Heather Roy's Diary
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World Recession: How is New Zealand Faring? 28/08/2010 - 1:09pm Comments 1 In late 2008, the huge American bank Lehman Brothers went bankrupt, and many other major financial institutions suddenly looked shaky. The US financial system froze as banks refused to lend to each other and the panic quickly spread. In Britain the Royal Bank of Scotland, a major bank, became insolvent, and Gordon Brown was in the unlucky position of being the first Prime Minister since Benjamin Disraeli - in the nineteenth century - to face a run on the banks. People queued for hours to make withdrawals in case their bank went under. To anyone who has studied the origins of the Great Depression of 1930, the sequence of events then and now had a horrifying similarity and the spectre of a global economic meltdown loomed. At the time New Zealand looked vulnerable on a number of fronts. Then we had a large balance of payments deficit and had been consistently importing more than we exported. The deficit was typically around nine percent, which was high by international standards. Only Iceland was in a worse position. New Zealand also had a low level of savings that made us dependent on overseas investment and that looked likely to evaporate at short notice. Much of New Zealanders’ money was tied up in housing and that sector looked particularly weak. Readers may recall commentary around interest rates being decided on what the Auckland housing market was doing. As the world banking crisis evolved we were already having a home grown problem with a number of insolvent Finance Companies. Many Mum and Dad investors lost their life savings. Our overall position looked weak but the truth is that New Zealand has, so far, done much better than most. Whilst Greece teetered on default and riots in the streets of Athens cost three lives, the reporting in New Zealand concentrated of Ministerial credit card spending. So how did we manage so well? The banking crisis never affected New Zealand directly. Most of our major banks are Australian owned and no Australian banks became insolvent. Presumably their lending policies were more prudent. Furthermore, Australia is our largest trading partner so their prosperity is to our benefit. Australia was the only large Western nation to not have experienced recession during the global financial crisis. The New Zealand economy also had some strengths. Government debt was relatively low at around 20 percent of one year’s production (GDP). By comparison Britain’s debt figure was 50 percent, which would not normally be considered excessive, but with tax revenues falling it rose rapidly. Furthermore, New Zealand had been labouring under relatively high interest rates in comparison with other OECD countries. These were progressively cut with the impact of making it easier for borrowers to service their loans. In countries where interest rates were already low there was less room to manoeuvre. The Japanese, for example, have interest rate close to zero making it difficult to create a monetary stimulus. During this time and when finance companies were beginning to topple the New Zealand government felt it prudent to guarantee deposits. To date, payouts have not been excessive. By contrast the US government, for example, has spent a fortune on propping up ailing banks and industries. New Zealand has also benefitted from being an exporter of commodities. Food products have attracted and maintained relatively good prices during the global recession and it is our manufacturing exports that have struggled. Our trade imbalance is down to three percent. Though New Zealand is now technically out of recession the overall picture is one of mild recession. The fear is that the USA continues to struggle. Its unemployment rate hovers stubbornly around 10 percent and its budget deficit is huge. Europe, meanwhile, struggles with the prospect of several nations defaulting on debt. As a small economy, if our trading partners suffer then so will we. So far, so good, but we need to remain vigilant and the right monetary policy decisions are crucial. That’s why the ACT party constantly calls for stimulation of our economy in the form of lower taxation coupled with less government spending. Lest We Forget Martin Luther King delivered his historic “I have a Dream” speech advocating racial harmony at the Lincoln Memorial during “The Great March on Washington”, also known as the “March on Washington for Jobs and Freedom”. A shortened version of the speech can be found at http://www.youtube.com/watch?v=Y4AItMg70kg&feature=related The march was a large political rally in support of civil and economic rights for African-Americans. Somewhere between 200,000 - 300,000 people marched. Of those who marched, 75-80 percent were black with the rest being made of white people and other minorities. The march was organised by a group comprising civil rights, religious and labour organisations. Most now credit the march with assisting the passage of the Civil Rights Act (1964). Comment |
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Simple Scams Still Dangerous 13/08/2010 - 2:44pm Comments 1 It seems that every day I read or hear about a new scam intended to part innocent Kiwis from their hard earned money. Sometimes I'm taken aback by the cunning and ingenuity but, more often than not, I'm dumbstruck at the brazen - and often feeble scams - which the majority of New Zealanders can see straight through. I'm beginning to think we need a new way of highlighting the danger of even the weakest scams, and perhaps celebrating the incredulity of those who see through them - maybe it's time for our own version of the Darwin Awards or 'Razzies' (the anti-Oscars). As Minister of Consumer Affairs, I am involved in a range of initiatives designed to protect people from scams - Fraud Awareness Week, Scamwatch (www.scamwatch.govt.nz), the recent launch of 'The ORB' (www.theorb.org.nz), etc - and wish that it were possible to say that we have finally rid the world of scammers and fraudsters. Failing that, however, I have to admit that life would be a lot easier if scams were so lame that people saw right through them immediately and were not taken in. In a world where fraudsters and scammers are coming up with increasingly sophisticated ways to dupe innocent victims out of their hard-earned money, it is sometimes refreshing to hear about a scam that is so feeble as to be almost laughable. I came across a great example of this while reading the 'Press' newspaper earlier this week. The 'Press' featured an article in which the Department of Internal Affairs (DIA) issued a warning to people about a cold caller (someone who makes unsolicited phone calls) suggesting there is a problem with a person's computer and trying to talk them through fixing the system. According to the article, a Christchurch woman received an unsolicited phone call from a man who asked if she had a computer. She answered that she did, and he then tried to convince her that he was calling about a problem with her operating system. He told her he needed her to log on to her PC so he could guide her through a process to fix the system. Given that the woman hadn't called anyone about her computer to begin with, she wasn't taken in and hung up the phone. Whoever it was that thought this scam would work is definitely a contender for one of these anti-awards. Another example of an unconvincing scam involves an email that one of my staff recently received telling him that he had been successful in his application for a part-time job - a vacancy he'd never heard of for a job he never would have applied for. In order to secure the job he simply needed to provide his bank account details - and $100 for "administration". Needless to say, he wasn't fooled. The fact is that there are just as many ill thought-out scams out there as sophisticated ones - as well as some that, although cunning when first created, are so well known as to be outdated. This could be said to be becoming true for the Nigerian letter scam, which is now so well-known that many people simply delete them without a second thought. The problem is that no matter how simple a scam is there is always someone, somewhere, who will fall for it. Why? Because scammers prey on our weaknesses, gaps in our knowledge - and sometimes our arrogance. The UK's Office of Fair Trading - the British version of the Ministry of Consumer Affairs - last year commissioned research from the University of Exeter to work out why people respond to scams. What researchers found was that some people respond because they feel the scam is an unusually good offer. Take, for instance, a scam offering the chance to obtain a large sum of money. Those who respond can picture what it would be like to have that money, they can imagine what they'd do with it, and may be more easily taken in than most people. What I found surprising was that the researchers also found that some people taken in by scams are actually quite knowledgeable about the subject that the scam is about - their belief that they are experienced in the scam's particular area increases their risk of becoming a victim. For example: the research suggested that people with experience of playing legitimate prize draws and lotteries may be more likely to fall for a lottery scam than those with less knowledge and experience. New Zealanders lose an average of $400 million a year through scams and I wouldn't be surprised if some of this is through scams at the lower end of the sophistication scale. Education is the key to preventing people from becoming scam victims. People need to know how to recognise a scam for what it is, and to move away from the attitude that scams happen to 'other people'. They also need to know that responding to a scam is never worth the risk and that if a deal seems too good to be true, then it probably is. Lest We Forget - NZDF Tragedy on Mt Ruapehu New Zealand Army Privates Brett Barker, Mark Madigan, Stuart McAlpine, Jason Menhennet and David Stewart, and Navy fitter Jeffrey Boult were all part of a group that set out on a training trek on Mt Ruapehu in August 1990. The group - which consisted of 11 servicemen and two instructors - were to undertake basic mountaincraft and build snow caves before descending to Turoa on the southern side of the mountain. The blizzard that hit Mt Ruapehu on August 11 and 12 came without warning and took the group by surprise. They became stranded on the mountain, unable to go forward or back, and in the end were so caught by the weather that they could build only a trench for shelter. With two trainees showing signs of hypothermia, two members of the party set out on an 11-hour trek to find help. When rescuers found the group on Monday, six were dead and the five survivors had hypothermia and frostbite. A commemorative service was held today at the Department of Conservation Visitor Centre, Whakapapa. ENDS Comment |
