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Steve Smith AREINZ
Managing Director
The World Keeps Turning
The news over the last month has been dominated by a few major
international events.
An Icelandic volcano with an unpronounceable name caused major
disruptions to international air travel around the globe. Some saw
it as a way to extend their holidays while others missed important
events or occasions. Importers and exporters had major supply
problems with fresh, perishable stock most at risk. Western Europe
is about as geographically far as you can get from NZ yet, as we
have seen, the consequences of a regional event can be very wide
reaching.
Greece is on the verge of bankruptcy with a bail-out of over 110
billion Euro being proffered by the EU. The rest of the union are
not happy with the situation but could not afford to have one of its
members default on their enormous obligations. Conditions of the
rescue package will require Greek citizens to work longer (current
retirement age is 52) and for the government to rein in spending.
This is the largest single bail-out ever and demonstrates that all
is not well on the other side of the world. Spain and Portugal are
also under severe economic pressure and property prices have dived.
The Gulf of Mexico is threatened by a major oil leak which has the
capacity to destroy billions of dollars of fishery and tourism
earnings. Tough break if you’re a Louisiana shrimper, maybe an
opportunity for local fisheries or travel companies to get
themselves noticed?
Back here we’ve seen an especially tragic Anzac Day and another
reminder of the sacrifices made for our wonderful way of life.
While all this sounds a bit negative, there is plenty to smile
about. The NBNZ monthly Business Outlook survey for April has found
that a net 50% of respondents expect the economy to improve over the
coming year. This was up from 43% in March and back to where the
reading was in February which was the strongest in ten years.
A very high net 50% of residential builders expect their activity
levels to go up in the coming year and a net 13% of respondents
expect higher levels of commercial construction. A net 10% of
businesses say they plan spending more on capital equipment over the
coming year and a net 13% of businesses expecting to hire more
people.
Overall the survey is strongly consistent with improving growth in
the economy and it is hard to not feel good about the future
prospects.
We are constantly reminded that the recession is expected to have
positive long term benefits as businesses gets smarter about how
they operate. Business owners have been trimming costs, getting
creative with marketing strategies and maximising output without
incurring additional expenses.
Closer to home, we’ve experienced a slowing in sales over the last
few weeks as buyers wait to see what effects the May 20 budget will
have. There have been a number of changes signalled including
raising the level of GST and lowering the company tax rate. Some
industries have been specifically targeted with funding to early
childhood centres flagged for change. Cigarette smokers will already
be feeling the pinch from the new excise tax but we’re not going to
be paying more for a bottle of wine or beer.
The next fortnight will continue to be somewhat sluggish pre-budget.
We expect things to heat up again after May 20th , once there is
more clarity and people can proceed with confidence.
Regards,
Steve Smith AREINZ
MANAGING DIRECTOR
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