Friday's Top 10 with NZ Mint

Friday's Top 10 with NZ Mint: Efficiency of services; Trojan Horse; suburban malls; Gerard Depardieu; housing stress; Fed minutes; P.J. O'Rourke; Dilbert, and more

4th Jan 13, 10:01am by David Chaston

Here's my Top 10 links from around the Internet at 10:00 am today in association with NZ Mint.

Bernard is on his summer break and will be back on January 22, 2013, from Wellington.

As always, we welcome your additions in the comments below or via email to david.chaston@interest.co.nz.

See all previous Top 10s here.

1. Avoiding US-style tax/spend gridlock
Through relentless and unforgiving price competition, both agriculture and manufacturing have become lean and efficient. They deliver most of what allows us to 'enjoy' our current standard of living. However, most of us actually work in service industries.

Unless the same pressure applies to services, we will face the exact same unsustainable debt pressures the US is facing - and that is because the most costly 'services' are government sevices - health, education, social welfare. We can see the future in the US. It is not something to look forward to.

We are living in age of wealth transfers to very high income health professionals, and moderately high income educators. I think their individual incomes can rise, but some modest efficiencies will be required over an extended time-frame. (And they will squeal. Remember the teachers unions own the Labour Party.)

Ken Rogoff has written about the need to urgently find a way to increase the pressure to innovate in services. In my view, it may be the banks who could show the way - they are big service providers who locally understand the problem, and are starting massive efficiency projects. They know lending growth has evaporated and are under threat from non-bank payments innovators like Google and telecom companies, and they only way they will save their businesses is through organisational efficiency. They have a real sense of urgency in these projects; and no-one will give them any sympathy if they fail.

How come government services can't adopt that same drive and imperative? Without it, taxes will rise and rise. Here is the Rogoff worry: the full piece is worth reading, and thinking how these issues will play out in New Zealand.

Without more ideas about how to innovate in the provision of government services, battles such as one sees playing out in the US today can only become worse, as voters are increasingly asked to pay more for less. Politicians can and will promise to do a better job, but they cannot succeed unless we identify ways to boost government services’ efficiency and productivity.

2. China services
Growth in China's increasingly important services sector accelerated in December at its fastest pace in four months, adding to signs of a modest year-end revival in the world's second-largest economy. More from Reuters:

The official manufacturing PMI survey in December matched November's seven-month high of 50.6, the NBS said on Tuesday, while a complementary survey with a greater focus on the private sector reached 51.5, its highest since May 2011.

China's fast-growing services industry has so far weathered the global slowdown much better than the factory sector, with the PMI consistently signaling healthy expansion and hitting a 10-month high of 58.0 in March. That's partly due to a maturing economy as well as a historic shift in the last decade leading a majority of Chinese to live and work in cities rather than the countryside. China's services sector generated 43 percent of China's GDP in 2010 and by 2011 provided nearly 36 percent of new jobs, exceeding the agricultural sector for the first time.

3. Is Huawei a Trojan Horse?
Almost a third of the planet is thought to be using its products and yet few know much about the highly secretive Chinese telecommunication equipment company Huawei. Should customers be concerned about the company founder's military background or the security vulnerabilities of its products? Spiegel Online investigates:

Do you own one? Are you concerned?

The first problem is just saying the company's name. Huawei is pronounced wah-way. It means something like "China acts!"

The second problem is its patriotic swagger. The telecommunications networking equipment and mobile phone supplier, based in the southeastern Chinese city of Shenzhen, is accused of secretly spreading high-tech spying devices around the world, having close ties with the Chinese military and supplying products to pariah states like Iran. A recent report by the Intelligence Committee of the United States House of Representatives warned against using the company's products for critical telecommunications infrastructure. The Australian government has also blocked the company from bidding for contracts related to the construction of its national broadband network.

It would appear that Huawei cannot be stopped, though.

4. Today's raw market data ...
A quick holiday update:

as at 11:10am	Today 9:00 am	Jan 3	Four weeks ago	One year ago

NZ$1 = US$	0.8284	0.8335	0.8289	0.7771
NZ$1 = AU$	0.7909	0.7938	0.7929	0.7624
TWI	74.58	74.77	74.00	69.36

Gold, US$/oz	1,663	1,688	1,615	1,613
Dow	13,395	13,320	13,066	12,408
Copper, US$/tonne	7,915	7,915	8,021	7,661
Volatility Index	14.73	15.31	16.58	22.97

5. A trend NZ retailers should worry about
US malls are in trouble. Vacancy rates are rising and effective rents are falling. They say they are now 'overbuilt'. The reason? So much retailing is going on-line. Maybe there is a place for a few premier malls, but the future looks bleak for most suburban malls, if the US trends are a precursor. America has too many malls.

When will the trend show up here - or is it here already? Be careful if you are attracted to a syndication as a property investment - the yield may not last. More from AtlanticCities:

6. Odd stuff
Politicians usually forget (or ignore) that most people will respond to the incentives offered. France's attempt to impose a top tax rate of 75% is no exception. If you want changed behaviour, change the incentives. Expecting people to do otherwise is naive. There are consequences to every incentive, many of them unintentional, some of them quite odd, like this one reported by Reuters:

Russian President Vladimir Putin has granted citizenship to Gerard Depardieu, the French movie star who is quitting his homeland to avoid a tax hike on the rich, the Kremlin said on Thursday. The "Cyrano de Bergerac" actor bought a house across the border in Belgium last year to avoid a new tax rate for millionaires in France planned by Socialist President Francois Hollande but said he could also seek tax exile elsewhere.

Kremlin spokesman Dmitry Peskov said Depardieu had applied for citizenship after Putin told reporters last month the actor would be welcome in Russia. "The citizenship could not have been granted to him without (such an) appeal," Peskov added. Russia has a flat income tax rate of 13 percent, compared to the 75 percent on income over 1 million euros ($1.32 million) that Hollande wants to impose in France. Asked, whether Depardieu had plans to move to Russia, Peskov said it was up to him and was "absolutely not mandatory". Putin did not speak to Depardieu before taking the decision, he added.

7. Sovereign bond issuance falling
The world’s leading economies will have US$220 billion less sovereign debt to refinance in 2013, according to a Bloomberg survey. Somewhat surprisingly, even Japan's 2013 refinancing will be lower than 2012. But the big bond hog is the US. The survey is of the G7 nations, plus the BRICs.

The US is expected to refinance 39.3% of all 2013 refinancings in this group. On a GDP basis the US has 'only' 31.9% of the economic ctivity of the eleven nations.

*Sovereign bond refinancing*		2013	%	2012	GDP	%
		US$ bil		US$ bil	US$ bil
USA	+	2,900	39.3	2,600	14,991.3	31.9
Japan	-	2,600	35.2	3,000	5,870.4	12.5
Italy	-	414	5.6		2,195.9
France	-	357	4.8		2,775.5
Germany	-	283	3.8		3,604.1
Brazil	-				2,476.7
UK	-				2,429.2
Canada	+				1,736.9
India	+				1,897.6
China	+				7,203.9
Russia	+				1,857.8
-------------------		----------	-------	---------	------------	-------
G7 + BRICs		$7,380	100.0	$7,600	$47,039.2	100.0
World (per UN)					$70,201.9

8. Fed minutes move markets
The release today at about 8:00am of the US Federal Reserve's FOMC minutes for its December meeting moved the markets noticeably. Gold fell, the US dollar rose, but US stocks took it in their stride. What surprised was the level of discussion around ending its lates round of asset purchases. You can read these minutes here ». Here is an early summary from the NY Times:

Federal Reserve officials spoke at a December meeting about ending a new round of asset purchases by the middle of 2013, less than a year after the start of its latest effort to drive down unemployment. The members of the Fed’s policy-making committee did not settle on a timetable. Some argued that purchases should continue until the end of the year, and others said it was too soon to make a judgment, according to a brief account of the meeting that the Fed published Thursday after a customary three-week lag. But the support for an early end date reflected uneasiness among Fed officials about the effectiveness of asset purchases in stimulating the economy and about the potential costs, including the disruption of financial markets.

9. Housing stress relief
We monitor the number of mortgagee listings on TradeMe and realestate.co.nz each Monday morning, and have noticed a sharp decline in them during December. Normally, the low point in the year occurs at the end of February. Terralink publish data on the actual number of mortgagee sales but this data lags considerably - the latest is for June 2012.

However because the data from our records and Terralink's goes back many years, we can correlate it reasonably well and this enables us to estimate the Terralink series through the end of December 2012. And that confirms the listing trend.

Mortgagee stress is evaporating in our housing markets. We expect the number of houses sold as mortgagee sales in December to be about 100 and this will be the lowest in more than four years, since mid 2008. We expect this level to keep declining until February.

10. Today's quote
"Giving money and power to government is like giving whiskey and car keys to teenage boys." P. J. O'Rourke

Dairy prices

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Source: GlobalDairyTrade and USDA

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62 Comments

by Stephen Hulme | 4th Jan 13, 10:24am 1357248241

RE:#1 - Ken Rogoff has written about the need to urgently find a way to increase the pressure to innovate in services. In my view, it may be the banks who could show the way - they are big service providers who locally understand the problem, and are starting massive efficiency projects

I don't think so - Basel Becomes Babel as Conflicting Rules Undermine Safety

Oops

The first Basel agreement on global banking regulation, adopted in 1988, was 30 pages long and relied on simple arithmetic. The latest update, known as Basel III, runs to 509 pages and includes 78 calculus equations.

The new capital rules are based on the same principal as the old ones: allowing the largest lenders to use their own mathematical models to determine how much capital they need. The calculations, which assume the banks can predict what’s risky, can involve millions of variables, making them difficult for examiners to review, according to an August report by the Bank of England.

by David Chaston | 4th Jan 13, 10:41am 1357249260

Actually, precisely because of these rules, which both the RBA and RBNZ are imposing here (and the local banks are not pushing back on significantly, unlike the EU and US banks which are squealing), our banks are more likely to move faster on their efficiency projects if they want to preserve their returns.

I still say, the public sector should look closely at any significant gains the banks make and take important lessons from them (including lessons if they stumble).

Taxpayers need the public service sector to be efficient. Ditto for the monopoly private sector service sector. Only voters can give the imperative and steel for change. The competitive private service sector can do what it likes, but firms will fail if they don't shape up.

Future tax levels will be all about how well the Service sector adjusts.

by Stephen Hulme | 4th Jan 13, 11:06am 1357250780

The competitive private service sector can do what it likes, but firms will fail if they don't shape up.

The banks sure do and get a government backstop whether it's deposit guarantees or cosy laws confirming the issuance of covered bonds at the expense of the private depositors.

by Nic the NZer | 4th Jan 13, 11:25am 1357251944

http://www.treasury.govt.nz/publications/research-policy/tp/govtsize/14…

What makes you think that the public service sector has the scope to make large efficiency gains? The trend has been towards more efficiency for a long time, 1986 ~ 2004. Over time it definitely gets more and more difficult to cost cut, a long downward trend might indicate that the government sector is scraping the bottom of the barrel in terms of efficicy gains.

We also know a lot of the recent increases are down to the weak NZ economy, and not the government adding fat or services into the government sector.

Clearly if there are not actually efficiency gains to be found, when you insist of savings you are just cutting back public expenditure, and if that policy is followed through sharply in the weak NZ economy, then you end up with the wider economy in recession and could very well just end up shrinking the wider NZ economy.

by Neville C | 4th Jan 13, 2:29pm 1357262987

12 years ago I was working in a large NZ govt dept. One of the accounting firms offered a 'free' benchmarking of the Finance section. The result was that the section was in the top 10% of their world wide database of organisations. They were very disapointed that they couldn't milk a large consultancy fee to make the finance section more efficent.

by steven | 6th Jan 13, 8:17am 1357413428

Yeah ive come across that as well....

regards

by Stephen Hulme | 4th Jan 13, 10:35am 1357248928

Re:#8 - Treasury 10-Year Note Yield Touches 7-Month High on Fed

Ten-year note yields rose seven basis points, or 0.07 percentage point, to 1.90 percent at 4:07 p.m. New York time, according to Bloomberg Bond Trader data. It touched 1.91 percent, the highest since May 10. The price of the 1.625 percent security fell 18/322 or $5.63 cents per $1,000 face value to 97 1/2. The recent low yield was 1.39%

Long and wrong?

The BNZ's Mr Jones may need to temper his confidence if interest rates stage a break out on the upside.

Rising dairy prices are likely to continue to help farmers pay off their debts in the first half of this year, but the heavily leveraged sector still looks vulnerable to price swings and the high New Zealand dollar. Read article

by JB | 4th Jan 13, 10:50am 1357249818

Stephen - with mark to market accounting and T10's T30's and private sector eventually returning one day to their long run averages I smell huge losses playing at a theater near bond investors with blood all over the floor.

Their fund managers have looked like geniuses as interest rates fell to record lows and they pocketed the mark to market gains. Little to do with their management skill I might add.

Let's see how they cope as the reef fish turn.

Your comments appreciated.

by steven | 6th Jan 13, 8:23am 1357413780

Do the math, long term averages inplies continued inifinite growth, on a finite planet that has used half its oil, and the cheap half at that.

So all this make believe money has to be under-witeen by work/energy, since it isnt its going to evapourate.

One big fish net I guess.

regards

by scarfie | 6th Jan 13, 8:28pm 1357457306

Happy new year Steven.

You are right onto it but I wonder which way you see it going. Interest rates of any rate require a claim on the future, a claim which you and I both know can't be honoured. That mean interest rates have to keep going down, even into negative territory. :-)

by steven | 7th Jan 13, 7:39am 1357497541

Happy new year to you.

Which way its going to go is sort of hard to answer...one thing for sure is its down at some point the only 2 qs are when and how far. When has astounded me by not happening yet. Even the ppl Ive read who I think were logical and switched on said 6 months to 2 years to play, yet here we into the 3rd year. The oil plateau has 2 to 5 years to run, maybe it will be that long.

How far, well Nicole Foss says a 90% down which made my jaw drop. Then I thought about it and I am hard pushed to say she's wrong... Take the property bubble away which is x2 and all the mess I think its a minimum of 60% and 75% doesnt seem that sureal. Those sorts of losses would stretch any society and with everything else I really think its going to be very harsh.

Interest rates are I think a construct....in effect its a masked EROEI...no one will borrow if they cant get the quantity of energy back for an energy profit and pay the capital energy capital back plus energy interest....hence yes I can but see interest rates collapsing.

So where does all this money go? it could buy things but again if say a farm produces $100k profit a year making it say worth $1million, maybe someone will pay 2million, but 5 or 10 million? Then that farm output is fossil fuel enhanced, organic output is 1/2 that....maybe less so that 10million farm now pays $50k.

It just doesnt add up.

This I think is where the free marketeers fall flat, they think that privte endevour will be the best way, but anyone with nounce just has to walk away because the rewards will be so uncertain. That means Govn with an eye to the nation's well being has to step in and do it all.

Otherwise It just doesnt add up, oops groundhog day....

regards

by Learn to Socia… | 4th Jan 13, 11:51am 1357253470

David, Thank you so much for the Michael Leunig cartoon in Thursdays Top Ten! It is the amazing cartoons that atracted my attention first to Interest.co.nz, and it is the cartoons that keep me coming back every day. The articles and comments are all a bonus, but the cartoons are the main course for me.

Yesterdays Leunig was a beautiful New Years gift. I hope to take it to heart in 2013. Thanks again for your good choosing.

by dh | 4th Jan 13, 12:06pm 1357254414

Is #1 some kind of elaborate troll, because if it is, the absence of actually evidence is a bit of a give-away. Doing a quick web search I find that the median U.S. physicians income in 1985 was $94000, in 2011 it was $176690. Adjusted for inflation this is a drop of $19,210 in 2011 money (about 10%).

There is one sector I can think of that has seen massive growth in income relative to inflation in the past 30 years, suggesting that it is most in need of rebalancing, and that is the managerial one.

Becuase of the whole weirdness of the New Zealand economy in the run up to 1984 and the years after it, even if I had easily been able to find the figures, I would be a bit reluctant to use them due to the local distortions.

by steven | 6th Jan 13, 8:34am 1357414492

We should be able to look at how the costs are made up. I think you'll find that pharmacuticals are rising at a tremendious rate where wages are not. Some professionals in the centres ie private surgeons are earning heaps, really though I suspect these are few and far between, really, not an issue. One thing also is the number of appointments made for ppl who are apparantly ill, yet never turn up....the % is actually pretty high....thats a good % of ppl with "lesser" issues that could be treated earlier.

Its also a bit strange to comment on US costs when the rump of healthcare is private and the next big spend is huge amounts on the military, The latter at least has no such concept as efficiency. Then we see that US universities charge so much that the payback on a degree is now dubious to say the least, that isnt the Govn's fault. Ditto US education, its state level organised.

ie when you start to look at this comment it starts to look really crappy, to say the least.

I started working in hospitals in 1986, there was already a drive for efficiency, after 30 odd years do you really think there is any fat left? no there isnt...whats going s the actual provision.

regards

by Learn to Socia… | 4th Jan 13, 12:19pm 1357255165

Re #1 and the CRIMINAL transfer of wealth to school teachers and nurses. This has to be STOPPED urgently! God forbid! I propose that we bring in great NZ financial innovaters like the canny David Ross, the fearless Rod Petrivovich, and cost-cutter Mark Hotchin. They in partnership with our banks can team up and work together to stop this awful wealth tarnsfer. Wow, where would we be without financial innovation that just makes NZ more and more wonderful and fair?

by Wolly | 4th Jan 13, 2:38pm 1357263520

Lovely long summer holiday..with pay...hahaaaaahaaaahaaaaaaaa sucka.

by scarfie | 6th Jan 13, 8:33pm 1357457596

Happy new year to you to Wolly :-)

by Millie Pickle | 6th Jan 13, 7:43pm 1357454625

mist- re: in the case of school

I have to laugh at the various red herring arguments contained in this comment. First off, the magical nostalgic "free basic education". A myth, never happened. Back then everyone decided it was worth the investment and footed the bill as a group.

Next- "cash cow for low return". That one is really funny, especially in light of true cash cows such as stealing old people's pension funds through dodgy financial services. Cash cow for who? School parking lots are not full of Tesla's and Range Rovers, it is easy to check out for yourself. Also, I don't know any teachers with 3 holiday homes, Hotchin/Petrovic-style.

Intelligent societies recognize that everyone benefits from a well educated populace, that argument has been over for a long time now, but if you want to start the ball rolling by paying the government back for all your years of education, then you should feel free.

The list goes on, but I don't want to beat a dead horse.

After many years of training to be a teacher, at my own expense, the most I ever made was $32k per year. Holidays and weekends off were almost non existent as the 20 hrs minimum weekly prep and evaluation work needed was done outside school hours on my own time. People want great education, they just don't want to pay for it.

But you perfectly express why I got out of education. I was too good at my job to put up with the lack of value placed on my training, experience, skill and commitment to students. Nobody takes teaching as seriously as teachers, as opposed to the big financial services crooks.

by Kate | 6th Jan 13, 11:31pm 1357468313

Hey mist, because I can see you believe in lifelong learning - it's principal, not principle with reference to those folks you know in education. :-).

by Nic the NZer | 7th Jan 13, 1:36am 1357475798

I am afraid Mist, there is no moral value to hard work, if your own hard work is not intrinsically rewarding then that really is your problem. Just because you work hard, that doesn't mean anybody else should work nearly as hard or take on as much risk, or even attribute you some moral superiority because of how hard you work.

Also you mentioned risk taking in employment in a positive light, well there are certainly activities where you must take risk on in order to take part, but there is clearly no reason for risk to be taken on where its not required. This makes any discussion of the amount of risk taken on by teachers rather hollow, its beside the point. In fact in a working economy its usually a good idea to minimise the risk for as many as possible, if the economy was constantly running with high levels of risk, and the resulting insecurity, this would be very inefficient indeed.

by Nic the NZer | 7th Jan 13, 7:37am 1357497455

Yeah, theres no moral value to living frugally either, so I hope you are enjoying that purely for your own sake as well.

by Interested2 | 7th Jan 13, 3:00pm 1357524010

Maybe this is a bit off-the-wall but I guess that the market for education and healthcare is very similar to that for funeral homes. Yet funeral homes are run as private businesses. Something to be learned here?

So Mist 42, if teaching is so easy, why don't you retrain as a teacher, then set up your own private school? As you said, the market is readily available, and you already know how to run a business. It might alleviate your lonliness too :P

by KH | 4th Jan 13, 12:36pm 1357256202

Nurses. Overpaid in my view -- as are teachers. I work a lot with nurses in the government sector and the salaries they get are huge considering the much lower demands on them compared with what they would have to do in any private sector service industry.

by Stephen Hulme | 4th Jan 13, 1:01pm 1357257710

Yep, it's only temporary as they shoot off to Australia and Saudi Arabia to get even higher salaries. - New Zealand's inability to generate higher paying jobs for the general population is causing the tax take to fall faster than transfer payment demands rise.

And there are too few people earning enough to pay the interest on the debt required to fill the gap - so that which you complain about will collapse in time.

by dh | 4th Jan 13, 1:16pm 1357258603

Nurses, New Zealand, mostly public sector, average income about NZ$60000 compared to a national average income of about NZ$55000.

Nurses, United States, mostly private sector, average income about US$64690 compared to national average income of about US$26364.

If anything that suggests that having a public sector health system has kept a spectacular lid on costs, and nurses in NZ are the opposite of overpaid. Though I suppose if you argument is "all nurses everywhere are overpaid, and I could do what they do and only kill or main a few people", well that's your opinion.

There is actually a serious discussion to be had about the level and scope of care that an ageing population can expect, but the savings come from institutions like Pharmac (while we have it).

by KH | 5th Jan 13, 11:01pm 1357380060

Nurses pay. I am very familiar with what nurses do. Very. With incomes of 60K to 80K the demands on them are very low. Both in stress, skill and simple workplace requirements. Yes. It is skilled, requires training and a job one can get seriously wrong. But thats not the point.

The point I made was that in private industry with an income of 60K to 80K a person has to be really on the ball. The demands are heavy and employment conditions fragile. Nurses are not overpaid.

Your tactic inventing comments about 'kill and maim' was offensive and more than stupid and undermine your other arguments.

Yes. Our public health system structure has kept that lid on costs. Yes. Pharmac saves New Zealanders a massive amount.

by speckles | 6th Jan 13, 3:16pm 1357438613

Not all nursing work is the same or equal. Take intensive care, high level mental health care work...totally different to A & E or even on the wards. You don't appear to know as much as you suggest

Why not start instead of bashing the modestly paid teachers and nurses and focus on the efficiencies we get from the 1 billion paid to consultants...or accomodation supplement subsidy to landlords....

by KH | 4th Jan 13, 12:44pm 1357256646

#1 I find it hard to differentiate between Government inefficiency and Big Corporate inefficiency on this topic. Both are hugely inefficient. It's true the Big Banks will do anything to cut costs. But those savings are simply to increase the vast gourging profits that flow out of the country. It does not assist New Zealanders.

We are becoming known as a hugely expensive country - in basics such as food but particularly in services. Where is that money going ? To Big Business and Big Government. Both have control of our financial environment and thus can gourge us at will.

The solution is to return to true competition. We don't have it now.

by profile | 4th Jan 13, 2:34pm 1357263241

Peak farmland has arrived.

http://www.rationaloptimist.com/blog/peak-farmland-is-here.aspx

by scarfie | 7th Jan 13, 9:24am 1357503873

Pure speculation and just noise for the sake of making noise. Serious flaw also like treating slowing population growth as a voluntary, not a symptom of a greater problem.

Take a look at the seneca effect.

by steven | 7th Jan 13, 9:54am 1357505681

That guy doesnt even aknowledge peak oil let alone the possibility the downside will be far steeper. So he's ignoring maths, that isnt rational.

http://www.theoildrum.com/node/8317

A very good piece.

That is of course a mathematical correction to a simplified model, its still not real world though. However the thing that is interesting is that the curve or model has proven extremely reliable over time on everything its modelled. By this I mean in the short term we can move off the line by making huge effort, however at some point we drop back to that line, we can see this time and time again in old data. What was not expected in the model was we would have such a flat plateau for so long, this has a future consquence. That is when you drop off, the drop could actually be very steep until it gets back to the model line.

So the synmetrical model predicts say 4%, seneca effect could be 8% though ive seen 14%, but the early drop could be mind boggling....that frankly spells chaos. The second thing they are not modeling is human/Nation behaviour, things like hoarding. Cuba went though this seneca effect wehn the CCCP collapsed and the state with draconian powers kept it together.

Gee what happy thoughts for the new year!

"It would be some consolation for the feebleness of our selves and our works if all things should perish as slowly as they come into being; but as it is, increases are of sluggish growth, but the way to ruin is rapid."

How does it go? those who ignore history are doomed to repeat it.

regards

by steven | 7th Jan 13, 9:39am 1357504798

Rational he isntby a long way, just by saying "peak farmland, a more plausible prediction than peak oil" says enough to say he is not.

regards

by Wolly | 4th Jan 13, 2:36pm 1357263371

"And they will squeal"

No they won't David....they will resign...most do...soon after they qualify...any idea why!

by speckles | 6th Jan 13, 3:12pm 1357438339

It is always amusing that Nats can't catch their bias against the teacher unions. The teacher unions are actually quite moderate as their membership is. Take a look at how many times they have striked in history, actually very few times.

The reason the Nats get caught out is they have no real empathy and interest in public education. It actually a quite clear agenda for cost cutting, quite simple and straightforward. If they actually looked at all public expenditure the same I would have a measure of respect for them.

The OECD report is clear cut. See no one here questioning the report.... so often it just an biased debate with few stats.

I have a friend who works in primary education. She is a smart and talented educator with post grad qualifications which would be useful in consulting I thought. When I meet her she was doing 12 hour plus days and often not leaving work before 10/11 pm at night, six days a week. A full class to teach and management duties including some of the principals. I suggested she tried some consulting for our firm, she was lacking confidence, we mentored her and she is a natural. So initially was doing 60-70 hours plus per week for the schooling earning 78k while during the year she cut back a little, put herself first and did 3-4 hours a week direct consulting time for us earning additional 30k.

Note a message on my phone to talk about her future, I sure she has been reflecting on this over christmas. She would be a great loss to out education system however why should she burn herself out, with no financial reward and no recongnition....time to put herself first.

The good ones are grossly underpaid. Any mid -range professional with any real ability is earning five time the amount with similar qualifications.

by Casual Observer | 6th Jan 13, 3:55pm 1357440919

Speckles - do you see performance pay as having a value in education? Two primary school teachers were discussing their workloads at Christmas time. What they said it came down to was the management abilities of the principal. One was leaving her position after many years - a really good educator - because the demands the principal was making on staff, over and above govt requirements, was 'crazy'. The other commented on how much happier and what better hours the staff at their school now were working - due to a new principal.

A friend was a school trustee member for many years on a rural school Board. The Board really wanted to reward the principal as they felt they were worth more than what they received, but were hamstrung because of the union salary scales and govt funding. So they found a way to 'reward' them with extras that can only come from an agricultural environment.

by speckles | 6th Jan 13, 4:13pm 1357441992

All valid examples CO. The person I know is working so hard as a result of weak management. Performance pay would be worthwhile if implemented correctly however that is not what is being suggested currently...also BOT and principals are a weak link regardless. No strong governance like most organisations in NZ....

by steven | 7th Jan 13, 9:57am 1357505850

No I dont as you cannnot really measure performance ie time and motion in a situation like this.

regards

by Wolly | 6th Jan 13, 4:19pm 1357442397

Simple fact...most new to teaching, plan on leaving as soon as they hit the full workload and discover they have lost their chance to have a life. Holidays become recovery time and job change planning time. Weekends become a distant memory.

by Learn to Socia… | 4th Jan 13, 5:12pm 1357272744

Re #1

It is very interesting how the meaning of words change over time! It is called euphemism. One of the most interesting phrases to aquire new meaning is "Financial innovation". Savy readers will know that it now means "vicious gang rape of the weak and/or naive". Knowledge of current meanings of phrases will avoid embarresment and confusion!

Some other interesting examples of euphemism;

Passed away instead of died
Correctional facility instead of jail
Departed instead of died
Fell off the back of a truck instead of stolen
Ethnic cleansing instead of genocide
Turn a trick instead of engage in prostitution
Negative patient outcome instead of dead
Relocation center instead of prison camp
Collateral damage instead of accidental deaths
Letting someone go instead of firing someone
Put to sleep instead of euthanize
On the streets instead of homeless

by powerdownkiwi | 4th Jan 13, 5:57pm 1357275420

Mist and KH demonstrate why we need more/better education, not less.

We can't afford the next generation to be so ignorant; certainly they have to understand what underwrites wealth.

For the umpteenth time - you can have efficiencies; but they won't save the day, nor sort the real problem.

Your problem is a real-time reduction in the delivered energy, and the per-head energy, yoy. Sure, it relfects in a barrel havinng gone from $30 to $110 in 10 years, but it's a mistake to value things in dollars now. If energy is required to do anything - and it is - then there comes a catch-22 point where there isn't enough energy available to do the real work to repay the debt which did the bidding. Simultaneously, there isn't enough to underwrite the cashed-in, artificially-increased 'values' of existing items.

Don't blame Govt, or teachers. Blame ignorance - there's a lot of it about.

by steven | 6th Jan 13, 10:20am 1357420809

" Declaring all resources to be the property of the nation"

Which they are....and given how in-effective so called private enterprise has been public manageing cant be that bad. For instance when an oil company gets a contract to develop a field for say 20 years its in its interest to get as much oil out in that time as it can, no matter if that drastically reduces the total eventual extracted amount.

regards

by Stephen L | 4th Jan 13, 6:17pm 1357276628

One reason I sometimes bang on about the exchange rate, is in public service salaries and costs, as per 1. Given the NZD rose from a low of US50c in early 2009, to 82c now, that is a 64% increase in nearly all public sector costs in that time in USD terms. Add in inflation adjustments of 10-20% in the same period and costs are up ~70% in 4 years. The public sector has no real natural pressures to keep such costs down, so the process inevitably will be last year's rate plus some inflation market adjustment, which only ever goes up.

Export and import substitution companies cannot raise their costs (especially as they are paying higher rent, rates, electricity, port costs, and other quasi government/council costs), so workers in those categories will not have had the same rises, or may well have been laid off.

Yet I don't really blame teachers or nurses; many of their costs remain in NZD, and they are not massively paid in local terms. Teachers may be resisting some sensible reforms- am not expert enough to judge that, but that is a side issue.

Letting the exchange rate rise so far so fast was very damaging indeed.(and there were and are key things to do about it, but won't repeat those things here.)

Still, the big rise was in 2009; with the rate through much of 2010 in the low 70s, in 2011 in the high 70s, and 2012 in the low 80s. So the last three years has merely turned the screw a little harder, and many may have been able to adapt. Second prize for me (failing managing a devaluation) would be not letting the rate go up further. There was a small hint at the end of 2012 that Mr Wheeler perhaps agrees with that view; good if he does, and manages accordingly.

by Stephen Hulme | 5th Jan 13, 10:15am 1357334134

One reason I sometimes bang on about the exchange rate, is in public service salaries and costs, as per 1.

Stephen L, your observation has great validity and we need to impliment an adjustment mechanism to move key benchmark salaries down while the NZD/USD and NZD/GBP pair remain strong.

The legacy re-benchmarking was undertaken when the NZD/USD was around 0.4000 and the NZD/GBP 0.3300.

The possibly egregious drive to seek so called 'world class' people to fill certain public service positions with British nationals caused NZers to fall back to default cringe mode and match the Stg.salaries on an exchange adjusted basis- hence we ended up paying three times too much and as you note those salaries are now cost plus adjusted upwards. Apparently we dare not re-match them to international rates any longer - hence foreigners are breaking their necks to secure employment here to collect NZD incomes we just don't retrieve through our USD export receipts.

by OMG | 4th Jan 13, 11:55pm 1357296900

"Unless the same pressure applies to services, we will face the exact same unsustainable debt pressures the US is facing - and that is because the most costly 'services' are government sevices - health, education, social welfare. We can see the future in the US. It is not something to look forward to."

The charts in this video are relevant to the discussion while "Rome burns"

http://live.wsj.com/video/everything-you-need-to-know-about-the-fiscal-…

by Stephen L | 5th Jan 13, 9:54am 1357332868

More damage coming, unless we do something about it.

http://blogs.telegraph.co.uk/finance/ambroseevans-pritchard/100022037/s…

Sums up what is going on elsewhere. The only reason we feel somewhat immune is that we don't even realise we've had the welcome mat out to all invaders; they've swarmed in and bought everything up. And are still doing so.

A Japanese yen tsunami is probably around the corner.

Sushi, anyone?

by steven | 5th Jan 13, 9:34pm 1357374869

great piece thanks

regards

by dh | 5th Jan 13, 6:52pm 1357365128

Just to belatedly bring some more numbers to an ideology fight (#1) the OECD reckon that New Zealand teachers are paid less and teach more students than would be expected from a country with our GDP.

http://www.oecd.org/edu/preschoolandschool/1840245.pdf

(see pages 4 though 7 of the PDF in particular, labeled 58-60)

by steven | 6th Jan 13, 8:06am 1357412760

2 things to look at,

a) teacher retention, how many years does a teacher stay in education? and how has that deteriorated in the last 30 years?

b) Compare a teachers qualifications, say BA, MA with whats earned by equiv. out in the "real" world. I think a teacher with a MA gets about $55k? doesnt strike me as well paid.....

regards

by speckles | 6th Jan 13, 4:39pm 1357443549

Here comes mist the paradox...only earns 20k.... has investment properties and other businesses...earns thousands I recall from day trading...hmmmm also hates teachers..wonder if one is an ex? :-)

by dh | 6th Jan 13, 6:32pm 1357450368

Regarding a) the only time series data I can easily find shows it in the 9 to 12% attrition per year from 1994 to 2004. Eyeballing the series, a line of best fit would slope pretty clearly up through this period (and a separate figure of 37% of staff leaving in 3 years for 2006 suggests that is an accurate interpretation). This is described in publications by NZ authorities as being in keeping with other OECD countries. However, most OECD countries seemed to have an attrition rate of 6 to 8% (I didn't bother trying to hunt out time series data on this).

I should add this seems fractionally above the average for all NZ workers, but all NZ workers includes the retail and service sectors where turnover is massive, suggesting turnover in teaching is much higher than many occupations with equivalent entry requirements.

by speckles | 6th Jan 13, 3:29pm 1357439357

Thanks dh, good to see someone actually put some substance to the debate.

by steven | 6th Jan 13, 8:08am 1357412919

Very high wealth professionals are the GPs and up...ie $150k and $650k is quite possible. I dont see nurses etc on anything like that and that have to do shifts.

regards

by Casual Observer | 6th Jan 13, 3:26pm 1357439177

steven, Comparing GPs incomes/work to nurses is cheese and chalk. GPs cannot refuse to treat a patient in need. GPs must provide 24/7 care to registered patients. In the bigger cities, after hours, this can be via a specialist A & M clinic, but even some of those, such as in Rotorua, are staffed after 5pm by the local GPs rostered on. My current GP practice is open for patients 6.30am - 4pm Mon-Fri. The nurses start at 8am. In general, new grad GPs are not wanting to buy in to practices anymore, they prefer to be salaried. The biggest reason is lifestyle - guaranteed 4 weeks holiday in addition to stats, and also, they are not responsible for finding locums when they are away. When the current crop of baby boomer GPs retire NZ is potentially going to be in a crisis situation for family medical practitioners especially outside of main centres.

If you really want to make money, become a dentist. :-) Don't have to treat children, no compulsory health treatment audits i.e. diabetes, immunisations etc, no compulsion to treat people in need, no 24/7 care compulsion, no after hours requirements.

by speckles | 6th Jan 13, 3:36pm 1357439812

Dentist do ok however never anything like a medical specialist) or GP in this country (oral specialists a possible exception....) Higher capital cost to set up a dental practice plus no sweet government subsidies. Still GP problems mentioned are real and people tend to forget there is a world shortage.. therfore world market...plus.better conditions in aussie as well.

by Casual Observer | 6th Jan 13, 6:03pm 1357448631

Yes, aussie certainly pays more for a GP. Depends on if we are talking about practice owning GPs or including non practice owning GPs. When I was recruiting GPs (mainly UK, North America and some European) NZ was chosen over Aussie for 'family lifestyle' (but Aussie for those that $ were the main consideration. There were exceptions, naturally. Once the UK changed the way they funded after hours, there was a noticeable drop off in UK GPs looking to come as it paid them well to stay back in UK. Also I was only interested in those willing to pay their own way, not those who expected their airfares to be paid for them.

Payments based on ethnicity of enrolled patients made some dents in some GP incomes (and added to others). GP clinics often employ a significant number of part time staff. I have often wondered if that is the most cost effective way to run a business, especially when it comes to the admin roles. My experience is based on provincial examples, not big cities. :-)

by steven | 6th Jan 13, 10:13am 1357420380

#6. Tax evasion, this will be interesting to watch

In Gerard Depardieu's specific case his income is based on a monopoly rent on common people. The common ppl are seeing hard times, his high profile tax dodge could seriously back fire on him.

The USA with its tax system taxing US ppl no matter where they reside will I think become the norm in the future. So GD's only avenue to avoid this will be to resign his french citizen's staus and move out to uh Russia, and probably bye bye income stream, good luck with that. I also expect that tax will be going up in most countries so his options and indeed every rich person's is going to disappear. Cayman islands, swiss bank accounts, all things of the past.

Think leper, think I for one wont ever watch a movie he's in again.

regards

by Mike B | 6th Jan 13, 1:18pm 1357431491

What about starting with Lawyers?

The first question we should all ask "how can you break the law if the law is so complex you need a degree to understand it?" that is "how can people break laws that people can't understand?"

There are that many laws now, all designed by lawyers, to suit lawyers, that even the government can't keep up with them. To cope they have given powers to unelected government departments to make "Rules", and what is worse, they can even impose penalties for not complying with those rules. Even Councils can make laws, called By-laws which should be "Bye-bye laws". In addition to all this there are all sorts of agencies who can just march into your house. So we have all these people makeing laws and rules for us to obey, piling them up on us, and giving themselves the authority to march into our homes at random. Boy, and all you have to worry about is teachers. There used to be a time when all laws had to be on the Statute books and to be accused of breaking the law they had to refer to the statute books. If it wasn't in the statute books it wasn't law.

Anyway, get rid of all the Rules and all unnecessary laws. What laws are left should be clearly understandable by all citizens who have to abide by those laws. Now, that should make the legal profession more competitive, as more people will be able to understand and practice it. Then we wont need as many MPs either. Now wouldn’t that be a good start?

Greedy academia at it again. It's not the teachers or the nurses it's the universities that are the problem, you will even find them on the payrol of cigarette and pharmaceutical company payrolls telling lies about those products.

by robby217 | 6th Jan 13, 4:55pm 1357444517

Esp. the tax code.

by Mike B | 6th Jan 13, 1:18pm 1357431528

What about starting with Lawyers?

The first question we should all ask "how can you break the law if the law is so complex you need a degree to understand it?" that is "how can people break laws that people can't understand?"

Greedy academia at it again. It's not the teachers or the nurses it's the universities that are the problem, breeding all this vermin, you will even find them on the payrol of cigarette and pharmaceutical company payrolls telling lies about those products.

by dh | 6th Jan 13, 3:12pm 1357438345

Um, most of the people that have been challenging (historically) the tobacco companies or (in modern times) the pharmaceutical companies have been academics. For example Ben Goldacre is probably leading the charge over pharmaceutical companies hiding their trial data. Because of the capture of regulatory authorities, there aren't really any other sectors with any credibility, and the industry has been launching personal attacks on Goldacre in the wake of his last book (Bad Pharma, highly recommended for anyone who favours an evidence based world). In this area, of particular interest to NZ is the vast amount of the health budget spent on stockpiling Tamiflu, when it is one of the drugs which has had most of it's clinical trial evidence hidden by the manufacturer, so it is entirely possible it is no better a treatment than a placebo (this issue is getting some traction in the U.K. at the moment).

I was reading another directly relevant article in this area this morning- the capture of regulatory authorities that happened over lead in petrol.

http://www.wired.com/wiredscience/2013/01/looney-gas-and-lead-poisoning…

which has in turn a link to the academic research on lead and long terms crime trends, which raises all sorts of issues about what law enforcement initiatives are actually worth funding

http://www.motherjones.com/environment/2013/01/lead-crime-link-gasoline

by Bruce Hitchcock | 7th Jan 13, 8:00am 1357498821

Mike B, that depends on what the defination of the word "is" is, as Bill Clinton once reportedly told the justice.

There are apparently twelve different diffentitons of the word "is" in US law.

Great idea of his team really, throw the English language up for debate and we'll stall indefinitely, presuming indefinately retains it's common usage meaning.

Had a look at some of the new NZ banking legislature the other week. Turns out any person who is politically active must be treated as suspicious and has greater compliance requirements, hence costs.

Very fuzzy wording, as I pointed out at the time. The law seems to be full of fuzzy wording, the sort that can be bent and twisted via post-modern thought or via old fashioned solipsism.

But it keeps lawyers in gravy. Whatever that means.

by Bruce Hitchcock | 7th Jan 13, 8:10am 1357499401

And Mike B why not start with accountants?

At the moment society's thinking seems to be;

" Oh, you can count and avoid tax? Great run our company, or country, on an absorbitant salary and/or directors fees. Yeah!"

In school I slept though most of my accounting classes. Still passed easily with zero study hours.

At least lawyers have to think.