Sharechat Logo

Catching Australia just got easier, says Harbour Asset's Bascand

Thursday 13th May 2010

Text too small?

Australian tax policy just made it easier for New Zealand to catch the "lucky country", says Harbour Asset Management managing director, Andrew Bascand.

In a note to clients this week, the respected fund manager says the sudden shift in Australian policy makes "many investment opportunities in New Zealand look promising relative to those in Australia" and recommends going under-weight in Australian mining and bank stocks as a consequence.

"In our opinion, the key strategy for the coming months is to increase US and New Zealand exposures", especially as the New Zealand economy shows signs of a rebound based on "good growth" from exports and increased investment.

The May 20 Budget "is likely to reinforce this rebalancing through a rise in GST, discouraging over-investment in housing, and potentially through encouraging companies to invest productively in both capital and labour."

Describing the 40% super-tax on Australian resource company profits as "ill-conceived", Bascand says: "It is ironic that a developed country with the strongest fiscal position and economic outlook (Norway aside) has stepped into a very market unfriendly policy world."

The Henry review tax proposals threaten to "turn Australia from a two-speed economy to a low speed economy."

"The significant socialist lurch in fiscal policy to forcing Australians to over-save for their retirement and discouraging global investment in the one sector which drives domestic growth seems destined to lift the risk premium on Australian investments" Bascand argues.

On top of that, signs of a slowdown in the Chinese economy mean that, at least in the short term, "as we see it, the resources trade is crowded."

Bascand predicts that Australian banks will be next in line for "regulatory tinkering", suggesting that there would be popular politics in taxing banks more heavily as the opinion polls close up ahead of the Australian federal election later this year.

In New Zealand, Bascand warns that there will be a transitional period for investors as monetary starts tightening later in the year.

"Emphasising quality, exporters and particularly the healthcare and technology sectors could be a successful strategy."

  General Finance Advertising    

Comments from our readers

No comments yet

Add your comment:
Your name:
Your email:
Not displayed to the public
Comments to Sharechat go through an approval process. Comments which are defamatory, abusive or in some way deemed inappropriate will not be approved. It is allowable to use some form of non-de-plume for your name, however we recommend real email addresses are used. Comments from free email addresses such as Gmail, Yahoo, Hotmail, etc may not be approved.

Related News:

Fletcher Building Announces Director Appointment
Meridian issues new demand response exercise notice to NZAS
CRP - Chatham Closes Private Placement of Shares
General Finance - Olympic Term Deposit Promotion featuring a Special Bonus of 0.1%
July 22nd Morning Report
VCT - Operational performance for the year ended 30 June 2024
Challenge to banks the way to go
Bigger returns or lower risk?
NPH - Director Appointment
July 19th Morning Report