Monday, 30 March 2015

Northland implications

David Farrar has the best analysis I've seen on the reasons why National lost the Northland by-election. I think reason 3 - Mike Sabin's departure - is the strongest. The feeling I picked up from National supporters in Northland was that the vacuum of information about Sabin's departure - which inevitably was filled with rumour and conjecture - really irritated even the most loyal supporters.

The question now is what happens in 2017. The preliminary results point to Peter's win being made possible by a large number of Labour voters giving Peters their electorate vote, as Andrew Little essentially instructed them to do.

It was a smart move by Little, and a clear demonstration that he understands MMP. But it creates a two-part problem for Labour that will be a headache in 2017: firstly it means they lose the ability to whack National over deals in Epsom and Ohariu. Morally their position is degraded - the media will simply point out they accommodated Winston where it suited them, to stick it to the government. But I suspect the public understands this is part and parcel of MMP anyway.

Secondly it means that the deal will need to be repeated in 2017 to ensure a similar result. This will be even more imperative if the rumour (Peters wanted to capture an electorate seat to guarantee NZ First's survival, similar to Act's win in Epsom in 2005) that Northland is part of Winston Peters exit strategy are true. If Labour wants an alternative to the Greens (and they should) then NZ First is their best bet. That means Willow Jean Prime will need to take another loss on the chin for Labour - and that risks a Margaret Hawkeswood style melt-down.*

My prediction is that Winston will now work to position himself alongside National, to keep Little and Labour on their toes. That way he might be able to extract more - perhaps even the baubles of office - if he finds himself as Kingmaker again in 2017.

*Margaret Hawkeswood was Labour's candidate for Coromandel in 1999; she was very unhappy when Helen Clark told Labour supporters there to give their electorate vote to Jeanette Fitzsimons (Greens co-leader) to get the Greens into Parliament. On election night that worked; however after the counting of the special votes the Greens got enough votes to get over the 5% party vote threshold.

Thursday, 26 March 2015

CIT's future options

Picture from the Upper Hutt Leader.
The CIT is now on the market (Upper Hutt Leader, 26 March). The ongoing saga since the closure of CIT in 2001 may be drawing to a close. JLL has been appointed to sell the buildings and land which has a council valuation of $13 million.

With the Treaty of Waitangi claim now resolved, there seem to be a number of future options for CIT:
  • The site is cleared and turned into a housing development.
  • CIT returns to some form of tertiary institution. WelTec may have to spend millions on earthquake strengthening its Petone building, it would make sense for WelTec to instead purchase CIT.
  • A technology park, hosting high-tech companies and creating high value, well-paid jobs in Upper Hutt.
My personal preference (as you can probably guess) would be for CIT to become a technology park. There could be a mixture of both a tertiary institution and technology park (or an "incubator" for new high-tech ventures) which would get optimal use of the site.

Wednesday, 25 March 2015

Alan Bollard and the Smiling Curve

Last week I went to a presentation by former Reserve Bank Governor Alan Bollard hosted by the New Zealand Initiative. The key concept Dr Bollard used was the "smiling curve", a way of emphasising where value is created in a modern economy. In years past, the curve was flatter - it was the fabrication of products that created the lion's share of the value in the economy.

The relentless expansion of technology and growth of the service economy has changed all of that.

Keep on smilin'
Now, more value is created at the start of the production process - patents, technology, research and development - and at the end of the process - brand, service and marketing. Dr Bollard then related this to New Zealand's economy and specifically to the dairy industry, using figures from the FMG Institute. The numbers showed that the production of milk power had a return on capital of 9%, where as marketing had a 17% return, and 29% for research and development. Oliver Hartwich, Executive Director of the New Zealand Initiative, asks:
...what would it mean for a New Zealand dairy company that is seeking to do increase its business in Asian markets? They might be aware that the return on assets is only 7 percent for farming, 9 percent for powder plants whereas it is 17 percent for marketing and even 29 percent for R&D and processing.
Which is where it gets interesting. There seems to be agreement that increasing our R&D spend is a good thing, but we need to make sure we take advantage of it. On the other hand, there are also lots of people who seem to think New Zealand should focus on the middle of the curve.

Sunday, 22 March 2015

CentrePort's "Big Picture"

Carrying on my recent obsession with seaports and their future for New Zealand, last week I sent a letter to the editor of the Upper Hutt Leader on CentrePort's expansion. I was responding to an earlier letter raising environmental concerns about the expansion:
CentrePort's response in last week's Leader was intriguing in its lack of justification for the dredging of Wellington Harbour. As well as the environmental concerns, ratepayers - as owners of CentrePort - should be concerned.

A recent Ministry of Transport report on the future of New Zealand's ports put forward a scenario where larger and larger container ships soon to be calling on New Zealand ports lead to fewer, bigger ports. CentrePort features in not one of the reports potential options, instead being relegated to a "feeder" port to the others.

Meanwhile, two of the "hub" ports the report identifies are moving in on CentrePort's business. Ports of Auckland and Port of Napier are opening a new logistics hub in Longburn, south of Palmerston North. They plan to rail containers there to their own ports, in direct competition with CentrePort's services.

If the Ministry of Transport's report comes to pass, we could end up with an environmentally degraded harbour that is bypassed by the major shipping lines. CentrePort needs to make its case clearly for the dredging to ratepayers.

Regards,


Lewis Holden
CentrePort have a website explaining what they're planning on doing in Wellington's Harbour, appropriately called "The Big Picture". But there's nothing in The Big Picture that addresses the underlying message of the Ministry of Transport's future scenarios for container ports: there will be fewer ports visited by these mega ships, with smaller container ports relegated to "feeder" status. That includes CentrePort.

Tuesday, 17 March 2015

Surplus

Here's a media release that seemed to have sunk below the radar... a half-year surplus:
This is the first time the Government’s books have shown a part-year surplus since 2009.
Oddly most articles focused on the February on the lower than expected deficit. But nothing on this news...