Blame it on the boomers

The affordability of housing is currently ahot topic. But even with house prices so high, over 102,000 properties changedhands last year – implying that housing is still affordable for some. Simpleeconomics tells us that prices would not keep rising if they weren’t beingdriven by demand.

Bio-fuels arenand#39;t the silver bullet

The government is set to introduce amandatory sales target for bio-fuels with the goal of improving the security ofNew Zealand’s fuel supply. However, the economic benefits from this policy could be outweighed by the additionalcosts imposed upon firms and consumers, as well as stifling longer-term effortsto produce efficient bio-fuel domestically.

A year of two halves

Road freight transport operators were slugged with a nasty one-two combination over the first six months of this year. A slowdown in economic activity weighed heavily on demand for road freight transport services, while soaring diesel prices and surging wage costs put the squeeze on margins. But after a tough start to the year trading conditions appear to be improving.

Business blues

Business confidence indicators have picked up over recentmonths, and are now well ahead of the lows reached at the end of 2005.  Butdespite these gains they remain in negative territory. In fact both the NZIER’sand the National Bank’s business confidence measures have been in the red since2002 – a period which the economy has grown at above average growth rates forthe majority of the time.  So what gives?  Business confidence measures aresupposed to provide insight into future economic prospects, but for some reasonbusinesses have expressed a pessimistic outlook throughout one of the bestperiods of economic growth in New Zealand’s history.  Are these guys neversatisfied?

The land of the setting sun

Japanese visitor arrival numbers to New Zealand have beendeclining steadily over the past 18 months.  But unlike similar downturns overrecent years which were driven by one-off global events (September 11, SARS,and the Iraq war), the falling numbers this time round do not have a single,easily identifiable cause.  Moreover, the fall in the number of Japanese peoplevisiting New Zealand comes at a time when the total number of Japaneseholidaying abroad is beginning to rise.  So why has New Zealand fallen out offavour with the Japanese?  And is this really something the New Zealand tourismindustry need be concerned about – won’t the burgeoning numbers of middle-classChinese more than offset a decline in Japanese holidaymakers?

Some good news

The fall in fuel prices over the past six weeks will be adding some fat to some pretty lean margins in the trucking industry. How much further will prices fall? Not much in our view. Although there are some conspiracy theories floating about that suggest the Saudis will pump enough oil to drop prices leading into the November mid-term elections in the US to help George Bush. An interesting theory, but one we don’t subscribe to.

Diesel fashion

The Audi A10’s win at this year’s Le Mans 24 hour endurancerace was the most significant victory yet for a diesel-powered car in a majorracing event. Moreover, not only did the Audi win, but it was also thecleanest and quietest car in the race. Diesels are also enjoying success offthe track. Underpinned by lower running costs, diesel cars’ popularity in Europeis now such that they are expected to out-sell new petrol cars during 2006.

Turn up the volume

There has been a trend towards volumebuilders over the last decade – an increased number of larger firms expandingmarket share at the expense of small building companies.  A similar trend hasbeen evident in other areas of business – supermarkets and department stores,for example.  We believe the trend towards volume builders has further to go,with tighter regulations and the desire to keep building costs down both factorsthat will give larger players an advantage over their smaller rivals.

Where is the growth coming from?

Enthusiasm, for what many glibly refer to as the knowledge or information economy suggests that is where future growth will emerge from. But what, in concrete terms, constitutes the knowledge/information economy? Telecommunications, media and computing business are those directly involved with the delivery and manipulation of information and constitute the backbone of the emerging information/knowledge economy. These businesses or sectors have been the standout performers in terms of growth most developed economies over the past decade. But will these technology-laden darlings of the sharemarket live up to their hype by continuing to outpace all other sectors in the economy over the next decade? We suspect they will.