Will New Zealand be okay in the economic crises?
If you read my book (go on – dare you) you will know that I tend to be really quite sceptical of people who are prepared to say what the economy is going to do with any certainty. You may as well toss a coin. Heads it will get better, tails it will get worse, coin falls down the drain – it will stay the same.
Which is about as much as you get from reading most commentaries as far as I can see.
Anyway – I was chatting to my mum the other day (she is back in the UK at the moment), and she was telling me the news from there. It seems that over the Christmas period, a lot of well known high street stores and businesses have gone bust.
Probably the most shocking is Woolworths. (For those Kiwi readers – UK Woolworths is more like The Warehouse than the NZ Woolworths you know). The last of the Woolworths stores closed this week, after they failed to find a buyer for the company. It was a bit of a shock: it feels like woolies have been around forever; definitely it was the place to buy toys when I was growing up! (My Star Wars Collection would not be as big as it is without them!).
Woolies is joined by; Officers Club (kinda like Hallensteins I guess), Zavvis (Used to be Virgin Megastore – maybe they shoulda kept the name), Adams (Children’s Clothes), Roseburys (Soft Furnishings); Whittards Tea has been bought out by someone else, and good old Wedgwood & Waterford Crystal. Wow!
The scary thing – these all fell over rapidly in the last few weeks.
Now – I’m not an economist – but something struck me as a bit odd about this – and it makes me wonder about how things are in New Zealand. You see, so far – the high street stores in New Zealand aren’t falling over. Some of them are grumbling – sure – but not going bust. Instead – we have had over 20 finance companies fail – but over the past 2 to 3 years, and most of them during 2007. That has put a huge dent in the ability to borrow money, and it has caused a lot of hassle for property development and investing which relied heavily on the money these companies lent out, but it doesn’t seem to have hit the high street!
The only Hight St store here I can think of that went bust was Sounds, selling Cd’s and DVD’s.
Also, New Zealand’s economic crisis has been in flow for a while now. The finance companies started going bust back in 2006. 15 had fallen by February 2008, and by then, the banks had started being rather strict in their lending.
Whereas in the UK – it seemed to come crashing down REALLY fast. With 2 major banks falling over in October and the government bailout coming so rapidly, along side the Iceland savings nightmare; it was a completely different scenario. A short sharp kick in the ghoolies vs. being stretched on a rack I guess.
So my opinion, for what its worth, is that New Zealand just isn’t reacting in the same way as the UK. People are spending less (mostly – there is still a lot of money being chucked around by some people!), but it just feels a bit less intense at the moment. While there is less money available, it really is mostly in the form of boring for property. People have certainly had it hard with high interest rates (remember – even with rates falling: many people are on Fixed rates which are expensive to break, and even than, rates are always higher here than in the UK.
The main difference that this will cause is that in the UK, the high streets are going to start looking very empty. In New Zealand – you can’t see that – it is not so “in your face”.
I think we will survive for the most part. It is going to be tough for some of us, no matter which country we are in. But as ever – if you look after your money, and take care of it, and live within your means – you can get through it.
Of course – that may change next week, but hey – that’s just the way I see it at the moment.
Today – mum tells me that even the great Marks and Spencers are closing 27 stores.
Related posts:
- New Zealand Banks and the Economic Crisis.
- And New Zealand Interest rates come down yet again.
- Why exactly should interest rates in New Zealand go up?
Comments
One Comment on Will New Zealand be okay in the economic crises?
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Hubby on
Mon, 12th Jan 2009 3:27 pm
There are a couple of schools of thought as to how the world wide economic waves will effect either the UK or NZ.
The UK has built a large export industry in Finance, as the export industry in manufacturing went south. With other countries not trusting banks outside of their immediate currency zones – this is likely to hit the UK finance industry badly, particularly as they remain outside the Euro. Being outside of the Euro may actually give the Bank of England more flexibility in changing interest rates, where the Euro Central Bank has to deal with a much wider constituency.
NZ wise, we’ve got a strong food orientated export market (milk, beef, lamb), and people are always going to need to eat.
NZ’s next biggest ‘export’ industry is tourism – exporting the desire of people to come here on holiday.
When the $$ is strong, exports are good, but tourism suffers. When the $$ is weak, lots more tourists come to NZ, however exports suffer because we’re getting fewer foreign monies for the same NZ priced product. So, there’s a bit of a balance there.
Which ever country you live in, the ability of business to borrow money will be the key thing. This is what the different fiscal stimulus packages were supposed to be about. They don’t seem to have worked so well in the UK – and it’s not just for investing and growing a business that you need borrowing for, but for keeping cash flow stable and having an overdraft, a line of credit with suppliers, not requiring immediate payment from your customers. If you can’t get a line of credit from suppliers, you have to get the cash from somewhere to pay for goods before you sell them. MacDonalds doesn’t have to worry about this, as customers all pay in cash (or the equivalent), which McD’s themselves have enough market size to insist on credit terms from suppliers. We’re not all that lucky though.
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