Archive

Posts Tagged ‘New Zealand Institute of Economic Research’

Silly Idea # 341,907,775 – increasing our population

23 November 2012 22 comments

.

.

From the Silly Ideas files comes this local story from the NZ Herald, regarding a proposition from  ExportNZ and the New Zealand Institute of Economic Research (NZIER),

.

Full story

.

ExportNZ  executive director, Catherine Beard, has suggested,

One of the obvious ways to overcome these problems is to make New Zealand a bigger country with bigger companies. We need a national debate on population policy and how big we should be by 2060.

Once grown, the challenge is then keeping these companies in New Zealand so the country benefits from them. The alternative is selling out to other countries and losing talent overseas for better jobs and better pay.”

The NZIER suggested  a population of 15 million for New Zealand, by 2060 .

NZIER deputy chief executive, John Ballingall, stated (with a straight face I assume),

We need to ensure existing capability-enhancing policies are delivering value for money. Our immigration, tax, welfare and foreign investment policies need to enhance rather than restrict the ability of New Zealand firms to gain scale.

On-going efforts to cut less vital spending like Working for Families and interest-free student loans will ease the pressure on the kiwi dollar. Public spending has acted like a tax on the export sector.”

Leaving aside the issue of migration for a moment, the question that  demands an answer is:  do these people actually think through issues before making public pronouncements?

Because reading their comments and thinking through the issues to inevitable conclusions leads this blogger to conclude that NZEIR and ExportNZ indulge in superficial thinking and short-term, easy “solutions”.

For starters, what would be the consequences of a population of 15 million people?

This country already suffers from the following;

  • 175,000 unemployed.

How does adding ten and a half million people help address those already jobless?

  • More pollution.

I think most of us know by now that our “100% Pure” and “Clean and Green” reputation is now mostly a fiction to rival that of elves, goblins, hobbits, pixies, Easter bunny, Little Red Riding Hood, Mickey Mouse, et al.

With 52% of our rivers having water quality at poor or very poor, what would tripling our population do to our environment?

Think of 15 million people needing clean water to drink; cook with; shower in; and wash laundry in… and then think of 15 million toilets flushing…

How does adding ten and a half million people help our “100% Pure” image?

Do we downgrade to “75 Pure”?

“50% Pure”?

Or wait for those 15 million toilets to flush simultaneously  and call ourselves “100% Pure Manure“?

  • Housing

We already have a pressing,  critical housing shortage. The cost of housing is spiralling further and further out of reach from New Zealanders.

.

Source

.

As our population has increased, so has housing affordability and availability worsened. Housing was more affordable fourty years ago and young New Zealanders are having to migrate to Australia to buy a home of their own.

The ‘market’ has been spectacularly inept at meeting demand. And when we do build houses, they tend to “dissolve in the rain”, as Bernard Hickey said with disturbing accuracy on 28 October.

How does adding ten and a half million people help address our critical housing problems?

  • Transport

Something for every Aucklander to ponder: think of your roads now, clogged with cars, with a city of over 1.5 million  people.

Now treble it.

Point made, I think?

.

.

Perhaps the most laughable aspect to NZIER’s comments was when John Ballingall, said,

On-going efforts to cut less vital spending like Working for Families and interest-free student loans will ease the pressure on the kiwi dollar.

It may “ease the pressure on the kiwi dollar” – but how much extra pressure will be put on New Zealanders; their families; and students?

And what might possibly be the consequences of putting more pressure on Kiwi families and students? Clue: Australia.

There are six  countries on this planet with populations ranging from 14,478,000 to 15,883,000;

.

     Malawi   –  15,883,000
Burkina Faso   –  15,730,977
Guatemala  –   14,713,763
Mali  –   14,528,662
Ecuador  –   14,483,499
Cambodia  –   14,478,000

.

Source: List of countries by population

None of the above nations have a GDP, per capita, higher than ours. So can we deduce that tripling our population is no guarantee of increasing our exports and thereby our wealth?

I believe that would be the first safe conclusion.

The second safe  contention might be the impact on our environment, with 15 million souls living within our shores, would result in environmental degradation  that would seriously harm our Destination New Zealand tourism  – a NZ$9.6 billion industry according to March 2012 figures.

The damage caused to our expanding tourism industry would most likely outweigh any benefits accrued from an increase in exports.

Third and last contention;  trebling our population seems a simplistic and hopelessly lazy “solution” to a problem that appears more rooted in other factors such as National’s blind obedience to neo-liberal policies, and it’s refusal to address the high value of our dollar.

It seems bizarre that ExportNZ has wandered off on some weird  tangeant, and ignored the real problems affecting exporters. It’s almost as if Ms Beard; her colleagues; and NZIER, have experienced a collective – dare I say it – brain fade.

If this is the best that our business leaders can come up with, then I despair for our country.

.

.

= fs =

Advertisements

Ports of Auckland Ltd – THAT magic 12% figure!

14 March 2012 4 comments

|

|

Much has been made of Port of Auckland Ltd being required to make a 12% return to it’s shareholder and owner, the Auckland City Council.

As recently as last Sunday (11 March), Len Brown confirmed the figure (albeit in a roundabout way), in an interview with Paul Holmes,

|

LEN  And by that, I mean that we are the 1.5 million Aucklanders, we own the shares, and as a consequence of that, I’m looking after their interests.  I want that port to be successful.  I certainly want a greater return on our investment-
 
PAUL Let’s talk about that shortly, but I wondered about your position because you have said and I quote you, ‘We deserve a port that’s competitive, a decent return for ratepayers and a settlement that is sustainable.’  That sounds like the port’s position, Mr Mayor.
 
LEN  No, it sounds like our position – our position, the council’s position and the position of any Aucklanders.  Look, my commitment during the campaign was not selling the ports; we will hold the port shares.  Secondly, we wanted the ports to be more commercial and present a much better return for ratepayers.

PAUL And that return, of course, the figure that you’ve come up with is you want an increase from 6.3% I think it is at the moment.

LEN  Yeah.
 
PAUL After tax.

LEN  12% over five years in terms of return on investment.
 
PAUL Where did you get the 12% from?  Pluck it out of the air?
 
LEN  No-

PAUL There’s not a port in Australasia, Mr Brown, making 12%.

LEN  So our view was, though, that the port was not performing as well as it was.  Now, you’ve heard Mr Pearson say it’s an aspirational target.  What we’re saying to the port is this is our view.  We believe as a consequence of the assessments that we’ve done within the  council-
 
PAUL Well, how firm are you on this?  Have you laid down the law on the 12%?

LEN  We have given it to them in our statement of corporate intent.  Right at the start of the year, I went down to the port, met all the workers and the employees and the company directors down there and said, ‘Right, this is what we’re expecting from the port.’  And we had an hour’s Q & A-
 
PAUL This is what we’re expecting.  Is this-?  I mean, were you laying the law about the return you want in five years – 12%?
 
LEN  We were laying down the law in terms of what we expected from the port in terms of its return and in terms of its performance generally.

PAUL Where did you get the 12%?

LEN  So, the 12% was an estimate, a view that certainly I’ve been working on for right through the last sort of 18 months, two years.  It was view that was discussed our own table with the officers, with our own council-
 
PAUL So it’s a guess?  It’s a good guess?

LEN  No, it’s an estimate.
 
PAUL (laughs)
 
LEN  This is what we think we should be aiming to achieve.  And so we went back to the company and said, ‘Okay, this where we think you should be.  What is your advice back to us?’  Their advice was, ‘Give us five years and we believe that we can receive that.’

PAUL Well, excuse me, look at this.  Okay, 12%, that’s your estimate – guesstimate.  Tauranga returns 6.8%, Lyttelton 8.6%, Sydney 6.7%, Melbourne 3.1%, Auckland 6% — 6.3% after tax.

LEN  So not just about return either-
 
PAUL Where’s the 12% being made anywhere?

LEN  It’s about competitiveness against other ports.  So we are losing share against Tauranga.  We are competing flat out against Brisbane, in particular, and Sydney.  It was our desire that we wanted the port to be much much stronger in terms of its-
 
PAUL Do you endorse what Mr Pearson was saying about he cannot believe the waste of resource at the Ports of Auckland?
 
LEN  Look, there’s a whole lots of things that we cannot believe about the performance of the Ports of Auckland, so it just was not about-

PAUL Can I just say to you again-?

LEN  a stronger return on investment.

Source: TVNZ Q+A

|

Yet,  at a meeting of the CCO Strategy Review Subcommittee, held on 21 April last year, a motion was passed to the effect;

|

PRESENT
Chairperson Mayor Len Brown, JP
Deputy Chairperson Deputy Mayor Penny Hulse
Councillors Cr Ann Hartley, JP
Mr Tony Kake
Cr Richard Northey, ONZM
Cr Sir John Walker, KNZM, CBE
Cr Penny Webster
ALSO PRESENT
Councillors Dr C Casey
C Fletcher
D Morrison
C Penrose
S Stewart  [until 11.25pm, part item 11]
W Walker

12  Shareholder Comments on the draft 2011-2014 Statements of Intent/Statement of
Corporate Intent of Substantive Council Controlled Organisations/Watercare Services
Limited

CCOS/2011/4
MOVED by Mayor Brown, seconded Cr Hulse:

b)

Auckland Council Investments Limited

ii) Replace the proposed shareholder comment on page 135 “Add a series of
performance measures/targets to measure port productivity and profitability.
This should include lifting the rate of return investment (from 6%-12% over
three years)” with
“Immediately following completion of the long-term strategy for POAL add to
ACIL’s statement of intent, a series of performance measures and stretch
targets to measure port productivity and profitability. The targets should
require a significant improvement in the performance of POAL, including the
rate of return on investment.”

CARRIED

Source: Council  Sub-Committee Minutes

|

So it seems evident that Auckland City Council no longer demands an outrageously high rate of return from Ports of Auckland. The target now requires  “a significant improvement in the performance of POAL, including the
rate of return on investment” – which could be anything; 7%, 8%, 9%, etc.

I believe that there is evidence (more in a moment on that) that what we’re seeing here is Auckland City Council/Ports of Auckland in a war of competition with other local ports – Tauranga to be specific.  Since corporatisation of New Zealand ports,   there has been a steady drive to increasing profits; returns to shareholders; and “efficiency”.  This involves aggressively attracting new clients to use port facilities.

Considering that there is only a limited number of shipping coming to New Zealand at any given moment, ports can only increase business at the expense of other ports. In essence, they are “cannibalising” each other.

A New Zealand Institute of  Economic Research (NZIER) report entitled “Port Performance and Ownership
An assessment of the evidence Report to the Local Government  Forum 9 August 2010” makes the following observations,

|

On the other hand, Maersk undoubtedly extracted significant discounts from Auckland to secure its business. Its standard business practice is to play off competing ports aggressively against one another in terms of price and the facilities they provide, such as fixed berth slots and equipment for loading and unloading. It cannot be criticised for its approach; it is operating in a very competitive market and needs to have as cost competitive a port service as it can find and negotiate. As Figure 8 shows, Port of Tauranga’s net profit after tax for continuing activities has been significantly better than Ports of Auckland’s since the Maersk decision in 2006.”

“…there is some evidence that Ports of Auckland, and possibly Lyttelton Port Company, have in recent times succumbed to local pressures to retain and grow the volume of trade through their port by agreeing to provide international shipping lines with levels of service at charges such that the services may not make a full economic return.”

|

This seems to be born out by data, such as presented by the (NZIER),

|

|

|

The graphs above show that despite having a higher a higher container volumes at Auckland than  Tauranga (1995 to 2009), Port of Auckland’s net profit after tax still dropped.

As NZIER stated,

It is extremely unlikely, therefore, that the commercial realities of the Maersk decision supported any change in the relative values of Tauranga and Auckland to the significant favour of Auckland. Indeed, the evidence suggests the impact was probably exactly opposite to this.”

With this in mind, the ongoing competition between NZ ports to attract business from shipping companies such as Maersk appears to be a self-defeating process; a race to the bottom.

In which case, POAL’s agenda for “greater productivity”  (ie; more profits) is now impacting on port worker’s incomes.  Driving down wages and casualising the workforce has the natural consequence of reducing the wages bill for the company.

This is what it’s all about; aggressive competition between ports.

And Maersk benefits.

|

* * *

|

Other Blogsites Views

No Right Turn: Ports and transparency

Bowalley Road: Only People Power Can Save Our Ports

Bowalley Road: A Study In Mauve

Pundit: Solving the Ports of Auckland dispute

Related Issues

Bryan Gould: Our workers being squeezed by the bottom line

Acknowledgement

Cathy Casey, Auckland City Councillor

|

|

= fs =