Forum Archive Index - April 2001

["G Stolwyk" <stolwyk@wave.co.nz>]

Readers: The previous installments were dated: April 14 and 15.

 

H: By the way, some Radio listeners think that more people in NZ will mean a larger market for businesses: therefore, we should have a much larger population!

 

It is also no secret that a larger home market can be used to support export ventures.

 

G: The US has an economy, where home commodities, eg. metals, coal, gold, cotton, farm products, are transformed into finished goods, be it cars, refrigerators, TV's, farm tractors, clothes, etc.

 

If all imports were banned, then, theoretically - apart from oil -it could nearly sustain itself. It is also the prime receiver of overseas talent!

 

That in itself is a great cost saver! And it gets returns from massive overseas investments!

 

Canada and Mexico, some of the larger markets, are reasonable close! The US is a protectionist country.

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H: The economy of NZ is primarily concerned with commodities and the country has few tariff barriers. These tariffs are low, anyway! 

NZ has no massive overseas reserves or investments; its residents had high debt levels but these are somewhat trending down.

The economy needs careful management:

 

Due to increasing " invisible " payments - partly as a result of selling key assets to foreigners - we tend to have reasonable high Balance of Payments Deficits.

However, the resulting lower $NZ is beneficial to exporters. At least, the farmer won't go broke and farm prices tend to be higher.

 

The commodity cycles can cause boom to bust cycles. Unpredictable droughts can sometimes damage the economy.

Unless we discover more oil, we may have to import all needed oil supplies after appr. 2007.

 

Before long, our sales of wood will increase markedly; more infrastructure and resulting investment is needed. 

 

Our exports are encountering heavy trade barriers: Most Far East countries only want logs. Graded timber meets high tariffs.

 

The EEC has forgotten the contribution made by NZ in the wars and is a very protectionist bloc.

The trade barriers and long distances to markets often result in marginal profits.

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G: We rely on exports, imports and skills. The standard of education has to improve before we can even think about much higher population levels ! We need skilled people to find new avenues of income generation! They will create employment and thus support a larger population!

 

H: We know that a segment of the population has a high unemployement rate.   

 

The problem is how to increase the GDP per person ! If there is no increase in the nation's GDP, then, based on a growing population, we will be poorer! By the way, I read that productivity per person is rather flat!

 

G: What can you expect if jobs have to be repeated: digging up roads and footpaths frequently to lay cables or whatever, or putting industry out of action because a cable was cut for no reason, just to mention a few examples!

 

The Auckland power crisis was a costly example of poor management!

 

H: Yes, we need to work smarter! It is true however, that a smaller market can be a barrier to sound investment!

 

Competitors may enter a smaller market, they may suddenly appear and they sometimes come from overseas.

 

Summing up, the long term NZ Risk Profile may not be so attractive to some investors! 

 

These are our opinions.

 

Gerry

( To be cont. )