Archive for August, 2011
A note to confirm that the legislation to abolish Gift Duty has been passed, so your time consuming and costly gifting programmes will not continue. Parliament passed the Taxation (Tax Administration and Rememdial Matters) Bill today, so gift duty will be a thing of the past from 1 October 2011 in New Zealand.
This legislation has not received the Royal Assent yet (perhaps one of the first pieces of legislation for Jerry Mateparae to assent) in light of him being sworn in yesterday, replacing 5 years of magnificent service from Anand Satyanand.
I think that this is great legislation and will save tens of thousands of New Zealanders hundreds of dollars every year from transferring their assets into their trusts. Well done Peter Dunne who championed this through and the National and ACT parties for their keen support.
There has been extreme volatility in international financial markets with two issues having dominated the media in the past couple of weeks. Firstly we had the US Government being downgraded from AAA to AA+ by Standard and Poors, after the jostling between the Democrats and Republicans about raising the debt ceiling (the statutory limit for the amount of money the US Government can borrow). Secondly there were troubles in Europe, with massive riots in London, and also in Birmingham, Manchester, Bristol and Liverpool, as well as fears that gigantic French banks may fall, along with troubles for the Spanish and Italian Governments.
The USD:NZD has been extremely volatile so far this month crossing at US 88.3 cents to 1 NZD on fears of the US Congress not approving the debt ceiling to be raised, and then it sunk to US 79.7 cents to 1NZD in the midst of the confusion. This is nearly a 9 cent swing which normally takes many months, not a week.
Similar volatility has been seen in sharemarkets with 4% wiped off markets in one-day then the next they would gain 3%, only to lose 3% and then gain around 3% again. Interesting times for sure. Property is simply nowhere near this volatile.
USA
The world’s biggest economy, the United States of America suffered its first sovereign credit downgrade ever on on 5 August 2011, by leading rating agency Standard & Poors. The US is now tied with NZ on AA+. This has increased the cost of borrowing for the US Government and means they will need to take an even deeper look at cutting expenditure (as the Republicans want) and/or raising taxes (as the Democrats want). There will be much jostling in the lead up to the Presidential election next year. Unemployment is high at 9.3%, growth is low still. Barack Obama is in trouble with his broken promises in terms of “change is coming” and “yes we can” fix the economy. He is predicted to lose next year’s election without a republican candidate even being named to stand against him.
I don’t think we will see as much space and military expenditure going forward from the US – the void of being world police, will be taken up by China in the years ahead.
Europe
There have been some very interesting and unsavoury events in Europe recently. We have seen riots causing tens of millions of dollars in damage in London, and other major cities in the UK. In addition we have a crisis of confidence hitting all banks, but in particular the French banks. Fears still reside over the finances of Greece, Ireland, Italy, Portugal and Spain.
We have seen Portugal being downgraded yet again to BBB- with Standard and Poors, meaning their 10 year yields spiked over 13% (now 10.3%) such is the associated risk with buying these. Unemployment is high at 12.4% and the country’s population is not happy about their growth falling backwards (-0.6% GDP currently).
Spain hasn’t flourished under the European Union. Its growth has floundered since 1999 when it joined the EU, and employment has been an issue. Sure their sharemarket and property markets did well from 2002 – 2007, but like many countries they crashed spectacularly in 2008 and now unemployment is a truly massive 20%. Yes, black money is common in Spain and there will be a number of jobs paid under the table, but certainly nowhere even close to 10% of the workforce will be paid in this fashion. I personally think Spain would be better suited to be out of the EU, so it could devalue its currency to make its exports competitive once again and to have employment and growth on this basis. However this is unlikely to happen. The European Central Bank helped Spain’s Government by buying their 10 year bond yields, which meant the rate dropped from selling at over 6%, down to 5.15%.
Italy is also in trouble. Unemployment is high at 9.1%, growth remains very low. Italy I think would also benefit from exiting the Euro and letting its currency devalue. Their Government debt to GDP is 119% and is rapidly climbing. ECB President Jean-Claude Trichet wanted “to stabilise” the fixed-interest rates in buying Italian Government bonds to take the yield from over 6% to 5.3%.
The world’s 6th largest economy (the United Kingdom) is in trouble still. Any country that has riots like these and youth (16 -24 year olds) unemployment over 20%, has major issues. Many youths are staying in education longer and doing more courses or postgraduate degrees to stave off unemployment. The UK’s public sector net borrowing (annual government borrowing) for 2010/11 was £143.2 billion or 11.7% of GDP. However the good news is that a lot of other countries are doing much worse. Prouds Poms will say the UK haven’t even hit NZ$2 trillion ($2,000,000,000,000) of debt yet, and had much higher debt after World War II. The UK’s growth is a paltry 0.2% of GDP and unemployment is at 7.7%. Here are some pictures of the worst violence in London since this city got trashed by the Germans in World War II:
At least England are now the number 1 ranked test cricket team after annihilating India by an innings and 242 runs, and it is a cheap place to visit with their currency below 2:1 (2 NZD to 1 GBP).
Android users can delight with the BNZ having launched New Zealand’s first internet banking app designed for them. BNZ’s iPhone app had over 15,000 downloads since its launch just last month.
Smartphones have experienced rapid growth and BNZ are meeting their clients’ expectations of being able to bank wherever they are. BNZ Android app users can pay bills, view balances and transfer funds on their smartphones.
The app is a free download and is available by clicking here.