NZ dollar & economics

[Marmoot]

They could lower the export-based taxes without raising the rest to strengthen the export sector in relation to the importers?

haven't you heard about tax-break, tax-incentive, tax-rebate and tax-exempt-products?

It is possible to raise the general tax level while keeping one particular sector down.

However, maybe I need to correct myself: government can increase income-tax rate to stem spending.

Not that I want them to do that either. I'll get depressed if they take another cent out of my skinny payslip!

[TwoSeven]

idb. I'll look into the mortgage side for you if you want.

I have an interest in macro-economics because I used to be interested in the forex market.

[idb]

haven't you heard about tax-break, tax-incentive, tax-rebate and tax-exempt-products?

It is possible to raise the general tax level while keeping one particular sector down.

However, maybe I need to correct myself: government can increase income-tax rate to stem spending.

Not that I want them to do that either. I'll get depressed if they take another cent out of my skinny payslip!

Yeah but I meant as an alternative to putting anyones tax up it would be more palatable to decrease the target sector's burden.

Anyway, this still doesn't help in figuring out the Reserve Bank's strategy in raising interest rates.
It looks pretty counter-productive at the moment or am I just impatient?

[Lou Girardin]

The opposite is true, if the value of the NZ dollar drops in relation to the world market then overseas speculators will chip in and buy up the excess stock, raising its value - they make a profit by selling it back at a higher price (forex market).
.

I thought that the dollar was driven up by investors attracted by our high interest rates.

[kerryg]

A strong currency is generally a reflection of a strong economy with good fundamentals. NZ's case is a bit different because our domestic economy is so small. Instead of reflecting good fundamentals (e.g. productivity) our dollar is over-valued because of speculation in it by overseas speculators attracted by the high interest rates to be earned in NZ (they're vastly higher than in the USA for instance).That can change in a very short time if the interest rate differential changes back the other way. We are pawns in a global poker game, you could say if you were a conspiracy theorist.OK I may be a bit of Luddite when it comes to these things but I figure it like this: we make stuff to sell overseas to earn our "income", right? And our exporters are struggling with a high NZD making many of them uncompetitive (eg forestry industry, a real good current example) so production volumes are down, plants working reduced hours, workers being laid off. So our income is shrinking. Meanwhile our laissez-faire trading policy allows cheap imported goods (cheap because of the high value of the NZD) to flow into NZ, practically without restriction. So our spending is increasing (mainly on crap so far as I can tell....although that is a different subject). Now...I can't run my household budget like that, not for long anyway. So...WTF?

[idb]

idb. I'll look into the mortgage side for you if you want.

I have an interest in macro-economics because I used to be interested in the forex market.

Cheers TwoSeven, any educating I can get is a good thing.

[Marmoot]

Yeah but I meant as an alternative to putting anyones tax up it would be more palatable to decrease the target sector's burden.

Anyway, this still doesn't help in figuring out the Reserve Bank's strategy in raising interest rates.
It looks pretty counter-productive at the moment or am I just impatient?

Idb, that is correct and I have overlooked that idea. That could help to some extend in making our export price quite competitive despite high currency rate.

But as answer to your last question there, I believe increasing interest rate is actually counter-productive and would worsen our crash because it would worsen our export (reducing our income) while increasing the currency exchange. When the crash happens, the drop would be more significant than otherwise; the fall would be higher.

And yes to kerryg, foreign exchange investors do operate in a mob fashion, raiding one country to the other. They shook Asia in 97. Soros and his friends tried real hard to shake US 1 or 2 years ago (?I am not good with dates?). So you are not simply a conspiracy theorist. It is a reality.

[TwoSeven]

I would suggest getting a couple of books from your library. First one is econoic concepts and applications 3rd edit, stewart & moodie (addison wesley)

The other is Economics 16th edition, samulson & nordhouse mcgraw-hill.

The second book is pretty much tought all over the world and been around for about 50 years (it gets updated fairly often). The first book was a course text when I did my economics class. It covers very similar content to the samualson book, but uses NZ examples which is why I like it.

[TwoSeven]

Couple of things with trade is that 1) countries tend to specialise eg. nz with dairy etc. 2) prices tend towards a world price, so you get a competitive advantage if you can compete with that.

As an example, china can produce clothes really cheap, but they cant produce wool and food as cheap as we can. So we sell them wool and food and they sell us clothes.

Not only that, but if we can sell them better luxury clothes, they will buy that as well (ie. marino wool suits). In fact, there are many markets where we can make goods cheaper than china can, which means its cheaper for them to buy from us than to use their local market. This rule is why global trade works.

Sometimes a country makes something cheaper than us, but it cant make enough of it, so they have to buy in expensive stuff to make up the difference. An example is us selling milk powder to america.

[Marmoot]

It may seem unpopular, but I suggest taking economics books with a grain of salt nowadays, especially ones that are written years ago.

Globalization and Internet has set an unprecedented changes in the way things relate to others, especially when it comes to exchange rates, international trade and export/import businesses.


On the other hand, common sense seems to be more and more accurate when used as economic analysis tool. What appears to contradict the age-old philosophies often come true.

[TwoSeven]

Both books are current 2004 updates (samuelson now has an 18th edition).

Economic theory hasnt changed with the internet and globalisation - the former just speeds things up, the latter has been around for a couple of hundred years (remember the world was global free trade before socialism closed it down).

However, when looking at economics you really do have to know about global politics and events.

[cowpoos]

I'm drinking this cheap beer...called ranfurly...20:95 a dozen of 440ml cans...not the nicest draught out there...but for bang for buck...not bad at all....whats everyone else drinking tonight?

[Marmoot]

I'm drinking this cheap beer...called ranfurly...20:95 a dozen of 440ml cans...not the nicest draught out there...but for bang for buck...not bad at all....whats everyone else drinking tonight?

I'm drinking a cheap soft-drink made of Aloe Vera juice from China. And I notice the price hasn't change a single cent even though our currency has strengthened....Maybe a sign that small retailers of everyday-life necesities are not affected by globalization.

A sign that there is still hope?

[cowpoos]

I'm drinking a cheap soft-drink made of Aloe Vera juice from China. And I notice the price hasn't change a single cent even though our currency has strengthened....Maybe a sign that small retailers of everyday-life necesities are not affected by globalization.

A sign that there is still hope?

or capitilization????

me cheap beer in NZ made

[idb]

I'm drinking this cheap beer...called ranfurly...20:95 a dozen of 440ml cans...not the nicest draught out there...but for bang for buck...not bad at all....whats everyone else drinking tonight?

All my effort to raise the level of general discussion just a bit undone by a random meaningless comment.
Grrrrrrrrrrrrrrrrrrrrrrrr
Vandal!!!!!!!!!!!!!!!