a month'.

Then think - "at present rates of consumption". Which only go up, so the time only goes down.

By the time they turn to the Bakken, to deepwater, and to shale, our economies are in permanent trouble. Which is what I think we;re seeing now....

Keep an eye on THEOILDRUM, best site generally. Keep it in perspective by looking at PEAKOILDEBUNKED. Iy doesn't take long to ascertain which has the better argument.

by steven | 11th Apr 11, 12:13pm 1302480788

Letting such companies take our oil doesnt make us high wage economy, in fact the opposite....any country that has become a petro-economy sees its export companies collapse under an exchange rate of 1.2 and not 0.7....

So all we end up becoming is a society that lives off the oil revenue....one huge welfare state.

This isnt what we want.

regards

by rc | 11th Apr 11, 1:05pm 1302483929

Dont disagree with much of that. I would want us to follow Norways example if we do ever become a petro economy (albiet briefly).

by TrimChaiLatte | 11th Apr 11, 10:20am 1302474054

As someone soon to cross the ditch, It's been obvious for years NZ has lost touch with the Australian standard of living. But for the government to actually admit the chase is up and attract business with cheap labour is sad news.

I don't believe this is a wise option, the gap may be large now (minimum 40-50% wage gap), but with this mentality from our leading government you can expect the gap to blow out further.

Some will say that Oz is 'the lucky country' and that keeping up was impossible. I disagree, NZ has stacks of potential but lacks the ability see beyond buying the bach in the Coromandel.

Listening to Bill English on Friday has only confirmed that using my special visa entitlement is the best option for the family. I don't want my children becoming 'cheap labour' for Australian companies and I'm pretty sure no one else will either.

by Gertraud T. | 11th Apr 11, 10:20am 1302474059

"America avoided just a shutdown"

On the 8 days preceding the agreement of cutting 38,5 billions the debt jumped 54 billions.

http://www.cnsnews.com/news/article/debt-jumped-54-billion-8-days-prece…

What a farce!

by childofthesun | 11th Apr 11, 11:17am 1302477472

I'll be joining you soon TrimChai Latte. The best I can offer my 3 year old daughter is that if her parents are stupid enough to stay in NZ that she will grow up in a low wage economy. I suspect that she may be smart enough to never forgive us.

Double Dipton needs to engage the brain before talking. Aspirational goals of 'closing the wage gap' with our cousins can be ignored as hyperbole by most but to suddenly shift gears and laud a low wage economy as an attractive alternative exposes the barren wasteland of unsustainable policy and ideas emanating from this government.

The reluctance to leave NZ and move across the Tasman has been well and truly eroded by a government that promised so much but has delivered scraps. Thanks for the tax cut John but really you need to focus less on the style and more on the substance.

by David George | 11th Apr 11, 11:44am 1302479064

Some worthwhile comment this morning (Breakfast show) by a chap from AUT regarding the low wage trap.. Low wages reinforce low productivity by removing the incentive to invest in more productive plant. As I've said before; do you want to have folk competing with heavy machinery in road building as they do in India?

Secondary effect is an inability for the average worker to save, there is no surplus at the end of the week, so your capital base shrinks or doesn't grow. No money left to invest in more productive/economic plant or it has to be borrowed and repaid with interest from foreigners.

The government further lowers wages with their foolish immigration policy towards lower skilled workers. Do we really need to import third world labour to catch fish or milk cows or pick fruit or become prostiuites or taxi drivers or $2 shop operators? Crazy!

I don't believe this Government are the slightest bit interested in raising Kiwi wages and living standards and Double Diptons comments prove it.

by Wolly | 11th Apr 11, 11:51am 1302479496

Rate rises of "...5.89 per cent for a $535,000 Blenheim property"...marl express....happy Blenheim ratepayers not...

by Elley | 11th Apr 11, 12:08pm 1302480496

That's not so bad. We're getting hit with a 9.8% increase (or is that 10.3%, I can't remember)...

by johnboy | 11th Apr 11, 12:05pm 1302480324

Do you remember Promina, a listed insurer on the ASX. It asked several NZ insurers to join

them in the mid 2000s. The AA did join, but AMI declined saying it wanted to remain

independent. Then Suncorp Bank in Brisbane bought out Promina, in 2007. AMI could

now have had financial strength behind them, but for their management wanting to keep

the rewards and the risks in-house. Regards johnboy

by steven | 11th Apr 11, 12:17pm 1302481078

Its a mutual its not for profit or at least thats not its focus....also so there would have been less competition...

I wonder just what they were saving in terms of per customer in re-insurance costs, $3 a month? $30?

regards

by Andrewj | 11th Apr 11, 12:14pm 1302480841

http://www.telegraph.co.uk/finance/comment/rogerbootle/8441470/Eurozone…

Everyone is now focused on government debt as the nub of the problem. And the numbers are shocking. http://www.telegraph.co.uk/finance/newsbysector/banksandfinance/8440938…

celand has rejected new proposals to pay back the £2.3bn that Britain spent on compensating savers when internet bank Icesave collapsed, according to early results of a referendum last night.

Broadcaster RUV estimated that 63pc of voters rejected the deal in a referendum, while the Icelandic prime minister and finance minister admitted the "no" side "appears" to have won.

by Wolly | 12th Apr 11, 6:06am 1302545163

"Treasury boss John Whitehead took World Bank and International Monetary Fund officials out for pricey dinners just a few months after State Service Commissioner Iain Rennie warned top public servants against doing just that.

Dr Whitehead's credit card expenses were published this week and show that last month he spent $292 on dinner for three at Wellington waterfront eatery Foxglove with World Bank executive director Jim Hagan.

Other public sector chief executive expenses released recently include those of former top spy Sir Bruce Ferguson - until December the head of the Government Communications Security Bureau. In his past six months with the bureau, he spent a total of $26,358, including $5000 on hospitality and gifts and $19,600 on international travel." herald

Harrrrrrrrrrrr hahahahaha...any wonder then that the general public think the 'Sir Humphreys' are a pack of shites sucking on the public purse with no regard to the bloody fact that taxpayers are funding their luxury lifestyle...what an utter farce...a gutless govt prepared to allow the splurge to continue....