Word of the day

October 1, 2015

Eudaemonic – conducive to or producing happiness.


Rural round-up

October 1, 2015

To the woman riding in my husband’s combine – Uptown Farms:

To the woman riding in my husband’s combine on a sales call,

I wouldn’t have thought much about you before last night.  Chances are, if you had tried to call on my husband and ride along in his combine I wouldn’t have known about it.  Most likely I would have been on a different farm, with a different farmer, trying to do my job in the same way you are doing yours.

I didn’t think of you before – but now I will.  Last night I read a post from a woman who was upset that a young, presumably attractive female, made a sales call to the farm – and rode in the cab of the combine with the farmer (the poster’s husband).  

For anyone not in the industry, it may sound funny that you would get into a combine with a customer. This time of year, the combine often acts as an office.  People who need to see the farmer go to the field and are often invited to ride along while they keep working.  Roughly 70% of the time that farmer will be a man.  

Women poured out of the woodwork to attack the sales rep, calling her unprofessional, unthoughtful, disrespectful and worse. . . 

Turning point for red meat sector – Allan Barber:

The Shanghai Maling Aquarius offer for 50% of Silver Fern Farms may not be the restructuring catalyst that MIE and some shareholders of both cooperatives were hoping for, but it certainly presages a dramatic change in the industry’s dynamics.

Assuming a positive shareholder vote on 16th October, for the first time in years all the major processors will have relatively strong balance sheets and will be in a position to compete on an equal basis. This is unlikely to bring about an immediate change in livestock procurement calculations, but different companies will progressively move to payments based on quality and specifications supplied for individual markets.

For too long the meat industry has been affected by an excess of processing capacity, under-capitalisation, procurement battles, inadequate market returns and, as a consequence of all this, falling livestock volumes. The recapitalisation of the country’s largest meat company potentially provides a solution to several if not all of these problems. . . 

Silver Fern receives an offer it can’t refuse – Allan Barber:

No wonder the deal between Silver Fern farms and Shanghai Mailing took so long to conclude, but from all appearances it was worth waiting for. Not that you would necessarily think so, if you read about the disappointment of some shareholders and the MIE group about the board’s unwillingness to give serious consideration to an alternative farmer offer of $40 million or some of the business commentary.

Going back several years, SFF wanted $120 million from its shareholders, hoped for $80 million and actually received $22 million. Nothing has really changed since then – good and bad years have followed each other, as livestock numbers and market prices fluctuated and the business struggled under a huge debt burden. . . 

Value-add key to improved returns for shareholders – Westland Milk Products:

Continuing its move into more value-added production is the best strategy to ensure shareholders competitive and sustainable returns Westland Milk Products says, as the co-operative confirmed a company average operating surplus available to shareholders for the 2014-15 season of $4.95 per kilo of milk solids (kgMS), before retentions.

Chief Executive Rod Quin says Westland, like dairy companies globally, has been adversely impacted by the “significantly lower” market prices in the last season, with total group revenue for the financial year 2014-15 down 23 percent on the previous year, at NZ$639 million.

However he says there is room for cautious optimism for an improvement and, accordingly, Westland has increased its forecast payout for the 2015-16 season by 30 cents to $4.90 – $5.30 per kgMS. . . 

Identifying insect species crucial to protect the environment:

Students at Lincoln University are covering the length and breadth of New Zealand to discover new insect species and keep ahead of potential threats to agriculture and the environment.

Bio-Protection Research Centre students, Francesco Martoni, Samuel Brown and Hamish Patrick have visited mountains, grasslands and forests to collect insect specimens. They have identified about 50 new species.

“This research, to understand what [insects] are present in New Zealand, is vital for us to recognise any change. Especially if it involves the introduction of species that may become pests, or spread disease,” says Dr Karen Armstrong, a Senior Researcher at Lincoln University, and the students’ supervisor.

“The only way to stay ahead of this, and to detect damaging interactions, is to know what is here. And for that, we need to produce experts in traditional taxonomy who are also trained to use modern technological approaches to describe and discover [insect species],” says Dr Armstrong. . .

Initiative gives support to rural schools:

Canterbury’s rural primary schools have been given a welcome boost, thanks to the support of local farmers and fertiliser company, Hatuma Dicalcic Phosphate Ltd.

The initiative, calls on farmers to nominate a school that they feel could benefit from Hatuma’s ‘Growing Minds’ fund. Over the last six years, Hatuma has donated over $30,000 to New Zealand’s rural schools through the programme.

One such beneficiary of the fund is Glentunnel School in mid-Canterbury, which attracted huge support from farmers. . . 

Chinese developer harvests first crop in Western Australia’s remote Ord Valley – Tom Edwards:

The Chinese-backed company developing the Ord River Irrigation Area in Western Australia’s east Kimberley is harvesting its first crop.

Kimberley Agricultural Investment is halfway through harvesting 360 hectares of chia in the Goomig farmland of Ord Stage 2.

Farm manager Luke McKay said it was an exciting milestone for the company and for the Ord agricultural zone in general.

“There’s been a fair bit of interest obviously, a lot of excitement about getting to this point,” he said. . . 

Wine Industry welcomes progress with South Korea Trade Deal

New Zealand Winegrowers welcomes news that the Tariff Amendment Bill was passed through Parliament on Friday, a big step towards implementing the Free Trade Agreement with South Korea.

The negotiators have achieved a great outcome for the wine industry, said Philip Gregan, ‘tariff free access into South Korea at the time the agreement comes into force represents a significant boost to our export ambitions in one of the key Asian markets.’ . . 

More Veterans Set to Go From Protecting America to Feeding America – Nicole Mormann:

For 200,000 U.S. service members transitioning out of the military each year, returning to civilian life will mean trading in their combat boots for a tractor and rubber galoshes, thanks to new farming-focused job-training programs created by the United States Department of Agriculture.

Last week, the USDA and the Department of Defense announced that agriculture will be one of the industries in which the government will provide career assistance and counseling programs to service members finishing their term of enlistment.
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The program will give veterans the opportunity to gain farming skills through classroom instruction and registered apprenticeships from experienced farmers. In addition to educational opportunities, the USDA will offer financial assistance to beginning farmers or ranchers who lack the funds to purchase necessary farming equipment, land, livestock, and other resources. Returning service members are also eligible for housing support programs, which can range from repair loans to emergency placement assistance. . . 

 


Thursday’s quiz

October 1, 2015

Blogging lighter precludes me setting questions but you are welcome to test us.

There’s no need to follow the five-question formula I used.

Anyone who stumps us all will win a virtual bouquet of spring flowers.


Quote of the day

October 1, 2015

. . . A strong focus of our policy is to make sure our markets work.

And over the last 30 years New Zealand has done a reasonable job of this.

Over the last seven years our labour market has been tested.

It has accommodated a significant recession in 2008, and a pickup in demand particularly in Christchurch following the earthquakes.

The labour market was able to respond quickly to those shifts in supply and demand conditions.

Today New Zealand’s proportion of the working-age population in employment is among the highest in the OECD.

Another area that is now working well is the energy market.

For a long time, New Zealand energy markets were over-regulated and poorly-regulated.

Extensive government ownership further stunted price signals.

For instance, water management in the hydro-electricity system was, compared to today, very poor.

And advertising campaigns to urge the public to restrict their energy use were more frequent.

In the last few months there have been a number of decisions in the energy industry which indicate a working market.

We’re shutting down excess capacity, and excess capital is being withdrawn and returned to the owners of that capital.

After years of litigation and legal contest over the rules, the energy market is now starting to work.

Which brings me to the housing market.

This is probably the largest market in New Zealand where the rules need to be reshaped.

The most evident indication of a problem is Auckland house prices.

I’m yet to find a housing market anywhere in the world where prices go up at over 20 per cent a year without stopping and then starting to come down again.

It may be that we are unique – but that seems unlikely.

So we’re concerned about the housing market.

Because it’s a large asset on the New Zealand balance sheet, worth around $600 billion.

And because what happens in our housing markets has a profound effect on every household.

I want to go through a number of the reasons why the Government worries about housing, why it matters to the economy, and some of the key issues around the way that market is regulated.

We have a better understanding of the significance of the planning process than we did in the past.

The process probably looks unexciting to most people – something busy-bodies and councils do.

But actually it’s the process by which one of our largest and most significant markets is regulated. And therefore we need to understand it.

As a group of young people, it is critical for you as potential future home buyers that we get this right.

There are three reasons why the Government is focused on planning – and each of these matter for you.

The first is that a housing market that is not properly functioning can have a significant effect on the macro-economy.

Over the last five years, the Auckland housing market has been the single biggest imbalance in our macro-economic system.

It takes around eight years for the housing market to respond to a shock to demand.

In part that is because changes to council plans can take years, in some cases over a decade.

Resource consents on a housing development regularly take 18 months, including pre-application times excluded from the official statistics.

When combined, those very real delays can exceed the length of the house price cycle.

The point is that when the supply of housing is relatively fixed, shocks to demand – like migration flows increasing sharply as they have recently – are absorbed through higher prices rather than the supply of more houses.

Long lead times in the planning process tend to drive prices higher in the upswing of the housing cycle.

And those lead times increase the risk that eight years later, when additional supply arrives, the demand shock that spurred the additional supply has reversed.

The resulting excess supply could produce a price crash.

This has been borne out by extensive studies in the United States following the Global Financial Crisis.

What they’ve found is that, across different markets subject to rules which vary by state, more-intense regulation of urban development is associated with higher house price volatility.

That is, the steepest price increases and the sharpest falls are in areas where regulation is strongest. 

The effects of planning rules can extend to the macro-economy.

Cities are one of the extraordinary inventions of the human race.

Studies have shown that cities are an engine room of growth. Incomes in cities are higher than elsewhere. That is one explanation for high rates of urbanisation.

Research indicates that when planning rules prevent workers shifting to higher-productivity locations, then there is a cost in terms of foregone GDP.

It’s only relatively recently that economists and politicians have understood the scale of those effects.

So when we’re talking about something as apparently dry as the Auckland Unitary Plan, we’re talking about a set of rules that will have a major impact on the city, on current and future residents – but also on the wider economy.

The second reason we focus on planning and its consequences is that poor planning drives inequality.

In my view, poor urban planning is one of the significant drivers of inequality.

Poor regulation of housing has the largest proportionate effect on the lowest quartile of housing costs and rents.

So when we’re having the debate about whether there is sufficient land available, we have to recognise that the people who lose the most from getting that decision wrong – and who stand the most to gain from fixing those decisions – are those on the lowest incomes.

Income inequality in New Zealand has been flat for 20 years, but the gap between incomes measured before housing costs and after housing costs is growing.

Housing costs are becoming a larger proportion of incomes – and that matters the most at the bottom end of incomes among people who have few choices.

And there are other measures of the effects on low-income households.

Twenty-five years ago, around 30 per cent of new homes coming into the market were priced in the lowest quartile. Another 30 per cent of new homes were priced in the upper quartile.

Today, only 5 per cent of new homes are priced in the lowest quartile. Nearly 60 per cent of new homes are priced in the upper quartile.

The new supply of lower-priced, affordable housing has dried up.

There are parts of Auckland where no new houses are entering the market priced at the affordable end of the market.

It is not surprising to see prices and rents rising disproportionately at the bottom end given this lack of supply.

Planning is often seen a public good activity that must address the needs of those who are most-vulnerable and have the lowest income.

In fact there is a strong argument to say it does exactly the opposite.

Poor planning favours “insiders” – homeowners – on high incomes and who have relatively high wealth.

Developers have told me that in Auckland they need to build a house worth $600,000 to make a development commercially viable.

That’s because it is difficult to build cheap housing on expensive land – particularly in view of the planning rules.

Those rules include urban limits, minimum lot sizes which prevent subdivision below a certain size, and maximum site coverage rules which prevent a house covering more than a certain proportion of the lot.

Working in combination, these rules reduce opportunities to develop affordable homes.

Now that planners are recognising these consequences, they are now creating even more rules to offset these effects; for example by requiring some developments to include up to 20 per cent affordable housing.

That is implicit recognition that planning rules have driven the costs up so much that another rule is required to offset it.

The impact of these rules on inequality, and on household incomes, leads to a third reason for why the Government is focused on the housing market.

That is the fiscal cost to Government.

As households have the proportion of their income spent on housing grow, the political pressure goes on governments to fill the gaps.

Today we spend $2 billion each year on accommodation subsidies. 60 per cent of all rentals in New Zealand are subsidised by the Government.

The state owns around $21 billion worth of houses.

One house in every 16 in Auckland is a Housing New Zealand property.

Many of these are three bedroom houses on quarter-acre sections only a few kilometres from the CBD – a massive misuse of scarce land. And all at the taxpayer’s expense.

So these are the reasons why the Government pays attention to the housing market and issues stemming from poor planning. . . 

As we get more information about what actually happens, often we find planning doesn’t achieve what people think it is achieving.

Planners and councils have a very difficult job in planning our urban areas.

Cities are incredibly complex systems. They are the product of millions of individual choices.

The idea that a small group of people could understand what choices we’re making is asking too much of them.

Not because they are in any way incapable. But because the task is overwhelming.

The Auckland Unitary Plan is 3,000 pages long.

It’s trying to regulate everything from the size of bedrooms to biodiversity in the Waitakere Ranges. No one person could possibly understand all the trade-offs in that plan.

Which means many of its effects will be certainly be unintended.

Planners can’t know everything – so of course they can’t be perfect in making trade-offs on our behalf.

Successful planning requires an understanding of its own limitations.

One of the things that needs to change is extra accountability and transparency.

Your prospects of being able to buy a house are directly related to the decisions made by planning officials about the availability of land, the environmental standards they apply to building, and the way infrastructure is allocated.

It’s very difficult to understand how planners do that, even though the consequences for the community and the economy are significant.

Central government has had the opportunity to sit alongside councils to understand how they make their decisions.

Some of those decisions appear quite arbitrary.

They can be driven by the tastes of individuals who have the power to make decisions.

Some decisions are contradictory within one planning system. Decisions might not fit together. Urban designers, for example, don’t always see things the same way as a council’s engineers.

First home buyers will be subject to rules which are not transparent and cannot be known in advance.

One of the areas this is most apparent is infrastructure.

Like central government, councils have historically made decisions on substantial long-term infrastructure projects with a minimal understanding of costs and benefits, and how the infrastructure will be supported over time.

Like central government, councils do not always know a lot about their infrastructure. And therefore they don’t know how to price it.

Pricing infrastructure is difficult. The nature of the asset makes it difficult to price. How do you price a stormwater system?

But that pricing matters. One of the big issues for getting a more-flexible supply of land is connecting the financing of the next piece of infrastructure with the value of the land it services.

Land is made more valuable when it is serviced by infrastructure. Infrastructure financing may sound a rather dry topic – but it is fundamental to allowing a city to grow.

Because if planners believe infrastructure supporting growth is too expensive, they’ll be too reluctant to release land for development – up or out.

That’s not a criticism – it’s an observation.

The funding base for councils is increasingly people on low fixed incomes. That is a product of an ageing population.

So you can understand why councils are under pressure not to expand if they think an expanding city is going to push up rates for existing ratepayers.

Councils need clear funding models so that development worth having can occur and future homeowners and current renters who might want to buy are taken into account.

So that’s a brief overview of how important it is that housing is regulated in a way that enables flexible supply, and I hope some indication of the progress we’re making.

That progress is necessarily slow, because these issues are complex.

If we better understand the economics of what is happening we can make better choices about housing regulation.

And that depends on one of the most important parts of public policy, which is the institutional arrangements by which those decisions are made.

That means looking at the incentives confronting an individual sitting in a council when making a decision about whether to allow a new subdivision.

We need to understand the incentives councils are reacting to. 

Next month the Productivity Commission will produce a further report on the regulation of land supply. It will be another input into further, ongoing improvements in this area.

And we are seeing new thinking on a range of issues affecting housing, including from councils.

Often politicians are accused of being focused on the short term. That’s one of the reasons this issue has never been dealt with properly in the past.

The Government is taking a long term view.

All of the things I’ve talked about today will take 10 to 15 years to sort out.

So it’s important that a broad group of people understand our single-biggest asset class – the most-important asset most of us will own – how is valued, how it is regulated, and how it can contribute to our general welfare.Bill English


October 1 in history

October 1, 2015

331 BC Alexander the Great defeated Darius III of Persia in the Battle of Gaugamela.

959  Edgar the Peaceable became king of all England.

1189  Gerard de Ridefort, grandmaster of the Knights Templar since 1184, was killed in the Siege of Acre.

1207 – Henry III of England, was born (d. 1272).

1787  Russians under Alexander Suvorov defeated the Turks at the Battle of Kinburn.

1791  First session of the French Legislative Assembly.

1795  Belgium was conquered by France.

1800  Spain ceded Louisiana to France via the Treaty of San Ildefonso.

1811 The first steamboat to sail the Mississippi River arrived in New Orléans, Louisiana.

1814   Opening of the Congress of Vienna, intended to redraw the Europe’s political map after the defeat of Napoléon the previous spring.

1827  The Russian army under Ivan Paskevich stormed Yerevan, ending a millennium of Muslim domination in Armenia.

1832 – Caroline Harrison, American educator, 24th First Lady of the United States (d. 1892).

1835 – Ádám Politzer, Austrian physician (d. 1920).

1843  The News of the World tabloid began publication in London.

1847  German inventor and industrialist Werner von Siemens founded Siemens AG & Halske.

1854   The watch company founded in 1850 in Roxbury by Aaron Lufkin Dennison relocated to Waltham, Massachusetts, to become the Waltham Watch Company, a pioneer in the American System of Watch Manufacturing.

1869   Austria issued the world’s first postcards.

1880  John Philip Sousa became leader of the United States Marine Band.

1880  First electric lamp factory opened by Thomas Edison.

1881 – William Boeing, American engineer and businessman, founded theBoeing Company (d. 1956).

1887  Balochistan conquered by the British Empire.

1890  – Stanley Holloway, English actor and singer (d. 1982).

1890  The Yosemite National Park and the Yellowstone National Parkwere established by the U.S. Congress.

1891  Stanford University opened.

1898  Czar Nikolay II expelled Jews from major Russian cities.

1898  The Vienna University of Economics and Business Administrationwas founded under the name k.u.k. Exportakademie.

1903  Baseball: The Boston Americans played the Pittsburgh Pirates in the first game of the modern World Series.

1905  František Pavlík was killed in a demonstration in Prague, inspiringLeoš Janáček to the piano composition 1. X. 1905.

1908  Ford put the Model T car on the market at a price of US$825.

1910  Los Angeles Times bombing: A large bomb destroyed the Los Angeles Times building in downtown Los Angeles, California, killing 21.

1910  – Bonnie Parker, American criminal (d. 1934).

1912 – Kathleen Ollerenshaw, English mathematician and politician was born.

1918  World War I: Arab forces under T. E. Lawrence (a/k/a “Lawrence of Arabia”) captured Damascus.

1920 – Walter Matthau, American actor (d. 2000).

1920 Sir Percy Cox landed in Basra to assume his responsibilities as high commissioner in Iraq.

1920 US actor Walter Matthau was born.

1923  –  First Chatham Cup football final.
First Chatham Cup football final

1924 US President Jimmy Carter was born.

1926  An oil field accident cost aviator Wiley Post his left eye – he used the settlement money to buy his first aircraft.

1928 The Soviet Union introduced its First Five-Year Plan.

1931  The George Washington Bridge linking New Jersey and New York opened.

1935 British actress and singer  Julie Andrews was born.

1936  Francisco Franco was named head of the Nationalist government of Spain.

1938  Germany annexed the Sudetenland.

1939  After a one-month Siege of Warsaw, hostile forces entered the city.

1940  The Pennsylvania Turnpike, often considered the first superhighway in the United States, opened to traffic.

1942 USS Grouper torpedoed Lisbon Maru not knowing she was carrying British PoWs from Hong Kong.

1942  First flight of the Bell XP-59 “Aircomet”.

1945 US musician Donny Hathaway was born.

1946  Nazi leaders sentenced at Nuremberg Trials.

1946  Mensa International was founded in the United Kingdom.

1947  The F-86 Sabre flew for the first time.

1949  The People’s Republic of China was declared by Mao Zedong.

1958  NASA created to replace NACA.

1960  Nigeria gained independence from the United Kingdom.

1961  East and West Cameroon merged as Federal Republic ofCameroon.

1962  First broadcast of The Tonight Show Starring Johnny Carson.

1964 The Free Speech Movement was launched on the campus of University of California, Berkeley.

1964  Japanese Shinkansen (“bullet trains”) began high-speed rail service from Tokyo to Osaka.

1965 Apostasia of 1965, a political move in Greece designed to overthrow the Prime Minister, George Papandreou.

1965 – General Suharto crushed an attempted coup in Indonesia.

1966 West Coast Airlines Flight 956 crashed with 18 fatal injuries and no survivors 5.5 miles south of Wemme, Oregon.

1969  The Concorde supersonic transport plane broke the sound barrierfor the first time.

1971  Walt Disney World opened near Orlando, Florida.

1975  The Seychelles gained internal self-government.

1975  The Ellice Islands split from Gilbert Islands and took the nameTuvalu.

1975  Thrilla in Manila: Muhammad Ali defeated Joe Frazier in a boxing match in Manila.

1978  Tuvalu gained independence from the United Kingdom.

1978  The Voltaic Revolutionary Communist Party was founded.

1979 The United States returned sovereignty of the Panama canal toPanama.

1982  Helmut Kohl replaced Helmut Schmidt as Chancellor of Germany through a Constructive Vote of No Confidence.

1982  EPCOT Centre opened at Walt Disney World.

1982  Sony launched the first consumer compact disc player (modelCDP-101).

1985  The Israeli air force bombs PLO Headquarters in Tunis.

1986 Goods & Services Tax (GST) was introduced in New Zealand.

Goods and Service Tax Act comes into force

1987  The Whittier Narrows earthquake shook the San Gabriel Valley, registering as a magnitude 5.9.

1989  Denmark: World’s first legal modern same-sex civil union called “registered partnership”

1991  New Zealand’s Resource Management Act 1991 started.

1992  Turkish destroyer TCG Muavenet (DM-357) crippled causing 27 deaths and injuries, by missiles negligently launched by U.S. aircraft carrier USS Saratoga.

1994  Palau gained independence from the United Nations (trusteeship administered by the United States of America).

1998  Vladimir Putin became a permanent member of the Security Council of the Russian Federation.

2009  The Supreme Court of the United Kingdom, which acquired the judicial functions of the House of Lords, began work.

2012 – A ferry collision off the coast of Hong Kong killed 38 people and injured 102 others.

2012 – Domestic and International flights of Thai AirAsia transferred all operations from Suvarnabhumi Airport to Don Mueang International Airport .

2013 – The U.S. federal government shut down non-essential services after it was unable to pass a budget measure.

Sourced from NZ History & Wikipedia


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