Monday, September 29, 2008

Most Southern in the World #6 - Post Office Ulva Island Stewart Island

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Post Office, Ulva, Stewart Island, the most Southern Post Office in the World, circa 1910

Charles Traill, an Orkney Islander, established a post office on Ulva Island in 1873. Ulva is an island in Paterson Inlet, Stewart Island, New Zealand's third largest island that lies across Foveuax Strait at the bottom of the South Island.

A view from a hill overlooking the Ulva Island post office, circa 1910s. The sender writes "terribly rough trip across [Strait] nearly every one was sick. Thank goodness I wasn't."

One can understand the discomfort of the sea voyage given the size of the tourist schooners plying Foveau Strait at the time. The sea voyage today can still be a rough one -

Schooner drawing in to Half Moon Bay, Stewart Island, circa 1910s

The post office was the first on Stewart Island and was no doubt an amenity that sealers, whalers, fishermen and early settlers appreciated. It also was a popular place for tourists to visit to be able to grab a postcard, mail it, and boast to those back home that they had been to the most southern post office in the world.

The Ulva post office closed in 1923 with a post office continuing operations in Half Moon Bay. Neither could still claim to be the southern most post office today since postal services operate now at places like Scott Base (NZ) and McMurdo station (US) in Antarctica.

The old post office building still remains on Ulva, but the island is now an open wildlife sanctuary. The sanctuary is free of introduced pests such as rats, enabling the re-establishment of native bird species including the Tieke/saddleback, mohua /yellowhead, toutouwai/Stewart Island robin and tītipounamu/rifleman since 2000. More details here.

Mail boat off Ulva Island, Stewart Island, circa 1907.

Sunday, September 28, 2008

Most Southern in the World #5 - Railway Station, Bluff, NZ

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The Most Southern Railway Station in the World, Bluff, N.Z. circa 1910

The railway line from Invercargill to Bluff was completed in 1867, connecting the growing town with its seaport. At the end of the line, the southern most railway station was constructed at Bluff.

Railway Station, Bluff - trackside. Muir & Moodie, 1913

The station was demolished.

Saturday, September 27, 2008

No Use Crying Over Spilt Milk?

Fonterra may have its 43 percent share in its Chinese joint venture, San Lu, sold out from underneath it.

The China Daily is reporting that the Sanlu group may be forced into bankruptcy and be taken over by Beijing Sanyuan Food, a major Chinese dairy producer that is not implicated in the melamine-tainted milk scandal in China. Sanyuan has reportedly received a Chinese government order to consider a merger with Sanlu.

Perhaps revealing a degree of naivete about how business is really conducted in China, Andrew Ferrier, Fonterra's CEO told the Wall Street Journal, "no one has contacted our people on the board about a purchase."

This past week Fonterra has written down its book value for Sanlu from NZ$139 million to $62 million, based on an assessment that the Sanlu brand could not be resuscitated.

In addition to its initial purchase price for a stake in Sanlu of NZ$150 million in 2005, Fonterra has put a further $200 million into the joint venture.

In a period when New Zealand dairy farmers have been living on the cream of the land as international dairy sales boomed, they will surely be asking what happened to the management of their international investments.

The whole episode brings into question the naivete or innocence of New Zealand businesses operating in foreign markets where the rules of the game are markedly different from those in traditional or domestic markets.

Tree Lords Law Passed - Central North Island Maori Claim Settlement

The New Zealand Parliament passed the Central North Island Forests Land Collective Settlement Act on 25 September that provides the largest Treaty of Waitangi claim settlement to date.

Seven central North Island iwi (Maori tribes) forming the collective are to receive $195.7m of crown forest land covering 176,000 hectares, plus about $223m in rentals that have accumulated on the land since 1989 and an annual income stream of $13m. The iwi represent over 100,000 tribal members.

The settlement only covers claims to Crown forest lands in the central North Island, but not other parts of claims the iwi may still have with the Crown. Only public land is involved in the settlement and public access to the forest land covered by the settlement will continue.

The iwi represented in the collective formed to negotiate the settlment with the Crown are Ngai Tuhoe, Ngati Tuwharetoa, Ngati Whakaue, Ngati Whare, Ngati Manawa, Raukawa and the affiliate Te Arawa Iwi and Hapu. An eighth iwi, Ngati Rangitihi, may yet join the settlement.

Note: the "Tree Lords" is a comparative reference to an earlier fisheries settlement that was commonly referred to as "Sealords" involving the joint venture purchase of a fisheries company Sealord as part of the earlier claim settlement.

Friday, September 26, 2008

Is Your Teacher A Prostitute?

An Auckland primary (elementary) school teacher is moonlighting as a prostitute, the New Zealand Herald reports. The woman - in her 30s and a mother of two - is new to teaching and moonlights to supplement her income.

The school's board of trustees is now considering the matter after a parent informed the principal of the teacher's extracurricular employment. The dilemma the board faces is that while the teacher's secondary employment may be seen by some to be incompatible with her teaching employment, that work is now legal in New Zealand.

Prostitution is legal in New Zealand. The Prostitution Reform Act (2003) makes adult prostitution a legal occupation and permits licensed brothels.

Schools can and do have policies preventing or restricting secondary employment, or at least requiring prior approval by the school board. A board might consider some types of secondary employment to be incompatible with its policies and with the role-modeling expected of its teachers. But the key issue might be whether the teacher's secondary work affects her work performance as a teacher.

The teacher may be in breach of the rules of conduct for registered teachers enforced by the New Zealand Teacher's Council. Under the Education Act 1989, the school board could petition the Council to review the teacher's employment as a prostitute to determine whether her conduct constitutes an "act... that brings, or is likely to bring, discredit to the [teaching] profession".

The counter-argument, of course, is that prostitution is legal employment and that unless the woman's work performance at her primary job is unduly affected, the school has no business sanctioning or dismissing the woman.

In 2006, an Auckland policewoman who was moonlighting as a sex worker at a massage parlour was told by her police employer that her secondary employment was inappropriate and incompatible with her policing work. After an investigation was completed, the woman was able to keep her police employment.

No word yet whether a teacher might be sanctioned or dismissed for engaging in other legal but morally questionable moonlighting such as used car salesperson, real estate agent, banker, lawyer, or economist.

New Zealand - US Antarctic Death Investigation

A New Zealand coroner in Christchurch holding a hearing into the death of Australian scientist Dr Rodney David Marks at the Amundsen-Scott South Pole Station on May 12, 2000 has found that the scientist died as a result of acute methanol poisoning.

The coroner concluded that Dr Marks may have mistaken the methanol for ethanol obtained from lab sources. Moonshine is suspected of being produced at the South Pole station and this too could have been contaminated with methanol.

The coroner highlighted the frustrations of New Zealand police in investigating the death without proper cooperation from US authorities who share in the operation of the South Pole base. He faulted the base's doctor for failing to diagnose the methanol poisoning, for failing to investigate needle tracks on the deceased's arm and not conducting "certain diagnostic tests".

Further hampering the NZ police investigation was the difficulty of obtaining evidence from US authorities, their failure to preserve or photograph the scene of death and to take statements from staff.

The coroner recommended the New Zealand government explore ways to improve cooperation with the US in conducting death investigations in the Antarctic.

US's Largest Bank Failure, Washington Mutual

Global financial instability continued overnight, with the US's largest bank failure in history. Washington Mutual headquartered in Seattle was seized Thursday evening by Federal regulators who simultaneously sold most of WaMu's assets for $1.9 billion to J P Morgan Chase.

The roots of the current US financial crisis can be traced back to the 1980s deregulation of the savings & loans industry that provided home mortgage financing and which WaMu was a part of.

US legislators continue to struggle to pass legislation to shore up the US financial system dangerously teetering on the top of a cliff.

Meantime, on the other side of the Pacific Rim, the Government Superannuation Fund which invests pension funds for some New Zealand government employees reports a NZ$261 million after-tax loss or -6.7 return on average assets as a result of taking hits on its domestic and international stock holdings precipitated by US financial woes and the onset of global recession.

Thursday, September 25, 2008

New Zealand Economy Officially in Recession

The New Zealand economy officially entered recession in the June quarter 2008 according to GDP data released by Statistics New Zealand today.

Expenditure on GDP dropped by almost 1.2 percent over the first half of 2008, with consumer spending dropping by nearly 0.7 percent over the same period, reflecting weakening household expenditures in the face of lower consumer confidence in general economic conditions. Slowing retail sales and a contraction in investment spending in housing is resulting in an inventory build-up that indicates businesses at the manufacturing and distribution levels are beginning to hold excess stocks that retailers are unable to sell.

In the trade sector, exports of goods and services fell 2.1 percent over the past six months as a high Kiwi dollar & interest rates combined with weakening international demand. The biggest reduction in export volumes came from dairy products that had expanded rapidly in recent years as part of a commodity boom. Reflecting the lag that typically takes place as the economy enters a recession, imports continued to surge by nearly 4.7 percent as domestic consumption fell. Strong demand for capital goods by businesses also contributed to the strong growth in imports.

New Zealand last experienced a recession with three quarters of real GDP decline in 1998.

Economists are now revising their forecasts for September quarter GDP downwards as the June quarter GDP tracks lower than previous estimates.

Since July, the Reserve Bank has cut official interest rates from 8.75 to 7.0 percent in two steps. Now analysts are expecting a further 0.5 percent cut at the Bank's next interest rate review late next month with rates down to 6.5 percent by early 2009.

Tempering the Bank's softening of monetary conditions is the risk of accelerating inflation that at least one commentator considers (somewhat exaggeratedly) to be "rampant" at 4 percent.

Most Southern in the World #4 - Signal Station, Bluff NZ

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The Signal Station, Bluff, New Zealand

Though the postcard caption does not say so, the signal station at Bluff probably qualified as the southern most signal station at the time this card was published around 1910.

Signal stations monitored flag signals from vessels at sea and relayed them to shore-based locations. For example, an approaching ship's imminent arrival at Bluff might be signaled from the ship including information about whether a doctor was required upon docking, the ship was carrying mail, the ship required assistance, and so on. Signals might also be sent in either direction about weather conditions such as approaching storms. Flag signals were soon to be superceded by wireless radio when this picture was taken.

The Awarua wireless radio station at Invercargill did not open until 1913. Its task was to monitor marine radio for distress signals and other communication in the southern oceans. On the night of 23 March 1916 it was Alfred Goodwin at Awarua who picked up a distress signal from Ernest Shackleton's Ross Sea party that their ship the Aurora had been disabled by sea ice and they needed assistance.

Wednesday, September 24, 2008

Most Southern in the World #3 - Pilot Station, Bluff

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The Most Southern in the World Pilot Station, Stirling Point, Bluff NZ

Continuing with our "most southern in the world" series from the early 20th century, here is the pilot's station at Bluff, on the southern shores of the South Island of New Zealand. No doubt the station was a cosy spot for the harbour pilot waiting to go out to board a vessel needing to be piloted into Bluff Harbour.

A view along the shoreline to the pilot's station on the point as a vessel hoves into view.

Pilot station, now disused, in 2007

Standing as testament to those who built her, the now abandoned pilot station still stands on Stirling Point. Those wire guy ropes were there for a reason - the prevailing westerly winds often reach gale force in Foveaux strait, a treacherous, stormy stretch of water between the South Island and Stewart Island. Nevertheless, given its low situation, it's amazing that the station has not been washed away by high seas over the past one hundred years or more.

Tuesday, September 23, 2008

UN Recognizes New Zealand's Seabed Rights Beyond EEZ

The UN Commission on the Limits of the Continental Shelf has recognised New Zealand's seabed rights to the outer edge of the continental shelf around the country, according to NZ Prime Minister, Helen Clark.

The 1.7 million sq km area is six times the size of New Zealand's land area and extends well beyond the country's fishing rights that are encompassed within the 320 km (200 mile) Exclusive Economic Zone (EEZ).

The territory includes a large area in the Tasman Sea called the Lord Howe Rise, a block extending north into the Pacific Ocean towards Tonga and Fiji, an area skirting the Chatham Rise to the east, and additional areas to the far south. The continental shelf is largely consistent with the Zealandia continental mass that has been submerged for millions of years.

A boundary agreement on the shelf was established with Australia in 2004, but an agreement on the shelf boundary to the north of New Zealand has yet to be finalized with Fiji and Tonga that share an overlap with the northern continental shelf.

The recognition of New Zealand's continental shelf means that in the future New Zealand will be able to control the use of any oil and other minerals on and below the seabed of the continental shelf, but fishing rights will not extend beyond the EEZ.

There may be oil reserves on the Lord Howe and Chatham Rise shelves, gold on the Three Knights ridge north of NZ, and manganese nodules that have formed on the seabed over millions of years.

Fonterra’s Troubles Multiply in China Poisoned Milk Scandal

Fonterra’s problems continue to mount in the melamine-tainted infant formula scandal in China involving its minority-owned San Lu joint venture.

The number of Chinese infants made ill by the toxic formula has now risen to over 13,000 hospitalised, with 4 deaths being linked to the formula. The numbers requiring clinical care but not hospitalization has climbed to greater than 54,000 children, according to the Xinhua news agency.

China's chief quality supervisor Li Changjiang, director of the General Administration of Quality Supervision, Inspection and Quarantine (GAQSIQ), has resigned.

Wu Xianguo, the Communist Party chief of Shijiazhuang, the capital of northern Hebei Province was also sacked on Monday.

The New Zealand government, through Prime Minister Helen Clark, has now criticised Fonterra’s ineffectual crisis management, saying that the cooperative had failed to act fast enough to alert Chinese national authorities to the health safety problem and for its 4 delay in publishing information in New Zealand on the problem, points made in earlier posts on this blog as the story broke.

It’s about time the 12,000 dairy farmer stockholders of Fonterra called for the resignation or firing of the executive responsible for the mis-management of Fonterra’s interests in San Lu and the consequent loss of buyer confidence in the Fonterra brand in some international markets.

Fonterra ought to issue a public apology to its customers for its failure to ensure adequate quality control and for the harm done to its most vulnerable consumers, infants. It ought to also take concrete steps to assist in the recovery of these children. Failure to do so will demonstrate Fonterra only pays lip service to the concept of corporate social responsibility.

Monday, September 22, 2008

New Zealand Women and the Vote - Suffrage

Kate Sheppard, NZ suffragette leader

New Zealand was the first self-governing nation in the world to grant women the right to vote. This right extended to both Maori and Pakeha women.

It was not until after World War I that women in most other democracies, such as the United States and United Kingdom, achieved a similar right to vote.

Kate Sheppard, head of the Women’s Christian Temperance Union (WCTU), led the Suffrage movement that petitioned Parliament in the years leading up to 1893, eventually persuading the Liberal government to pass the right to vote legislation in the House of Representatives and finally breaking the log jam in the Legislative Council upper house.

Sheppard and her suffragette sisters are commemorated on the current NZ$10 bank note and on a 2008 postage stamp promoting voter participation.

Political equality was still some way off for New Zealand women in 1893 since it was not until 1919 that parliament passed legislation granting women the right to stand for parliament. It was not until 1933 that the first woman member of parliament was elected, Elizabeth McCombs, who took the seat her late husband had represented.

At the 2005 general election, a third of the MPs elected were women, still lower than their presence in the population, but a significant advance historically and relative to other countries.

In recent years, women have held the country's key constitutional positions: prime minister, governor-general, speaker of the House of Representatives and chief justice. The glass ceiling is also starting to crack noticeably in the public service and business sector.

Further history on women’s suffrage and the right to vote can be found at New Zealand History On-line.

Women in New Zealand's Political Economy

A Journeyman Pictures documentary from 2001 surveying the progress women have made in New Zealand society:

Women of Substance - New Zealand (October 2001)

For all the progress in greater equality for women, there still remains a large economic gap. Statistics New Zealand's Household Economic Survey shows that median annual personal income for women was 60 percent of that for men in 2007.

The ratio of female to male median hourly earnings was 88 percent in June 2007. It rose from 83 percent in June 1997 to 88 percent in June 2001 but has not risen above that level since. The greatest earnings gap between the genders occurs in age groups over 30 years of age, with groups under 30 showing little earnings difference between men and women. See The Social Report 2008, published by the Ministry of Social Development here.

Sunday, September 21, 2008

Most Southern in the World #2 - Streetcar & Moving Wagon?

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The Most Southern Electric Car in the World, Invercargill, NZ, William Nees, circa 1910.

The view across the street from the Hansom cab & gas lamp from the previous "Most Southern" #1 post reveals an impressive electric tram or streetcar of the Invercargill Tramways company. Note that the young girl standing by the gas lamp now has a post box she can post letters in. But is it the most southern post box?

And just a few years earlier, before the electric tramway was laid down and the overhead poles & wires installed, a team of horses and a wagon pause to admire the gas lamp. Is that bicycle or that church the "most southern" of its kind?

Saturday, September 20, 2008

Most Southern in the World #1 ... Hansom Cab & Gas Lamp

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Most Southern Gas Lamp & Hansom Cab in the World, Invercargill, New Zealand, Muir & Moodie, postmarked 1907.

At the turn of the 20th century, during the Golden Age of postcard sending & collecting, pakeha New Zealanders delighted in sending postcards back to the British Isles where most of them had come from or across to Australia to show the recipients that they had indeed started to carve out a new Britain in this far flung bastion of the British Empire.

What could be more convincing evidence than images of symbols of British technology and civilization at the furtherest reaches of the red coloured parts of the world map?

Thus, with a range of postcard views captioned "The Most Southern...", citizens of the new country plied their families and friends "back home" with the proof of their civilizing ways.

To be "most southern" in New Zealand meant to be in Invercargill, the southern most city at the southern tip of the South Island - or to go a further 30 km south to Bluff, the port serving Invercargill.

This postcard shows that one could catch a Hansom cab and read one's newspaper under the glow of a gas street lamp.

Don't be fooled by the scene, my friends, into thinking that this cab and lamp were in the middle of nowhere for across the foot trail to the right of the image there are further "most southern" delights awaiting you. Watch out for the next "thrilling" installment...

National Posts Huge Lead Over Labour in Latest Opinion Poll

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The National party continues to post a huge lead over the ruling Labour Party in the last Fairfax-Nielson poll released on 20 September. It would take a major swing for Labour to win a fourth term in government when voters go to the polls on 8 November.

At 52 percent support, National has a substantial 18 percent lead over Labour. Of the minor parties, only the Greens would pass the 5 percent threshold to win party-list seats in the new parliament; however, the Maori Party, United Future, and ACT are expected to win constituency seats to maintain their presence in the next parliament. Don’t knows constitute 13 percent of voters.

National’s John Key is preferred by 41 percent voters as prime minister to Helen Clark, the current prime minister, at 30 percent. 21 percent of voters don’t know who they prefer.

The poll questioned 1130 people and has a 3 percent margin of error.

Friday, September 19, 2008

Kakapo - World's Only Flightless Parrot - Endangered Species

Six billion people, only 91 kakapo....

The kakapo, the world's only flightless parrot, is an endangered species. By 1995 there were only 50 individuals left, located on Stewart Island, and under threat from invasive pests such as feral cats and rats.

The surviving kakapo were transferred by the Department of Conservation to Codfish Island (Whenua Hou), off Stewart Island, as part of a recovery programme for the species. Before the kakapo could be relocated, rat eradication had to be successfully completed in 1998.

In 2002, 24 chicks were born on Codfish Island, 4 in 2005, and a further seven in early 2008. Kakapo breeding and chick rearing depend on the "masting" or heavy crop of fruit from rimu trees every 3 to 5 years. This year the fruit did not ripen and as in some past years the chicks have been hand-reared to ensure their survival.

The following documentary traces the re-introduction of kakapo to Chalky Island, off Fiordland. Learn more about the Kakapo Recovery Programme here.

Kakapo - New Zealand documentary April 2003

One recovery underway. One short term success. New Zealand needs many more successes, as does the world...

Gangsta Paradise? Street Culture in New Zealand

A Journeyman Pictures documentary perspective on street gang culture in New Zealand. The biker gangs of the 1970s & 80s (eg Mongrel Mob) have been superceded by street gangs of South Auckland modeled on those of Los Angeles. Sadly, many of these young people haven't listened closely enough to Coolio's lyrics.

Gangsta's Paradise - New Zealand (October 2007)

Different places, different street cred: Weird Al's Amish Paradise

Thursday, September 18, 2008

Stoned - Fonterra on San Lu & Chinese Baby Poisoning

The facts updated:

Fonterra knew for 6 weeks that its Chinese joint-venture, San Lu, had been selling melamine-tainted milk used in infant formula before it informed the New Zealand government. Fonterra claims it was trying to work internally within China to get a public health authority response. Once informed, the New Zealand apparently acted decisively to alert the Chinese central government through diplomatic channels of the health risks to Chinese babies: more than 6244 of whom have contracted kidney stones, 158 are suffering acute kidney failure.

San Lu is alleged to have known as early as 2005 that its milk was being tainted with the toxin, according to a vice governor of Hebei province, Yang Chongyong.

Contrary to San Lu claims that Chinese dairy farmers had added the toxin to their milk, initial investigations now show 41 out of Sanlu's 372 own fresh milk supply centres mixed melamine in milk.

Beware corporate tainted "love"...

Confidence Reported at No. 2 The Terrace

In reponse to international coordination between the Federal Reserve & other central banks to boost international liquidity, the Reserve Bank reports it is confident that the New Zealand banking system remains sound despite turmoil in global debt markets upon which New Zealand banks are "relatively reliant".

The Bank says trading banks in New Zealand do not have direct exposures to the financial derivatives instruments that have been the root of much of the financial instability in U.S. and some European markets. Nonetheless, some indirect effects are occurring because of a tightening of liquidity in global debt markets.

To assist in liquidity management, the Reserve Bank is introducting two measures. First, it will begin accepting bank paper in its open market operations. Second, after consultation with the industry, it will acccept certain Asset Backed Securities (ABS) as collateral in its domestic liquidity facilities.

Meantime, Statistics New Zealand reported the current account deficit for the June year 2008 deficit widened to $14.9 billion from $14.2 billion in the year ending in March . By one estimate this is about 8.3 percent of GDP. The increased need for overseas borrowing to cover the deficit in a period of tight international liquidity will likely increase the cost of borrowing and place downward pressure on the Kiwi dollar exchange rate.

Underscoring the demand for liquidity in a cash-strapped US financial system, data released by the Federal Reserve shows US banks borrowing from the Fed at an average of US$47.97 billion a day in the week ending September 17.

Kiwis Take Flight across Tasman to Oz

A net outflow of 33,000 Kiwis to Australia was recorded in the year ending August, a 19 year high, according to Statistics New Zealand. Kiwis are reported to be finding their wings and taking flight to the west because of higher wages and a higher standard of living in the land of Oz.

While 86 % of those leaving are under the age of 45, the majority are younger than 30.

In true ANZAC spirit, both countries are better off. As the late Sir Robert Muldoon, NZ Prime Minister in the late 1970s, quipped: "Kiwis migrating to Australia raised the average IQ in both countries".

Muldoon's government did its level best to mis-manage the economy in those years, helping to precipitate an exodus then. Kiwi voters on both sides of the Tasman gave him the toss in his equally famous mis-timed snap election of 1984.

His refusal to roll back a 40% sales tax on music sales because pop music wasn't "culture" prompted the following response below from NZ band, The Knobz:

While You Were Sleeping... Federal Reserve Acts with Massive Global Liquidity Injection

The US Federal Reserve acted in the dead of night to try to stem the tide of the global financial crisis that rose to a economic tsunami level in recent days as major bank and insurance company failures in the U.S. and U.K. threatened a systemic failure of financial institutions around the globe.

In a press release dated 3 am, September 18, the Fed announced its Federal Open Market Committee (FOMC) has authorized a $180 billion currency swap with other central banks, namely the EU's European Central Bank, the Bank of England, the Bank of Japan, the Swiss National Bank, and the Bank of Canada. These arrangements will underpin the extension of greater liquidity to the financial systems of the respective countries in the hope that global financial markets will settle down after the wave of recent failures of large financial institutions.

No news yet out of the Reserve Bank of New Zealand as to its reaction to the moves.

On the good news front, the Reserve Bank Amendment Bill (No 3) was passed by Parliament on 3 September making the Reserve Bank the regulator of non-bank deposit takers such as finance companies, building societies, and credit unions. One fly in the ointment: the Reserve Bank will assign an important role to "reputable" credit rating agencies in the new regulatory set-up, the same kind of credit rating agencies implicated in failing to effectively monitor the sub-prime meltdown in the U.S. Huh?

Nothing like waiting till the horse has bolted. Shame on governments and policymakers both in the U.S and New Zealand for not having established effective regulatory regimes 30 years ago when they liberalized markets concurrent with a wave of new financial innovations in the form of financial derivatives.

Perhaps they would be singing different songs from these now:

Heard in many financial districts around the world this week:

Meantime, the Central Banker Chorus is wailing:

Wake Me Up When It All Ends...

Wednesday, September 17, 2008

Arrest of San Lu General Manager, Fonterra's Chinese Subsidiary

Chinese authorities have arrested Tian Wenhua, the general manager of San Lu, the Chinese minority ownership subsidiary of Fonterra, the New Zealand dairy multinational.

The count of infants sickened by San Lu's infant formula laced with melamine has grown to 6,244 with 158 acute cases of kidney failure.

The scandal widens in China with the government reporting that 20 percent of 109 dairy companies had product batches containing melamine.

Two Chinese dairy companies have been ordered to recall export shipments made to Yemen, Bangladesh, Myanmar, Gabon and Burundi.

Breaking News Out of the U.S. - 3-ply Toilet Paper to Hit Market

And in these troubled times, breaking news out of the U.S. ...

Georgia-Pacific Paper Co is reporting from Neenah, Wisconsin - that other stronghold of dairying in the world - that 3-ply toilet paper is about to hit the market on Monday.

Just in time for some serious cleaning-up after all the financial turmoil in recent days.

Anxious occupants of far flung outhouses in New Zealand may have to wait some time for supplies to reach them.

Christchurch - Past & Present #5 The Square Post Office

Views looking west across Cathedral Square, Christchurch, to the General Post Office. (Click on pictures for larger views).

The Post Office in 1906 (top) and a few years later in the 1910s (bottom). Note the steam tram in 1906 has given way to electric trams in the second view.

Built in the 1870s, in an Italian/Venetian Gothic style, the GPO housed not only the post office but other government departments when it opened in 1879. It later housed New Zealand's first telephone exchange. It now serves as the tourist Information and Visitor Centre.

The post office in a paved pedestrian mall Square in 2007. Starbucks has moved, where else, into the corner spot of the post office while Telecom NZ looms large over the old post office.

The modern monstrosity, lacking all grace and charm, dwarfing the old post office is the Telecom New Zealand building, a typical example of contemporary New Zealand corporate architecture when bottom lines trump aesthetics.

Monday, September 15, 2008

A Little Economic Information is a Dangerous Thing - The Saveloy & Condensed Milk Conspiracy

Residents of Taranaki in the North Island are reported to be stockpiling cans of condensed milk and saveloys after a recent TV news report that Statistics New Zealand is to remove the items from the basket of goods & services priced to calculate the consumer price index used to measure inflation.

The Saveloy ---- Condensed milk

Lest anyone think Joe & Joanna Blow, the average Kiwi citizen, are well-versed in the methodology of economic statistics, attuned to the niceties of index numbers and the household expenditure survey, it appears that the news story has been twisted into a conspiracy story or urban myth that the government is about to ban the humble sav and can of condensed milk, one-time staples of low income Kiwis.

With a general election only just called last week for 8 November, what government in its right mind would contemplate such political suicide? Some would argue that the current Labour government has already done enough to harm itself without outlawing the sav & condensed milk.

All a horrible mix up in a dumbed-downed age, but a boon for supemarkets in places like Hawera in Taranaki that report sales up by a third in recent weeks.

For those not versed in Kiwi culinary delights, a saveloy is a type of pork sausage usually with a bright red skin, usually served boiled & wrapped in a slice of bread or deep fried in batter (not a health food). And condensed milk is milk that has had much water removed from and to which sugar has been added to yield a rather thick, sweet product that can last for years in a can. It's used to sweeten & whiten tea, in baking, or as a salad dressing. (Ugh!)

Incidentally, the sav and condensed milk would be unlikely meal mates, but no doubt there is some thrillseeker out there who enjoys them together. A sav is more typically dipped in tomato sauce (ketchup).

Sunday, September 14, 2008

New Zealand Government Blew Whistle to Chinese Goverment on Fonterra Subsidiary

In breaking news, New Zealand Prime Minister Helen Clark has announced that upon receiving notice on 5 September from Fonterra, which owns 43 percent of China-based joint venture, Shijiazhuang Sanlu Group Co Ltd, the company implicated in a tainted infant formula investigation, her government convened a senior ministerial meeting that concluded that diplomatic intervention was necessary.

The New Zealand government determined that local government officials in Hebei province, where San Lu is located, had blocked Fonterra's efforts to have a full recall of the tainted product. Fonterra is now reported to have been notified by San Lu on 2 August of the problem.

Clark's government blew the whistle on the local government obstruction to the Chinese government in Beijing on 9 September. Swift central government action has subsequently been taken by the Chinese, resulting in arrests, recall of the product, and the cessation of Sanlu production.

Babies from poor rural Chinese families are reported to be heavily represented amongst the children sickened by San Lu's "Bei Bei Infant Powder". The formula is particularly attractive to these families because of the low 18 yuan price compared to higher priced imported brands.

San Lu is reported by The South China Morning Post to have known of production problems since March, to have corrected contamination issues by 6 August, but only publicly admitted the contamination last week.

Who, one wonders, owns the majority stake in San Lu? San Lu itself has been in business over 50 years which suggests at least in the past it was a state owned enterprise. The dominant partner today is the Shijiazhuang Dairy Group. Chinese business is often linked closely to local government authorities either in terms of ownership or regulatory control, that to outsiders at least smacks of what in the past has been termed "crony capitalism", if not defunct socialism. The lesson of the socialist market economy in China continues to be that the poor, those supposedly who should receive the most political and social protection, are likely to be the last to receive it.

Fonterra still doesn't think such a significant public health problem created by one of its joint ventures for its most vulnerable consumers - infants - is worthy of an official statement on its web site, as of late 14 September. Plenty of pictures of smiling Asian children consuming milk, but no statement of responsibility or a plan of action to remedy the situation. Perhaps they'll get around to it eventually when they're good and ready.

Fonterra New Zealand Dairy Cooperative Linked to China's Tainted Infant Formula

Fonterra, New Zealand's multinational dairy cooperative, is linked to China's contaminated infant formula scandal through its ownership of 43 percent of San Lu Group, China. Fonterra accounts for about a third of international trade in dairy products.

San Lu is the company responsible for selling melamine adulterated formula that has resulted in 432 babies across China becoming ill with kidney stones. Melamine, a toxin, has been used by unscrupulous suppliers in China to appear to raise the protein content in animal feed that may have entered the milk supply. The tainted formula is based on Chinese-sourced milk, and not from milk products from New Zealand or other outside sources.

According to Radio New Zealand news, Fonterra has called for a full product recall since it was advised of the contamination in August and has upgraded milk quality testing procedures. Over 8000 tonnes of infant formula have been pulled off store shelves in China. It is unknown what the delay in removing contaminated product from sale has done to expose Chinese infants to further health risks.

Radio New Zealand reports Yang Chongyong, vice governor of the northern province of Hebei, where San Lu is based, as stating that 19 people have been detained and a further 78 questioned in connection with the contamination of the formula.

This consumer health & product safetly failure underscores the high risks multinational joint ventures face where they are unable to create effective control of the global supply chain for their products. The "wild west frontier" mentality of Chinese product safety regulatory and enforcement regimes where enforcement frequently occurs in a very blunt, executory way, well after the harm has been done accentuates the need for responsible investment by multinational investors in the conduct of their business.

Chinese consumers have a right to expect to learn from Fonterra how it plans to execute more effective governance measures over its joint venture, San Lu Group, to secure the public health. As of September 14, Fonterra has not even acknowledged the product safety problems of its Chinese subsidiary on the Fonterra web site.

Saturday, September 13, 2008

All Blacks Triumphant - ABs 28 - Wallabies 24

The All Blacks stared down the barrel of a gun in their final & decisive test with the Wallabies in Brisbane for the Bledisoe Cup & Tri-Nations trophy. In a close, hard fought game, the All Blacks ultimately triumphed with a 21 point run that the Wallabies could not answer in much of the second half, after the Australians had led 17-7 early in the second half.

The All Blacks carry away all the silverware of the Southern Hemisphere rugby championships for 2008, the Bledisoe Cup having been locked away for a fifth consecutive year. As for the Tri-Nations title, the ABs have 4 consecutive titles and have won 6 out of the last 7. Although the Springboks may be World Cup champions, there can be no doubt who is the Southern Hemisphere champ.

Mortgagee Sales Double in New Zealand reports that the weekly rate of mortgagee sales (foreclosures to Americans) in New Zealand doubled in early September compared to weekly rates in March. The failure of finance companies as reported in earlier posts has resulted in those institutions calling in loans that have contributed to the surge in mortgagee sales against the backdrop of a slowing economy.

Friday, September 12, 2008

Kaitiakitanga of New Zealand Fisheries - A Maori Perspective

Maori Television's Native Affairs programme for September 8, 2008 investigates the challenges facing Maori as overfishing continues to threaten New Zealand's marine and freshwater fisheries (watch video here).

Maori own 40% of New Zealand's commercial fishing quota, 100% of the customary fishing quota and 20% of the aquaculture industry. For them, the fisheries are not only an economic resouce but very much a matter of kaitiakitanga (broadly interpreted as guardianship), as is the case for many Pakeha New Zealanders who increasingly are concerned about the sustainability of the fisheries.

The Fisheries Act of 1996 adopted the precautionary principle as the guide to sustainable fisheries management under a property rights Quota Management System (QMS). Under the Act, the Minister of Fisheries must maintain stocks at or above a level that can produce the Maximum Sustainable Yield (MSY). Having determined this, the Minister then sets the Total Allowable Catch (TAC), the global quota for each species under management.

In February 2008 the High Court ruled in an action brought by commercial quota holders that the Minister could not reduce TAC for an orange roughy fishery because under section 13 of the Act for any fishery, he or she must have received estimates of the current stock level of the fishery as well as its target stock level. But such information is currently available at reasonable cost or based on available research for very few fisheries.

Subsequently, the Government has moved to amend section 13 to permit TACs to be set based upon methods applied prior to the court's ruling, namely modelled estimates of biomass and alternative indicators of current fish stocks. The amendment bill is currently before Parliament.

Thursday, September 11, 2008

New Zealand General Election Set For November 8

Prime Minister Helen Clark today set the General Election for Saturday, November 8.

Clark has ambitions of leading the Labour Party into a fourth term of government despite a marked decline in the economy and flagging popular support amongst the electorate.

Since 1993, New Zealand has used a mixed member proportional (MMP) representation voting system in which the voter casts two votes - a vote for an electorate or constituency representative and a second vote for a party. Parties that receive 5 percent of the party vote are entitled to a share of the 120 seats in the House of Representatives. More details here.

In the 2008 election there will be 63 general electorates, 7 Māori electorates and 50 list seats.

Voters regularly cast 25-33 percent of their party votes for minor parties rather than the two major parties of Labour or National so that either major party must seek an accommodation with one or more of the minor parties to form a government.

Currently, the Labour government with 50 seats in Parliament is a minority government, 11 seats short of an absolute majority, relying on agreements with three minor parties - New Zealand First, United Future, and The Green Party - for confidence and supply in order to remain in office.

Recent opinion polls suggest that the National Party will either run Labour close for the most seats in the 2008 election or be in a position to seek to form a minority government with smaller parties after the election.

Wellington’s Little White Lie on Oriental Bay

Oriental Bay, Wellington, NZ

Oriental Bay on a picture-perfect January day. One of only two days of the year, some Wellingtonians joke, that the postcard pictures are taken in a city dubbed the Windy City for the prevailing nor’westerlies that bluster & send low lying clouds scudding over the hills and through nearby Cook Strait between the North and South Islands.

But that is unfair to a capital city that has a great deep water harbour that one can enjoy from many different vantage points around the bays, out to the Hutt, and from the central city. A leisurely stroll along the harbour front, past Te Papa the national museum, and you soon find yourself in magnificent Oriental Bay.

Look at that stunning white sand. How can it be so bright and clean in a location where hundreds of thousands of people work and live?

Don’t worry! The more than 27,000 tonnes of sand needed to restore and expand the beach area fourfold was obtained from within New Zealand in an environmentally sustainable way. You can read more about it here.

But the sand was

Once again the Mainland (the South Island) stepped up to help out the national capital. The sand was shipped in from Golden Bay, Nelson in the northwest of the South Island.

Seven years to plan & consult, one year to construct (why does it take so long to get things done in New Zealand?), for a cool $7 million. Which incidentally must have pumped up the value of some of the most expensive property in Wellington along the waterfront.

But what price a Green Day at the beach?

So, tourists, not all is what it may seem.

Wednesday, September 10, 2008

Reserve Bank Chops OCR by 0.5 percent in 2nd Rate Cut

The Reserve Bank slashed the Official Cash Rate, its lending rate, 50 basis points - twice as much as expected by financial analysts - in its second rate cut in around six weeks. The cumulative rate reduction is now 0.75 percent. See press statement here. The September Monetary Policy Statement released at the same time may be found here.

With its primary policy responsibility as set out in the Policy Targets Agreement (PTA) as the requirement to keep inflation within the 1-3 percent range in the medium term, the Bank predicts that the "marked slowdown, led primarily by the household sector" will result in "lower inflation pressures in the medium term". An easing in world oil prices is probably likely to more than offset the depreciation of the Kiwi dollar that is taking place in recent weeks as the US dollar regains some strength.

The Reserve Bank points to tightening credit conditions within New Zealand impacting households and business as grounds for bringing forward its easing of monetary conditions. No doubt the Bank is mindful of the chronic financial stress in some parts of the financial sector (see yesterday's post) and the real estate market, and the high debt burden of the household sector that in the absence of monetary easing might precipitate an accelerated rate of foreclosures and personal bankruptcies. After years of low domestic saving rates and a consumption binge, "tomorrow" has arrived and the chips are falling where they may.

Edgy times at the Bank.

While this blog concluded back in late July that "A half-point cut, and some months ago, might have been more in order given the increasing gravity of the financial instability and weakening macroeconomic conditions", we are under no illusions that Governor Alan Bollard reads our scribblings. Still, we are pleased that through ESP or analysis moving in parallel he has reached the same conclusion albeit a bit later in the piece!

Tuesday, September 9, 2008

And Another One Bites the Dust…

Yet another New Zealand finance company, Dominion Finance Group (DFG), has nose-dived into receivership with some 6,000 investors owed NZ$224 million.

This follows closely on the announcement that receivers project payouts to Lombard Finance investors to be reduced to 19 to 40 cents on the dollar for the $127 million owed them.

While Lombard’s receivers have flogged off the managing director’s company-owned Maserati Quattroporte sports car for $97,000 and the former chairman’s Volvo for $19,000, such asset sales have failed to offset the write down as bad debts of the coastal subdivisions owned by the company. The real estate market has treated these properties as if they were so many sandcastles facing the incoming spring tide.

In the past two years more than a dozen finance companies have been placed in receivership with 30 either in receivership or under financial stress affecting in excess of $3 billion in investors money.

In related news, a World Bank survey reports New Zealand is ranked second in the world (after Singapore) in the ease of doing business. The small Kiwi investor must be greeting this news somewhat ruefully with the thought that they meant “ease in losing your shirt – and pants” while the managing director tooled around in the corporate Maserati trying to relive his days as a boy racer.

If politicians like Winston Peters, leader of NZ First, had spent less time tilting at windmills and doing a whip round for his legal expenses without regard to electoral financing laws and more time keeping the finance sector honest, some of the mismanagement and inadequate prudential supervision of finance companies might have been brought to the light of day.

Instead a macabre cannibalistic ritual is being enacted at Parliament to see which political party can disembowel the others first in the run up to the anticipated November general election, with Peters as perhaps the deserved first kebab on the spit. "This horrid practice", indeed, as Captain Cook might have put it.

Meanwhile, across the street at No. 2 The Terrace in the Windy City, the Reserve Bank is picked to cut interest rates by 25 basis points tomorrow (Thursday NZ Time). Don’t expect any mea culpas anytime soon from that quarter on the inadequacy of its prudential supervision of non-bank financial institutions. In true central banker smugness it reassures all and sundry that all is well with the financial system and its (regulatory) work is good. To do otherwise, in conventional wisdom, is to invite the barbarians at the door to the Governor’s whiskey and to precipitate financial crisis.

Expect, as in the US, a lot of finger pointing in the run up to the election instead of a thorough, honest policy discussion of how both legislatures and regulatory authorities in both countries dropped the ball repeatedly over the past couple of decades in the name of market liberalization. Let’s hope the All Blacks don’t take that page from the playbook when confronting the Wallabies in the final Bledisoe test on Saturday. It’s a losing strategy.

Christchurch - Past & Present #4 South from Cathedral Square

Looking south from Cathedral Square, from a spot close to front doors of the Cathedral... a century or so between views... (click on pics for larger view).


circa 1910 and 2007

The Bank of New Zealand retains its location on the left corner, replacing its original building with a multiple storey structure. The United Service Hotel on the right corner was built in 1884-85, a fifth storey added in 1929 and was demolished 1990 to be replaced by the ANZ Bank building currently on the site. The trams were long gone, the last one running in 1954, but a few were brought back in 1995 as a lure for tourists on a short downtown circuit.

Southern view from Square, 2007 showing BNZ and ANZ buildings in wider view (top);
Restored tram streetcars (bottom), The Square, 2007.

Monday, September 8, 2008

Silver Fern Farms & PGG Wrightson Meat Industry Merger Approved

Farmer shareholders of the producer cooperative, Silver Fern Farms, have approved a merger with PGG Wrightson, a stock and station agent, to vertically integrate part of the New Zealand meat industry.

The hybrid business organization will meld the farmer cooperative, SFF, with a 60 years-long history of sheep & beef meat processing & distribution into export markets with the stock exchange listed corporate PGG Wrightson, itself a merged entity over the years of several major stock & station agent firms that engage in livestock procurement for freezing works as well as selling farm inputs, transacting rural real estate, and lend working capital to farmers.

A SFF-PGGW entity will vertically integrate the supply chain "from plate to pasture" with livestock purchase contracts being secured between farmers and PGG Wrightson agents to supply SFF meat works. The use of "from plate to pasture" is mean to symbolize a more demand-driven perspective of the new company, though in practice it will still be a supplier so a more accurate, not to mention logical, slogan would be "from pasture to plate".

Vertical Integration of new meat company, SFF & PGG Wrightson Summary of Business Case, Pricewaterhouse Coopers, 2008. click pic for larger image

Silver Fern Farms barely secured the required 75 percent super majority of farmer shareholders required to approve the merger, with a 75.62 percentage vote in favour.

The new entity will have a 50:50 share capital split between SFF and PGG Wrightson. PGG Wrightson's NZ$220 million payment will provide a capital injection that boosts shareholders funds to $510 million and the equity ratio to 80 percent. Offseting this is the potential loss of farmer control. While farmers will have a 50 percent representation on the new board, farmers are unlikely to vote as a bloc, based on historical experience, and the separation of ownership from control phenomenon may be expected to bias board control towards the PGG Wrightson bloc over time where its directors on the new board may be expected to speak with one voice in favour of PGGW interests.

The New Zealand meat industry has been trading in a tough global environment in recent years. Sheep numbers have fallen from a peak of 70 million in the early 1980s to just over 40 million. High interest & exchange rates, increasing production costs, and excess processing capacity, have reduced the profitability of meat exports.

SFF and another meat processor, Alliance, had contemplated a horizontal merger of meat processing facilities to reduce excess capacity but those talks broke down. The executives of the new SFF-PGGW entity have indicated that they would consider further consolidation of the industry with Alliance to improve the profitability of the meat export sector.

Sunday, September 7, 2008

Early Arrival of Godwits - Kuaka at Christchurch Estuary

The Press in Christchurch reports that the first godwits have arrived from Alaska at the Avon-Heathcote estuary some two weeks earlier than expected, causing concern as to why they left their northern hemisphere grounds so soon.

Feeding sites used by the birds on their way north to Alaskan breeding grounds have been steadily eroded by human development in recent years.

So far some 122 birds have been recorded arriving at the Estuary in recent days. Since the non-stop trans-Pacific flight commonly totals 11,000 km, the new arrivals are reported to be eating ravenously to regain body weight loss.

Friday, September 5, 2008

Pasifika English - New Zealand

Pasifika English

A similar adaptation of English, as Maori have done, by Pacific Island communities in New Zealand, such as Samoan, Cook, Nuiean, and Tongan, results in Pasifika English with additional influence on younger Pasifika English (and Maori) speakers from African-American hip-hop. More here

The New Zealand animated TV series Bro'Town captures some of the Pasifika English dialect:

Bro'Town clip

Another Bro'Town clip addresses the interface between social services & Pasifika peoples.

And another one on race relations, that have not always been cordial, between Maori & Pasifika peoples:

Thursday, September 4, 2008

Maori English - New Zealand

One of the developments that can occur when an indigenous people's language is lost over time and a foreign language is adopted by the indigenous people is that in the process of adopting the majority language the group creates its own characteristic form in the new language, that is, a new dialect influenced by their former language. See a full discussion here.

The late, great Billy T James, Maori entertainer and comedian, recalls his bro' Prince Tui Teka:

Prince Tui and the Takeaways video

And Billy T James in one of his Te News skits, delivers the news in Maori English:

And a further clip, with a weather segment bonus:

Wednesday, September 3, 2008

The Kiwi Accent - It's A Changing...

The Kiwi accent - a primer - and how Kiwis are throwing off the cultural cringe of trying to parrot the Queen's English:

TVNZ One News, 24 May 2007

And a less "scholarly" take on the Kiwi accent pointing out some of the distinctive characteristics of the Kiwi accent and distinguishing it from the Aussie accent. Don't confuse the two, or you'll hear about it...

March 2008

Tuesday, September 2, 2008

Flight of the Conchords to Ground TV Series

The Flight of the Conchords - the music-comedy duo of Bret McKenzie and Jemaine Clement from Wellington, NZ - have indicated to British magazine Q that the second series of their HBO show Flight of the Conchords currently being filmed in New York is likely to be their last. Both performers wish to broaden their horizons with new ventures in music, acting, and script writing.

magazine said the pair were the "cult hit of the moment", "New Zealand's biggest export since those films about hobbits".

It's Business Time for Bret and Jemaine:

Monday, September 1, 2008

Canterbury Cricket Want Hagley Oval as Test Cricket Venue

The Canterbury Cricket Association (CCA) and New Zealand Cricket want Hagley Oval located in Hagley Park to serve as the CCA’s headquarters and the provincial and test cricket venue in Christchurch.

They'll have to move the sheep first.... Actually, this is North Hagley Park, the Oval is in South Hagley Park and the sheep are long gone. Postcard by Muir & Moodie circa 1905

Christchurch has been denied a test venue since Canterbury cricket was no longer able to use Lancaster Park, now AMI stadium for its games or for test cricket over a decade ago. Since then Canterbury games have been played at QE II's Village Green – a wind swept, sunburn bowl.

Canterbury Wizards v Northern Districts, Jan 6 2007 at the QE II Village Green

Moving the venue back closer to the centre of the city would be a return to the location of Canterbury cricketing activity at the club level over many decades. Spectators might enjoy some more tree shade too.

Perhaps too the cricketing elite will be more comfortable back in Hagley, adjacent to the Christ College sports grounds, and away from the less affluent suburbs of the north-eastern coastal suburbs. The well-heeled will have an easier time of it coming in from the upper class neighbourhoods of the north-western suburbs and be able to enjoy their cricket in a more "English-like" setting. Christchurch is still a class-divided town.

The CCA says Hagley “will be a Cricket Oval not an Entertainment Venue with AMI Stadium continuing to host International One Day and Twenty20 Internationals. At Hagley, we envisage low grass embankments and sympathetic refurbishment of the existing buildings for facilities and to house Canterbury Cricket’s offices.”

The Christchurch City Council will hold a meeting on September 11 to consider whether to recommend the Hagley Oval be adopted as Canterbury’s cricket venue.

Let's hope the Christchurch Council & Canterbury Cricket don't hit their stumps on this one...