Rod Oram waves the danger flag
Went along to Rod Oram’s presentation at Vic Uni Law School yesterday. He pretends to be a documentary maker pitching a documentary idea and the topic is the environmental record of NZ. You can read more about it here.
Oram in character points to our woeful record on land management, soil loss, forest loss, biodiversity loss, biosecurity incursions, nitrogen in rivers, water overextraction for dairy, very high greenhouse emissions per capita, poor energy efficiency, the energy intensity of the economy amongst other things.
He points out that if anyone in Europe ran serious campaign focussd on our clean green image it would start to wobble pretty quickly. The result could be a very serious impact on our economy - possibly a 15% drop in tourism, 20% drop in food exports and and 25% drop in wine exports.
The really interesting bit that I was unaware of was the refinancing of $3-4billion in Japanese loans that comes up in the first four months of next year. This is quite serious for an economy that runs a massive current account deficit ~ 10% GDP. If the economy wobbled our creditors would be less happy about refinancing our loans.
November 17th, 2006 at 8:10 pm
In the first four months of next year the US economy will be falling into serious recession… it is already falling, the effects will be felt in Japan as well.
What this will mean to the Kiwi, to investors overseas, and to us remains a bit of an unknown… how the Fed treats it will have a lot to do with the result… but expecting trade and tourism from the US to decrease is a fairly certain result.
Nope, there’s nothing definitive I can say about NZ in that, but Rod Oram is right about our image. If people back in the USA get wind of how we’ve been mucking up our luck we’re in even more poo.
respectfully
BJ
November 18th, 2006 at 9:09 pm
Well done Rod, who, as far as I can tell, is respected amongst big business circles, and isn’t viewed to have any obvious green political agenda. This will have a few of the big boys thinking… 100% pure, yeah right. (Tui, I dare you!) NZ tourism will have to come up with a new catchphrase. Agreed, the NZD is an accident waiting to happen, way over valued particulary with such a high current a/c deficit as a % of our GDP. Japanese retail investors (Mrs Watanabe who controls the family purse) have been attracted to buy NZD “Uridashi” bonds in such large volumes due to the relatively high yields on offer, but any sign of a weaker ccy or interest rates having peaked, will result in these billions looking for an alternative home come bond redemption time, resulting in NZD under huge pressure, particulary vs JPY. Oh well, at least that will please NZ exporters doing business with Japan…
November 19th, 2006 at 1:23 am
boot
The problem for investors is going to be where else they can find to put their money. Damned few places offer the sort of interest rates that NZ does, and when the US dollar tanks…. (and it will), the resulting flight to anything else will be difficult to predict.
This bit of future is hard to predict, but the next few months should tell the tale. At worst the Kiwi would be in a “race to the bottom” with the USD. I’d expect the USD to win (the race) as it seems far more overbought, but during the race, any horse can lead.
ciao
BJ
November 19th, 2006 at 11:08 am
perhaps the clearest indication of the upcoming pressures on the american dollar is the fact that the chinese govt…
which has two thirds of its’ trillion dollar o/s currency investments in american dollars..
has just ordered the dis-investment in those dollars…moving them to the yen/euro etc…
and when that american dollar drops..it will drop like a stone…
with worrying implications for us all..
phil(whoar.co.nz)
November 19th, 2006 at 3:28 pm
Interesting times ahead!
I live in what has become “a very desirable area” and the lifesyles of an increasing proportion of the newcomers around me include … HUGE new houses, one expensive car per family member, all mod cons, private school fees, trips away (often “overseas”) for holidays, an SUV/boat/batch/ for weekends, professional gardeners, housecleaners, dog washers(!) etc etc … must be financed from somewhere.
Those of us who “have lived here for ever” (many on low incomes such as NZ Super) will watch with interest!
November 20th, 2006 at 5:15 pm
eredwen, Fendalton by any chance? (in some parts of town, otherwise known as “the f word”….)
There is a scary amount of leverage in the system, and I suspect many of your neighbours are leveraged to the hill. When the poo hits the fan, burnt fingers galore, and the banks will be forced at last to review lending criteria.
November 22nd, 2006 at 12:59 am
boot: Definitely not Fendalton! which, although a pleasant suburb, has always had its areas of noticeable “pretention”.
We live on the lower NW facing slopes of Clifton (traditionally part of Sumner) with panoramic views of estuary/sea, and across the Plains to the Southern Alps. This area used to be regarded as “too far” from central Christchurch. Our “Metro” system has buses every 10-15 minutes, and, with modern bicycles and cycle lanes, it is within easy biking distance of the City Centre. Unfortunately these alternatives dent only slightly the daily one-person-per-car comute.
April 26th, 2007 at 1:24 pm
So the exchange rate is going to need more controlling in future.
Here’s a plan for lowering it now:
- there’s a tax called the Approved Issuer Levy
- if you’re overseas and you invest in an Approved Issuer (a bank or Telecom) in NZ, then you pay 2% tax in NZ
- if you’re in the UK and domiciled in NZ, then you pay no more tax on that interest
- give the Reserve Bank an exchange-rate target, and control over the Approved Issuer Levy tax rate
- have them manage down the exchange rate, for now, so they can stop managing it down if it tries to tank
- expect them to raise the tax rate, to discourage the wall of overseas money that’s currently flowing into our housing market
I don’t know:
- how to set the target
- it does have to be public and explicitly set, like the inflation target
- what you have to do to avoid creating a distortion between debt investments and equity investments
How do people like this proposal? who know how this part of the system works.