Sorry, but we can’t find a financial whiz to assure us the short-term economic outlook is bright

It’s been a grim week for investors.  RNZ reported the local sharemarket continued to slide yesterday, because of anxiety about the coronavirus and the prospect of it sparking a global recession,  and the NZ dollar tumbled after the first case in this country was confirmed.

The market mayhem was induced by the global panic as news of more coronavirus cases, notably in Italy, raised concerns of the virus’s economic impact being much greater than previously expected.

The market started the week at a record high but fell every day and had lost almost 7 per cent by the end of trading on Friday.

The three main US indexes ended the week down 10% or more.

“A known unknown” is how one major company boss described the economic fallout of coronavirus to the BBC, which reported the markets have woken up to the disruption to the economic activity from coronavirus being wider, deeper and perhaps longer lasting than previously assumed.

Dairy exporters remain sanguine while other sectors (and investors) take a hit from coronavirus

Finance Minister  Grant  Robertson insists  NZ  is in a  strong position to weather  the fallout  from   coronavirus, even  though  Australia  has  declared it a  pandemic.

He underlines the  Crown accounts are  buoyant, the fundamentals of the economy are strong and  careful management has seen the economy continue to grow in the face of constant headwinds like international trade disputes and uncertainty over Brexit.

But he concedes there might be a need for fiscal stimulus.

“We  are preparing for  multiple scenarios”.

He  says  the government is carefully monitoring the impact of coronavirus on all sectors.

 “We are ready to support our people and our businesses through any eventuality.

 “We believe it is sensible and responsible to plan for every possible scenario, but that does not mean we are predicting them. We are also at a stage in the 2020 Budget process where we can consider the policies required if we need them”.

Robertson’s aplomb might have a hollow ring for investors taking a thrashing in the sharemarket.

Clearly some sectors are  suffering  more than others  and  Westpac  bank  economists  have talked of  a  “significant blow”  to  the  NZ  economy from  the  coronavirus impact. Sectors such as  tourism, education and the logging industry  in  particular  are  under the  pump.

But for the country’s biggest export  sector  there has  been some  reassurance  this  week   with   reports  from  Fonterra  and  A2 Milk  on the state  of  their  sales to   China.

Fonterra confirmed   it is not  revising its forecast farmgate milk price range at $7.00-7.60kg/MS. The co-op reported it has signed deals with suppliers in China, which should offset the impact of the coronavirus.

CEO  Miles Hurrell  said the current situation is very fluid and uncertain.

“However, we have already contracted a high percentage of our 2020 financial year’s milk supply and this is helping us manage the impact of coronavirus. While there had been a slowdown in container processing at ports, products were continuing to be cleared by customs and quarantine officials.

“The momentum we saw in the first three months of the financial year has continued, and as we approach the interim results our underlying earnings are tracking well.  However, given the potential significant risks that could arise from coronavirus in the second half, we are taking ant approach and maintaining our full-year forecast earnings range”.

ASB analyst Nathan Penny described it as a “reassuring and comforting” announcement, considering the speculation around coronavirus.

Meanwhile A2 Milk has reported a big jump in interim profit, boosted by strong growth in the Chinese infant nutrition market.  The company’s net profit climbed  21% to $184.9m in the December  half and revenue rose 31% to $806.7m. Chinese label infant nutrition sales doubled to $146.7m, and distribution expanded to 18,300 stores.

Acting CEO Geoff Babidge said the company expected strong revenue growth to continue, but he acknowledged the potential for the Covid-19 coronavirus to impact on supply chains and Chinese consumer demand.

A2’s products were “essential” for many Chinese families and revenue for the first two months of the second half is likely to be above expectations.

“However, this is a dynamic situation and at this stage we are unable to quantify the impact, either positively or negatively, for the full year.”

One forecast A2 did make was a medium-term target for its operating profit margin, of around 30%.

This was lower than the first half due to a number of factors, including increased marketing costs, possible supply chain costs resulting from the virus in China, and the potential for “unfavourable” foreign exchange rate movements.

“Given the Covid-19 situation, we are assessing the level of discretionary marketing investment and trade marketing activation that can be effectively deployed in China for the remainder of the fiscal year,” Babidge said.

 

Regions are to benefit from $190m poured into capital projects – but what about those emission targets?

Announcing a package of regional capital projects worth about $190 million, Regional Economic Development Minister Shane Jones mentioned climate change.

He said Regional New Zealand “will be a hive of activity in the coming months as the New Zealand Upgrade Programme delivers on its promise to modernise our infrastructure, prepare for climate change and help grow our economy”.

How well climate change has been taken into considerations is a good question.  In Britain, plans for a third runway at Heathrow Airport face an uncertain future after the Court of Appeal said the government’s decision to allow it was unlawful.

According to CNN –

The British government’s contentious plans to build a third runway at London’s Heathrow Airport have been blocked by an appeals court on environmental grounds, in a landmark victory for climate campaigners.

Funding furore is enough to bug voters (while marring the PM’s image) – and then the covid-19 virus comes along

Is  it  the   kind of headline  that  will  win  votes at the general  election?  “Rock-star reception in   Fijian  village”    followed  by a   sub-head  “Rapturous   greeting for  Ardern  during visit to launch $3m  sanitation project”.

The  reporter  (veteran Barry  Soper, Newstalk ZB’s  political  editor) poses the  rhetorical  question:  “Is there any wonder that Ardern loves going overseas?”

As   well,   there  has  been  the effusive   welcome  from  Fiji  strongman  Frank  Bainimarama  who,  according  to  another  reporter,  is  expecting, even “demanding”,  Ardern to  pressure  Australia  on  its climate  change  inaction.

Point of  Order  suspects  Ardern  may be  less  forthcoming than  Bainimarama  would  like,  when  she  meets  Australia’s  Scott Morrison.  Almost certainly  climate change  won’t be on the agenda  in the  Morrison-Ardern  talks.

Still, that  won’t  diminish  Ardern’s  popularity  with   those  New Zealanders   who  delight    in her   being  billed   as  one of the world’s  leaders,    by global  media   like  the  US  Time  magazine   which  featured  her  in a cover story   recently.

Second helpings (with a price tag in the millions) are served to some PGF beneficiaries

As we acknowledged yesterday, Point of Order must declare a pecuniary interest in the boost to benefits announced by Social Development Minister Carmel Sepuloni.  Some of the team are among the 800,000 people receiving New Zealand Superannuation and Veteran’s Pension who will enjoy a rate increase by just over 3 per cent.

Should we therefore turn off the Point of Order Trough Monitor?  Perhaps. But not yet.  

At least, not before the Provincial Growth Fund has been exhausted – and probably not even then, because we are confident it will be either replenished or replaced by another trough.

Accordingly we can advise today that the distributors of PGF swill have been busy in recent days, although none of the latest lashings of largess have been directed into Northland.

In some cases, beneficiaries have been served a second helping.

Here’s what the monitor detected:

Spending monitor seeks better deal for taxpayers but a blogger begs for bigger boost for beneficiaries

Whoopee!  A pay rise.

No – to be precise, a rise in the national super which is paid to some of the team at Point of Order.

Super was mentioned in the boost to benefits announced yesterday by Social Development Minister Carmel Sepuloni.

Fair to say, this boost did not go down well with the monitors of public extravagance at the Taxpayers’ Union.  The indexation of benefits to wages means taxpayers are treated less fairly than ever, they say.

Martyn Bradbury, on the Daily Blog, is critical too – but his grouch is that the government has been much too stingy.

Point of Order checked social spending as a percentage of total government spending in the latest six-month Crown financial statements.  We were surprised to find it is a smaller portion of than it was 20 years ago.

But first, the announcement.

Conundrum for the Democrats is whether left-wing Sanders can beat Trump – and if not, who can?

US politics ain’t for the faint-of-heart.  Signs of desperation are emerging in the Democratic Party as Senator Bernie Sanders surges to the lead after three key polls – and party grandees worry whether mainstream United States is ready to elect a “socialist”.

Then, Republicans fear the US intelligence agencies, labelled “deep state” by President Donald Trump, are interfering in the election campaign. Intelligence officials briefed Congress this week on indications that the Russians are once again dabbling in US politics.

This caught Trump by surprise because his own officials hadn’t briefed him on what the lawmakers would be told – and led to a blitz of weekend TV on the news that maybe, possibly, the intelligence community had passed on the right “nuance”.

A green partner for the Nats looks unlikely as Sustainable NZ’s sustainability is tested

The Sustainable New Zealand Party is struggling to demonstrate it has enough political sustainability to last until the election campaign heats up later this year.  Within just a few months media attention has turned from its founding to its foundering.

The New Zealand Herald seems not to have caught up with the foundering bit of the fledgling party’s brief existence (at least, we found no up-to-date report in a quick Google search).  But on November 10 last year it did report on the party’s  establishment under the heading Sustainable NZ Party launches with promise to boost conservation spending by $1 billion.

The party is led by Vernon Tava, a former Green Party member who unsuccessfully stood as co- leader in 2015 against James Shaw, arguing that the party should declare its willingness to partner Labour or National in government.

The RBNZ’s staff numbers surge – but the governor warns he wants more (especially for supervision)

Staff expenses at the Reserve Bank  – which have increased by an average 4.4% a year since 2009/11 – surged by 14.8% in the 12 months to 2018/19.

Total staff numbers increased by an average 3.4 a year during those nine years  but shot up by 19  in 2018/19 from 255 to 274.

But wait.  We need more – or rather, the governor says he needs more.

The Taxpayers Union reckons we should ignore him.

According to the Dominion-Post, Adrian Orr this week told a parliamentary select committee the bank is anticipating “a much more significant increase” over its next five-year funding period.

“The begging letter is on its way to the Treasury for inspection and then we will be going into our funding agreement discussion with the Minister of Finance in mid-March,” he said.

Orr told Parliament’s Finance and Expenditure select committee he was not comfortable talking about the scale of the possible resourcing increase ahead of those discussions, but said it was “30 per cent perhaps”.

“The biggest percentage change in staff would be in supervision.”

O’Connor is accused of being slow to act on bovine tb – but Nats have been slow to raise questions, too

The Nats are accusing Biosecurity Minister Damien O’Connor of being slow to act on a bovine tuberculosis outbreak in Hawke’s Bay.  Is it a fair cop?

OSPRI confirmed an outbreak in Hawke’s Bay in April last year, but a disease management response wasn’t put in place until October, National agriculture spokesman Todd Muller contends.

There have been more positive tests since then and one third of Hawke’s Bay will be under stock movement controls from March 1.

“Responses like this need to be fronted quickly for the sake of our valuable beef and dairy sector. The Minister needs to be across his portfolio and ensure these issues don’t sneak past him.”

But whether O’Connor has been caught napping depends on when he first learned (a) about the bovine tb and its rate of spread and (b) what was being done to deal with the outbreak – and when he should have first learned those things.