|Myths of New Zealand Economy and Dollar|
This article does not pretend to be an authoritative view. It is only a discussion and a rational explanation of what we have experienced in the last 9 months since the year began. The purpose of this writing is to help our channel peers position the business and plan for the near future.
On the top of the list of observations is the global economy recession which started in 2008 and dragged New Zealand into the vortex. New Zealand is a very small economy. It is so small that it is smaller than a dot on the map of the global economy village. However small we are, we are connected with the rest of the world and we have no strength not to follow the tide. Many countries especially on the Pacific Rim have recovered and they are now taking the lead to restore the global economy. This is a game of change of fortune. Interestingly the press pointed out that our biggest trading partner and our neighbour Australia was the only country exempted from the global recession due to its enormous mineral reserve. Did we hear the Aussies scream at all?
On the next level down the list are several major events that rocked the global and New Zealand economy. The earthquakes in Christchurch are certainly noticeable by everyone in the country. The quakes have wiped out over $15 billion of assets from the country. We are therefore $15 billion dollars poorer. Our office building (Bush Road Albany) insurance policy was renewed recently. The premium has gone up 50%. Are we subsidizing Christchurch from Auckland? Did New Zealand insurance companies reinsure globally? We believe most if not all New Zealand insurance companies are owned by foreigners anyway. Our costs have gone up!
The Rugby World Cup drew 19 countries into New Zealand bringing with them the biggest injection of money into our economy in a single event of a few weeks duration. Most matches played so far (including the quarter finals) were well attended. Everywhere around the central city in Auckland is a carnival. Why would the national rugby company estimate a final loss of about $25 million? Why did many retailers including restaurants but not pubs screamed of the lack of business during the time of the cup? Something does not match well.
On a real life level, how did we fare in terms of sales and business level? As Compucon work through the channel for business, our experience could be a good indication of individual members assuming that all members have continued to support Compucon. Our Q1 and Q2 this year are better than last year, but Q3 was lower than last year. Can we easily relate the fluctations of our business levels to the economy and the major events mentioned above? Not easily. Your business sales profile could be different to Compucon. Have you been able to relate your profile to the economy?
GDP is a good measure of the prosperity of an economic entity. It is a basket of statistics and takes New Zealand Statistics 3 months to compile the result for each quarter. The GDP for Q1 was 0.9%. It is not a brilliant figure but a comfortable figure for economic recovery. Banks and economists picked Q2 to be 0.6%. They were proven wrong when NZS announced 0.1% for Q2 at the end of September. Do not trust banks, economists, and the press!
Computers for business use are treated as capital assets. Purchases of business capital assets are not decided in real time and decisions often lag real time sales level by one quarter or more. This is rational and has explained our experience quite well. We are pleased with this finding. What’s next?
Shortly after NZS released the shocking 0.1% result for Q2, Standards and Poor downgraded the credibility of New Zealand the 2nd time in a short period from AAA to AA+ and then to AA. This brought down the NZD from 0.84 to 0.74 over the same period. These 2 events are balancing acts.