One of the neat things about living in New Zealand, a country with a small population, is that you can actually get to meet with those people who are running the country and have a chat with them. Yesterday I attended a small gathering for lunch at the Rain restaurant and bar in Papamoa, which is in the Bay of Plenty and met with Bill English, the Deputy Prime Minister and Minister of Finance and Tony Ryall, the Minister of Health.
It was an informal occasion with a buffet lunch being served as the Minister of Finance gave us an update on the state of the domestic economy and an overview of the global environment, the gist of it is as follows:
Two years ago New Zealanders were irresponsible borrowers but they have now got the message and have become savers, are paying off their debts and are spending less. Bill urged the audience not to borrow money to buy wide screen TVs etc, but to save their money. These savings are building and they reduce the need to borrow money from the international money markets. This is the opposite from the policy of some other countries were the public are urged to spend money in order to stimulate the economy and in our view its a sensible one.
GST has recently been increased which is a sort of consumption tax and is there to discourage spending, however, income tax, tax on companies and tax on savings has been lowered, which should enable people to reduce their debts accordingly.
The government is currently 30% of the economy and so they are now looking at ways to become more efficient and various initiatives are being put in place. He also said that he was of the opinion that a small company such as ‘Blow carts’ we think they do go-carts with sails, could spend $100,000.00 better than the government could spend $1000,000.00. The audience readily agreed.
Bill also urged the audience to look to the export market in order to grow the economy. New Zealand’s traditional trading partners of the United Kingdom, Japan etc, were now debt ridden and that their economies were in very poor shape. The future for growing the economy now lies in the east where trade with China is on the increase and provided they keep growing at a reasonable rate, then New Zealand should do well.
The subject of the housing market was raised as it has been everyone’s darling over about the last decade. Bill was of the opinion that ‘flipping’ houses and apartments was not the way to build an economy and asked the audience to raise their hands if they intended to go that route once this recession was over. Only one hand was raised so just maybe the ‘buy to let’ era has come to an end.
In conclusion we feel reasonably positive about the future for New Zealand and that they are making the right moves, however, it is a tiny player on the world stage so we will see just how things pan out over the coming years.
To stay updated on our market commentary, which gold stocks we are buying and why, please subscribe to The Gold Prices Newsletter, completely FREE of charge. Simply click here and enter your email address. (Winners of the GoldDrivers Stock Picking Competition 2007)
DISCLAIMER
Gold Prices makes no guarantee or warranty on the accuracy or completeness of the data provided on this site. Nothing contained herein is intended or shall be deemed to be investment advice, implied or otherwise. This website represents our views and nothing more than that. Always consult your registered adviser to assist you with your investments. We accept no liability for any loss arising from the use of the data contained on this website. We may or may not hold a position in these securities at any given time and reserve the right to buy and sell as we think fit.