Change Starts when Someone Takes the Next Step
Over the last year I’ve been very positive about the New Zealand economy in relation to the rest of the world and this has been reflected in my recent newsletters.
It's time to move on, time to get going
What lies ahead I have no way of knowing
But under my feet, baby, grass is growing
It's time to move on, it' s time to get going
To see the Tom Petty video click here
Over the last year I’ve been very positive about the New Zealand economy in relation to the rest of the world and this has been reflected in my recent newsletters.
Well now we have a key offshore economist thinking the same way. According to Karen Ward, Senior Global Economist for HSBC and author of a new HSBC report, it seems New Zealand will be the top performer in the developed world by 2050, with GDP growth outstripping other developed countries including Australia and Canada.
They say 2050 will also bring about a marked shift from West to East as the emerging markets continue to outperform the developed world. China will overtake the U.S. as the largest economy and countries such as the Philippines will rise 27 places into 16th overall, Peru up 20 places to 26th, Ukraine up 19 places to 40th and Malaysia up 17 places to 21st. In fact, 19 of the top 30 countries in 2050 are currently considered ‘emerging’.
The HSBC chief economist for New Zealand, Paul Bloxham says “With the growth of the middle classes in emerging markets set to explode, at the same time the demand for commodities will also rocket suggesting that New Zealand is well placed to take advantage of the growth in the world’s fastest growing markets of Asia and Latin America.” See the press release here
This is similar to what I was saying in my December 2011 newsletter. The reason why New Zealand has such a bright future is food – or rather protein. See discussion under “The Asian Crescent Moon” here
Innovative Export Outlook
Which brings me to BNZ economist Tony Alexander’s comments in his January Weekly Overview from Hong Kong (and quoted in my January Newsletter here) where he says “On the face of it one might think that this huge surge in the money we are making from China’s growth is great and as long as we keep doing what we have been doing everything will be okay. But that way of thinking is the very problem. Over 96% of the things we export to China are primary products and growth in those receipts has been about 126%. But growth in receipts of non-primary exports has been only 9%. We are exporting low value-added products to a country whose consumers are experiencing rapidly rising incomes and demanding increasingly sophisticated goods and services akin to those Western households consume.” Tony has promised a new report on China and I must say I’m looking forward to that.
So you’ll be pleased to know there are people here looking to add value in our own country or to joint venture with offshore entities and keep our assets and intellectual property in New Zealand hands. For example, LanzaTech is a New Zealand company founded in 2005 to “develop and commercialise proprietary technologies for the production of low-carbon fuels that do not compromise food or land resources”. They have now raised more than US$85 million from international investors and won a U.S. government contract to commercialise alcohol based jet fuel. They have also joined a Chinese coal to fuel project. See NBR article here
At TBK Capital we’re seeing more interest in green technologies with international markets - like the Zoono non-toxic antibacterial offer on our website. We now have businesses seeking investment in bio-fuels, solar-cells, aquaculture, internet based gaming, cloud based technology, and new carbon management solutions. If you have an interest in this type of industry give me a call and I’ll make sure we get in touch with you if anything of interest comes up.
In fact there have been significant changes in the New Zealand carbon credits market over the last few months. In December, the NZ Government followed an international trend and banned cheap international industrial gas CER’s (synthetic European carbon credits) which had been flooding the local market, and which had played a prime role in crashing the NZ carbon credit price in the second half of 2011. This change, together with the inevitable ban on other means of buying cheap credits (which also contravenes the spirit of Australasian Carbon Pricing Mechanisms) means there will be an increase in the price of carbon credits.
Accordingly indications are that this is the best time for forest owners to buy credits (and conversely the worst time to sell them).
By the way, a reminder that the Carbon Credit Leasing Offer on our web site closes next Monday. If you own a forest you must look at this. To see this offer click here
No Housing Market Bubble
According to the latest QV monthly index, nationwide residential property values have continued to rise - with Auckland leading the charge – but some provinces are seeing falls. For details see the Landlords Article here
And according to the Real Estate Institute of New Zealand January 2012 saw a 25.2% rise in house sales making it the best January for sales volumes since 2008. See article here
So I’m delighted to see my friend Rodney Dickens, author of Rodney’s Ravings, in the latest issue addressing the question “Is a house price bubble brewing”. This is an excellent article written in Rodney’s typical mix of hard economic data and irreverent view. Here are some of his thoughts:
- If cheap money was going to drive a “bubble” in the housing market the number of sales should already be well above historical average levels rather than somewhat below. And a housing bubble needs significant participation by investors.
- Money is cheap but investors are not playing a major part because the financial incentives don’t stack up for them.
- There is no shortage of sections to build on. The low level of building is because demand is low which reflects a rational response by people to new housing and especially section prices being unaffordable.
- There is no doubt that the demand-supply balance is tighter in the Auckland market than nationally. However, at the moment the gap between the number of sales and the number of listings is around half what it was in 2007. This suggests that Auckland is heading for solid increases in house prices as distinct from a “bubble” or a “boom”.
Read the Ravings here
Time to Move On
To end this newsletter on a commercial note, what are you doing to take advantage of the position we now enjoy, living in this part of the world? It’s always been the early movers that have been successful in a turnaround, not those who come in at the end of the cycle.
We’ve been privileged to work with excellent clients since we started TBK Capital and to assist them in raising funds for both property and business. We’ve got access to all forms of debt finance – including larger loans from non-bank sources – and private investors looking to take part in this new cycle.
So if you’d like to borrow or raise money, or participate in ventures like those mentioned above – just give us a call.
Cheers
JP