Thursday, July 31, 2008

The frustrations of globalization

On Tuesday, I took my old Sunbeam water purifier, which leaked every time I used it, to the recycling center. I then headed to the electrical goods store to buy a replacement. A routine operation, you might think.

About half an hour later, I had my new machine on the kitchen bench at home. The machine's design had changed, but its principle seemed to be much the same. It even used the same filter cartridge.

The instructions left a little to be desired, but were probably superfluous. After all, there is not much more to do than fill the machine's receptacle with water and switch it on.

All went well until I noticed that water was leaking from the base as well as spurting into the jug I had positioned under the spout. I switched the machine off and consulted the "troubleshooting" section of the instructions. These said such leakages could be caused, as in the case of the previous model, by an incorrectly fitted cartridge.

I removed the cartridge and reinserted it. No improvement. I called the help line and was put through to a gentleman with an Indian accent. Where was he, I wondered. In Bangalore?

The man suggested I check a screw on the base, which might be loose. It wasn't. Eventually, I took the machine back to the shop, which gave me a replacement.

End of problem, I thought. I was wrong. I couldn't get any water to pass through the second machine, and returned it to the shop the next day. I suggested that someone demonstrate its use to me. Of course, everyone was too busy to do that, although a mere 10 minutes would have been enough.

The store called Sunbeam, which suggested I be given a third machine. The store didn't have one, so I accepted the offer of a refund. And now I have no water purifier.

Was I doing something wrong? I don't know. Perhaps the fact that Sunbeam has outsourced its production to China had something to do with my difficulties. In the good old days, when appliances were made locally, I could have taken the machines back to the factory, and found out whether they were, indeed, faulty.

Three cheers for globalization!


Tuesday, July 29, 2008

Kiwi dollar nosedives

The exporters who, until recently, were moaning and groaning about the high kiwi dollar must be happy.

As the New Zealand economy has declined, it has taken the dollar with it - from above US82c in mid-March to below US74c last week. It closed today at US74.37c.

But worse is to come. According to a Bloomberg News report last week, Lehman Brothers expects the currency to fall to US64c by the end of the year and to US60c at the close of 2009.

Today, the Bank of New Zealand said the New Zealand dollar could fall closer to US70c by end of the year and to US64c by the end of next year.


Friday, July 25, 2008

Skilled get more; unskilled get less

A survey of 73,000 jobs listed on the Trade Me website shows average pay rates rose by 3.7 percent between the last quarter of last year and the first half of this year, the New Zealand Press Association reported today.

During this period, the average salary in New Zealand rose from $55,583 to $57,664.

Trade Me, which conducted the survey, said it was not scientific. It provided only a snapshot comparison.

Another of its findings was that unskilled workers went backwards in nominal terms, even before the annual inflation rate of 4 percent was taken into account.

Kitchen staff were the worst paid at $28,831, down from $29,625. Waiting staff were at $30,296, down from $30,826; caregivers at $30,894, down from $31,967; shop assistants at $31,668, down from $32,565, and cleaners at $31,704, down from $31,964.


Thursday, July 24, 2008

Reserve Bank cuts rates, but I'm not rejoicing

It wasn't the news I wanted to hear: The Reserve Bank today lowered New Zealand's official interest rates from 8.25 percent to 8 percent.

As far as I am concerned, as a greedy oldie, the official rates can never be too high, as high official rates invariably result in high interest rates on my term deposits.

The reduction by the Reserve Bank - the first cut in official rates in exactly five years - could have been greater, in view of inflation figures released last week. These showed that annual inflation had climbed to 4 percent.

Economists now believe it is likely to hit 5.5 percent later this year - a level that is well above Reserve Bank governor Alan Bollard's 1 percent to 3 percent target band.

Working in favour of people like myself are the very high rates of interest that banks are having to pay offshore, where they source about 25 percent of their funds, because of the global credit crisis.

So for the time being, at least, my income from my long-term deposits will probably remain reasonably high.


Wednesday, July 23, 2008

Hanover Finance bites the dust

What can I say, except that I am really glad I didn't put any of my $400,000+ retirement money into a finance company.

No doubt many people felt that Hanover Finance, which today announced it was suspending acceptance of new investments and repayment of existing deposits, was secure - even if lesser finance companies were falling by the wayside.

This is what the company's website said until today:

Hanover Finance has a proud history of delivering strong financial performance and consistent returns to investors over 23 years. We are one of the five biggest finance companies in New Zealand and one of only six with an international long term credit rating, BB+ from Fitch Ratings.

Key to our success is our wealth of experience in property finance. We know the market. We deal with experienced, successful developers who we know, and we apply strict loan approval criteria which results in only one in five loans being approved. Over the years we have managed the business through a range of market conditions, delivering consistent returns to investors through sound financial strategies.


Today, the entire website has gone, and been replaced by a press release that reads, in part:

Hanover Finance, which continues to meet its Trust Deed obligations and has ongoing financial capacity to trade, says it is acting early to preserve value in the business as market conditions continue to deteriorate and uncertainty mounts over borrowers’ abilities to repay as forecast.

Shareholder Mark Hotchin says: "Against a backdrop of global credit uncertainties, falling property prices and lower reinvestment rates, the industry model has collapsed. Alternate financiers are increasingly unwilling to step in, and we’re also now starting to see borrowers trying to take advantage of the uncertainty to delay payments - further compounding the situation."


It's dismal news for the investors who put about $1.2 billion into the company, according to the December 2007 six monthly accounts (the latest available).

Mr Hotchin, a co-owner of Hanover Finance (with Eric Watson), said this evening that the recent collapse of finance companies Dorchester Finance, Dominion Finance and St Laurence had seen all new investment in Hanover dry up.

Reinvestment rates from debenture holders had plummeted from around 40 percent to less than 20 percent in the past few months.


Tuesday, July 22, 2008

The exodus to Australia continues

A net 31,900 people crossed the Tasman in the year to June 2008, figures released yesterday by Statistics New Zealand showed. It was the highest migration level in 19 years.

In the year to May 1989, the net figure was 32,000.

Last month, the net outflow of migrants to Australia was 2900, up from 2200 in June 2007.

As many of those migrating to Australia are skilled people, the exodus could worsen the shortage of strategic skills and contribute to the dampening of the economy, says ANZ National Bank chief economist Cameron Bagrie.


Sunday, July 20, 2008

'Incentivization' of bank workers under fire

The finance sector union Finsec is teaming up with Green MP Sue Bradford to launch a campaign for fair lending regulations for New Zealand's banks.

Finsec wants all the banks to join a discussion of proposals to phase out, or at least modify, their sales incentives. It claims these incentives have shifted banks from a service- to a sales-driven culture.

In today's edition, the Sunday Star-Times says it has obtained copies of some of the banks' incentive schemes, under which staff are "incentivized" to sell products.

At the ANZ, for example, management sets "revenue targets" before the financial year begins. These show how much money the bank would like to make from its customers for its shareholders in the coming year.

This revenue target is then "translated into required product sales" - the number of mortgages, credit cards and term deposits the bank needs to sell to reach the target.

Every employee with a sales role is then given his or her personal target, which requires minimum sales in each category to qualify for a bonus.


New Zealand house prices plummet

House prices are falling more steeply than official figures suggest, sending household wealth tumbling and curbing consumer spending, today's issue of the Sunday Star-Times says.

The paper says Bernard Hickey, managing editor of interest.co.nz, is predicting that house prices will drop 30 percent during the next two years, as the foreign capital that funded the housing boom dries up, and that prices won't return to the November 2007 peak until 2018.

Since last November, the national median house price has fallen $12,000 - a drop of 3.4 percent, which is equivalent to an annual drop of nearly 6 percent.

The head of TradeMe Property, Brendon Skipper, says properties are taking 20 days longer to sell, and that the average property now stays on the site for 60 days. The number of listings is also declining, he says.

But the rental market is "going gangbusters". In fact, he says, the number of properties listed for rent has increased by 38 percent during the past three months.


Friday, July 18, 2008

NZ lending rates could go even higher

Looking forward to lower lending rates in the near future? Don't hold your breath.

As the country waits for next week's announcement by the Reserve Bank, which could include a cut in official interest rates, the BNZ is warning that banks' lending rates could go even higher, because of the global credit crisis.

BNZ economist Craig Ebert says 20 percent to 25 percent of funding for the New Zealand banking sector comes from offshore, and that overseas markets are "charging a pretty penny" for the money because of the credit crunch.

"The fact of the matter is, global money has become as expensive for NZ banks as it's been in many a year," Mr Ebert said today.

"...While all and sundry are looking forward to falling interest rates, we are worried that term retail rates might have to go up - and stay there for a good while to come."


Wednesday, July 16, 2008

Kiwis defaulting in basic bill payments

Loan defaults in New Zealand are up sharply and new loan applications are down, says credit information company Veda Advantage.

Consumer defaults were up 7 percent in the first half of the year, compared with the same period of last year, and commercial defaults were up 24 percent.

Veda Advantage says there have been sharp jumps in the numbers of people defaulting in their payments of such basic bills as phone (up 148 percent) and internet bills (up 100 percent).

There was a 21-percent drop in mortgage applications in the first half of 2008, compared with the same period of last year.


Bank outsourcing work to India

The work of 238 people in the ANZ National Bank's lending services centre in Auckland and customer transaction service centre in Wellington will be outsourced to India, the bank announced yesterday.

Finance workers union Finsec today accused the Australian-owned bank of being greedy and a bad corporate citizen. Finsec campaigns director Andrew Campbell said the bank could easily afford to employ a New Zealand workforce, but wanted to meet a stated goal of doubling its profit in five years.

The work of the employees in the two centres will be done in India at a quarter of the cost.


Tuesday, July 15, 2008

NZ food prices up 8.2 percent in June year

Soaring food and petrol prices pushed annual inflation up to 4 percent in the June year, after the Consumer Price Index (CPI) leapt a higher-than-expected 1.6 percent in the June quarter, Statistics New Zealand said today.

The department reported that food prices rose 8.2 percent in the June year – the highest rise in the Food Price Index (FPI) for 18 years.

The annual inflation rate rose from 3.4 percent in the March year, and has now been outside the Reserve Bank's 1-3 percent target band for three quarters.

Yesterday, figures released by Statistics New Zealand showed that total retail sales fell by a seasonally adjusted 1.2 percent in May, or by $69 million. It was the biggest monthly decline since February 2004, and was led by lower auto and furniture sales.

In the past month or so, my sales of secondhand books on the internet have slowed. This week, I sold only one book.


Saturday, July 12, 2008

Change course now, say Greens

Green Party Co-Leader Russel Norman has responded to the prediction by Australia's CSIRO (Commonwealth Scientific and Research Organization) that gas could cost $10 a litre within a decade by calling for a rapid change of course.

"Petrol at that price would make the Government's entire motorway building project a white elephant - modern-day Easter Island statues. Our new motorways would be monuments to short sightedness and profligate waste of resources.

"Governments even contemplating building motorways like the billion dollar-plus Transmission Gully project in Wellington or the $2 billion Waterview tunnel project in Auckland are seriously out of touch with reality."

In Palmerston North, I think the city council will eventually have to remove all its traffic islands, median strips, etc., and put down tracks for electric trams. We could have an excellent tram service.


Friday, July 11, 2008

Net worth of New Zealand households falls

Spicers, which describes itself as "one of New Zealand’s most successful financial advice firms", had another dose of gloomy news for us today.

According to a new survey by the company, the net worth of the average household fell more than $5900, or 1.2 percent, during the March quarter – the largest fall in almost a decade.

The March decline follows a revised decline during the December quarter of $2500.

Spicers says the decline was a result of a fall in the value of financial and physical assets coupled with a further increase in debt.

The index of household assets fell 0.5 percent in the quarter – the first decline in seven years. This was mainly due to the fall in house prices and the fall in the value of managed funds and shares.

Household liabilities continued to rise, but at a slower rate. Liabilities rose 2.2 percent in the quarter, slower than the 2.7 percent rise in the December quarter.


Thursday, July 10, 2008

NZ workers who quit not being replaced

Half the employers questioned in a survey of businesses north of Taupo, in the center of the North Island of New Zealand, say they will not be replacing staff when they leave.

At the same time, the inaugural online survey of employment plans conducted by the Employers and Manufacturers Association (Northern) last month found only 11 percent of the 932 respondents were making definite plans to put off staff.


Wednesday, July 9, 2008

Bush knows the game is up

The following passage is from http://www.lifeaftertheoilcrash.net/

'For what it's worth, Bush's Crawford ranch has been completely off-the-grid since 2002. The ranch is equipped with the latest in energy saving and renewable power systems. It has been described as an "environmentalist's dream home." The fact a man as steeped in the petroleum industry as Bush would own such a home should tell you something.'

As I type these words, there are still cars driving past my house in Palmerston North, New Zealand. But for how much longer? One year? Two years?


Monday, July 7, 2008

Goodbye good times, hello recession

It's almost official: The economy is in recession.

The independent economics group Infometrics says quarterly economic growth is expected to be "negative or close to zero" during the first three quarters of the year.

It adds that the next five years are not looking positive for New Zealand.

In its latest long-term forecast, which should come as a surprise to absolutely no one, Infometrics says the recession has been caused by high food and petrol prices, high interest rates and a slumping housing market.

The economy is set to grow only 0.5 percent in the year to March 2009, after years of 2 percent to 3 percent growth.


Sunday, July 6, 2008

Renting beats owning, paper says

I always thought, as the owner of a mortage-free house, that I had the best deal going. Not so, says The Sunday Star-Times, which has found that, regardless of whether you own an expensive house or a humble abode, "it makes more cents to rent than own".

"We looked at three areas with different housing-market characteristics," Greg Ninness says in an article in today's issue of the paper. The three areas were Devonport, on Auckland's North Shore, where the median selling price in May was $820,000, according to the Real Estate Institute of New Zealand; Mt Maunganui/Papamoa, where the median was $395,000; and Timaru, where the median was $240,000.

"We then estimated what that money would earn if it were invested, instead of being tied up in a property. We used a conservative benchmark for this: Kiwibank's term-deposit PIE account, which pays interest of 8.85 percent and is taxed at 30 percent. This provided an annual income figure.

"We then looked at the cost of renting a property in the same area. We drew the likely weekly rent figures from the Department of Building and Housing's Tenancy Bond Centre. In each case, the rents were for a three-bedroom house and the rents were in the upper quartile (top 25 percent) for that type of property, ensuring they reflected the cost of renting a good-quality house in each area.

"The rents ranged from $600 a week in Devonport to $250 in Timaru.

"In each case, this left a significant surplus, even after deducting tax from the investment interest and paying rent.

"In the Devonport example, this was $19,599 a year, in Mt Maunganui/Papamoa $6270, and in Timaru $1868. These amounts would be cash in the hand to the investors.

"We also had to allow for the fact that people who own their homes have to pay for rates, insurance and maintenance on their properties, whereas those who rent do not.

"When these are added into the equation ,they considerably improve the financial advantage of renting over owning."


Friday, July 4, 2008

Is there still money in sex?

Every day, we read about the hard times that people are having, as a result of the credit crunch and the rises in gas and food prices. And if one thing is certain, it is that things will become tougher as oil reserves dwindle.

I was therefore a little surprised to read of the ambitious plans for a "high-class brothel" in Dannevirke - a town in an area that was, as its name suggests, settled in the 19th century by people from Denmark. It is on the other side of "the Ranges", a 47-minute drive from Palmerston North.

Who, these days, can still afford to pay $100+ for sex? I'm sure there aren't many local people who can, as the area is in economic decline.

According to news reports this week, the Tararua District Council has given the green light to the brothel, which is to be called Promiscuous Girlz and which is to be located in the historic Public Trust Office on the town's main street.

The brothel's prospective operator promises that signage around the premises will be discreet.


Tuesday, July 1, 2008

Pessimism grows over employment prospects

The Westpac McDermott Miller employment confidence index fell eight points to 120.8 in the June quarter, reflecting the increasing realization among employees that the economic downturn will result in further job losses.

A number above 100 indicates there are more optimists than pessimists, while a number below 100 indicates that pessimists outnumber optimists. The index is thus still in positive territory, despite the loss of 29,000 jobs in the first quarter of this year (according to Statistics New Zealand figures).

My own employer, Fairfax Media, today announced that about 40 sub-editors (copy editors) are likely to be made redundant at the company's newspapers in New Zealand, as a result of a planned restructuring that will see "hubs" created in Wellington and Christchurch to handle the editing of the features, world and business pages for all the papers. Each paper will thus be left with a smaller staff to handle the editing of mainly local news.

I am a sub-editor at the Fairfax-owned Manawatu Standard in Palmerston North. But as I am now employed on a casual basis in the advertising features department, rather than in the editorial department, I don't yet know whether I will be affected. My boss thinks that, as we make a lot of money for the company, we may be left alone. The fact that I am my department's only sub-editor may also strengthen my position.