Brain Gain NZ

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Mission Statement To boost NZ’s growth potential through better connectivity with Kiwi expats. Welcome Expats 1 NZ Interest and Exchange Rates 11

NZ Housing Market 3 NZ Expat & Global Surveys 14

NZ Labour Market 6 More Than Milk and Scenery 16

NZ Migration Flows 9 Kiwi Business Culture 19

This publication is written by Tony Alexander. The views expressed are my own and do not purport to represent the views of

the BNZ. No endorsement is implied for any company mentioned here. Back copies will be available here http://tonyalexander.co.nz Information for possible migrants here. http://skilledmigrantjobs.com/

Welcome Expats Welcome to the first issue of our new monthly publication, Brain Gain NZ. We like to think that the title gives a good indication as to what we are aiming for

improving the connectivity of Kiwi expats with New Zealand and,

promoting the utilisation of the goodwill toward our country which these people have regardless of whether their brains remain offshore or come back here.

New Zealand has the second largest diaspora of all OECD countries after Ireland, and the largest annual proportionate population churn as some 85,000 people on average each year shift here to call NZ home, and about 72,000 leave for other climes. There are by some estimates up to one million New Zealanders offshore with the overwhelming majority in Australia. http://www.stats.govt.nz/browse_for_stats/population/mythbusters/1million-kiwis-live-overseas.aspx Having met a good number of these people while travelling overseas the past four years it is clear that goodwill toward New Zealand is usually very strong. Reaction to the Christchurch earthquake showed that in force. However this contact and numerous surveys show that although this goodwill may be one factor leading on average to some 25,000 Kiwis returning to New

Zealand each year, why they return and what they find here suggests massive under-utilisation of what they have to offer. In this first issue of BGNZ (not the Brewers Guild of NZ) we start by providing expats with some broad information on what is happening in the housing market (rising strongly), the labour market (yet to spark but shortages of skilled people apparent), then examine the data on flows of migrants including expats. There is no uplift in expats returning to NZ except from Australia and Germany. In the housing market section we include some of the results from our regular survey of over 10,000 licensed real estate agents in New Zealand – the BNZ-REINZ Residential Market Survey. For the first time we have asked agents for insight into the presence of foreign buyers in their local markets. The data do not yet allow us to say what proportion of buyers come from overseas (we will add that next month), but they do tell us the nationalities of those buyers who are around. People from the UK dominate across the country, but Chinese dominate in Auckland and Australians in Northland and Otago.

18 February 2013

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We then look at the exchange rate (bad news for those hoping to get lots of NZDs for their foreign coin), and interest rates (lowest since the 1960s in NZ but higher than most other countries). After that we take a run through surveys released in the past month extolling the virtues of our deregulated economy, and also showing some areas in which we need improvement – such as innovation, job satisfaction, and globalisation. Then we get to what hopefully people will find to be the most interesting sections. First we aim to show that there is “More Than Milk and Scenery” driving the NZ economy through monthly examination of areas such as high value manufacturing, ICT, creative digital content, food and agricultural technology, and the green economy. In this section this month we start with the first of what will be a regular series of articles from the NZ Manufacturers and Exporters Association looking specifically at high value manufacturing in New Zealand. http://www.nzmea.org.nz/ Then we learn from Wil McLellan and Colin Andersen about what may be one of the most exciting developments in New Zealand’s business sector for many years. http://www.epicinnovation.co.nz/ The EPIC centre in Christchurch (Enterprise Precinct and Innovation Campus) brings together a range of businesses from a variety of industries. They are all interested in collaborative exchanges of ideas and insights providing the sort of cross-pollination benefits which elude many NZ businesses because of distance from major centres of world population, and perhaps our traditional (now being challenged thankfully) culture of isolationism. Speaking of which, after looking at things other than cows and landscapes we examine the characteristics of “Kiwi Business Culture”. Participation in a LinkedIn discussion group of expats outlining their often poor experiences in seeking acceptance by potential NZ employers led to production of a six page paper examining these experiences. The paper was widely distributed and read, and acknowledgement of the need to raise awareness of the cultural factors impeding effective NZ utilisation of what expats have to offer led directly to this publication. http://tonyalexander.co.nz/wp-content/uploads/2012/11/Expathiring.pdf

BGNZ will be released on the second to last Monday of each month. There will be no emailing list held for it by ourselves and instead distribution will be primarily through the many NZ recruitment firms maintaining contact with expats and potential immigrants wanting up to date insights into what is happening in New Zealand – and why. We shall also however send a copy each month to the over 27,000 people who receive the BNZ Weekly Overview each Thursday night. Should anyone wish to be guaranteed receipt of the BGNZ each month then they can simply sign up for the Weekly Overview here. http://feedback.bnz.co.nz/forms/Fx-I8ploskSGWgjN_7WOAw There is a significant quantity of material and numerous points for discussion are contained in this document. Were time to permit we would open up an online forum for discussion. However with just one person writing most of the BGNZ we will for now confine engagement to a broadcast social media approach and later on consider a structured discussion environment. Until then all comments will be greatly received and can be sent to myself at tony.alexander@bnz.co.nz I am particularly interested in people who feel they may be able to contribute to the sections ‘More Than Cows and Scenery” and “Kiwi Business Culture”. Skilled Migrant Jobs http://skilledmigrantjobs.com/ This is the National Australia Bank managed website aimed at matching migrants with employers. 1. Over 7000 CV are loaded up onto SMJ by potential migrants seeking employment either in OZ or New Zealand. 2. There are over 6500 new visitors to the SMJ website every month. 3. All CVs are updated every 40 days to ensure they are still current. 4. SMJ is a free resource for BNZ clients to profile their company and vacancies to international migrants. 5. SMJ and its employment opportunities are marketed at all the global migration events that the team attend internationally every month.

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NZ Housing Market

NZ Houses Are Expensive By world standards NZ house prices are high – very high. According to the latest Demographia International Housing Affordability Survey NZ rates as “Severely Unaffordable” with Auckland ranked as the 16th least affordable city and Christchurch 24th. Wellington comes in 31 rated as “Seriously unaffordable”. http://www.demographia.com/ Why the high rating for New Zealand? In the words of Finance Minister Bill English’s quite good introduction in this year’s Demographia survey… “supply side factors explain the deterioration in New Zealand’s housing affordability… Land has been made artificially scarce by regulation that locks up land for development… The structure of infrastructure financing, and the timing levies are to be paid, raises the market price for housing. Appeals under the Resource Management Act, New Zealand’s land use regulation, can hold up developments and city planning for a decade or more in some cases. Time is money because development is risky… New Zealand’s residential build volumes are small, and the construction sector is highly fragmented. Only five firms in the country built more than 100 homes in 2011. The vast majority of builders build only one house each year. New Zealand is a late adopter of prefabrication and use of standardised materials. In New Zealand, if a window is to be added into a house, it will usually be measured and built by hand. Construction industry productivity has stagnated in the past 30 years, and is now below where it was in 1978. Industry regulation favours single person operations. New Zealand has inadvertently created a cottage industry to supply one of our most important asset classes.”

Market Rising – More To Come With regard to the latest data on the state of the housing market in New Zealand we have in hand the nationwide REINZ numbers released on Tuesday 12th. They show that sales in January were 21% ahead of a year earlier making for a 3% seasonally adjusted rise in the past three months. Annual sales now total 74,860 which is a 21% rise from a year earlier, the highest annual number since April 2008, but well down from the 122,000 peak in early-2004.

So turnover is well off its lows and rising firmly, and properties are selling at a quickening pace. In January dwellings had on average sat on the market for 41 days when sold. This is 2.6 days below average for the past decade whereas December’s days to sell reading was 0.8 days below average.

And so, unsurprisingly, prices are rising. In the three months to January the average NZ house sale price – adjusted for changes in the month to month mix of dwellings sold – rose by 1.9%. This was the same rise as in the three months ending October so it seems fair to conclude that prices are rising at about an 8% underling annual clip on average – even though they retreated 1% in January.

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In fact in the three months to January prices on average were ahead 7% from a year earlier and the latest price measure is 3.2% above the pre-GFC peak late in 2007.

Auckland - strong Auckland is where the property shortage is the greatest for a number of reasons. Weak construction during the 2000s boom

which was led by the regions, in contrast to the 1990s boom which Auckland led. This time it is Auckland’s turn again.

Strong population growth from internal and external migration flows.

Sprawl limitations and the fact Auckland sits on an isthmus.

The NZ Property Report shows that at the end of January Auckland had the equivalent of 14.8 weeks’ worth of stock on the market – down from 23.6 weeks a year earlier and the lowest reading on record after December’s 13.9 weeks. The Auckland market is very tight for buyers. http://www.realestate.co.nz/

Sales in Auckland in the three months to January were 25% ahead of a year earlier and the median dwelling sale price ahead 11.2% with a rise of 1.4% in the past three months. These are strong numbers, and another one is that in January the number of days taken to sell a dwelling in Auckland

was 5.6 fewer than average at 33. The nationwide outcome noted above was 2.6 days faster than average. More detailed data on Auckland and other regions can be found here. https://www.reinz.co.nz/reinz/public/reinz-statistics/reinz-statistics_home.cfm Wellington – yet to fire Wellington’s real estate market is weaker than the national average for a number of reasons. One is that it always lags movements in Auckland (which has positive implications for 2014). Another is that there is a lot of employment uncertainty associated with the government’s informal sinking lid policy on departmental payrolls, and the ever-present lure to companies of shifting their head office to New Zealand’s commercial centre of Auckland. The number of weeks’ worth of stock listed on the Wellington residential property market at the end of January was 19.4 which was down from 21.6 weeks a year earlier. This decline is far less than for Auckland and stock availability is not all that tight at 2,721 properties from 2,754 a year earlier.

With regard to sales, turnover in January was 24% ahead of a year earlier (Auckland 27%) and in the three months to January the annual rise was almost 18%. Growth is underway. But on average in January it took 50 days to sell a dwelling (note Auckland’s 33 days) and this outcome was 3.9 days slower than average. The Wellington real estate market is weaker than Auckland and Canterbury with prices ahead only 1.2% from a year ago in the past three months. Christchurch/Canterbury - v. tight supply The Christchurch real estate market has been heavily impacted by the earthquake of February 22 2011. Many houses can no longer be occupied,

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many people have left the city, but many remain and with builders arriving for the city’s reconstruction the housing market is very tight. At the end of January the total stock of 3,248 property listings represented a 16% decline from 3,865 a year earlier. The stock in terms of weeks of sales was 18.1 from 21.7 a year earlier which is about the same degree of tightening as in Wellington and therefore much less than in Auckland.

Sales in the three months to January were just 8.5% ahead of a year earlier compared with the 25% and 18% rises for Auckland and Wellington respectively. Supply is tight. The median sales price was 8.5% up from a year ago, and on average in January dwellings sold at a pace 6.7 days faster than average. This is far better than the 2.6 day national average and Auckland’s 5.6 days

– showing just how quickly properties are getting snapped up in Canterbury. BNZ Confidence Survey Real Estate Insights You can find comments on residential real estate submitted by respondents in our monthly BNZ Confidence Survey in the latest document posted here. http://tonyalexander.co.nz/topics/surveys/ In addition, each month we survey over 10,000 licensed real estate agents in New Zealand and the results are available also at the address above. They show that in Auckland a net 83% of agents feel prices are rising, Canterbury 79%, and the country overall 56%. Both first home buyers and investors are seen as out in force everywhere. The table we have chosen to include here shows for each region the countries which responding agents say foreign buyers come from. Note that next month our survey will tell us the proportion of all buyers who are foreign. In Auckland Chinese dominate, but British buyers have a strong presence everywhere except Manawatu/Wanganui. http://tonyalexander.co.nz/topics/surveys/bnz-reinz-survey/

Of the foreign buyers in your market, where do they predominantly come from? Australia China Europe India Other UK USA Other Excl. UK Asia Northland 47.6% 4.8 11.9 0.0 2.4 26.2 7.1 n/a Auckland 9.8 44.8 5.7 9.5 9.5 18.3 2.5 n/a Waikato 28.8 16.9 5.1 6.8 3.4 35.6 3.4 n/a Bay of Plenty 31.8 9.1 4.5 6.8 2.3 40.9 4.5 n/a Hawkes Bay/Gisborne 32.3 6.5 3.2 3.2 6.5 41.9 6.5 n/a Taranaki 17.4 13.0 8.7 4.3 4.3 47.8 4.3 n/a Manawatu/Wanganui 43.5 17.4 4.3 8.7 4.3 17.4 4.3 n/a Wellington 26.2 9.8 8.2 1.6 3.3 44.3 6.6 n/a Nelson/Marl. W. Coast 38.9 5.6 5.6 0.0 0.0 33.3 16.7 n/a Canterbury 23.3 21.9 6.8 2.7 5.5 38.4 1.4 n/a Otago 47.6 4.8 11.9 0.0 4.8 26.2 4.8 n/a Southland To be included in March All 21.7 24.4 6.1 5.5 5.9 26.8 2.7 6.9 Given the supply shortage in New Zealand, the low level of interest rates, migration net outflows almost turning positive, the sheer stack of first home buyers catching up on purchases not made the past five years, and rising investor demand from NZ and offshore, NZ house prices this year are expected to rise more than they did over 2012. For more regular information on the state of the NZ housing market you can read the housing section in the BNZ Weekly Overview available here. http://tonyalexander.co.nz/ At this next link you will find our Weekly Overview containing the article ’19 Reasons Why Auckland House Prices Will keep Rising” http://tonyalexander.co.nz/wp-content/uploads/2012/11/WONovember-1.pdf

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NZ Labour Market Improvement Underway – But Only Slight Normally when writing about the labour market in New Zealand we economists would make reference to the long-running Household Labour Force Survey. However this survey has developed some major problems which mean it no longer gives accurate readings into employment outcomes. Therefore the best one can say with regard to the unemployment rate in New Zealand is that while it is officially 6.9% it is probably somewhere between 6.5% and 7% while jobs growth will be positive rather than 1.3% negative for calendar 2012 as the HLFS reports.

In fact we are left having to use the Quarterly Employment Survey of employers rather than households to gauge what is happening and doing that we find the following. During the December quarter the number of filled jobs in New Zealand grew by 0.4% giving 1.4% growth for the year. Full-time job numbers rose 2% over the year and part-time fell 0.9% which generally one reads as a positive sign of employer commitment to hiring. These are good numbers. Job numbers however fell in six sectors during the year led by Information, media and telecommunications, but rose in ten others led by Electricity at 18.2% and Construction 7.2%. Information, media, and telecommunications -3.5 Rental, hiring, and real estate services -3.5 Finance and insurance services -2.0 Transport, postal, and warehousing -1.0 Retail trade -0.3 Manufacturing -0.2 Arts, recreation, and other services 0.1 Prof, sci, tech, admin, and support services 0.2 Education and training 0.9

Accommodation and food services 1.2 Total all industries 1.5 Forestry and mining 1.9 Public administration and safety 2.2 Health care and social assistance 4.7 Wholesale trade 5.4 Construction 7.2 Electricity, gas, water, and waste services 18.2

With regard to average wages growth we struggle for a reliable economy-wide measure in New Zealand. But a special series created by Statistics NZ which attempts to track the same jobs over time rose by 3% during 2012 which was down from 2011’s 3.2% rise and 2010’s 3.6%. In fact the calendar year rise was the lowest since the series started in 2000 bar 2.9% in very depressed 2009 and this is not what one would expect to see were labour demand strong in New Zealand and staff availability low.

Not Tight, Not Loose Before looking at where we think employment is headed, we have a number of gauges of the extent to which the labour market is tight or loose. The best come from the NZIER’s Quarterly Survey of Business Opinion. It showed that late last year a net 20% of respondents said that they were having difficulties sourcing skilled labour. This is about average for the past decade but well away from the net 42% in 2009 saying skilled people were easy to find. In contrast a net 8% have been finding it recently easy to find unskilled labour though this reading is also massively better than the 2009 outcomes near a net 68% easy.

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Therefore employers find themselves facing vastly different hiring conditions than three years ago, though difficulties are still well away from 2003-2007 levels when the unemployment rate eventually was pushed down to 3.5%. Job Growth Prospects Looking ahead now we find from the NZIER survey that a net 3% of business plan hiring more people. This outcome is consistent with readings since the second half of 2009 when businesses pulled back from fearing a Great Depression scenario. There is no upward trend clear in this measure suggesting that in the short-term NZ labour market conditions will remain on the very marginally looser than average position.

As yet we have no update on the monthly ANZ Business Outlook employment intentions measure which stood in early-December at a net 8% positive. This was however above the ten year average of a net 4% positive with above average intentions in retailing, manufacturing, and of course construction. However, a more sobering outlook for employment growth is afforded by the monthly Department of Labour Jobs Online release which captures data from the Seek and Trademe advertising sites. During the December quarter the seasonally adjusted number of skilled jobs advertised fell 2.5% due largely to falls in November and December.

Going into the end of last year businesses were reining in their hiring advertising.

This late-year weakness was evident for all regions except the non-Auckland and Wellington parts of the North Island where there was a flat result. Over the December quarter seasonally adjusted job ads fell 3% in Auckland , and 3.1% in each of Wellington and Christchurch. Looked at by broad sector we see an interesting rise in advertising for staff in the Hospitality and Tourism sectors in spite of the high currency hitting inward visitor numbers. But there is strong growth in Construction and Engineering – as one would expect given the Christchurch rebuild and other sources of construction demand. 3 month change Accntg, HR, legal admin -9.8 Construction & engineering 5.6 Other 5.3 Healthcare & medical -3.3 Hospitality & tourism 7.3 Education & training 2.4 Sales, retail, marketing & advertising -6.1 IT -8.7 We can gain some further insight into employment trends by looking at the latest Hudson report. http://nz.hudson.com/Default.aspx?TabID=20757&report=2013-Q1 It shows positive hiring intentions consistent with levels for the past four years (therefore not signalling a surge), with good demand however in the South Island, plus Government, Education, and Financial Services. In the unskilled staff area demand is expected to be firm for food processing, retail, accommodation, agriculture, construction and utilities. In addition, in their Salary and Employment Insights Survey of 1,328 employees in New

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Zealand they found 42% feel that they are more stressed than a year before. 67% of firms are spreading the same work over fewer employees and 77% of employees said they noticed it. http://www.nzherald.co.nz/business/news/article.cfm?c_id=3&objectid=10863360 A few weeks ago the annual Michael Page Salary and Employment Forecast was released and it may interest some readers because of the breakdown of the report into areas including Finance, Marketing, Procurement and Supply Chain, Property & Construction, and sales. http://www.michaelpage.co.nz/websitepdf/13230_S&EF_Report_NZ_online.pdf The Q1 2013 Manpower Employment Outlook Survey found a net 16% of businesses planning to hire more people – a result which has moved little in the past year and like so many others is not suggestive of an immediate lift in labour demand. https://www.manpower.co.nz/research/manpower-employment-outlook-survey.aspx

Continuing the earlier theme of employers finding it more and more difficult to find skilled staff, the Grant Thornton International Business Report survey has found that 51% of NZ businesses are finding sourcing skilled staff to be difficult compared with a

world average of 39%. New Zealand in fact ranks 12th out of the 40 countries covered with regard to staff sourcing difficulties. http://www.grantthornton.co.nz/Publications/Privately-held-businesses/international-business-reports.html http://www.voxy.co.nz/business/businesses-struggle-find-skilled-workers-survey/5/146795 Overall, our expectation is that as 2013 advances and activity in the construction sector lifts while world prospects edge toward the better, demand for staff in New Zealand will grow. Currently businesses say they face skilled labour shortages but that this is not as yet much of a constraint on their activities. However in a world where skilled labour is going to become in increasingly short supply NZ companies will need to give more and more thought to their offshore recruitment strategies, the recruitment firms they can bets work with, and the reasons why migrants come to New Zealand – and why many Kiwis leave. SkillFinder If you are an employer in New Zealand looking to access staff from offshore then take a look at the Immigration New Zealand SkillFinder website. In their words “SkillFinder is a free service provided by Immigration New Zealand, which assists New Zealand employers who are searching for the skills their business needs. The tool is for New Zealand employers looking to fill vacant, permanent positions that they’re unable to fill locally. SkillFinder connects New Zealand employers with our database of overseas people who have registered their interest in living and working in New Zealand. Employers can search the database for people with the skills they need by using filters, such as occupation and years of experience. http://www.immigration.govt.nz/employers/skillfinder/ If you are an expat wanting to register your skills then go here instead. http://www.newzealandnow.govt.nz/

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NZ Migration Flows No Flood Home New Zealand has the most churning population in the OECD. On average each year we lose 1.7% of our population offshore and gain 2.1% - thus delivering a net migration gain for the past ten years of 13,000 people per annum and a total gain of 200,000 in the past 25 and 40 year periods. Be wary of those claiming the net flows add to nothing – their starting point is 1977 when people were fleeing the country’s tightening Muldoonist restrictions and the biggest housing construction boom in our history was unwinding. We almost always lose people to Australia – an important labour market safety valve – and the net loss was 38,796 in 2012. Note the trend from the last time this net flow was positive in 1991. Peak net losses are getting larger and larger – perhaps helping to explain why the Australian Prime Minister in Queenstown last weekend said to John Key that he has nil and Buckley’s chance of welfare benefits being extended to Kiwis in Australia to match the eligibility of Aussies in NZ.

NET MIGRATION FLOWS NZ vs. AUSTRALIA

-45000

-30000

-15000

0

15000

79 81 83 85 87 89 91 93 95 97 99 1 3 5 7 9 11

12 month total

Source : Statistics NZ

Net loss

In contrast we tend to gain people from other parts of the world.

NET MIGRATION FLOWS NZ vs. UK

-10000

-5000

0

5000

10000

15000

79 81 83 85 87 89 91 93 95 97 99 1 3 5 7 9 11

12 month total

Source : Statistics NZ

Net gain

In fact over 2012 net flows amounted to the following for a range of countries.

Europe excl. UK 5,888 United Kingdom 5,731 China (incl Hong Kong) 5,646 India 5,099 Philippines 2,102 USA 808 South Africa 736 Purely Kiwi Flows During calendar 2012 the overall net migration flow was a loss of 1,165 people. That was from 85,255 people arriving and 86,420 leaving. But with 23,210 Kiwis coming back home and 62,054 leaving the net Kiwi flow was a loss of 38,844.

And so here we start to get into some of the nitty gritty as to what this publication is about. Can we see trends in whether or not Kiwis come back to our lovely isolated shores? Frankly it is hard to imagine a line with less trend than the blue one above showing the 12 month gross flow of Kiwis back to NZ. The net flow shown as the lower green line moves almost entirely in response to changes in outflows. After falling away sharply over 2009 when worries were high regarding the world economy outflows returned to high levels by the end of 2011. But at a pinch one may be able to see evidence that the gloss outflow is easing slightly. With regard to the gross flow back there is an equally slight hint of a rise with that flow of 23,210 people up from a low of 22,317 in the year to August. But the change is too small to draw any conclusion regarding a new flow home kicking in. For your guide, on average in the past ten years New Zealand has suffered a net loss of almost

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25,000 Kiwis per annum. The gross loss has averaged almost 50,000 per annum. Without immigrants and returning Kiwis our population would be rapidly shrinking as births less deaths net out at just over 31,000 on average per annum. Do we reach the same conclusion on the absence of a rise in the gross flow of Kiwis back to NZ if we look at countries which might harbour the most Kiwis? For want of any better, consistent method, we have calculated the net loss of Kiwis to a range of countries since early 1978 and present them here. Net Cumulative Loss 1978-2012 Australia 656,115 United Kingdom 48,892 United States 6,540 Japan 3,727 Ireland 2,173 France 1,512 Hong Kong 1,389 India 929 Germany 797 How are numbers evolving for returning expats from each of these countries? Gross Returnees 2012 2011 Change Australia 9,731 8,974 757 United Kingdom 5,284 5,645 -361 United States 1,049 1,171 -122 Japan 232 302 -70 Ireland 170 245 -75 France 213 231 -18 Hong Kong 258 268 -10 India 195 219 -24 Germany 232 198 34 All countries 23,210 23,190 20 Gross returns have increased by 757 in the past year from Australia and 32 from Germany. But apart from that in the other countries slightly fewer expats headed back in 2012 than in 2011. Even for depressed Ireland fewer Kiwis came back last year than in 2011! There is zero indication that woe in the United States or Europe is causing Kiwis to return. This even with much higher unemployment in these parts of the world than in New Zealand. Why the lack of rising returnees? We theorise that the exchange rate and difficulties selling houses overseas may be reasons but would welcome any

insights expats might have to offer as to why they are staying put.

In fact we might be able to answer the question using the 2011 Global Career Link survey “A Future in New Zealand” 91% of the 414 respondents, largely based in the UK, said that they would consider returning to New Zealand. But asked as to why they have not returned the most commonly cited reasons given were Limited career opportunities Low income levels Inability to replicate overseas lifestyle Remoteness from other countries Exchange rates (then 49 pence, now 55!) House price affordability Lack of business opportunities Realistically, none of these things is expected to take a radical turn for the better. Therefore it would seem unrealistic to expect that in the near future great numbers of Kiwi expats will sell their houses, pack their bags, bundle the kids up and head down south. Helping Potential Migrants Tabak Business Sales is a nationwide business brokerage focused on the sale of “better businesses” to buyers in NZ; investors and ex-pats returning to New Zealand. Tabak businesses vary from $200k to $20m in value, and 80% of sales are made to buyers on Tabak’s database. For early notice of good businesses becoming available, please register online at www.tabak.co.nz or phone/email any one of our seven offices nationwide.

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NZ Interest and Exchange rates Nature of the NZD Beast There are two key things people need to know about the Kiwi dollar. First, the NZ dollar is a high beta currency. What that means is that its movements tend to exceed those of the “market” overall. In this context what we mean is that when the world’s investors get nervous and move into usual safe havens such as the greenback the NZD gets sold more than currencies such as the Euro, Yen (itself sometimes a safe haven) and Aussie dollar. When hopes for world growth and stability improve the NZD tends to rise quickly. Second, since floating in 1985 the NZD has defied two key economic theories saying it will fall away. The first is based on our persistent current account deficits which average near 5% of GDP. A resulting ratio of net international liabilities to GDP of 70% suggests the NZD will fall. It has not. Second, the interest parity theory says that a country running interest rates above those overseas will see its currency decline to remove the interest rate advantage to investors. That does not happen. The NZD for 28 years has offered superior yield without depreciation. Why High? The Kiwi dollar recently has hit a four and a half year high against the Japanese Yen, two and a half year high against the Australian dollar, 35 year high against the British Pound, and at around 84.5 cents sits near 23 cents above the post-float average against the US dollar.

Why the ongoing high currency – which we fully expect to continue? Partly low government debt below 40% of GDP, a history of undertaking

massive economic reforms when needed in the 1980s, no history of default, a highly deregulated economy, independent low inflation focussed central bank, broad political agreement on economic policy, well run banks which came comfortably through the GFC, and now, seemingly upwardly trending international food and fibre commodity prices and rising demand for safe and quality food products from Asia’s booming middle class.

Most recently the NZD has been boosted by some better than expected data on retailing spending and construction, expectations that NZ monetary policy will tighten well ahead of policies overseas, and perhaps deepening worries offshore regarding a slow de facto currency war between the major economies.

Best Guess From Here Major central banks are printing money – boosting their currency supplies – to try to kick-start or consolidate growth following the worst financial crisis since the Great Depression. The Reserve Bank of NZ is not because banks are willing to lend, interest rates are already historically low, credit growth has lifted, house prices are rising, and the biggest housing construction surge since the early-1970s is about to commence.

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This simple divergence in currency supplies says the NZD will stay strong and probably go higher. More than that, the chances are that NZ monetary policy will tighten before policies in major economies and history shows the NZD rises when NZ monetary policy restraint is applied.

Throw in rising demand for NZ food and investments such as property from Asia’s burgeoning middle class and we get a forecast of the NZD rising until conditions radically turn for the better in the US, European and UK economies. Against the Australian dollar we expect a rise to 85 cents, against the Pound to between 55 and 60 pence, against the greenback to 90 cents, and against the Yen to potentially over 80 should efforts there to lower then Yen continue. Appreciation of the NZD is also likely against the Euro to over 65 centimes.

With regard to the levels and when the NZD will peak – history tells us that this is outright impossible to predict. Migrants should be extremely wary of forecasts regarding the NZD peak and the speed of decline on the other side. Often the best strategy for those shifting money is simply to break it down into lumps equalling the number of months until it will be needed in New Zealand and shift one lump each month. Should the NZD weaken then one might bring two or three lumps over at once. Good luck.

Interest Rates NZ interest rates historically have averaged higher than rates in the likes of the US, UK and until recently Australia. The driving force has been strong credit demand from NZ householders and the worst household savings rate in the OECD which sat near -8% in the mid-2000s, plus the need to finance a persistently large current account deficit and hefty bank lending exposure to the housing and farming sectors. There is no evidence suggesting that this disparity will cease – apart from the comparison with Australia where minerals demand has produced extra inflationary pressures. There is also no evidence that any sustained switch from household dissaving to building assets for retirement, health, education, and unemployment is underway outside of the possibly temporary scare provided by the GFC. Currently the official cash rate in New Zealand is at the 2.5% level the Reserve Bank took it to in March 2011 after the earthquake in Christchurch and a string of weak economic data. The cut of 0.5% back then reversed a 0.5% rise in 2010 when like the Reserve Bank of Australia and European Central Bank the RBNZ believed that some good growth momentum was developing. In contrast the ECB rate is 0.75%, RBA 3%, Bank of England 0.5%, US Federal Reserve 0.25%, and Bank of Japan 0.1%. Because of this record low NZ cash rate and low medium to long term rates overseas borrowing costs facing New Zealanders are at their lowest levels since the 1960s. The floating mortgage rate currently averages just under 5.9%, three year fixed rates 5.9%, five years 6.6%, and seven years 7%. Note a mild discounting war kicking off however and hunt around.

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Interest Rate Outlook One of the key lessons of the GFC is that forecasting has become a whole lot harder and that applies especially to interest rates. Few if any forecasters have a good prediction record over the past five years and our relatively strong comment for four years has been that no-one should strongly rely upon a particular set of interest rate forecasts when making their risk management decisions.

Nevertheless, one must take a view and this is it. Given a household debt to income ratio near 145% and the reduced world interest rate outlook, NZ interest rates are not expected to regain levels of 2008 (mortgage rates above 10%) in the next few years – or ever. The next change in monetary policy is likely to be a tightening with the financial markets pricing in a 0.25% rise in the official cash rate before the end of the year. However, given the prospects for extra currency strength the risk is that the Reserve Bank does not move until early-2014. How rapidly will interest rates rise? That is impossible to say and even before the GFC forecasters did not have a good record of picking either the pace or longevity of rate rises, or the eventual peaks. Predictability is massively hindered by the absence of any model telling us how saving and borrowing decisions of households, businesses and governments will change post-GFC, and how bank willingness to lend will alter as capital, lending, and operational rules are adjusted. Our current view is that the cash rate will peak at 4.25% in 2015. On that basis floating mortgage rates can be expected to rise from the current

average 5.9% to near 6.65%. Before then fixed rates will rise to reflect the risk that global investors this year continue to shift funds out of fixed interest securities into growth-oriented assets such as shares. If I Were A Borrower What Would I Do? Given that I do not expect floating mortgage rates to fall I would take as my starting point that I would either fix one year near 5.25% or two years near 5.4%. The decision then becomes one of whether I instead seek protection against future rate rises by fixing three years near 5.9% or out to seven years near 7%. I rule out seven years as the rate is above where I feel floating rates will peak. Similarly I rule out fixing five years near 6.5% as I expect floating over the next five years will yield a lower cost. That leaves fixing three years near 5.9% or four years near 6.2%. Given the massive uncertainty surrounding interest rate changes in coming weeks, months and years I would split my mortgage into a mixture of terms encompassing perhaps one-third floating, one-third fixed two years, and one-third fixed four years. Should a burst of competition lead to falls in fixed rates I would consider cutting the one-third floating then to 10% and placing 15% into a new low four or five year rate. For borrowers in this environment where competition between banks is heating up and demand for credit is rising, it would seem optimal to keep an eye out for rate discount campaigns. As they erupt moving to longer term fixed rates as protection against uncertain offshore rate rises as the year progresses and 2014 in particular beckons could be optimal.

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NZ Expat and Global Ranking Surveys The world is awash with surveys and each month in this section we will examine any recently undertaken of expats, plus run through the many surveys which show how NZ ranks with regards to low corruption, starting a business etc. Pity about incomes, cost of living, housing affordability, job satisfaction, globalisation, & low innovation.

The Lottery of Life 7th best In late-November last year the Economist magazine “The World in 2013” publication included research undertaken by the Economist Intelligence Unit into something called “The Lottery of Life”. In the words of the article “It earnestly attempts to measure which country will provide the best opportunities for a healthy, safe and prosperous life in the years ahead. http://www.economist.com/news/21566430-where-be-born-2013-lottery-life New Zealand is ranked seventh out of the 80 countries surveyed, Australia second, Switzerland first, the United States 16th and UK 27th just after France. The survey incorporates various satisfaction surveys with measures of wealth, crime, health, geography, trust in public institutions, gender equality and so on. Basically it says that if you are born in New Zealand you are very lucky. Score Switzerland 8.22 Australia 8.12 Norway 8.09 Sweden 8.02 Denmark 8.01 Singapore 8.00 New Zealand 7.95 Netherlands 7.95 Canada 7.81 Hong Kong 7.80 Human Freedom 1st freest A survey from the Fraser Institute ranks New Zealand as the freest country in the world according to their Human Freedom report covering 123 countries. http://www.fraserinstitute.org/research-news/display.aspx?id=19170 The research behind the creation of the index measuring freedom is extensive and ongoing and looks like interesting reading in a world where in many countries the freedoms which we enjoy are unheard of. In the following list we present the Personal Freedom scores. The total score is

calculated utilising also an Economic Freedom measure.

Personal Freedom

Netherlands 9.5 Uruguay 9.4 New Zealand 9.2 Japan 9.2 Norway 9.2 Ireland 9.0 Iceland 9.0 Denmark 8.9 Portugal 8.9 Australia 8.8 Economic Freedom 4th Then there is the Heritage Foundation Freedom Index released recently showing New Zealand ranks fourth in terms of economic freedom for the 185 countries covered. First comes Hong Kong followed by Singapore then Australia. http://www.heritage.org/index/country/newzealand These two surveys show that in New Zealand we can to a large degree do what we want and if our wants are in the field of putting our skills and drive to profit-making use then we are very privileged – which just goes to show how there have to be some very interesting factors explaining why we under-perform so badly on many economic outcome measures. LinkedIn – Job Happiness Second to last One of the many surveys conducted using LinkedIn has found that only 25% of Kiwis and 26% of Australians feel that they are in their dream job. That places New Zealand second to last ahead of the UK out of the (only) 17 countries surveyed with India at the top at 44% then Indonesia at 42%. Go figure. http://www.nzherald.co.nz/nz/news/article.cfm?c_id=1&objectid=10858600 People who've found their dream job 1. India 44 per cent 2. Indonesia 42 per cent 3. United Arab Emirates 35.7 per cent

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4. Germany 33 per cent 5. Brazil 32 per cent 6. Austria 31 per cent 7. Switzerland 30 per cent 8. USA 29 per cent 9=. France, Canada, Sweden, South Africa 28 per cent 13=. Singapore, Hong Kong 27 per cent 15. Australia 26 per cent 16. New Zealand 25 per cent 17. UK 21 per cent Worldwide Cost of Living 19th Auckland The Economist Intelligence Unit’s annual worldwide cost of living survey covers 140 cities in 93 countries and ranks Auckland as the world’s 19th most expensive city to live in. The survey excludes the cost of housing as the results are intended for use by employees posted overseas and housing is assumed to be provided. But it includes about 160 products. http://www.nzherald.co.nz/nz/news/article.cfm?c_id=1&objectid=10864275 1. Tokyo 2. Osaka Sydney Oslo Melbourne Singapore Zurich Paris Caracas Geneva Bloomberg Innovation Index 28th NZ is ranked only 28th out of 50 countries with regard to innovation The country ranked a lowly 30th for Research and Development, 25th for productivity, 11th for tertiary activity, and third for patent activity. Australia achieved an overall ranking of 22nd, and somewhat surprisingly Israel 32nd. The US ranks first, China 29th. http://www.nzherald.co.nz/technology/news/article.cfm?c_id=5&objectid=10863824 USA South Korea Germany Finland Sweden Japan Singapore Austria Denmark France In New Zealand we are free to invent things and we do, but when it comes to putting in hard yards

aimed at researching what we do before we do it then we rank poorly. Globalisation Index 21st According to the Ernst and Young Globalisation Index NZ ranks as the 21st most globalised country out of a survey of 60. Hong Kong ranks number one, Australia 24th and the United States 25th. The index is based upon five key factors of openness to trade, capital movements, exchange of technology and ideas, labour movements, and cultural integration plus a survey of executives. Ernst and Young feel NZ could achieve 12th position come 2016 based on increased broadband penetration and uptake. http://www.ey.com/GL/en/Issues/Driving-growth/Globalization---Looking-beyond-the-obvious---2012-Index But speaking of broadband. Over 60% of Kiwis believe they are paying too much for it. http://www.nzherald.co.nz/business/news/article.cfm?c_id=3&objectid=10863862 Top Luxury Destination In the Chinese Luxury Travel Awards NZ has been named top destination for 2013 and Auckland International Airport has been classed as best airport in the world. http://www.nzherald.co.nz/travel/news/article.cfm?c_id=7&objectid=10862569 Open Budget Survey 1st NZ ranks as having the most open government budget documents of 100 countries surveyed, up from second place in the previous survey undertaken in 2010. Yippee, though boring. http://internationalbudget.org/what-we-do/open-budget-survey/rankings-key-findings/ Out of 100 New Zealand 93 South Africa 90 United Kingdom 88 Sweden 84 Norway 83 France 83 United States 79 South Korea 75 Czech Republic 75 Russia 74

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More Than Milk and Scenery It is rare when one travels overseas to encounter news on New Zealand beyond an All Blacks game, natural disaster, as a tourist destination ($9bn, 15.4% all exports), and as a player in China’s milk market. But a lot more is happening than these things and in this section we shall explore over time the fields of ICT, creative digital content, high value manufacturing, incubators, food technology, nutriceuticals etc. High Value Manufacturing Each month we shall include a column from the NZ Manufacturers and Exporters Association President Brian Willoughby highlighting developments in the important high value manufacturing sector. Over this next year I will be submitting an article for Tony’s regular monthly emails. From the start I would like to say thank you for this opportunity to share with you insights into the world that our manufacturers and exporters operate in. These articles were sparked from a forum thread I started, asking for views on what is it about New Zealand’s business environment that is preventing us from reaching the country’s true potential in economic performance. Can improvement be spurred by a top-down vision, led by Government? Or must this be bottom-up, with businesses taking it upon themselves to create change and innovate? Also raised was the question as to why does New Zealand have such a large proportion of our University graduates leaving? How does this affect manufacturers who require highly skilled staff? I believe it is becoming more apparent around the world that a strong manufacturing base is crucial to the success of a modern economy. Manufacturing is more than production; it incorporates the whole process, from the idea and design, to final production, distribution and sales, adding value while supporting growth in other sectors. In many western economies manufacturing has been allowed to wither away. Some influential commentators contend that this is an inevitable consequence of a country’s development wherein activity in services eventually grows to become more important in an economy than manufacturing. Indeed examples of this happening are praised as smart use of the best skills in both the economy losing the production work and the economy that gains it. I think that over the next twelve months you will see the foolishness of this thinking and come to an understanding of the effect of this on our “Real Economy”.

Much of New Zealand’s manufacturing is world class in quality and innovation, and this is what allows the sector to compete in global markets. As the President of the New Zealand Manufacturers and Exporters Association (NZMEA), along with my own experience in the area I am privileged to mix with the entrepreneurs, trades people, engineers, scientists and sales people that make all this possible. Personally, I have a shareholding interest in and run two manufacturing companies; one a Christchurch based engineering firm producing metal components, mainly for high tech companies, the other a high end audio company, which exports to more than 40 countries. These two businesses are humble endeavours compared to others we are fortunate to support but you will see similarities in the problems and opportunities we have in common; perhaps the scale of the issues being the only real difference. Over the next 12 months I am going to interview business leaders from the high value added manufacturing sector, to share their views and stories. In doing this, I hope to create a more truthful and clearer picture of what firms in the sector face; what are their difficulties? What are their successes? What really needs to happen to provide growth and innovation in New Zealand? Is it the climate for investment that prevents the economy reaching its potential? Or is it the exchange rate that is holding back growth? We all view the world from the hill on which we are standing, so clearly my view is one where manufacturing is of vital importance to any country’s economy. Further, no developed economy can earn enough to provide the living standards we feel entitled to, the health systems, the education opportunities and the rich variety of job opportunities we want for our youth unless it has a vibrant manufacturing sector in its economy. I’ll leave it to Tony to provide his perspective on that view, from the hill he is standing on.

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Creative Digital Content + Screen In this section we shall examine New Zealand’s screen, animation, educational software, apps, visual effects, game development and wider digital sector. The field is a large one but apart from a study from Statistics NZ estimating that the screen sector has revenues of $3bn there is a dearth of information on the magnitude of the sector overall. But we shall work during the year to flesh out what is happening across the many diverse sub-sectors. Just to start with something very simple, here are some comments offered by an Auckland-based accountant with many CDC clients. “I run a small Accountancy Practice here in Mt Eden of less than 1000 clients who mostly work in film and television and design. My highest earning clients are compositors – they are instantly recognisable walking into my home office with their slightly demented ‘intensely creative, intensely technological’ stares. They tend to have a good understanding of ‘work life balance’ earn a great deal of money and have relationships with businesses and people in many different countries… Virtually every second new client I have works in design in a wider sense, it seems to be expanding at a great rate and there is a huge call out there for digital content – my husband is a cameraman and producer of video content and see the middle-person being cut out from traditional content models – businesses are able to access production people directly – of course this trend of people accessing what they need directly via the internet is across all industries” EPIC = Enterprise Precinct and Innovation Campus One of the identified constraints on NZ’s ability to grow is poor connectivity with the rest of the world. What this means in practice is that because our population is small and because we are a long way from others we do not have as many occasions where entrepreneurs bump into scientists who bump into administrators who bump into capitalists etc. In addition our culture is biased toward not just independence but high self-sufficiency and sometimes suspicion of others. Improving the functioning of our economic growth generating neural network is why this publication

has been created for helping meaningfully connect expats and to educate Kiwis about our specific business culture. But the most exciting development in forming a more collaborative approach toward business growth that I have ever seen is happening in Christchurch in the just relabelled “Rebuild Zone” and is called EPIC – the Enterprise Precinct and Innovation Campus. Having visited this 4,000 square metre facility last Thursday (plans are to expand to 40,000) and learning about how it functions and the linkages being created with similar endeavours in Auckland and San Francisco, one comes away with some great hope for New Zealand’s creative digital content sector in particular. The following section is written by creators of EPIC, Wil McLellan and Colin Anderson. EPIC is designed to stimulate the growth of innovation focussed businesses in Christchurch. Since its inception in April 2011 the initiative has attracted the support of over 100 SME companies, equating to over 2,000 FTE's requiring up to 30,000 sqm of office space in the long term. EPIC was aware that it did not need to 're-invent the wheel' and understood that this is a great opportunity to learn from the experts. As such, the advisory group was delighted that Christopher Coleman, Google's Director of Global Real Estate, responsible for building many large Google campuses across the world, and Craig Nevill-Manning, Engineering Director in New York, who was the 'customer' for a large build-out in New York City (now 2,000 employees), were both prepared to offer advice for the development of the campus. This advice was invaluable based on their experience of designing large collaborative spaces for software engineers, salespeople and creative staff to a tight budget. The EPIC initiative has a two stage approach: Phase 1 is called Sanctuary and Phase 2 is called Sigma. Sanctuary focused upon the immediate creation of safe and affordable temporary premises within the central city for EPIC tenants that were been displaced and are at most risk. Sanctuary is using the Para Rubber Site upon which a temporary building was constructed to service up to 300 FTE's. The objective of this phase was to prevent collapse or flight of vulnerable companies that had lost premises and would benefit from co-location and collaboration. Sanctuary clearly demonstrated

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a proactive action to protect these high growth and innovation focused SME's in Christchurch. TV news footage of the opening can be viewed at www.epicinnovation.co.nz . The Sanctuary project was approved and construction began in April 2012, opening in November 2012. The 19 companies involved in this initial phase have signed up over a five year term. The Sanctuary tenants have all indicated interest in moving on to the Sigma phase at the completion of the 5 year Sanctuary term. The Sigma phase refers to the staged development of the permanent Campus. This phase will see the gradual and modular development of permanent buildings on a central city site. The design of the campus will promote collaboration through shared facilities encompassing both business services such as meeting rooms, printing services and "quality of life" facilities such as recreation rooms, open spaces, cafes, crèches etc. Providing the sites identified are large enough, the modular nature of this development means it can be expanded as the tenants grow or new tenants join. This inspirational environment will promote business efficiency, the development of collaborative business opportunities and serve as an iconic example of quality of life in the new Christchurch. This development will naturally compliment the Councils strategy of creating "Live Work" spaces and “Precinct” development within the CBD. Over the last 6 months, as the EPIC Sanctuary Campus has developed, the EPIC Innovations team have been planning the development of EPIC Sigma. Demand for stage 2 has steadily increased to the point where over 100 companies have now registered their interest in EPIC Sigma. These companies cover a selection of industries and the

size of organisation ranges from multinationals to Kiwi start-ups. Next Steps EPIC is investigating several land options and hopes to secure a location by Q2 2013. From that stage EPIC will require at least 9 months of research and development before construction of the first phase of Sigma can be considered. If development is to commence in 2014 we anticipate that the first tenants could potentially move into the first phase of Sigma in 2015. Please consider that we are in the early stages of a very complex process and the dates and times mentioned are merely estimations and have assumptions that require validation. EPIC Innovation website: www.epicinnovation.co.nz Wil McLellan wil@wpicinnovation.co.nz Colin Andersen colin@epicinnovation.co.nz Food and Agriculture Technology Material to come, input invited. The Green Economy Material to come, input invited. In this section I shall highlight developments in the green sphere but not over-arching economic plans such as those favoured by Greenpeace in their recently released sponsored document “The Future is Here”. It outlines economic gains should NZ go completely green but forgets to mention or provide any estimates of the costs of the infrastructure required to achieve such an outcome – a common failing for zealots in this field. http://www.stuff.co.nz/business/industries/8285106/Green-economy-way-of-future

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Kiwi Business Culture We all speak with an accent – though no-one realises it until they hear people from other countries or regions. In similar vein, as businesspeople we all have a culture. But we don’t always know we do until we encounter businesspeople elsewhere, and realise that we might need to make adjustments to operate outside the home market. This could be especially difficult for New Zealanders. In New Zealand we have long spoken in terms of a culture of the “tall poppy syndrome” whereby high performers (excluding in the field of sports) will be cut down to size if they make too much noise. This is part of the Kiwi egalitarian spirit. There is also the “number 8 wire” mentality involving cobbling together solutions to problems from whatever materials are at hand. This explicitly recognises invention as a process of reacting to circumstance rather than adopting a long-term focus with long-term development paths. (Perhaps reflected in New Zealand’s low ranking in the Bloomberg Innovation Index noted earlier on.) It also reflects a societal preference for those with “hands-on” skills who display high independence and self-reliance. There is also the triple B scenario whereby it is accepted that we make just enough money to buy a BMW, boat and bach and at that point happily sell our businesses and live what by NZ societal terms is a life of luxury – but not one so ostentatious that one will need cutting down to size. We are easily satisfied. In this section each month we shall explore a key aspect of the traditional Kiwi business culture – explicitly on the basis that this characteristic tends not to serve us well in three ways. First we often come unstuck when taking our culture offshore, especially to Asia. This is a major problem because with 16.8% of New Zealand’s merchandise export receipts now coming from China (42% Asia all up, 63% incl. Australia) and exports to China soaring 16% last year, our engagement with China (and other Asian nations) will naturally grow – probably a lot quicker than NZ businesses are remotely ready for. Second, and this was the motivation for my six page paper released in November and the development of this publication – NZ employers tend to avoid or not properly use returning Kiwis.

http://tonyalexander.co.nz/what-we-lack/expat-experiences-of-nz-hiring/#more-1048 Third, we tend not to take full advantage of the generally highly deregulated operating environment facing businesses. All three factors help explain why New Zealand’s pace of productivity, income, and economic growth has not soared since the ending of the huge deregulation surge in the early-1990s. Inferiority/Superiority Wariness The front page of the Dominion newspaper on February 9 contained an article about humour in the workplace and said “That’s important in New Zealand… where workers have a low tolerance for power inequalities.” http://www.stuff.co.nz/dominion-post/news/8281368/Jokes-on-the-boss-the-power-of-office-humour Kiwis tend to be wary of relationships whereby one person is seen or holds themself to be inferior or superior to others. Egalitarianism is a well-known key aspect of New Zealand culture reflected in the break-up of large sheep stations in the late-1800s, granting women the vote in 1893, development of the welfare state in the 1930s, and substantial angst over the economic reforms of the 1980s and the reluctance of any government since 1992 to initiate new free market moves. But even though one could not claim New Zealand is in reality unusually egalitarian with a Gini Coefficient near 0.33 compared with an OECD average of 0.32, the attitude nonetheless prevails. (A reading of zero means everyone has the same income. A reading of one means one person has everything. China sits in a range from 0.47 to 0.61.) In the words of one Wikipedia page on NZ Culture “New Zealanders’ egalitarianism has been criticised as discouraging and denigrating ambition and individual achievement and success. New Zealanders tend to value modesty and distrust those who talk about their own merits. They especially dislike anyone who seems to consider themselves better than others even if the person in question is demonstrably more talented or successful than others. This attitude can manifest itself in the tall poppy syndrome, which describes the 'cutting down' of

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anyone thought to have risen above the general mass of people.” http://en.wikipedia.org/wiki/Culture_of_New_Zealand#The_.27classless_society.27 Expats contributing to a LinkedIn discussion of problems getting employed in New Zealand made a number of comments showing how this attitude of egalitarianism/Tall Poppy Syndrome is held by some employers. “I was actually told by several people that I didn't get the job because the Manager 'perceived' that I knew more than he did and therefore felt threatened.” “A number were also intimidated by what I had been doing and maybe I was inadvertently sending a signal that I was accustomed to being the decision maker and was not really an employee” “I was told by employment agencies to trim down my CV and not show so many skill sets as that frightens off prospective employers.” “It’s about getting NZ managers to stop being scared, stop feeling (wrongly) threatened because they think that we might know more than them.” “If returnees offer themselves part time some NZ managers may see the expat as less of a threat having achieved or experienced their ambitions overseas and nowadays just want to help out in NZ.” Apart from the obvious point that fear of possibly superior talent, connectivity, and drive may deprive NZ businesses and therefore the economy of very beneficial people, this dislike for unequal relationships (real or imagined) affects Kiwi businesses in many other ways also. From our BNZ Insights paper of May 2011… “Our Tall Poppy Syndrome leads to -Distrust of leadership. -Distrust of experts and “book-learning”, preferring those who’s achievements are practical. -Lack of workplace and business emotion. Because we dislike superiority and are

sensitised to not make ourselves look superior we have difficulty being an effective manager of people we have worked alongside in a business. Being an effective boss may mean moving to another company where the mateship bonds are absent and the new manager/employee relationship can

start without having to hold back. This can cost a firm the meta knowledge built up by the advancing individual.

Because we distrust experts and “book learning” we fail to imbed and effectively utilise and nurture in our businesses talented managers, scientists etc.

Because we tend not to show respect to those who over-achieve we tend to drive them away.

Because we prefer to keep control and avoid bringing in outside capital the growth in our firms is usually financed out of cash flow and that retards growth.

Because we distrust experts we fail to subject our inventions to the analysis and refining needed to reduce the need for trial and error and move them closer to being profitable innovations. “

http://tonyalexander.co.nz/wp-content/uploads/2011/05/Our-Deficiencies-Summarised.pdf Go to page 3 The message we intend therefore from this first dip into an examination of traditional (but not universal or unchanging) Kiwi business culture is the following. The world may be awash with unemployed people currently. But demographic trends mean that situation will soon change and businesses in New Zealand without a well thought out global recruitment strategy could find themselves again back where they were before the GFC when the unemployment rate was 3.5% - bereft of good people even though this could happen at a much higher unemployment rate this time around. Hiring and successfully integrating and utilising good people in NZ, skilled expats, and skilled immigrants will require

acknowledgement that the Tall Poppy Syndrome exists,

that it retards effective workforce management, and,

that adjusting one’s own attitudes and practices seems a far better route for the country than hiring only those people who don’t “scare” us.

Further reading http://www.forte-management.co.nz/default/team.aspx

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Big Opportunities in Changing New Zealand Economy Contributed by Kelly Services Ltd The $30 billion dollar Canterbury rebuild and strong growth in the service sector are making New Zealand an increasingly attractive proposition for jobseekers. With New Zealand faced with the mammoth task of rebuild its second largest city, demand for skilled workers is skyrocketing. Not only will this mean growing demand for builders and trades people but also real opportunities for engineers, architects and designers. For jobseekers, the big appeal of the Christchurch rebuild is not only the abundance of potential jobs in high-paying sectors, but the opportunity to stamp their mark on one of the largest building projects and help to determine the face of the new Christchurch. Beyond Canterbury, New Zealand also offers other opportunities to skilled workers. With an acknowledged skills shortage in a numbers of important areas, New Zealand’s employers are competing hard to attract the best talent. In recent statistics by job advertisement websites Seek and Trademe, sectors such as the Banking and Finance Industry were reporting rates of new

job openings much higher than the national average. This was also true of vacancies in the insurance and superannuation fields. Another field expecting strong job growth in the coming years is the information technology sector. With significant levels of public investment not only in the nation’s new ultrafast broadband network, but also in the wider areas of information technology, research and development, more New Zealand businesses than ever are looking to the internet to help them compete on the world stage. New Zealand’s growing digital economy offers a wide range of opportunities for skilled workers, in everything from systems administration to graphic design and data analysis. What all of these opportunities have in common is the gradual transformation of the New Zealand economy towards a greater emphasis on the professional services sector, and the higher skilled, higher paid jobs that it supports. For workers currently frustrated by low levels of job growths in other countries, or worried about continuing instability in the international economy, these trends will make New Zealand stand out as a very exciting option for jobseekers. www.kellyservices.co.nz

Brain Gain NZ is written by Tony Alexander, Chief Economist at the Bank of New Zealand, with input from invited experts. 0064 4 474-6744, tony.alexander@bnz.co.nz Other publications include the following. BNZ Weekly Overview sent each Thursday night to over 27,000 subscribers.

http://tonyalexander.co.nz/topics/regular-publications/bnz-weekly-overview/ Monthly Growing With China publication, http://tonyalexander.co.nz/topics/china/ Monthly BNZ Confidence Survey, http://tonyalexander.co.nz/topics/surveys/bnz-confidence-survey/ Monthly BNZ-REINZ Residential Market Survey. http://tonyalexander.co.nz/topics/surveys/bnz-reinz-survey/ Monthly column for the NZ Property Investor magazine, http://www.propertyinvestor.co.nz/ Monthly column for the NZ China Trade Association. http://www.nzcta.co.nz/ Most of these publications plus others are available on my website. www.tonyalexander.co.nz Tony Alexander has been Chief Economist at the BNZ since 1994 and apart from publications and advising management spends considerable time on the road around New Zealand making presentations and speaking with the media. He travels to the UK and Europe twice a year to assess economic conditions and present at numerous functions, has five children, tramps, and his partner Dr Sarah Farquhar runs the early childhood education network www.childforum.com This publication has been provided for general information only. Although every effort has been made to ensure this publication is accurate the contents should not be relied upon or used as a basis for entering into any products described in this publication. To the extent that any information or recommendations in this publication constitute financial advice, they do not take into account any person’s particular financial situation or goals. Bank of New Zealand strongly recommends readers seek independent legal/financial advice prior to acting in relation to any of the matters discussed in this publication. Neither Bank of New Zealand nor any person involved in this publication accepts any liability for any loss or damage whatsoever may directly or indirectly result from any advice, opinion, information, representation or omission, whether negligent or otherwise, contained in this publication.