Archive for January, 2010

The Reserve Bank Governor, Dr Alan Bollard has just announced that the Official Cash Rate (“OCR”) is to remain unchanged at 2.50%.  This move was widely expected by economists.  On discussions with my business banking contacts they say that they have already factored in a 0.5% increase into fixed rates by 30 June of this year.

Dr Bollard’s press statement interestingly said that:

the New Zealand economy continues to recover…

The economy is being assisted by both monetary and fiscal policy support…

If the economy continues to recover in line with our December projections, we would expect to begin removing policy stimulus around the middle of 2010.”

As a result I predict that the major banks will not change their floating rates, but perhaps edge up their 1 – 3 year rates a little bit further.  The floating rates will rise when the OCR rises.  I predict that the OCR will stay unchanged on March 11, April 29, but then rise by 0.25% on 10 June 2010.

MARGARET WARREN

(10 February 1918 to 21 January 2010)

After nearly 92 years of a fantastic life, my Grandmother passed away last Thursday.  She was not just a grandmother but a great friend too, someone I lived just a 6 or so minute drive away from, and a real fighter with so much love for her family and her many friends.  We could all do a lot by following in her footsteps and holding true to core values and principles of love, honour, integrity, duty and respect.

Here is my eulogy that I delivered at the All Saints Chapel of Purewa Cemetary and Crematorium in Meadowbank, Auckland this morning.  It is not one of sadness, but one of remembrance:

Today is our chance to say goodbye to a truly special lady.  Granny brightened our lives, and was truly blessed to be granted a full life. Granny was an amazing lady, with so much love for her family and friends.  I never heard her complain or whinge, right up to 2 hours before her peaceful death.  That was when I last spoke with her, to get her shopping list for the week, with Mum and Dad away in Melbourne.  Even then she was asking how Liam was, and what Bridget and I were doing for the day.

My sister Sarah and I loved being able to walk just a couple of hundred metres from Cornwall Park Primary School to see Granny and Granddad at Maungakiekie Avenue to play on their tennis court with them, or in their beautiful garden; to go to Ngaiwi Street in Orakei to throw a ball around, as I did with Grandad just before he died in May 1991.  I will always treasure the memories of her cooking, the delicious chocolate fudge, self-saucing puddings, shepherds pies, I had with her  - she was an outstanding cook.

Granny was so very excited about Sarah’s engagement to James. She was keenly awaiting their June 19th arrival back to Auckland for good, and their March 2011 wedding. Granny and I had just spoken about how great Sarah was at sending her postcards pretty much every week. Granny had amassed a beautiful collection from most of the 80 or so countries that Sarah had visited since she goes travelling most weekends, that gave her so much pleasure and joy.

I could always visit and talk to Granny about sport – she always kept up with netball, rugby and cricket results – and I enjoyed having her over sometimes to watch our Auckland netball and rugby teams, on my big screen TV so she could actually see the ball! She was very fond of her great-grandson Liam, even when he ate her ornaments and leaves off trees in her garden!

With Granny passing away a special bit of my life goes. I will always cherish her memories of the past, including what our magnificient city used to be like, her childhood, going to Waiheke Island in 9 different decades, all the special times with Granddad, and her friends both here today and those she will now join in heaven.

I hope today that we can set aside the sadness and instead celebrate all that Granny was, all that she did, and all that she lived for.

I love you Granny, I always will, and I miss you so much already.

Finally to remember yet another extremely happy time (of which there were so very many); here’s a photo of Granny at Bridget and my March 2007 wedding:

The Tax Working Group (TWG) reported their findings yesterday afternoon (20/1/2010) at:  http://www.victoria.ac.nz/sacl/cagtr/pdf/tax-report-website.pdf

Summary of the TWG’s findings

The main recommendations in the report are to:

1. Align the company, trust, portfolio investment entity and top personal income taxation rates (to 30%)
2. Increase GST to 15% (but provide tax incentives to those on lower incomes)
3. No exemptions to GST (keep its broad application)
4. Make NZ’s company tax rate competitive with Australia (ideally lower than that of Australia)
5. Bring in more taxes to “broaden the tax base”
6. Not to implement a Capital Gains Tax (which Inland Revenue said was notoriously hard and inefficient to administer)
7. Strongly consider bringing in a tax on equity invested in property – “risk-free rate of return method” (as property is an “unproductive investment” according to the TWG, and we need to invest more in the NZ sharemarket, managed funds and in term deposits).
8. Consider removing the 20% depreciation loading on new plant and equipment (eg new curtains, appliances, carpet on your rental property would no longer gets a 20% loading to the depreciation rate)
9. Consider removing tax depreciation on buildings (building structure) on rental properties if empirical evidence shows that they don’t depreciate in value
10. Change the thin capitalisation rules by lowering the safe harbour threshold to 60% from 75%, to minimise interest expense costs to offshore parents companies
11. Keep the imputation credit system (for company dividends)
12. Reducing Government (over) spending was not looked at by the TWG

What is the TWG?

The TWG is a group of corporate tax practitioners, academics, businesspeople, and high ranking Inland Revenue and Treasury officials, that was established by Victoria University’s Centre of Accounting Governance and Taxation Research.  Whilst Bill English (Minister of Finance) and Peter Dunne (Minister of Revenue) didn’t actually request that this group be formed, they were supportive of it.

They held 6 sessions from June 2009 to December 2009.

My initial thoughts

• There was no consideration given to reducing Government expenditure.  We are bleeding over $200 million a week ($10 billion per year) by New Zealand spending more than we earn.  As part of a decent civil society we want to provide a roof over every New Zealanders’ head that wants it.  This is Housing New Zealand’s role – they need private landlords to house the poorest Kiwis.
• There was no-one from the New Zealand Property Investors’ Federation (NZPIF), Property Council or gigantic commercial property owner (like Goodman Property or AMP) to represent property investors’ interest.
• Martin Evans NZPIF President and Andrew King NZPIF Vice President were charged $200 each to attend the last session!  Others including media and managed fund observations were not charged this.
• It appears that there was an orchestrated attack on property investors, with them not there to speak for themselves.

I will research more, do a summary table of what the TWG suggests and then read the full report (73 pages) and speak with colleagues in my network to give you my full thoughts on this.

HAPPY NEW DECADE

Wishing you all an extremely happy decade as we warmly welcome the “tens”.

Whether we call 2010, “twenty ten” or “two-thousand and ten”, it doesn’t matter.  What is important is that we step back and reflect over what happened last decade.  Did things in life happen around us, as if we were merely a passenger, or did we make things happen.

Lets commit to making 2010 a good year, and this decade to being an excellent one, where you right down some long term goals and work to achieving them.  If you need help in this regard, you should get a tried and tested mentor.

Contact me if you need help with goal setting and smart wealth creation (or maintenance) strategies for the coming decade.

My Highlights of the Noughties

Well another decade has come and gone.  It has been an interesting and fun one filled with highlights.  This is a log of highlights of the Noughties Decade where I name a few of them for me:

1. My Wedding to Bridget

A very happy day and special occassion.  I had been going out with Bridget since October 2000, and we got engaged in December 2005, so my March 2007 wedding was good timing.

As with so many people, it came and went so fast and to be brutally honest I can’t actually remember that much of it, apart from the fact it was a great day!

The honeymoon to the Yasawa Island’s in Fiji was amazing – thanks Dean Letfus for the recommendation to go to Nanuya Island Resort on Nanuya Lailai Island – home of the Blue Lagoon – yes the very place where the movie of the same name was filmed, where Brooke Shields became a household name.  We spent the rest of the time at the Sheraton on Denarau Island – super stuff.

2. My son being born

Well I didn’t know quite what to expect with my first child – I got told a lot.  Being squeamish I fainted once in hearing about the delivery process, but I managed to hold my nerve and was able to talk property investment with our midwife and specialist O&G surgeon that we had on the ‘case’ during delivery and numerous consultations and scans.  The result is one fantastic baby boy (now nearly 14 months old), Liam Whitburn, who can already run up our hallway with a full size rugby ball and trip up and score a try.  He likes eating food on our plates that he lunges for whilst we are eating, as well as soil and leaves from our garden too, so he’s a real omnivore!

3. NZ Property Market

The Property Boom of 2002 – 2007 was New Zealand’s biggest highlight for me.  This is where we saw several thousand millionaires made in our country.  Yes unfortunately 2008 and 2009 tail end the decade as badly as it began in 2000 and 2001 with negative equity recorded in the 2000 and 2008 calendar years.

I am a big statistics fan and researcher, even did a stats paper at Auckland University in 1997 as part of my BSc degree. As a result lets look back at the decade’s property prices in January of each year as laid out on my blog here.  We had a 109% increase in New Zealand overall in the period from January 2000 to November 2009.  That is pretty special, and we could easily see similar growth in this coming decade.

4. Hitting my goal and becoming a millionaire in my 20s

I wrote down a very aggressive goal when I was 24 – to become a millionaire before I hit 30.  The great news was that I did it!  In addition I turned 30 in time lock in my million before the downturn and reduce my loan to value ratio to safe levels.  Fortunately my portfolio was well presented and in good locations so I had tenants the whole way through the downturn, bar 17 days in one property, and the value I lost that year has more than come back.  It’s a great feeling to have hit my goals.

5. Sporting Highlights

There are just so many to choose from with the Silver Ferns win in 2003 Netball World Championships in Jamaica (beating Australia 47 – 45 in the final), the League Team winning the World Championships in Australia in 2008 (beating overwhelming favourites Australia 34 – 20 in the final) and on an individual note Scott Dixon’s Indy Car racing successes this decade including the title in 2008, Valerie Vili’s shotputting feats, Hamish Carter’s glorious Athens Olympic Gold and Nathan Astle’s 222 off 168 balls – still the fastest double century in international cricket (including 28 fours and 11 sixes).  Michael Campbell’s 2005 US Open victory at Pinehurst (by 2 shots over the legendary Tiger Woods) was a memorable success too.

However for my decade runner up I am choosing an obscure highlight of Andre Adams securing an impossible victory for Auckland over Northern Districts chasing 161 in the 20/20 game at Seddon Park, Hamilton on 28 January 2007.  Auckland needed 12 runs to win off the last ball – usually this would be thought impossible, but not for the big hitting uber talented Aucklander Andre Adams, and Graeme Aldridge bowling a waist high full toss (a no-ball) which was slammed for 4.  Then Auckland needed 6 off the last ball – surely he couldn’t achieve the dream…  However Aldridge’s bowling and Adams clean hitting ensured that defeat was snatched from the jaws of victory, as Adams absolutely pounded the ball for a big six over long off to guide Auckland to an amazing win.

The Decade Winner has to be the All Whites who qualified for the World Cup for the first time since 1982.  Despite Rory Fallon heading home the goal just before half time from an expertly taken Leo Bertos corner, and Mark Paston saving an amazing kick from the penalty spot, the whole team played like a bunch of heroes.  Well organised, structured and solid – can we mix it on the World Stage at the 2010 World Cup in South Africa.  We are drawn against Italy, Slovakia and Paraguay – can we be in the top 2 teams of this pool to qualify for the 2nd round?