News } TBK Capital

Social Change and Immigration

My guess is, like most of us here, the news that Great Britain was leaving the EU came as a bit of a shock. But in retrospect I now wonder why I might have even been surprised.

How I wish, how I wish you were here.
We're just two lost souls swimming in a fish bowl, year after year,
Running over the same old ground.
What have we found?
The same old fears.
Wish you were here.

Pink Floyd - Wish you were here

My guess is, like most of us here, the news that Great Britain was leaving the EU came as a bit of a shock. But in retrospect I now wonder why I might have even been surprised.

Things have changed so much since the post World War II relationship our countries enjoyed. We now no longer rely on Great Britain for our exports and I suspect the major benefit to people here has become ease of travel through Europe and the U.K.

It’s not surprising then that the financial markets quickly recovered from the initial shock, from which leading economic indicators fell, and only days later recovered. See NBR reports on equities and on the currency.  And the latest from the NZ Herald here.

In retrospect the timing of the falls and their recovery showed a classic stop-loss pattern as punters who bet the wrong way cleared their positions.

I thought BNZ currency strategist Jason Wong summed it up well when he said "The recovery continued for risk assets, with the market continuing to reverse the losses seen in the immediate aftermath of the shock UK vote.”

"A consensus view is emerging that the shock will be isolated to the UK itself, with little spillover for the rest of the world. Central banks will deliver further easing and, in the case of the Fed, will delay any tightening for potentially a long, long time."

As to Great Britain’s future outside the EU it looks like the general consensus emerging is a bit of uncertainty in the short term but in the long run it was inevitable. See a very thought provoking article from David Stockman.  His view is “Staying in the EU can not help ameliorate the UK’s real economic and fiscal problems in the slightest. What it needs is lower taxes, less welfare, and a dramatic reduction of government regulatory intervention. These are not policy directions that stir the juices in Brussels.

“So today’s noisy meme that the Brexit voters have done themselves irreparable economic harm is patent nonsense. By contrast, whether they fully understood it or not, they have liberated the UK from what will be the economic disaster of “more Europe”."

Social Change and Immigration

The voting reflected a social change throughout the Western World.

The Brexit vote to leave the EU was strongest in heavily white areas where average levels of education were very low. Stay was strongest in the university cities: Oxford, Cambridge, Bristol, York and Brighton. Areas with more than a quarter of the population without good secondary school exams voted 82% for Leave. There was also an age divide: 73% of 18 to 24-year-olds voted Remain; only 40% of those over 65 did.

As I watched the post-election results and interviews on TV, two things stood out to me. It was not the younger people who voted to leave. And in the geographical locations that voted to leave, it seemed the major reason was people being fearful of being outnumbered by non-English speaking groups and job losses. All of a sudden membership of the EU meant they were not in control of their own immigration policy.

Readers of my newsletters will know I’ve been a long-time fan ofJohn Mauldin whose newsletter provide excellent commentary on the U.S. and international financial markets. John hasn’t disappointed us with his - and George Friedman’s  - remarks on the “Brexit Bombshell” as he calls it.

You can read John’s latest newsletter, which contains George’s two articles on Brexit, here, but I also enjoyed George’s first reaction which came out the day before. Entitled Is Brexit the End of the EU? in this he points out it’s the EU which is the weaker player not Britain. This is well worth a read, especially the section “Immigration Seen as Loss of National Self-Determination”.

Is this the start of a trend?

Fortunately immigration’s something we in New Zealand and Australia still do control – but I predict it’s going to become more of an issue in both our countries.

Last Friday’s Herald had an interesting article suggesting Brexit and Donald Trump are believed “to have triggered a surge in searches of New Zealand Property listings from Britain and America”.

And the Aussie election over the weekend produced a far closer result than expected with the issues raised having the same flavour as what we saw in the UK. I enjoyed Liam Dann’s Herald article today where he says “It isn’t hard to draw a link between Australia’s economy and our current immigration boom”.

The article shows a very interesting graph depicting the link between Australia’s economy and our current immigration boom. Our net migration gain of 68,400 in the year to May 2016 was a nominal record dating back to at least 1860. Never, even in colonial times, did we gain so many new residents in a year. The per capita gain was nearly three times that of Britain where immigration proved the divisive issue in the Brexit vote.

As Liam says, “While there is a lot of focus on Chinese home buyers, it is New Zealanders coming home (and not leaving) that has made the difference.” This is a thought provoking commentary well worth a read.

And then there’s Donald Trump coming up. Now that’s going to be interesting!

The Asian Crescent Moon

It reminded me of a newsletter I wrote in December 2011 entitledMerry Christmas, Food’s the future, Happy to be Here. Under the heading “The Asian Crescent Moon” I talked about the change in Asian food habits – more meat, more fruits and more vegetables - and New Zealand’s and Australia’s ability to supply them. It was very interesting to read it again over 5 years later. Clearly now the Asian interest in New Zealand is not restricted to food.

In any event, apart from New Zealand being seen as a safe haven, our commercial and personal interests are becoming more and more associated with the Pacific rather than the Atlantic.

If you look at New Zealand on a 3 dimensional globe (do they sell those round globes on a stand anymore?) you can’t even see Britain and Europe.  But there is a clear crescent shape of countries commencing at the bottom South East corner with New Zealand, through Australia, Indonesia, the Philippines, China, South Korea, and ending in the North East corner with Japan.

These are the countries of the future for our economy.

Happy to hear from you

I’m always happy to hear from you if you’d like to comment on the matters raised in our newsletters – or of course if you’re looking to raise debt or equity for business or property or would like to invest in either.

The best way to keep in contact is to phone me on +64 9 307 3257 or +64 21 902 901, or email.



John Paine B.Sc., Dip BIA
TBK Capital Limited
Level 10, BDO Building
120 Albert Street
Auckland 1010, New Zealand
Phone +64 9 307 3257
Fax +64 9 309 4519
Mobile +64 21 902 901


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