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February 2009 | Blog home | April 2009
Let’s look at the current state of New Zealand’s economy, just by some recent headlines and stories in the NZ Herald. This will give you a snapshot of where we are right now. By all accounts, New Zealand is in a recession, but I’ve not really heard it officially declared. Here are some of the topics we'll cover this blog and next:
Unemployment could reach 8 per cent - ANZ
Tuesday Feb 24, 2009 By Brian Fallow
EDITED FOR BREVITY
ANZ National Bank economists have slashed their forecasts and now expect the economy to contract by 3 per cent this year and the unemployment rate to approach 8 per cent.The bank was already at the gloomy end of the range of mainstream forecasters, picking a 2 per cent decline in gross domestic product this year.
New Zealand was on a "losing trifecta" of global recession, heavy reliance on overseas capital and the need to reduce debt, he said. In such an environment what got sacrificed was growth.
Chief economist Cameron Bagrie said "We can talk about prospective interest rate cuts, expansionary fiscal policy and a potential influx of returning Kiwis all we like," he said. "But this is a major global credit event and New Zealand needs to get the current account deficit down. There is simply no painless way out of it."
The current account deficit in the year to September 2008 was $15.5 billion, adding to the country's external liabilities of more than 90 per cent of GDP - second only to Iceland among developed countries.
With world trade expected to shrink this year, earning our way out of trouble through the export sector was "not a 2009 story", Bagrie said. "We hope our assessment for the coming year is wrong. No one likes to envisage these sorts of adjustments and outcomes." Either it would take place sharply or over, say, five years of below-par growth or a bit of both.
The large stimulus being applied from fiscal and monetary policy would gain traction at some stage, particularly in the housing market. But it was ironic that the housing market was being thrown the lifeline when an over-extended household sector was the seat of the problem.
We're overstaffed, say a third of NZ businesses
Tuesday Feb 24, 2009 - NZPA
EDITED FOR BREVITY
A third of New Zealand businesses surveyed by Business New Zealand say they have more staff than they need and are planning redundancies [layoffs] and reducing working hours in the face of a worsening economy.
It warned the survey was not fully representative of all businesses, but there was a strong number of responses, particularly from small and medium sized firms.
Industries with the most surplus staff were manufacturing (42 per cent) and wholesale, retail, accommodation, cafes and restaurants (38 per cent).
Twenty-five per cent of those businesses who believed they were overstaffed were planning redundancies, 38 per cent were planning to reduce working hours and 37 per cent were planning to do both.
"The good news, however, is that many employers (40-70 per cent) would reconsider making staff redundant if the Government provided some assistance by way of wage subsidy, additional subsidised annual leave or other help," said Business NZ chief executive Phil O'Reilly.
Meanwhile, the survey's news was better for trainees and apprentices. Of businesses employing apprentices or trainees, 90 per cent said they intend to keep them on, despite the worsening economic situation.
The businesses surveyed also showed commitment to training, with 58 per cent considering the economic environment provided an opportunity to upskill workers for their future needs.
Loan applications fall sharply, defaults soar, says Veda
Tuesday Feb 24, 2009, NZ HERALD ONLINE reporting
EDITED FOR BREVITY
Credit agency Veda Advantage published its "biannual snapshot of the New Zealand economy" based on information gathered from its own credit bureau. The latest numbers look at the six months between July and December 2008.
Personal loan applications fell 15 per cent compared with the year before, while hire purchase [short term things like tvs and appliances] applications for the same period dropped by 11 per cent, and also 11 per cent on the first half of 2007.
Veda was expecting to see "a more encouraging January" in terms of credit applications, with tax cuts, lower interest rates and petrol prices all helping. However, consumers are clearly bracing themselves for the likelihood of greater stress on household budgets in 2009.
Credit cards applications have stayed steady over the past 18 months, says Veda, with only a 1 per cent fall from the same six months in 2007.
We don't really hear much these days about rises in the cost of living, apart from fuel which has once again gone up about halfway toward it's highs of last year. But we hear alot about alternative modes of transport, in Nelson it is the bicycle and carpooling. In bigger cities, as follows:
A double whammy of high fuel prices and global recession is being cited for big increases in public transport use in New Zealand's largest city.
Auckland Regional Transport Authority statistics show public transport patronage grew 8 per cent for the year to December, to more than 57.7 million trips - a 24-year high.
Rail services have also increased in popularity, with Aucklanders taking 18 per cent more rail journeys for a total of more than 7.2 million passenger trips. Ferry patronage was down 2.2 per cent for the year, but January figures show a 6.8 per cent increase on the same time last year.
More next blog on the rest of the topics, and then after we'll talk some about what New Zealand is doing to mitigate the downturn (or recession, if you prefer). Who cares what word it is, it just sucks!
Several weeks ago - sometime in January, actually, I received an email from the associate editor of the Nelson Mail, our local newspaper. He'd found the website and blog - my first reaction was to cringe! So much for trying to remain anonymous in small town Nelson. But he asked me if I would be interested in writing a piece for the Saturday Voices column, which features a guest Nelson author each week. I hemmed and hawed for awhile because I didn't want to come off as some crackpot foreigner dissing my adopted city.
Finally I came up with a topic that I was interested in writing about and I tried to ensure it wasn't mean spirited and that I couldn't be identifed as a non-kiwi!! Here's the column, click to open a larger version and enjoy - it may be a topic familiar to those of you who have been reading awhile.
Just note: they butchered my last line - I think someone retyped the thing, there are a few changes and the last line is backwards and forwards!
Continuing our look at the current state of New Zealand’s economy, here are a few more topics to give an idea of where New Zealand is right now in the global recession:
Last time:
Several stores in Nelson are closing, there are vacant spots all over. Sales are on everywhere - not a common occurrence and definitely not an ongoing occurrence. Typically people only expect sales twice yearly, but they have been steady now for months.
A fifth of New Zealand's 2000-plus used-car dealers have closed down in the past six months.
Industry groups say the closures, and cutbacks at surviving dealerships, have wiped out at least 10,000 of the 50,000 jobs in the used-car business. There are now only four used-car dealers in downtown Wellington, down from 20 to 25 a few months ago.
Apparently Australian retail sales were up in January and holding steady. There isn't much overarching retail news, but clearly retailers are closing up shop in many parts of the country.
Climate of fear pushes NZ market to five-year low
Tuesday Feb 24, 2009 By Tamsyn Parker
EDITED FOR BREVITY
The New Zealand sharemarket hit its lowest point since March 2004 yesterday as investors faced more negative news in the local reporting season amid overseas market turmoil.
The benchmark NZX-50 fell 38 points or 1.48 per cent to close on 2538 points in its sixth negative day in a row. Yesterday's drop topped the four-and-a-half year low hit on November 24 when the NZX-50 touched 2575 points.
Value at the date of this blog: 2,497
To watch regularly, visit this link: http://www.nzx.com/markets/indices/NZ50
Retirement savings schemes took a hammering last year with the average balanced fund losing 14.4 per cent and the worst dropping close to 20 per cent, say the results of a recent survey. Superannuation funds are the basic equivalent of a 401k or workplace retirement plan.
Construction sector expects rebound soon
Monday Mar 02, 2009 By Anne Gibson
EDITED FOR BREVITY
Workers in the $12 billion building and construction sector are facing the toughest times in almost two decades but a rebound is being picked soon.
Graham Darlow, Fletcher Construction's engineering division general manager, said "We're waiting to hear more on the Government's stimulus package, particularly for infrastructure, which we believe will provide further employment both on major national and regional projects."
BIS Shrapnel senior project manager Adeline Wong also expects the building sector to rebound soon because of strengthening economic growth, low interest rates, better home affordability, pent-up demand for apartments and houses, higher net overseas migration levels and a growing deficiency of housing stock.
The civil engineering sector would also provide a buffer to the construction sector, she said, due to increased spending on infrastructure amounting to about $5.8 billion in the next five years. That would result in the civil engineering sector expanding by more than 10 per cent a year during the two years to 2010/11, she predicted.
Auckland property market back from the dead?
Thursday Mar 05, 2009, Herald Online
It may not be the dawn itself, but latest house sales numbers from Auckland's largest real estate company might just show the first glimmer of light in a gloomy property market.
The number of homes sold by the company rose nearly 9 per cent from the month before to 559. Barfoot says it is the first time in four years it has sold more homes in February than the proceeding January.
Average prices rose by 3.5 per cent from February last year, at $512,536. These prices were also up slightly - 2 per cent on January.
Concern about the number of listings in the real estate market may be starting to ease, with 1470 new listings for Barfoot in February. This is up 50 per cent from January, well down when compared to the same month last year.
Company managing director Peter Thompson said the three key indicators - number sold, average price and the number of new listings for February were "positive and encouraging."
"The average price achieved of $512,536 in February is the highest average price ever achieved in a February, the highest average achieved in the past four months, and the first time in 13 months that the average price has been higher than its comparative month in the previous year.
"Buyers and sellers are cautiously re-entering the market, and there is cause to have some optimism that the housing market is settling.
"The combination of lower interest rates, awareness of the low number of residential building permits being granted, and the general growth of the Auckland region are all contributing factors to this modest turn around," said Thompson
House party back on - for lucky few
Sunday Mar 08, 2009 By Gill South
EDITED FOR BREVITY
With another official cash rate cut expected next week, experienced and less-seasoned property investors are looking at the housing market and seeing more reasons to buy.
And conditions will only improve. BNZ chief economist Tony Alexander expects the rate will get to just 2 per cent by the middle of the year. He also forecasts that real estate sales have almost reached their weakest level.
Longtime property investor and Acumen financial adviser Lisa Dudson is calling this the best market for property investment that she has seen in seven or eight years. It is now possible to buy positive cashflow properties - properties whose rent will cover the main expenses, such as the mortgage. The only problem is persuading the bank to lend you money, Dudson says.
In this market there is a new set of rules, and investors are borrowing some tricks from the United States. Dudson says professional investors with networks will have more success finding positive cashflow properties than less-seasoned players.
We've not seen house prices come down too much in Nelson - but lots of prices are somewhat lower and always negotiable. This seems to be similar to other parts of New Zealand, stabilised and/or slightly lower, but not bargain levels like we're hearing about in the US. The main factor is the interest rates are lower.
But first, more:
Big rate cut coming next week, say ASB economists
Thursday Mar 05, 2009
SHORTENED FOR BREVITY
ASB economists are predicting a 1 percentage point cut to official interest rates next week.
Reserve Bank Governor Alan Bollard is set to look at rates next Thursday, March 12. He will also be releasing a "Monetary Policy Statement", a quarterly review of what the bank is thinking about the economy, especially future growth and inflation rates
If the ASB economists are correct and Bollard cuts the OCR by 100 basis points, it would mean a fall from 8.25 per cent to 2.5 per cent in less than a year.
Don and I are of the opinion – since we keep in touch with many over in the US and have a good idea of what’s going on – that New Zealand hasn’t been hit yet, we are behind six months, maybe twelve. Not that either of us are economists [technically I do have a bachelor degree in economics so that has to be worth something - Don], mind you. But we are only seeing now some of the issues that were being talked about last fall in the States.
But we aren't seeing the issues hurt nearly as bad, that's for sure. A recession may not bite as hard here as over there, we are smaller and may just naturally absorb less of the effects. Plus, and it's a big one, no sub prime issue here as lenders are FAR more prudent in their practices (another way to put it is lenders are FAR less greedy).
And we see more good news here to offset the bad – news such as high tech firms are bucking the downward trend, and “high-tech manufacturers and software companies are also bucking the downturn. In some cases, like Healthcare, they are directly picking up the people made redundant in the sectors that have been hit harder.” (NZ Herald, 27 Feb, Simon Collins)
Next blog, we'll talk more about what's being done, what actions government is taking, and trying to look forward.
I know you all are screaming for more picture from our Coromandel holiday, so I'll do my best to satisfy you craving.
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First stop is Thames, the largest town on the pennisula. It's located at the southwest edge and just north of the famous Kopu bridge that takes you from the 'mainland' to the peninsula. It's a typical small New Zealand town with one business lined main street. The also have a mall - suffice to say we didn't stop as its anchor store was a Pak-n-Save grocery. Since we had a long drive ahead, Angela decided to get one for the road at the local pub. |
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The west coast road almost feels like you are driving around a large lake. The other side of the bay is visible and small towns litter the side of the road every few kilometers. |
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One of the straightest sections - deserted road and beach. The beach on this sides wasn't as nice as the ocean side and the water was a bit muddy until you got further north. This picture was taken prior to Christmas which is why it was so quiet. |
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The first time we drove this route we took the interior road from Te Mata to Coroglen. The was about 25kms of gravel road that went up and over the mountains. It felt like we were in the middle of a jungle. I was waiting for guerrillas to jump out at us at any moment. It was quiet except for the birds with very few people. |
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We took this cool 10 minute walk to check out one of the large the Kauri trees. This was a well kept trail with many sections built up to provide easy access and protect the hillside. |
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More of the trail through the jungle. |
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Angela and Kauri tree. |
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Narrow + winding + gravel roads x Angela having 3 shots of whiskey = trouble. Luckily we had stolen this car out front of the pub. |
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A couple days later we took the same route but kept heading north towards Coromandel town. |
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The scenery here was fantastic as well and reminded me a bit of Ireland (especially the clouds). |
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After Coromandel town we took the 309 road to head back to Tairua. Of course the 309 is yet another gravel winding interior road. Nice because most of the traffic is on the main road. First stop was the highly popular Waiau Waterworks. Not really sure the appeal but basically a place where water is the star. Mainly for kids and very overpriced. One of the listed highlights is "Mr Bones and his water powered bycycle" and "giant slide & sand pit." |
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We then drove up the road a bit and did another hike to a Kauri grove. Rather than show you more big trees, I'll provide some of the fern photos I took. |
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Here is where the red fern grows. |
So what is New Zealand doing to brace for the economic downturn? Well, New York has taken notice about whatever it is we are doing because the Wall Street Journal has praised Prime Minister John Key for his economic stimulus package - a package that the WSJ says is at odds with the rest of the world.
Fairfax as appeared in the Nelson Mail, and edited for brevity:
"The WSJ says Mr Key's idea of growing a nation out of recession by improving productivity puts him at odds with Washington, Tokyo and Canberra. They are putting billions into stimulus packages with taxpayers' money, something Mr Key calls risky.
'You've saddled future generatoins with an enormous amount of debt that they then have to repay,' he said. 'There is actually a limit to what governments can do.' He said New Zealand had been sliding down to the bottom half of the Organisation for Economic Cooperation and Development's per-capita GDP rankings. 'So we need to lift those per-capita wages, and the only way to really do that is through productivity growth driving efficiency in the country,' he told the WSJ.
His first focus will be on personal income tax cuts, while cutting the 30 percent corporate tax was not crucial just now...
He said he wanted to eventually align personal, trust, and company tax rates at 30 percent.
Mr Key said his focus was on chipping away entrenched regulations that drive away foreign capital.
His biggest worry was rising inflation on the back of rising money supply."
Recently, there was a mega hyped jobs summit. Lots of news came out of that. First ...
Key tells job summit: 'We are a gritty little country'
Friday Feb 27, 2009, NZ HERALD STAFF, NZPA
EDITED FOR BREVITY
Prime Minister John Key told his job summit in Auckland today that New Zealand is not a country of whiners and slackers and had the right attitude to get through the global recession.He told more than 200 business, community and union leaders we would see unemployment grow in the coming year as the world recession bites.
Mr Key told the summit: "We are not a country of whiners. We are not a country of slackers. We are not a country of selfish individuals. "We are a gritty little country with the smarts and determination needed to weather this storm."
Mr Key said in his speech that the Government was looking for practical, achievable steps that could be taken to save and create as many jobs as possible.
But the biggest idea was the four-day work week:
Four days a week - firms fight jobs crisis
Feb 27, 2009 By Simon Collins
EDITED FOR BREVITY
Businesses are increasingly turning to the four-day week as the recession bites into manufacturing orders from home and abroad.Employers and unions seem agreed that changes to working hours maybe a workable solution.
The Employers and Manufacturers Association said the number of businesses asking for information about four-day weeks was increasing.
"Companies which need to make some changes to stay in business have a choice between downsizing and making a few people redundant or simply asking everybody to take a day off or making a few changes across the board so it affects people only a little bit," said northern region employment services manager David Lowe.
Andrew Little, secretary of the biggest private sector union, the EPMU, said talk about a four-day working week had "now turned into the nine-day fortnight". "I think there is a willingness to explore that and look at the potential costs for training," he said.
For some businesses, four-day weeks have been the forerunner to closure.
One of the newer stars of the manufacturing sector, Hunza Outdoor Lighting, gave its 32 staff a choice this week of redundancies or adopting a four-day week. All but one of the workers voted for the four-day week. "There's not much we can do, the company has to survive in these hard times," said quality control manager Sang Lee, 50, who has his wife and two children aged 11 years and 18 months to support."It's hard. Of course it affects me, it's a 20 per cent cut," he said. "I'm losing my savings. I can't live on my salary at the moment."
And now they've moved toward serious discussions around a nine-day fortnight:
Nine-day subsidy likely to be only for unionised - Key
John Key said the plan could save around 20,000 jobs
Tuesday Mar 10, 2009
EDITED FOR BREVITY
A nine-day working fortnight subsidy is likely to only be available to large unionised workplaces in its initial stages, Prime Minister John Key said today.
The Government has indicated that it is considering a partial subsidy of employees' wages where some workplaces move to a nine-day working week to avoid redundancies.
On the 10th day workers would possibly get a wage subsidy and the Government could also subsidise training.
"We haven't ruled out that there could be some sort of allowance for workers who would otherwise have reduced income," Mr Key said.
As to housing, and finance ...
Experts' tip: Now's the time to buy a house
Feb 26, 2009, By Anne Gibson
EDITED FOR BREVITY
If you are secure in your job and have enough money saved, now is the time to buy a house, say real estate experts.No one should try to pinpoint the bottom of the housing market and if the price is right, the timing is perfect, says BNZ chief economist Tony Alexander. His call sits uncomfortably with talk of recession and the worsening international outlook, but it is based on sound judgment. "As long as I figured on keeping my job I would be out there actively looking for a property at the moment," Mr Alexander said.
He believes real estate sales have probably almost reached their weakest level, and activity is likely to fluctuate and start moving up before the end of the year.
House prices will possibly fall another 5 per cent, but will stabilise by the end of the year, then rise slightly next year, he says. Buyers should be seeking a mortgage interest rate of 5.5 per cent fixed for five years.
Per NZ Press Association, February 25, 2009:
EDITED FOR BREVITY
ASB Bank has set aside $1 billion for low-interest loans to small and medium businesses and farmers to help them save and create jobs. It says the move will reduce its profits, and is calling on other banks to follow its lead.
The bank said the fund would enable businesses to borrow at "below market rates" if they could show the loans would create employment, or prevent people losing their jobs.
The initial interest rate is 5 per cent.
Prime Minister John Key welcomed the plan as "just the sort of creative private sector idea I have been seeking in the lead-up to this week's jobs summit". [REFERENCED ABOVE]
New Zealand's largest bank, ANZ National, last week said it would extend $4 billion in new loans to businesses and farmers this year, in line with new lending levels last year.
And of course, being a small country, we need to turn to foreign investment.
Review will encourage investment into NZ - Key
Mar 14, 2009, NEWSTALK ZB
The Prime Minister is keen to open the door to foreign investors.
In a speech to the Act Party conference today, John Key said a review of the Overseas Investment Act will be announced by Finance Minister Bill English next week.
The review aims to create an overseas investment screening regime that encourages investment into New Zealand while protecting sensitive land, assets and resources.
Mr Key also told the meeting that New Zealand is in a better position than many other countries to withstand the worst global economic downturn seen in more than a generation but the significant challenges it faces include falling growth rates, lower commodity prices, falling demand for New Zealand's exports, operating deficits and rising unemployment.
He says the Government is determined to keep the economy running as strongly as possible and take the sharpest edges off the recession.
Well, that should give you a decent idea ... now as to us, we're doing our part for the economy and flying to Auckland today to see Coldplay in concert tonight at Vector arena, and then spending Friday in town as well. HOW EXCITING!
It was a GREAT concert, so glad that they booked a second night here as the first one sold out before tickets even went on sale. And we had great seats, danced and sang for more than two hours, and participated in making a new world record:
http://www.coldplay.com/newsdetail.php?id=357&page=0
Can you spot Don's cell phone? Yes, those are all cell phone lights going round and round in our Mexican cell phone wave. Even cuter, proof of the guys in spots all over Auckland:
http://www.coldplay.com/newsdetail.php?id=356
Finally, I'm on record saying that I saw bassist Guy walking in Parnell the next morning as I waited for Don to get his bagel. I KNOW it, I'm sure it was him.
Tauranga and Mount Maunganui (toe-rang-uh and mount mon-gan-ooee) are on the North Island about one hour south of the Coromandel Peninsula and 2 - 2 1/2 hours south of Auckland. This is the final blog from our trip to the Coromandel over Christmas, and it talks about our trip south to New Zealand's fifth largest city, Tauranga.
On Boxing Day (26 Dec) we drove 140km from the Coromandel Peninsula to Tauranga for some shopping. Mostly, I wanted to visit the local yarn shop there to pick up some more goodies that I found on a work daytrip a few months ago. A local shop makes their own fabulous colourways for variegated yarn so I was excited to stock up on some cool items.
The thought had crossed my mind, but given that Tauranga is now such a big spot and close by Mt Maunganui is a hot vacation destination, I thought all the shops would be open. Many shops were, but lots of the boutique shops and non-chain stores were not - including my yarn shop BOOOOOO HOOOOOOOO I was devastated. I should have known better!
We looked around anyway, Don got to see Tauranga and we went over to see what Mt Maunganui was all about and got a surprise. As you'll see, the weather was a bit dodgy when we left on our drive, but brightened up by the time we got to Tauranga except only 6km away at Mt Maunganui storm clouds were out, oddly.
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Tauranga, edge of the city centre and where we finally got a car park. This is part of their pretty esplanade area, as much of the city is based around water, from the Bay of Plenty. |
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Looking up a main city centre street. Just to the right is Starbucks, my last chai for a week between Christmas and New Year's - detox time. |
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The main strip of Mt Maunganui, same shops, different setup, same crowds. |
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What we discovered was that Mt Maunganui is like a resort destination type spot, with a miles-long beach across the road from developing hotels and rentals. It is a smaller version of the Gold Coast, or like spots you find in Mexico or Hawaii. It has that resort-y feel for sure. We had no idea! Next time we tell ourselves that we want to go to the Gold Coast, we'll save some money and go here instead. |
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Oh, those crazy kids! They love their poo. You can see they didn't have luck with all the poo changes. |
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Just a fraction of the beach at Mt Maunganui, it had people on it for miles and miles as we drove by, with holiday homes just across the street and resorts mixed in. |
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Here's some of the walkway between beach and resort strip, the cranes are that lovely common feature in developing beach destination locations - always building that next resort! That's the mount in the background, it seems to be a reserve spot, you can walk all over it and get good views. |
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Beach. |
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Everyone walking by this house, including us, commented on it, looked inside the windows, etc. it was quite swanky. I think we were all envious. |
After our outdoor adventure exploring around, we went into the Bayfair Mall, because despite all my hopes and dreams of malls, I try and try and try to find a NZ mall that matches my dreams and it never happens. What did happen is we were wall-to-wall with people in the mall, also out on the biggest shopping day, and it was crowded beyond words! The only good part is we got a parking spot right away, beating out everyone else in line before us!
One last photo from our Coromandel trip ... we were pleased to have my friend Annie and her husband Dan visit us for two days while in the Coromandel. Easy enough for them, they flew their plane to nearby Pauanui and then back out toward the north after their visit. Here's their plane, the wee thing, with Dan loading it up for their departure.
Hope you enjoy the next couple of weeks, we'll be on holiday doing a road trip to the south part of the South Island to see places we've not yet seen ... Dunedin, the Catlins, Invercargill, the Central Otago region (wine country!) and back to Lakes Tekapo and Pukaki which we visited on our vacation here in 2005, and then up the east coast via Kaikoura way back homeward. Lots of photos, lots of scenery, you'll enjoy it when we get back!
