David Thompson Posted:
So very, very true. It beggars belief that we consider ourselves to be a developed nation when so much of our economy is based on selling milk powder or logs. BTW, I own a Plinius amplifier (my second) that drives a set of Theophany speakers.
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David Thompson Posted:
A robust but sobering report. It concerns me that confidence is rising, yet sales and exports are down and "manufacturers and exporters are still lagging behind other sectors". Surely we should wait until we're earning more money before we start spending more?
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siemens Posted:
Yes true! The only thing that will never die in this world is the nature and its science behind it. Great post.
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Kieran Ormandy Posted:
Thanks for the question Steven, Germany has seen increases in manufacturing employment since 2009, and Switzerland has had stable manufacturing employment between 2006 – 2011, even in the face of ongoing Euro-zone issues. Korea has seen increases in manufacturing employment since 2008 and Israel experienced large increases since 1998, while being stable over the last 4 years. Singapore has had increases in manufacturing employment over the last two years. These countries all value their manufacturing sectors and work to protect them, this is reflected in the above numbers and their performance through the GFC. Note data around the above examples was sourced from OECD labour market stats.
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John Walley Posted:
Point one: you should have no doubt what our Association says publically represent the views of our members. Point two: we don’t knee jerk responses, if you trace back our comments around NZPower you will see them link all the way back to our research in 2004 and 2005. All that material is fully linked from our comments above. Point three: you will note our comments on major users, sadly the same advantage does not accrue to smaller industrial users. The perverse incentives of the LRMC approach in all this are well known. Point four: the NZMEA is not like any other Association in New Zealand we admit only manufacturers and exporters into membership, and our public expressions are the views of that restricted membership.
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Action needed on asset bubbles

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High debt levels in the New Zealand dairy industry remain one of the greatest concerns for the banking sector according to KPMG’s Financial Institutions Performance Survey. The New Zealand Manufacturers and Exporters Association (NZMEA) is supporting moves by the Reserve Bank to increase the amount of equity that banks must hold to cover rural loans and suggests further balancing using capital gains and land taxes to move capital from the tax shelters of land and buildings into productive business.

NZMEA Chief Executive John Walley says, “At $47 billion rural debt is not much less than the total size of the NZX. That says something about why our productivity growth is anaemic.”

“In the midst of an asset bubble it is easy to forget that a true value of an asset is based on the revenue it can earn. The bet on a tax free capital gain to deal with excess debt load is a risky practice for the lender and the borrower – policy should be pushing back against this.”

“It is clear that high interest rates did not stop the frenzy so the Reserve Bank’s moves to introduce farm lending capital requirements must be applauded. Limits on borrower loan to value ratios would also be useful and of course these sorts of restrictions must also be applied to other assets classes.”

“The absence of a broad tax base has also played a big part in the rural debt problem,” says Mr Walley. “Without a capital gains or land tax it is possible to capitalise earnings and avoid tax; that simply adds more pressure to the asset bubble driving values well above the capability of the land to fund the borrowing.”

“To balance our economy the tax burden has to be spread across income and assets, and debt growth controls are necessary.”

tags: asset bubble, land tax, capital gains tax, loan to value ratios, reserve bank, kpmg, rural debt


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