Like it or not, New Zealand has ratified the Kyoto Protocol,which means that we need to either reduce our net emissions of greenhouse gases(primarily carbon dioxide, methane and nitrous oxides) back to 1990 levels, orpurchase emission permits from another country under an international emissionstrading scheme. It seems likely that the latter scenario will eventuate.
The Reserve Bank’s recent intervention inthe currency clearly signals their belief that the current New Zealand dollar exchange rate is unjustified by economic fundamentals. But how much confidence can we store in the statement that the kiwi is "overvalued"?
Annual average GDP growth is at a seven-yearlow, but economic forecasters appear to have broadly accepted the ReserveBank’s commitment to raising interest rates higher. This combination suggeststo us that the Reserve Bank has explicitly grown less accepting of medium-terminflation pressure, and that it has largely convinced the market that anaggressive stance is necessary.
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 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?
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?
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.
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.
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.