Posts Tagged ‘new zealand’

September 6th, 2009

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Coming soon: The ANZAC$

Surely the ultimate humiliation for New Zealand would not be losing the Bledisloe Cup nor even seeing the Wallabies win the Rugby World Cup in 2011 at Eden Park but the bone jarring crunch of monetary union with Australia.

Recently smoke signals have been wafting from the Beehive as John Key and Kevin Rudd white flagged the issue in recent talks. When politicians say it’s a good idea but unlikely you know that it’s on the table. In fact this is not a new story. It comes up whenever there has been a proper meltdown and New Zealand looks a bit lonely and downbeat.

It’s been raised by some local economic commentators and all the usual pros and cons have been mentioned. Don Brash laid these all out nicely in a speech back in May 2000 and it’s hard to see past his conclusion that it is primarily a political decision, given that the economic pay off is unclear.

It may be a political decision then but it may not be a comfortable one. As Bernard Hickey writes today “we may not have a choice if we continue to borrow heavily”. The “shotgun wedding” wouldn’t be the most favourable outcome but NZ is not well placed at the moment. To coin a phrase you can’t be a little bit pregnant.

And, as Brian Gaynor writes, according to a recent OECD study, New Zealand is perilously close to Iceland in a ranking of countries with exposure to “overseas debt……personal debt and financial leverage”.The numbers are eye watering and the piper will be most surely paid at some point in time.

But, for now, the Australian banks, which make up most of our banking system, have underwritten us by sending new capital across the ditch. We also had to follow Australia’s deposit guarantee scheme with no choice in the matter. To all extents and purposes we are heavily dependent on them. So as Bernard notes we may find ourselves at the altar of currency union by default and not by political will. And it may happen sooner than we think.

Is there an alternative? Yes. A fully sovereign domestic money supply. More on that another time.

August 13th, 2009

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Currency Intervention: Kiwis don’t fly (Episode 2)

2 years seems a long time but feels like yesterday. In that period the NZ$ fell from 0.82 to 0.49 and now is back trading just below 0.68. Wow…talk about currency whiplash.

So back then I suggested the RBNZ should think about selling as much NZ$ as they could. Why? Why go against prevailing market sentiment which is that intervention doesn’t really work and simply provides a target for the speculating hordes which incidentally account for 95% of the volume of daily trades.

That’s a fair sentiment when your currency is falling but when it’s rising? And when you have an eye popping foreign debt of almost 140% of GDP……that’s foreign debt not overall debt.

And yet the punters keep buying the NZ$. Perhaps they know something I don’t. Maybe 50 years worth of oil has been discovered in the Southern Basin. Who knows?

The point is that at some point that money has to be paid back and at the moment, due to the sneaky monster that is compound interest, we can’t even get close to reducing it.

But now is the time to strike.

Again I would like to suggest that the RBNZ starts selling NZ$. When you have a lot of something to sell it’s always best to do it when others are keen to buy. Now is that chance.

By selling NZ$ now and paying back, or at least holding for that same purpose, it will take the pressure off the very precarious dependency we have on overseas lenders.

This doesn’t eliminate the debt but simply transfers it to a domestic situation where it can be managed at lower rates and where there is no threat of having to suddenly repay.

How can the RBNZ do this? Again this is very simple. Print NZ$ and buy US$. There is no change to the actual money supply just how the debt is denominated.

Considering the implosion Iceland experienced and the unfolding disaster that is Ireland (surviving only due to its membership of the Euro), it makes complete sense just to get on with this now.

To allow foreign debt to be run at such a level is financial mismanagement of the highest level.

It also shows a willingness to be dictated to and dependent on overseas interests. This makes no sense at all when the country’s economy security is at stake.

August 2nd, 2009

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Climate Change: Time for a Ringfenced Carbon Tax

Another case of yes, no, maybe, no. The recent G8 summit started with a resounding yes but soon slipped back into a rather tentative not on your nelly.

Simply put the developing or poorer nations have got pressing issues of poverty to deal with and they simply don’t see why they should have to pay for the ecological sins of the developed and richer nations, never mind the fact that they got rich on the back of an imperialist framework!

It just seems that no deal can ever be done without some form of equity payback. There has been some suggestion that revenue raised from either carbon taxes or auctioning of permits could be rebated on a per capita basis. This is simply redistributing the costs in a progressive manner and makes sense on the face of it.

However, can’t see the wealthy punters in the West going for that. What to do?

Maybe it’s time to look for the simplest solution and just get a carbon tax on the books. It’s quick and simple as you only need to tax, at source, basic fossil fuels: oil, gas and coal.

This is something i posted about in 2007 but it’s time to take another look.

Let’s say we have established a price for “carbon”,this being a proxy for externalities caused in the combustion of fossil fuels. The most efficient way to alert the market to this cost is to price it in at source ie where the fossil fuel is sold wholesale. This would be the global oil, gas or coal exchanges.

In my paper, Climate Control, i argued for the establishment of a World Energy Agency, where all fossil fuels were sold through. Simply add on the price of carbon and leave it at that. As a one point global process it would be very simple and then that price information would flow out across the world. End of story.

But there are two issues here:

One is that we are trying to stop carbon quantities breaching certain levels. The price elasticity of fossil fuel consumption may hinder this somewhat as consumers of oil products are slow to change demand in response to price. But there is no doubt that the price rises over the last few years certainly caused some pain in the wallet and made people think about ways of cutting back on petrol usage.

The second issue is interesting. What happens to that money? Who does it belong to? As a charge being levied by the WEA it has no soveriegn recipient. So i propose this “charge” goes into a Global Environmental Contingency Fund (GECF). I want to make clear this is not a tax, it is a cost. It is therefore directly related to an expense which is in this case the use or environmental services.

Let’s stop using the word tax. It’s incorrect and draws attention from the fact that we are simply paying for a service we are using.

So how could the GECF work? I have to give that some more thought but the rough idea is that it would hold those funds in bonds (sovereign) or could lend them out at low interest to fund projects that have a positive environmental benefit. This is the tricky bit. But let’s sit with the first piece. The money comes in and sits in bonds. That’s it. So it’s not being spent on projects of a dubious outcome. As the title implies its a Contingency Fund. We don’t know for sure what will happen in the future. The money can be repaid if required by discounting the price of fossil fuels if it turns out that the cost has turned out to be lower.

What could New Zealand do right now?

Implement a tax and use that revenue to reforest the whole country. This can link into a global emissions trading scheme at some point but the important point is to make sure that the tax collected does not go into the general pot.

People need to see the flow of money from them into pure offsetting activities. If we don’t restrict supply (the only accurate and long lasting solution) then we have to slowly change behaviour and do it in the most straightforward way. A ring fenced and targeted tax is probably the best option we have right now given the likelihood of any global agreement at Copenhagen.

July 15th, 2009

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Aid Fade: Is the Aid model history?

Listening attentively to a paper on Aid and the Millenium Development Goals at the NZAE ’09, it occured to me that perhaps the traditional aid model should be completely ditched. I let that thought swirl for a few moments whilst i considered the ramifications and then came back to the idea with a simple vision.

Let peer to peer aid be the new model driven by people not governments.

Why are governments involved anyway? Well that’s not about aid really, its about influence…ok let’s be brutal it’s about money and power. Yes it’s all about politics: quid pro quo, backhanders and the rest of it. We’ll give you money and you help us out, vote for us at the UN or give us some nice contracts for whatever.

That’s the good bit. Now let’s see it in action. Up the government chain on one side and down the other. Hands out all the way up, across and down. Let’s not even go there. Of course some governments take this seriously and see aid as a genuine redistribution of national income but the model has been sorely abused over the years.

Even locally we had the Niue government telling the NZ PM that if it didn’t receive aid quickly it would turn to China instead. It doesn’t get more blatant than that. More and more aid has become a strategic tool in the foreign office of wealthy nations.

Francis Fukuyama recently reviewed two books on the subject both with similar themes but differing opinions: “The Challenge for Africa” by Wangari Maathai and “Dead Aid” by Dambisa Moyo. What I like most is that these are books coming from Africans themselves and women as well. It’s a refreshing change to Western University academics. It’s also an area of quite passionate debate. Here’s a great debate with Dambisa Moyo, Hernando de Soto, Paul Collier and Stephen Lewis on whether foreign aid does more harm than good.

Some issues are clear: corrupt governments and a weakened civil society; years on the western government welfare teat; trade barriers and resource depletion. The West carries the guilt and assuages it with cash even if its straight into the Swiss bank account of the latest tyrant.

So if governments are the problem why not remove them from the picture?

Well perhaps that is what will happen. Today the UK Conservatives unveiled a new policy on aid. As part of that they proposed a Gbp40m fund called “My Aid” which would allow the people to vote on their favourite aid project. Ok this all sounds a bit like the next reality show but for me it signals a subtle change in direction.

What if governments simply dropped their Aid budgets and gave that money back in either tax cuts or tax credits for giving? What would happen?

- Microfinance would take off.

- Giving platforms would widen and internationalise.

- There would be more targeted and personal involvement.

- Social Media would drive this (TwitterAid?).

- This would lead to grassroots build up and development of localised civil society.

- It may lead to an increase in giving as government moves out of the way.

- And maybe less celebrity nonsense as well!

Above all this p2p Aid model would be people driven and . as with microfinance, be very empowering. The aid infrastructure will still be necessary but that too may require some modification or restructuring. The Kiva and Wokai models will be very useful for this as will giving and donating platforms.

July 8th, 2009

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Aussiebank? Aussies looking at their version of Kiwibank

3 months a campaign was launched in the UK for a Post Bank to compete with high street lenders and provide a more democratic platform for banking. And now the Aussies are getting behind the same proposition. Dubbed the People’s Bank, it would be run through the network of Australia Post just as Kiwibank has done in New Zealand.

Initial reaction has been interesting with the government saying everything is fine and no need for any competition new competition or inquiry into the financial system for that matter. Well that’s what governments always say. In 5 years of corresponding with officials here in NZ I’ve never had a response that ever differs even when pointing out the finance company sector was going to collapse.

There has also been some commentary about not needing a government owned bank given the disasters of earlier years when many state owned banks collapsed. I enjoyed this quote from the Liberal Senator, George Brandis:

In principle the opposition philosophically does not support government-owned enterprises unless there is a very clear case, for example, cases of market failure.”

Er yes.

Mostly the commentary has been at the fluffy level. Kiwibank has demonstrated that it is possible and can work well. I certainly have enjoyed their internet platform and found it way better than the big 4 banks. I like that government is backing it in terms of capital though it should be noted it operates as a stand alone SOE. Sam Knowles was quick to comment on the workability of the Kiwibank model in Australia.

So this is the opener in a debate that could take some time and hopefully focus on the real issues within the banking system namely who creates the credit.

Stay tuned.

June 20th, 2009

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Volunteering: Everyone should do it

You may not know it but this last week has been Volunteering Awareness Week in New Zealand. Here are some facts and figures to consider:

· New Zealand is a leading nation in contribution made by volunteers. A recent study of the New Zealand Non-profit sector estimated that volunteers make up 67 per cent of non-profit workforce equal to 133,799 full time positions, a higher proportion than in any of the other 40 world countries participating in the research project. This represents 6.4 per cent of economically active population.

· Non-profit institutions contributed 2.6 per cent to New Zealand’s gross domestic product (GDP) in 2004. When volunteer labour is included, non-profit institutions’ contribution to GDP increases from 2.6 percent to 4.9 percent.

· More than one million New Zealanders are actively involved in volunteer work. Statistics NZ estimated that in the year ended March 2004, there were 1,011,600 who volunteered for one or more of 97,000 non-profit organisations. This represented 31 percent of the population aged 12 and over.

· New Zealanders contribute 270 million hours of formal, unpaid work for non-profit organisations annually. The time given has been valued at almost $3.31 billion in the year ended March 2004.

· Volunteers contribute these millions of unpaid hours to human rights, faith communities, health, education, sports and recreation, social services, arts and culture, emergency services, the environment and conservation, animal welfare, and community support and development.

· When reporting on unpaid activities undertaken in the 4 weeks prior to the 2006 NZ Census:

- 460,143 people (14.56%) aged 15 years and over looked after a child who did not live in their household

- 258,708 people (8.13%) aged 15 years and over helped someone who was ill or had a disability, and did not live in their household

- 437,241 people (13.84%) aged 15 years and over were involved in other helping or voluntary work for or through an organisation, group or marae

· Some community and voluntary organisations report shortages of volunteers, but others have waiting lists and have more potential volunteers than they need. The underlying reason for either of these situations is often how the organisation manages its overall volunteer programme from recruitment through orientation and training to support and manage the volunteers. In addition, the issue might be a supply and demand one - volunteering hasn’t declined but demand has gone up, and many people prefer ‘project-type’ volunteering over long-term commitments.

· There is an ongoing research into various aspects of volunteering in New Zealand. An inventory of existing NZ research is available at www.volunteeringnz.org.nz/resources/research.php and www.ocvs.govt.nz/work-programme/volunteering-research.html.

Those statistics make impressive reading. It’s clear the social fabric of the country would be seriously impaired without the contribution of this army of volunteers. So why volunteer?

Why not is the obvious answer. For me though it’s about making a contribution and performing a service to your community. You can think of it as giving back something or simply being grateful for what you have in your life and projecting that gratitude out into the world.

And it’s free. All you give is your time. It keeps your feet on the ground, teaches you humility and opens your eyes to people and situations you may not come across in your daily life. All in all its a fabulous thing to do.

I’ve been a volunteer for a 3 years now and am involved in 3 different organisations. I’ll tell you a bit about them because I simply want to promote them and hope that maybe someone out there will find that it spurs them on to get involved.

I’ve been a Budget Service Advisor for Christchurch Budget Services for a few years now. It’s a debt counselling service focused on helping people understand basic budgeting and how to navigate their way out of the debt trap and take a responsible approach to managing their financial position. i’ve met some interesting people and hopefully helped them on their way to a better position for themselves. Sometimes i’ve felt like a personal counsellor as well as often money issues can reveal personal problems. You don’t have to be an expert in money issues as full training is provided. What i like about it is there is often a very concrete outcome and i love taking financial and lending organisations to task! I’ve yet to meet anyone who isn’t serious about paying off their debts. But boy I wish i’d been around before they started!!

Nearly a year ago I joined up with PILLARS, an organisation dedicated to improving the lives of children who have parents in prison. They match volunteers with these children for a year’s worth of mentoring in the hope that it will have a positive impact. It really does. It’s a proactive approach to ended the cycle of criminalty and making sure these children are not lost and forgotten by adults when their parents disappear for no fault of the child’s. It’s been anincredible experience getting to know a young boy who has come from a very difficult family situation. The role is to spend 2-6 hours a fortnight with your mentee basically hanging out and doing stuff and be able to commit for a year. We’ve done all sorts over the last year: biking, climbing, mini-golf, walking, playing in the park, reading in the library, wandering around town visiting the various sites. It takes time getting to know a child who is often naturally wary of strangers but the rewards come later. Again all it takes is a bit of your time and a belief that all children deserve a decent crack. It’s a wonderful organisation to be involved in and lots of training is provided with courses throughout the year.

This year I decided to volunteer at Refugee Services and help a family resettle in Christchurch. Each year the UN resettles thousands of refugees in third party countries, where there is no hope of return to one’s homeland and the country they are currently in will not take them permanently. New Zealand takes about 750 a year of these “quota refugees” and helps them settle into their new life. There is a very thorough training program to prepare you for the job ahead. It’s a 6 month commitmnet but usually it’s the first 4 weeks that are full on and then it settles down. You work in teams and all undertake different tasks such as dealing with WINZ (that’s me!), housing, education, health, english language and general hospitality. My team has been helping a Bhutanese family settle in. It’s been a marvellous experience and has really stretched me at times. The families arrive almost as a clean slate and hurriedly must put a new life together. Yet they are so keen, hopeful and desperate to start a normal life, get jobs and contribute. They are immensely grateful for the help New Zealand has provided. As a volunteer it’s a chance to make a real difference and also experience a new culture and have your eyes opened to the lives that some people live through no fault of their own. Globally the refugee community numbers over 11m people……people who have been forcibly displaced from their homes and in many cases will never go back.

It makes me feel very humble and very grateful for the comfortable life I have. I think that’s what volunteering really does. It makes you appreciate what you have; it connects you with your fellow man; it teaches you new skills and it takes you out of your comfort zone.

As the proverb states; ” You must give in order to receive”.

So what’s stopping you?



About

I’m a Londoner who moved to Christchurch, New Zealand in 2002. After studying economics and finance at Manchester University and a couple of years of backpacking, I ended up working in the financial markets in London. I traded the global financial markets on behalf of investment banks for 11 years. I write about the intersection of economic, social and environmental issues . My prime interest is in designing better systems to create a better world. I welcome comments and input.

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