News Worthy: 22 February 2008
22 February 2008 - No. 238
The Year of the Rat
One of the significant features of the Lunar New Year is that the celebrations continue for a 15 day period from (in this year) 7 February. Somewhat similar perhaps to the 12 days of Christmas.
On Tuesday in a Parliamentary setting the Chinese New Year was celebrated with a cultural programme and speeches by the Prime Minister and others. It was very much a Parliamentary occasion.
Politics continues however to loom large at such events. On the lectern confronting those present was a line of Chinese characters which for those fluent in Chinese detracted from the occasion. Translated it read "Labour Party supports Chinese". The Government propaganda machine had clearly been in full flight. Not disclosed was the funding source for the propaganda.
The finance company collapses
In the last eighteen months 14 finance companies have collapsed. There is little doubt that more will follow. The delayed Government response has been to introduce the Financial Advisers Bill which requires competency of financial advisers, disclosure of conflicts of interest and provisions seeking to hold financial advisers accountable.
I have always been surprised at the readiness of investors to place money in finance companies in the New Zealand setting.
Many investors have not received appropriate returns for their risk. For example, while finance companies engage in riskier lending than banks, this is only partly reflected in the returns on short-term deposits. The average difference between the interest rates on 1 year term deposits at banks, and 1 year finance company debentures has been consistently around 1%.
So one can ask why an investor would put money into a finance company and not go off to a bank like Westpac or Rabobank and earn a monthly rate of interest, on a reasonable deposit sum of in excess of 8%.
Deposit-taking finance companies, on average, have a margin between debentures and loans - the interest spread - around twice that of banks, and it is significantly more for companies lending for consumer purposes.
The legislation will catch the unsuspecting because of its scope. Bank tellers will fall within its umbrella as well as other classes of occupation. A customer who goes into a trading bank and says to the teller "I have $20,00 to invest, what do you suggest I do" is clearly seeking financial advice and the response from a teller will likely be in the form of an opinion identifying particular financial products offered by the bank.
The legislation needs substantial improvement. There are provisions relating to enforcement of obligations but New Zealand lags behind other countries in that it has no provision for class actions where a group of investors bring proceedings on behalf of others in a setting where loss has been suffered. Our rules of procedure provide for "representative actions' which have significant limitations.
Amidst claims by the Government that National is stealing Labour policy is the reality that the reverse is in fact true. The illustrations are countless and include the following (links to releases available on www.richardworth.co.nz)
/ National announced / Government announced
Removing the cap on charitable donations. Donations of any amount, up to an individual's total net income, will be eligible for the 33.3% rebate. Removing the 5% cap on the level of donations that can be deducted by companies and Maori Authorities. / 27 February 2007 / May 2007 budget
All payments which reimburse volunteers for actual and reasonable expenses will be tax free, regardless of the amount of the payment / 16 May 2007 / released discussion document 1 November 2007
A greater emphasis on trades training in schools. Giving schools more flexibility to offer their students trades and industry training opportunities outside their school-gates. Expanding school-based apprenticeship training / 18 June 2007 / 30 January 2008
Giving the police the ability to issue time-bound, on-the-spot protection orders to protect families / 1 November 2007 / Released discussion document in mid-December 2007
Committing all fuel tax revenues to the National Land Transport Fund / Had in 2005 election policy / 25 July 2007
Serious consideration of Public Private Partnerships for roading projects / National policy for many years - most recently confirmed on 17 Sep 2007 / 7 February 2008
Allowing lines companies to invest in generation, especially from renewable energy sources / Had in 2005 election policy / Government introduced with Electricity Industry Reform Amendment Bill, first reading 11 Dec 2007
Devolving carbon credits to post-1990 forest owners / 6 March 2007 / 20 September 2007
Political Quote of the Week
"I find that the harder I work the more luck I seem to have" Thomas
Jefferson - 3rd USA President
Dr Richard Worth
National Party MP