Economy

The other, sadly, involved more unexpected action by the Commerce Commission, with the effect of destroying wealth belonging to NZ KiwiSavers, people with money in funds, and direct investors.

This was in regards to Sky TV entering into deals with Telstra, Vodafone and Telecom over whether this might impact on competition on pay TV. (this after they cleared Sky TV going into partnership with one of its competitors on the grounds it wasn’t a big deal).

SkyTV are partnering with the companies that give it more options with the distribution of its content in anticipation of the big fibre rollout. Unsurprisingly, SkyTV want to ensure they get exclusive rights with the broadband retailers they partner with. This has caused the Commerce Commission to wade in and sniff around.

It’s a nonsense concern, because thanks to the Government rolling out fibre (in concert with Chorus) it will be cheaper than ever before for a new entrant to come to NZ, and offer set top boxes that plug into fibre connections for entertainment. Who needs expensive broadcast equipment anymore? It would be cheap for a new entrant to offer a broadband/fibre based TV package to consumers. (Just don’t mention how the Commerce Commission is going to disincentivise broadband users by artificially forcing down old copper prices!)

Sky TV’s shares were down by over 7% yesterday, or around $150 million in shareholder value lost.

Add to that the $180m of value lost in Chorus after the Commerce Commission unexpectedly proposed dropping copper wire broadband pricing by a large amount (and also involving the subsidising of rural users by town users), and you now have over $330m that got wiped away in the last two weeks – all thanks to the unexpected actions by a Government organisation.

If the National Party professes to respect property rights, then it’s now high time for the government to step in and re-write the Commerce Commission’s frameworks and guidelines, so as Bryan Gaynor so rightly put in the other day, the interests of shareholders and investors in NZ companies are considered in the mix as well.

ᔥ Stuff.co.nz

When I started working in a bank the rules for mortgages were very restrictive. You had to have a minimum of 20% deposit before the manager would even see you. There was pretty much no other way to get there, even for staff. Now you can get a mortgage with barely 5% deposit. Some fool probably thought that would enable home ownership for the great unwashed….all it did really was create yoke to enslave people. People who really shouldn’t have been given the glimmer of hope that they could afford to own a house.

Well all that is about to change. Of course the mortgage brokers are going ape over the proposals because they have made a living of wedging unsuitable applicants into banks through a bit of creative paperwork and copping a nice fee on the way through from the same banks.

When you owe 95% of the value of your house, it isn’t your house, it is the banks.

The days of 5 per cent deposits for homes could soon be over as the Reserve Bank contemplates enforcing strict lending criteria.

The changes could require first-home buyers to save larger deposits, and restrict the ability of existing homeowners to increase their mortgages to buy more expensive properties, or to top them up to use the money for other purposes.

Maximum loans to 80 per cent of a property’s value were once common, requiring buyers to find 20 per cent deposits, but during the last property boom, banks lent up to 100 per cent. The 80 per cent limit was reintroduced as the 2008 credit crisis bit, but has since eased, with most banks now offering 95 per cent mortgages.

Reserve Bank deputy governor Grant Spencer has said the bank is considering introducing limits on the loan-to-value ratios banks use.

But mortgage broker Mike Pero said he would be “surprised” and “disappointed” if the Reserve Bank put a limit on mortgages.

“If it did happen it would have a significant impact on home loans, and especially first-home buyers.”

He said the move would also impact property values. “Coming out of a financial crisis, where banks continued to lend to 95 per cent, I’d be disappointed to see that change.”

If 80 per cent limits were imposed, average homes would become unaffordable for many. “You would need $80,000 for a $400,000 home, and most would struggle to find it.”

The move is one of a number of measures being considered to rein in credit policies, and while it would force first-home buyers to save more, not everyone sees it as a problem.

ᔥ Southland Times

It seems that Kiwi workers have a bad attitude for Kiwi employers, preferring instead motivated immigrants

Southland dairy farmers are finding immigrants more desirable staff than “dysfunctional” New Zealanders, a Lincoln University academic says.

University researcher Rupert Tipples said a lot of problems dairy farmers were seeing with Kiwis was that they might have a criminal record, social issues and did not want to work.

“In contrast, the migrants come in to work, make money, pay money back to their relatives, and they are highly motivated,” Dr Tipples said.

This month he invited 700 Southland dairy farmers to Winton to talk about immigrants working on dairy farms.

A Dairy Insight study he worked on in 2004 highlighted the need for immigrants in the New Zealand dairy industry.

Dairy farmers preferred employing immigrants for the entry-level jobs once deemed suitable for unemployed New Zealanders, he said.

“The unemployed New Zealanders, they have less skills and qualifications, and if you throw in something like `have you got a clean criminal record?’ All the migrants need to have that to get in the country.”

A Canterbury farmer once told Dr Tipples because of New Zealanders’ social baggage, he employed only Filipinos.

“Because you don’t have to do all the social work, [that] you have to do with the Kiwis. You’re their financial adviser, you’re their councillor and social worker, and a farmer at the same time.

“The guy said `I want to be a farmer, I don’t want to be doing all these social worker things, that’s not my stuff,’ yet that’s what comes when you have a dysfunctional Kiwi worker,” Dr Tipples said.

Most of the unemployed lived in the North Island, were young Maori and Pacific Islanders, and would not head south for work, Dr Tipples said.

“The major group of unemployment, at the highest rate these days is Maori and Pasifika youth. They probably come out of school with minimal qualifications, they probably live north of Hamilton, and the jobs are down here in Canterbury and Southland.”

ᔥ The Spectator

This article in The Spectator is about Sweden’s Finance Minister Anders Borg who confronted the recession by cutting taxes across all income groups to prevent the wealthy leaving Sweden, refused a big stimulus spend up  and has been working to move Sweden away from a high tax, high regulation system and create smaller government including cutting welfare payments.

His advice, ‘Keep on dealing with the deficit, because deficits destroy everything else.’ Similar to National in New Zealand he was criticized for allowing tax cuts to the wealthy and yet the Financial Times recently declared him the most effective finance minister in Europe.

Interestingly we don’t hear much about Sweden from Labour despite it’s success at dealing with the global recession.

‘Everybody was told “stimulus, stimulus, stimulus”,’ he says — referring to the EU, IMF and the alphabet soup of agencies urging a global, debt-fuelled spending splurge. Borg, an economist, couldn’t work out how this would help. ‘It was surprising that Europe, given what we experienced in the 1970s and 80s with structural unemployment, believed that short-term Keynesianism could solve the problem.’ Non-economists, he says, ‘might have a tendency to fall for those kinds of messages’.

He continued to cut taxes and cut welfare-spending to pay for it; he even cut property taxes for the rich to lure entrepreneurs back to Sweden. The last bit was the most unpopular, but for Borg, economic recovery starts with entrepreneurs. If cutting taxes for the rich encouraged risk-taking, then it had to be done. ‘In most cases, the company would not have been created without the owner,’ he says. ‘There would be no Ikea without [Ingvar] Kamprad. We would not have Tetra-Pak without [Ruben] Rausing. They are probably the foremost entrepreneurs we have had in the last few decades, and both moved out of Sweden.’

But they were not rich, I say, when they were starting out. ‘No, but they were becoming rich. If you have a high wealth tax and an inheritance tax, people emigrate because it becomes too costly to own a company. Ownership is a production factor. Entrepreneurs are a production factor. Yes, these people are rich and you can obviously argue that we want to encourage social cohesion. But it is also problematic if you drive out entrepreneurs from your country, because they are the source of job creation.’

The Conservative took a hit politically for giving tax cuts to the rich, but interstingly the tax cuts across the board had spectacular results:

Tax rates would be cut for workers, and welfare cut to pay for it. High welfare levels, he says, can inflict cruelty in the name of compassion. ‘People emigrate from the labour market. Unemployment traps capture a lot of people in social exclusion.’ Tax cuts are not spoken of as an ideological aim, but as a tool to cut unemployment and advance social justice.

What even Borg did not expect was that his tax cut for the low-paid would increase economic growth so much that it has almost entirely paid for itself. Borg had created something that Osborne’s critics say does not exist: a self-financing tax cut. ‘There was some criticism at the time that we were borrowing to finance tax cuts,’ he says. But Sweden could do it, because it was expecting to return to surplus soon; Britain has no such luxury, he says. His main advice to Osborne is: ‘Keep on dealing with the deficit, because deficits destroy everything else.’

National is trying to return to surplus and Labour insists on spending even more. AS Anders Borg says deficits destroy everything else.

ᔥ The Telegraph

This morning I blogged about abundance, and as if my magic I found this article at The Telegraph about shale gas deposits in the UK.

Costs would come down quick if the subsidised this rather than expensive, failing green technology.

My personal policy is Mine, Drill it, Sell it:

Britain may have enough offshore shale gas to catapult it into the top ranks of global producers, energy experts now believe, and while production costs are still very high, technology should eventually make reserves commercially viable.

UK offshore reserves of shale gas could exceed one thousand trillion cubic feet (tcf), compared to current rates of UK gas consumption of 3.5 tcf a year, or five times the latest estimate of onshore shale gas of 200 trillion cubic feet.

Reserves of 200 tcf would put the UK in the top 20 countries with the highest shale reserves, alongside Brazil, and 1,000 tcf would put Britain in the same league as estimates for China, the United States and Argentina, top dogs in global shale potential.

Although there are still no reliable figures available for the UK, and only around 10-20pc of total reserves are currently deemed recoverable, experts say that whatever the final recoverable reserve figure is, it is likely to be big enough to make Britain energy self-sufficient.

“There will be a lot more offshore shale gas and oil resources than onshore,” Nigel Smith, subsurface geologist and geophysicist at the British Geological Survey (BGS) said. UK offshore reserves could be five to 10 times as high as onshore, said.

On Tuesday, UK authorities gave approval to drill for shale gas onshore after a temporary ban on the controversial extraction technique known as hydraulic fracturing, or fracking.Britain is well placed for offshore development with its North Sea oil and gas sector long established.”We were pioneers in the North Sea with conventional oil and gas and the technology has gone around the world, so why not become one in the unconventional sector,” Smith said.

ᔥ Freakonomics

I believe in abundance. Socialists believe in scarcity. People who believe in abundance tend to be freeer in their thinking whereas those who believe in scarcity want to control things so everyone has a crack.

Accordingly when it come to natural resources that world view then affects the way they address issues. Take the history of aluminium, once considered the most valuable metal in the world:

In short, during the early 1800s aluminum was considered the most valuable metal in the world. This is why the capstone to the Washington Monument is made from aluminum, and also why Napoléon III himself threw a banquet for the king of Siam where the honored guests were given aluminum utensils, while the others had to make do with gold.

Technically, behind oxygen and silicon, aluminum is the third most abundant element in the Earth’s crust, making up 8.3 percent of the weight of the world.  However, aluminum is tightly bound in a clay-like material called bauxite. While bauxite is 52 percent aluminum, separating out the pure metal ore was a complex and difficult task. It was the creation of a new breakthrough technology known as electrolysis, discovered independently and almost simultaneously in 1886 by American chemistCharles Martin Hall and Frenchman Paul Héroult that changed everything. The Hall-Héroult process, as it is now known, uses electricity to liberate aluminum from bauxite.  Suddenly everyone on the planet had access to ridiculous amounts of cheap, light, pliable metal. Today aluminum is cheap, ubiquitous, and used with a throwaway mind-set.

So, compare that with the current fad to talk about solutions for peak oil…The Greens think that oil is a scarce resource, others like me think it is abundant. We are both probably a little bit right. There is plenty of oil out there, just that some of it is just like aluminium once was…difficult using current technology to get at. Time and research solves that problem.

This is why I can’t stand the little creeps currently trying to stop innovation and invention by the banning of technologies that allow us to extract the earth’s resources…they believe in scarcity and through their scaremongering actually make scarcity a reality, when in fact we could all enjoy abundance.

ᔥ NZ Herald

The West Coasters want a bigger slice of the pie:

West Coasters want any increase in coal and goldmining royalties handed back to the district of origin.

Bumping up royalties is among recommendations in a review of the Crown Minerals Act.

The review, which is open for public submission, aims to streamline the regime and ensure better coordination of regulatory agencies.

West Coast-Tasman MP Damien O’Connor said the mining industry had taken enough from the West Coast and it was time it started to pay it back, not take more.

“Before the National Government screws down the mining industry it should give some thought to the local communities who have to pay for and maintain the infrastructures that support it,” he said.

What an absolutely brilliant idea from Damien O’Connor.

In the same vein I’d like to see all the road user tax collected by the region actually spent in the region. That way Auckland would have plenty of cash to fix its roads.

Likewise I’d like to see tax revenue spent according to population too. Fifty per cent of the population live north of Taupo…so let’s have 50% of all government expenditure spent inthe same area.

Damien O’Connor has come up with a brilliant idea.

ᔥ Andrew Bolt

A powerful campaign has been launched in Australia supporting mining. It has all the hallmarks of a nice left wing cause, but this time supporting mining, and workers and people behind mining in Australia. According to the Minerals Council it would appear that not all miners are rich white folks:

These Minerals Council ads have been around for a few months, but I’ve only just caught up with them. On one level, I’m not so keen on them, since they exploit emotion and racial politics to sell a case that reason alone should make.

But why not use the tools and values of the Left to subvert a Leftist antagonism to mining that would also hurt us all, including such children of Cambodians and Aborigines? Good stories, they are, too. Good people. And, of course, with good jobs.

Check out thisisourstory.com.au

This is how National and Gerry Brownlee should have dealt with silly actresses cavorting in coal.

ᔥ Cactus Kate

Cactus Kate isn’t impressed with the limp dick response of the Financial Markets Authority:

The latest in this regulatory debacle appears to be that charges have been laid, on Friday 30th March, a day before accounting year end against six directors totalling a mere $35 million or $5.8 million each. The closest Sean Hughes and his clowns at the FMA could have got to April Fools Day.

$35 million - less than the alleged $40 million cost of the Hotchin house that has become a symbol of the Hanover case. Hughes believes that this prospectus based civil prosecution is the strongest they have.

Once again I ask – how many of those investors even bothered to read the prospectus? Such is the silliness of charges based on a document that most Mum and Dad investors would not have even opened. For example Richard Long was not named as a promoter which is interesting. More Mum and Dad investors would have put their money in based on his recommendation than the prospectus documents. I would be looking to put each investor, or a random cross section on the stand and ask them precisely why they invested in Hanover and then analyze their knowledge of the actual prospectus they allegedly relied on that resulted in that loss.

April Fools Day fell on a Sunday this year. Therefore denying us this complete fairytale ending. Although not quite, the FMA seem to have confirmed the charges on April Fools Day with Sean Hughes appearing on television prior to midday to swing his now rather shriveled excalibur.

Basically it appears that the FMA civil action hangs on a few misplaced commas and poor grammar in just a few sentences:

But what he has achieved here after talking up a game really is the equivalent of a parking fine. Fraud and jail to begin with, now a technical prospectus civil prosecution.

We also have a regulatory authority that appears on television to announce charges to the public after the past six months getting the public used to the simple fact they could not pin a $500 million criminal fraud on Hanover. The magic number being chucked around with all sorts of dirty allegations about Mark Hotchin and Eric Watson.

Mark Hotchin just one of the six directors, suffered 15 months of asset freeze on what seems to be just the trust’s Paritai Dr property left.

Investigations have been ongoing for three whole years to get us to this point.

There will be no criminal prosecution from the FMA. Hughes made this comment today.

I explained to the public back in December that we did not think that this case merited a criminal prosecution. That was certainly the advice that we received, and were comfortable with that outcome.

If you were a woman in a bar and Sean Hughes picked you up promising this much and on return to his home he whipped this out, you’d laugh, run outside and call for a cab home.

Heh, spanked like only Cactus can spank.

ᔥ The Telegraph

India has joined China in rejecting their stupid carbon charges for airlines and threatening retribution:

The threat of an aerospace trade war between Europe and the rest of the world has escalated after India joined China in threatening retaliation over the European Commission’s carbon emissions charges.

Chinese airlines have cancelled $14bn (£8.8bn) of orders with European aircraft manufacturer Airbus following the introduction of the charges and a senior Indian official has now warned there are “lots of measures” that India could take if the EC does not back down.

“The question is, are you [the European Union] provoking the world into a trade war?’,” the official told Reuters.

The EU Emissions Trading Scheme (ETS) requires airlines flying to or from Europe to buy carbon permits to offset their emissions from January 1 this year. However, non-European governments are furious that the charges cover the entire flight and not just European aerospace.

It is understood that India has told its airlines not to buy carbon credits from Europe or share emissions data, although it has not ordered the cancellation of orders from Airbus, which dominates the Asian aerospace market. India is also prepared to impose steep charges on European airlines to fly into India if Indian airlines are blocked from flying into Europe because of the ETS. “We have the power of the economy. We are not bleeding as they are,” the Indian official added.