Views on 2013

January 22nd, 2013 at 1:00 pm by David Farrar

Fairfax asked me a couple of weeks ago for some views on the year ahead. I didn’t quite realise that it would be presented in such an immodest way, but anyway their summary of what I said is:

In the year ahead he believes the big issue will be the US struggle to get debt under control by reducing the federal deficit.“Sadly, I see no sign of any political leadership in this direction, so believe the US dollar will continue to devalue, and this will push the New Zealand dollar close towards parity with the greenback,” he says. New Zealand’s export industry will feel the impact and while Farrar looks to a successful Trans Pacific Partnership outcome, he doubts the US will agree to meaningful reductions in trade barriers. He points also to worries that the Chinese economy may slow down. If it does, and with the US and European debt woes, 2013 could be a rough year for New Zealanders.

Domestically, the Government’s planned asset sales will be the domingating political and economic issue. “The politics are fairly easy to predict – there will be a referendum, and the result will be a vote against. The unknown is how large the turnout is – the larger the turnout, the more damaging it may be.”

The biggest factor in the year will be how successful the floats actually are.They could give vibrancy to capital markets, boast economic confidence and private savings.“If the floats are viewed as limp, or even worse are delayed further by the Supreme Court, then the Government’s economic programme will be seriously challenged.”

Farrars tips on names to watch in politics ahead: Chris Hipkins in Labour, Kevin Hague of the Greens, new National backbencher Mark Mitchell and Tracey Martin.

 A couple of minor corrections. I love in Wellington, not Auckland, and Whale Oil has been getting more visits than me since beginning of 2012.
They used a decent photo of me in the print edition, but I must pay someone to destroy the photo they used for the online edition!
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8 Responses to “Views on 2013”

  1. Pete George (22,851 comments) says:

    “I love in Wellington, not Auckland…”

    What’s wrong with women in Auckland? Don’t you like fly bye belles?

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  2. Monique Watson (1,062 comments) says:

    Woo hoo. I used to love in Wellington too.

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  3. hmmokrightitis (1,511 comments) says:

    Love in Welly is highly recommended. The Bolton. Thank me later.

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  4. david@tokyo (262 comments) says:

    If debt devalued a currency then the Japanese yen would be the weakest of the lot, would it not?

    Foreigners haven’t started dumping US treasuries yet. Until that becomes a reality I can’t see the political games having such a big negative impact on the US dollar. As I recall, what happened last year when the US was downgraded was investors actually bought US treasuries…

    Also, the US is full of people with lots of assets to invest, and when things go pear shaped (as problems with US debt would imply) they tend to repatriate their assets back to the US, rather than leave them abroad exposed to risk and currency fluctuations.

    So I don’t think the US debt issue is about to trigger capital flight out of the US, and into “safe havens” (in terms of debt) such as the NZ dollar. On the contrary, I see the NZ dollar selling off on bad news out of the US, and the US dollar strengthening.

    The mid-long term decline of the US dollar is I think more due to their trade deficit. There is never a shortage of people who have sold junk to Americans looking to sell their US dollars back into their home currencies. There’s a persistent US dollar selling factor there.

    However, if US unemployment continues it’s gradual fall, this could also lead to expectations for monetary tightening from the FRB being brought forward, and thus upward pressure on US bond yields. The decrease in interest rate differentials with NZ assets could see the NZ dollar weaken.

    Another thing to look out for is the potential for the US to ramp up it’s domestic energy production. Energy imports contribute to the US deficit, but if this new technology being bandied about can indeed turn the US into a net energy exporter, this too could bring an end to the long term US dollar downtrend.

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  5. pq (728 comments) says:

    Before the next erection [ another freudian slip Farrar ]
    I will be sending what litle money our family has to $AUD or $CAN.
    Then you NZ can have a Green Finance Minister if you like

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  6. hj (6,359 comments) says:

    George Monbiot has a good post titled “The Deafening Silence” speciffically with rrgard to land taxes. That is somethingDavid Farrar and George Monbiot agree on. “The Defening Silence” is an apt description of politicians reaction to the Savings Working Group.

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  7. Jim (398 comments) says:

    “I didn’t quite realise that it would be presented in such an immodest way…”

    I’m no media junkie, but I learned 15+ years ago that “journalists” are experts at taking casual throwaway remarks and turning them into page 1 fodder. Based on their well-honed ability to choose only the silliest and most extreme comments from an otherwise moderate conversation I have long since labeled mass media journalists as Stupidity Amplifiers. With very selective filters.

    When they have a live one in their net then anything is possible.

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  8. Judith (7,631 comments) says:

    I have to admit love in Wellington can have it’s advantages. However, it with its constant breeze it cannot be recommended for ‘love’ in the sand. Auckland is much less ‘gritty’.

    Domestically, the Government’s planned asset sales will be the domingating political and economic issue. “The politics are fairly easy to predict – there will be a referendum, and the result will be a vote against. The unknown is how large the turnout is – the larger the turnout, the more damaging it may be.”

    I agree with you on this point. The question remains though, do people feel strongly enough to allow it to change their vote in the next election, which ain’t that far off? It doesn’t appear the issue was a big contributing factor in the last election. Will Key have enough to influence the normal plebs, like myself, into putting our money on him, despite him having sold part of MY asset? It will have to be a very steady and improved economy during this next year to tempt me in that direction. I would probably require a few more carrots than what appears to be on offer.

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