Public Address | System (Home)

Posted at 11:39AM on 10 Oct 08. Permalink.

Well I think the whole point of free trade sorts of legislation is that tax breaks are a no-no

What we can do though is intensive handholding of local business - we have a wonderfull resource in NZ: native Chinese speakers - exactly what we need to do biz in China - getting new kiwis involved with local business - training them in how to do business in China from those who know how to do it (just because you speak the language and know the customs doesn't make you a business expert) etc etc

To be fair I think China is going to be hurting with it's biggest trading partner going down the tubes - they're going to be looking around for new people to do business with

Posted at 11:44AM on 10 Oct 08. Permalink.

It seems common knowledge amongst the politerati that Bill English can't stand Kiwisaver. When it was introduced he told us no one would sign up. When people signed up he told us it was a lemon. When people ignored him and went ahead anyway, he lapsed into a sullen silence. I wonder if this attack on kiwisaver to fund the tax cuts isn't a huge miscalculation on the part of a National party that has consistently underestimated the public appeal of kiwisaver.

Posted at 11:54AM on 10 Oct 08. Permalink.

... too Statist ...

With what's going on in the banking sector, it seems that Statism is the new black.

Posted at 12:04PM on 10 Oct 08. Permalink.

Kiwisaver popularity: Key keeps saying only 1 in 5 belong.
5 X 800,000 =4 million. The total population is a bit over 4 million. So are our babies included in the count?

Posted at 12:31PM on 10 Oct 08. Permalink.

So are our babies included in the count?

Well, they are eligible to join, so not counting them wouldnt be fair... :)

While only those starting payed employment are joined up automatically... anyone can join, including infants...

Posted at 12:32PM on 10 Oct 08. Permalink.

Firstly, I endorse this YouYube clip.

Do I detect the dulcet tones of Grant Robertson?

Posted at 12:35PM on 10 Oct 08. Permalink.

I am reliably informed it is he.

Posted at 2:11PM on 10 Oct 08. Permalink.

haha, laughing all the way to the bank. good luck with those native speakers, they sure gave fonterra a helping hand...

Posted at 2:21PM on 10 Oct 08. Permalink.

A long period of export led growth by catering to Western consumers is stopping now as all us Westerners have maxxed out our credit. How will it impact on the popularity of the Communist Party when the growth falters?

Interesting times in China?

Posted at 2:30PM on 10 Oct 08. Permalink.

Bernard Keane at Crikey argues it this way:

But China relies on exports, people will object, especially to Europe and America. Indeed. But it also has 1.2 plus billion people, in a region with another billion people in rapidly-developing economies (remember that enormous disaster, the Asian economic crisis?). So far this is whites-only crisis.

Posted at 2:33PM on 10 Oct 08. Permalink.

For that matter, the whole thing is worth quoting. Lest anyone at that publication feel cheated, let me make the plug that you can buy a subscription at crikey.com.au for not much more than a hundred a year. Excellent value, assuming you still have money in your account.

Right, here's the quote.

2 . Can everyone calm the fudge down about the economy?
Canberra correspondent Bernard Keane writes:

Everyone see Steve Keen on The 7.30 Report last night?

You can take your pick, Keen reckons, from either a recession more severe than the last one, or an Even Greater Depression lasting a decade with 20% unemployment.

With all due respect to Steve, he needs to get a grip -- as do plenty of other doom and gloom merchants. Mike Steketee today was declaring that Kevin Rudd could face the same fate as Scullin, the only other one-term Prime Minister -- undone by the Depression.

I’m still waiting for someone to produce some reasoning as to why the Australian economy is going to shrink, let alone fall off a cliff, because there’s no evidence for it. And the collective amnesia about the fact that six months ago we were all worried the economy was running too hot is particularly annoying.

The IMF doesn’t think we’re too badly placed. And unemployment figures for September came out this morning. Employment is a lagging indicator, so it presumably won’t tell us much about what’s happening now, but unemployment skyrocketed to an alarming ... 4.3%, in seasonally adjusted terms.

In trend terms, employment rose slightly and unemployment fell slightly. Employers who are still struggling to get skilled staff might be able to breathe a sigh of relief sometime soon, but not right at the moment.

And then there’s commodities and China. Chinese growth is tipped to slow to a sluggardly 9%. It wasn’t too long ago that the main worry about the Chinese economy was overheating, as well. You’d have to tip that the long boom in commodities prices is over, but who seriously thinks that with Chinese demand still growing strongly, they’re going to fall back to the sort of levels we saw in the early part of the decade?

But China relies on exports, people will object, especially to Europe and America. Indeed. But it also has 1.2 plus billion people, in a region with another billion people in rapidly-developing economies (remember that enormous disaster, the Asian economic crisis?). So far this is whites-only crisis.

And then there’s our currency, which is currently plumbing irrational depths that must make exporters weep with joy. A damn sight better than parity with the US dollar, even if it means petrol stays expensive.

Yes, almost certainly, the drop in growth will undermine the Government’s tax take. The Mid-Year Economic Forecast in December now takes on a significance it hasn’t for some years, as it will provide a pointer to just how badly Treasury expects deteriorating economic conditions to affect revenues. However, the Government has showed some nous on that front.

Lindsay Tanner and Finance officials have been engaged all year in a line-by-line search for savings through the Commonwealth Budget, the sort of root-and-branch savings hunt that hasn’t been conducted since Peter Costello undertook a similar hunt back in 1996-97, which will free up spending to be redirected if necessary. The Government should therefore be well-placed to maintain targeted spending without spooking the markets by wiping out the surplus or going into deficit.

And a few commentators might want to understand that the equity markets do not equal the real economy -- particularly when they are behaving as irrationally as they are currently. The US bailout is already being declared useless when barely a cent has been spent -- all because stock markets have tanked since it was passed.

People might want to wait until it starts working before declaring it ain’t working. Particularly when they represent the sort of investment banks that stand to directly benefit from even more taxpayer largesse.

Between professional pessimists like Keen, a media anxious to play up the drama and self-interested representatives of the financial sector, you’d get the impression the only rational response to the crisis is unrestrained panic. That will probably ensure predictions of a depression become self-fulfilling. Just remember how we finally overcame the last depression -- with a world war.

Posted at 3:12PM on 10 Oct 08. Permalink.

I have been hanging out at film premieres [Guitars From The Leafy Suburbs]

I once read that "leafy suburbs" was Queensland slang used in newspaper "flatmate wanted" ads, to show that it was a certain kind of flat - what would probably be called "easy-going" or "open-minded" here...

Posted at 4:22PM on 10 Oct 08. Permalink.

So far this is whites-only crisis.

No it isn't. Several days ago Indonesia's stock exchange started to plunge dramatically, losing 10% in only a few hours. Trading has been suspended since then, in attempt to prevent the a repeat of the devastation of 1997. In that case; a country with huge currency reserves, a high trade surplus, and low inflation was plunged into a crisis that sent millions into deeper poverty and caused the collapse of the Suharto regime.

Of course, then as now, this was in no way the fault of the Indonesians, rather Americans and Europeans panic selling their way around the world. These things have already started to hurt developing countries, and have the potential to do so dramatically.

It is still the case that when America sneezes on the rest of the world, it catches a cold

In other news, Pakistan is on the edge of bankruptcy. This would normally make headlines, but not right now.

Posted at 4:37PM on 10 Oct 08. Permalink.

George, how would you assess the balance of Keane's proposition? How much harm could severe contraction in the West do to China's economy?

Posted at 4:59PM on 10 Oct 08. Permalink.

Oh, China is well insulated (at least it appears so to me). There's no way I contend that. Australia is also well placed to weather this.

My point was only to say that many other countries are significantly more exposed to the problems of developed countries.

Posted at 5:01PM on 10 Oct 08. Permalink.

In other news, Pakistan is on the edge of bankruptcy. This would normally make headlines, but not right now.

I was meaning to go read up on what that might mean, but it seemed a little bleak for a Friday. I mean, really.

Posted at 5:03PM on 10 Oct 08. Permalink.

Kevin Rudd could face the same fate as Scullin, the only other one-term Prime Minister ...

They bat longer than us at cricket too.

Posted at 5:03PM on 10 Oct 08. Permalink.

Wasn't doubting you, George - just wondering whether the faith I have in China's prospects was well-founded.

Posted at 5:06PM on 10 Oct 08. Permalink.

Kevin Rudd could face the same fate as Scullin, the only other one-term Prime Minister ...

Quoting Crikey just once more:

In short, Rudd has not just got a major economic meltdown to deal with, but the sort of historic problems that would tough nuts even when times were great. The only saving grace is that Rudd looks like the sort of guy who loves a challenge – and the more the better.

Posted at 5:22PM on 10 Oct 08. Permalink.

The only saving grace is that Rudd looks like the sort of guy who loves a challenge – and the more the better.

But is he a Ricky Ponting or an Alan Border?

Posted at 5:44PM on 10 Oct 08. Permalink.

But is he a Ricky Ponting or an Alan Border?

Neither of them are dipped in titanium.

Meanwhile, from China I've had this message. It's from a reader whose partner I've been pestering for a while to interview about the expansion of their NZ business there.

The streets here are paved with gold for those Kiwi companies that want to make the effort. Everyone's talking about how much work is here for those that can tap into it. But it's not easy.

Posted at 6:28PM on 10 Oct 08. Permalink.

So far this is whites-only crisis.

as Goerge points out above, Mr. Keane appears to have some slightly misinformed opinions...

unless of course the Tokyo Stock Exchange is a now whites-only instituion?

broadest measure of the TSE is the TOPIX index.
it is currently scraping along just under 830. down 8.3% for the day so far...yesterday it was up a tiny bit but Wednesday it lost 9%. looks to have gone from about 1170 to 830 in 12 trading days. that's a drop of 29%. this is starting to look ominous, IMHO.
the recent peak in TOPIX was about 1800, just 15 months ago. so it's lost over 50% since then. whites only, eh? whatever.

let's see,

Hong Kong's Hang Seng index looks like it's down about 45% this year
China's CSI 300 index looks to have lost about 65% this year
Taipei seems to be off 44% since May
Seoul's main index down 34% since May
Thailand and India both look to be approaching falls of 50% this year...

but of course, the stock market doesn't matter, according so some people. how about a complete meltdown of US-European banking? will that matter? mmmm...tricky.

i have to ask though, how could China be insulated from this mess when it's economy is so utterly driven by exports? domestic consumption is tiny as a proportion of the total economy compared with OECD countries. no, i would suggest that if exports seize up, there will be big problems with unemployment in China.

as for good articles to get a handle on what is going on and why in the financial meltdown, this piece by Prof. Herman Daly (expert on the steady-state economy) is a good place to start, IMO. BTW, Nandor threw in some interesting references to Prof. Daly in his speech during the Budget Debate this year. That speech alone is enough to convince me who to give my party vote this year. Even if Nandor is no longer in the House.

Posted at 9:25PM on 10 Oct 08. Permalink.

I strongly advise against putting your faith in China to help us through the current crisis.

As Stephen points out, stock markets in the region have been hammered, led by the decline in the Shanghai market which began before anywhere else.

It's true the Chinese stock market had increased six-fold over a two-year period so the losses we've seen are not as damaging for the overall economy as they otherwise would have been.

Although this is a country of 1.3bn people, 730m of them are peasant farmers with an average income of NZ$800 per year. Their urban cousins, who are in a much better position, have an average annual income of NZ$2,800.

Chinese financial institutions are mostly insulated from the credit crisis because China has a closed capital account, which means the currency is managed in a sliding peg against the US dollar and is not freely convertible and all cross-border investments are monitored and controlled by the government. The financial regulators here have been very conservative about allowing Chinese institutions to invest abroad, in part because China bailed out all of its own banks less than a decade ago and kept bailing them out until just three years ago.

But as others have pointed out, China is absolutely not immune from the global crisis - not only because exports are so important but also because the domestic property market appears to have stalled and could be about to go off a cliff.

Only the most optimistic predictions are saying China will grow 9 per cent next year - down from 12 per cent last year.

This is because China's economy is largely driven by investment - new property developments and new factories to make all those exports.

If the export and property sectors are no longer growing at warp speed then people will stop investing and the Chinese economy will slow dramatically. That will cause a huge jump in bad loans and possibly another financial crisis in China.

That is why Beijing is considering a massive fiscal stimulus package and government-led investment to pump-prime the economy. There is only so much they can do but this is a question of survival for the Communist Party.

In China it is not just unemployment you have to worry about it is social instability (the government's euphemism for riots, protests, revolution) that results from unemployment. According to internal government estimates from earlier this decade, the Communist Party needed to keep the economy growing at 7% a year to ensure its own survival because if growth dropped below that level then it would not be able to manage (read - suppress by any means necessary) the resulting "social instability". I think the red line is now lower - I'm hearing more like 4 or 5% - but it still exists.

When the economy collapses in democracies you vote in a new government. If the economy collapses here there is no pressure-release valve so when things get really bad your only recourse is "social instability" of the sort we saw centred on Tiananmen Square in 1989, when China was struggling with 24% inflation, rampant corruption (at levels we see again today) and a collapsing economy.

And I'm afraid even if China had really "de-coupled" and was about to become the global engine of economic growth, New Zealand would be in a very poor position to capitalize given the damage that has been done to brand NZ by Fonterra's ill-advised involvement in the poisonous Chinese dairy industry.

I do agree that NZ should be looking more to this part of the world in all sorts of fields and should be educating its populace about the growing importance of China.

I just don't think China's going to help the world out of the hole this time around.

Best Regards,

Jamil Anderlini
Deputy Beijing Bureau Chief
Financial Times
www.ft.com

Posted at 10:37PM on 10 Oct 08. Permalink.

I think that's probably good advice, Jamil.

730m of them are peasant farmers with an average income of NZ$800 per year

Who are not going to be taking up the slack on $4k flat screen tellys, though maybe the Warehouse's gumboot supplier could sell a few domestically.

Posted at 10:56PM on 10 Oct 08. Permalink.

Thank you for that Jamil.

Can I ask a few questions?

given the damage that has been done to brand NZ by Fonterra's ill-advised involvement in the poisonous Chinese dairy industry.

How substantial do you gauge the damage to be?

The financial regulators here have been very conservative about allowing Chinese institutions to invest abroad

Are they in a position to do so now? Could they become significant firesale investors if the world economy really tanks?

I do agree that NZ should be looking more to this part of the world in all sorts of fields.

Taking the view that China is not immune or decoupled, what export growth possibilities for NZ might we nevertheless contemplate in the next few years?

Posted at 2:24AM on 11 Oct 08. Permalink.

Surely as a broader point, any country dependant on the commodities boom should be rather worried - plenty of non white countries included in that. Although this whole "whites only" lols is a little confusing to me at least - does this include Latin America? Where do we stand with countries that have large white or not white minorities?

Posted at 7:01AM on 11 Oct 08. Permalink.

Although this whole "whites only" lols is a little confusing to me at least - does this include Latin America? Where do we stand with countries that have large white or not white minorities?

I believe the US has a long history of distinguishing between "white" and "non-white" Hispanics. Must be jolly difficult if you're a Hispanic (what does this mean anyway - Spanish speaking?) of mixed or uncertain origins. Or of a generic coffee-coloured complexion.

It's the kind of idiotic quasi-racial categorization Turiana Turia would be proud of.

Posted at 8:05AM on 11 Oct 08. Permalink.

I'd hardly say the streets in China are 'paved with gold'.

It was naivety along those lines that got Fonterra into its current mess.

While it sounds nasty, I would also be cautious about relying too much on 'new New Zealanders'. It seems that the loyalties of those from the PRC are overwhelming to the PRC.

http://www.nzherald.co.nz/nz-election-2008/news/article.cfm?c_id=1501799&objectid=10536584

If they want to see New Zealand elections decided on how loyal candidates are to the CCP then. . .well really. . . please don't vote guys.

Posted at 1:09PM on 11 Oct 08. Permalink.

Indeed, New Zealand should make good use of the FTA with China, but that would mean NZs business leaders actually showing leadership and intelligence and thinking about more than just satisfying their immediate, short-term desires. It would also mean NZ finally giving us linguisticky types the respect we deserve- despite the inane ramblings of certain undeservedly famous "China business experts" and the equally stupid rumours floating around certain social circles, learning the language and culture really is essential if you want to succeed here.

See, it's not just Fonterra (although I really love watching them squirm), but NZ's business community as a whole. Ask around, plenty of Chinese business types will tell you Kiwis just don't know how to do business. They show up, they sign what they think is a deal, they disappear, then they wonder why their China business fails. The two key phrases in what David Slack quotes from his China-based reader are "that want to make the effort" and "But it's not easy." Indeed, it takes long-term, strategic vision, solid preparation and a hell of a lot of really hard work.

@Seamus Harris: In a democracy, one is entitled to have and express one's own opinions. If certain 'new New Zealanders' consider loyalty to the PRC or even the CCP (actually, they said loaylty to China- quite a different concept) to be important factors as they decide which candidate to support, that is their right.

Posted at 1:15PM on 11 Oct 08. Permalink.

i think the naivety that got Fonterra into their mess wasn't that the streets aren't paved with gold. it's that they trusted their their shoes (and whatever came between them and the gold) a little too much and weren't prepared to convert the ideals they have offshore into the way they handle their Chinese projects.

re: what jamil says

In China it is not just unemployment you have to worry about it is social instability (the government's euphemism for riots, protests, revolution) that results from unemployment. According to internal government estimates from earlier this decade, the Communist Party needed to keep the economy growing at 7% a year to ensure its own survival because if growth dropped below that level then it would not be able to manage (read - suppress by any means necessary) the resulting "social instability". I think the red line is now lower - I'm hearing more like 4 or 5% - but it still exists.

in the wake of the olympics, the space walk, the knitting of the nation following the earthquake and tibet fiasco, the country hasn't been as united since probably 1949.

social instability will be quashed, as it always has,who governs china? the chinese communist party, but who owns china and give the CCP mandate to govern?
the PLA

the chinese army are pure capitalism
any resistance results in extermination
their business interests are vast
their business ethics invulnerable to the sway of the system designed for the average chinese,
the usefulness of the CCP as an umbrella is incalculable.
the government doesn't own the army, the army owns the government, hence the effortless drift from communism to capitalism
if unemployment results in social instability
then unemployment numbers will be cut (down in the prime of their lives)
facing that barrel
significant social unrest is merely a suicide option for those brave not family oriented enough
the guan xi (network) systems are secured.
while the chinese family system remains strong (read social welfare)
so will the social system.

the chinese save money
a major generalisation the average chinese makes about the west is 'they don't save money, while we chinese save money'

they have been waiting for such a global event as is happening now, for a long time,

But as others have pointed out, China is absolutely not immune from the global crisis - not only because exports are so important but also because the domestic property market appears to have stalled and could be about to go off a cliff.

facts

but they have lived through worse

they will emerge from this, frontrunners

Jamil tian an men 1989 didn't collapse the government, it merely reinforced their claim.