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Dollar Parity

Written By: - Date published: 8:19 am, April 7th, 2015 - 308 comments
Categories: Andrew Little, australian politics, capitalism, class war, Economy, exports, farming, john key, national, same old national - Tags:

For the first time since it floated the New Zealand dollar is heading for parity with its Aussie equivalent.  Some of the commentary is pretty naff, describing the situation in testosterone flavoured terms.  The New Zealand dollar is “strengthening” while the Australian dollar is “weakening”.  And in a bird related term according to the Herald our dollar is soaring.

The analysis is superficial in the extreme and hides what is becoming a significant economic problem.  And also shows how the Government’s cupboard of economic policies is bare.

The Irascible Curmudgeon recently reposted this fascinating article on New Zealand’s economic predicament by Raúl Ilargi Meijer of the Automatic Earth blogsite, a site I have not read before.  The analysis is sharp and compelling if somewhat terrifying.  Basically we are heading into a really difficult times because of international forces beyond our control and a Government that refuses to even acknowledge that structurally we are unable to deal with these forces.

Firstly the Reader’s digest version of Australia’s current economic malaise.  China had previously been buying huge amounts of steel and coal from Australian companies for construction but more recently sales have plummeted.  Interestingly New Zealand’s timber exports, heavily used for boxing concrete in China, has also plummeted.

New Zealand’s “well performing” economy is based on confidence caused by surging land prices particularly in Auckland and historically high earnings by dairy farmers.  But milk and butter fat prices have recently taken a hit and the pressure on farmers is intensifying.  If you want a distressing statistic to validate this then the number of farmer suicides is growing substantially.  High prices meant that some over leveraged themselves into farms and when the price collapsed their situations were cruelly exposed.  And the housing market is out of control with more and more Kiwis being unable to buy a house in their own country.

Some other comments made by Meijer:

  1. Annual GDP growth of 3.3% relied heavily on tourism spending and on housing investment and strangely disposable income went down.  He has concerns about the accuracy or legitimacy of the figure.
  2. Total exports to China in February were down more than 36% on the same month last year.
  3. New Zealand has 30% of the world’s dairy trade.  This is a huge amount for such a small country and leaves us in a particularly vulnerable position should things go wrong.

Meijer’s conclusion?

Back to New Zealand’s reality for the vast majority of people, who will never be able to fork over 100s of 1000s of dollars for a house. People like the workers in the timber industry, who see slowing Chinese demand translated into job cuts both for those who cut the trees and those who transport them.

Again, a dumb idea to base a whole industry around one client, but the men and women who did the job were just glad they had work. And now they don’t anymore. Jobs that in all likelihood will never come back again. China won’t have another debt-financed growth spurt, and there are no other candidates waiting on the horizon.

And that’s all a big shame. New Zealand is not poor, but it’s by no means as rich as Australia or Canada or Germany or the US. What it does have is the potential to be largely self-sufficient. A potential that is being squandered in order to play with the big boys of globalized trade.

New Zealand has only 4.5 million citizens, one third of which live in Auckland. It has vast tracts of productive land that are now used to feed export oriented cows and American pines, neither of which are even native. It could have a great shoe industry, plenty of leather, and a textile industry, plenty of wool. But New Zealand, like everyone else, imports such basic needs from China. While having scores of unemployed people. When will that light go off?

Meijer is particularly scathing about John Key.

The country’s prime minister since 2008, John Key, used to work at Merrill Lynch and the New York Fed, and that sort of background guarantees valiant efforts to sell anything in the country that’s not bolted down, and take an axe to what is. It also guarantees zero initiative to become self-sufficient.

Speaking of Key he was interviewed on Radio New Zealand this morning and was at his dissembling best.  He thinks that parity is a measure of New Zealand’s sound economic policies, not the influx of overseas money seeking to buy land or the influx of insurance money required to rebuild our second biggest city.  He says that confidence is high and a high dollar has had no effect.  He should talk to these people.  He claims that low oil prices is helping New Zealand businesses.  Well they are but they are helping businesses world wide and are doing nothing about competitiveness.  And he states that he has no control over the Reserve Bank and interest rates despite the Bank being a creature of statute and subject to Parliamentary control.

He thinks that because manufacturing companies import equipment and parts there is no significant effect.  If we were exporting goods with high imported content that may be right but milk, timber and meat do not have any imported components.

Andrew Little had a chance to respond.  While Suzy Ferguson gently questioned Key Espiner ran Government attack lines against Little.  Little had the perfect response by asking Espiner to listen to his answer and to comprehend what he was saying.

So we have a situation where Australian holidays and goods are cheaper for Kiwis but Kiwi holidays and goods are more expensive for Australians.  The upside is where?

Obviously we are in for more of the same where a slight tremor in the dairy market could spell gloom for us, and where we rely more and more on low paid tourism jobs to keep afloat.  If only we had a Government with a plan for our economy.

308 comments on “Dollar Parity”

  1. vto 1

    Its the free market micky, the free market knows best and John Key loves to let the free market run its course …….

    except when farmers can’t get private investment for their irrigation businesses

    and except when Bill English’s constituents make poor finance company investment decisions and need their poor widdle hands held

    and except when Rio Tinto asks for some welfare payments

    and except when Steven Joyce’s company Mediaworks can’t pay its bills

    and expect when they want to shore up land values in Christchurch CBD

    and except when private citizens take on business with the RMA

    …. I mean, the free market has worked particularly well with…

    Pike River and 29 dead men
    Leaky homes
    Providing affordable homes for NZers

    the free market

    such a joke that even John Key doesn’t work with it

    ha

    • Gosman 1.1

      When a State owned business or organisation screws up does that mean government based solutions don’t work? Following your overly simplistic logic it would.

      • vto 1.1.1

        Poor widdle gossie doesn’t like the hypocrisies of his favoured government being exposed. Leaky homes and 29 dead men at Pike River are not just “screw ups” and the fact you see them as such illustrates your poorly and ignorant attitudes to so very much.

        The poor widdle free market – flourishes in Somalia and look at the results….

        poor widdle free market followers are starting to cry

        • Gosman 1.1.1.1

          How is Somalia an example of the free market when most people who advocate for a free market believe in a strong legal system to enforce contracts?

          • Paul 1.1.1.1.1

            Please go there and find out.

            • Skinny 1.1.1.1.1.1

              Ask ya mate Hooton if you can tag along not his next OE holiday , he loves getting bang for the Kwi buck by traveling through third World Countries. Must make him feel like King Dick. He does fly first class though, no cattle class crush mixing with common peasants.

          • vto 1.1.1.1.2

            oh I just thought I would beat you to your usual trick of naming other countries as if they are somehow indicative of various subjective things …… your typical ones including, laughably, Zimbabwe, Venezuela and even ffs Cuba.

          • vto 1.1.1.1.3

            How is Pike River’s 29 dead men and the tens of thousands of leaky homes just a “screw up”?

            They are not just a screw up they are evidence of the serious flaws in the free market.

            • The lost sheep 1.1.1.1.3.1

              No one ever died in a coal mine during the era’s the Chinese and Russian Mining Industries were State Owned and working within a completely state controlled economy then VTO?

              • vto

                not relevant to the issue at all lost sheep

                of more relevance is that this government, in spite of Pike River deaths, wants to extend the same fatal logic to the heavy trucking industry………. this lot want to allow truckers to issue their own warrants of fitness for their 45 ton trucks

                but yep you just carry on lost sheep I’m sure it will work

                maybe we could test it out on the general population first and allow them to issue their own wof’s

                this is the black comedy that is people like you

                • Gosman

                  Not relevant because it is inconvenient to your point which seems to be that due to private sector screw ups the public sector should take over.

                  • vto

                    Wrong. Read again.

                    But while you are there, let me repeat the question you are trying to ignore – How is Pike River’s 29 dead men and the tens of thousands of leaky homes just a “screw up” and not indicative of the serious and deadly flaws in current free market / self-regulation / greed-is-the-driver policies?

                    • Gosman

                      Whilst no deaths were involved Novopay was a project commissioned and managed by the public sector. Do you think the failure of that indicates the public sector itself is fundamentally flawed. That is the same logic you are using.

                      I am also not buying in to you trying to politicise tragedies like Pike River. I personally think that is incredibly bad taste. Hence why I am not responding to your petulant demands on that topic.

                    • vto

                      That is not the issue being look at at all. The issue is whether the free market is useful for various things and it has proved itself incapable of being able to deal with the important things. Evidence of that has already been provided.

                      As for this….
                      “I am also not buying in to you trying to politicise tragedies like Pike River. I personally think that is incredibly bad taste. Hence why I am not responding to your petulant demands on that topic.”

                      … you can get fucked. Pike River is absolutely relevant and 100% political and the deaths of those men at the hands of people just like you cannot be left to your pathetic excuse above. What a poor human you are for suggesting such. Ask the families involved.

                      Pike River proved the flaws in the approaches you advocate. Deadly flaws.

                      That you now try to minimise it reflects so very badly on you. Get fucked asshole.

                    • vto

                      “I am also not buying in to you trying to politicise tragedies like Pike River. I personally think that is incredibly bad taste.”

                      What is incredibly bad taste is refusing to look at what killed these men.

                      Shame on you.

                    • KJT

                      Novapay was a continuation of privatisation of State services, and loss of expertise from the State service..

                • BassGuy

                  this lot want to allow truckers to issue their own warrants of fitness for their 45 ton trucks

                  A friend of mine is a bus driver. A few years ago, he told me about the Certificate of Fitness process at his work. He started off by saying that the buses only meet their Certificate of Fitness for the day of their assessment. Their diesel mechanic would get a vehicle roadworthy, it’d get the CoF, and then the parts would be migrated to the next vehicle to be assessed for a CoF, and the bus would be returned to its pre-certification state. Nice and cheap, buy a single set of parts, and install them in each vehicle.

                  That business later was bought out, and merged with another bus company. I don’t think things have improved that much (but I would hope they have).

                  • vto

                    Yep exactly. This is what happened at Pike River with the neoliberal policies approach.

                    This is self-regulation and what it brings. Gosman and Act and the National Party like self-regulation and imposed it on the mining sector with deadly failure results.

                    Now they refuse to even look at it

                    It disgusts me. Pigs.

              • The argument is not that totalitarian states run by psychopaths give a shit about their citizens.

                It’s that the “free market”* is quite happy to view labour as a disposable resource.
                In this aspect, there is an argument to be made that that the people who construct the “free market” are simply better at keeping their hands clean than the examples you cite.

                * “free market” is in quotes because in a truly free market, murder and even genocide are on the table (after costs, will killing this group of people turn a profit/achieve market dominance?) – hmm, more similarities to totalitarian states run by psychopaths.

                • The lost sheep

                  “free market” is in quotes because in a truly free market, murder and even genocide are on the table

                  Which is why we don’t have completely free markets, and nobody is advocating we should have.

                  The question is actually to what extent markets should be allowed to be free, and to what extent they should be controlled.

                  “there is an argument to be made that that the people who construct the “free market” are simply better at keeping their hands clean…”

                  The argument that can be made, very strongly in fact, is that controlled free market mixed model economies have consistently proved to be far more successful at delivering benefits to everyone in a society than completely controlled economies.

                  The best known example of this is what happened to the Chinese economy once they started introducing free market reforms in 1978…..

                  So until someone tables a compelling argument for a controlled model that will work better than the mixed model, I can’t see a paradigm shift from the current model occurring.

                  • We may see mixed model slightly differently.

                    I’m not opposed to markets, as long as they are transparent, and externals are costed.
                    And that they are mixed with public (state as representative of NZ citizens) control and accountability (to the NZ public) of natural monopolies (core telecom infrastructure, power, water etc) and national resources (forestry, mining, fisheries et al.)

                    Additionally, that government spends or tax money in the most efficient way possible when viewed intergenerationally
                    – which means free high quality education
                    – it means paying beneficiaries so they have the funds to look for work (be able to rent a home that doesn’t make them sick, , good quality food so they remain healthy, good quality clothes so they don’t fail interviews on appearance, transport costs) and are also able to participate in their communities
                    – it means rivers that people can drink straight from
                    – it means replanting , Black Maire, Totara, Kauri and Rimu forests
                    – It means surveying and locating all fishery breeding grounds and ensuring those areas are not fished, as well as extending existing marine reserves.
                    – it means rooting out the corruption that exists in local councils and government institutions.

                    Also, the state as our representative and accountable to us, should be the only institution that can deprive a person of their liberty. Both Serco itself, and the privatisation of CYF’s services are an affront to democracy.

                    I see the role of the state is to ethically represent its citizens, and to do nation scale works (be it power infrastructure, or creating an institution to provide housing to the vulnerable and incapable) to ensure we all prosper.

                    • The lost sheep

                      All good aims by me Naturesong.

                      But I am not aware of any evidence that increased state control of the economy is the best way to further those aims while maintaining a healthy overall economy?

                      The problem always is ‘who is the state?’….

                    • The state is us. You and me, and our neighbours and friends and even that cranky old guy who lives just down from me. If it does not – fight to make it so. We’re supposed to live in a democracy, right?

                      It always comes back to comes back to governance and representation.

                      But, when you have a government committed to destroying, underfunding, or reorganising public intuitions into the ground, you will degrade the governance of those institutions.

                      When you outsource core govt. responsibilities, you remove the ability of the public to hold those institutions to account.

                      When you threaten public watchdogs with cutting their funding, you erode both their role in holding the govt. to account, but you also ensure that every other public institution knows not to speak out of turn.

                      When you turn a utility (power infrastructure, telecommunications infrastructures), and turn it into a company, you remove its mandate to act in the public good. You also then have to set up a regulatory agency, because now you cannot otherwise legally restrain them or direct them to act in concert with the nation’s power or telecommunications strategy.

                      When the majority of the media consists of fluff and propaganda, people will disengage.

                      When ever larger sections of the population no longer feel that either of the main parties represent them. And when the parties that do represent them are relentlessly stigmatised in the press, people will disengage.

                      When communities are atomised due to internal migration caused by poverty people feel helpless and disengage.

                      When the government messes with the stats (environment reports, crime stats etc) not only do they prevent themselves from constructing policy based on reality, they poison every debate on those subjects. And people disengage

                      As for increasing role of govt. in the economy, just look to the most successful places to live – hint, look north.
                      Conversely, turning over the economy to the banks and financial intuitions destroys economies, and the livelihoods of those who are plugged into those economies (GFC)

          • KJT 1.1.1.1.4

            “Free Market” = “strong legal system to enforce contracts”.

            The Grand Fisiani prize for cognitive dissonance to………………..

            GosMaa–aaN!

    • Kat 1.2

      Good points, and some research on the construction of the Hoover Dam in the US is a classic example of the ‘free market’ at work!

      John Key says history is a thing of the past! Such riveting intelligence appears to keep the 47% happy eh.

  2. Paul 2

    Excellent post.
    Thank you

  3. Gosman 3

    New Zealand has 30% of the World trade in Dairy because most Dairy is produced and sold locally whereas New Zealand exports most of our production. Whether this is a problem or not is debateable as the Total World Dairy market is many times larger than the international trade in Dairy produce.

    • mickysavage 3.1

      It is a large problem when prices crash and you have so much of your export earnings dependent on it.

      • Gosman 3.1.1

        Whether we have a significant proportion of the international trade in Dairy is largely irrelevant In that regard. What us more important is how much of the total amount of exports a single sector makes up. This could be a problem. However I don’t think it has changed massively over the past 10 to 15 years or if it has Dairy has simply replaced another sector which was similarly dominant.

        • Lanthanide 3.1.1.1

          Yip, the author sees the 30% figure and it sets off warning bells in their head (rightfully so), but then goes on to conflate that 30% figure as being a massive exposure for a small country like NZ. But what is relevant there is what the country’s exposure actually *is*, which is not the same as the 30% figure.

          I believe Bill English was saying diary only makes up 8% of our GDP – I have no idea if that is accurate or if Bill is twisting the figure in some way, but lets just take him at his word. So when prices go down, it is definitely a risk to the economy, but it’s nothing like the 30% figure that is trying to be used as a proxy.

      • Wayne 3.1.2

        New zealand has been dependent on a small rage of temperate pastoral exports for around 150 years. Obviously it is better to diversify, but this is and has been a real challenge for successive governments. But Labour has failed to prove their thesis of a manufacturing crisis, given the fact of increased manufactured exports.

        As far as I can see Meijer effectively wants New Zealand to rip up its WTO obligations, and become something like Cuba. An autarkic economy that does not export. Never going to be adopted, except by the Green Party and Mana.

        mickysavage, I thought from previous posts that you are a Labour Party activist. But obviously you are completely divorced from Labour Party policy if this is what you believe.

        If the Left (by that I mean Labour) are going to attack National’s economic record (not that easy when the Nats record is growth near the top of the OECD), they are going to have to do better than this.

        This item only speaks to those who believe in Mana and the Greens, and they ain’t going to change the govt any time soon.

        • The Murphey 3.1.2.1

          Stark reality will be ripping WTO obligations shreds in your lifetime Wayne

          Around the same time that the global financial frameworks have finished cannibalizing themselves

          Globalists such as yourself seem unable to accept that the future is local and it always has been

        • mickysavage 3.1.2.2

          Thanks Wayne. I remain a Labour activist. Medium term when oil starts to run out and we realise the limitations of the planet and the need to consume less and we realise (like Australia) that reliance on the export of one particular commodity will end in tears if we rely on it too much we may think that giving locals jobs and paying slightly more for stuff is not such a bad thing.

          I look forward to the day when we work less and improve ourselves more and consume less.

          And the growth rate? All smoke and mirrors. How can it be that disposable income went down during a time of such plentitude.

    • ghostwhowalksnz 3.2

      Most of the other countries dairy is for internal consumption, is mostly protected and not subject to world trade prices.

      Isnt it the whole point, WE ARE.

      I reckon if this continues for another 2 -3 years the taxpayers will be doing some sort of bailout of Fonterra.

      The consumers are doing that partly allready as there is NO FALL in local dairy prices for milk of milk products.

      There has been a big windfall for Fonterra in the drop in fuel prices, as of course they have a huge fleet which collects from every farm , every day during season.

      • Once was Tim 3.2.1

        They’re also being ‘bailed out’ already because the tax/rate payers are cleaning up the shit thats a by-product of the system – in rivers, on dusty roads, etc. I.e. we’re subsidising all that so-called free-market in which Fonterra operates.

        I like the bit in the above article where it’s acknowledged that NZ could be close to being self-sufficient (AS INDEED we could in terms of sustaining our population – food housing, etc.). We could do better with the accent on localism, then regionalism (our P.I neighbours and southern hemisphere neighbours.

        It’s just that ‘oil’ problem – which in itself is a gigantic fuckup of a cartel-driven bugger’s muddle.
        In some ways, the big crash might just be a solution

        • Gosman 3.2.1.1

          I believe the North Korean’s have a similar self sufficient ideology.

          Do you understand the basic principles behind free trade and why the majority of the mainstream political parties generally support freer trade?

          • Once was Tim 3.2.1.1.1

            “Do you understand the basic principles behind free trade and why the majority of the mainstream political parties generally support freer trade?”

            Do you understand the basic principles behind free trade and why the majority of the mainstream political parties who’ve signed up to the neo-liberal agenda and TINA, and any number of other ‘economic sages’ (such as yourself generally support freer trade?
            FIFY

            You’re either not very worldly are you Gozz, or you’re amongst the demographic that’s never ever experienced any other alternative. I suspect the latter.
            I also suspect you’d do well in China …. where democracy is viewed as a nice-to-have once we’ve got the economy where we want it. (One or two HR abuses, several executions, a risk-taker or two betting on the odds – so be it eh? The cost of doing bizz.
            But as I said – I suspect you’ve never ever actually EXPERIENCED anything other than what’s now become Norman Normal.
            Never mind …. you’re in bad company!. Your idol – the shaista knew SFA about the world – let alone our immediate region when he came to power. (He’s hardly heard of the Fijian antics other than there was this idyllic isle beneath whilst floyung ta Hwoieee.

            I’ll not engage with you further tho’ – no offense …. just that I know your primary motivation for commenting here is to wind those bloody lefties up as much as you can.
            You’re better to just keep attending morning prayers in a bid to solidify your ideology. Jamie-Lee’s got a dick to suck to keep him regular for all those msm engagements – how else is he going to cope with the cinder?

      • Lanthanide 3.2.2

        “The consumers are doing that partly allready as there is NO FALL in local dairy prices for milk of milk products.”

        Except Fonterra has already frozen prices for domestic consumption, going back to 2011 when it really got into the news (John Campbell doing piece on it week after week).

        So actually, the massive international price of $8.40 or whatever for milk solids was being subsidised by Fonterra. Now that prices have fallen, this subsidy is costing Fonterra a lot less money.

        Funny how quickly people forget the special deals that were done, and treat the status quo as if it is a free market, when it isn’t.

        http://www.stuff.co.nz/business/farming/4676611/Fonterra-freezes-milk-prices

        • ghostwhowalksnz 3.2.2.1

          You drank the cool-aid on that one.

          $10 mill , that must hurt ,NOT

          • Lanthanide 3.2.2.1.1

            Not sure what your point is. You claimed that consumers are bailing out Fonterra because domestic prices haven’t fallen despite the international price having fallen, when the situation is exactly the opposite.

  4. tracey 4

    Isn’t Australia still one of our biggest trading partners? Dollar parity will be killing exporters into the Aussie market. This isn’t a game of rugby … the country with the highest “score” doesn’t win if it is entirely dependent on exporting.

    • Gosman 4.1

      Luckily we have diversified the destinations for our exports significantly over the past 30 years to the extent that Australia is not as important as it once was.

      As for not relying entirely on exporting. I totally agree. The appreciating dollar will allow companies making goods for the New Zealand market to import raw materials at a much cheaper rate than they were doing before.

      • tracey 4.1.1

        sadly there are too few companies making goods for the NZ market to take “advantage” of the dollar against the aussie…

        We could import uranium, it would be way cheaper now, and make us some nuclear power plants, right Gosman?

        • Gosman 4.1.1.1

          Interesting diversion there. If you want to speculate what we could do with the higher dollar go right ahead. I have little interest in doing so myself.

          • Tracey 4.1.1.1.1

            then why did you speculate on what could be done with the higher dollar in the comment I replied to?

            “The appreciating dollar will allow companies making goods for the New Zealand market to import raw materials at a much cheaper rate than they were doing before.”

            and in anothe rpost

            “People going on Holidays or buying goods and services from Australia now have more money to spend on other items as well.”

            • Gosman 4.1.1.1.1.1

              That is hardly speculating about what they could do with a higher dollar. That is an actual outcome of a higher dollar. People who import raw materials for production will have cheaper inputs. No speculating involved.

      • Brendon Harre 4.1.2

        Gosman I call BS on your diversification claim. NZ in my lifetime has swapped dependence on the UK market with dependence on the Chinese and Australian markets. With Australia dependent on the Chinese market so really we are dependent on one market destination and one product -white gold. Like our gold mining forefathers there will be a boom and a bust……

        • Gosman 4.1.2.1

          Which if true would have meant the NO economy should be worse off than Australia about now. Do you know why Australia is doing so badly at the moment?

          • Brendon Harre 4.1.2.1.1

            Gosman stop trying to act like you are some sort of economic know it all when you demonstrate from your ignorant comments that you are a know it nothing sort of guy.

            Andrew Little spoke the truth in his radio clip, go and listen to him.

            Australia is doing badly because the price of iron ore that China is prepared to pay has dropped massively. Kiwis are no longer going to Aussie to work in the mines. New Zealand has a problem with inflating house prices and we have lost the migration vent to Australia, so it will get worse. This means our Reserve Bank cannot cut interest rates like other Reserve Banks in the world have done without inflating the housing bubble further and putting the whole NZ financial system in danger. This relatively high interest rate makes NZ attractive to foreign investors but most of this investment is going to the unproductive economy by further inflating real estate prices and the exchange rate.

            What part of this story is good? What is National doing about it?

            This story is not going to have a happy ending.

            • Gosman 4.1.2.1.1.1

              So if the reason why Australia is doing badly is because China is no longer buying their products why hasn’t our trade with both these batiks plummeted and caused our economy to crash? Remember it was you who argued that we are now dependent on them?

              • Brendon Harre

                Maybe it will crash soon, an economy cannot survive on inflating land prices in Auckland and insurance payouts in Christchurch forever.

                Gossman have you seen the dairy prices? Farmers can survive one season of low prices but not two or three…..

              • Stats NZ, Overseas Merchandise Trade: February 2015 – Media Release: Dairy drives fall in exports
                Milk powder, butter, and cheese exports led the fall, down 41 percent ($647 million) from February 2014, due to lower prices and a 10 percent fall in quantities exported. Over three-quarters of the drop in value was due to falling exports to China

              • Tracey

                Keep believing we are and will be immune from China’s downturn Gosman… which means you have to ignore one of the reasons behind the dropping dairy prices

                FOG

                • Gosman

                  I never claimed we were immune from any downturn in China. I’m not sure why you thought I did.

                  • Tracey

                    I’m sure you are not sure, but if you reread all your posts again you might see why people are attributing things to you that you don’t recall.

          • Tracey 4.1.2.1.2

            It’s like once you hit submit you don’t believe your comment exists if it becomes inconvenient to you…

            you wrote

            “to the extent that Australia is not as important as it once was.”

            BS, it is our number 2 trading partner by some margin, so Australia is as important as ever.

          • KJT 4.1.2.1.3

            Of course the wave of privatisations, union busting and wage cuts, and cuts in Government spending, have nothing to do with it.

      • Tracey 4.1.3

        Um, they are our second largest trading partner… there is fresh air between them and third…

        so your statement is nonsense.

  5. Gosman 5

    “So we have a situation where Australian holidays and goods are cheaper for Kiwis but Kiwi holidays and goods are more expensive for Australians. The upside is where?”

    Ummm… I thought it would be obvious. People going on Holidays or buying goods and services from Australia now have more money to spend on other items as well.

    Unless you are trying to argue that a viable economic solution is to constantly devalue the dollar against our trading partners.

    Are you aware that devaluing the dollar is essentially making everyone poorer on a comparative basis?

    • vto 5.1

      Do you notice the sun come up each day gosman? With the narrowness of your blinkers you may miss it sometimes…… you really cannot get yourself out of the paradigm your brain has been taught can you

      get a few more decades and you may begin to realise

    • Draco T Bastard 5.2

      The value of our dollar should reflect what we’re importing against what we’re exporting. We’ve been importing far more than we’ve been exporting for many years now and the value of our dollar should, but doesn’t, reflect that. After this amount of time of living well beyond our means the NZ$ should be about 0.30c US$ and dropping. That is actually the point of floating exchange rates.

      Keeping it high is just allowing us to continue spending beyond our means and thus putting us on course for having to sell our economy. Yes, that’s what selling state assets actually means – selling our economy. And doing that obviously makes us poorer.

      • Gosman 5.2.1

        Except you don’t take into account that the dollar is more than just a reflection of exports versus imports. You are also wrong about imports massively outweighing exports. Over the past few years we have actually posted merchandise trade surpluses in many years. It is the capital flows which lead to deficits on the capital account.

        • Draco T Bastard 5.2.1.1

          Over the past few years we have actually posted merchandise trade surpluses in many years.

          Has that been enough to offset the decades of trade deficits?

          It is the capital flows which lead to deficits on the capital account.

          So there’s more going out than coming in? Then the NZ$ should be going down and not up.

        • The Murphey 5.2.1.2

          Except you don’t take into account that the dollar is more than just a reflection of exports versus imports

          Q. What else is it a reflection of ?

    • Paul 5.3

      So your rich mates have cheaper shopping trips to Sydney and Melbourne.
      Great news, gossie.

      • Gosman 5.3.1

        Do you not know anyone who visits Australia then?

        • Skinny 5.3.1.1

          I try avoid visiting the rock, find the Aussie an unchof lot. Last time I visited the former penal colony I had to endure sexist & racial jokes, well actually took the offenders to task and gave one of the loud mouth thugs a crack sitting him on his fat arse. Chosen to give the place a wide berth.

          Sure have no regrets it was the right ethical call. I know nothing has changed too.

        • Tracey 5.3.1.2

          do you not know anyone who doesn’t go to Australia?

    • KJT 5.4

      So even more money goes overseas paid for by less goods and more borrowing.

      But that is OK, is it?

  6. Lanthanide 6

    “Some of the commentary is pretty naff, describing the situation in testosterone flavoured terms. The New Zealand dollar is “strengthening” while the Australian dollar is “weakening”. ”

    I think saying the words “strengthening” and “weakening” are somehow testosterone-related is sexist.

    Would you say steel is more masculine than wood, or would you just say it was stronger?

    • Kevin 6.1

      I am sick to death of Dollar reporting which treats it as some sort of game we are either winning or losing.

      • Lanthanide 6.1.1

        For the people whose full time job it is to trade, and also report on it, it pretty much is a game.

      • Olwyn 6.1.2

        +1, especially given that the implication is that we should take heart from it in the same way that some people take heart from sporting victories and Oscar wins. Rejoice, rejoice, because someone you don’t know can buy more other-currencies with their kiwi dollars, and more new shoes in Sydney.

      • Pat 6.1.3

        sadly Kevin regardless of who is “winning” the argument nobody is solving the problem..

  7. fisiani 7

    The Psychological impact of dollar parity would be like a major tsunami on both sides of the Tasman. The Australian government would most likely lose the next election being seen as an obvious economic failure.
    The opposite effect would take place in my country which only has one name and that is New Zealand.
    The New Zealand government would most likely win the next election being seen as as obviously an economic success.
    No amount of spin, canards, strawmen or lies can hold back this self evident truth.
    Andrew Little is a decent chap but can he stop a tsunami?
    Already plane loads of returning Kiwis and aspirational Aussies are touching down each week. they have faith in the masterful stewardship of Bill English.
    Economic growth is currently 3.5%. Wages are outstripping our low inflation. Housing affordability (ex Auckland) is improving. Christchurch is being rebuilt and NCEA grades are improving. Enjoy your brighter future brought to you by Honest John and the best government in our history.

    • mickysavage 7.1

      Why do you regard a high dollar as being evidence of economic success? Do you think exporters will agree? Do you think that young people who cannot buy a house think that the Government’s mix of policies is right?

      Despite the growth rate disposable income fell last year. And this is a good thing? NCEA grades are not improving. Eligibility for university plummeted.

      • Gosman 7.1.1

        The high dollar has little to do with housing costs and indeed could be a major disincentive for foreign investors buying up NZ property (Something I believe many lefties like you think should be restricted).

        • mickysavage 7.1.1.1

          Don’t agree. The flood of overseas money coming into the country to be invested in land, farms etc will be having an effect on the level of the dollar. And overseas interest rates are that low that they can spend ridiculous amounts on Auckland houses, rent them out and still make a profit.

          • tracey 7.1.1.1.1

            Can overseas based folks buying property here borrow from their own banks at low rates or do they have to borrow from the australian banks here in NZ?

            • Lanthanide 7.1.1.1.1.1

              They borrow from their own banks at low rates.

              But they have to take exchange-rate risk into consideration, which pretty much wipes out the ‘advantage’ of low interest rates – a 10% rise or fall in the exchange rate on your capital base will likely swamp the interest rate advantage 3 or 4 times over. But having low interest rates does allow you to get into the market into the first place (or a bigger slice in the market), where with higher rates you might not have been able to purchase anything at all.

            • Molly 7.1.1.1.1.2

              Mary Holm has an article from the NZ Herald on her website stating why they would be unlikely to do so, but it seems there is no legislation that prohibits it.

          • ghostwhowalksnz 7.1.1.1.2

            AS well Aussie investors are very aware we dont have capital gains tax.

            Even for second or holiday homes , Queenstown, parts of Auckland have absent Aussie owners

            • Macro 7.1.1.1.2.1

              And absent Chinese and Russian owners. My previous Auckland property was bought by Chinese people who viewed the property on google and to my knowledge have never set foot in NZ. It has been leased to NZers for the past 4 years.

          • Gosman 7.1.1.1.3

            With an appreciating currency the money they make when repatriating profits will be much lower.

        • tracey 7.1.1.2

          You mean lefties like these?

          “Many British politicians, architects and planners are now calling for taxes and other restrictions on foreign ownership, similar to those in Australia and elsewhere. Australia legislates that no sale can take place to overseas buyers unless they can show that their investment will add to existing housing stock.” guardian article
          http://blogs.vancouversun.com/2014/02/03/london-ready-to-restrict-foreign-ownership-will-vancouver/

          From April 2015, overseas investors will face a capital gains tax bill on any profits they make from UK property… David Cameron is a Stalinist he’s so left…

          or in Hong Kong

          http://www.wsj.com/articles/SB10001424052970203922804578080691384244814

          Singapore imposes a 10% tax on residential property purchases by foreigners, to stabilize the housing market. Bloody communists.

          • Gosman 7.1.1.2.1

            Are you stating that restrictions on foreign property purchases is not a left wing policy? Who imposes and enforces this restriction?

            • Draco T Bastard 7.1.1.2.1.1

              The hard RWNJ governments of the UK, US, Singapore…

              Some people, even if they are RWNJs, understand that local resources should only be for the use of local people.

              • Gosman

                That would suggest they are not as hard right as you would make out. Imposing restrictions of buying and selling is generally not a right wing policy.

                • felix

                  No true Scotsman would support such a policy.

                • Tracey

                  So any policy you dont agree with is by definition “leftie”. How convenient for your world view.

                  FOG

                  • Gosman

                    No. That is not what I stated at all.

                    • felix

                      You said it was only left-wing govts who have such policies.

                      Then someone pointed out some right-wing govts with said policies.

                      Then you said they can’t be real righties then.

                    • Gosman

                      No I didn’t. I stated it was a left wing policy. I didn’t state that right leaning governments haven’t implemented it. National has promised to help first home buyers get on the property ladder. That does not mean thus policy is a right leaning one.

                    • felix

                      Gosman, that’s a lie.

                      Draco said:

                      The hard RWNJ governments of the UK, US, Singapore…

                      Some people, even if they are RWNJs, understand that local resources should only be for the use of local people.

                      And you replied to that:

                      That would suggest they are not as hard right as you would make out.

                      Hard RWNJ govts. Not as hard right as you would make out.

                      Your words.

                    • Gosman

                      That doesn’t make them left leaning governments simply because they have adopted a left wing policy. My point is the government in question are far more centrist than Draco was making out with his RWNJ comments. How do you determine if a party is RWNJ or not?

                    • felix

                      Nice goalposts. Where did you find them?

                      You really have no shame at all to lie about what you said only a couple of comments above on the page.

                    • Tracey

                      Do you deliberately use words loosely so you can disassociate later or are you just not very aware of the power of words and careless use misleads?

                    • felix

                      I’m going with (a), Tracey.

          • Gosman 7.1.1.2.2

            Are you stating that restrictions on foreign property purchases is not a left wing policy? Who imposes and enforces this restriction?

            • Tracey 7.1.1.2.2.1

              David Cameron is a leftie? Howard was a leftie? Lee Kwan Yew was a leftie?

            • Wynston 7.1.1.2.2.2

              For at least some 40 years successive National governments supported the (then) Land Settlement Promotion and Land Acquisition Act 1949 which, amongst other things, restricted foreign ownership of land and the aggregation of economic farming properties by owners of an economic property.

      • tracey 7.1.2

        High dollar was not regarded by the National Party as an economic success between 1999 and 2008. Funny that.

        • Gosman 7.1.2.1

          Take it up with the National party then.

        • Phil 7.1.2.2

          The New Zealand Dollar was not high during all this period. In fact, it hit historic lows in the ’00, ’01, and ’02 period.

          • Tracey 7.1.2.2.1

            I know that Phil… I was referring to the high dollar being evil when Labour is in and not when National is in. From 99 to 02 National as taking credit fo rit being low due to their policies.

            • Phil 7.1.2.2.1.1

              I am 100% certain that both major parties are equally guilty of loudly proclaiming the success of their policies when the dollar is both very high and very low, as well as very average.

    • tracey 7.2

      HIlarious. There you go again, using slogans and mantras to mock the stupidity and emptiness of this PM and his government. Well done fisi.

    • Paul 7.3

      You obviously didn’t read the article featured in the post.

      • Tracey 7.3.1

        Fisi is big on NCEA because from his own experience he understands the disadvantage of poor reading skills.

    • ghostwhowalksnz 7.4

      NCEA grades improving ?

      You should read this Listener story- All Shall Pass

      http://www.listener.co.nz/current-affairs/education/all-shall-pass/

      Some excerpts

      “He and other sector leaders are concerned that the pressure to deliver high pass rates will see schools shunt more students into vocational courses – where they can pick up credits for making coffee or riding a motorbike on flat terrain.”

      “Our results in international benchmarking tests have been “stagnant or declining” in the past decade, according to an internal Ministry of Education document. And our performance in the highly respected PISA tests has been flat since they began in 2000.

      And so many NCEA students are getting such good grades that NZQA has had to step in and raise the bar for University Entrance.

  8. Gosman 8

    This Meijer fellow seems to be advocating some sort of return to an import substitution policy which we followed pre 1984.

    If this is indeed something that should be pushed why don’t I see Labour and the Greens arguing that we should ditch our Free Trade agreement with places like China and impose tarrifs and restrictions on trading volumes?

    Are lefties here going to be pushing for them to adopt such policies? Please say yes. Please.

    • vto 8.1

      you’re looking in the wrong direction gosman

    • Draco T Bastard 8.2

      If this is indeed something that should be pushed why don’t I see Labour and the Greens arguing that we should ditch our Free Trade agreement with places like China and impose tarrifs and restrictions on trading volumes?

      The only conditions that need to apply are:

      1. The NZ$ is correctly valued against other currencies
      2. That products are comparatively priced at the gate, i.e, same minimum wage, working conditions and environmental protections

      Those alone would, after the years of living well beyond our means, push import substitution.

      The problem, of course, is that the market isn’t allowed to function as it should do. We allow people offshore to buy our land and businesses, our exchange rate isn’t set by trade balance but by our high interest rates and speculation and out FTAs don’t enforce similar conditions. All of this undermines the operation of the market rewarding unethical and often corrupt behaviour as well as the hollowing out of our own economy which then gets sold off to rich offshore owners.

    • ghostwhowalksnz 8.3

      Wether we can do it now , probably impossible:

      But I worked from after the war till 1984.

      People like Key benefited as his unskilled Mum could get a state house easily, and could get part time work to suit.

      Rodney Hides father had a rural transport business which was protected from local competition ( as were pubs, movie theatres and heaps of others)

      Michael Lhaws, parents were unskilled but easily found work in Wanganui

      Bill Englishs family sheep farm in Dipton would have benefited from Muldoons payments for just having sheep – probably paid for his boarding at St Pats

      • Gosman 8.3.1

        Are you advocating that we should favour unskilled work?

        • vto 8.3.1.1

          To stop yourself being snookered you are supposed to sink the red balls first. Useless

        • Tracey 8.3.1.2

          Bill English quite openly said our competitive edge was low wages, that tends to be the case in an unskilled economy. That is indeed what this Goverment has worked toward. You voted for their prop Gosman, so don’t try and disengage from the consequences.

          • Gosman 8.3.1.2.1

            Except the consequences seems to be a closing of the wage gap with Australia and a much better performing economy.

            • Tracey 8.3.1.2.1.1

              Australia’s economy is performing badly gosman, that doesn’t mean ours is tickety-boo. Being better than awful doesn’t mean good.

    • Murray Simmonds 8.4

      Getting a bit desperate for a sane, cohesive argument to put eh Ghostman?

      Thank you Micky Savage for the links to some of the most sane, insightful analysis of NZ’s place (like it or not) in the world economy. The analysis provided by Meijer is absolutely spot on in my opinion.

      ” . . . . .a Government that refuses to even acknowledge that structurally we are unable to deal with these forces . . . .”

      That is the “quote of the day!”

      We have an ostrich for a prime minister. But an ostrich that is far more dangerous to this country than the other members of its species.

    • Macro 8.5

      You might recall (but being such and ignoramus I’m sure you can’t) – that it was indeed the Labour Govt that signed the FT deal with China in the first place. So they would highly unlikely to want to undo it now would they?
      You might also recall that (but being such and ignoramus I’m sure you can’t) that the Greens were opposed to the signing of the deal, because they could see that all it guaranteed was an erosion of working conditions in NZ and the importation of cheap products and unfair trade. The Greens are not opposed to Trade per se – just so long as it is fair trade.
      Free Trade with a large trading partner, with poor working conditions is irresponsible to the people of the smaller partner, because the larger partner simply imposes its conditions on the smaller. It is simply naive to think otherwise.

  9. Draco T Bastard 9

    If only we had a Government with a plan for our economy.

    The government does have a plan for our economy. That plan is to sell it off to the rich and turn the rest of us into serfs.

  10. fisiani 10

    NCEA grades are improving. They have been improving every year since they came in Check your facts.
    University enrolments of those who will likely get a degree have not dropped at all. Eligibility for university tightened and the entry bar was raised. Do you not understand that plummeted means that it dropped? Check your facts.
    It really does not matter whether I or you or any poster here regard a high dollar as evidence of economic success. That is and will always be a political and economic truism that will be accepted by 2,000,000 voters here and by many more in Australia.

    • mickysavage 10.1

      So why has China actively kept its exchange rate low for so long and are you saying China is a failure? And the NZ dollar is falling against the US dollar. According to your analysis this is a sign of failure.

      • fisiani 10.1.1

        Read this again slowly and carefully.
        It really does not matter whether I or you or any poster here regard a high dollar as evidence of economic success. That is and will always be a political and economic truism that will be accepted by 2,000,000 voters here and by many more in Australia.
        Now go and check your facts.

        • mickysavage 10.1.1.1

          So perception is more important than reality.

          • fisiani 10.1.1.1.1

            The voters perception is more real than your reality. I of course accept that a higher dollar comes with some problems as the Swiss and Norwegian people know well.
            Dollar parity with Australia, if it happens, will be a psychological TSUNAMI of epic proportions. Surely you must accept that?

          • vto 10.1.1.1.2

            Not quite micky. What is more important is the personal lives of fisiani and his suckee John Key. They will rort any policy to remain in power even if it means shitting on their neighbours. This is the mindset of the right wing.

          • tracey 10.1.1.1.3

            it is to Fisi, cos without it John Key is not “Honest” and he would be plummeted into a psychological tsunami all of his own.

          • les 10.1.1.1.4

            if it wasn’t this govt would have been long gone.

      • tracey 10.1.2

        This government is happy with the high dollar cos it gives them the excuse to tip, shit and bust on working conditions and payments.

      • Gosman 10.1.3

        You make the assumption that having an undervalued exchange rate policy such as China is a positive thing.

        • mickysavage 10.1.3.1

          I don’t but they do.

          This is from a Paul Krugman column in 2010 (http://www.nytimes.com/2010/03/15/opinion/15krugman.html)

          “Tensions are rising over Chinese economic policy, and rightly so: China’s policy of keeping its currency, the renminbi, undervalued has become a significant drag on global economic recovery. Something must be done.

          To give you a sense of the problem: Widespread complaints that China was manipulating its currency — selling renminbi and buying foreign currencies, so as to keep the renminbi weak and China’s exports artificially competitive — began around 2003. At that point China was adding about $10 billion a month to its reserves, and in 2003 it ran an overall surplus on its current account — a broad measure of the trade balance — of $46 billion.

          Today, China is adding more than $30 billion a month to its $2.4 trillion hoard of reserves. The International Monetary Fund expects China to have a 2010 current surplus of more than $450 billion — 10 times the 2003 figure. This is the most distortionary exchange rate policy any major nation has ever followed.

          And it’s a policy that seriously damages the rest of the world. Most of the world’s large economies are stuck in a liquidity trap — deeply depressed, but unable to generate a recovery by cutting interest rates because the relevant rates are already near zero. China, by engineering an unwarranted trade surplus, is in effect imposing an anti-stimulus on these economies, which they can’t offset.”

          The situation has not changed.

          • Gosman 10.1.3.1.1

            That is quite correct. Artificially keeping the Yuan low is seriously damaging. You have essentially provided the evidence for the point i was making. Thank you for that.

            • mickysavage 10.1.3.1.1.1

              It is damaging to other economies but the Chinese seem to be doing very well. Countries are allowed to look after their interests.

              • Gosman

                No. What are the Chinese having to do with all the dollars they have accumulated? They essentially fund consumption in places like the US. They are propping up Western living standards instead of encouraging greater living standards for Chinese people.

                • Draco T Bastard

                  And yet you’ve been, throughout this thread, pushing for us to maintain an artificially high NZ$ which propagates the same problems as having an artificially low currency.

                  • Gosman

                    You argue it is artificially high not I

                    • Draco T Bastard

                      You’re arguing that it should remain high despite the fact that we’ve been living beyond our means.

                    • Gosman

                      I’m not advocating for any specific level for the NZ dollar.

                    • Draco T Bastard

                      Yes you are:

                      Are you aware that devaluing the dollar is essentially making everyone poorer on a comparative basis?

                      You’re advocating for it to remain high.

                    • Gosman

                      No I’m not. Sometime make everyone poorer is the only option an economy has to attempt to grow it’s way out of a hole.

                • Murray Simmonds

                  What total and utter bullshit.

                  You mean employment opportunities created in China by their economic policy don’t benefit the Chinese?

                  in what way is fueling debt-driven consumption in the USA actually BAD for the Chinese economy?

                  Go walk the streets of Shanghai for a day or two as I did not so long back. You’ll soon find that your analysis is completely out of touch with reality.

                  • Draco T Bastard

                    Gosman himself is completely out of touch with reality.

                    • Gosman

                      Stares the person who wants to turn us in to the South Pacific version of North Korea. Not one mainstream political party advocates policies that you support Draco yet somehow you think it us I who has lost touch with reality.

      • Gosman 10.1.4

        You make the assumption that having an undervalued exchange rate policy such as China is a positive thing.

        • Tracey 10.1.4.1

          No I don’t.

          I conclude from interacting with you over the months and recently that you will criticise anything not done by the Right (to make yourself feel superior whether you agree with it or not). You will then claim to not agree with the Right either (as though that confirms in your mind that you must be a rational, non emotional thinker who can glean the true picture of everything because you are unbiased). Simultaneously claiming you are not responsible for anything the Right does that you don’t agree with because you voted for ACT, while simultaneously saying that when you voted ACT you knew they would not stand by any of their principles for which you voted and would cave to National’s policies.

          I have no doubt you know more about economics than I do. I know next to nothing. BUT I also know that people like Marilyn Waring know more about economics than you do.

    • tracey 10.2

      “NCEA grades are improving”

      And yet your critical thinking has deteriorated, or never evolved.

      Do you understand that in times of recession and higher unemployment local enrolments in tertiary study rise? Yes, they rise, not cos the economy is doing well, but cos it isn’t.

    • ghostwhowalksnz 10.3

      The grades are just make up standards.

      http://www.listener.co.nz/current-affairs/education/all-shall-pass/
      “Actually, there are no exams in the vocational courses, and only one in every four NCEA results last year came from an exam: many students tick off all their credits before exam season, and there’s at least one school where kids do no exams at all.)”

      Achievement in coffee making? Way to go

      • Gosman 10.3.1

        Who introduced NCEA again?

        • Draco T Bastard 10.3.1.1

          IIRC, it was National and it was a mess. The 5th Labour led government were starting to fix it up when we got the 5th National government.

        • Naturesong 10.3.1.2

          National is responsible for the NCEA

          Labour had just finished upgrading the National curriculum, which was better suited to NCEA when they got voted out of power in 2008.

          National threw it in the bin – 7 years of evidence, research and practitioner input to create a curriculum appropriate to NZ.
          It was replaced by National Standards – which has been a proven failure in both the UK, and US

          If you want a rundown of the kicking National has given schools and teachers in the last 7 years, check Local Bodies: The Destruction of New Zealand’s Public Education System

          • Tracey 10.3.1.2.1

            national curriculum was one of mallards successes imo. it would have prepared our kids for their world far better than the three r’s of the 1950’s this govt drives.

        • ghostwhowalksnz 10.3.1.3

          It was Bill English, as education minster in the Bolger shipley years who started the indroduction

          Thanks for asking.

    • DoublePlusGood 10.4

      “NCEA grades are improving” – sure, because they keep making it so more people pass. Looks good on reports. However, it does not look good when those people show up at university and NCEA has meant they haven’t learnt a damn thing. There are so many 1st year students at uni that really need to go back and learn what they were supposed to learn in NCEA levels 1-3 – if only to save the sanity of those who have to mark their work.

  11. Paul 11

    This post seems to have attracted particular attention from our rwnjs.
    Must be close to the mark then.

    • tracey 11.1

      it does seem to have resulted in some ideiological mantras.

      High dollar under Labour = sign of economic mismanagement (Key and English)
      High Dollar under National = prosperity and good times and a psychological tsunami of economic achievements…

      • Gosman 11.1.1

        Who here has argued that a high dollar under Labour was a bad thing?

        • Tracey 11.1.1.1

          Other than Bill Englisha nd John key you mean? I know they are not “here”, ut they are all around us FOGGY

    • Gosman 11.2

      Or maybe this subject enables right wingers to point out flmadsive aws and holes in left wing thinking hence why it is a popular post. I often enjoy posting on economic threads such as this because many leftists have little understanding of the subject and get themselves in a muddle trying to discuss the subject.

      • vto 11.2.1

        but you are already in a muddle on several mini-threads on this post already gosman – see above

        you simply ignore and walk away when snookered. we have all been subjected to your walking away when lost

        • Gosman 11.2.1.1

          Where has anyone snookered me? Certainly not you with your rather pathetic attempt to equate free market concepts with what is happening in Somalia or trying to argue that the free market fails due to what happened in Pike river and with Leakey homes.

          • vto 11.2.1.1.1

            see above

            “Certainly not you with your rather pathetic attempt to equate free narket concepts with what is happening in Somalia” …. explained as mirroring your typical raising of zimbabawe Venezuela cuba etc

            ” or trying to argue that the free market fails due to what happened in Pike river and with Leakey homes” …… absolutely free market failures

            have a crack at warrants of fitness for vehicles gosman – go on. Self-regulation works – give it a crack. Allow everyone to issue their own wof’s. It is what your lot are trying to do with heavy trucking

            • Gosman 11.2.1.1.1.1

              What happens in Venezuela is relevant to the left right argument because the policies being followed there are generally regarded by both sides as being left leaning. You are trying to argue that Somalia is a country following right leaning policies. I have shown why that is nonsense.

              • mickysavage

                Gossie I am struggling to work out what you have shown. You are all over the place with your arguments although your conclusion always seems to conclude to “the left is evil”.

              • KJT

                And Mexico and Columbia are right leaning.

                Both failing in many ways, but of course “they”: are following the approved Mantra’s of the “free market” and “free trade” so their almost total dysfunction is ignored.

                While Venezuelan success in reducing poverty, and adding to literacy is of course, not noted.

          • Brendon Harre 11.2.1.1.2

            Gosman I snookered you too. You have no answer for National’s failure to diversify the economy.

            I also note that Andrew Little also said in the radio clip that National had dropped its export target of 40% and that under National instead of exports moving to towards 40% they had in fact dropped to under 30%.

            National have no plan…. It is just arrogance and spin. People are beginning to see that John Key is an emperor without clothes…..

            Steven Joyce dropping the export target is also discussed in interest.co.nz
            http://www.interest.co.nz/currencies/74844/wake-dairy-price-slump-economic-development-minister-says-govt-may-reduce-target-li

            • Gosman 11.2.1.1.2.1

              First off you never provided any evidence suggesting the economy has not diversified. Second why is this the job of government?

              • Brendon Harre

                Gosman you were the one who claimed the economy had diversified. Prove it, give us some facts instead of the usual spin.

                Secondly the government gave itself the target of lifting exports to 40% of GDP so they seemed to think that was something they could assist with.

                Of course this National led government administration have flip-flopped on this diversification/lifting exports issue by removing the target. Again proving they are all spin and arrogance…….

      • Draco T Bastard 11.2.2

        Or maybe this subject enables right wingers to point out flmadsive aws and holes in left wing thinking hence why it is a popular post.

        Actually, as Tracey points out, what it’s done is highlight the vast hypocrisy of the RWNJ who hold that anything that happens under National is good and that anything the left do is bad.

        • Gosman 11.2.2.1

          Who here has argued that a high dollar under Labour was a bad thing?

          • Draco T Bastard 11.2.2.1.1

            http://www.johncarter.co.nz/columnarchive_2007.htm

            Then, last week, in response to the jump in interest rates, the NZ dollar soared and the Reserve Bank intervened in the currency market for the first time since 1985. The high interest rates, caused by high inflation, forced the dollar to unsustainably high levels.

            This is causing manufacturers like Fisher & Paykel, Skellerup and Click Clack to lay off staff. It is causing a great deal of pain for our sheep and beef farmers. Small exporters are struggling to stay afloat, and it’s these exporters who earn foreign currency that pay for our imports – our flat-screen TVs, cars, ipods and petrol.

            So, that would be National and National supporters who parrot whatever National says.

            And nobody said anything about “here” but about National saying that the high dollar was bad during the last Labour led government.

            • Gosman 11.2.2.1.1.1

              Take it up with the National party and National party supporters then.

              • Draco T Bastard

                We are.

              • Tracey

                As someone who votes for ACT, knowing it will never stand for its own principles if they conflict with national, you are a National supporter.

                FOG thinking

                • ropata

                  I had Goosie pegged as a loony Libz voter, their slogan: “all for me and none for you”

                  He has the requisite superiority complex.

          • lprent 11.2.2.1.2

            Me. In fact I’d suggest that you’d be hard pressed to find someone here who argued that it was a good thing. It causes significiant issues with balance of payments and exporting. Both too high and too low are a problem.

            What is annoying is that the currency level in NZ has nothing much to do with underlying economic realities. It has more to do with speculation in ‘safe’ currencies where there are bubbles to make money from. Like our ridiculous property market.

            • Gosman 11.2.2.1.2.1

              The problem being the definition of too high or too low is a value judgement. People might like to think there is some sort of ‘natural’ level that the dollar should be at. Unfortunately government isn’t very good at identifying and maintaining it.

              • lprent

                Agreed. But you didn’t deal with my main point, the differences in the tax frameworks between countries and the profit gained from funding the untaxed profit from property investments.

                This is the main thing that makes the housing bubble so good to invest in relative to any other investment, and causes the speculative bubble that impacts on our currency.

                If we moved more in line with other safe countries and had a capital gains tax, it’d trim that speculative bubble over time. That means that the government is currently interfering in the international trade in our currency because they provide an incentive for unwarranted speculation.

                • The Chairman

                  @ Iprent

                  Property investors in New Zealand have largely shunned the market as an alternative. A CGT won’t change that sentiment.

                  As long as banks keep favoring property, investors will continue to invest.

                  Property taxes haven’t prevented property speculation overseas and Labour know this, thus expect the tax to be a revenue source.

                  Areas of high property demand (the very areas of concern) give scope for the tax to be passed on, defeating the objective while exacerbating the problem.

                  Alternatively, a CGT may result in investors turning over more properties to offset the burden.

                  When all are taken into account, a CGT will therefore have little to no significant impact on property speculation while running the risk of exacerbating the problem.

                  Which is why Labour need to reconsider it.

                  • ropata

                    A wealth tax and a tougher rates regime on McMansions within 10 km of the CBD should slow down the bubble mania.

                    Simple if the pollies had the balls to create the right incentives (toward higher density and affordability). But the happily ensconced monied class will never let that happen until the social fabric starts to tear and riots and pillaging break out on the streets

                  • lprent

                    As long as banks keep favoring property, investors will continue to invest.

                    Sure, banks are risk averse and favour tangible assets. That is why they prefer to lend on existing property and are damn hard to extract investment money for building new properties. That is the main reason why Auckland isn’t keeping up with the production of bedrooms to fit demand. A new build carries liability risks for things like leaky buildings and the banks (and councils) got heavily burnt by that over the last decade. And it is taxed with GST.

                    But I think you missed my point.

                    Of course it won’t change speculators behaviour. That is no different from the gold market where something that is largely useless gets bid up to inflated levels almost entirely on speculation.

                    The property speculation in NZ is excessive and has a lot of downstream effects on our economy like our relative currency. The retail speculator who are the ones buying houses, like banks, tend to prefer low risk as well. So they don’t favour new properties where their money would be useful. They also don’t like the GST that they get on purchasing new properties.

                    A CGT in NZ will, in an international marketplace, help to share their speculative hysteria with other countries more, thereby reducing the impact of it on NZ. It becomes more likely that they will buy in other markets.

                    If nothing else, I think that this will tend to concentrate high property values into the areas of real shortages, largely Auckland and Tauranga now that Christchurch is settling down,

                    In my view, Labour and the Greens should extend their respective CGT policies, to include all house transactions. They should also set it at a similar level to GST. This will have the effect of stopping people gaming the tax. It will also redirect banks and investors who like property and want to invest here into looking at new construction.

                    But I am a well known extremist on having a level playing field on taxation to block speculative loopholes.

                    • The Chairman

                      Indeed, property speculation in NZ is excessive and has a negative downstream impact on our economy.

                      However, there are more effective ways (in which a CGT can’t achieve) to significantly slow it down. Thus, to avert the negative downstream impact, are more vital pursuing.

                      The lack of a comprehensive CGT is not the only thing driving offshore investment here.

                      The ongoing housing shortage, thus high demand, reduces the risk, largely ensuring good and quick returns (for some years to come) is also a draw-card.

                      There is also the attractiveness of the lack of restrictions placed on offshore investors here. For example, offshore investors aren’t limited to only buying new homes, as in Australia.

                      In the UK, tax deductions are ring-fenced from other income. This should be adopted here.

                      Therefore, while a CGT may level the international field a little, it is still only one consideration in the many investors make.

                      Thus, the overall impact of a CGT on offshore investors would be insufficient to stem off large numbers.

                      Moreover, there are also more effective ways to curb offshore investment.

                      If GST is putting investors off buying new homes, adding a comprehensive CGT on top of that won’t encourage them. Running the risk of exacerbating the problem.

                      Politically, Labour would chance another disaster at the polling booths if they run with this again.

                      Moreover, extending it to include all house transactions (including the family home) would most certainly keep Labour out of office for another term.

                      Your extremism seems to be clouding your perspective in this matter.

                • Gosman

                  Except both the UK and Australia have policies along those lines and it hasn’t slowed the proerty bubble in their main centers.

              • Tracey

                Don’t you mean reserve bank with really strong nudges from John

              • Draco T Bastard

                Unfortunately government isn’t very good at identifying and maintaining it.

                And the private speculators, who are the ones that presently set our dollar’s exchange rate, are far worse.

                As I say, what we actually need is a rate determined by a formula that takes in our Terms of Trade. It’ll be far more stable, it’ll be connected to reality and neither the government nor the speculators will be able to game it.

      • ghostwhowalksnz 11.2.3

        While to some extent there is faulty economic thinking, you are blinded by your preconceptions too.

        During the Clark government, you lot told us that the mining was such a little part of the economy, it couldnt possibly be why they were ahead.

        Manipulating the currency- more common than you think. Certainly China does it.

        We have this bizarre attraction to speculators playing with NZD futures, they make it far more commonly speculated than the size of our trade.

        They dont even buy or sell real NZD, as that takes real money. They play with futures as they can do it with a small % of the contracts they buy.

      • Tracey 11.2.4

        Including David Cameron…

        you have displayed quite a lot fogged up thinking yourself, but being smug and overly confidant of your own ability can do that to ya.

        FOG

  12. The Chairman 12

    Andrew Little says the strengthening NZ dollar is a result of a weakening Australian economy.

    He then says the Reserve Bank can’t act to lower interest rates as it would lead to a larger problem in our housing market.

    He went on to say we need the Reserve Bank Act to have a broader mandate.

    How would giving the Reserve Bank Act a broader mandate correct the problem of a weakening Australian economy and lower interest rates creating a larger problem in our housing market?

    Thoughts?

    • Draco T Bastard 12.1

      It wouldn’t.

      The value of the NZ$ should be set by via the Terms of Trade and that should be cumulative. As it stands that means that our dollar should be dropping. Instead it’s set by speculation on high interest rates compared to the rest of the world which means that it’s going up.

      As for the housing problem that also needs rules around who can purchase land and houses in NZ. Or, to be more precise, offshore ownership needs to be banned. The same also applies to businesses and farms. Allowing offshore people to buy land in NZ prices locals out of the market.

      • vto 12.1.1

        “Allowing offshore people to buy land in NZ prices locals out of the market.”

        No it doesn’t. Bill English said so. 300million north americans and 700 million Europeans and Russians and 1,500 million Chinese and probably 2,000 million others from other parts of the globe have no effect on our 4 million-size market here………

        This is what Bill English says so it must be right.

        I hate liars and cheats. They are scum

      • The Chairman 12.1.2

        Thanks, Draco, but that isn’t what Little is saying, thus doesn’t answer the question.

        Not a bad proposal though.

        I would add tighter LVR restrictions on investors while also removing their ability to leverage off equity. That would slowdown local speculation in the housing market.

        Nevertheless, people want to know how Labour plan to correct this?

  13. Ilargi 13

    Glad to see you guys read and discuss my article.

    • Ilargi 13.1

      Any questions, do let me know.

      • Gosman 13.1.1

        Are you advocating for a return to tariffs and other import restrictions to facilitate import substitution?

        • Ilargi 13.1.1.1

          I’m advocating for every country and/or society to provide for their basic needs – food, water, clothing, shelter – as close to home as possible. This is always a healthy idea, since it decreases dependency on other nations and wasteful (in more ways than one) transport lines, but it also strengthens your economy and leaves far fewer people unemployed.

          It becomes paramount when you realize how bad the coming economic collapse will be, namely so bad that things will stop arriving at your shores. The world of finance is in much worse shape than it was in 2008. This merely remains hidden temporarily behind the tens of trillions in central banks stimulus issued in the intervening period. It should be obvious that this can’t last. US GDP growth was 0% in Q1 2015, Europe is worse, Japan is on its way back to feudalism, China is nowhere near the 7% it claims it will attain, and I have no confidence in that 3.3% your government published.

          Whether you would achieve the buy New Zealand policy through tariffs or through other measures is a later issue. You first have to explain to people why it is the by far best approach from a purely economic point of view. If you can get them to understand that, tariffs may not even be needed.

        • Skinny 13.1.1.2

          Clearly your not in the slightest interested in what is being said Gosman.

          New Zealand needs to be thinking of our future. We are fortunate to be in a strong position to becoming self sufficient as a nation. IIargi’s article clearly alludes the problem is our country is being run by a former money trader who is more aligned with corporate America.

          We have everything we need to isolate ourselves from a deteriorating World around us. If Key was in the least bit of a patriotic Kiwi he would put an immediate holt to selling our land off to rich foreigners. Large chunks of our premium land is moving off shore. This must be stopped before its too late.

          • Gosman 13.1.1.2.1

            I’d love to see large chunks of land being exported. Reminds me of a Goodies episode where they moved the UK next to Norway by tying ropes to the land and towing it.

            • ghostwhowalksnz 13.1.1.2.1.1

              Ask the Irish before WW1 back to around the time of potato famine, how absentee landlords are no problem as they cant tow the land away

    • lprent 13.2

      I suspect there will be a very active discussion 🙂

  14. peterh 14

    30 Years ago new Zealanders thought that those, who thought a high NZ dollar, was good for new Zealand were DIPSTICKS. and now we have dipsticks everywhere even a couple on this site, and on all our radio stations

    • Gosman 14.1

      Incorrect. In fact a significant section of society wanted to keep the currency artificially high.

      • peterh 14.1.1

        Your right. and we called them dipsticks. I was in the export sector then, where were you

        • Gosman 14.1.1.1

          You regarded Muldoon as a dipstick? Interesting. Did you ever call that to his face? Does this mean you supported the floating of the dollar?

  15. Brendon Harre 15

    Reposted from Interest.co.nz as it is so good.

    by itsme | 07 Apr 15, 9:38am
    We are living in a fools paradise. Because house prices are out of control in Auckland, people feel much wealthier and spend more money on consumer goods.
    One of the main reasons house prices are going up in Auckland is because the Chinese cannot get a good return on their money in China and are pouring money into New Zealand’s farms and Auckland’s houses. They cannot do this in other countries due to sensible Government regulations elsewhere.
    This is creating a demand for NZ dollars.
    If it was not for this, our dollar would have dropped against the $US as our biggest export, milk powder, has gone the same way as iron ore.
    When house prices correct / crash, our dollar will fall dramatically. This Chinese money is “hot’ money, meaning it will leave our shores as soon as the Chinese can get a better return elsewhere.
    http://www.interest.co.nz/opinion/74841/bernard-hickey-looks-how-slide-chinas-iron-ore-demand-making-holidays-gold-coast-cheap#comment-807647

  16. The Murphey 16

    Annual Global GDP – $80tn +/-

    Annual Global FX Trading – $1800tn +/-

    • Gosman 16.1

      So?

      • The Murphey 16.1.1

        Except you don’t take into account that the dollar is more than just a reflection of exports versus imports

        Q. What else is it a reflection of ?

        • Gosman 16.1.1.1

          Capital flows and supply and demand.

          • The Murphey 16.1.1.1.1

            Took you a long time to come up with that

            Q. Where does the delta in the the values global annual fx trading and global gdp come from ?

            Q. How does the delta represent ‘capital flows ~ supply and demand’ ?

      • vto 16.1.2

        ha ha ha so funny

        you that is

    • Phil 16.2

      Keep in mind that GDP measures how much was produced in a year. It’s a ‘flow’ measure. It’s not “how much is the world worth, in dollar terms?” it’s more akin to “how much extra is the world worth this year compared to last year?”

      This means GDP not a particularly useful metric for comparing with FX trade volume; FX trading is more or less underpinned by the value of assets and the money supply. – i.e. the value of what the world is “worth”, or all previous years of GDP combined.

      • The Murphey 16.2.1

        Thanks Phil I am aware of the representations

        FX has divorced itself from physical reality using ________ ?

        I’m sure Gosman is appreciative of the extra information

        • Phil 16.2.1.1

          The NZ exchange rate hasn’t divorced itself from anything, physical reality or otherwise.

          My personal view is that the Kiwi dollar is pretty much where it should be. We have a comparatively healthy economy and the outlook here is much stronger than our trading partners.

          • The Murphey 16.2.1.1.1

            I should have been more detailed

            The FX reference was the FX Market as a whole which in my opinion has completely divorced itself with the entire financial markets framework from physical reality in almost every imaginable way

            Q. What would you base your perspective around the NZD on ?

            • Phil 16.2.1.1.1.1

              Strip back all the rhetoric, hubris, and political grandstanding on the exchange rate. Think about what the core attributes of the “ideal” free market are, as described in Econ 101. The market for foreign exchange does as good a job as any market ever will at approximating those key attributes.

              * There is (figuratively) an unlimited number of buyers and sellers who can freely choose to, or choose not to, trade any volume they want to at the prevailing price.
              * No single buyer or seller has price setting power in a meaningful way.
              * The product being traded is able to be substituted perfectly – my $1NZD is exactly the same as your $1NZD.
              * All the relevant information from which we can obtain value (this is, in my opinion, the single most important factor for the efficient running of any market) is freely available to all participants! We can see historic trading patterns and volumes. We all have access to the same information on GDP, inflation, forecasts etc at our fingertips. The billions of barrels of ink spilled writing about and analyzing exchange rates is freely shared by all and sundry.

              From that starting point, it’s hard to say that a free floating exchange rate is ever not at equilibrium. If we think the current level of the NZD is unjustified, it’s probably an indicator that we need to look at the fundamental drivers in more detail.

              So why is the NZD where it is?

              Like I said before, we’ve got a comparatively healthy economy at the moment, and the outlook for the rest of the world is still not great.
              Additionally, our terms of trade – the price we get for exports vs the price we pay for imports – are just coming off the best they’ve been in at least 40 years.
              We’ve also got low and (more importantly) relatively stable levels of inflation. The major global economies are going to have to find a way out of quantitative easing at some point, and inflation is looking like the probable means of doing that.

              • The Murphey

                The market for foreign exchange does as good a job as any market ever will at approximating those key attributes

                Q. Can you identify the problem with this statement ?

                Q. Do you know which mechanisms have contributed to the split of foreign exchange rates from economic and market ‘reality’ ?

                • Phil

                  Q. Can you identify the problem with this statement ?

                  I can identify when someone has a prejudice that gets in the way of their being able to have a debate. Does that count?
                  😛

                  Seriously though, we (i.e. economists) have a picture of what the ‘perfect’ free market looks like. This is exactly the same as when left-of-centre thinkers picture what the ‘perfect’ centrally planned or regulated system looks like.

                  The ForEx market is basically as good as it gets for economists looking for that ‘perfect’ free market in reality and, surprise surprise, it behaves in pretty much the ways free-market theory expects it would…

                  Prices adjust virtually instantaneously when new information is discovered. The market clears at an equilibrium price. Futures, Options and Swap derivatives all exist to manage risk and/or offer speculative opportunities to those with a forward view.

                  Do you know which mechanisms have contributed to the split of foreign exchange rates from economic and market ‘reality’ ?

                  Re-read my last paragraph in 16.2.1.1.1.1.
                  There is a good case to be made that the value of the NZD is exactly where it should be, based on the things we see happening in the real economy.

  17. Brendon Harre 17

    More criticism of RWNJs on interest.co.nz

    by OnwardsUpwards | 07 Apr 15, 10:32am

    I suppose you’re one of those doomsters who missed out on the greatest DJIA bull run in human history. Well I put my strong NZD to good use there – thanks John. Or are you one of the doomsters who missed out on the Auckland property bull run? I didn’t. Thanks again john. Be warned, too much doom porn can make you blind to opportunities right under your nose.

    by Chris_J | 07 Apr 15, 11:45am

    Make sure you lock in those gains by deleveraging and are also comfortable losing the cream of the top of any assets you do keep.

    Undoubtedly we are nearing a peak. Christchurch is already starting to turn with an oversupply of mid priced new homes, a rental market returning to normal/oversupply, and the bulk of insurance money drawing to a close within the next 12 months or so.

    Auckland gains are purely speculation on further gains at this point in time … That always ends in tears.

    If your investments only just cover outgoings, then set a time for your appointment with the official assignee. For safety at the moment make sure you investments are not only self funding (cash flow not capital gains) but make you a surplus equal to the current outgoings, that way you will be ready when the proverbial hits the fan…

    by xelnaga | 07 Apr 15, 11:49am New

    At least we agree that Key and his muppets are responsible for the cost of housing.

    http://www.interest.co.nz/currencies/74861/pm-says-parity-australian-dollar-should-be-celebrated-downplays-effect-exporters-sa#comment-807657

  18. Philip Ferguson 18

    Bit dated, but hopefully still useful:

    “Every few months exchange rates feature as a point of discussion about the state of the New Zealand economy. For many people it must seem odd that both a ‘high’ and ‘low’ NZ dollar are presented as problematic. What is going on? Does it really matter?

    “Back in February 2006, there was a flurry of concern by economic writers and commentators about the NZ dollar being too high. This meant that a NZ product with a sale price of $100 would sell in the US for $66. . . full at: https://rdln.wordpress.com/2011/08/03/420/

    and on Key’s economic policy: https://rdln.wordpress.com/2013/01/31/keys-vision-managing-the-malaise-of-new-zealand-capitalism/

  19. fisiani 19

    Number of exporters unhappy with dollar parity = 80,000
    Number of voters happy with dollar parity = 2,000,000
    Exporters are generally smart so therefore are National voters.
    It’s a TSUNAMI I tell you.
    it will destroy the Abbott Government and raise the National Party.

    • Lanthanide 19.1

      Voting for a particular party doesn’t indicate support for any specific, or even general, policy promoted by that party. I don’t believe the topic of dollar parity even came up during the general election.

      “Exporters are generally smart so therefore are National voters.”

      Studies suggests that people who vote for right-wing and conservative parties on average have lower IQs than those that vote for left-wing or progressive parties.

      http://www.livescience.com/18132-intelligence-social-conservatism-racism.html

    • Draco T Bastard 19.2

      Repeating the lie doesn’t make it true.

      • fisiani 19.2.1

        Correct the live science crap has been discredited yet the left still believe it despite all the evidence to the contrary.
        The Tsunami will hit NZ 41 minutes at 4.31pm today.

        The public feel good factor will be the equivalent of winning 5 World Cups and the impact will not recede till will well after the election 2017.
        You read it here first.

    • Wynston 19.3

      Methinks the adage “Teach a parrot the terms ‘supply and demand’ and you’ve got an economist” definitely applies to you!

  20. AUDNZD 20

    A strong currency is the reflection of a strong economy. End of story.

    • Lanthanide 20.1

      No, merely a reflection of a *perceived* strongER economy.

      Which is not the same thing as a strong economy, on many levels.

    • The Murphey 20.2

      Q. Do you understand how your statement is incorrect ?

      Q. What is an economy ?

      Q. Should your handle be interpreted as ironic ?

    • Draco T Bastard 20.3

      No, in NZ’s case it’s a reflection of the higher than anywhere else in the world interest rates which fuels speculation, especially in housing in Auckland.

    • fisiani 20.4

      A strong economy is what keeps a successful government in power. Why put it all at risk for a weak and divided opposition.

      • Draco T Bastard 20.4.1

        The problem is that we don’t have a strong economy and all this government is doing is lying about it.

      • Atiawa 20.4.2

        The only NZ/Aust parity promise referred to by this government in recent years was to bridge the pay gap that exists and continues to exist between ourselves and Australian workers. Yet all they have done is make closing that 20-30% wage difference more unobtainable.
        You keep believing your own bullshit fisi. The rest of the country is starting to realise they have been hood-winked.

        • Gosman 20.4.2.1

          Ummm…. An appreciating currency is closing the wage gap. A NZ worker now has more purchasing power comparatively than his Australian equivalent.

          • The Murphey 20.4.2.1.1

            Only if they earn $18.60 per hour or more *

            FIFY

            Q. What is NZ’s minimum wage ?

          • KJT 20.4.2.1.2

            Power up, how much? Rent up, how much? Food up, How much?

            FIFY.

            Parity. If you can live on flat screen TV’s.

    • DS 20.5

      Yes. That’s why Greece’s economy is so much better off with the strength of the Euro as opposed to the old drachma. Oh wait…

      Fact is, currency speculation (and this is speculation) is a reflection of interest rates. New Zealand has relatively high interest rates, so money pours in, and our currency goes up. Nothing to do with the alleged strength of our economy.

      • Gosman 20.5.1

        Yet the Greeks on the whole don’t want to leave the Eurozone for some reason. Why do you think that is?

    • BassGuy 20.6

      To paraphrase Van Halen, right now too many people are working too hard for minimum wage.

    • KJT 20.7

      In this case, it just shows we have the unrealistically highest interest rates in the West.

      Attracting overseas speculators with lots of QE produced cash.

  21. Ennui 21

    Thanks again to Illargi for visiting this site. I have read http://www.theautomaticearth.com for several years now and have thoroughly enjoyed your commentary upon the Ukraine and Charlie H.

    One question. I cannot see any tour dates on the site for NZ.

  22. Wreckingball 22

    So do you propose that we drastically reduce the amount that we trade and become self-sufficient? I do not see any benefits in NZ having a shoe or textile industry as suggested in Meijer’s article. NZ has a comparative advantage in the production of some goods compared to other countries – hence, trade.

    Imagine the inefficiencies if NZ decided to try to be completely self-sufficient. Living standards would drop enormously and NZers would end up working in industries that NZ is just not built to support.

    Do you not agree that comparative advantages exist and that if all countries focus on industries in which they have a comparative advantage, the world will be richer?

    • Tracey 22.1

      How about that dairy industry aye?

    • Draco T Bastard 22.2

      Imagine the inefficiencies if NZ decided to try to be completely self-sufficient.

      Actually there’d be a reduction as the added expenses of transporting the goods would be removed.

      Living standards would drop enormously and NZers would end up working in industries that NZ is just not built to support.

      No, living standards are likely to improve for the majority of people. That second part is just delusional. NZers are as capable of producing manufactured goods as any other country and we can certainly feed and clothe ourselves without importing anything.

      Do you not agree that comparative advantages exist and that if all countries focus on industries in which they have a comparative advantage, the world will be richer?

      Nope. It’s all a load of bollocks. Considering modern manufacturies even economies of scale no longer apply.

      • Tracey 22.2.1

        any money on him coming back to address the posts of you and TM?

      • Phil 22.2.2

        This is a line you’ve been peddling for years, DTB… and it’s the “load of bollocks”.

        Start-up costs are real. Fixed costs are real. They’re huge. You can’t wave those away with some nonsense about economies of scale not mattering.

        • Draco T Bastard 22.2.2.1

          I didn’t wave them away.

          Once a building is built and machinery is in place you’re not getting those resources back until you recycle them and recycling them will use more resources. You don’t get the labour back at all. This applies to all factories and pretty much everything else.

          All that labour has to be, has to be, supported by the entire community while those things are made. So people growing food, distributing it, building houses etc, etc This has to be done because these things are real. We can’t borrow from the future to pay for it now as all these resources need to be supplied now.

          Use of those resources will mean that something else can’t be made at the same time (although with modern productivity that’s unlikely). This is economics.

          It’s not me waving away economies of scale – it’s reality.

          You know what the delusion of scale does? It gives us cars because it’s supposedly cheaper to build a million cars than 15000 buses. This is despite the fact that those million cars will use up far more resources than the 15000 buses. About a quarter of resources go into the buses than what goes into making the cars. The buses, over their lifetime, will use less fuel than the cars as well and take up less labour in maintenance.

          The delusion of scale has us using more resources than we need to use and it does so so that a few people can be rich.

          • Phil 22.2.2.1.1

            Once a building is built and machinery is in place you’re not getting those resources back until you recycle them and recycling them will use more resources…
            … It’s not me waving away economies of scale – it’s reality.

            Everything you’ve said between these two lines is IN FAVOUR of trade and comparative advantage.

            Great. We’ve found common ground.

            delusion of scale

            I’ve never heard this phrase, before… apparently, neither has Google. *shrugs*.

        • Wreckingball 22.2.2.2

          In basic terms this is how comparative advantage works DTB.

          China can produce rice better than NZ and NZ can produce lamb better than China.

          Without trade. China can produce 5 units of Rice and 2 units of sheep. NZ can produce 5 units of lamb and 2 units of rice.

          With trade. China can produce 10 units of rice and NZ 10 units of lamb.

          Overall, there is now more food to consume and both countries are better off.

          That is why trade is good and why NZ shouldn’t be producing shoes, cars and aeroplanes.

          • Gosman 22.2.2.2.1

            Sorry to burst your bubble but that is the theory of absolute advantage not comparative. The principle behind comparative advantage is similar except it states that even if one country is better at producing all items than other nations it still pays to specialise and trade the surplus.

            • Wreckingball 22.2.2.2.1.1

              Correct Gosman. Regardless, my bubble remains partly inflated as my point still stands.

              The Murphey and DTB fail to debunk the existence of the benefits of trade. They tend to just flout around the edges throwing abuse.

              • Gosman

                DTB has this truly bizarre idea which basically a variation of the North Korea ‘philosophy’ of Juche or self sufficiency. An example of how way out DTB’s thinking is. DTB believes it would make sense for New Zealand to develop our own Operating system and associated software applications despite the fact that even Microsoft has major probelems doing this with their 10’s of thousands of employees. It is completely pie in the sky fantasyland stuff which no mainstream political party would ever advocate. Despite this DTB is indulged by many of the more moderate lefties on here.

                • KJT

                  Even Ricardo, have you even bothered to read him, never said that Britain should stop producing wine altogether.

                  That would have laid them open to price fixing by Portugal.

                  Beyound your understanding, just as DTB’s comments are>

                  Note that Britain’s “comparative advantage” in textiles was due to cheap, slave produced, cotton from the Americas and the huge forced market, in India.

                  We have gone from selling top quality commodities to Britain for shoddy manufactured goods, degrading our land, people and future, to doing the same from the USA, Japan, and now China.

    • The Murphey 22.3

      Imagine the inefficiencies if NZ decided to try to be completely self-sufficient. Living standards would drop enormously and NZers would end up working in industries that NZ is just not built to support

      Without transitioning the country in that direction you won’t need to imagine inefficiency or lower living standards as they will be forced upon the country due to repeated failure of governments to legislate the frameworks required to prepare for inevitable and major change

      Industry that “NZ is just not build to support” will be meaningless which are those I presume you picture alongside higher standards of living

      The industry NZ can and does already support are those required to support human populations

      Good luck eating your flatscreen

      • Wreckingball 22.3.1

        In basic terms this is how comparative advantage works DTB.

        China can produce rice better than NZ and NZ can produce lamb better than China.

        Without trade. China can produce 5 units of Rice and 2 units of sheep. NZ can produce 5 units of lamb and 2 units of rice.

        With trade. China can produce 10 units of rice and NZ 10 units of lamb.

        Overall, there is now more food to consume and both countries are better off.

        That is why trade is good and why NZ shouldn’t be producing shoes, cars and aeroplanes.

        • Gosman 22.3.1.1

          See above for my comments. I appreciate your sentiments here just make sure you get the details correct otherwise people will attack your integrity rather than the point you are making (which is basically sound)

        • The Murphey 22.3.1.2

          Your thinking is dated or you are not thinking which are effectively one and the same

          Trade will not continue infinitely in the ‘natural sphere’ the current corporatist consumerist model ensures it

          Try using some imagination

          • Gosman 22.3.1.2.1

            The concept of trade and the principles behind it are not new nor tied up with the “current corporatist consumerist model” (whatever that mouthful actually means) despite what you think. It is like trying to argue the laws around supply and demand are just constructs of the existing paradigm.

            • The Murphey 22.3.1.2.1.1

              Having comprehension issues again today eh Gosman

              • Gosman

                Care to expand on that or are you just going to engage in meaningless ad hominem attack in lieu of an argument about the topic at hand?

                Btw I think you meant indefinitely rather than infinitely. Noone I know argues that trade needs to be infinite.

                • The Murphey

                  I’ll place your incorrect use of ‘ad hominem’ alongside the inaccurate presumption around word selection

                  Q. Why are you responding for wrecking ball ?

                  Q. Why do you selectively ‘avoid’ responding to questions put to you ?

                  • Gosman

                    What question have I selectively avoided answering?

                    I’m not responding for Wrecking ball. I am merely adding or assisting in the points he has made.

                    Your understanding of economics is so astoundingly flawed that I can only assume you are quite young or quite uneducated.

                    • The Murphey

                      Q. Was the use of ad-hominem deliberate ?

                      Q. Do you understand what projection is ?

              • Wreckingball

                So Murphey, to be clear, do you agree that some countries are better at producing some things than others? Yes or No.

                If you agree with the above statement, does it not make sense for a country to focus on what it produces best (increasing the overall size of the pie)?

                • The Murphey

                  W-Ball

                  Q. Why are you attempting to frame a decaying trade model for me ?

                  I am more interested in what those same nations will do when they are no longer able to produce goods to sell and are unable to provide the necessities of life to support human populations

                  The pie to which you refer is well past its use by date and waiting to be disposed of completely

                  Free your imagination

          • Wreckingball 22.3.1.2.2

            So Murphey, to be clear, do you agree that some countries are better at producing some things than others? Yes or No.

            If you agree with the above statement, does it not make sense for a country to focus on what it produces best (increasing the overall size of the pie)?

  23. Barfly 23

    I think the NZ dollar is way too high and has been for a long time…there is a very simple way to lower the dollar…..all you have to do is get government officials to say the words “quantitative easing” and watch the currency traders collapse
    in apoplexy….you may not even have to do any “quantitative easing” the mere use of the phrase may be spectacularly effective

    • Phil 23.1

      Wouldn’t work.

      Quantitative easing is only (and dubiously) effective when you’ve already exhausted normal monetary policy options. In a New Zealand context, that would mean having the OCR dropping from its current 3.50% to 0.00%… and that ain’t going to happen.

      Traders know that and, if a government did try to bid the currency down with this kind of ‘open mouth operation’, they’d see right through the patina of bullshit.

  24. Colonial Rawshark 24

    You have to understand the WHY the international bankster and corporate types LIKE a deliberate and purposeful set up where the NZ dollar continues to be very high relative to the US dollar.

    Simply put: foreign hedge funds, foreign corporates and 0.1% foreign investors now own many tens (or hundreds) of billions worth of NZ assets. The value of these assets are denominated in NZD. And assisted by this asset base, these institutions and investors go on to extract out from the NZ economy around NZ$15B in monies each year.

    A high NZ dollar thereby makes their NZ investments far more valuable in terms of the currencies that they actually do care about and personally spend, particularly the USD. And of course, like our politicians (and ex-politicians), these foreign owners don’t give a flying fuck if our SMEs and local industries are strangled by the high NZD.

    Yes, the small minded Kiwi top 10% set earning $100K pa get cheaper overseas holidays and cheaper BMWs with the NZD at stratospheric levels, but that’s just by the by. The real beneficiaries are the 0.1%.

  25. instauration 25

    Parity – no reason to party

    Love for this girl..

    http://jonimitchell.com/music/song.cfm?id=265
    Caught in the middle
    ‘Karol’ we’re middle class
    We’re middle aged
    We were wild in the old days
    Birth of rock ‘n’ roll days
    Now your kids are coming up straight
    And my child’s a stranger
    I bore her
    But I could not raise her
    Nothing lasts for long
    Nothing lasts for long
    Nothing lasts for long

    Down at the Chinese Cafe
    We’d be dreaming on our dimes
    We’d be playing “Oh my love, my darling”
    One more time

    Uranium money
    Is booming in the old home town now
    It’s putting up sleek concrete
    Tearing the old landmarks down now
    Paving over brave little parks
    Ripping off Indian land again
    How long how long
    Short sighted business men
    Ah nothing lasts for long
    Nothing lasts for long
    Nothing lasts for long

    Down at the Chinese Cafe
    We’d be dreaming on our dimes
    We’d be playing “You give your love, so sweetly”
    One more time

    Christmas is sparkling
    Out on Carol’s lawn
    This girl of my childhood games
    With kids nearly grown and gone
    Grown so fast
    Like the turn of a page
    We look like our mothers did now
    When we were those kids’ age
    Nothing lasts for long
    Nothing lasts for long
    Nothing lasts for long
    Down at the Chinese Cafe
    We’d be dreaming on our dimes
    We’d be playing
    “Oh my love, my darling
    I’ve hungered for your touch
    A long lonely time
    And time goes by so slowly
    And time can do so much
    Are you still mine?
    I need your love
    I need your love
    God speed your love to me”
    (Time goes – where does the time go
    I wonder where the time goes)

    © 1982; Crazy Crow Music

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