Speaker 1: How do you revitalize New Zealand capital markets? And you
Speaker 1: go through some of the investment houses and they've been
Speaker 1: putting out articles one way or another, sometimes disguise, but
Speaker 1: asking those re same questions, how does New Zealand capital
Speaker 1: markets actually get a shot.
Speaker 2: In the arm given that you know, there's a fair
Speaker 2: amount of New Zealand beef that goes into the US,
Speaker 2: and I'm pretty sure a fair amount of that probably
Speaker 2: goes onto McDonald's Burger's. Given Trump's interest in the Golden Archers,
Speaker 2: maybe there's a trade opportunity for us.
Speaker 1: The cryptocurrencies now have an investment legitimacy which will not
Speaker 1: be broken notwithstanding what happens, and it will speed up
Speaker 1: moves by central banks and other mainstream financial service providers
Speaker 1: to get into the space somehow.
Speaker 3: Cura and welcome to Shed Lunch, brought to you by Cheesy's.
Speaker 3: My name is Helen Madison, and today on the program
Speaker 3: we'll be looking back at twenty twenty five, the good,
Speaker 3: the bad and the ugly, but we'll also be looking
Speaker 3: towards twenty twenty five and Watson's Store. I'll be joined
Speaker 3: by Giles Beckford, the business editor at R and Z
Speaker 3: and Informetrics chief economist Brad Olsen. But before we get started,
Speaker 3: he's some important information.
Speaker 4: Investing involves the risk you might lose the money you
Speaker 4: start with. We recommend talking to a licensed financial advisor.
Speaker 4: We also recommend reading product disclosure documents before deciding to invest.
Speaker 4: Everything you're about to see and here is current at
Speaker 4: the time of recording.
Speaker 3: Thanks for coming in, Giles and Brad, Welcome to the
Speaker 3: studio and our last episode of shed launch for twenty
Speaker 3: twenty four. Let's start with January this year when the
Speaker 3: Security and Exchange Commission that's the US regulator, actually approved
Speaker 3: bitcoin exchange traded funds. That's a real difference for crypto
Speaker 3: and probably legitimizes the fact that it could be an
Speaker 3: asset class. Giles, how do you think the feed since then?
Speaker 1: Well, that was the good housekeeping seal of approval, wasn't it.
Speaker 1: When the SEC comes out and says, yeah, you know
Speaker 1: it's going future, and everybody figured, let's not play around
Speaker 1: with actually getting into the crypto. Let's get into the
Speaker 1: crypto operators. Hence the ETFs that got set up and bang,
Speaker 1: that was just the touching the blue paper and away
Speaker 1: it went, and all we've seen since then is just
Speaker 1: a complete appreciation. Right, it's dominated by bitcoin. You have
Speaker 1: to say that there's much about the crypto scene which
Speaker 1: is still dodgy. It is questionable. You just know that
Speaker 1: there's so much dark stuff happening under the surface, and
Speaker 1: the amount of crypto that's been stolen so much for
Speaker 1: it being necessarily secure investment. But all that aside. Once
Speaker 1: the bandwagon gets rolling, everybody keeps chasing the train, and
Speaker 1: that's what's happening. And with the prospect now with the
Speaker 1: new Trump administration saying you know, we're going to make
Speaker 1: it easier, when you've got the likes of Musk being
Speaker 1: able to hype it up in particular doge, how coincidental
Speaker 1: is it that the new department he's going to run
Speaker 1: to take out the red tape and make government more
Speaker 1: efficient and cheaper and easier as the acronym doge as well.
Speaker 1: I mean, oh, it's a complete meme, right, I mean,
Speaker 1: and they're not going to have the US government sealed there.
Speaker 1: What they're going to have, in fact, is probably the
Speaker 1: portrait of being on Musk right behind every employee there.
Speaker 1: But you have to say that cryptocurrencies now have an
Speaker 1: investment legitimacy, which will not be broken notwithstanding what happens,
Speaker 1: and it will speed up moves by central banks and
Speaker 1: other mainstream financial service providers to get into the space.
Speaker 2: Somehow, I think it's well though. I mean, yes, it
Speaker 2: legitimized it a touch, but I think it also gave
Speaker 2: it a crypto more generally, a bit of an easier
Speaker 2: entry method, and rather than people having to figure out
Speaker 2: how their own wallets and everything else worked, you know,
Speaker 2: you didn't have to go through all the hoopla that
Speaker 2: was sometimes either a bit dangerous, dodgy or otherwise, and
Speaker 2: it actually just made it a little bit more convenient
Speaker 2: through those ETFs and similar I mean, there's still, I think,
Speaker 2: like you say, a lot of caution, a lot of
Speaker 2: worry in some areas about it, and people are still
Speaker 2: dropping new coins all the time. And there was another
Speaker 2: popular one the other day, the hop tour Girl released
Speaker 2: a coin that you know, shot up in price and
Speaker 2: then immediately crashed ninety percent. So again, some people are
Speaker 2: still putting some pretty serious money into things that they're
Speaker 2: not fully or aren't fully regulated. But now there's a
Speaker 2: little bit more of I guess some guardrails around it.
Speaker 2: That provides a little bit more legitimate to So you're right.
Speaker 1: It would be interesting to see actually how firm those guardrails
Speaker 1: are because the US will set the standard for regulation
Speaker 1: and everyone else is going to take it around the world.
Speaker 1: Like about one of the bigger operators here in New Zealand,
Speaker 1: and we've spoken to them a few times recently. They
Speaker 1: I think are probably being extremely responsible by saying, look,
Speaker 1: do your due diligence, right, but don't take this as
Speaker 1: being the be all and end all of your investment future.
Speaker 1: This firm whom I won't name, but they're saying, look,
Speaker 1: regard crypto as say a five percent part of a
Speaker 1: diversified portfolio, right, just be sensible. And I'm thinking these
Speaker 1: are people who are actually going to earn money out
Speaker 1: of it, but they're taking a really responsible view, trying
Speaker 1: to advise people and keep the custom.
Speaker 2: Well that that's with everything though, right, I mean, the
Speaker 2: risk conversation is always the biggest one. I still all
Speaker 2: the time, all through this year, all through the last
Speaker 2: couple have people coming up and there generally three questions
Speaker 2: that people on the street want to know. You know,
Speaker 2: what's the housing market going to do, What's my personal
Speaker 2: interest rate that I should fix on for and what's
Speaker 2: my investment strategy? And I always go back, well, what's
Speaker 2: your tolerance? You know, if you're real happy to sort
Speaker 2: of maybe put it all on on one thing and
Speaker 2: it'll either blow up or blow down, as the case
Speaker 2: might be, then then that's cool for you, if you're
Speaker 2: willing to lose it all or gain it all. But
Speaker 2: for a lot of other people who aren't, it's then going, well,
Speaker 2: how do I sort of match things through? So you're
Speaker 2: totally right, that's a much more appropriate response and sort
Speaker 2: of plow it all in on the one option and
Speaker 2: sort of hope that hope, like heck it works.
Speaker 3: Sticking with the US, guys, I'm just thinking Donald Trump,
Speaker 3: president elect. Tariffs has been a big topic, and what
Speaker 3: will happen to New Zealand In other countries, uncertainty seems
Speaker 3: to be what we're going for in twenty twenty five, Brad,
Speaker 3: What are you thinking given the US is our second
Speaker 3: largest trading partner.
Speaker 2: Yeah, well, and that's only happened this year, right, the
Speaker 2: Chinese economy hasn't been going as well. We've now been
Speaker 2: doing more with the US because their economy has been
Speaker 2: a lot stronger. That's great, But equally you're right that
Speaker 2: we're seeing more uncertain times, but perhaps we're seeing more
Speaker 2: certain uncertainty. You know, it's going to be maybe not
Speaker 2: as volatile, but there's just so many moving parts that
Speaker 2: are sort of heading forward. So I think increasingly when
Speaker 2: we're looking at the US markets and more generally the
Speaker 2: US economy, I think we know that we're in for
Speaker 2: quite a lot. You saw some of those early talks
Speaker 2: this year by Trump saying, look, I might levy tariff's
Speaker 2: on Mexico, Canada, and China. Now knew about China, we
Speaker 2: didn't necessarily know who was going to be first off
Speaker 2: the ranks for the other ones. But again, the reaction
Speaker 2: that had one changed the currency around quite a bit
Speaker 2: for New Zealand. But also some of our providers like
Speaker 2: so Officier and Piker Will they've got manufacturing sites in
Speaker 2: Mexico that supply North America. So I think it also
Speaker 2: highlighted to us again sort of the importance in the
Speaker 2: financial system that the US occupies. We've known that for
Speaker 2: a long time, but it's been a bit more latent
Speaker 2: or background, and now all of a sudden it's back
Speaker 2: to the forefront, because whatever happens there will have sort
Speaker 2: of ripple effects and maybe bigger ripples than before through
Speaker 2: to the rest of US.
Speaker 1: I think Trump's last administration it's slightly indicative of how
Speaker 1: we might feel the whole thing about tariffs and the like.
Speaker 1: You know, the one thing that sort of directly affected us,
Speaker 1: and it was only small fry, was aluminium steel, which
Speaker 1: the tariffs cost us in the region of say six
Speaker 1: million bucks I think over that period. But the bigger impact,
Speaker 1: in fact was the paralysis that attached and Trump brought
Speaker 1: to the World Trade Organization. Now we believe in the
Speaker 1: World Trade Organization because it's the referee of the world
Speaker 1: trading system. It's rules based, and little people like this,
Speaker 1: when you haven't got financial clout right, you've got to
Speaker 1: rely on the rules to help you. And the Trump
Speaker 1: administration last time round, they basically froze the WTO into inactivity.
Speaker 1: They made it impotent as a trade referee, very simply
Speaker 1: just because they refused to nominate people to be appellate
Speaker 1: judges to work out the disputes between people who trying
Speaker 1: to work out. What's interesting for me is it sheds
Speaker 1: a bit of a light that there are a significant
Speaker 1: number of small New Zealand tech companies who have domiciled
Speaker 1: themselves essentially in the States, and that might be our
Speaker 1: little secret back door, right that we've got Kiwi firms
Speaker 1: doing business in the States who will actually be to
Speaker 1: some extent insulated. Right, they actually might get the advantage
Speaker 1: of these sorts of things. But we'll wait and see
Speaker 1: on that one. Trump. Look, there's more bluff and bluster
Speaker 1: right than you would find Niagara Falls.
Speaker 2: Well, you just don't know, and I think that's one
Speaker 2: of the big challenges for everyone, not only in New
Speaker 2: Zealand but around the world. You're just not sure what
Speaker 2: is ever going to necessarily come through. I mean, the
Speaker 2: wider tone I think from this is that trade is
Speaker 2: going to be more difficult, which is not great news
Speaker 2: for New Zealand. Equally, I've been quite impressed that this year,
Speaker 2: you know, we have had a greater focus on trade deals.
Speaker 2: We've got with the UAE, We've got trade deals with
Speaker 2: the Golf Cooperation Council, we've got some with Costa ECRA
Speaker 2: in Switzerland recently. So is still a lot of good
Speaker 2: moves there. We've had in the last couple of years,
Speaker 2: both the EU and the UK Free Trade Agreement, So
Speaker 2: we've still got a lot of options out there, but
Speaker 2: I think that trading environment is more difficult. The challenge,
Speaker 2: I think is that the US economy is still such
Speaker 2: a hefty part of the global market that you know,
Speaker 2: this year, for example, we saw that when our meat
Speaker 2: wasn't going as well into China, we could pivot that
Speaker 2: quite quickly a lot of it, not all of it,
Speaker 2: but a lot of it into the US because they've
Speaker 2: got the lowest beef stocks and I think seventy years,
Speaker 2: so you know, that's where we can send our meat. Now,
Speaker 2: it does always come through. And you know, we've talked
Speaker 2: about not only the tariffs but the possible exemptions that
Speaker 2: maybe we need to try and focus on because Trump
Speaker 2: won't be looking to target New Zealand, it'll just be
Speaker 2: probably across the board thing. But given that, you know,
Speaker 2: there's a fair amount of New Zealand beef that goes
Speaker 2: into the US, and I'm pretty sure a fair amount
Speaker 2: of that probably goes into McDonald's burgers. Given Trump's interest
Speaker 2: in the Golden Archers, maybe maybe there's a trade opportunity
Speaker 2: for US there, or you know, some sort of exemption.
Speaker 2: But I mean just the consumption numbers that you're seeing
Speaker 2: in the US. They are spending like no tomorrow. And
Speaker 2: I must say, looking at the markets as well, there's
Speaker 2: part of me that goes, we're too next. I mean
Speaker 2: that just what's going on there.
Speaker 3: I'm keen to see what you think of that, Giles too,
Speaker 3: because the tech stocks and video and the like, it's
Speaker 3: been insane, but there seems to be no bottom.
Speaker 1: Well, I don't know, let's be honest. You know, things
Speaker 1: can run their course. We've been through these sorts of
Speaker 1: cycles in the pastime thinking that I've been around so long, Right,
Speaker 1: the Internet wasn't invented when they started journalism. Microsoft was
Speaker 1: just a twinkle in Bill Gates's eye. But what then
Speaker 1: turned out was that we are we very quickly had
Speaker 1: the dot com bubble bang right just on the turn
Speaker 1: near the late nineties, right, we had the e commerce
Speaker 1: like that. You know, everybody built so much promise into it,
Speaker 1: right bang it fell away. But I think, you know,
Speaker 1: we've got to say that the tech stocks now they
Speaker 1: have such clouts. You know, when the likes of Nnvidia
Speaker 1: is what one hundred times bigger than the New Zealand economy,
Speaker 1: I think there's evaluation of it, so like that, you go, yeah,
Speaker 1: they're probably here to stay. It's the games that the
Speaker 1: investment funds want to play, I think, and where the
Speaker 1: technology will take us where we see that you know,
Speaker 1: artificial intelligence will be the driver for two, three, four,
Speaker 1: five years, right, the invidios of this world and all
Speaker 1: the other chip makers and the associated tech companies must
Speaker 1: continue to thrive. The Magnificent seven. Who knows if there'll
Speaker 1: actually be seven or seventeen or three allies all the
Speaker 1: same companies and who will own them. I mean politics
Speaker 1: comes in to play because there's a lot of Chinese
Speaker 1: influence in that tech sector, like it or not, and
Speaker 1: do the politics of a Trump administration wants to punish
Speaker 1: the Chinese, as we've just actually seen in the past
Speaker 1: few days where there's a district court judgment in the
Speaker 1: States right that TikTok's got TikTok's got to be divested.
Speaker 1: And so from that point of view, you know, technologies
Speaker 1: here of the state, there will all be companies and
Speaker 1: money that drive that. We're going to see more boom,
Speaker 1: I think. But I think we're just going to say
Speaker 1: there will be busts somewhere as well.
Speaker 2: Well. It has been interesting. I saw a chart the
Speaker 2: other day that because let's be clear, this is mostly
Speaker 2: about the US markets. It's not that generally you know,
Speaker 2: stocks and equities and that are just on a rocket
Speaker 2: ship to the moon. It's the US. And I saw
Speaker 2: something the other day I think that said that, you know,
Speaker 2: the US markets are you know, now so far away
Speaker 2: relative to Europe. It's like the biggest the GAP's ever
Speaker 2: been in terms of sort of you know, the positioning
Speaker 2: on the US compared to Europe. And I mean that
Speaker 2: does highlight that again, there's a lot of growth and fundamentals,
Speaker 2: there's a lot of money going in there, there's a
Speaker 2: lot of consumer spending. But I go, the markets are
Speaker 2: high when interest rates have been high. If interest rates
Speaker 2: then come down normally that would stimulate a greater level
Speaker 2: of investment in spending, which would then put the markets higher.
Speaker 2: So if the markets are high when interest rates are high,
Speaker 2: and when they're low, then, like you say, I mean,
Speaker 2: my question is when does it turn around? But I
Speaker 2: mean the reality is you look at the sorts of
Speaker 2: numbers that New Zealanders invest, we do put it into
Speaker 2: the US as well. We're not alone in that fact.
Speaker 2: So there seems to be correct me up from Wronghound,
Speaker 2: but there seems to be sort of quite a focus
Speaker 2: there on people wanting to look at it well.
Speaker 1: I find interesting though, is that you talk about how
Speaker 1: the US is just well ahead of the rest of
Speaker 1: the world. Is that also introduces distortion into capital allocation
Speaker 1: around the world, And you've got to say, well, if
Speaker 1: the US is sucking it all up or is putting
Speaker 1: most of its own resources into the sector, right, how's
Speaker 1: the rest.
Speaker 2: Of the world going with the rest of it?
Speaker 1: That's right? Where's ourbit right?
Speaker 3: Well, that leads me to the fact that here in
Speaker 3: New Zealand we've had our highest trading days ever at
Speaker 3: Cheersey's a lot of that is US fueled because everybody
Speaker 3: sees great returns, prospects, etc. They're not seeing the same
Speaker 3: with our own market. Then dead X and Giles. You know,
Speaker 3: there's been a few shockers and terms of earnings, there's
Speaker 3: many companies I could talk about, Spark in New Zealand,
Speaker 3: the Warehouse, the list goes on.
Speaker 1: Yeah, it's the incredible shrinking inz X, isn't it. You
Speaker 1: contrast it with thirty forty years ago where it was
Speaker 1: well driven, well supported. But the in X, you have
Speaker 1: to say, has just not being able to make any
Speaker 1: headway in persuading local companies that the exchange is the
Speaker 1: place for them. What is the ENDINEX for? Essentially, it's
Speaker 1: a way of raising money. Why do you invest in it? Well,
Speaker 1: because you, as an investor have confidence in the way
Speaker 1: companies are run. You would have to save that over
Speaker 1: the past two to three years in particular, and the
Speaker 1: case for some companies for the past decade, they've been
Speaker 1: less than competently run. Right, And I was channeling up
Speaker 1: the number of companies in this country that have not
Speaker 1: been paying dividends for the past couple of years. There's
Speaker 1: some really big ones, right, Sky City, Fletcher Building in
Speaker 1: New Zealand, some of the retail stocks, right, But they're
Speaker 1: all saying we're saving our cash, well, saving the cash, well,
Speaker 1: saving the cash actually to cover some rather big holes
Speaker 1: in their balance sheets because they made really bad decisions.
Speaker 1: And I think that's one of the features is that
Speaker 1: the level of corporate governance and commercial nous that's been
Speaker 1: applied by some of our publicly listed companies has been
Speaker 1: shown to be woefully inadequate. Leave aside the one off
Speaker 1: effects of the pandemic because everybody got a kick in
Speaker 1: the backside and a kick in the balance sheet for that.
Speaker 1: Well and good, but you have to say that, you know,
Speaker 1: the level of shareholder return and the New Zealand market
Speaker 1: is essentially supported by investors who want dividends. That's what
Speaker 1: it's all about. It tells you everything that the NSINEX fifty,
Speaker 1: the benchmark index, includes dividends, right, a lot of other
Speaker 1: places around the world it doesn't. And I think that
Speaker 1: a lot of people will have been woefully disappointed. And
Speaker 1: you can see why people don't have much enthusiasm for
Speaker 1: actually getting in there. If there's going to be a
Speaker 1: big IPO. Say, you know, let's just pretend bank k gosh,
Speaker 1: aren't they just the spectral vision on the horizon? Now
Speaker 1: that's going to save us? Or Kiwi Bank?
Speaker 2: Are they?
Speaker 1: But the point being is that say Kibibank were to list,
Speaker 1: everybody would be in like the way that people were
Speaker 1: in for the gent tailors, right, Meridian, Mighty River Power.
Speaker 3: We're talking twenty eight, aren't we, now, Child, Well, if
Speaker 3: it happens.
Speaker 1: At all, it may not happen in any of our
Speaker 1: investing lifetimes.
Speaker 2: I've got a lot of time.
Speaker 1: I think, but I mean I think, you know, serious
Speaker 1: questions come down to how do you revitalize New Zealand
Speaker 1: capital markets? And you go through some of the investment
Speaker 1: houses and they've been putting out articles one way or another,
Speaker 1: sometimes disguise, been asking those very same questions, how does
Speaker 1: New Zealand capital markets actually get a shot on the arm,
Speaker 1: And I'm not sure that anybody's actually got a reasonable
Speaker 1: answer about that.
Speaker 2: Well, the question I start to ask is, you know,
Speaker 2: when does this come to a head, Because you've got
Speaker 2: those the issues with just canvas, the fact that increasingly
Speaker 2: seems to be a trend of businesses that are either
Speaker 2: looking to only list on the Australian markets in Australian Exchange,
Speaker 2: or they're actually going unlisted here in New Zealand because
Speaker 2: they don't want all the big obligations and the costs.
Speaker 2: And so I think one of the reasons that you're
Speaker 2: not seeing, for example, there as many young people. I
Speaker 2: know that there's an easy way to vote now and
Speaker 2: I've done that myself with Macheesy's app, But I look
Speaker 2: at that and I do find that a lot of
Speaker 2: times people go, well, I've continued to get the same results,
Speaker 2: and I feel like, you know, it's not like I
Speaker 2: can put up a director or eything else. You know,
Speaker 2: I've sort of got to vote on the pictures that
Speaker 2: are made by those that sort of seem to have
Speaker 2: more of the power. What's the point. I'm sort of
Speaker 2: just voting for the same old, same old. So I
Speaker 2: think there is a real lack of engagement and a
Speaker 2: real level of disappointment amongst investors, but who are voting
Speaker 2: with their wallets and going, well, stuff it, I'll find
Speaker 2: something better, and they are.
Speaker 1: Yeah. The one little candle of confidence, if I can
Speaker 1: call it that, is that I like the more assertive
Speaker 1: and prominent attitude that the Shareholders Association has taken in
Speaker 1: the past few years, where they've been willing to stand
Speaker 1: up whether it's big company or small company and saying
Speaker 1: what you're proposing isn't good. It works against the interests
Speaker 1: of small shareholders and us be honest, you know, the
Speaker 1: Shareholders Association looks after little folks, little folk like me
Speaker 1: who've got their three hundred shares and you know ABC
Speaker 1: dot Com, and we we feel the person who's got
Speaker 1: ten million shares right, well, we've done so why bothered?
Speaker 1: But you know, we've got some sort of return. But
Speaker 1: the Sharehold Association says no, you know, big company or
Speaker 1: small companies say you've got a standard of care and
Speaker 1: the standard of duty and a fiscal, a fiduciary and
Speaker 1: legal obligation to look after all shareholders, big or small. Right,
Speaker 1: So I applaud the Shareholder Association. I actually I think
Speaker 1: that if there was an organization to belong to as
Speaker 1: an investor, that would be one that you would look
Speaker 1: at and say it's worth giving our support, because if
Speaker 1: somebody's going to be a voice against some of the
Speaker 1: bigger powers, it'll be then.
Speaker 2: There's been a bit more sort of talk as well,
Speaker 2: I feel this year and last as well about sort
Speaker 2: of putting your money where your mouth is, you know,
Speaker 2: making sure that for some of those people who are
Speaker 2: on boards and even a management you know that they
Speaker 2: need to have some skin in the game to recognize
Speaker 2: why this loss of value and the lack of outcome
Speaker 2: is actually important. And I mean you brought up keep Bank,
Speaker 2: and I sort of feel like that's sort of similar there.
Speaker 2: I find it pretty difficult to stomach the idea that
Speaker 2: the government thinks that having a bank is so good,
Speaker 2: but it's not good enough for them to bank with.
Speaker 2: Why on earth does a bank? Does a government own
Speaker 2: a bank that they're not willing to do work with?
Speaker 3: Speaking of banks, and one of the things that did
Speaker 3: happen in twenty twenty four is interest rates, which obviously
Speaker 3: banks have a big part in play, thinking, Brad, we're
Speaker 3: on the downward cycle, but it doesn't feel like it's
Speaker 3: champagne time. It's caution still. What's your view on where
Speaker 3: we're going to get to in twenty twenty five.
Speaker 2: I think the big thing with interest rates at the
Speaker 2: moment is we're looking for where the new goldilocks owners,
Speaker 2: where is the new normal, because it might not be
Speaker 2: exactly where it was pre pandemic in twenty nineteen. And
Speaker 2: I think the difference as well this time is we're
Speaker 2: not trying to stimulate the economy. We're trying to take
Speaker 2: our foot off the break and stop restraining it. If
Speaker 2: you look at where the official cash rade is expected
Speaker 2: to end out around that sort of three ish percent,
Speaker 2: maybe three and a half percent, that's still quite a
Speaker 2: bit above where it was in twenty nineteen. So I
Speaker 2: think that that's the sort of the different tone it's
Speaker 2: we're trying to unlock the economy, but we're not trying
Speaker 2: to put any sort of boost or noss behind it.
Speaker 2: We're just trying to get it back to a normal,
Speaker 2: solid level of operation. So that will be different. I
Speaker 2: think when we're looking at sort of the next year,
Speaker 2: there's been a lot more front loading of those intrast
Speaker 2: rate cuts by the Reserve Bank, and there seems to
Speaker 2: be a bit more front loading that the retail banks
Speaker 2: have done as well on mortgage rates and the likes
Speaker 2: of savings rates and similar as well. So I do
Speaker 2: wonder there will be further next year. There will be
Speaker 2: more to come, but I think that we're possibly closer
Speaker 2: to the bottom of interest rates than we might think.
Speaker 2: It's just that it will take a while, I think,
Speaker 2: for households to refix. So there's probably another six months
Speaker 2: of quite challenging conditions until midyear when a lot more
Speaker 2: people every fix that all of a sudden got a
Speaker 2: bit more money that they're not spending on the mortgage,
Speaker 2: they can spend that on other things. Business sales start
Speaker 2: to perk up a bit. Businesses then need a bit
Speaker 2: more resource, start to hire a bit more, and you
Speaker 2: start to get again that more I guess it is
Speaker 2: solid level of economic activity. It's it's not economic goal drums,
Speaker 2: but it's not the rocket ship to the moon stuff either.
Speaker 1: Interestingly, just before I came here this morning, one of
Speaker 1: our leading clothing retailers just reported to the internet saying,
Speaker 1: our sales are up ten percent for the first eighteen
Speaker 1: weeks of our trading year, and go ten percent. That's great,
Speaker 1: And I said, but you should have seen what they
Speaker 1: were like last year, so a ten percent rise isn't
Speaker 1: that great. But they made the comment that they found
Speaker 1: their margins were actually stable in an environment where everybody
Speaker 1: else would be doing deep discounting just to get goods
Speaker 1: out the door, right, and to get cash into the tools,
Speaker 1: that whole turnover piece, right, just running fast to stay still.
Speaker 1: And from that point of view, you know, there's been
Speaker 1: a real pressure on margins. In the end, I think
Speaker 1: a lot of firms were hanging on by their fingertips
Speaker 1: through the pandemic. They were saved by wage subsidies and
Speaker 1: the other cheap finance schemes that came through from the government.
Speaker 1: And now that that TAP's been largely turned off, right,
Speaker 1: and people like Treasury and the banks are saying, well,
Speaker 1: we lent you, you know, five hundred thousand dollars during the pandemic.
Speaker 1: Excuse us, can we have some of it back? Right
Speaker 1: in an environment where they're still paying high money for
Speaker 1: their working cash when they're not making sales and wage
Speaker 1: bills are Actually we should note there that their wage
Speaker 1: costs have gone up quite considerably as well. So looking
Speaker 1: at that throw it all together, Yeah, you can see
Speaker 1: why more businesses are failing, and we.
Speaker 3: Probably will have some more failures, you think, o.
Speaker 1: Bounty, I mean, you've got well, four hundred and thirty
Speaker 1: six thousand people. I think by the last Centric report,
Speaker 1: we're in their debt areas, right, four hundred and thirty
Speaker 1: six Now you say, you know, that's enormous. The number
Speaker 1: of liquidations of companies is double in the past year
Speaker 1: or so, in particular construction, retails, a hospital.
Speaker 2: It is interesting, though, because I feel like we're sort
Speaker 2: of back into a almost an economic purgatory position where
Speaker 2: you've got those business closures coming through. You've still got
Speaker 2: some pretty tough operating conditions through in the economy. But
Speaker 2: at the same time you are looking at the likes
Speaker 2: of electronic card data are starting to pick up ever
Speaker 2: so slightly. It's still down on a year ago, but
Speaker 2: it's picking up slightly, and I think it highlights that
Speaker 2: there's still that level of cause amongst consumers that when
Speaker 2: we've looked at that, how that spending has sort of
Speaker 2: changed consumable so you know, your supermarket spend your essentials
Speaker 2: is pretty stable and solid. Your durables, your big items,
Speaker 2: your electronics and couches, and that's still pretty lackluster.
Speaker 3: One of the other features of twenty twenty four was
Speaker 3: we had the introduction of climate reporting and that's four
Speaker 3: entities I think that have got one billion in assets.
Speaker 3: It feels quite mixed reaction. We've had what would you say, Giles.
Speaker 1: Well, we had two big reports out in the past
Speaker 1: couple of weeks. One was from the Financial Markets Authority,
Speaker 1: who have got the oversight for the climate reporting entities.
Speaker 1: Those big firms that you were talking about. They said, well,
Speaker 1: you know, I'm generally speaking, people have sular got to
Speaker 1: grips were that, but there areas of need for improvement
Speaker 1: and we've got the view that some firms actually probably
Speaker 1: still haven't quite got the grips of what they're supposed
Speaker 1: to say and what they're supposed to measure and how
Speaker 1: they're supposed to present the information. Some of them were
Speaker 1: accentuating the positive, right and should we say, well the
Speaker 1: dirty word, but exactly they were green washing. And then
Speaker 1: there was a report by Forsyth Bar who looked at
Speaker 1: those companies on the nz X who were putting out
Speaker 1: the ESG reporting and they do a carbon component as well,
Speaker 1: and they said the ones who have got to grips
Speaker 1: with that are the gent tailors. And the reason why,
Speaker 1: of course, is because they've got some of the biggest
Speaker 1: carbon emissions, so they actually they measure, they know the cost,
Speaker 1: they're moving to mitigate racings. They've got the whole renewable
Speaker 1: energy side to their business as well. They're fine. Other
Speaker 1: companies are trailing quite a way back. Everybody's making an effort.
Speaker 1: I thought the interesting comment that came out of the
Speaker 1: FMA report was that cost of compliance, even for a
Speaker 1: small firm, a smallish firm, you can be spending a
Speaker 1: million dollars or more to actually do this report or
Speaker 1: to do these reports. It's required by law for those
Speaker 1: entities of being who meet that criteria, but you know,
Speaker 1: and it's taking up a lot of time, there's a
Speaker 1: whole industry now in ESG reporting. So all those firms
Speaker 1: that we're doing consultancy on smart tax avoidance sorry, tax
Speaker 1: minimization schemes right are now doing reports on how to
Speaker 1: do your ESG reporting. That's a new side of their business.
Speaker 2: See. That's my worry as well, though, is that we're
Speaker 2: effectively creating a whole another cottage industry. And in fact,
Speaker 2: you get some of the businesses who, you know, I
Speaker 2: don't know if it's been public or reporter, but a
Speaker 2: few every now and then seem to suggest that actually,
Speaker 2: thus spending more on compliance, that they've actually had to
Speaker 2: strip out some of their budget for doing stuff on
Speaker 2: the climate, for supporting you know, the adaptation and mitigation
Speaker 2: to just fill out the forms and do some of
Speaker 2: that reporting, and that seems a little bit over the top.
Speaker 2: There has been I think some common sense changes that
Speaker 2: have come through from the External Reporting Board and that
Speaker 2: that have sort of pushed out the expectations of how
Speaker 2: quickly a whole lot of the additional reporting has to
Speaker 2: come through. And that's important, And my sort of worry is,
Speaker 2: like I totally think we need to do this quite clearly.
Speaker 2: It's important more importantly from a business point of view,
Speaker 2: you're seeing a lot of our overseas operators, those who
Speaker 2: are buying from New Zealand businesses saying I need you
Speaker 2: to do this, otherwise I won't buy from you. So
Speaker 2: like there's a business imperative there for it, but I
Speaker 2: feel like there's got to be a slightly smart way
Speaker 2: of going about it. Then making everyone do all of
Speaker 2: this paperwork that might have some value but maybe isn't
Speaker 2: all going as easily to plan, isn't quite as cheap
Speaker 2: to produce, and more importantly diverts resources away. That there's
Speaker 2: got to be a better middle ground there. It was
Speaker 2: encouraging though at least what my sort of one positive
Speaker 2: on that broader climate landscape was at least the emission's
Speaker 2: trading scheme got a few credits sold this year because
Speaker 2: market I mean, there was nothing before and it's i
Speaker 2: mean again still not working like it should be, but
Speaker 2: the fact that there was actually a few bit of
Speaker 2: a look up.
Speaker 1: You wouldn't, like buy some cute carbon credits. I've just
Speaker 1: got a few times.
Speaker 2: If I could buy some, I probably would. I mean,
Speaker 2: one of the disappointing things this year as as an economist,
Speaker 2: you know, we're always looking at numbers. Was that actually
Speaker 2: some of the transparency on the carbon markets was taken
Speaker 2: away when Jarden's closed, the sort of public fronting on
Speaker 2: carbon and price supporting. So, I mean, it's one of
Speaker 2: those things. I feel like the government still got a
Speaker 2: lot of work to do there to make everyone actually
Speaker 2: realize that you do need to do this stuff, rather
Speaker 2: than at the moment it still seems like everyone's like, yeah, okay,
Speaker 2: we get it, but you don't seem committed. So I
Speaker 2: don't know if I need to be committed well, which
Speaker 2: is a bad place.
Speaker 1: Interestingly, of course, the government before it came into power
Speaker 1: was counting on a rather robust ets to be able
Speaker 1: to furnish some money for them, which actually hasn't emerged.
Speaker 2: There's no money in the kiddy for that.
Speaker 1: Right, You hat another pressure on the scores.
Speaker 3: Now, guys, we've talked about a lot of things, and
Speaker 3: a lot of them are a little bit depressing. We
Speaker 3: need to lift the tempos somewhat. What are you thinking
Speaker 3: in twenty twenty five, I'll start with you, Giles, is
Speaker 3: going to be a positive for New Zealand.
Speaker 1: I think we're just actually going to be more cheerful.
Speaker 1: I mean, we're no now, I mean, and that's.
Speaker 2: That's where it starts. It's that positivity there.
Speaker 1: Right, a sunny disposition of disposition even if the weather
Speaker 1: doesn't play ball. But I think people you're feeling it already, right,
Speaker 1: People talk positive, right. I mean the number of people
Speaker 1: I talk to now are actually saying it won't be thrive, right,
Speaker 1: but we've survived right well and good you're right.
Speaker 2: Next year I think will be better quite simply because
Speaker 2: people's mortgages are coming down like that. We've seen that effect.
Speaker 2: Monetary policy did very well to curb economic activity when
Speaker 2: they were high. Now they're coming down. It will give
Speaker 2: people a bit more money. So I think as we
Speaker 2: go through next year it won't hit the first of January.
Speaker 2: Everything is all that quickly better. But that sort of
Speaker 2: talk around you know, green shirts, and I've been talking
Speaker 2: about it quite a lot. I feel like the sunflower
Speaker 2: comes out a bit more around midyear, if you will,
Speaker 2: because that's when the spending will come through. And again,
Speaker 2: I mean, you can't break the economy down this simply,
Speaker 2: but sometimes you have to try. Once households are spending
Speaker 2: a bit more, they will go and put that into
Speaker 2: out into businesses, and similar to those businesses, once they
Speaker 2: have a bit more activity, they've got some runs on
Speaker 2: the board, they need a few more people to work
Speaker 2: through that. That then stimulates a bit more employment. The
Speaker 2: unemployment rate drops a bit, more spending happen. So again
Speaker 2: I think you're right, We're just onto a more solid
Speaker 2: footing next year.
Speaker 3: Speaking of spending, then, Brad, what are you thinking for
Speaker 3: spending for Christmas? What about gifting? How do you feel
Speaker 3: about that?
Speaker 2: Personally? I really struggle with present shopping one. It's just
Speaker 2: the crowd sort of you know. I struggle with those enough.
Speaker 2: But as a good economist, the sort of lowest transaction
Speaker 2: value is to give people cash. In fact, a bank
Speaker 2: transfer would be better. Now some people say it's very unsentimental, Charles,
Speaker 2: I don't know if you've got a view on how
Speaker 2: you gift, but I'm a big fan of cash and money.
Speaker 2: That's a much better option for me, very easy. Whoever
Speaker 2: I'm gifting it to, they can choose whatever they want.
Speaker 1: The best gift I think I can give actually is
Speaker 1: my time. Right is to be actually with You can't
Speaker 1: put a price on it other than to say right
Speaker 1: when I have a family gathering, I come away uplifted, right,
Speaker 1: and I hope that you know, they gain a little
Speaker 1: something from me. And so time is the most important thing.
Speaker 1: And I don't think Look, we speak about peace on earth,
Speaker 1: good world war people right for Christmas, why don't we
Speaker 1: do it for three hundred and sixty five days of
Speaker 1: the year. Actually, that's the key issue. I know it
Speaker 1: doesn't generate a lot of money. I know Brad's economic
Speaker 1: philip won't you know, necessarily get that boost, But so
Speaker 1: be it right, if we're actually better mentally within our
Speaker 1: own family structures, that actually, to me is the foundation
Speaker 1: of a good economy.
Speaker 3: Well, that's with many more things we could talk about. Guys,
Speaker 3: thank you so much for coming in today and being
Speaker 3: with us for our last episode of the year, and
Speaker 3: thanks listeners for joining us. You can watch Shared Lunch
Speaker 3: on YouTube, or you can follow us on your favorite
Speaker 3: podcast app. Leave us a rating and tell us what
Speaker 3: you'd like to hear next. Merry Christmas and Martewar