An American Perspective of the New Zealand Economy
By Michael Reps / Nov 09 • Categorized as Living Overseas •
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Mount Cook
In July 2001 I made the decision to emigrate from the US to New Zealand. By July 2002 I became a permanent resident and now am a dual US/NZ Citizen. I emigrated because I believed the rampant credit expansion in the US would end badly. Many of my peers at the time thought I was a bit premature and I’d have to agree, I could have waited a few years to be proven correct. Now, after 9 years of living here in New Zealand I help others migrate to these shores to establish businesses and residency.
I believe it’s important when viewing someone’s perspective on anything, to first get a feel for who they are and what motivates them. We all have our own particular preferences and motivations. Just as one would expect a Californian like myself to have regional preferences to parts of New Zealand that differ from what an East Coaster might like, its important to understand that my observations are made with a known bias that I can not escape.
I was born in San Francisco and raised in Los Angeles in the 70’s 80’s and 90’s I spent about 8 years traveling the US while in the military, enough to be familiar with the South, Texas and Virginia. Notice that I did not include Virginia in the South. And yes, Texas could be its own country with its distinct identity. Oakies know what I mean here.
My background is in the investment management and business formation area where I have spent the last 20 years studying and refining my knowledge of market trends and investment opportunities. The one major constant I would pass along to anyone willing to take free advice is; “The fastest way to make a lot of money is slowly”. What I mean by this is that the longer term big picture is what investors should focus on.
With that said, let me draw your attention to the quote from CFA Daniel Amerman regarding the current state of the US Corporate environment:
Indeed, let me suggest that taking market share and profits from legacy corporations that are burdened with retiree pension and health care inefficiencies, as well as with retiree shareholders and retiree bondholders, will be one of the most profitable business strategies of the coming decades. For the destruction of the inefficient is the very basis of capitalism.
http://danielamerman.com/Video/Capitalism.htm
In short, the GM’s of the world are better off going bankrupt and clearing their slates if they hope to compete with less debt burdened new entrants. While this may be good for some, especially investment banks, private equity funds, and sovereign wealth funds, it is bad for existing bondholders, stock holders and those past employees relying on promises made for their hard work and dedication. Not to mention Ford, who now must compete with a less encumbered GM.
The future consumption that was brought forward into the present day via easy credit has consequences. We are now in the future and many US Corporations and American People do not have the money required to continue on with such consumption patterns.
What does this mean for the US and what does it mean for New Zealand? It means that the sectors that expanded the most and that were facilitated by easy credit will turn into the sectors that contract the most facilitated by tighter lending. This is the overall big picture and long term trend.
While I believe this credit expansion is a global phenomenon and that New Zealand, as well, has been swept up in credit expansion, I see a much different outlook going forward here than what I see in the US. With a population of 4 million people there are immediate benefits to being able to change course if your economy is not functioning at optimum level. This country went through a structural reform in the mid 80’s with the introduction of Rogernomics from their then Prime Minister Roger Douglas. The policies included cutting agricultural subsidies and trade barriers, privatizing public assets and the control of inflation through measures rooted in monetarism, and were regarded in some quarters of Douglas’s New Zealand Labour Party as a betrayal of traditional Labour (Democrat) ideals.
New Zealand now ranks among the freest economies in the world with one of the least corrupt governments. It operates one of the better secondary school systems educating its young while spending only 8% of its GDP on healthcare compared to the US’s 16%. Our current unemployment also is only about half to a third of what the US’s real or stated unemployment numbers are. I can rattle off numerous statistics that place New Zealand as a very nice place to migrate to, but most importantly, it is well suited to change course and engage in structural reform, should the need arise. This, I believe, is its saving grace. But as I stated earlier, I have my bias and your preferences may vary.
The rest is all what you make of it. As I stated from the beginning, we can not escape our own bias’s. If you are the type of person that is drawn to a country that resembles California several decades back, I’m sure you will like it here.
About the Author: Michael Reps is Managing Director of Yield Qwest Ltd. www.yieldqwest.co.nz if you have any questions feel free to contact him at anytime at m.reps@yieldqwest.co.nz
Roger Douglas was never the Prime Minister of New Zealand. He was the Minister of Finance in the fourth Labour government; David Lange was the then Prime Minister. Douglas is now a list MP and a member of the far right ACT party.