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Speaker 1: How do you revitalize New Zealand capital markets? And you

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Speaker 1: go through some of the investment houses and they've been

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Speaker 1: putting out articles one way or another, sometimes disguise, but

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Speaker 1: asking those re same questions, how does New Zealand capital

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Speaker 1: markets actually get a shot.

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Speaker 2: In the arm given that you know, there's a fair

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Speaker 2: amount of New Zealand beef that goes into the US,

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Speaker 2: and I'm pretty sure a fair amount of that probably

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Speaker 2: goes onto McDonald's Burger's. Given Trump's interest in the Golden Archers,

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Speaker 2: maybe there's a trade opportunity for us.

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Speaker 1: The cryptocurrencies now have an investment legitimacy which will not

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Speaker 1: be broken notwithstanding what happens, and it will speed up

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Speaker 1: moves by central banks and other mainstream financial service providers

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Speaker 1: to get into the space somehow.

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Speaker 3: Cura and welcome to Shed Lunch, brought to you by Cheesy's.

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Speaker 3: My name is Helen Madison, and today on the program

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Speaker 3: we'll be looking back at twenty twenty five, the good,

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Speaker 3: the bad and the ugly, but we'll also be looking

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Speaker 3: towards twenty twenty five and Watson's Store. I'll be joined

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Speaker 3: by Giles Beckford, the business editor at R and Z

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Speaker 3: and Informetrics chief economist Brad Olsen. But before we get started,

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Speaker 3: he's some important information.

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Speaker 4: Investing involves the risk you might lose the money you

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Speaker 4: start with. We recommend talking to a licensed financial advisor.

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Speaker 4: We also recommend reading product disclosure documents before deciding to invest.

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Speaker 4: Everything you're about to see and here is current at

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Speaker 4: the time of recording.

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Speaker 3: Thanks for coming in, Giles and Brad, Welcome to the

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Speaker 3: studio and our last episode of shed launch for twenty

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Speaker 3: twenty four. Let's start with January this year when the

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Speaker 3: Security and Exchange Commission that's the US regulator, actually approved

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Speaker 3: bitcoin exchange traded funds. That's a real difference for crypto

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Speaker 3: and probably legitimizes the fact that it could be an

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Speaker 3: asset class. Giles, how do you think the feed since then?

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Speaker 1: Well, that was the good housekeeping seal of approval, wasn't it.

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Speaker 1: When the SEC comes out and says, yeah, you know

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Speaker 1: it's going future, and everybody figured, let's not play around

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Speaker 1: with actually getting into the crypto. Let's get into the

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Speaker 1: crypto operators. Hence the ETFs that got set up and bang,

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Speaker 1: that was just the touching the blue paper and away

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Speaker 1: it went, and all we've seen since then is just

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Speaker 1: a complete appreciation. Right, it's dominated by bitcoin. You have

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Speaker 1: to say that there's much about the crypto scene which

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Speaker 1: is still dodgy. It is questionable. You just know that

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Speaker 1: there's so much dark stuff happening under the surface, and

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Speaker 1: the amount of crypto that's been stolen so much for

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Speaker 1: it being necessarily secure investment. But all that aside. Once

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Speaker 1: the bandwagon gets rolling, everybody keeps chasing the train, and

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Speaker 1: that's what's happening. And with the prospect now with the

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Speaker 1: new Trump administration saying you know, we're going to make

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Speaker 1: it easier, when you've got the likes of Musk being

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Speaker 1: able to hype it up in particular doge, how coincidental

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Speaker 1: is it that the new department he's going to run

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Speaker 1: to take out the red tape and make government more

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Speaker 1: efficient and cheaper and easier as the acronym doge as well.

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Speaker 1: I mean, oh, it's a complete meme, right, I mean,

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Speaker 1: and they're not going to have the US government sealed there.

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Speaker 1: What they're going to have, in fact, is probably the

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Speaker 1: portrait of being on Musk right behind every employee there.

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Speaker 1: But you have to say that cryptocurrencies now have an

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Speaker 1: investment legitimacy, which will not be broken notwithstanding what happens,

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Speaker 1: and it will speed up moves by central banks and

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Speaker 1: other mainstream financial service providers to get into the space.

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Speaker 2: Somehow, I think it's well though. I mean, yes, it

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Speaker 2: legitimized it a touch, but I think it also gave

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Speaker 2: it a crypto more generally, a bit of an easier

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Speaker 2: entry method, and rather than people having to figure out

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Speaker 2: how their own wallets and everything else worked, you know,

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Speaker 2: you didn't have to go through all the hoopla that

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Speaker 2: was sometimes either a bit dangerous, dodgy or otherwise, and

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Speaker 2: it actually just made it a little bit more convenient

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Speaker 2: through those ETFs and similar I mean, there's still, I think,

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Speaker 2: like you say, a lot of caution, a lot of

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Speaker 2: worry in some areas about it, and people are still

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Speaker 2: dropping new coins all the time. And there was another

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Speaker 2: popular one the other day, the hop tour Girl released

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Speaker 2: a coin that you know, shot up in price and

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Speaker 2: then immediately crashed ninety percent. So again, some people are

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Speaker 2: still putting some pretty serious money into things that they're

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Speaker 2: not fully or aren't fully regulated. But now there's a

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Speaker 2: little bit more of I guess some guardrails around it.

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Speaker 2: That provides a little bit more legitimate to So you're right.

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Speaker 1: It would be interesting to see actually how firm those guardrails

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Speaker 1: are because the US will set the standard for regulation

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Speaker 1: and everyone else is going to take it around the world.

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Speaker 1: Like about one of the bigger operators here in New Zealand,

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Speaker 1: and we've spoken to them a few times recently. They

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Speaker 1: I think are probably being extremely responsible by saying, look,

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Speaker 1: do your due diligence, right, but don't take this as

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Speaker 1: being the be all and end all of your investment future.

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Speaker 1: This firm whom I won't name, but they're saying, look,

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Speaker 1: regard crypto as say a five percent part of a

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Speaker 1: diversified portfolio, right, just be sensible. And I'm thinking these

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Speaker 1: are people who are actually going to earn money out

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Speaker 1: of it, but they're taking a really responsible view, trying

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Speaker 1: to advise people and keep the custom.

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Speaker 2: Well that that's with everything though, right, I mean, the

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Speaker 2: risk conversation is always the biggest one. I still all

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Speaker 2: the time, all through this year, all through the last

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Speaker 2: couple have people coming up and there generally three questions

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Speaker 2: that people on the street want to know. You know,

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Speaker 2: what's the housing market going to do, What's my personal

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Speaker 2: interest rate that I should fix on for and what's

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Speaker 2: my investment strategy? And I always go back, well, what's

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Speaker 2: your tolerance? You know, if you're real happy to sort

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Speaker 2: of maybe put it all on on one thing and

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Speaker 2: it'll either blow up or blow down, as the case

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Speaker 2: might be, then then that's cool for you, if you're

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Speaker 2: willing to lose it all or gain it all. But

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Speaker 2: for a lot of other people who aren't, it's then going, well,

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Speaker 2: how do I sort of match things through? So you're

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Speaker 2: totally right, that's a much more appropriate response and sort

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Speaker 2: of plow it all in on the one option and

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Speaker 2: sort of hope that hope, like heck it works.

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Speaker 3: Sticking with the US, guys, I'm just thinking Donald Trump,

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Speaker 3: president elect. Tariffs has been a big topic, and what

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Speaker 3: will happen to New Zealand In other countries, uncertainty seems

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Speaker 3: to be what we're going for in twenty twenty five, Brad,

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Speaker 3: What are you thinking given the US is our second

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Speaker 3: largest trading partner.

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Speaker 2: Yeah, well, and that's only happened this year, right, the

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Speaker 2: Chinese economy hasn't been going as well. We've now been

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Speaker 2: doing more with the US because their economy has been

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Speaker 2: a lot stronger. That's great, But equally you're right that

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Speaker 2: we're seeing more uncertain times, but perhaps we're seeing more

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Speaker 2: certain uncertainty. You know, it's going to be maybe not

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Speaker 2: as volatile, but there's just so many moving parts that

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Speaker 2: are sort of heading forward. So I think increasingly when

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Speaker 2: we're looking at the US markets and more generally the

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Speaker 2: US economy, I think we know that we're in for

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Speaker 2: quite a lot. You saw some of those early talks

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Speaker 2: this year by Trump saying, look, I might levy tariff's

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Speaker 2: on Mexico, Canada, and China. Now knew about China, we

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Speaker 2: didn't necessarily know who was going to be first off

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Speaker 2: the ranks for the other ones. But again, the reaction

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Speaker 2: that had one changed the currency around quite a bit

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Speaker 2: for New Zealand. But also some of our providers like

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Speaker 2: so Officier and Piker Will they've got manufacturing sites in

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Speaker 2: Mexico that supply North America. So I think it also

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Speaker 2: highlighted to us again sort of the importance in the

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Speaker 2: financial system that the US occupies. We've known that for

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Speaker 2: a long time, but it's been a bit more latent

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Speaker 2: or background, and now all of a sudden it's back

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Speaker 2: to the forefront, because whatever happens there will have sort

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Speaker 2: of ripple effects and maybe bigger ripples than before through

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Speaker 2: to the rest of US.

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Speaker 1: I think Trump's last administration it's slightly indicative of how

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Speaker 1: we might feel the whole thing about tariffs and the like.

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Speaker 1: You know, the one thing that sort of directly affected us,

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Speaker 1: and it was only small fry, was aluminium steel, which

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Speaker 1: the tariffs cost us in the region of say six

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Speaker 1: million bucks I think over that period. But the bigger impact,

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Speaker 1: in fact was the paralysis that attached and Trump brought

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Speaker 1: to the World Trade Organization. Now we believe in the

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Speaker 1: World Trade Organization because it's the referee of the world

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Speaker 1: trading system. It's rules based, and little people like this,

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Speaker 1: when you haven't got financial clout right, you've got to

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Speaker 1: rely on the rules to help you. And the Trump

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Speaker 1: administration last time round, they basically froze the WTO into inactivity.

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Speaker 1: They made it impotent as a trade referee, very simply

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Speaker 1: just because they refused to nominate people to be appellate

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Speaker 1: judges to work out the disputes between people who trying

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Speaker 1: to work out. What's interesting for me is it sheds

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Speaker 1: a bit of a light that there are a significant

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Speaker 1: number of small New Zealand tech companies who have domiciled

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Speaker 1: themselves essentially in the States, and that might be our

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Speaker 1: little secret back door, right that we've got Kiwi firms

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Speaker 1: doing business in the States who will actually be to

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Speaker 1: some extent insulated. Right, they actually might get the advantage

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Speaker 1: of these sorts of things. But we'll wait and see

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Speaker 1: on that one. Trump. Look, there's more bluff and bluster

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Speaker 1: right than you would find Niagara Falls.

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Speaker 2: Well, you just don't know, and I think that's one

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Speaker 2: of the big challenges for everyone, not only in New

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Speaker 2: Zealand but around the world. You're just not sure what

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Speaker 2: is ever going to necessarily come through. I mean, the

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Speaker 2: wider tone I think from this is that trade is

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Speaker 2: going to be more difficult, which is not great news

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Speaker 2: for New Zealand. Equally, I've been quite impressed that this year,

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Speaker 2: you know, we have had a greater focus on trade deals.

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Speaker 2: We've got with the UAE, We've got trade deals with

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Speaker 2: the Golf Cooperation Council, we've got some with Costa ECRA

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Speaker 2: in Switzerland recently. So is still a lot of good

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Speaker 2: moves there. We've had in the last couple of years,

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Speaker 2: both the EU and the UK Free Trade Agreement, So

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Speaker 2: we've still got a lot of options out there, but

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Speaker 2: I think that trading environment is more difficult. The challenge,

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Speaker 2: I think is that the US economy is still such

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Speaker 2: a hefty part of the global market that you know,

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Speaker 2: this year, for example, we saw that when our meat

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Speaker 2: wasn't going as well into China, we could pivot that

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Speaker 2: quite quickly a lot of it, not all of it,

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Speaker 2: but a lot of it into the US because they've

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Speaker 2: got the lowest beef stocks and I think seventy years,

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Speaker 2: so you know, that's where we can send our meat. Now,

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Speaker 2: it does always come through. And you know, we've talked

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Speaker 2: about not only the tariffs but the possible exemptions that

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Speaker 2: maybe we need to try and focus on because Trump

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Speaker 2: won't be looking to target New Zealand, it'll just be

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Speaker 2: probably across the board thing. But given that, you know,

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Speaker 2: there's a fair amount of New Zealand beef that goes

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Speaker 2: into the US, and I'm pretty sure a fair amount

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Speaker 2: of that probably goes into McDonald's burgers. Given Trump's interest

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Speaker 2: in the Golden Archers, maybe maybe there's a trade opportunity

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Speaker 2: for US there, or you know, some sort of exemption.

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Speaker 2: But I mean just the consumption numbers that you're seeing

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Speaker 2: in the US. They are spending like no tomorrow. And

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Speaker 2: I must say, looking at the markets as well, there's

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Speaker 2: part of me that goes, we're too next. I mean

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Speaker 2: that just what's going on there.

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Speaker 3: I'm keen to see what you think of that, Giles too,

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Speaker 3: because the tech stocks and video and the like, it's

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Speaker 3: been insane, but there seems to be no bottom.

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Speaker 1: Well, I don't know, let's be honest. You know, things

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Speaker 1: can run their course. We've been through these sorts of

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Speaker 1: cycles in the pastime thinking that I've been around so long, Right,

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Speaker 1: the Internet wasn't invented when they started journalism. Microsoft was

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Speaker 1: just a twinkle in Bill Gates's eye. But what then

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Speaker 1: turned out was that we are we very quickly had

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Speaker 1: the dot com bubble bang right just on the turn

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Speaker 1: near the late nineties, right, we had the e commerce

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Speaker 1: like that. You know, everybody built so much promise into it,

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Speaker 1: right bang it fell away. But I think, you know,

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Speaker 1: we've got to say that the tech stocks now they

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Speaker 1: have such clouts. You know, when the likes of Nnvidia

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Speaker 1: is what one hundred times bigger than the New Zealand economy,

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Speaker 1: I think there's evaluation of it, so like that, you go, yeah,

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Speaker 1: they're probably here to stay. It's the games that the

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Speaker 1: investment funds want to play, I think, and where the

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Speaker 1: technology will take us where we see that you know,

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Speaker 1: artificial intelligence will be the driver for two, three, four,

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Speaker 1: five years, right, the invidios of this world and all

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Speaker 1: the other chip makers and the associated tech companies must

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Speaker 1: continue to thrive. The Magnificent seven. Who knows if there'll

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Speaker 1: actually be seven or seventeen or three allies all the

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Speaker 1: same companies and who will own them. I mean politics

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Speaker 1: comes in to play because there's a lot of Chinese

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Speaker 1: influence in that tech sector, like it or not, and

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Speaker 1: do the politics of a Trump administration wants to punish

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Speaker 1: the Chinese, as we've just actually seen in the past

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Speaker 1: few days where there's a district court judgment in the

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Speaker 1: States right that TikTok's got TikTok's got to be divested.

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Speaker 1: And so from that point of view, you know, technologies

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Speaker 1: here of the state, there will all be companies and

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Speaker 1: money that drive that. We're going to see more boom,

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Speaker 1: I think. But I think we're just going to say

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Speaker 1: there will be busts somewhere as well.

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Speaker 2: Well. It has been interesting. I saw a chart the

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Speaker 2: other day that because let's be clear, this is mostly

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Speaker 2: about the US markets. It's not that generally you know,

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Speaker 2: stocks and equities and that are just on a rocket

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Speaker 2: ship to the moon. It's the US. And I saw

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Speaker 2: something the other day I think that said that, you know,

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Speaker 2: the US markets are you know, now so far away

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Speaker 2: relative to Europe. It's like the biggest the GAP's ever

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Speaker 2: been in terms of sort of you know, the positioning

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Speaker 2: on the US compared to Europe. And I mean that

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Speaker 2: does highlight that again, there's a lot of growth and fundamentals,

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Speaker 2: there's a lot of money going in there, there's a

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Speaker 2: lot of consumer spending. But I go, the markets are

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Speaker 2: high when interest rates have been high. If interest rates

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Speaker 2: then come down normally that would stimulate a greater level

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Speaker 2: of investment in spending, which would then put the markets higher.

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Speaker 2: So if the markets are high when interest rates are high,

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Speaker 2: and when they're low, then, like you say, I mean,

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Speaker 2: my question is when does it turn around? But I

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Speaker 2: mean the reality is you look at the sorts of

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Speaker 2: numbers that New Zealanders invest, we do put it into

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Speaker 2: the US as well. We're not alone in that fact.

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Speaker 2: So there seems to be correct me up from Wronghound,

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Speaker 2: but there seems to be sort of quite a focus

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Speaker 2: there on people wanting to look at it well.

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Speaker 1: I find interesting though, is that you talk about how

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Speaker 1: the US is just well ahead of the rest of

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Speaker 1: the world. Is that also introduces distortion into capital allocation

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Speaker 1: around the world, And you've got to say, well, if

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Speaker 1: the US is sucking it all up or is putting

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Speaker 1: most of its own resources into the sector, right, how's

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Speaker 1: the rest.

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Speaker 2: Of the world going with the rest of it?

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Speaker 1: That's right? Where's ourbit right?

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Speaker 3: Well, that leads me to the fact that here in

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Speaker 3: New Zealand we've had our highest trading days ever at

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Speaker 3: Cheersey's a lot of that is US fueled because everybody

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Speaker 3: sees great returns, prospects, etc. They're not seeing the same

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Speaker 3: with our own market. Then dead X and Giles. You know,

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Speaker 3: there's been a few shockers and terms of earnings, there's

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Speaker 3: many companies I could talk about, Spark in New Zealand,

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Speaker 3: the Warehouse, the list goes on.

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Speaker 1: Yeah, it's the incredible shrinking inz X, isn't it. You

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Speaker 1: contrast it with thirty forty years ago where it was

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Speaker 1: well driven, well supported. But the in X, you have

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Speaker 1: to say, has just not being able to make any

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Speaker 1: headway in persuading local companies that the exchange is the

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Speaker 1: place for them. What is the ENDINEX for? Essentially, it's

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Speaker 1: a way of raising money. Why do you invest in it? Well,

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Speaker 1: because you, as an investor have confidence in the way

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Speaker 1: companies are run. You would have to save that over

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Speaker 1: the past two to three years in particular, and the

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Speaker 1: case for some companies for the past decade, they've been

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Speaker 1: less than competently run. Right, And I was channeling up

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Speaker 1: the number of companies in this country that have not

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Speaker 1: been paying dividends for the past couple of years. There's

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Speaker 1: some really big ones, right, Sky City, Fletcher Building in

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Speaker 1: New Zealand, some of the retail stocks, right, But they're

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Speaker 1: all saying we're saving our cash, well, saving the cash, well,

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Speaker 1: saving the cash actually to cover some rather big holes

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Speaker 1: in their balance sheets because they made really bad decisions.

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Speaker 1: And I think that's one of the features is that

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Speaker 1: the level of corporate governance and commercial nous that's been

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Speaker 1: applied by some of our publicly listed companies has been

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Speaker 1: shown to be woefully inadequate. Leave aside the one off

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Speaker 1: effects of the pandemic because everybody got a kick in

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Speaker 1: the backside and a kick in the balance sheet for that.

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Speaker 1: Well and good, but you have to say that, you know,

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Speaker 1: the level of shareholder return and the New Zealand market

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Speaker 1: is essentially supported by investors who want dividends. That's what

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Speaker 1: it's all about. It tells you everything that the NSINEX fifty,

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Speaker 1: the benchmark index, includes dividends, right, a lot of other

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Speaker 1: places around the world it doesn't. And I think that

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Speaker 1: a lot of people will have been woefully disappointed. And

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Speaker 1: you can see why people don't have much enthusiasm for

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Speaker 1: actually getting in there. If there's going to be a

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Speaker 1: big IPO. Say, you know, let's just pretend bank k gosh,

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Speaker 1: aren't they just the spectral vision on the horizon? Now

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Speaker 1: that's going to save us? Or Kiwi Bank?

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Speaker 2: Are they?

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Speaker 1: But the point being is that say Kibibank were to list,

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Speaker 1: everybody would be in like the way that people were

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Speaker 1: in for the gent tailors, right, Meridian, Mighty River Power.

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Speaker 3: We're talking twenty eight, aren't we, now, Child, Well, if

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Speaker 3: it happens.

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Speaker 1: At all, it may not happen in any of our

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Speaker 1: investing lifetimes.

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Speaker 2: I've got a lot of time.

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Speaker 1: I think, but I mean I think, you know, serious

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Speaker 1: questions come down to how do you revitalize New Zealand

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Speaker 1: capital markets? And you go through some of the investment

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Speaker 1: houses and they've been putting out articles one way or another,

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Speaker 1: sometimes disguise, been asking those very same questions, how does

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Speaker 1: New Zealand capital markets actually get a shot on the arm,

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Speaker 1: And I'm not sure that anybody's actually got a reasonable

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Speaker 1: answer about that.

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Speaker 2: Well, the question I start to ask is, you know,

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Speaker 2: when does this come to a head, Because you've got

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Speaker 2: those the issues with just canvas, the fact that increasingly

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Speaker 2: seems to be a trend of businesses that are either

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Speaker 2: looking to only list on the Australian markets in Australian Exchange,

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Speaker 2: or they're actually going unlisted here in New Zealand because

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Speaker 2: they don't want all the big obligations and the costs.

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Speaker 2: And so I think one of the reasons that you're

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Speaker 2: not seeing, for example, there as many young people. I

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Speaker 2: know that there's an easy way to vote now and

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Speaker 2: I've done that myself with Macheesy's app, But I look

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Speaker 2: at that and I do find that a lot of

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Speaker 2: times people go, well, I've continued to get the same results,

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Speaker 2: and I feel like, you know, it's not like I

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Speaker 2: can put up a director or eything else. You know,

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Speaker 2: I've sort of got to vote on the pictures that

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Speaker 2: are made by those that sort of seem to have

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Speaker 2: more of the power. What's the point. I'm sort of

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Speaker 2: just voting for the same old, same old. So I

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Speaker 2: think there is a real lack of engagement and a

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Speaker 2: real level of disappointment amongst investors, but who are voting

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Speaker 2: with their wallets and going, well, stuff it, I'll find

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Speaker 2: something better, and they are.

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Speaker 1: Yeah. The one little candle of confidence, if I can

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Speaker 1: call it that, is that I like the more assertive

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Speaker 1: and prominent attitude that the Shareholders Association has taken in

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Speaker 1: the past few years, where they've been willing to stand

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Speaker 1: up whether it's big company or small company and saying

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Speaker 1: what you're proposing isn't good. It works against the interests

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Speaker 1: of small shareholders and us be honest, you know, the

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Speaker 1: Shareholders Association looks after little folks, little folk like me

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Speaker 1: who've got their three hundred shares and you know ABC

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Speaker 1: dot Com, and we we feel the person who's got

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Speaker 1: ten million shares right, well, we've done so why bothered?

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Speaker 1: But you know, we've got some sort of return. But

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Speaker 1: the Sharehold Association says no, you know, big company or

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Speaker 1: small companies say you've got a standard of care and

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Speaker 1: the standard of duty and a fiscal, a fiduciary and

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Speaker 1: legal obligation to look after all shareholders, big or small. Right,

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Speaker 1: So I applaud the Shareholder Association. I actually I think

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Speaker 1: that if there was an organization to belong to as

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Speaker 1: an investor, that would be one that you would look

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Speaker 1: at and say it's worth giving our support, because if

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Speaker 1: somebody's going to be a voice against some of the

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Speaker 1: bigger powers, it'll be then.

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Speaker 2: There's been a bit more sort of talk as well,

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Speaker 2: I feel this year and last as well about sort

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Speaker 2: of putting your money where your mouth is, you know,

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Speaker 2: making sure that for some of those people who are

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Speaker 2: on boards and even a management you know that they

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Speaker 2: need to have some skin in the game to recognize

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Speaker 2: why this loss of value and the lack of outcome

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Speaker 2: is actually important. And I mean you brought up keep Bank,

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Speaker 2: and I sort of feel like that's sort of similar there.

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Speaker 2: I find it pretty difficult to stomach the idea that

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Speaker 2: the government thinks that having a bank is so good,

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Speaker 2: but it's not good enough for them to bank with.

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Speaker 2: Why on earth does a bank? Does a government own

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Speaker 2: a bank that they're not willing to do work with?

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Speaker 3: Speaking of banks, and one of the things that did

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Speaker 3: happen in twenty twenty four is interest rates, which obviously

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Speaker 3: banks have a big part in play, thinking, Brad, we're

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Speaker 3: on the downward cycle, but it doesn't feel like it's

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Speaker 3: champagne time. It's caution still. What's your view on where

408
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Speaker 3: we're going to get to in twenty twenty five.

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Speaker 2: I think the big thing with interest rates at the

410
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Speaker 2: moment is we're looking for where the new goldilocks owners,

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Speaker 2: where is the new normal, because it might not be

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Speaker 2: exactly where it was pre pandemic in twenty nineteen. And

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Speaker 2: I think the difference as well this time is we're

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Speaker 2: not trying to stimulate the economy. We're trying to take

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Speaker 2: our foot off the break and stop restraining it. If

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Speaker 2: you look at where the official cash rade is expected

417
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Speaker 2: to end out around that sort of three ish percent,

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Speaker 2: maybe three and a half percent, that's still quite a

419
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Speaker 2: bit above where it was in twenty nineteen. So I

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Speaker 2: think that that's the sort of the different tone it's

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Speaker 2: we're trying to unlock the economy, but we're not trying

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Speaker 2: to put any sort of boost or noss behind it.

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Speaker 2: We're just trying to get it back to a normal,

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Speaker 2: solid level of operation. So that will be different. I

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Speaker 2: think when we're looking at sort of the next year,

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Speaker 2: there's been a lot more front loading of those intrast

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Speaker 2: rate cuts by the Reserve Bank, and there seems to

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Speaker 2: be a bit more front loading that the retail banks

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Speaker 2: have done as well on mortgage rates and the likes

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Speaker 2: of savings rates and similar as well. So I do

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Speaker 2: wonder there will be further next year. There will be

432
00:23:01,720 --> 00:23:04,560
Speaker 2: more to come, but I think that we're possibly closer

433
00:23:04,600 --> 00:23:07,359
Speaker 2: to the bottom of interest rates than we might think.

434
00:23:07,680 --> 00:23:09,200
Speaker 2: It's just that it will take a while, I think,

435
00:23:09,200 --> 00:23:11,560
Speaker 2: for households to refix. So there's probably another six months

436
00:23:11,560 --> 00:23:14,639
Speaker 2: of quite challenging conditions until midyear when a lot more

437
00:23:14,680 --> 00:23:16,760
Speaker 2: people every fix that all of a sudden got a

438
00:23:16,760 --> 00:23:18,680
Speaker 2: bit more money that they're not spending on the mortgage,

439
00:23:18,800 --> 00:23:21,240
Speaker 2: they can spend that on other things. Business sales start

440
00:23:21,280 --> 00:23:23,399
Speaker 2: to perk up a bit. Businesses then need a bit

441
00:23:23,400 --> 00:23:25,199
Speaker 2: more resource, start to hire a bit more, and you

442
00:23:25,240 --> 00:23:27,560
Speaker 2: start to get again that more I guess it is

443
00:23:27,640 --> 00:23:31,119
Speaker 2: solid level of economic activity. It's it's not economic goal drums,

444
00:23:31,119 --> 00:23:33,000
Speaker 2: but it's not the rocket ship to the moon stuff either.

445
00:23:33,400 --> 00:23:37,199
Speaker 1: Interestingly, just before I came here this morning, one of

446
00:23:37,240 --> 00:23:41,200
Speaker 1: our leading clothing retailers just reported to the internet saying,

447
00:23:41,680 --> 00:23:45,040
Speaker 1: our sales are up ten percent for the first eighteen

448
00:23:45,119 --> 00:23:49,440
Speaker 1: weeks of our trading year, and go ten percent. That's great,

449
00:23:49,480 --> 00:23:51,200
Speaker 1: And I said, but you should have seen what they

450
00:23:51,200 --> 00:23:55,200
Speaker 1: were like last year, so a ten percent rise isn't

451
00:23:55,240 --> 00:23:59,840
Speaker 1: that great. But they made the comment that they found

452
00:24:00,160 --> 00:24:05,199
Speaker 1: their margins were actually stable in an environment where everybody

453
00:24:05,200 --> 00:24:08,399
Speaker 1: else would be doing deep discounting just to get goods

454
00:24:08,520 --> 00:24:12,880
Speaker 1: out the door, right, and to get cash into the tools,

455
00:24:11,880 --> 00:24:17,240
Speaker 1: that whole turnover piece, right, just running fast to stay still.

456
00:24:18,160 --> 00:24:21,080
Speaker 1: And from that point of view, you know, there's been

457
00:24:21,960 --> 00:24:25,440
Speaker 1: a real pressure on margins. In the end, I think

458
00:24:25,480 --> 00:24:29,000
Speaker 1: a lot of firms were hanging on by their fingertips

459
00:24:29,400 --> 00:24:32,320
Speaker 1: through the pandemic. They were saved by wage subsidies and

460
00:24:32,320 --> 00:24:35,960
Speaker 1: the other cheap finance schemes that came through from the government.

461
00:24:36,680 --> 00:24:40,000
Speaker 1: And now that that TAP's been largely turned off, right,

462
00:24:40,119 --> 00:24:43,280
Speaker 1: and people like Treasury and the banks are saying, well,

463
00:24:43,320 --> 00:24:46,600
Speaker 1: we lent you, you know, five hundred thousand dollars during the pandemic.

464
00:24:47,119 --> 00:24:49,880
Speaker 1: Excuse us, can we have some of it back? Right

465
00:24:50,600 --> 00:24:54,000
Speaker 1: in an environment where they're still paying high money for

466
00:24:54,560 --> 00:24:59,439
Speaker 1: their working cash when they're not making sales and wage

467
00:24:59,440 --> 00:25:02,040
Speaker 1: bills are Actually we should note there that their wage

468
00:25:02,040 --> 00:25:04,480
Speaker 1: costs have gone up quite considerably as well. So looking

469
00:25:04,520 --> 00:25:06,600
Speaker 1: at that throw it all together, Yeah, you can see

470
00:25:06,640 --> 00:25:08,840
Speaker 1: why more businesses are failing, and we.

471
00:25:08,800 --> 00:25:10,679
Speaker 3: Probably will have some more failures, you think, o.

472
00:25:11,240 --> 00:25:15,040
Speaker 1: Bounty, I mean, you've got well, four hundred and thirty

473
00:25:15,040 --> 00:25:17,639
Speaker 1: six thousand people. I think by the last Centric report,

474
00:25:17,680 --> 00:25:21,160
Speaker 1: we're in their debt areas, right, four hundred and thirty

475
00:25:21,200 --> 00:25:25,399
Speaker 1: six Now you say, you know, that's enormous. The number

476
00:25:25,400 --> 00:25:30,520
Speaker 1: of liquidations of companies is double in the past year

477
00:25:30,600 --> 00:25:35,880
Speaker 1: or so, in particular construction, retails, a hospital.

478
00:25:37,000 --> 00:25:38,880
Speaker 2: It is interesting, though, because I feel like we're sort

479
00:25:38,920 --> 00:25:42,240
Speaker 2: of back into a almost an economic purgatory position where

480
00:25:42,240 --> 00:25:45,439
Speaker 2: you've got those business closures coming through. You've still got

481
00:25:45,520 --> 00:25:49,240
Speaker 2: some pretty tough operating conditions through in the economy. But

482
00:25:49,280 --> 00:25:51,560
Speaker 2: at the same time you are looking at the likes

483
00:25:51,560 --> 00:25:54,520
Speaker 2: of electronic card data are starting to pick up ever

484
00:25:54,640 --> 00:25:56,359
Speaker 2: so slightly. It's still down on a year ago, but

485
00:25:56,359 --> 00:25:58,679
Speaker 2: it's picking up slightly, and I think it highlights that

486
00:25:58,680 --> 00:26:02,400
Speaker 2: there's still that level of cause amongst consumers that when

487
00:26:02,440 --> 00:26:04,960
Speaker 2: we've looked at that, how that spending has sort of

488
00:26:05,040 --> 00:26:08,480
Speaker 2: changed consumable so you know, your supermarket spend your essentials

489
00:26:08,720 --> 00:26:12,040
Speaker 2: is pretty stable and solid. Your durables, your big items,

490
00:26:12,040 --> 00:26:14,680
Speaker 2: your electronics and couches, and that's still pretty lackluster.

491
00:26:14,840 --> 00:26:16,919
Speaker 3: One of the other features of twenty twenty four was

492
00:26:16,920 --> 00:26:20,120
Speaker 3: we had the introduction of climate reporting and that's four

493
00:26:20,400 --> 00:26:23,080
Speaker 3: entities I think that have got one billion in assets.

494
00:26:23,600 --> 00:26:27,800
Speaker 3: It feels quite mixed reaction. We've had what would you say, Giles.

495
00:26:27,800 --> 00:26:30,119
Speaker 1: Well, we had two big reports out in the past

496
00:26:30,400 --> 00:26:33,080
Speaker 1: couple of weeks. One was from the Financial Markets Authority,

497
00:26:33,160 --> 00:26:37,480
Speaker 1: who have got the oversight for the climate reporting entities.

498
00:26:37,520 --> 00:26:41,119
Speaker 1: Those big firms that you were talking about. They said, well,

499
00:26:41,560 --> 00:26:44,960
Speaker 1: you know, I'm generally speaking, people have sular got to

500
00:26:45,040 --> 00:26:51,200
Speaker 1: grips were that, but there areas of need for improvement

501
00:26:51,600 --> 00:26:55,600
Speaker 1: and we've got the view that some firms actually probably

502
00:26:56,000 --> 00:26:58,439
Speaker 1: still haven't quite got the grips of what they're supposed

503
00:26:58,480 --> 00:27:00,280
Speaker 1: to say and what they're supposed to measure and how

504
00:27:00,280 --> 00:27:03,800
Speaker 1: they're supposed to present the information. Some of them were

505
00:27:04,160 --> 00:27:10,639
Speaker 1: accentuating the positive, right and should we say, well the

506
00:27:10,720 --> 00:27:14,760
Speaker 1: dirty word, but exactly they were green washing. And then

507
00:27:14,920 --> 00:27:20,560
Speaker 1: there was a report by Forsyth Bar who looked at

508
00:27:20,680 --> 00:27:23,720
Speaker 1: those companies on the nz X who were putting out

509
00:27:23,840 --> 00:27:28,800
Speaker 1: the ESG reporting and they do a carbon component as well,

510
00:27:29,200 --> 00:27:32,560
Speaker 1: and they said the ones who have got to grips

511
00:27:32,600 --> 00:27:35,360
Speaker 1: with that are the gent tailors. And the reason why,

512
00:27:35,440 --> 00:27:37,120
Speaker 1: of course, is because they've got some of the biggest

513
00:27:37,119 --> 00:27:41,879
Speaker 1: carbon emissions, so they actually they measure, they know the cost,

514
00:27:42,240 --> 00:27:46,560
Speaker 1: they're moving to mitigate racings. They've got the whole renewable

515
00:27:46,720 --> 00:27:50,120
Speaker 1: energy side to their business as well. They're fine. Other

516
00:27:50,160 --> 00:27:55,760
Speaker 1: companies are trailing quite a way back. Everybody's making an effort.

517
00:27:56,320 --> 00:27:58,680
Speaker 1: I thought the interesting comment that came out of the

518
00:27:58,720 --> 00:28:04,520
Speaker 1: FMA report was that cost of compliance, even for a

519
00:28:04,600 --> 00:28:08,000
Speaker 1: small firm, a smallish firm, you can be spending a

520
00:28:08,040 --> 00:28:12,159
Speaker 1: million dollars or more to actually do this report or

521
00:28:12,200 --> 00:28:15,480
Speaker 1: to do these reports. It's required by law for those

522
00:28:15,640 --> 00:28:19,560
Speaker 1: entities of being who meet that criteria, but you know,

523
00:28:19,680 --> 00:28:21,800
Speaker 1: and it's taking up a lot of time, there's a

524
00:28:21,840 --> 00:28:27,240
Speaker 1: whole industry now in ESG reporting. So all those firms

525
00:28:27,280 --> 00:28:32,760
Speaker 1: that we're doing consultancy on smart tax avoidance sorry, tax

526
00:28:33,000 --> 00:28:38,240
Speaker 1: minimization schemes right are now doing reports on how to

527
00:28:38,280 --> 00:28:41,520
Speaker 1: do your ESG reporting. That's a new side of their business.

528
00:28:41,600 --> 00:28:43,640
Speaker 2: See. That's my worry as well, though, is that we're

529
00:28:43,680 --> 00:28:47,080
Speaker 2: effectively creating a whole another cottage industry. And in fact,

530
00:28:47,160 --> 00:28:49,120
Speaker 2: you get some of the businesses who, you know, I

531
00:28:49,160 --> 00:28:50,840
Speaker 2: don't know if it's been public or reporter, but a

532
00:28:50,840 --> 00:28:53,200
Speaker 2: few every now and then seem to suggest that actually,

533
00:28:53,200 --> 00:28:55,520
Speaker 2: thus spending more on compliance, that they've actually had to

534
00:28:55,520 --> 00:28:57,600
Speaker 2: strip out some of their budget for doing stuff on

535
00:28:57,640 --> 00:29:01,080
Speaker 2: the climate, for supporting you know, the adaptation and mitigation

536
00:29:01,480 --> 00:29:03,520
Speaker 2: to just fill out the forms and do some of

537
00:29:03,520 --> 00:29:06,520
Speaker 2: that reporting, and that seems a little bit over the top.

538
00:29:06,560 --> 00:29:09,040
Speaker 2: There has been I think some common sense changes that

539
00:29:09,040 --> 00:29:11,200
Speaker 2: have come through from the External Reporting Board and that

540
00:29:11,200 --> 00:29:14,200
Speaker 2: that have sort of pushed out the expectations of how

541
00:29:14,280 --> 00:29:16,360
Speaker 2: quickly a whole lot of the additional reporting has to

542
00:29:16,400 --> 00:29:19,240
Speaker 2: come through. And that's important, And my sort of worry is,

543
00:29:19,280 --> 00:29:21,960
Speaker 2: like I totally think we need to do this quite clearly.

544
00:29:22,320 --> 00:29:25,800
Speaker 2: It's important more importantly from a business point of view,

545
00:29:25,800 --> 00:29:28,880
Speaker 2: you're seeing a lot of our overseas operators, those who

546
00:29:28,920 --> 00:29:31,480
Speaker 2: are buying from New Zealand businesses saying I need you

547
00:29:31,560 --> 00:29:33,320
Speaker 2: to do this, otherwise I won't buy from you. So

548
00:29:33,440 --> 00:29:35,680
Speaker 2: like there's a business imperative there for it, but I

549
00:29:35,720 --> 00:29:37,600
Speaker 2: feel like there's got to be a slightly smart way

550
00:29:37,640 --> 00:29:40,080
Speaker 2: of going about it. Then making everyone do all of

551
00:29:40,080 --> 00:29:42,720
Speaker 2: this paperwork that might have some value but maybe isn't

552
00:29:42,760 --> 00:29:46,000
Speaker 2: all going as easily to plan, isn't quite as cheap

553
00:29:46,000 --> 00:29:49,120
Speaker 2: to produce, and more importantly diverts resources away. That there's

554
00:29:49,160 --> 00:29:51,040
Speaker 2: got to be a better middle ground there. It was

555
00:29:51,120 --> 00:29:53,680
Speaker 2: encouraging though at least what my sort of one positive

556
00:29:53,720 --> 00:29:56,840
Speaker 2: on that broader climate landscape was at least the emission's

557
00:29:56,840 --> 00:29:59,080
Speaker 2: trading scheme got a few credits sold this year because

558
00:30:00,120 --> 00:30:02,320
Speaker 2: market I mean, there was nothing before and it's i

559
00:30:02,320 --> 00:30:04,719
Speaker 2: mean again still not working like it should be, but

560
00:30:04,760 --> 00:30:07,000
Speaker 2: the fact that there was actually a few bit of

561
00:30:07,000 --> 00:30:07,480
Speaker 2: a look up.

562
00:30:07,560 --> 00:30:10,480
Speaker 1: You wouldn't, like buy some cute carbon credits. I've just

563
00:30:10,480 --> 00:30:11,320
Speaker 1: got a few times.

564
00:30:11,360 --> 00:30:13,840
Speaker 2: If I could buy some, I probably would. I mean,

565
00:30:14,080 --> 00:30:16,760
Speaker 2: one of the disappointing things this year as as an economist,

566
00:30:16,760 --> 00:30:18,880
Speaker 2: you know, we're always looking at numbers. Was that actually

567
00:30:18,880 --> 00:30:21,160
Speaker 2: some of the transparency on the carbon markets was taken

568
00:30:21,160 --> 00:30:24,080
Speaker 2: away when Jarden's closed, the sort of public fronting on

569
00:30:24,480 --> 00:30:26,800
Speaker 2: carbon and price supporting. So, I mean, it's one of

570
00:30:26,840 --> 00:30:28,440
Speaker 2: those things. I feel like the government still got a

571
00:30:28,480 --> 00:30:31,080
Speaker 2: lot of work to do there to make everyone actually

572
00:30:31,080 --> 00:30:33,000
Speaker 2: realize that you do need to do this stuff, rather

573
00:30:33,040 --> 00:30:36,720
Speaker 2: than at the moment it still seems like everyone's like, yeah, okay,

574
00:30:36,720 --> 00:30:39,840
Speaker 2: we get it, but you don't seem committed. So I

575
00:30:39,840 --> 00:30:41,640
Speaker 2: don't know if I need to be committed well, which

576
00:30:41,640 --> 00:30:42,240
Speaker 2: is a bad place.

577
00:30:42,360 --> 00:30:46,520
Speaker 1: Interestingly, of course, the government before it came into power

578
00:30:47,080 --> 00:30:50,840
Speaker 1: was counting on a rather robust ets to be able

579
00:30:50,880 --> 00:30:55,680
Speaker 1: to furnish some money for them, which actually hasn't emerged.

580
00:30:56,280 --> 00:30:57,960
Speaker 2: There's no money in the kiddy for that.

581
00:30:58,080 --> 00:31:00,520
Speaker 1: Right, You hat another pressure on the scores.

582
00:31:01,520 --> 00:31:03,959
Speaker 3: Now, guys, we've talked about a lot of things, and

583
00:31:04,000 --> 00:31:05,560
Speaker 3: a lot of them are a little bit depressing. We

584
00:31:05,640 --> 00:31:09,960
Speaker 3: need to lift the tempos somewhat. What are you thinking

585
00:31:10,400 --> 00:31:13,560
Speaker 3: in twenty twenty five, I'll start with you, Giles, is

586
00:31:13,720 --> 00:31:15,680
Speaker 3: going to be a positive for New Zealand.

587
00:31:16,120 --> 00:31:18,600
Speaker 1: I think we're just actually going to be more cheerful.

588
00:31:18,720 --> 00:31:22,120
Speaker 1: I mean, we're no now, I mean, and that's.

589
00:31:22,440 --> 00:31:24,600
Speaker 2: That's where it starts. It's that positivity there.

590
00:31:24,520 --> 00:31:30,040
Speaker 1: Right, a sunny disposition of disposition even if the weather

591
00:31:30,120 --> 00:31:34,280
Speaker 1: doesn't play ball. But I think people you're feeling it already, right,

592
00:31:34,360 --> 00:31:37,720
Speaker 1: People talk positive, right. I mean the number of people

593
00:31:37,760 --> 00:31:42,280
Speaker 1: I talk to now are actually saying it won't be thrive, right,

594
00:31:42,320 --> 00:31:45,480
Speaker 1: but we've survived right well and good you're right.

595
00:31:45,520 --> 00:31:47,800
Speaker 2: Next year I think will be better quite simply because

596
00:31:47,840 --> 00:31:51,040
Speaker 2: people's mortgages are coming down like that. We've seen that effect.

597
00:31:51,240 --> 00:31:54,400
Speaker 2: Monetary policy did very well to curb economic activity when

598
00:31:54,440 --> 00:31:56,600
Speaker 2: they were high. Now they're coming down. It will give

599
00:31:56,640 --> 00:31:58,240
Speaker 2: people a bit more money. So I think as we

600
00:31:58,280 --> 00:32:00,880
Speaker 2: go through next year it won't hit the first of January.

601
00:32:00,880 --> 00:32:03,920
Speaker 2: Everything is all that quickly better. But that sort of

602
00:32:03,960 --> 00:32:05,960
Speaker 2: talk around you know, green shirts, and I've been talking

603
00:32:05,960 --> 00:32:08,040
Speaker 2: about it quite a lot. I feel like the sunflower

604
00:32:08,080 --> 00:32:10,280
Speaker 2: comes out a bit more around midyear, if you will,

605
00:32:10,720 --> 00:32:13,000
Speaker 2: because that's when the spending will come through. And again,

606
00:32:13,200 --> 00:32:15,680
Speaker 2: I mean, you can't break the economy down this simply,

607
00:32:15,720 --> 00:32:18,680
Speaker 2: but sometimes you have to try. Once households are spending

608
00:32:18,680 --> 00:32:20,760
Speaker 2: a bit more, they will go and put that into

609
00:32:21,240 --> 00:32:24,000
Speaker 2: out into businesses, and similar to those businesses, once they

610
00:32:24,000 --> 00:32:26,160
Speaker 2: have a bit more activity, they've got some runs on

611
00:32:26,200 --> 00:32:28,040
Speaker 2: the board, they need a few more people to work

612
00:32:28,080 --> 00:32:30,440
Speaker 2: through that. That then stimulates a bit more employment. The

613
00:32:30,520 --> 00:32:33,280
Speaker 2: unemployment rate drops a bit, more spending happen. So again

614
00:32:33,440 --> 00:32:35,160
Speaker 2: I think you're right, We're just onto a more solid

615
00:32:35,240 --> 00:32:36,160
Speaker 2: footing next year.

616
00:32:36,920 --> 00:32:40,920
Speaker 3: Speaking of spending, then, Brad, what are you thinking for

617
00:32:40,960 --> 00:32:44,280
Speaker 3: spending for Christmas? What about gifting? How do you feel

618
00:32:44,280 --> 00:32:44,680
Speaker 3: about that?

619
00:32:45,200 --> 00:32:49,840
Speaker 2: Personally? I really struggle with present shopping one. It's just

620
00:32:49,920 --> 00:32:52,760
Speaker 2: the crowd sort of you know. I struggle with those enough.

621
00:32:52,960 --> 00:32:55,640
Speaker 2: But as a good economist, the sort of lowest transaction

622
00:32:55,760 --> 00:32:57,880
Speaker 2: value is to give people cash. In fact, a bank

623
00:32:57,920 --> 00:33:01,840
Speaker 2: transfer would be better. Now some people say it's very unsentimental, Charles,

624
00:33:01,840 --> 00:33:03,440
Speaker 2: I don't know if you've got a view on how

625
00:33:03,480 --> 00:33:06,160
Speaker 2: you gift, but I'm a big fan of cash and money.

626
00:33:06,200 --> 00:33:09,000
Speaker 2: That's a much better option for me, very easy. Whoever

627
00:33:09,040 --> 00:33:11,080
Speaker 2: I'm gifting it to, they can choose whatever they want.

628
00:33:11,240 --> 00:33:14,640
Speaker 1: The best gift I think I can give actually is

629
00:33:14,640 --> 00:33:19,240
Speaker 1: my time. Right is to be actually with You can't

630
00:33:19,240 --> 00:33:21,680
Speaker 1: put a price on it other than to say right

631
00:33:21,960 --> 00:33:26,040
Speaker 1: when I have a family gathering, I come away uplifted, right,

632
00:33:26,120 --> 00:33:28,560
Speaker 1: and I hope that you know, they gain a little

633
00:33:28,560 --> 00:33:34,120
Speaker 1: something from me. And so time is the most important thing.

634
00:33:34,120 --> 00:33:37,640
Speaker 1: And I don't think Look, we speak about peace on earth,

635
00:33:37,640 --> 00:33:41,280
Speaker 1: good world war people right for Christmas, why don't we

636
00:33:41,320 --> 00:33:43,440
Speaker 1: do it for three hundred and sixty five days of

637
00:33:43,480 --> 00:33:46,840
Speaker 1: the year. Actually, that's the key issue. I know it

638
00:33:46,880 --> 00:33:51,120
Speaker 1: doesn't generate a lot of money. I know Brad's economic

639
00:33:51,200 --> 00:33:55,240
Speaker 1: philip won't you know, necessarily get that boost, But so

640
00:33:55,400 --> 00:34:00,560
Speaker 1: be it right, if we're actually better mentally within our

641
00:34:00,640 --> 00:34:03,960
Speaker 1: own family structures, that actually, to me is the foundation

642
00:34:04,200 --> 00:34:05,320
Speaker 1: of a good economy.

643
00:34:06,080 --> 00:34:08,799
Speaker 3: Well, that's with many more things we could talk about. Guys,

644
00:34:08,840 --> 00:34:11,560
Speaker 3: thank you so much for coming in today and being

645
00:34:11,600 --> 00:34:13,880
Speaker 3: with us for our last episode of the year, and

646
00:34:14,000 --> 00:34:17,360
Speaker 3: thanks listeners for joining us. You can watch Shared Lunch

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Speaker 3: on YouTube, or you can follow us on your favorite

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Speaker 3: podcast app. Leave us a rating and tell us what

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Speaker 3: you'd like to hear next. Merry Christmas and Martewar