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Of Bulls & Bears

Friday 7th July 2000

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Mainfreight moans about coalition

Not everyone shares the view that New Zealand's government is no longer relevant to business. In its latest annual report, transport company Mainfreight expresses gloom about the economy following tinkering by the Labour-Alliance coalition government. "Naïve legislation and policy changes affecting ACC, employment law and international currency fluctuations will see a tightening of the New Zealand economy, placing pressure on our domestic tonnages and transactions," it says. This view is reiterated in the "directors' report" which concludes there is "considerable uncertainty" in both our economy and Australia's "which does not bode well for buoyant trading." Cabinet ministers may disagree with this gloomy outlook, but none of them are directors of Mainfreight. Someone who is likely to support these comments is Act New Zealand leader Richard Prebble, who is a Mainfreight director.

Telecom roller coaster due to turn?

Fear and greed are the driving forces of sharemarket investment and the former seems to be in the ascendancy where Telecom Corporation is concerned. Much attention has been given to the share's decline this week to a 32-month low of $7.25, down 27% in the past three months. However, this is part of a regular cycle Telecom shares seem to go through. At least since 1996, Telecom shares have declined in the middle half of the calendar year but always picked up strongly in the last quarter. Since 1998 the low point of the year for the shares has come in September but by the end of December the shares were up 13% that year and 17% in 1999. Those who believe history repeats may wish to have a dabble.

Kiwi fiscal crisis still makes grade

New Zealand's economy is too tiny to get much notice in world circles. However, there is one aspect of the economy that continues to fascinate the world - the Muldoon years. Under Sir Robert Muldoon, New Zealand had what one commentator famously described as "an East German economy without the tanks." By 1984, when Muldoon and his National party lost a snap election, the economy was in bad shape. These difficult days get a mention in the latest Fortune magazine, which ranks New Zealand high on the list of countries to have had a "fiscal crisis." Using peak debt-to-cash flow ratios, Fortune finds New Zealand in 1984 had the sixth worst crisis in history. It has been beaten only by Ireland in 1987, Italy in 1996, Canada in 1994, Mexico in 1982 and, worst of all, Britain in 1947. The article also notes Japan may be heading for trouble since its ratios are double that of Britain's worst hour.

Foreign mentions

New Zealand has rated two stories in the UK's Financial Times filed by its Asian editor Peter Montagnon, who was visiting Wellington. In one he wrote how this country could appoint a committee similar to that operated by the Bank of England to help it decide interest rates. In another he reported comments by Prime Minister Helen Clark saying Apec had run out of momentum.

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