Friday, September 10, 2010

Midnight subsidy for quake-hit businesses

The first round of quake-affected businesses signed up to the Government's wage assistance package will see money in the bank tomorrow.

The Canterbury Chamber of Commerce has worked to approve a number of small businesses in the last two days.

They'll receive $350 a week per staff member.

Chamber Chief Executive Peter Townsend says the payments will be processed at midnight.

"So that is an extraordinarily fast relief package, it's in place and we will see that building quite significantly over the next few days."

Mr Townsend says there should be another round of payments to more businesses on Friday night.

The Government announced on Tuesday it was putting aside $15 million for the $350-a-week subsidies which can be paid to earthquake-affected businesses so they can continue to pay their employees.

Mr English said that in the day-and-a-half since the announcement was made Work and Income had received about 340 calls from employers and 36 formal applications.

"The first few have already been approved and we expect that to grow quickly over coming days," he said.

Updating Parliament on the cost of earthquake damage, he told MPs the $4 billion estimate issued by Treasury yesterday was "still a very early estimate" and a better idea of the overall cost would gained when more information was available.

"So far the Earthquake Commission has received 36,000 claims and expects this to rise to around 100,000 claims in coming weeks," Mr English said.

Asked about the cost to the economy, he said Treasury expected there would be lower GDP growth over the next two or three months but a net benefit over the 12 months following that as money from insurance companies and the Earthquake Commission was injected into the Canterbury economy.

- Newstalk ZB, NZPA

Thursday, September 9, 2010

Earthquake could cost $4 billion

he full cost of the Canterbury earthquake could be as high as $4 billion, Treasury has revealed.

Treasury Secretary John Whitehead said the $2 billion figure previously used in relation to the cost of the earthquake referred to Earthquake Commission liabilities only.

Treasury's "ballpark" estimate of the total cost to householders, insurance companies, businesses and the Government was double that.

"The cost faced by the EQC, individuals, and insurance costs will probably be of the order of $4 billion," Mr White head said.

In terms of the economic impact it was early days "but the pattern of these is certainly a short term drop in activity of businesses being unable to function and ...there's always a risk of businesses failing.

"In the slightly longer term when you've got that reconstruction effort, a big amount of that going on tends to raise GDP (gross domestic product)."

But Mr Whitehead stressed that there were a "very wide range of estimates" on costs at the moment because officials were still to "get down to what's actually happened on the ground".

Wednesday, August 25, 2010

NZ dollar heads down towards US 70c

The New Zealand dollar fell to its lowest level against the yen in three months and headed down toward support at US70c as international events continued to dictate direction in a week with little in the local economic diary.

The NZ dollar was at US70.15c at 5pm, down from US70.47c at 8am. It had fallen throughout yesterday from US71.25c to nearly US70c shortly after midnight then started to move upward, rising after news that sales of previously occupied homes in the United States during July fell to the lowest level in 15 years.

ANZ said market sentiment was negative through last night's session, weighing on offshore equities and initially sending currencies, the NZ dollar included, lower against the US dollar and the yen.

"The US dollar's fortunes reversed after abysmal US housing data saw a swift US dollar sell off, allowing the NZ dollar to move back to mid-range levels," ANZ said.

Westpac said that the Australian and New Zealand dollars look heavy, and should break below major support levels during the next few sessions.

In the Australian dollar's case the level is US88c. It was at US88.37c at 5pm, from US88.76c at the same time yesterday.

In the New Zealand dollar's case the support level was US70c.

The yen has been at a 15-year peak against the US dollar but retreated slightly today on speculation that Japanese authorities will intervene to knock it back down.

The NZ dollar dropped to 59.11 yen at 5pm from 59.70 yen at the same time yesterday.

It was at 0.5547 euro 5pm from 0.5559 at the same time yesterday.

The NZ dollar was at A79.37c at 5pm, down from A79.72c at 8am but up from A79.19c at 5pm yesterday.

The trade weighted index was at 65.91 at 5pm from 66.09 at the same time yesterday.


Tuesday, August 24, 2010

Kiwi dollar tipped to weaken on Aust election drama

The New Zealand dollar may fall below 70 US cents this week as investors wait on the outcome of Australia's Federal election, which failed to deliver a clear result.

Five of seven economists and strategists in a BusinessDesk survey were downbeat on the currency this week after Saturday's election raised the prospect of a hamstrung executive.

Neither the reigning Labor Party nor the Liberal Coalition secured a majority.

The two remaining strategists are picking the kiwi will trade in a range this week.

Initial market reaction was to push the kiwi higher to 70.57 US cents from 70.25 cents on Friday in New York, and it gained to 79.44 Australian cents from 79.16 cents as investors eschewed the so-called 'lucky country' in favour of New Zealand amid the uncertainty over the election.

However, currency strategists don't expect this trend to hold.

"The kiwi's going with it (the Australian dollar) to some extent, and this could be the catalyst to break 70 US cents,"said Imre Speizer, markets strategist at Westpac Bank.

"It's going to be a volatile week with weakness hovering over the Aussie."

Speizer predicts the kiwi will fall against the greenback this week as a general downbeat tone among investors keeps them shying away from yields on offer in Australia and New Zealand.

Tim Kelleher, vice president of institutional banking and markets at Commonwealth Bank of Australia, forecasts the New Zealand currency to make a "gradual drift off" towards 69 US cents, though the kiwi will get some early support as investors jump out of Australia and into New Zealand.

Central bankers from around the world will gather in Jackson Hole in Wyoming in the annual Federal Reserve forum on Thursday.

Fed chairman Ben Bernanke's keynote address on Friday will be watched with interest by market-makers.

The local data calendar is almost bare, with the Reserve Bank's survey of inflation expectations the only release of note, though it's unlikely to be market-moving.

Mike Jones, strategist at Bank of New Zealand, said the two-year expectation will be one to watch, and any prediction above 3 per cent, which is outside the central bank's target band, could see the kiwi rally as investors boost their pricing for an interest rate hike.

Investors have been paring back their forecast track for the official cash rate as the economy cooled down, and they're picking 54 basis points of hikes over the next year, according to the Overnight Index Swap curve.

Nervous investors are still waiting to see what comes, if anything, of a proposed meeting between Japan's Prime Minister Naoto Kan and Bank of Japan Governor Masaaki Shirakawa.

The yen's strength has been a cause of concern, and markets have been chattering that the central bank is poised to intervene.

Khoon Goh, ANZ New Zealand head of market economics and strategy, said the Bank of Japan would need a coordinated approach for intervention to succeed, and with most countries wanting to devalue their currencies, the bank can't intervene successfully.

The kiwi climbed to 60.45 yen from 60.03 yen on Friday in New York. The seven strategists surveyed by BusinessDesk are more divided on where the currency will go on a trade-weighted basis, with four having a negative bias, though only one is calling an outright decline, and three expecting it to go sideways this week.

The kiwi rose to 66.32 on the TWI from 65.91 last week.

European Central Bank council member Axel Weber told Bloomberg TV that Europe needs to keep its stimulus in place until the end of the year, wiping any upbeat sentiment investors have about the state of the region, while sovereign debt continues to plague Europe's outlook.

BNZ's Jones said credit default swap spreads widened last week, and the region's sovereign debt is still a concern for the market. The kiwi climbed to 55.56 euro cents from 55.26 cents on Friday in New York, and was little changed at 45.35 pence from 45.27 pence.

On the radar this week is American housing data and the Richmond Federal Reserve's manufacturing index. An estimate of second-quarter growth in the US Germany's IFO survey will also come under scrutiny as Europe's biggest economy continues to bear the brunt of the region's recovery.

Wednesday, August 11, 2010

Australia growing faster, Govt admits

Finance Minister Bill English has admitted Australia's economic growth is outstripping New Zealand's and says that in the long term the Government is determined to turn that around.

Mr English and Prime Minister John Key have been under pressure in Parliament over National's commitment to close the wage gap with Australia, with Labour saying it is widening and accusing the Government of failing to do anything about it.

Mr English today said Australia had a higher growth rate because its economy had not been in recession, and because of the huge demand for its minerals.

"Australia's mineral boom is likely to mean it will perform better than New Zealand in the near term, but it is the long-term trend we are determined to turn around," he said.

"The only way we can permanently lift New Zealand's economic growth is through considered and consistent reform and change year after year."

He said New Zealand's economic growth in the three years to 2008 had been unbalanced and sluggish, and while Australia's economy grew by 11.5 per cent in the four years to March this year, New Zealand's grew by just 2 per cent.

Australia's minerals were in such high demand they made up 70 per cent of its exports, while New Zealand's leading export industry, the dairy sector, made up 20 per cent of exports and prices had not increased by as much as those for minerals.

Labour's finance spokesman, David Cunliffe, has been leading the attack over the wage gap.

He said today Mr English's claim that National inherited a bad economic situation ignored Labour's achievements, such as the world's lowest unemployment rate, the longest post-war economic expansion and halving gross government debt while pre-funding superannuation.

"Every time Bill English repeats his mantra it sounds thinner and more ridiculous," Mr Cunliffe said.


Lifestyle No 1 reason for investor migrants Lifestyle No 1 reason for investor migrants

New Zealand's lifestyle is more important than business and tax issues to migrants moving here, a study has found.

A dozen investor migrants and one investor's wife were interviewed for an Immigration New Zealand and Investment New Zealand-commissioned study aimed at finding messages to lure potential investor migrants.

"It is clear that this decision to migrate is a heart decision ... emotive topics were far more resonant for these migrants than facts and rationality," the report said.

"Business and tax issues came a distant second to lifestyle and community."

Thirty 30 potential messages were developed for the research, and the migrants were asked to select the message that appeal most strongly to them.

The top two messages were "New Zealand is a great place to bring up a family" and "New Zealand is a small country with a strong sense of community".

A message that strongly did not find favour at all was "Investing in New Zealand isn't about just relocating - it's about regenerating your business."

Any references made to "government" - such as one that said "The New Zealand Government understands it takes time to get your offshore tax affairs in order" - also didn't go down well.

Some said it was difficult to establish business networks.

"I've been here for one and a half years and am just finding my way in. It's a much smaller market and difficult to get established," one said.

"Children are a critical element in the migration decision," the report said.

"When young they are clearly an important motivating factor but by the time they hit the teen years they can become a barrier."

A senior marketing lecturer at Massey University, Dr Henry Chung, said the study confirmed what many already knew.

"The wealthy see the investor migrant category as a pathway to come to New Zealand, usually for the lifestyle or for their children, and not necessarily to do business or make money.

"New Zealand is such a small economy, and usually, a would-be business migrant would be better off staying put in their country of origin."

By Lincoln Tan

Monday, August 9, 2010

Ten reasons why house prices have 10pc to fall

I want to detail 10 reasons why I think house prices have another 10 per cent to fall, but first a bit of background.

Back in March 2008 before the Global Financial Crisis hit and before finance companies collapsed en masse, I predicted house prices would fall 30 per cent from their late 2007 peaks.

I got a lot of stick for saying such an outrageous thing. Our Home Loan Affordability analysis showed then that prices were unaffordable for most and I was worried about the stability of the global financial system, although not the New Zealand system.

I thought New Zealand house prices had been pumped up with NZ$100 billion of foreign debt over the past 5 years and would subside once the cheap foreign credit dried up.

Then most of the property finance companies collapsed through May, June and July of 2008. Lehman Brothers and AIG collapsed in September 2008 and global credit markets froze through until early 2009. All hell appeared to be breaking loose and there was genuine fear for the future of the financial system.

In early October Australasia's banks were granted government guarantees and between July 2008 and April 2009 the Reserve Bank of New Zealand cut the Official Cash Rate from 8.25 per cent to 2.5 per cent, helping to bring the 2 year mortgage rate down from over 9 per cent to under 6 per cent. This stabilised the economy and the housing market, where prices had fallen as much as 11 per cent by early 2009.

So in early 2009 I revised my view on house prices to a fall from the late 2007 peak of 15 per cent, rather than the 30 per cent I forecast a year earlier. House prices bounced through mid 2009 thanks to the drop in interest rates and the decision by many investors to abandon low interest rates in banks, a collapsing finance company sector and a discredited stock market to put yet more leveraged cash into rental property.

Also, it appeared, New Zealand's economy had dodged a bullet because of our stable banking system and our close connections to the strong-growing Australian and Chinese economies.

But the fundamental problems had not gone away. Housing was still vastly overvalued compared to incomes, households were carrying too much debt, and the cheap foreign credit had dried up.

And now those fundamentals are coming home to roost.

In the last six to eight weeks the sheer weight of these problems has ground down growth in the economy and the housing market to a virtual standstill.

Reports on the housing market from Quotable Value, REINZ, Barfoot and Thompson and First National indicate the winter of 2010 has been awful for the housing market. Buyers have gone into their shells and those that haven't are demanding price reductions.

Those that still want to borrow are reporting the banks are being cautious about Loan to Value ratios and the types of property being bought, in particular apartments, townhouses and sections.

Two events locally and one internationally seem to have been the catalysts for this slowdown. The May 20 Budget was initially welcomed by property investors as being a weaker crackdown on property tax breaks than they had feared, but it was still a crackdown of sorts.

Also, the Reserve Bank's widely expected decision to start putting up the Official Cash Rate from June 10 appears to have shocked those who thought interest rates would stay low for a long time. The European Financial Crisis in May to June was the final nail in the coffin.

So now prices are falling again.

Here's why I think they have another 10 per cent to fall, taking the fall from the late 2007 peak to 15 per cent. QV figures show prices are now down 4.7 per cent from the late 2007 peak.

1. The cheap foreign credit has dried up

Before the Global Financial Crisis banks could borrow as much as they wanted for around 15 basis points above the prevailing wholesale interest rates. That cost rose above 200 basis points early in 2009 before subsiding to around 120 basis points earlier this year.

The European Financial Crisis boosted that cost to back over 150 basis points and now it's clear that the cost is never going back to the 'normal' levels of 2002-2007 when New Zealand's banks borrowed almost NZ$100 billion on these 'hot' money markets and passed it on to home buyers at a sharp margin.

This chart shows how much those margins have risen during the crisis. Interest rates are likely to remain around 1 percentage points higher than they would otherwise have been.

This makes it harder for the banks to offer fixed mortgage rates that are significantly cheaper than floating rates and keeps the margin between mortgage rates and the OCR relatively high.

2. Home loans remain unaffordable for most in the bigger cities

The Roost Home Loan Affordability reports that we prepare show that it still takes 61.8 per cent of a single median income earner's after tax pay to afford an 80 per cent mortgage on a median priced property in New Zealand.

In Auckland Wellington, Hamilton, Tauranga, Queenstown, Nelson and Christchurch that portion of after tax income is between 65-75 per cent.

New Zealand's house price to gross income multiples are still well above historic norms and those of other countries such as Britain and America, albeit not Australia.

Those with two incomes in provincial cities such as Wanganui, Palmerston North, Invercargill, Whangarei and New Plymouth can still afford to buy a house, while first home buyers with two incomes can also afford a cheaper property in these markets.

Rodney Dickens makes the point in his piece about the property outlook here.

3. New Zealanders are migrating to Australia again.

The exodus of New Zealanders to Australia through 2008 was a major reason for the decline in house prices through mid to late 2008.

During 2009 the exodus slowed as the Australian economy slowed, but it has restarted again in recent months as Australian wages are now growing at a rate of 5.5 per cent while New Zealand wages are growing around 1.5 per cent.

Australia's unemployment rate has fallen to 5.1 per cent versus New Zealand's on 6.8 per cent. The likely reduction in non-New Zealand immigration to Australia after the upcoming Australian election will intensify the pressure for New Zealanders to migrate to Australia. The wage gap between Australia's average weekly earnings and New Zealand average weekly earnings has blown out to NZ$643 from NZ$565 in the last two years.

That translates into an annual gross wage gap of NZ$33,400, up from NZ$23,000 two years ago. New Zealand wages are now on average worth 60 per cent of the Australian equivalent, down from 66 per cent two years earlier.

At current wage growth and exchange rates, New Zealand wages will be half those in Australia within 7 years. By then annual wages will be NZ$65,000 higher in Australia than New Zealand.

4. The property tax changes are hurting more than expected

The tax changes in the 2010 Budget were less than some had expected or hoped or feared, depending on your exposure to property. But they are having a real impact on demand for residential investment property, particularly by those already heavily geared.

It is forcing many to ask whether than can afford to take the risk of going negatively geared when they may not be able to claim so much of the losses back against their regular incomes.

The IRD is also cracking down around the fringes of the property trading, LAQC and family trust areas. The recent Penny vs Hooper case has sent a chill through the sector.

Independent economist Rodney Dickens believes the property tax changes are having as big an impact on property demand as a 100-150 basis point increase in the OCR.

5. The developed world is deleveraging from property bubbles

The forces of deleveraging globally cannot be underestimated. The scale of the debt now embedded into developed economies in Britain, Europe and America is enormous.

Consumers, in particular, but also governments, will spend at least 20 to 30 years either repaying or restructuring debt to reduce their debt loads.

This chart here shows the scale of the debt in the US economy, the world's biggest. To reduce leverage levels to anything near normal will take decades of slower growth, less consumption, more savings and higher interest rates. Debt is now much higher than it ever was before the 1929 Depression.

New Zealand's banks depend on these international funding markets and will be affected in one way or another by this huge sinking lid of deleveraging.

6. NZ households have hit debt saturation point

New Zealand's household debt to disposable income hit a peak of 159 per cent in the fourth quarter of 2008, right at the time of the Global Financial Crisis. Since then it has been trending down as New Zealanders chose either not to take on any more debt or chose to repay debt.

Reserve Bank figures show many New Zealanders either left their mortgage repayments at relatively high levels, even though interest rates had fallen, or 'downsized' their houses and repaid debt.

Leverage is reducing. It has a long way to get back to 'normal' levels of around 100 per cent, which is widely seen as the sustainable maximum for any government or household.

To get back to around 100 per cent, New Zealand's household sector would have to repay around NZ$45 billion of debt over the next five to seven years.

House prices will not rise without the impetus of extra debt.

7. Our debt is relatively high compared to many others

New Zealand's household debt to disposable income ratio is actually higher than some of the countries such as Britain, America, Spain and Italy, who are seen as heavily indebted and in danger of being ostracised by lenders.

New Zealand is lucky in that government or sovereign debt is much lower than in those countries, but it's the reason why our government can't afford to 'pump' up the economy with deficit spending.

That will restrain the ability of our government to restart economic growth with heavy government spending.

The risk is that foreign lenders will work out how indebted we are and increase our interest rates.

8. Rents are not increasing in most places

Data from the Department of Building and Housing up until the end of June shows the median rent across New Zealand has been flat since December 2008 at NZ$300/week.

However, they have risen in Auckland in recent months, particularly for larger houses rather than apartments.

However, rental growth remains significantly below inflation and has stubbornly remained less than growth in house prices.

Landlords looking to increase rents more than wage growth have consistently failed to impose such increases.

Increasing costs and the potential removal of tax breaks will dampen demand from residential property investors, given rental growth will not be enough to compensate for higher costs and the removal of tax breaks.

That sends a new chill across the market.

9. Banks face even more funding pressure

The pressure from the big banks to pass on increased funding costs and to restrict their lending growth will become more rather than less intense in the coming two to three years. This will keep the pressure up on interest rates and ensure banks remain cautious.

European and US banks have to replace over US$2 trillion worth of funding in the coming 18 months, raising the likely cost of such funding on international markets.

The Reserve Bank's Core Funding Ratio (CFR) is expected to increase from 65 per cent to 75 per cent over the next two years, forcing the banks to raise more funds from the expensive long term and local funding markets rather than the cheaper 'hot' short term money markets.

The likely imposition, albeit slowly, of tougher rules for capital and leverage by the Basel Committee for international capital rules will also keep credit growth contained in coming years.

10. The baby boomers will start selling down their houses and rental properties to free up cash

Fresh research published over the weekend by the Bank for International Settlements estimates real New Zealand house prices could fall more than 35 per cent over the next 40 years as a growing population of elderly are forced to sell assets to a smaller population of younger people to fund their retirement and health care costs.

By Bernard Hickey

Friday, August 6, 2010

Unemployment jump puts pressure on RBNZ

A surprisingly large rise in the unemployment rate in the June quarter is putting pressure of the Reserve Bank of New Zealand (RBNZ) to stop hiking interest rates.

Many economists believe the central bank will hike up the official cash rate - now at 3 per cent - once more at its next policy review on September 16, then pause.

Some question that scenario and predict the monetary policy tightening from historic lows begun in June is now on hold.

The New Zealand unemployment rate rose to 6.8 per cent in the June quarter, reversing most of a sharp fall in the March quarter, according to the Household Labour Force Survey published today by Statistics New Zealand.

The New Zealand dollar fell immediately to US72.75c from US73.52c but consolidated at lower levels.

The 6.8 per cent unemployment rate was significantly higher than economists predicted and resulted from the number of unemployed people growing at a faster rate than the labour force.

In May, Statistics NZ stunned financial markets by reporting the March quarter unemployment rate fell 1.1 percentage points to 6 per cent. It was the first fall in the rate since the December 2007 quarter, and the largest fall since the survey began in March 1986.

"This rise in unemployment follows an unseasonal drop recorded in the March 2010 quarter and indicates a period of volatility in the labour market," Statistics NZ said today.

The RBNZ was expecting a steady unemployment rate of 6 per cent, but economists said it should now pause for thought.

"We believe the Reserve Bank should now be pausing. The domestic economic recovery is lacklustre and commodity price support is waning," said Goldman Sach JBWere economist Philip Borkin.

Westpac senior currency strategist Imre Spezier said the headline grabbing number raised questions about the quality of the survey and caused people to question if the Reserve Bank will hike, but the detail in the survey was positive.

"It has increased the chances of a pause next month but we still think they will go," he said.

To go in two quarters from an unemployment rate of 7.1 per cent to one of 6.8 per cent was more in line with history and consistent with other data on the economy, said Speizer.

Borkin said the headline unemployment number likely overstated the weakness in the labour market.

"The fall in employment was entirely driven by a 1.6 per cent quarter-on-quarter fall in part-timers. Full-time employment rose 0.2 per cent," he said.

Hours worked rose 0.6 per cent, suggesting that firms are looking to utilise more labour resources. The participation rate was unchanged 68 per cent.

Borkin sees a 60 per cent chance of a pause at the next review, and expects the official cash rate to stay at 3 per cent for the rest of 2010.

ASB economist Jane Turner still expected a rate increase in September, followed by a pause in October and December and was predicting a cycle peak of a 4.5 per cent, down from 5 per cent previously.


Thursday, August 5, 2010

Dollar falls as unemployment up

The New Zealand dollar fell after unemployment data for the June quarter surprised on the upside after surprising on the downside last quarter.

Investors are scratching their heads but said the 6.8 per cent unemployment rate in the June quarter is consistent with a slow recovery and increased the chance that the Reserve Bank of New Zealand (RBNZ) will pause in its next interest rate review or the one after that.

The drop in the unemployment rate from 7.1 per cent to 6 per cent in the March quarter had been hard to reconcile.

The NZ dollar fell sharply on today's data from US73.57c to US72.75c but quickly consolidated and was at US72.95c by 5pm. It was US73.52c at 8am compared with US73.44c at 5pm yesterday.

"There was a big reaction immediately and then it stabilised quickly," said Imre Speizer, senior currency strategist at Westpac.

He said the headline grabbing unemployment number raised questions about the quality of the survey and caused people to question if the RBNZ would hike next month, but the detail in the survey was positive.

"It has increased the chances of a pause next month but we still think they will go," he said.

To go in two quarters from an unemployment rate of 7.1 per cent to one of 6.8 per cent was more in line with history and consistent with other data on the economy.

But the central bank was not getting traction with its monetary policy tightening because yields in the wholesale money market have fallen, rather than risen.

The two-year swap rate has fallen around 40 basis points since the RBNZ started tightening. It fell around five to seven basis points to 6.39 per cent today.

The NZ dollar also fell against the Australian dollar to be A79.68c by 5pm from A80.16c at 8am and A80.49c at 5pm yesterday.

It was at 0.5544 euro from 0.5558 yesterday, and 62.83 yen from 62.72.

The trade weighted index fell to 67.37 by 5pm from 67.68 at the same time yesterday.


Tuesday, August 3, 2010

Forecasters expecting jobless rate to rise

Economists expect the June quarter's unemployment rate, due on Thursday, to retrace some of the March quarter's jaw-dropping decline from 7.1 to 6 per cent.

The consensus among forecasters is that the unemployment rate will rise to 6.4 per cent, reflecting a rise of 0.4 per cent or 8700 in the number of people employed.

That would represent a slowdown in job growth from the outsized 1 per cent increase recorded in the March quarter.

Business sentiment surveys support the big-picture conclusion that the employment cycle has turned into a recovery phase.

The Institute of Economic Research's quarterly survey of business opinion has recorded steadily rising reported employment levels for a year now, while hiring intentions are slightly above their long-run average.

ANZ chief economist Cameron Bagrie said the survey's findings suggested continued modest improvement in employment, while the National Bank's business outlook survey indicated the possibility of a more sizeable increase, in spite of declining hiring intentions since May.

ANZ is picking an unemployment rate of 6.3 per cent.

Bank of New Zealand head of research Stephen Toplis said that with the Reserve Bank seeming to have relaxed the urgency with which it intended to raise interest rates, all eyes would be on Thursday's data to see if they corroborated the bank's newfound pessimism.

But Statistics New Zealand's household labour force survey, the official measure of unemployment, has been erratic of late. Since June last year it has recorded unemployment rates of 5.9, 6.5, 7.1 and 6 per cent.

"This means that two of the four largest movements in the [24-year] history of the series have occurred in the last year. Given this degree of volatility, almost any outcome should be taken with a pinch of salt, especially by policymakers," Toplis said.

BNZ's pick for the unemployment rate is 6.3 per cent.

Westpac research economist Dominick Stephens is forecasting 6.2 per cent. A lot depended on the reason for the exceptionally steep fall recorded in the March quarter, he said.

It could have been a sampling error - always a possibility when extrapolating from a survey, even a large one like the labour force survey which covers about 30,000 people - or problems with seasonal adjustment.

The normal pattern is for a rise in employment in the December quarter, to do with the holidays and seasonal work in agriculture, which is then reversed in the March quarter, a pattern the statisticians adjust for.

But this year it broke down. The number of people unemployed did not rise as usual in the March quarter. It fell 5400 in raw or unadjusted terms. The average for the past 25 years has been an increase of 11,000.

If the March number was a statistical aberration, as many market economists believe, an upward correction in the June data can be expected.

However, the other possible explanation for the March quarter's surprise, Stephens said, was that forecasters got it badly wrong and the household survey correctly reported what had happened.

"After all, the consensus of New Zealand economists has a poor record in forecasting unemployment, with a consistent bias towards forecasts that are too high," he said.

"Perhaps employers are finding it easier to find workers now, whereas employment growth was hamstrung by a shortage of workers in the last decade."

The Department of Labour reports that the number of skilled jobs advertised online rose 10 per cent in the June quarter, continuing a year-long improving trend. But skilled job ads remain 31 per cent below their peak in March 2008.


6 per cent - Unemployment rate in March quarter, down from 7.1 per cent in the December quarter.
6.4 per cent - Consensus forecast of unemployment rate for June quarter.

Wages and salaries rising slightly, says Stats NZ

Salaries and wages are going up slowly, with a small rise in the June quarter showing employment is barely picking up.

The labour cost index (LCI) published by Statistics New Zealand (SNZ) today put the annual rate of salary and wage growth, including overtime, at 1.6 per cent, and 0.4 per cent in the June quarter.

This follows an increase of 1.5 per cent in the year to the March 2010 quarter, and a steady decline in the growth of salary and wage rates, including overtime, from a peak of 4 per cent in the year to September 2008.

The salary and wages rates went up for both the public sector by 2.1 per cent and the private sector by 1.5 per cent in the year to June.

The quarterly employment survey (QES), also published today, found an increase of 2.5 per cent in total paid hours in the year to June - the first annual increase in total paid hours after six consecutive quarters of annual decline.

And full-time employees rose by 1.3 per cent, increasing on an annual basis for the first time since the September 2008 year.

SNZ said the major contributors were the professional, scientific, technical, administrative, and support services; and the arts, recreation, and other services industries.

The average total hourly earnings rose by 2.1 per cent for the year, following an identical result in the year to March, which had been the lowest annual increase since the same increase in the December 2004 year.

SNZ said seasonally adjusted, total gross earnings rose 1.8 per cent for the June 2010 quarter, while seasonally adjusted paid hours went up 1.2 per cent.


Wednesday, July 28, 2010

Shortfall in migrants could cost NZ economy 'over $1b'

New Zealand is threatening to undershoot the number of migrants it needs to keep the economy healthy, say immigration consultants.

Immigration New Zealand has returned its lowest number of "expressions of interest", after a period of six months where selections have been around 30 per cent lower than previous years.

If the trend continues, less than 13,500 applications will be selected this year.

The numbers of skilled and business migrants finally approved could fall far short of the 27,000 to 30,000 people the New Zealand Residence Programme targets, an immigration commentator has said.

Mike Bell, who runs the online move2nz site, says this is the lowest selection since the present rules were introduced in 2005.

"At this rate, it suggests that an additional 5500 people would be required to meet the minimum numbers under the quota," said Mr Bell.

The direct financial impact on New Zealand of fewer skilled migrants coming could be a loss of more than $1 billion, because an average migrant family spends about $200,000 in New Zealand to start their new lives.

But other immigration observers say the impact could be greater, as it would leave New Zealand short of skills in vital industries and stall economic growth.

"This is worrying. There may be concerns for jobless New Zealanders but slashing skilled migration numbers is not the solution," said Dr Henry Chung, senior marketing researcher at Massey University.

Immigration expert Paul Spoonley says the global economic crisis has also resulted in a reduced number considering migration, and this could impact on migration numbers to New Zealand this year.

But head of Immigration Nigel Bickle says it is on track to meet immigration targets, despite the low selection on July 14.

Wage gap with Australia wider

Let open part of the conservation land like 1/4 or 1/8 for mining, increase job opportunity, boost the economy, attract more foreign investor, as the result Nz will be more powerful economically.

Australian workers are being paid even more than their Kiwi cousins since National became the Government.

The Dominion Post newspaper reported that while Economic Development Minister Gerry Brownlee was saying the wage gap had reduced since his party came into office, figures it obtained comparing average weekly earnings in November 2008 and February this year painted a different picture.

They showed New Zealand wages grew by 5.2 per cent compared to 6.17 per cent for Australia.

Australia's ordinary average wage rose from A$1165 to A$1243 ($1433 to $1529) while New Zealand's went from $891 to $947.

On yesterday's currency rates, the gap widened from about $540 a week in December 2008 to around $580 in March this year.

Australia weathered the global financial crisis in better shape than New Zealand, avoiding recession while New Zealand did not.

Yesterday in Parliament Brownlee said it would take time to work out exactly how much the gap would close by after the October 1 tax cuts, but the gap between the two countries "is certainly a lot less" than under Labour.

Closing the gap with Australia was something National campaigned on.

In a May speech reported by NZPA Labour leader Phil Goff ridiculed the Government's pledge to do that.

"To the contrary, wages have risen faster in Australia over the last year. Our unemployment is higher than Australia's by a significant margin for the first time in a decade."

Goff said while Australia was boosting employer contributions to superannuation the Government here had done the opposite.

Australia's top tax was higher than New Zealand and the reason New Zealanders were going to live there was wages, which the Government had not managed to lift.

He said GST, ACC increases, higher power bills, and increasing mortgage rates would also hit New Zealand workers.

At the time Finance Minister Bill English said Labour advocated more debt and higher taxes at a time of financial constraint.


Business confidence falls for third month

Business confidence has fallen for the third consecutive month, and has almost halved since reaching a decade high in February.

There was now a clear change of direction which was beyond what could be put down to "usual monthly volatility," the National Bank says in its latest business outlook survey.

Just 28 per cent of respondents expect business conditions to improve in a year, down 12 points from the previous month.

Leading the decline were the agricultural and manufacturing sectors with business confidence in those areas falling 14 points from June.

"We characterised last month's decline in confidence as the economy merely shifting from a gallop to a canter. Perhaps this month is seeing a shift from a canter to a trot."

Firms' own activity expectations fell seven per cent, but held up better overall, with 32 per cent of respondents expecting better activity in the coming year.

All sectors, bar manufacturing recorded declines in own activity reading.

Just eight per cent of respondents expected to hire staff in the coming year, a fall of five points.

The construction sector fared the best of all the sectors in this area, posting a four per cent increase in the month - something the bank says could be due to the numbers of employees who were moving to Australia, rather than a sign that things are expected to pick up.

Investment intentions fell five points, while profit expectations fell 10 points to a net nine percent of business who expect to see an improvement in their bottom line in the next year.

Interestingly, just 31 per cent of respondents expect to be putting prices up, down from 39 per cent in June, in the next year.

The result was surprising given the impending GST hike, the bank said.

"Perhaps this is an indication of the tough demand environment firms are facing, and the reality that there will be a lot of consumer resistance to price rises, no matter what the cause."

The bank said most respondents were resigned to the fact the Reserve Bank will lift the Official Cash Rate again tomorrow.

"But with signs that the economy is not surging away and momentum is levelling out, we find it difficult to envisage rates will move up every six weeks."

Thursday, July 22, 2010

Weak pound lures Kiwi investment

New Zealand has climbed up the rankings of countries investing in Britain, taking advantage of a weak pound.

It was among the top 20 investors into Britain, ranking 16th - up from 19th last year, with 24 NZ companies setting up in Britain in the last year.

Inward investment from New Zealand bucked the global trend, which saw figures drop around the world.

The United Kingdom High Commission says the number of investment projects in Britain fell by 7 per cent last year but investment into Europe dropped by an average of 10 per cent and global investment flows declined by around 40 per cent.

Dollar figures for investment were not available but New Zealand firms had invested in 24 "projects" in 2009-10, up from 18 the previous year.

The UK High Commissioner to New Zealand, Vicki Treadell, said the strong results from New Zealand showed Britain was a natural European investment destination for New Zealand.

"For many Kiwi companies the UK is the best place to start their international business experience. We work the same way and talk the same language," she said.

"The continued strength of the Kiwi dollar, as well as the UK's overall attractiveness as a destination for foreign investment, means it's a great time for Kiwi businesses in the UK."

Leading the number of investment projects last year was the United States with 484, followed by Japan with 107.

The New Zealand dollar was worth 46.8p last night.

By Grant Bradley

Money: Cheques dying a slow death

New Zealanders wrote one-third fewer cheques last year than they did six years earlier, as consumers opted for quicker payment methods.

Latest estimates from the New Zealand Bankers' Association (NZBA) show cheques now account for just six per cent of all New Zealand domestic payments (excluding cash), and the rate in which they are declining is between seven and nine per cent per year.

Preliminary figures due out shortly show just 134,065,977 cheques were processed in New Zealand during 2009, down from 206,018,930 during 2003.

New Zealand Bankers' Association chief executive Sarah Mehrtens said consumers were increasingly swapping the "cumbersome" cheque book for the convenience and ease of electronic transactions.

Not only was swiping a card a lot quicker, it was also a considerably safer form of paying, she said.

Preliminary figures show eftpos use almost doubled in the six years to 2009, while internet banking trebled during the same period and last year overtook cheques as a more popular payment method.

Mehrtens said anecdotal evidence suggested cheques were most commonly used by people over 60 years of age, and mainly for paying utility bills.

Other significant users were businesses for payments such as supplier invoices and dividend payouts, she said.

Internationally there was a move towards phasing out cheques, with the United Kingdom and Ireland set to remove them from their economies by 2018, the association said.

Mehrtens said it was too early to say if, or when a similar move might be adopted here.

"As an industry banks are continually reviewing the range of payment methods available, and cheque payments are part of that process."

NZBA members were closely monitoring these developments and were "looking for lessons that may be applied to New Zealand," Mehrtens said.

Oil giants BP and Shell both said they stopped accepting cheques several years ago, while Foodstuffs, which operates Pak 'n Save, New World and Four Square, said the vast majority of its stores still accept this form of payment.

Progressive Enterprises said cheques accounted for less than five per cent of all transactions in stores.

The company has no plans to phase them out, a spokesperson said.

BP New Zealand spokesperson Neil Green said the company stopped accepting cheques eight years ago as the rate of use declined, coupled with the introduction of ATMs in stores.

The decision to stop accepting cheques also reduced the risk of fraud, he said.

Foodstuffs general manager of retail Rob Chemaly said most stores accepted cheques when provided with satisfactory ID and a fee of 25c.

Shell petrol stations no longer accept cheques and haven't done so for six years.

"One of the things that our customers value the most is speed of transaction - they quite rightly don't want to be standing in a queue waiting for people to fill out cheques, write their details on the back, provide ID and fill out the stubs.

"Our customers want to get in, get what they want and get out quickly to get on with their day," spokesperson Jonathan Hill said.

Interesting cheques are the only payment method the Department of Building and Housing accepts for residential tenancy bond payments, but is set to move to an online system in the next year or so.

Spokesperson Jeff Montgomery said the move was purely customer driven.

"The feedback we have had from landlords is that the only reason they use their chequebook is for bond payments."

Montgomery said the DBH used to accept cash for bond payments, but this posed a significant security risk.

2009 preliminary figures

Eftpos: 1,191,761,110
ATM: 207,653,954
Credit card: (all NZ issue credit cards used globally): 242,352,783
Credit card: (all credit card transactions in NZ): 248,452,661
Internet banking: 143,074,467
Electronic credits: (includes automatic payments and direct credits): 366,059,140
Direct debits: 120,231,525
Cheques: 134,065,977

By Susie Nordqvist

Saturday, July 17, 2010

Inflation now 1.8pc - lower food prices offset tobacco hike

The consumers price index (CPI) rose 0.3 per cent for the June 2010 quarter, Statistics New Zealand said today, which means annual inflation is now running at 1.8 per cent.

This morning's inflation numbers are slightly lower than what many expected, with economists and the Reserve Bank picking 0.5 per cent for the quarter - a 2 per cent annual inflation rate.

This follow a 0.4 per cent rise in the March quarter, when the CPI annual rate rose 2 per cent.

Higher tobacco, transport, and housing prices were partly offset by lower food prices prices in the latest figures.

Statistics NZ manager Chris Pike said cigarette and tobacco prices rose 8.7 per cent, reflecting excise duty increases.

Food prices fell 0.9 per cent, reflecting lower prices for meat, poultry, and fish (down 3.3 per cent) and fruit and vegetables (down 2.6 per cent).

The transport group rose 0.9 per cent in the June 2010 quarter, reflecting higher prices for petrol (up 1.4 per cent) and second-hand cars (up 2.4 per cent).

The housing and household utilities group rose 0.5 per cent, with higher prices for rentals for housing (up 0.5 per cent) and electricity (up 1 per cent).

The average pick among market economists polled by Reuters was for the CPI to rise 0.5 per cent, which would keep the annual inflation rate steady at 2 per cent. That was also the Reserve Bank's forecast.

Goldman Sachs JBWere economist Philip Borkin said the "downside
surprise" for the Reserve bank was a pleasant one, ahead of what is arguably going to be a challenging period for policymakers.

"At a time when the domestic economic recovery is lacklustre (with data and various industry anecdotes nothing but mixed) and risks remaining around the pace of global recovery, in our eyes the Reserve Bank is going to have to contend with inflation likely rising over 5 per cent year on year on the back of government charges and a hike in GST - a somewhat uncomfortable scenario."

The Reserve Bank, said Borkin, was assuming that "the coming temporary increase in inflation is assumed to have an only limited impact on medium-term inflation expectations".

"We do not feel today's data has any major implications for monetary policy. We see the Reserve Bank is rightly more concerned about medium-term inflation and there are still a number of question marks on this front; in particular, whether inflation expectations remain anchored."

Borkin said he thought the Reserve Bank would pause in its move towards raising the Official Cash Rate before the end of this year, though he did still expect a 25 basis point hike at the end of this month.

"But as the recent domestic data attests to (and the soft CPI today supports at the margin), we believe there is a risk that this pause comes earlier than our current forecasts."

ANZ Bank senior economist Khoon Goh described today's CPI numbers as "soft across the board - especially when you consider that most of the increase in the headline number was due to a large increase in tobacco excise taxes."

If the tobacco tax increase was excluded, underlying CPI was up just 0.1 per cent in the quarter.

This morning's subdued CPI would be " the last for a while", said Goh, " as various government related policy changes is set to lead to large increases in the CPI over the coming quarters."

Nonetheless, the starting point was better than what the Reserve Bank was expecting. Goh said he expected to see another increase in the Official Cash Rate - 25 basis points (0.25 per cent) later this month.

Today's figures, along with other recent data, suggested " some waning in growth momentum", said Goh.

CTU Economist and Policy Director Bill Rosenberg said the Reserve Bank should be holding interest rates down in light of the lower than expected inflation rate announced today.

"The Reserve Bank overestimated inflationary pressure and underestimated the grounds for concern at the state of the economy," he said.

"The main concern now is about the impact of GST on inflation heading into 2011 and the pressure this puts on workers and families who missed out on decent tax cuts and have had low or no wage increase."

Inflation has averaged just under 3 per cent over five years, held up by the non-tradable sectors (where prices are not disciplined by international competition or exchange rate) averaging close to 4 per cent.

The Reserve Bank forecasts annual non-tradables inflation of 2 per cent in the June quarter, but that is as good as it gets. It expects it to be back above 3 per cent in a year.

The impending GST rise is expected to add 2 per cent to the CPI, and the emissions trading scheme will impact on fuel and electricity prices, adding 0.3 per cent.

The Reserve Bank in its June monetary policy statement said it expected the slack in the economy generated by the recession to be eliminated by early next year and that increased pressure on domestic resources would result in higher non-tradable inflation.


Google earnings rise - but miss target

SAN FRANCISCO - Google's second-quarter earnings missed analysts' target as higher expenses and the fallout from the European debt crisis dragged down the internet search leader.

The letdown stemmed from Google's expanding payroll and a run-up in the US dollar that has been driven by fears that the euro will crumble if governments in Greece, Spain, Portugal and Italy default on their perilously high debts.

The worries hurt Google because about one-third of the company's revenue comes from Europe, and customer payments made with the euro translated into fewer dollars than a year ago.

Google added nearly 1,200 employees in the second quarter to end June with more than 21,800 workers.

Despite the currency squeeze and rising expenses, Google's net income and revenue still rose at a fast clip. But the earnings growth wasn't quite as robust as analysts had hoped, a factor that seemed to amplify investor concerns that had already been weighing on Google's stock price.

Google shares fell US$19.79, or 4 per cent, in extended trading Thursday after the release of results. Earlier, the company finished the regular session at $494.02, up $2.68.

The report wasn't entirely bad news. In a positive sign for the overall economy, marketers were willing to pay more for the online ads that generate virtually all of Google's income, and people are clicking on the commercial messages more frequently.

Those trends provide another indication that more companies and shoppers are feeling a little better as they recover from the worst economic downturn in more than 70 years.

Google, which is based in Mountain View, earned $1.84 billion, or $5.71 per share, in the April-June period, up 24 per cent from $1.48 billion, or $4.66 per share, a year ago.

If not for expenses covering employee stock compensation, Google said it would have made $6.45 per share. That figure was below the average estimate of $6.52 per share among analysts polled by Thomson Reuters.

Revenue climbed 24 per cent to $6.82 billion, from $5.52 billion a year earlier. After subtracting commissions paid to its ad partners, Google's revenue stood at $5.09 billion - about $10 million above analyst projections.

- AP

By Michael Liedtke

Friday, July 9, 2010

Facebook credits to be sold in Kiwi stores

Facebook is partnering with a Malaysian company to sell credits at retail outlets across Asia, New Zealand and Australia for the first time, aiming to make it easier for millions of people to purchase virtual goods and play games on the social networking site while boosting revenue for developers.

Electronic payments company MOL - part of the business empire of tycoon Vincent Tan - will offer the online currency from Aug. 1 at more than 500,000 outlets including 7-Eleven stores and Internet cafes in five Southeast Asian countries, India, Australia and New Zealand, company spokesman Nor Badron said Friday.

The move is targeting people who don't have a credit card, particularly younger Facebook users, and those who don't want to take the risk of making payments online.

"Asia has a huge gaming community, and it's typically young people," Nor said. "The penetration for credit cards is very low... so the developers are not making money and missing this opportunity."

Nor said MOL already sells prepaid credits for other online games at its established network of stores, but it will be the first time that consumers can buy credits for Facebook's applications, including such popular games as Mob Wars and FarmVille, without credit cards.

MOL, which last year bought social networking site Friendster, announced the partnership with Facebook in a press release Thursday.

"We view this agreement as a major opportunity to broaden the availability of a simple, unified currency that can be used in games and applications across Facebook," said Vaughan Smith, director of business and corporate development at Facebook, in the press release.

"Working with MOL means we can offer the benefits of Facebook Credits to millions of people in Asia using a payment system that is already widely used and trusted," he said.

In Southeast Asia, the credits will be sold in Malaysia, Thailand, Singapore, Indonesia and the Philippines.

More than 70 percent of Facebook members use applications, and payment transactions and volume have seen a double-digit increase over the last quarters, according to MOL.

Tuesday, July 6, 2010

Consumers feeling comfortable financially - survey

I really doubt about the survey which was publish by NzHerald. Are the surveyor asking the right people ? Almost everything in our daily lives have increased but not our wage though. We should be more worried financially.

Consumers are feeling more comfortable about the economy and their personal finances than they were in February, a poll by UMR Research has found.

The Consumer Comfort Index (CCI), carried out last month, found 48 per cent of 1100 New Zealanders surveyed believed the economy was either excellent or good, up from 32 per cent in February and 37 per cent in April.

As a result, the index improved to minus 1 per cent, compared with minus 18 per cent in February and minus 12 per cent in April.

The CCI was based on how people felt about the economy and their personal finances, and how they rated their ability to buy the things they wanted and needed.

The latest result meant the number of respondents feeling negative about financial aspects of their lives only just outnumbered those feeling positive, UMR said.

The US CCI currently sat at minus 43 per cent, compared with minus 49 per cent in February.

Asked about their personal finances, 58 per cent of respondents rated them as either excellent or good, up three percentage points since February.

Forty-one per cent said now was a good time to buy the things they wanted and needed, up six percentage points since February.

Respondents across the country were more positive, with Auckland's CCI now at plus 1 per cent, up from minus 19 per cent in February, and Christchurch now at plus 2 per cent, up from minus 9 per cent.

Wellington consumer comfort leapt from minus 18 per cent in February to plus 7 per cent now.

The rest of the North Island was at minus 4 per cent, up from minus 22 per cent, and the rest of the South Island was now on minus 9 per cent, up from minus 16 per cent.

Men were more positive than women, at plus 7 per cent (up from minus 14 per cent in Feburary), and women at minus 8 per cent (up from minus 22 per cent).

The poll of 1100 people was carried out June 16-22 and had a margin of error of plus or minus 2.95 per cent.


Auckland house prices slump in June

Auckland house sales slumped last month as winter malaise set in among buyers amid declining demand in the property market.

The number of sales sank 16 per cent to 665 in June from a month earlier, and was down 23 per cent from a year ago, according to Barfoot & Thompson, Auckland's biggest real estate firm.

The average sale price dropped 3.6 per cent to $523,058 month-on-month, and was up an annual 0.2 per cent.

"Housing market activity is likely to remain very weak throughout the remainder of 2010, reflecting waning demand," said Jane Turner, economist at ASB Bank.

"Given the weakening fundamentals we expect to see house prices decline slightly this year, however, the low level of supply, as indicated by weak consent issuance and the low level of new listings, will limit the degree of downside pressure on house prices."

House prices are expected to fall at an annual pace of 2 per cent for the next two years with several years of subdued sales volumes, according to Westpac Bank.

That comes after the government clamped down on tax benefits for property investors in its May Budget, while the Reserve Bank embarked on tightening monetary policy.

Barfoot chief executive Wendy Alexander said the Budget contributed to lower sales, but didn't have much impact on prices.

The firm added 1,194 new listings in June, down 13 per cent from May, and had 5,794 properties on its books at the start of July. At the start of June, it had 6,023 properties on its books, and on July 1, 2009, it had 5,597. ASB's Turner said new listings had been "very subdued" for some time.

Barfoot's average weekly rent rose to $403 last month from $398 in May and $388 a year earlier. It rented out 690 properties in June, up from 649 a month earlier, though down from its 735 in 2009.

Turner said anecdotally, landlords have been lifting rents in response to the budget's tax changes, though "the ability to increase rents may be limited by prospective tenants' ability to pay given the weakness in wage growth over the past year."

Wednesday, June 30, 2010

Petrol and electricity prices to rise with ETS

Life is getting harder and harder, everything seem to go up at the 3rd quarter of the year. GST and ETS. Increase the petrol and electricity will trigger the food price and etc to shoot up. The business operation increase, the thrifty business owner will only charge on the consumer. Consumer or normal citizen will always get the blow 1st.

Petrol prices will increase by up to 3c and electricity by up to 3.3 per cent on Thursday when the emissions trading scheme takes effect.

Energy, fossil fuels, industrial processes and transport will face extra costs from July 1 as a result of the scheme.

Prime Minister John Key said yesterday "a disproportionate amount" of the costs will be paid by households in relation to their emissions.

Mr Key warned power companies against using the scheme as an excuse to raise prices.

The government has estimated on its climate change information website that the average household will face $165 a year in additional costs.

Many power and petrol companies have announced exactly how much more their customers will pay from Thursday.


* Mercury Energy is increasing electricity prices by 3.3 per cent starting from Thursday and Contact Energy by 3.2 per cent.

* Trust Power said it would not make any one-off increases, but extra costs would be gradually absorbed.

* Genesis Energy said it would take some time to review the impact of the ETS on its business before making a decision about retail pricing.

* Meridian Energy has not yet returned calls but has previously said it had no plans to increase prices in the short term.


* Caltex said it would be raising its petrol prices by 3c and diesel by 4c on Thursday.

* BP said it did not yet know how it would change its prices and would review the situation on Thursday.

* Gull said it would "definitely not" raise its prices until at least next week. It had planned for the emissions trading scheme by introducing biofuels, which would be spared from much of the expected price increases on fossil fuels, it said.

* Shell's New Zealand owner and operator, Greenstone Energy, said it could not say exactly how much its prices would increase on Thursday, but the government's estimate of 3c to 4c "should not be too far off".

* Mobil said it could not say how much it would increase its prices as it would depend on "competitive responses".

By Michael Dickison

Auckland, Wellington, among 'best value' cities in the world

Listed "Best Value" Cities in the world ? Is this a good sign or a bad sign ?

The bad sign is the Economy isn't growing strong enough. Wages is not increasing yet GST is going to increase soon. Inflation is coming to hunt the citizen. What more to say the government is going to charge the citizen on "Emissions Trading Scheme".

The good sign is Nz will attract more visitors coming for holiday, will this boost up the economy on average ? Nope, cause workers dont get wage raise, so they cant spend extra, and the money wont be circulating to boost the economy.

Auckland and Wellington have emerged as two of the cheapest cities to live in the world, according to a global study of 214 centres.

The latest Cost of Living Survey from Mercer puts Auckland in 149th place and Wellington in 163rd place, beating all Australian cities surveyed in offering value for money.

The survey measures the comparative cost of more than 200 items in each location, including housing, transport, food, clothing, household goods and entertainment.

It is used to help multinational companies and governments determine compensation allowance for their expatriate employees.

Auckland was placed 138th and Wellington 139th in 2009 but only 143 cities were measured in that study.

Topping the list of most expensive cities across five continents this year was Luanda in Angola, with Tokyo coming in at second place, followed by Ndjamena in Chad in third.

Karachi in Pakistan is ranked as the world's least expensive city in the survey.

It is the first time the ranking of the top 10 most expensive cities has featured three African urban centres.

Mercer senior researcher Nathalie Constantin-Metral said the results reflected the growing economic performance of the African region to global companies across all business sectors.

The top 10 also features three Asian cities Tokyo (2), Osaka (6) and Hong Kong (8=).

Moscow (4), Geneva (5) and Zurich (8 =) are the most expensive European cities, with Copenhagen rounding out the top 10.

Constantin-Metral said New Zealand and Australian cities remained cost competitive destinations for companies extending their business into the Asia-Pacific region and when compared to cities including Tokyo (2) and Osaka (6) and other major commercial hubs including Hong Kong (8), Singapore (11), and Beijing (16) - which ranked within the top 20 cities.

New Zealand was also ranked more affordable than Australian cities in the study, including Sydney (24) Melbourne (33), Brisbane (55), Perth (60) and Canberra (74). Adelaide (90) is the Australia's least expensive city.

The New Zealand and Australian dollar significantly strengthened against the US dollar as of February, making these cities more costly for expatriates coming from the US, the report said.

The currency movements reflected the stability of the Australian and New Zealand economies earlier this year, relative to the rest of the world, Mercer said.

Auckland was named as having the fourth-best quality of living, while Wellington was judged 12th worldwide in a separate survey produced by Mercer last month.

Costly cities

1. Luanda, Angola
2. Tokyo, Japan
3. Ndjamena, Chad
4. Moscow, Russia
5. Geneva, Switzerland
6. Osaka, Japan
7. Libreville, Gabon
8. Zurich, Switzerland
8= Hong Kong
9. Copenhagen, Denmark

Most affordable

205. Windhoek, Namibia
206. Tegucigalpa, Honduras
207. Kolkata/Calcutta, India
208. Addis Ababa, Ethiopia
209. Bishkek, Kyrgyztan
210. Ashkhabad, Turkmenistan
211. La Paz, Bolivia
212. Islamabad, Pakistan
212. Mangua, Nicaragua
214. Karachi, Pakistan

Friday, June 18, 2010

Soros: Europe faces recession, stagnation

LONDON: Europe faces almost inevitable recession next year and years of stagnation as policymakers’ response to the eurozone crisis causes a downward spiral, billionaire US investor George Soros said on Tuesday.

Flaws built into the euro from the start had become acute, Soros told a seminar, warning that the crisis had the potential to destroy the 27-nation European Union.

The lack of a correction mechanism or of a provision for countries to leave the eurozone could be a fatal weakness, he said.

Germany had imposed its criteria on how a 750 billion euros rescue mechanism for the eurozone should be used and was imposing its own standards – a trade surplus and a high savings rate – on the rest of Europe, Soros said.

“But you can’t be a creditor country, a surplus country, without somebody being in deficit.

“That’s the real danger of the present situation – that by imposing fiscal discipline at a time of insufficient demand and a weak banking system, by wanting to have a balanced budget you are actually ... setting in motion a downward spiral,” he said.

Germany would do relatively well because the decline in the euro had boosted its economy, he told the seminar on the eurozone crisis organised by two think-tanks, the European Council on Foreign Relations and the Centre for European Reform.

“Germany is going to smell like roses but (the rest of) Europe is going to be pushed into a downward spiral, stagnation lasting many years and possibly worse than that,” he said.

“In other words, I think a recession next year is almost inevitable, given the current policies,” Soros said, later clarifying that he meant a recession in Europe as a whole.

“If there is no exit, (it) is liable to give rise to social unrest and, if you follow the line, social unrest can give rise to demand for law and order and (sow the) seeds of what happened in the inter-war period,” he said.

Political-will to forge a common fiscal policy in Europe was absent and since Europe was liable to move backwards if it did not advance, “the crisis of the euro could actually have the potential of destroying the European Union,” he said.

European banks had bought large amounts of the sovereign bonds of weaker eurozone countries for a tiny interest rate differential, Soros said.

“That’s one of the reasons why the banks are so over-leveraged and why the German and the French banks own Spanish bonds,” he said.

“Now ... they have a loss on their balance sheets which is not recognised and it reduces the credibility of those banks, so the banking system is in serious trouble.

“The commercial paper market, for instance, in America is now refusing to lend to European banks so there is even a funding crisis and the ECB (European Central Bank) has to step in and the banks are unwilling to lend to each other,” he said. — Reuters

More than 50,000 jobless in Auckland

About 51,000 Aucklanders are jobless, with job-market observers warning that figure is unlikely to fall any time soon, reports The Aucklander.

The unemployment rate climbed from 5.1 per cent in March 2009 to 7.3 per cent three months ago, the last official figure.

"The largest employment declines in Auckland have occurred in manufacturing, retail trade and construction. In addition, there has been a decline in employment in the financial and insurance service industry," says Benedikte Jensen, the Government's Labour Market Information head.

She says the labour market is not yet as robust as before.

"While employment is expected to recover in many of these industries, it is important to understand that because many of these sectors were severely affected during the downturn, it will be some time before activity and employment levels return to pre-recession levels," she says.

At the start of the year, only 38 per cent of businesses surveyed by the Northern Employers and Manufacturers Association thought they would hire permanent staff by the second half of the year - in other words, the next few months.

"My key message here is that it's improving but it's still very patchy," says David Lowe, EMA's employment services manager.

In the short term, more salespeople will be needed than administrators. "It's not unexpected that when businesses recover the first area they look for is sales to grow their businesses," he says. "Once they begin to generate work, obviously they need to get staff to look after the business."

Heather Walker, director of the NZ JobSquad and Mana Recruitment, says more jobs are being advertised, both online and in print. "Top shortages have been reported as IT consultants, engineering managers, nurses and midwives, local government staff and solicitors."

Mr Lowe says employers may be needing tradespeople as soon as the recession eases. "We are saying to businesses, if they think they are going to need these people in the next little while, they should think about actually getting them now so they get the pick of the bunch."

Wednesday, June 16, 2010

NZ trailing Australia on pay rises

New Zealand continues to lag behind Australia when it comes to salary increases, a survey has found.

The Hays Salary Guide - which examined salary and recruiting trends for over 1800 job functions in 16 sectors across Australia and New Zealand - found 43 per cent of Australian employers were planning salary increases in their next review, compared with 33 per cent in this country.

Thirty-three per cent of New Zealand employers were also planning to take on new staff this year, the survey said, while the number across the Tasman was around 10 per cent higher.

Hays New Zealand managing director Jason Walker said Australia was four to six months ahead of New Zealand in terms of its economic recovery and there was a risk of losing workers across the Tasman where more opportunities were available.

New Zealand firms needed to concentrate on retaining staff now, he added, in order to lessen the impact of a future skills shortage that was looking increasingly likely.

"We believe in the next 12 months ... we'll start seeing skills shortages and candidates in higher demand probably having more control over the recruitment process."

Employers and Manufacturers Association advisory services manager David Lowe said a "level of uncertainty" still existed among New Zealand employers regarding the economic recovery.

Salary increases were a permanent investment, similar to buying machinery, he said.

"It really comes down to the confidence people have in the future, and I think one in three [New Zealand employers planning salary increases] is a reflection of the improving confidence, but also recognition that people are still a bit cautious."

Lowe said a strengthening Australian economy was positive for New Zealand as that country was our biggest trading partner.

The survey also indicated 80 per cent of employers in New Zealand's mining sector were planning salary increases of between 3 and 6 per cent in their next review.

Forty-seven per cent of employers in the professional services sector, and 42 per cent in IT & Telecommunications, indicated they would give pay rises in the same range.

Eighteen per cent of employers planned to increase temporary workers, up from 12 per cent last year.

By Christopher Adams

Sunday, June 6, 2010

G-20 Fails to Agree on Bank Tax, Calls for Joint ‘Principles’

By Gonzalo Vina and Theophilos Argitis

June 5 (Bloomberg) -- Group of 20 nations failed to agree on an effort to impose a global tax on banks that was aimed at making the financial industry shoulder the cost of bailouts, settling instead for a common set of guidelines.

G-20 finance ministers and central bank governors said in a statement in Busan, South Korea, that governments will take account of each nation’s “circumstances and options.” The result allows nations such as Canada, China and Brazil, whose banks suffered less during the global financial crisis, to skip introducing a tax. European countries and the U.S. have advocated the levy.

“If we’re living in an ideal world, a global financial tax would be a good idea but in reality, it is almost impossible to implement,” said Tomo Kinoshita, an economist at Nomura Holdings Inc. in Hong Kong. “There are too many obstacles.”

Today’s statement leaves in place an initiative to seek tighter global standards for capital levels at banks, which is a “more practical” way to help reduce the risk of financial crises, Kinoshita said. Banks have opposed the effort, warning that the costs may curb credit expansion and economic growth.

European governments and the U.S. have advocated a bank tax to be adopted in every major country to prevent lenders from relocating to jurisdictions that don’t charge the levy. The International Monetary Fund was asked by the G-20 last year to recommend how to tax the industry.

Ministers today said they now recognized that there’s a “range of policy options” open to countries and agreed instead to adopt “principles” that protect taxpayers and reduce the risks of further crises.

Canada’s Opposition

Canadian Finance Minister Jim Flaherty, speaking at a press briefing at the conclusion of the two-day G-20 gathering in Busan, said the plan lacked majority backing among G-20 nations and is a “distraction.” He said “there is no agreement” to proceed with a tax.

Instead, Canada has proposed that countries force lenders to keep “contingent capital” on hand to ensure taxpayers don’t end up paying the bill for any future bailouts. Such securities could convert to equity in a time of crisis to ensure that lenders remain well capitalized.

The IMF recommended that financial institutions’ non- deposit liabilities and the sum of their profit and compensation should be taxed to help pay for future bailouts. Led by Canadian opposition, G-20 officials at a meeting in Washington pushed back talks by ordering the IMF to study the issue further.

IMF Task

“The problem is not uniformity, the problem is to do things which are consistent and that do not create arbitrage in terms of regulation and taxation,” the fund’s Managing Director Dominique Strauss-Kahn said in Busan, Korea’s second-largest city. The principles will be written in a way that avoids inconsistency in the different systems, he said.

The G-20 separately said that “it is critical that our banking regulators develop capital and liquidity rules” tough enough to ensure lenders can withstand further crises. The rules should be agreed by November, with implementation targeted for the end of 2012, the statement said.

Chancellor of the Exchequer George Osborne said that Britain will push ahead with a plan to implement a tax and that he will unveil further details in his June 22 budget. The U.K. wants tax revenue to finance general government expenditure, marking it aside from other European nations who want the tax to fund future bailouts.

“If one country goes alone in the bank tax, there will be a risk of regulatory arbitrage,” said Venkatraman Anantha- Nageswaran, who helps manage about $140 billion in assets as global chief investment officer at Bank Julius Baer & Co. in Singapore.

Thursday, June 3, 2010

Kiwis willing to miss mortgage payments

Up to 20 per cent of New Zealanders say they would be prepared to miss a mortgage repayment over the next 12 months, according to new research.

The latest Consumer Priorities Study by credit reporting agency Dun & Bradstreet showed that up to a quarter of New Zealanders said they would be late paying bills over the next year, with 20 per cent saying they might even skip a mortgage repayment.

In the past 12 months 21 per cent of New Zealanders were late in settling their credit card accounts, 20 per cent were late in paying their home phone bills, and 19 per cent were late in paying their mobile phone, internet and pay TV bills.

Tough economic times were cited by the majority of respondents as the reason behind their late payment, with 47 per cent saying they simply didn’t have enough money to pay on time. For others it was a case of laziness or forgetfulness – with 31 per cent saying they had just forgotten to pay their bills on time.

Different age groups had different problem areas with their financial obligations. People aged 18-34 were more likely to be late in paying their internet and pay TV bills, 35-49 year-olds were more likely to be late with their mobile and home phone bills, while older Kiwis were more likely to struggle to pay their credit card or council bills on time.


John Scott, general manager of Dun & Bradstreet New Zealand, said New Zealanders needed to realise that lagging in paying their bills would have a negative impact on their credit history.

"A late payment, or worse, recurring late payments, have disapproving effects on an individual’s credit history and can cause long term damage that takes years to amend," he said.

Mortgage lenders, banks, utility companies and other credit providers all rely on a person’s credit history when deciding if they want to do business with them.

Wednesday, June 2, 2010

Kiwis losing four homes a day to mortgagee sales

New mortgagee sales figures show ordinary Kiwis are losing their homes at a rate of four a day, as the effects of the recession still linger.

Terralink International's latest data shows there were 202 registered mortgagee sales in March of this year, and two thirds of the affected properties were owned by private homeowners.

At the height of the recession it was largely companies and property investors who were facing mortgagee sales.

But a year on Terralink Managing Director Mike Donald says it's now mums and dads who are unable to make payments on their family homes.

“Increasingly we’ve got mum and dad homeowners that are now struggling, for instance they have lost their job, haven’t been able to secure another job, run out of capital; it puts pressure on trying to pay that mortgage.”

In March there was an average of six mortgagee sales a day.


Govt's online tax calculator 'misleading'

The forecast inflation rate is not included in the online tax calculator which helps people figure out the impact of the budget on their taxes, Finance Minister Bill English confirmed today.

The budget last month included income tax cuts across the board. Budget documents showed the cuts off-set by the increase in GST to 15 percent.

Labour today said the Government had misled the public by overstating the benefits of the tax cuts.

It was "unacceptable" the Government's online tax calculator did not take into account Treasury's forecast of 5.9 percent inflation in 2011, the party's finance spokesman David Cunliffe said.

The calculator also did not include potential increases in rent, ACC and childcare costs, he said.

Labour's calculations said minimum wage earners would be worse off until 2014 under the changes.

Mr English said the online calculator included income tax cuts, the rise in GST and compensation in Working For Families, Superannuation and benefit payments.

It did not include forecasts, he said.

The calculator had seen 360,000 page views from New Zealand, Australia, the United Kingdom, Europe, the United States and Asia.

Mr English said the website was "conservative" in its estimates as it assumed people spent all their income.

Countering Mr Cunliffe's figures, Mr English said forecasts showed wage growth was projected to be greater than price increases over the next four years.

Mr English skirted around the subject of the calculator in Parliament today until Speaker Lockwood Smith told him to answer the question.


House sellers drop their prices

House sellers have dropped their prices to the lowest level since January, as large numbers of houses remain unsold heading into winter, according to a monthly property report.

The average asking price fell 3.6 percent in May to $407,349, compared with April, property website said.

With the large number of houses remaining unsold - it would take 46.9 weeks to sell the 51,980 properties on the market - a tipping point was reached in May where both high inventory and prices were unsustainable, chief executive Alistair Helm said.

"Last year we were in a similar situation, but it was the volume of sales that decreased. This year it's price," Mr Helm said

New listings were up 17 percent on a year ago, but fell 4 percent from April to 11,733.

There had been no evidence so far that the Government's budget on May 20, making property investment less attractive, had had any effect on asking price, he said.

The asking price was up 1.5 percent in May on a year ago, although it was still 5 percent below the market's peak in October 2007.

"While we've not seen a deluge of cheap property for sale, it does appear that we've peaked on price and there's an opportunity here for buyers," Mr Helm said. is half-owned by the Real Estate Institute of New Zealand, with six real estate companies owning the rest.


Monday, May 31, 2010

Inflation makes savers the biggest Budget losers

There's been a lot of discussion about the inflationary effects of the GST increase since the Budget, but everyone is looking in the wrong direction. They're talking about consumers and interest rates and ignoring savers who are taking the biggest hit.

Labour is pointing to the combined effect of the GST hike, increased power and petrol prices from the Emissions Trading Scheme, and increased ACC levies as a sign the Government is increasing taxes and making consumers poorer. Even the Treasury is forecasting annual inflation will hit 5.9 per cent in 2011.

The Government responds it has structured the income tax cuts and various top-ups to ensure both middle and lower income earners are not disadvantaged.

Tuesday, May 25, 2010

Property pundits at odds over Budget

A property seminar promoter says the Budget will not force out landlords and drive down house prices.

Arron Davis, who runs Investments and Projects, disagrees with SuburbWatch's Kieran Trass who predicts house prices will fall 5 to 10 per cent in the next year.

Trass told Campbell Live moves in the Budget would be extremely detrimental to investment housing.

His prediction is based partly on the loss of the depreciation tax write-off.

"Many developers have sold negatively-geared properties, and used the tax benefit of depreciation to justify the purchase price in the first place, to people who now will lose the benefit of that depreciation.

Of course some people will exit the market," Trass said, adding that he expected rental property to be in short supply and rents to rise.

But Davis said the Budget would create a stronger economy.

"When the economy is growing and there is inflation, property prices go up," Davis said.

Davis, originally from Australia, said he had run about 500 seminars.

"The main financial impact for property investors arising from the Budget is changes to rules on depreciation - changes that will cost an investor on average only another $15 a week per home.

"The fact that GST will increase means that the cost of new housing and section prices has to go up which will bring along established home values with them," Davis said.

Richard Carver, director of house-builder Jennian Homes, said building would not get cheaper because rising GST would push up the price of land and buildings.

Any staged payments by people in the midst of building made after October 1 would incur higher GST, he said.

"Builders will be under pressure to have homes completed before the increase date," he said.

Andrew King, vice-president of the Property Investors Federation, said his organisation was not entirely happy with all aspects of the Budget.

But he was pleased that the Government had "seen through many of the false claims made against rental property and resisted calls for large and discriminatory tax increases for the industry".

Those claims partly centre on the value of residential property investment, variously estimated to be worth between $60 billion and $200 billion.

King said landlords would not consider big rent rises which had been predicted if harsher tax increases were introduced last week.

"Withdrawing the ability of rental property owners to depreciate their rentals is disappointing, although chattels can still be depreciated which will limit the adverse effect," King said.

The GST increase would have a minor inflationary effect on rental prices, although GST does not apply to mortgage interest costs which are often the largest expense for rental property providers, King said.

Reducing income to increase Working for Families entitlements was never a realistic reason for investing in rental property, he said.

The changes to loss attributing qualifying company structures was aimed to tax profits at the investors' top marginal tax rate rather than the lower company rate.

"There is concern about the level of losses that can be claimed and this will need to be looked at more closely."

Tax cuts: How much extra you will get?


Low-income couple Munish and Sarah Pathak have gained almost twice as much as expected from the Budget, despite paying GST even on their rent.

They will gain almost $27 a week from the income tax cuts, about $6 a week more than expected, because the tax rate on income between $14,000 and $48,000 a year has been cut from 21 per cent to 17.5 per cent instead of the predicted 19 per cent.

They will still pay an extra $14 a week in GST, as expected. But their net gain from the tax switch alone will now be $13 a week compared with the $7 they expected.

Mr Pathak, 26, works for 60 hours a week at $13.26 an hour, just above the minimum wage, as a security guard at Auckland City Hospital. He earns $41,371 a year gross, giving him almost the maximum benefit from the cut in the 21 per cent tax rate.

His wife, Sarah Pathak, 20, is a fulltime nursing student on a student allowance of $150 a week. Her allowance will go up by $3 a week in line with a 2 per cent increase in all benefits to compensate for the GST hike.

The couple pay $245 a week for a room in a hostel. Rents in such long-stay accommodation are subject to 60 per cent of the standard GST rate, so the GST on their rent will go up from 7.5 to 9 per cent.

Their net $13 gain could still be wiped out if their rent and other costs rise by more than 2 per cent.

Their landlord, Abacus Unitel general manager Mike Newman, said this week that their rent would rise by more than that because he held off the annual adjustment in February so he would not have to raise prices twice in one year.

"I don't think there will be enough balance," Mr Pathak said last night.

"With increasing GST, that means an increase in everything else like your rent. The tax cuts are not going to give you that much money anyway, so it will be pretty much the same thing."


Average-income couple David Hall and Anne Mason will be only marginally better off after yesterday's Budget - and could end up worse off depending on the impact on their investment property.

Mr Hall, a Hamilton teacher, earns the average wage of $50,000 a year. Ms Mason earned $12,000 last year as a part-time English teacher for foreign students, making their household income only fractionally short of last year's national median of $63,900.

Figures released with the Budget show that, if they have a typical spending pattern, they will pay $19 a week in higher GST from October, but income tax cuts of $25 a week will put them $6 ahead.

But they could be hit by three other changes.

First, they will get slightly less in Working for Families tax credits than they might have expected because the $36,827 income level at which credits start reducing has been frozen, instead of adjusting with inflation.

Second, they benefit from the 20 hours free childcare policy for most of the 24 hours a week that their 3-year-old spends in childcare. They are unsure how the Budget's changes in childcare funding will affect them.

Third, they own an investment property through a loss-attributing qualifying company, which currently allows them to deduct losses at Mr Hall's marginal tax rate of 33 per cent but have their profits taxed at the company rate of 30 per cent.

The Budget will make their company a "flow-through" entity. This appears to mean that Mr Hall's new marginal tax rate of 30 per cent will apply to both losses and profits.

"It will probably affect us slightly," Ms Mason said.

She noted that experts thought the Budget was "good for the economy".

"We might start spending more and feel more relaxed."


Superannuitants Les and Ngaire Williams will get a double boost from the Budget - they get the same tax cuts as everyone else, plus a 2 per cent lift in their pension.

World War II veteran Mr Williams, who is 90 next month, and his wife, 77, rely largely on their married superannuation of $489.42 a week, apart from a small "something in the bank".

Their super will go up in October to $511.06 after tax, a rise of 4.4 per cent, because of the combination of tax cuts and a 2.02 per cent increase in the actual rate of super.

They could also be hit harder than usual by the GST increase because they own their own house. The GST hike will be softened for many younger people still paying rent or mortgages, because rents and mortgage payments are generally exempt from GST.

But Mr Williams said the couple managed on their existing pension and were "not great high flyers".

Even if they spent their entire pension on items subject to GST, their GST bill would go up in October by only $10.87 a week, leaving them $10.77 a week better off.

Mr Williams was sceptical last night.

"They get out and quote a lot of figures but you have no way of checking on those figures whatsoever," he said.

"I thought Key shouldn't have gone on the way he went when he was going at Goff [on TV]. I thought Goff put it over quite well."

Other welfare beneficiaries will not get the same double benefit as superannuitants. For example, the gross unemployment benefit for a single adult will actually be cut by $5 a week to offset the tax cuts and keep the increase in the net benefit to just 2.02 per cent - up from $194.12 a week to $198.04.

Gross benefit rates will also be cut to keep the net increase to 2.02 per cent for sickness, invalid and domestic purposes benefits and student allowances.

Monday, May 24, 2010

Rich-poor gap basically same after Budget, English claims

A Budget that delivers thousands a week in tax cuts to the super wealthy and a few dollars to those on the minimum wage will leave the gap between rich and poor "about the same", Finance Minister Bill English said yesterday.

Labour and the Greens have strongly criticised the Budget for delivering windfalls in real terms to high earners while leaving lower-income earners with small gains to cope and facing a spike in the inflation rate next year to 5.9 per cent.

Speaking on TVNZ's Q+A , Mr English said that overall, the Budget would have no significant impact on the rich-poor gap.

"We've achieved a shift in our tax system without making that problem significantly worse in a static sense."

He said other measures in the Budget would make people save more and strive to earn more, as people would keep a greater share of their income.

Last week's tax package will give across-the-board cuts and reduce the thresholds when higher income taxes apply.

A chief executive on $5 million a year will get $4800 extra a week, while a minimum wage earner will be $6.36 better off.

But looked at proportionally, Treasury numbers show that household income across the board will rise by between 0.4 and 0.7 per cent of their current levels, taking into account tax cuts, GST, and other measures such as increases in benefits.

Prime Minister John Key has said those on higher incomes contribute greatly to the economy and need incentives not to take their skills and experience overseas.

Mr English rejected keeping the high tax rate of 38c for incomes higher than $100,000, which Labour has said it will look at.

"We've gone for a comprehensive tax package, we've decided to close as many of the loopholes as we can at the top end."

He said people such as Trade Me founder Sam Morgan, who infamously said he pays virtually no tax, can now focus on investing in economic growth and new jobs, rather than trying to dodge the tax system.

The highest income tax rate will be aligned with the trust rate at 33c, meaning there will no longer be a benefit for those hiding their incomes in trusts. But some business analysts have said the drop in the company tax rate to 28c will mean a new tax dodge will emerge as people hide their incomes in firms.

Mr English also said the Government had not considered state asset sales. He floated the idea on Friday at a post-Budget function by saying there would be strong interest in shares in Kiwibank, but yesterday moved to calm speculation about the issue.