December 17, 2024 • 40 mins
The economy has been in an uncertain place for quite some time, and 2024 was no different.
Over the last year, we’ve seen some improvement. In October, the annual rate for inflation had fallen from 3.3 percent to 2.2 percent. The official cash rate ended the year on 4 point 25 percent.
Elsewhere, the news hasn’t been so positive. The country’s gross domestic product contracted 0.2 percent in the June quarter, only just missing out on a technical recession.
Job cuts across multiple sectors have seen Jobseeker benefit numbers surge to over 200,000.
And Government books released this week show that it’s unlikely we’ll return to a surplus until 2029 – about a year later than originally anticipated in this year’s Budget.
So what’s going on in our economy? And how soon until we start to see some change?
On this compilation episode of The Front Page, we revisit some of the discussions we've had to do with economy and the business sector throughout 2024, including post-Budget analysis, closures in the retail and hospitality sector, and the big scandal around Du Val Group.
Follow The Front Page on iHeartRadio, Apple Podcasts, Spotify or wherever you get your podcasts.
You can read more about this and other stories in the New Zealand Herald, online at nzherald.co.nz, or tune in to news bulletins across the NZME network.
Host: Chelsea Daniels
Sound Engineer/Producer: Richard Martin
Producer: Ethan Sills
See omnystudio.com/listener for privacy information.
Mark as Played
Transcript
Episode Transcript
Available transcripts are automatically generated. Complete accuracy is not guaranteed.
Speaker 1 (00:05):
Kiyota m Chelsea Daniels and this is a compilation episode
of The front Page, a daily podcast presented by the
New Zealand Herald. The economy has been in an uncertain
place for quite some time, and twenty twenty four was
no different. Over the last year, we've seen some improvement,
(00:27):
though in October the annual rate for inflation had fallen
from three point three percent to two point two percent.
The official cash rate ended the year on four point
twenty five percent. Elsewhere, though, the news hasn't been so positive.
The country's gross domestic product contracted zero point two percent
(00:48):
in the June quarter, only just missing out on a
technical recession. Job cuts across multiple sectors have seen job
seeker benefit numbers surged to over two hundred thousand, and
the government books released just this week show that it's
unlikely we'll return to a surplus until twenty twenty nine,
about a year later than originally anticipated in this year's budget.
(01:14):
So what's going on in our economy and how soon
until we start to see some change. Let's start back
in May, when Finance Minister Nikola Willis announced her first budget.
We got analysis from Enzet Herald Business editor at large,
Liam Dan starting with those much promised tax cuts.
Speaker 2 (01:34):
So I'm trying to give government benefit of the doubt here.
They want to give people a little bit of hope,
a little bit of money back, a squeeze middle all
that sort of stuff. But there are some issues I
think around timing. Look, no, but no tax expert i've
spoken to thinks it's a bad idea to adjust these
threshold It's been about fourteen years since they've been adjusted.
So that's moving the brackets at which you move to
the next higher tax rate, adjusting them up effectively for
(01:58):
the inflation, it just means you don't pay quite as
much tax and so we get our twenty dollars a week,
probably for a large chunk of New Zealand. The issue
is that the timing. When you're putting twenty dollars a
week in people's pockets, it's a bit like you know,
labor did different things with the cost of living crisis
last year, but they cut petel taxes and things, and
when you do that, it's inflationary. It sort of keeps
(02:20):
the economy ticking over, which normally is a good thing
in a recession. You want to stimulate. But we've had
so much stimulus through COVID, we've got this high inflation,
and that means the Reserve Bank is going to be
looking at it very closely, doing the maths on them
whether it really balances out, because the balancing force in
all of this is the cuts to public services, so
that comes out of the economy and that should be
(02:42):
a disinflationary force, and Nikola Willis has said they've got
that finally balanced so that it won't be inflationary. She's
quite adamant about that.
Speaker 3 (02:51):
Wild times may feel tough for everyday, Kiwis right now,
the economy will recover and inflation will come down. Tax
relief in Budget twenty twenty four is fully funded from
savings and revenue initiatives, and I can confirm that because
of this, the government is not borrowing to fund this
(03:13):
tax relief and it will not add to inflation.
Speaker 2 (03:21):
You know, already some economists like Cameron Baggery are questioning
that because you know the timing of the cuts. We
don't know that they're going to take a lot longer
to implement, and frankly, it could be quite a long
time before the sort of disinflationary impulse of the tax
cuts flows through, whereas after July one, we should all
be starting to see I say all, there's certainly all
(03:42):
middle wage journers, and wage journers will start to see
some tax back. It doesn't deliver for beneficiaries, for example,
so it's worth remembering that too. So they're always going
to have a hard sell at that social issues end
of the political spectrum.
Speaker 1 (03:55):
It's hard, isn't it, Because we speak about the squeezed
metal and income families, etc. But what about those beneficiaries,
what about those on minimum wage? I feel a bit
ecky knowing that I'm going to get more back a
week than someone on a minimum wage.
Speaker 2 (04:11):
Yeah, and not to mention all the money you'll get
back on all those properties. Even wealthier people with multiple
properties investment properties will also be able to claim tax back,
of course, And so there is a sense that there
is a political, some might say ideological, aspect to this.
National has talked about wanting to get people off the benefit.
There's plenty of other people who see that as punitive,
(04:33):
but there's certainly a sense that they want to make
life easier for those who are working. Worth mentioning, I
suppose that unemployment in this whole equation of economic rebalancing.
Unemployment is expected to keep rising, so it's a tough
job market to get off for benefit.
Speaker 4 (04:51):
The government could choose to prioritize keeping New Zealanders and work.
It could choose to prioritize lifting children out of poverty
rather than forcing more children into poverty. It could choose
to prioritize tackling climate change. It is not making those choices. Instead,
it's choosing to prioritize tax cuts that are going to
(05:14):
lead to higher inflation for longer.
Speaker 1 (05:19):
When we spoke last week, we discussed the worry that
the government would end up borrowing to fund these tax
cuts in some kind of way. Does it seem like
that's the case now that we've actually seen the books.
Speaker 2 (05:30):
Well, I don't think much has changed in terms of
how people are going to argue this point. Nikola Willis
is adamant they are not borrowing for tax cuts, but
the government will be borrowing twelve billion more over the
next four years. They've got a program of tax cuts
of about fourteen billion over the next four years, different
pools of money. Apparently, that's what they're saying, So that
(05:51):
they're borrowing for some other stuff, not the tax cuts,
but they will have less money because of the tax cuts.
In a narrow accounting sense, they're balancing up, you know,
the spending cuts and the tax cuts. In the big
picture of government spending, it still means we take longer
to get out of deficit. So take till the twenty
seven to twenty eight year instead of twenty six twenty seven.
(06:13):
And there's that extra bond program, twelve billion dollars of
New Zealand government bonds that we will go out and
sell to the world.
Speaker 1 (06:25):
In November, as signs the economy wasn't performing as well
as it could be became clearer, the Reserve Bank cut
the official cash rate to four point twenty five percent.
We spoke with Simplicity chief economist Schamabel Jakub for his
analysis on how things had performed since the budget, starting
with cuts to home loan interest rates.
Speaker 5 (06:50):
We desperately need this good news. For the last couple
of years, people have been refixing their mortgages from very
cheap to very expensive rates, and we've now just turned
the corner and the lower interest rates are going to
give a lot of relief to people who are refixing
In the next year or so, so absolutely good news,
but it takes a little bit of time for them
to flow through.
Speaker 1 (07:09):
How much time does it take to flow through, do
you think? And what kind of numbers are we going
to be looking at after this decision.
Speaker 5 (07:16):
Look, it usually takes somewhere between six and twelve months
before these interest rate cuts really kind of become broad
based better news for the economy. That's because the current
level of interest rates are still quite painful. They're quite high,
so people aren't borrowing and investing like the who are
doing during good economic times. So we probably need to
assume that for the next three to six months things
(07:37):
are still going to remain a little bit painful. We'll
initially get just a better relief that people are not
paying so much when mortgages, and then eventually, when interest
rates get low enough, we're going to start borrowing and
investing again, and that's when the party begins.
Speaker 1 (07:50):
If you could explain to me, like I'm a five
year old, how ocr rates then translate to a better economy,
could you do that?
Speaker 5 (07:59):
Of course, the OCA is kind of like the interest
rates from very short term money. You and I don't
borrow that money. But when the reserve Bank changes the OCA.
It also changes your floating mortgage rate. It also changes
you fixed mortgage rates, not by the same amount, but
it influences all those costs of borrowing for all of us.
And so when the reserve bank drives and the cost
of debt, it means that we are paying less for that.
(08:22):
And when we see less expensive debt, when we see
banks being more willing to lend, not only do we
get relieved from the debt we already have, but we
are willing to take on more new debt. And so
we are spending, we're investing, We've got more spare cash,
and it means there is just more money going around
in the economy. We all feel better.
Speaker 3 (08:44):
Since August, the rate has now been dropped one point
two five points, and this is welcome news for families
and businesses. For people with mortgages, the impact will of
course depend on the size of their mortgage, whether they're
floating or fixed, and what rates their current on. But
to give one example, a family with the twenty five year,
(09:04):
five hundred thousand dollars mortgage could expect to be about
one hundred and eighty dollars a fortnight.
Speaker 6 (09:11):
Feet are off.
Speaker 1 (09:16):
The ocr is obviously just one snapshot of the economy, right,
what other data have you seen recently that shows that
it's doing quite well well.
Speaker 5 (09:27):
The OCI is very much the tool to try and
influence the economy. What's going into the rest of the
economy is we're just in a recession. We're quite late
stage in a recession. It's this is probably the deepest
and longest recession since the global financial crisis. So, you know,
the pain that people are feeling, the kind of gloom
that's out there entirely justified, but also is short lived.
(09:47):
Once in a recession and the Reserve Bank is cutting
interest rates, we know things will get better. So right
now what we're seeing is people are spending less, people
are investing less. We're not buying in something houses so much,
businesses are not investing so much, in not hiring so much.
So that's the kind of the I guess, the anatomy
of a recession. But once we kind of work through
this painful part, what we tend to start to see
(10:09):
is there is a return of hope.
Speaker 1 (10:11):
A big draw card for voters was nationals tax relief policy.
You kind of wrap up of tax bracket changes, family
tax credits things like that, has this actually done anything
for the economy?
Speaker 5 (10:25):
Look, I mean we've still had a recession and households
are still spending less. We can see that household spending
is still falling and people are still struggling. I guess
the counterfactual is they might have had even less money
to spend, and they might have spent even less in
the absence of the tax cuts. So it's a little
bit hard to kind of look at it and go, oh,
there has been no effect. But it's not clear that
(10:46):
those tax cuts have actually made any difference to the
current recession, because on the one hand, there is more
money in consumers hands, but on the other hand, the
government investment and government spending, which is also part of
the economy, has been a lot less.
Speaker 1 (10:58):
And so do you expect that perhaps change next year
with the next budget, because there have been whisperings that
this budget is going to be obviously economy focused and
focused on building on that government spending.
Speaker 6 (11:11):
Not really.
Speaker 5 (11:12):
I don't think there's going to be much good news
in the next budget either. So this government is very
focused on fiscal austerity. That means they want to spend
less money. And when the government spends less money, those
parts of the economy that are reliant on government spending
will be smaller. Now, the question is if the government
spends less, will somebody else spend more money? Well, not
in health or infrastructure or education. Right, That's just not
(11:34):
how it works. So my sense is that actually government
will remain a bit of a headwind to the economy,
and the recovery next year is going to be much
more about the private sector. It's in spite of the
government that will have a recovery rather than because of.
Speaker 1 (11:54):
Job losses were a big story this year. Notably, much
of the public sector reduced to meet government savings targets.
The news industry contracted significantly, with the entire news Hub
brand shutting down, the closure of many community newspapers, and
long running current affairs shows going off air. We also
(12:15):
saw notable closures across the retail and hospitality sector. In June,
we spoke with First Retail's Chris Wilkinson about the changing
face of retail after Auckland, Icon Smith and Coey's announced
its closure, which was eventually scaled back to a reduced
physical footprint on Queen Street.
Speaker 7 (12:37):
The situation with department stores in that dare I say
cut of that upmarket ategory is being played out across
the world at the moment. So we've seen this happen
in New Zealand over recent years with Circaldy and Stains,
David Jones and Wellington, and then Ancient j Smiths in Southland.
(12:57):
The challenge for the sector is that they're no longer
able to differentiate in terms of their ranges. In many
cases their sites are large and are going to require
significant refurbishment and these economic headwinds are really affecting their
customer base. So without being able to see any clarity
(13:20):
going forward, there are a few options open to them.
Speaker 8 (13:24):
Yeah.
Speaker 1 (13:24):
Are We're seeing more brands and companies choose to open
their own stores as opposed to giving their stock, say
to a big departments store to sell.
Speaker 7 (13:32):
That's very true if we think about the brands and
the categories that the likes of Smith and Cohe's have
done particularly well in. Going back to cosmetics, perfumery. One
of the largest supplies lv MHD luxury goods manufacturer that
sells Chanel and all those other types of perfumes. You know,
they've all got their own stores, they've all got investments
(13:54):
in the likes of Sephora, and you know we're seeing
these category is now develop into specialty type stores. So
was a really good example. But also mec is another
good example. You know, stores of very large scale but
just specifically focused on these categories and in particular very
(14:17):
appealing to younger and successive audiences.
Speaker 1 (14:21):
I know Sephora and Mecca. Well, is that mindset why
perhaps Flybys is wrapping up here later this year? Why
get your customers to join a separate rewards program when
they can just join one in store.
Speaker 7 (14:35):
You are absolutely right. So successive audiences are less inclined
to be part of these traditional loyalty programs. They are
much more adept at finding deals. They're less inclined to
want to sign up to things, and it's just for them,
it's a fuss. They're more empowered consumers.
Speaker 1 (14:58):
And I guess moles in New Zealand up their game
in the last decade. Hey really selling themselves as more
of a destination, a place to go. Is that where
retail is shifting towards and can standalone stores survive on
their own anymore?
Speaker 9 (15:12):
I'm thinking Queen Street.
Speaker 7 (15:14):
Green Street's a really good example because once upon a
time brands coming to New Zealand would have almost certainly
needed to be in Queen Street. That would have been
their flagship site because that's where the population was, that's
where the audience was. Nowadays, those retailers are being attracted
by the likes of Sylvia Park or Westfield or Commercial
(15:36):
Bay and those walls need those types of businesses to
create that differentiation. But increasingly so that's where the consumers
are as well. That's where a very certain audiences and
in particular those types of environments play into this big
shift that we've seen from goods to experiences. So going
(15:59):
to a place like Sylvia Park will give you a
great range of food, it'll give you entertainment, it'll give
you the likes of health services and all these other
types of things that you would need on a day
to day basis. So that's where our big shift is happening.
And again this is a global trend that we've seen.
Speaker 1 (16:24):
And after a series of high profile restaurant closures, we
discussed where to next back in August with Harold, Deputy
Lifestyle Editor Joanna Thornton and aut hospitality and tourism professor
David Williamson.
Speaker 9 (16:41):
Joanna can you run us.
Speaker 1 (16:42):
Through some of the restaurants that have closed down so
far this year. Yeah, there's a few.
Speaker 10 (16:47):
I mean, I suppose the biggest or the most shocking
was Espqure, which closed in July after thirty two years.
We had Madame George on kd Unhappy Road, which was
a huge loss. It's one of Viva's top fifty restaurants.
There was also Floor on K Road as well, which
is a cute little wine bar. Homeland is closed down.
Orphan's Kitchen Omni which is a little yakatory spot on
(17:10):
Dominion Road. Stanley AV Winebar and Milford. We also had
Conch which was more sort of a bar and restaurant,
the Wine Cellar and Tiger Burger is another one that's closed.
Speaker 1 (17:22):
God, there's so many. What have some of the reasons
been behind their closures?
Speaker 10 (17:27):
There's a few, and Madame George said it was the
economic downturn. Stanley AV said that there were a host
of reasons like the pandemic, weather events and strained economic conditions.
And I actually saw the Restaurant Association reported in a
recent survey that the main challenges businesses are citing is
just customer downturn.
Speaker 1 (17:46):
David from your years of experience in the hospitality industry.
Is this speed of closures unusual or is it kind
of par for the course.
Speaker 8 (17:54):
It's sort of hard to differentiate that it is an
unusual time.
Speaker 6 (17:59):
I'm not sure the number.
Speaker 8 (18:00):
Of closures is particularly different, But I think what is
different is that people are really struggling in this sector,
and I think we're going to see more closures coming through.
I was talking to a couple of veterans from the
industry recently and they were adding to that suggestion of
what's really going on is not just the difficulties right now,
(18:23):
but the history of really impactful changes over the last
sort of periods since COVID. So you have to understand
that this industry was shut down or massively disrupted for
a number of years through COVID, when the boarders shut
they had huge staff shortages. Then you have those weather events.
Just as we're coming out of COVID and starting to
(18:44):
recover from that, we get smashed with weather events, which
was really impactful on the industry. And then you have, yeah,
the high inflation cost of living. People have a lot
less discretionary income to spend on things like restaurants, cost
of goods for these industries that record high. They are
paying top interest rates on any debt they're holding. There's
(19:05):
perceptions of higher crime and the inner city for people
in Auckland who are coming in to dine out at night.
So you know, there's an awful lot going on, and
it's just been one challenge after another. So a lot
of these businesses are small, standalone, own or operated businesses.
They don't have huge amounts of capital reserves to survive
(19:27):
periods like this. So it's not so much a question
I think of, gosh, why are restaurants going down At
the moment, it's a question of how on earth are
they not going down? Given you the conditions that we've
had over the past few years.
Speaker 11 (19:43):
For decades, Aucklanders have enjoyed a long lunch in the
sun at Ponsomby Institution SPQR.
Speaker 9 (19:49):
But now the.
Speaker 11 (19:50):
Doors are shouting it's in liquidation, owing creditors over two
million dollars, another casualty of rising costs and people keeping
their wallets firmly shut.
Speaker 1 (20:03):
Johanna, can you explain to us what happened with SPQR
in particular?
Speaker 10 (20:08):
Yeah, well, I mean, I suppose the announcement seemed pretty
dramatic when they said they were closing in July, but
I think it had definitely, you know, the quality of
the food maybe had dropped off in recent years, and
it wasn't sort of the hottest spot to be anymore
where it had been in the past. And owner Chris
Rupe just released a really brief statement saying that he
was really sorry for the current situation and sort of
encourage people to get out there and support hospitality. But
(20:31):
then it turned out they were placed into liquidation with
the business owing more than two million in land revenue
and it owes over one hundred thousand two staff in
unpaid wages and holiday pay. And then The Herald also
reported that the business that owns Specure withdrew nearly one
point four million from the business before it went into liquidation.
So I think we're going to hear a lot more
(20:51):
about that story.
Speaker 1 (20:52):
It is quite jarring when some of our favorite places close. Hey,
I mean, Peter Gordon's Homeland closed this year's citing issues
with renewing it's lease. How often is an issue like
that to blame for a space taking on a new life.
Speaker 10 (21:05):
Well, I mean I heard that the problem with Homeland
was There's a massive new retirement village going in there
called Cracker Bay, So I think the development of that
whole West Haven area didn't include keeping Homeland there. So
I'm not sure how often you a lease is to blame.
Speaker 8 (21:22):
Yeah, I think there's a whole range of problems like
that that certainly would finish off a lot of places.
But yeah, again, I think it's a more complex and
a multifaceted number of pressures which brings these organizations to
the edge of collapse.
Speaker 6 (21:39):
I think what is.
Speaker 8 (21:39):
Interesting is it's such a resilient and it's such an
innovative industry. Often describe restaurants that's extremely nimble, and so
you know, at the moment where you have these really
difficult trading conditions, hospitality shows up as an area where
businesses do suffer and go down, but when conditions pick up,
hospitality is also the first industry to recover. We sort
(22:02):
of go into recessionary times quicker and lower, but we've
come out of them faster and higher. So it's a
very nimble industry. And Ram's just pointed out in their
last report that you know there is nineteen thousand, five
hundred and eighteen restaurants still in New Zealand. It's the
largest number we've ever had in the country. The growth
(22:25):
has very flat since twenty twenty three, only zero point
one percent growth and restaurant numbers. But you know, it's
not an existential crisis. We're not going to certainly run
out of restaurants, but it is a very real crisis
for the people who are running these businesses.
Speaker 1 (22:45):
One New Zealand company that enjoyed success this year was
rocket Lab, the country's premier space business, celebrated its fiftieth
launch in June, around the time the Coalition government ramped
up investment in the era space sector. I spoke with
the company's founder, Sir Peter Beck, about where too next
for the company.
Speaker 6 (23:10):
The space industry isn't just launch.
Speaker 12 (23:12):
In fact, you know, two thirds of their businesses building
satellites and spacecraft and that's kind of geographically agnostic. And
there's some great startups actually in New Zealand now, great
space startups, and we're really started to see an ecosystem
build which is super exciting. So I think New Zealand
can contribute in the space industry. You know, like I say,
launch Away steals a show, but does a tremendous amount
(23:35):
of opportunity across the whole space sector, and you're starting
to see a number of little startups and in even
traditional companies play.
Speaker 1 (23:42):
Yeah, it's quite exciting to see. Hey, we've spoken to
Space Minister Judith Collins just after she was overseas promoting
New Zealand space industry. In the US. She told us
and New Zealand was number four last year in the
number of launches worldwide, after the US, Russia, and China.
How incredible was that?
Speaker 6 (24:01):
Yeah, I think I look as a proud keV.
Speaker 12 (24:03):
I think it's wonderful and she's been right, like America
launches the most amount of rockets, and then it's China,
then it's Russia, and then it's the Maha Peninsula, then
it's Europe and India and so on and so forth.
So no, I think it's awesome, and you know, it
shows where New Zealand kind of sits in ranks in
the international industry and such a short amount of time.
Speaker 1 (24:22):
Are you excited to see the real possibilities for New
Zealand when it comes to space.
Speaker 12 (24:27):
Absolutely, I mean it's exactly the kind of thing that
New Zealand does really well. And that's kind of testament
to our success and been able to be successful in
scale in New Zealand and New Zealand, as I said before,
I had incredibly smart people, were very innovative and the
ability to kind of move across multiple functions and disciplines,
which is really important in space industry. So no, I look,
(24:49):
we've already seen a bunch of Rocket Lab has spin
out and start their own ventures.
Speaker 6 (24:53):
Which I absolutely applaud and support. Long may that continue.
Speaker 12 (24:57):
I think there's this tremendous opportunity and it's one of
those things that every country has recognized the value of
space and investing deeply in it.
Speaker 6 (25:04):
I mean it's kind of like the other AI.
Speaker 12 (25:07):
I mean, there's AI is obviously the talk of all
the conversations, but equally, you know something that is scaling
just as fast as space.
Speaker 1 (25:26):
Amongst the policies of the coalition government, reform of the
Holidays Act is one of the many areas in the spotlight.
It's the responsibility of Workplace Relations Minister Brook van Velden
to oversee this. Just this month, she's directed officials to
change the proposed direction of the reform based on consultation feedback.
(25:47):
But in June, we caught up with her on what
her plans were for sorting out this part of the economy.
Speaker 13 (25:57):
One of my top priorities is that we need religious
lit of change in this term of government. I understand
many successive Ministers of Workplace Relations have tried and failed
to get a Holidays Act change across the line, and
I'd love to make it easier for businesses and workers
to pay out the right entitlements and for those workers
(26:18):
to know that they are getting paid the right amounts.
So that's top priority for me. We're on track to
get this out in September, and it'll be targeted consultation
because it's a very technical law. But I very much
look forward to all of the feedback that comes back
to let us know if we're on the right track
to make it simpler. The last thing I want is
(26:38):
a new law change that's even more complex.
Speaker 1 (26:41):
It is kind of one that would be difficult to
explain to someone on the street, right because it's a
lot of backroom situations in terms of payroll and things
like that that perhaps employees don't exactly see totally.
Speaker 13 (26:53):
Absolutely look for most people, they'll assume that their business
or their manager is getting it right. They might get
their pay slip every fortnight or every month, and it
tells them how much they're earning that week, how much
they may have in holidays pay coming up, or you know,
what their sick leaving titlements might still be. By and large,
(27:14):
most people are doing a very good job. But because
the law is so complicated and so complex, even some
of our largest organizations have been getting it wrong. You take,
for example, the Ministry of Business, Innovation and Employment. You
know they even got holidays pay wrong. Now, if the
law is so complex that even the government department that's
(27:35):
supposed to look after this law is getting it wrong,
there's serious work that needs to be done because at
the heart of this I want all workers to know
they're going home at the end of the week with
the right pay, with the right holidays pay, with the
right sick leave, and that businesses have far more time
to actually do what they do well, which is their
real job, not figuring out compliance.
Speaker 1 (27:59):
In July, Minister Chris Bishop announced that the government wants
to flood the market with more houses to improve growth
and bring down prices, going against Kiwi tradition we're owning
houses is pretty much the cornerstone of our economy. To
discuss how this might work, we spoke with Opus Partners
economist Ad mcnight.
Speaker 14 (28:23):
Well.
Speaker 15 (28:23):
I think the Housing Minister christ Bishop is talking a
big game, and certainly his incentivized to do that. Lots
of people want house prices to be stable over the very,
very long term. I think there will be some benefits
to it. For instance, they're saying they are going to
remove any minimum requirement about how big a house or
an apartment has to be. That will mean we get
(28:46):
more smaller sized departments built. On top of that, councils
won't be able to have a say in terms of
whether apartments have to have balconies or not, or how
large those balconies have to be. Well, with all of
those rules gone, we should see some cheaper and certainly
smaller apartments coming through. And at the margin, yeah, maybe
a couple more developers will build those sorts of properties,
(29:07):
and that will be good for people who are okay
and happy to live in slightly smaller properties. I always
take what politicians say with a grain of salt, because
they're very good at saying that they're going to do
something big and meaningful and then it doesn't always materialize,
and I'll give you an example of that. The Housing
Minister is saying that they want every single council in
the country to open up or zone for thirty years
(29:30):
of population growth, and often christ Church is the shining
example that the government holds up because immediately after the
earthquakes they zoned for thirty years of population growth. There
was a lot of housing being built and for a
time house prices were pretty flat down in christ Church.
But what a lot of people miss is that during
(29:50):
the COVID boom from twenty nineteen onwards, christ Church house
prices actually increased at a much faster rate than the
likes of Wellington, Auckland, Dunedin. And so I'm not sure
whether zoning a whole heap of land is going to
fix all of the problem, but it will certainly help.
Speaker 1 (30:08):
We've already seen the growth of new builds in Auckland,
for example, outpaced population growth. So what do we need
to keep building more houses?
Speaker 15 (30:16):
Well, if I take you back a couple of years,
every single media outlet, including the Herald, was talking about
a massive housing crisis and we needed to build more
and more and more homes. I think this is just
part of the catch up.
Speaker 1 (30:28):
Do you worry about their plan to remove the urban
rural boundaries?
Speaker 15 (30:33):
I worry more about the infrastructure. It's quite interesting because
if you remove the rural urban boundary, you're going to
get more housing sprawl, right, so you are likely to
see more housing built out Pocono Way just south of Auckland,
and also down in Bookacoi in some of those more
rural communities. Now, that obviously has benefits and drawbacks. The
benefit is that if I am a person who is
(30:55):
willing to live an hour out of the city because
I want a standalone house, prices are a bit cheaper
and I want that kind of lifestyle, I kind of think, well,
why do we have all these rules in place? But
we also know that we're not so good at building
infrastructure here in New Zealand. So all good, We're going
to get rid of the rural urban boundary. But now
it's Auckland Council and Auckland Council ratepayers who are now
(31:18):
responsible for building that infrastructure that goes in there to
support those houses. Now, yes, the developers have to pay
some taxes what's called development contributions in order to build
those properties. But often my understanding is that a lot
of that infrastructure is ultimately financed by the poor old ratepayer.
Speaker 1 (31:35):
Those plans to decide the minimum size of new apartments,
could that see kind of like an influx of shoebox
style apartments, the ones that we see I'm thinking in Japan,
you know, one by one meter, et cetera.
Speaker 15 (31:47):
Well, that is the risk if you don't have a
rule in place. A developer will build them if they
think they can sell them, and if they think they
can make more money by selling those shoe box apartments
compared to building something else. So ultimately it comes down
to what are home buyers or investors willing to purchase.
And if an investor is buying those kinds of shoe
(32:08):
box apartments and saying, y'reh okay, I'll buy that at
whatever price the developer are selling it for, whether people
are actually willing to rent those properties. I considerably foresee
a future where there are a lot of studio apartments built.
Investors then purchase them, and there we have new stories
about how small these properties are and the rents that
people are paying for them. But it ultimately comes down
(32:29):
to what are people willing to build? What are people
willing to buy and what are people willing to rent?
Speaker 1 (32:41):
Finally, no wrap of the year in ki we business
would be complete without touching on the saga of the
Deval group. The home of company founders Kenyon and Charlotte
Clark was rated by police in early August as part
of the investigations into the Auckland apartment developers. Court hearings
have followed over recent months, and a court case between
(33:04):
the Financial Markets Authority and PwC against Duval and the
Clerks is set for June next year. We caught up
with Enzid Herald property editor Anne Gibson in late August
when Deval was placed into statutory management by the government.
Speaker 14 (33:24):
This company is a relatively complex group, with about seventy entytes.
It is essentially an Auckland apartment and townhouse developer. Now
on its website it said it had settled the sale
of seven hundred and seventy four homes in the last
six years and it has two hundred and seventy eight
(33:47):
homes under construction. Are those are mainly apartments as well.
It has what their Commerce and Consumer Affairs Minister Andrew
Bailey told us yesterday one hundred and twenty to one
hundred and fifty investors, home buyers and commercial lenders.
Speaker 1 (34:09):
What more can you tell us about the people behind
this group?
Speaker 14 (34:12):
Well, essentially there were four people according to the Devai
business Now, the first two are the founders husband and wife,
Charlotte and Kenyan Clark. She's the CEO, he's the former CEO.
Then we have John Delzel. Now he's had many years
experience in the Auckland property market and he was Auckland
(34:34):
Council's waterfront regeneration project here that was see in city
were the real focus on the Winyard Quarter many years ago.
And he's the chairman of Deval. And then we've got
a lawyer on Culiny. He's also a director.
Speaker 1 (34:50):
Kenyon and Charlotte Clark seem like they were quite high flyers, hey,
or at least they were trying to portray that image.
Weren't they filming a reality show about them or something?
Speaker 14 (35:01):
Yes, this show is called The Property Developers and one
season is evidently made. It is a number of parts
and there was talk about a second season being made.
Now for some years the Herald has reported on the
Property Developers and you can see a trailer online which
is most interesting. It has never screenmed. But when I
(35:21):
talked to the person behind that in Queenstown about a
week ago, he said that he was hoping to secure
distribution to an international business and he has previously mentioned
Netflix and Neon and the likes of those sorts of businesses,
(35:41):
but we've never yet seen it. He did tell me
that it's more likely to be shown overseas before it's
shown in New Zealand.
Speaker 1 (35:49):
Right, is it some kind of selling Sunset esque kind
of thing. I don't know whether you watch that or not.
Speaker 14 (35:54):
It's a reality sort of behind the scenes of what
is the life of a property developer, and so it
is a reality serious where the clerks are shown and
their children are shown. They're filmed in different parts of
New Zealand and it looks pretty amazing. It'd be really
interesting to see it. I look forward to it.
Speaker 1 (36:13):
I'm really concerned that there are some pretty serious issues
with it.
Speaker 3 (36:17):
Do you know what, I actually need to call my lawyers.
Speaker 7 (36:19):
It was kind of funny, but if he's putting this
up publicly, the yeah, I mean.
Speaker 4 (36:25):
This is just this week's problem.
Speaker 10 (36:27):
Let's just say that I think that we basically just
burned a million dollars.
Speaker 1 (36:33):
The company's troubles first became public earlier this month. Why
did they come to the attention of the Financial Markets Authority?
Speaker 14 (36:41):
It dates back to twenty twenty one when the FMA
talked Val to remove advertising for a mortgage fund. It
was about twenty million dollar fund and the FMA basically
said that that advertising gave the impression to people it
was low risk. But Kenny Clark said in response that
there hadn't been anyone who had complained and had raised
(37:04):
twenty million dollars via that mortgage offer. So that was
the first time that we began to realize that there
was action by the Chrome Authority against Juvail Group.
Speaker 1 (37:16):
Take us through the events on August second, when these
actions became public and the group was put into interim
receivership is well, that's.
Speaker 14 (37:24):
When the FMA announced that three accountants of Peter Receiver
interim receivers and managers of sixty four deval entities. So
there's a companies as well as partnerships, and also they
had control over Kenyon and Charlotte Clark. And so the
FMA had said it had been to the court to
(37:47):
have that appointment made although there had been a number
of actions by the FMA against Deval, and Deval had
challenged at least at one of those. Was the first
time on August two, when we realized the quite serious
nature of what was occurl Do.
Speaker 1 (38:08):
We know why police were involved in showing up at
the Clark's house. It seems pretty unusual in a situation
like this.
Speaker 14 (38:14):
So my college John Weeks, went to the police and
asked why they were involved. We knew that when the
FMA went to the Clerk's house on the second that
the police had been there as well. Now the police
said that no arrests were made, but that they had
(38:35):
taken custody of several firearms at the property. Now they
said staff were quired to take custody of those and
that had been seized as property. One of our photographers,
Alex Burton, took photographs of police going into this home
with what appeared to be gun cases.
Speaker 1 (38:56):
A few weeks after that interim receivership, the government intervened
earlier this week. Can you walk us through the government moves?
Speaker 14 (39:05):
Yes, that was a real surprise as well. There have
been a number of surprising aspects to this. So the
FMA confirmed that the Governor General, on the advice of
the Minister of Commerce and Consumer Affairs, had declared that
a number of entities within the Duval Group be placed
in statutory management. Now this is under the Corporations Act
(39:29):
and statutory management means effectively that one entity, in this
case PwC and those accountants who are also the receivers
and the managers of the De Rold business. As it
gets really complicated, one entity is in charge.
Speaker 1 (39:49):
Now.
Speaker 14 (39:49):
The FMA thought that was important to limit or prevent
the risk of further deterioration in the financial affairs of
their businesses or any fortunate activity. It to preserve the
interests of the critics and to enable the affairs of
Duval Group to be managed and what if you may said,
(40:12):
was a more orderly way.
Speaker 1 (40:16):
That's it for this compilation episode of The Front Page.
Speaker 9 (40:20):
You can read more about the stories featured in.
Speaker 1 (40:23):
This episode and extensive news coverage at enziherld, dot co,
dot and z.
Speaker 9 (40:28):
The Front Page is produced by.
Speaker 1 (40:30):
Ethan Sills and Richard Martin, who is also our sound engineer,
along with Paddy Fox.
Speaker 9 (40:35):
I'm Chelsea Daniels.
Speaker 1 (40:37):
Subscribe to The Front Page on iHeartRadio or wherever you
get your podcasts and tune in tomorrow for another compilation episode,
taking a look back at some
Speaker 9 (40:46):
Of the year's biggest stories.
Kiyota m Chelsea Daniels and this is a compilation episode
of The front Page, a daily podcast presented by the
New Zealand Herald. The economy has been in an uncertain
place for quite some time, and twenty twenty four was
no different. Over the last year, we've seen some improvement,
(00:27):
though in October the annual rate for inflation had fallen
from three point three percent to two point two percent.
The official cash rate ended the year on four point
twenty five percent. Elsewhere, though, the news hasn't been so positive.
The country's gross domestic product contracted zero point two percent
(00:48):
in the June quarter, only just missing out on a
technical recession. Job cuts across multiple sectors have seen job
seeker benefit numbers surged to over two hundred thousand, and
the government books released just this week show that it's
unlikely we'll return to a surplus until twenty twenty nine,
about a year later than originally anticipated in this year's budget.
(01:14):
So what's going on in our economy and how soon
until we start to see some change. Let's start back
in May, when Finance Minister Nikola Willis announced her first budget.
We got analysis from Enzet Herald Business editor at large,
Liam Dan starting with those much promised tax cuts.
Speaker 2 (01:34):
So I'm trying to give government benefit of the doubt here.
They want to give people a little bit of hope,
a little bit of money back, a squeeze middle all
that sort of stuff. But there are some issues I
think around timing. Look, no, but no tax expert i've
spoken to thinks it's a bad idea to adjust these
threshold It's been about fourteen years since they've been adjusted.
So that's moving the brackets at which you move to
the next higher tax rate, adjusting them up effectively for
(01:58):
the inflation, it just means you don't pay quite as
much tax and so we get our twenty dollars a week,
probably for a large chunk of New Zealand. The issue
is that the timing. When you're putting twenty dollars a
week in people's pockets, it's a bit like you know,
labor did different things with the cost of living crisis
last year, but they cut petel taxes and things, and
when you do that, it's inflationary. It sort of keeps
(02:20):
the economy ticking over, which normally is a good thing
in a recession. You want to stimulate. But we've had
so much stimulus through COVID, we've got this high inflation,
and that means the Reserve Bank is going to be
looking at it very closely, doing the maths on them
whether it really balances out, because the balancing force in
all of this is the cuts to public services, so
that comes out of the economy and that should be
(02:42):
a disinflationary force, and Nikola Willis has said they've got
that finally balanced so that it won't be inflationary. She's
quite adamant about that.
Speaker 3 (02:51):
Wild times may feel tough for everyday, Kiwis right now,
the economy will recover and inflation will come down. Tax
relief in Budget twenty twenty four is fully funded from
savings and revenue initiatives, and I can confirm that because
of this, the government is not borrowing to fund this
(03:13):
tax relief and it will not add to inflation.
Speaker 2 (03:21):
You know, already some economists like Cameron Baggery are questioning
that because you know the timing of the cuts. We
don't know that they're going to take a lot longer
to implement, and frankly, it could be quite a long
time before the sort of disinflationary impulse of the tax
cuts flows through, whereas after July one, we should all
be starting to see I say all, there's certainly all
(03:42):
middle wage journers, and wage journers will start to see
some tax back. It doesn't deliver for beneficiaries, for example,
so it's worth remembering that too. So they're always going
to have a hard sell at that social issues end
of the political spectrum.
Speaker 1 (03:55):
It's hard, isn't it, Because we speak about the squeezed
metal and income families, etc. But what about those beneficiaries,
what about those on minimum wage? I feel a bit
ecky knowing that I'm going to get more back a
week than someone on a minimum wage.
Speaker 2 (04:11):
Yeah, and not to mention all the money you'll get
back on all those properties. Even wealthier people with multiple
properties investment properties will also be able to claim tax back,
of course, And so there is a sense that there
is a political, some might say ideological, aspect to this.
National has talked about wanting to get people off the benefit.
There's plenty of other people who see that as punitive,
(04:33):
but there's certainly a sense that they want to make
life easier for those who are working. Worth mentioning, I
suppose that unemployment in this whole equation of economic rebalancing.
Unemployment is expected to keep rising, so it's a tough
job market to get off for benefit.
Speaker 4 (04:51):
The government could choose to prioritize keeping New Zealanders and work.
It could choose to prioritize lifting children out of poverty
rather than forcing more children into poverty. It could choose
to prioritize tackling climate change. It is not making those choices. Instead,
it's choosing to prioritize tax cuts that are going to
(05:14):
lead to higher inflation for longer.
Speaker 1 (05:19):
When we spoke last week, we discussed the worry that
the government would end up borrowing to fund these tax
cuts in some kind of way. Does it seem like
that's the case now that we've actually seen the books.
Speaker 2 (05:30):
Well, I don't think much has changed in terms of
how people are going to argue this point. Nikola Willis
is adamant they are not borrowing for tax cuts, but
the government will be borrowing twelve billion more over the
next four years. They've got a program of tax cuts
of about fourteen billion over the next four years, different
pools of money. Apparently, that's what they're saying, So that
(05:51):
they're borrowing for some other stuff, not the tax cuts,
but they will have less money because of the tax cuts.
In a narrow accounting sense, they're balancing up, you know,
the spending cuts and the tax cuts. In the big
picture of government spending, it still means we take longer
to get out of deficit. So take till the twenty
seven to twenty eight year instead of twenty six twenty seven.
(06:13):
And there's that extra bond program, twelve billion dollars of
New Zealand government bonds that we will go out and
sell to the world.
Speaker 1 (06:25):
In November, as signs the economy wasn't performing as well
as it could be became clearer, the Reserve Bank cut
the official cash rate to four point twenty five percent.
We spoke with Simplicity chief economist Schamabel Jakub for his
analysis on how things had performed since the budget, starting
with cuts to home loan interest rates.
Speaker 5 (06:50):
We desperately need this good news. For the last couple
of years, people have been refixing their mortgages from very
cheap to very expensive rates, and we've now just turned
the corner and the lower interest rates are going to
give a lot of relief to people who are refixing
In the next year or so, so absolutely good news,
but it takes a little bit of time for them
to flow through.
Speaker 1 (07:09):
How much time does it take to flow through, do
you think? And what kind of numbers are we going
to be looking at after this decision.
Speaker 5 (07:16):
Look, it usually takes somewhere between six and twelve months
before these interest rate cuts really kind of become broad
based better news for the economy. That's because the current
level of interest rates are still quite painful. They're quite high,
so people aren't borrowing and investing like the who are
doing during good economic times. So we probably need to
assume that for the next three to six months things
(07:37):
are still going to remain a little bit painful. We'll
initially get just a better relief that people are not
paying so much when mortgages, and then eventually, when interest
rates get low enough, we're going to start borrowing and
investing again, and that's when the party begins.
Speaker 1 (07:50):
If you could explain to me, like I'm a five
year old, how ocr rates then translate to a better economy,
could you do that?
Speaker 5 (07:59):
Of course, the OCA is kind of like the interest
rates from very short term money. You and I don't
borrow that money. But when the reserve Bank changes the OCA.
It also changes your floating mortgage rate. It also changes
you fixed mortgage rates, not by the same amount, but
it influences all those costs of borrowing for all of us.
And so when the reserve bank drives and the cost
of debt, it means that we are paying less for that.
(08:22):
And when we see less expensive debt, when we see
banks being more willing to lend, not only do we
get relieved from the debt we already have, but we
are willing to take on more new debt. And so
we are spending, we're investing, We've got more spare cash,
and it means there is just more money going around
in the economy. We all feel better.
Speaker 3 (08:44):
Since August, the rate has now been dropped one point
two five points, and this is welcome news for families
and businesses. For people with mortgages, the impact will of
course depend on the size of their mortgage, whether they're
floating or fixed, and what rates their current on. But
to give one example, a family with the twenty five year,
(09:04):
five hundred thousand dollars mortgage could expect to be about
one hundred and eighty dollars a fortnight.
Speaker 6 (09:11):
Feet are off.
Speaker 1 (09:16):
The ocr is obviously just one snapshot of the economy, right,
what other data have you seen recently that shows that
it's doing quite well well.
Speaker 5 (09:27):
The OCI is very much the tool to try and
influence the economy. What's going into the rest of the
economy is we're just in a recession. We're quite late
stage in a recession. It's this is probably the deepest
and longest recession since the global financial crisis. So, you know,
the pain that people are feeling, the kind of gloom
that's out there entirely justified, but also is short lived.
(09:47):
Once in a recession and the Reserve Bank is cutting
interest rates, we know things will get better. So right
now what we're seeing is people are spending less, people
are investing less. We're not buying in something houses so much,
businesses are not investing so much, in not hiring so much.
So that's the kind of the I guess, the anatomy
of a recession. But once we kind of work through
this painful part, what we tend to start to see
(10:09):
is there is a return of hope.
Speaker 1 (10:11):
A big draw card for voters was nationals tax relief policy.
You kind of wrap up of tax bracket changes, family
tax credits things like that, has this actually done anything
for the economy?
Speaker 5 (10:25):
Look, I mean we've still had a recession and households
are still spending less. We can see that household spending
is still falling and people are still struggling. I guess
the counterfactual is they might have had even less money
to spend, and they might have spent even less in
the absence of the tax cuts. So it's a little
bit hard to kind of look at it and go, oh,
there has been no effect. But it's not clear that
(10:46):
those tax cuts have actually made any difference to the
current recession, because on the one hand, there is more
money in consumers hands, but on the other hand, the
government investment and government spending, which is also part of
the economy, has been a lot less.
Speaker 1 (10:58):
And so do you expect that perhaps change next year
with the next budget, because there have been whisperings that
this budget is going to be obviously economy focused and
focused on building on that government spending.
Speaker 6 (11:11):
Not really.
Speaker 5 (11:12):
I don't think there's going to be much good news
in the next budget either. So this government is very
focused on fiscal austerity. That means they want to spend
less money. And when the government spends less money, those
parts of the economy that are reliant on government spending
will be smaller. Now, the question is if the government
spends less, will somebody else spend more money? Well, not
in health or infrastructure or education. Right, That's just not
(11:34):
how it works. So my sense is that actually government
will remain a bit of a headwind to the economy,
and the recovery next year is going to be much
more about the private sector. It's in spite of the
government that will have a recovery rather than because of.
Speaker 1 (11:54):
Job losses were a big story this year. Notably, much
of the public sector reduced to meet government savings targets.
The news industry contracted significantly, with the entire news Hub
brand shutting down, the closure of many community newspapers, and
long running current affairs shows going off air. We also
(12:15):
saw notable closures across the retail and hospitality sector. In June,
we spoke with First Retail's Chris Wilkinson about the changing
face of retail after Auckland, Icon Smith and Coey's announced
its closure, which was eventually scaled back to a reduced
physical footprint on Queen Street.
Speaker 7 (12:37):
The situation with department stores in that dare I say
cut of that upmarket ategory is being played out across
the world at the moment. So we've seen this happen
in New Zealand over recent years with Circaldy and Stains,
David Jones and Wellington, and then Ancient j Smiths in Southland.
(12:57):
The challenge for the sector is that they're no longer
able to differentiate in terms of their ranges. In many
cases their sites are large and are going to require
significant refurbishment and these economic headwinds are really affecting their
customer base. So without being able to see any clarity
(13:20):
going forward, there are a few options open to them.
Speaker 8 (13:24):
Yeah.
Speaker 1 (13:24):
Are We're seeing more brands and companies choose to open
their own stores as opposed to giving their stock, say
to a big departments store to sell.
Speaker 7 (13:32):
That's very true if we think about the brands and
the categories that the likes of Smith and Cohe's have
done particularly well in. Going back to cosmetics, perfumery. One
of the largest supplies lv MHD luxury goods manufacturer that
sells Chanel and all those other types of perfumes. You know,
they've all got their own stores, they've all got investments
(13:54):
in the likes of Sephora, and you know we're seeing
these category is now develop into specialty type stores. So
was a really good example. But also mec is another
good example. You know, stores of very large scale but
just specifically focused on these categories and in particular very
(14:17):
appealing to younger and successive audiences.
Speaker 1 (14:21):
I know Sephora and Mecca. Well, is that mindset why
perhaps Flybys is wrapping up here later this year? Why
get your customers to join a separate rewards program when
they can just join one in store.
Speaker 7 (14:35):
You are absolutely right. So successive audiences are less inclined
to be part of these traditional loyalty programs. They are
much more adept at finding deals. They're less inclined to
want to sign up to things, and it's just for them,
it's a fuss. They're more empowered consumers.
Speaker 1 (14:58):
And I guess moles in New Zealand up their game
in the last decade. Hey really selling themselves as more
of a destination, a place to go. Is that where
retail is shifting towards and can standalone stores survive on
their own anymore?
Speaker 9 (15:12):
I'm thinking Queen Street.
Speaker 7 (15:14):
Green Street's a really good example because once upon a
time brands coming to New Zealand would have almost certainly
needed to be in Queen Street. That would have been
their flagship site because that's where the population was, that's
where the audience was. Nowadays, those retailers are being attracted
by the likes of Sylvia Park or Westfield or Commercial
(15:36):
Bay and those walls need those types of businesses to
create that differentiation. But increasingly so that's where the consumers
are as well. That's where a very certain audiences and
in particular those types of environments play into this big
shift that we've seen from goods to experiences. So going
(15:59):
to a place like Sylvia Park will give you a
great range of food, it'll give you entertainment, it'll give
you the likes of health services and all these other
types of things that you would need on a day
to day basis. So that's where our big shift is happening.
And again this is a global trend that we've seen.
Speaker 1 (16:24):
And after a series of high profile restaurant closures, we
discussed where to next back in August with Harold, Deputy
Lifestyle Editor Joanna Thornton and aut hospitality and tourism professor
David Williamson.
Speaker 9 (16:41):
Joanna can you run us.
Speaker 1 (16:42):
Through some of the restaurants that have closed down so
far this year. Yeah, there's a few.
Speaker 10 (16:47):
I mean, I suppose the biggest or the most shocking
was Espqure, which closed in July after thirty two years.
We had Madame George on kd Unhappy Road, which was
a huge loss. It's one of Viva's top fifty restaurants.
There was also Floor on K Road as well, which
is a cute little wine bar. Homeland is closed down.
Orphan's Kitchen Omni which is a little yakatory spot on
(17:10):
Dominion Road. Stanley AV Winebar and Milford. We also had
Conch which was more sort of a bar and restaurant,
the Wine Cellar and Tiger Burger is another one that's closed.
Speaker 1 (17:22):
God, there's so many. What have some of the reasons
been behind their closures?
Speaker 10 (17:27):
There's a few, and Madame George said it was the
economic downturn. Stanley AV said that there were a host
of reasons like the pandemic, weather events and strained economic conditions.
And I actually saw the Restaurant Association reported in a
recent survey that the main challenges businesses are citing is
just customer downturn.
Speaker 1 (17:46):
David from your years of experience in the hospitality industry.
Is this speed of closures unusual or is it kind
of par for the course.
Speaker 8 (17:54):
It's sort of hard to differentiate that it is an
unusual time.
Speaker 6 (17:59):
I'm not sure the number.
Speaker 8 (18:00):
Of closures is particularly different, But I think what is
different is that people are really struggling in this sector,
and I think we're going to see more closures coming through.
I was talking to a couple of veterans from the
industry recently and they were adding to that suggestion of
what's really going on is not just the difficulties right now,
(18:23):
but the history of really impactful changes over the last
sort of periods since COVID. So you have to understand
that this industry was shut down or massively disrupted for
a number of years through COVID, when the boarders shut
they had huge staff shortages. Then you have those weather events.
Just as we're coming out of COVID and starting to
(18:44):
recover from that, we get smashed with weather events, which
was really impactful on the industry. And then you have, yeah,
the high inflation cost of living. People have a lot
less discretionary income to spend on things like restaurants, cost
of goods for these industries that record high. They are
paying top interest rates on any debt they're holding. There's
(19:05):
perceptions of higher crime and the inner city for people
in Auckland who are coming in to dine out at night.
So you know, there's an awful lot going on, and
it's just been one challenge after another. So a lot
of these businesses are small, standalone, own or operated businesses.
They don't have huge amounts of capital reserves to survive
(19:27):
periods like this. So it's not so much a question
I think of, gosh, why are restaurants going down At
the moment, it's a question of how on earth are
they not going down? Given you the conditions that we've
had over the past few years.
Speaker 11 (19:43):
For decades, Aucklanders have enjoyed a long lunch in the
sun at Ponsomby Institution SPQR.
Speaker 9 (19:49):
But now the.
Speaker 11 (19:50):
Doors are shouting it's in liquidation, owing creditors over two
million dollars, another casualty of rising costs and people keeping
their wallets firmly shut.
Speaker 1 (20:03):
Johanna, can you explain to us what happened with SPQR
in particular?
Speaker 10 (20:08):
Yeah, well, I mean, I suppose the announcement seemed pretty
dramatic when they said they were closing in July, but
I think it had definitely, you know, the quality of
the food maybe had dropped off in recent years, and
it wasn't sort of the hottest spot to be anymore
where it had been in the past. And owner Chris
Rupe just released a really brief statement saying that he
was really sorry for the current situation and sort of
encourage people to get out there and support hospitality. But
(20:31):
then it turned out they were placed into liquidation with
the business owing more than two million in land revenue
and it owes over one hundred thousand two staff in
unpaid wages and holiday pay. And then The Herald also
reported that the business that owns Specure withdrew nearly one
point four million from the business before it went into liquidation.
So I think we're going to hear a lot more
(20:51):
about that story.
Speaker 1 (20:52):
It is quite jarring when some of our favorite places close. Hey,
I mean, Peter Gordon's Homeland closed this year's citing issues
with renewing it's lease. How often is an issue like
that to blame for a space taking on a new life.
Speaker 10 (21:05):
Well, I mean I heard that the problem with Homeland
was There's a massive new retirement village going in there
called Cracker Bay, So I think the development of that
whole West Haven area didn't include keeping Homeland there. So
I'm not sure how often you a lease is to blame.
Speaker 8 (21:22):
Yeah, I think there's a whole range of problems like
that that certainly would finish off a lot of places.
But yeah, again, I think it's a more complex and
a multifaceted number of pressures which brings these organizations to
the edge of collapse.
Speaker 6 (21:39):
I think what is.
Speaker 8 (21:39):
Interesting is it's such a resilient and it's such an
innovative industry. Often describe restaurants that's extremely nimble, and so
you know, at the moment where you have these really
difficult trading conditions, hospitality shows up as an area where
businesses do suffer and go down, but when conditions pick up,
hospitality is also the first industry to recover. We sort
(22:02):
of go into recessionary times quicker and lower, but we've
come out of them faster and higher. So it's a
very nimble industry. And Ram's just pointed out in their
last report that you know there is nineteen thousand, five
hundred and eighteen restaurants still in New Zealand. It's the
largest number we've ever had in the country. The growth
(22:25):
has very flat since twenty twenty three, only zero point
one percent growth and restaurant numbers. But you know, it's
not an existential crisis. We're not going to certainly run
out of restaurants, but it is a very real crisis
for the people who are running these businesses.
Speaker 1 (22:45):
One New Zealand company that enjoyed success this year was
rocket Lab, the country's premier space business, celebrated its fiftieth
launch in June, around the time the Coalition government ramped
up investment in the era space sector. I spoke with
the company's founder, Sir Peter Beck, about where too next
for the company.
Speaker 6 (23:10):
The space industry isn't just launch.
Speaker 12 (23:12):
In fact, you know, two thirds of their businesses building
satellites and spacecraft and that's kind of geographically agnostic. And
there's some great startups actually in New Zealand now, great
space startups, and we're really started to see an ecosystem
build which is super exciting. So I think New Zealand
can contribute in the space industry. You know, like I say,
launch Away steals a show, but does a tremendous amount
(23:35):
of opportunity across the whole space sector, and you're starting
to see a number of little startups and in even
traditional companies play.
Speaker 1 (23:42):
Yeah, it's quite exciting to see. Hey, we've spoken to
Space Minister Judith Collins just after she was overseas promoting
New Zealand space industry. In the US. She told us
and New Zealand was number four last year in the
number of launches worldwide, after the US, Russia, and China.
How incredible was that?
Speaker 6 (24:01):
Yeah, I think I look as a proud keV.
Speaker 12 (24:03):
I think it's wonderful and she's been right, like America
launches the most amount of rockets, and then it's China,
then it's Russia, and then it's the Maha Peninsula, then
it's Europe and India and so on and so forth.
So no, I think it's awesome, and you know, it
shows where New Zealand kind of sits in ranks in
the international industry and such a short amount of time.
Speaker 1 (24:22):
Are you excited to see the real possibilities for New
Zealand when it comes to space.
Speaker 12 (24:27):
Absolutely, I mean it's exactly the kind of thing that
New Zealand does really well. And that's kind of testament
to our success and been able to be successful in
scale in New Zealand and New Zealand, as I said before,
I had incredibly smart people, were very innovative and the
ability to kind of move across multiple functions and disciplines,
which is really important in space industry. So no, I look,
(24:49):
we've already seen a bunch of Rocket Lab has spin
out and start their own ventures.
Speaker 6 (24:53):
Which I absolutely applaud and support. Long may that continue.
Speaker 12 (24:57):
I think there's this tremendous opportunity and it's one of
those things that every country has recognized the value of
space and investing deeply in it.
Speaker 6 (25:04):
I mean it's kind of like the other AI.
Speaker 12 (25:07):
I mean, there's AI is obviously the talk of all
the conversations, but equally, you know something that is scaling
just as fast as space.
Speaker 1 (25:26):
Amongst the policies of the coalition government, reform of the
Holidays Act is one of the many areas in the spotlight.
It's the responsibility of Workplace Relations Minister Brook van Velden
to oversee this. Just this month, she's directed officials to
change the proposed direction of the reform based on consultation feedback.
(25:47):
But in June, we caught up with her on what
her plans were for sorting out this part of the economy.
Speaker 13 (25:57):
One of my top priorities is that we need religious
lit of change in this term of government. I understand
many successive Ministers of Workplace Relations have tried and failed
to get a Holidays Act change across the line, and
I'd love to make it easier for businesses and workers
to pay out the right entitlements and for those workers
(26:18):
to know that they are getting paid the right amounts.
So that's top priority for me. We're on track to
get this out in September, and it'll be targeted consultation
because it's a very technical law. But I very much
look forward to all of the feedback that comes back
to let us know if we're on the right track
to make it simpler. The last thing I want is
(26:38):
a new law change that's even more complex.
Speaker 1 (26:41):
It is kind of one that would be difficult to
explain to someone on the street, right because it's a
lot of backroom situations in terms of payroll and things
like that that perhaps employees don't exactly see totally.
Speaker 13 (26:53):
Absolutely look for most people, they'll assume that their business
or their manager is getting it right. They might get
their pay slip every fortnight or every month, and it
tells them how much they're earning that week, how much
they may have in holidays pay coming up, or you know,
what their sick leaving titlements might still be. By and large,
(27:14):
most people are doing a very good job. But because
the law is so complicated and so complex, even some
of our largest organizations have been getting it wrong. You take,
for example, the Ministry of Business, Innovation and Employment. You
know they even got holidays pay wrong. Now, if the
law is so complex that even the government department that's
(27:35):
supposed to look after this law is getting it wrong,
there's serious work that needs to be done because at
the heart of this I want all workers to know
they're going home at the end of the week with
the right pay, with the right holidays pay, with the
right sick leave, and that businesses have far more time
to actually do what they do well, which is their
real job, not figuring out compliance.
Speaker 1 (27:59):
In July, Minister Chris Bishop announced that the government wants
to flood the market with more houses to improve growth
and bring down prices, going against Kiwi tradition we're owning
houses is pretty much the cornerstone of our economy. To
discuss how this might work, we spoke with Opus Partners
economist Ad mcnight.
Speaker 14 (28:23):
Well.
Speaker 15 (28:23):
I think the Housing Minister christ Bishop is talking a
big game, and certainly his incentivized to do that. Lots
of people want house prices to be stable over the very,
very long term. I think there will be some benefits
to it. For instance, they're saying they are going to
remove any minimum requirement about how big a house or
an apartment has to be. That will mean we get
(28:46):
more smaller sized departments built. On top of that, councils
won't be able to have a say in terms of
whether apartments have to have balconies or not, or how
large those balconies have to be. Well, with all of
those rules gone, we should see some cheaper and certainly
smaller apartments coming through. And at the margin, yeah, maybe
a couple more developers will build those sorts of properties,
(29:07):
and that will be good for people who are okay
and happy to live in slightly smaller properties. I always
take what politicians say with a grain of salt, because
they're very good at saying that they're going to do
something big and meaningful and then it doesn't always materialize,
and I'll give you an example of that. The Housing
Minister is saying that they want every single council in
the country to open up or zone for thirty years
(29:30):
of population growth, and often christ Church is the shining
example that the government holds up because immediately after the
earthquakes they zoned for thirty years of population growth. There
was a lot of housing being built and for a
time house prices were pretty flat down in christ Church.
But what a lot of people miss is that during
(29:50):
the COVID boom from twenty nineteen onwards, christ Church house
prices actually increased at a much faster rate than the
likes of Wellington, Auckland, Dunedin. And so I'm not sure
whether zoning a whole heap of land is going to
fix all of the problem, but it will certainly help.
Speaker 1 (30:08):
We've already seen the growth of new builds in Auckland,
for example, outpaced population growth. So what do we need
to keep building more houses?
Speaker 15 (30:16):
Well, if I take you back a couple of years,
every single media outlet, including the Herald, was talking about
a massive housing crisis and we needed to build more
and more and more homes. I think this is just
part of the catch up.
Speaker 1 (30:28):
Do you worry about their plan to remove the urban
rural boundaries?
Speaker 15 (30:33):
I worry more about the infrastructure. It's quite interesting because
if you remove the rural urban boundary, you're going to
get more housing sprawl, right, so you are likely to
see more housing built out Pocono Way just south of Auckland,
and also down in Bookacoi in some of those more
rural communities. Now, that obviously has benefits and drawbacks. The
benefit is that if I am a person who is
(30:55):
willing to live an hour out of the city because
I want a standalone house, prices are a bit cheaper
and I want that kind of lifestyle, I kind of think, well,
why do we have all these rules in place? But
we also know that we're not so good at building
infrastructure here in New Zealand. So all good, We're going
to get rid of the rural urban boundary. But now
it's Auckland Council and Auckland Council ratepayers who are now
(31:18):
responsible for building that infrastructure that goes in there to
support those houses. Now, yes, the developers have to pay
some taxes what's called development contributions in order to build
those properties. But often my understanding is that a lot
of that infrastructure is ultimately financed by the poor old ratepayer.
Speaker 1 (31:35):
Those plans to decide the minimum size of new apartments,
could that see kind of like an influx of shoebox
style apartments, the ones that we see I'm thinking in Japan,
you know, one by one meter, et cetera.
Speaker 15 (31:47):
Well, that is the risk if you don't have a
rule in place. A developer will build them if they
think they can sell them, and if they think they
can make more money by selling those shoe box apartments
compared to building something else. So ultimately it comes down
to what are home buyers or investors willing to purchase.
And if an investor is buying those kinds of shoe
(32:08):
box apartments and saying, y'reh okay, I'll buy that at
whatever price the developer are selling it for, whether people
are actually willing to rent those properties. I considerably foresee
a future where there are a lot of studio apartments built.
Investors then purchase them, and there we have new stories
about how small these properties are and the rents that
people are paying for them. But it ultimately comes down
(32:29):
to what are people willing to build? What are people
willing to buy and what are people willing to rent?
Speaker 1 (32:41):
Finally, no wrap of the year in ki we business
would be complete without touching on the saga of the
Deval group. The home of company founders Kenyon and Charlotte
Clark was rated by police in early August as part
of the investigations into the Auckland apartment developers. Court hearings
have followed over recent months, and a court case between
(33:04):
the Financial Markets Authority and PwC against Duval and the
Clerks is set for June next year. We caught up
with Enzid Herald property editor Anne Gibson in late August
when Deval was placed into statutory management by the government.
Speaker 14 (33:24):
This company is a relatively complex group, with about seventy entytes.
It is essentially an Auckland apartment and townhouse developer. Now
on its website it said it had settled the sale
of seven hundred and seventy four homes in the last
six years and it has two hundred and seventy eight
(33:47):
homes under construction. Are those are mainly apartments as well.
It has what their Commerce and Consumer Affairs Minister Andrew
Bailey told us yesterday one hundred and twenty to one
hundred and fifty investors, home buyers and commercial lenders.
Speaker 1 (34:09):
What more can you tell us about the people behind
this group?
Speaker 14 (34:12):
Well, essentially there were four people according to the Devai
business Now, the first two are the founders husband and wife,
Charlotte and Kenyan Clark. She's the CEO, he's the former CEO.
Then we have John Delzel. Now he's had many years
experience in the Auckland property market and he was Auckland
(34:34):
Council's waterfront regeneration project here that was see in city
were the real focus on the Winyard Quarter many years ago.
And he's the chairman of Deval. And then we've got
a lawyer on Culiny. He's also a director.
Speaker 1 (34:50):
Kenyon and Charlotte Clark seem like they were quite high flyers, hey,
or at least they were trying to portray that image.
Weren't they filming a reality show about them or something?
Speaker 14 (35:01):
Yes, this show is called The Property Developers and one
season is evidently made. It is a number of parts
and there was talk about a second season being made.
Now for some years the Herald has reported on the
Property Developers and you can see a trailer online which
is most interesting. It has never screenmed. But when I
(35:21):
talked to the person behind that in Queenstown about a
week ago, he said that he was hoping to secure
distribution to an international business and he has previously mentioned
Netflix and Neon and the likes of those sorts of businesses,
(35:41):
but we've never yet seen it. He did tell me
that it's more likely to be shown overseas before it's
shown in New Zealand.
Speaker 1 (35:49):
Right, is it some kind of selling Sunset esque kind
of thing. I don't know whether you watch that or not.
Speaker 14 (35:54):
It's a reality sort of behind the scenes of what
is the life of a property developer, and so it
is a reality serious where the clerks are shown and
their children are shown. They're filmed in different parts of
New Zealand and it looks pretty amazing. It'd be really
interesting to see it. I look forward to it.
Speaker 1 (36:13):
I'm really concerned that there are some pretty serious issues
with it.
Speaker 3 (36:17):
Do you know what, I actually need to call my lawyers.
Speaker 7 (36:19):
It was kind of funny, but if he's putting this
up publicly, the yeah, I mean.
Speaker 4 (36:25):
This is just this week's problem.
Speaker 10 (36:27):
Let's just say that I think that we basically just
burned a million dollars.
Speaker 1 (36:33):
The company's troubles first became public earlier this month. Why
did they come to the attention of the Financial Markets Authority?
Speaker 14 (36:41):
It dates back to twenty twenty one when the FMA
talked Val to remove advertising for a mortgage fund. It
was about twenty million dollar fund and the FMA basically
said that that advertising gave the impression to people it
was low risk. But Kenny Clark said in response that
there hadn't been anyone who had complained and had raised
(37:04):
twenty million dollars via that mortgage offer. So that was
the first time that we began to realize that there
was action by the Chrome Authority against Juvail Group.
Speaker 1 (37:16):
Take us through the events on August second, when these
actions became public and the group was put into interim
receivership is well, that's.
Speaker 14 (37:24):
When the FMA announced that three accountants of Peter Receiver
interim receivers and managers of sixty four deval entities. So
there's a companies as well as partnerships, and also they
had control over Kenyon and Charlotte Clark. And so the
FMA had said it had been to the court to
(37:47):
have that appointment made although there had been a number
of actions by the FMA against Deval, and Deval had
challenged at least at one of those. Was the first
time on August two, when we realized the quite serious
nature of what was occurl Do.
Speaker 1 (38:08):
We know why police were involved in showing up at
the Clark's house. It seems pretty unusual in a situation
like this.
Speaker 14 (38:14):
So my college John Weeks, went to the police and
asked why they were involved. We knew that when the
FMA went to the Clerk's house on the second that
the police had been there as well. Now the police
said that no arrests were made, but that they had
(38:35):
taken custody of several firearms at the property. Now they
said staff were quired to take custody of those and
that had been seized as property. One of our photographers,
Alex Burton, took photographs of police going into this home
with what appeared to be gun cases.
Speaker 1 (38:56):
A few weeks after that interim receivership, the government intervened
earlier this week. Can you walk us through the government moves?
Speaker 14 (39:05):
Yes, that was a real surprise as well. There have
been a number of surprising aspects to this. So the
FMA confirmed that the Governor General, on the advice of
the Minister of Commerce and Consumer Affairs, had declared that
a number of entities within the Duval Group be placed
in statutory management. Now this is under the Corporations Act
(39:29):
and statutory management means effectively that one entity, in this
case PwC and those accountants who are also the receivers
and the managers of the De Rold business. As it
gets really complicated, one entity is in charge.
Speaker 1 (39:49):
Now.
Speaker 14 (39:49):
The FMA thought that was important to limit or prevent
the risk of further deterioration in the financial affairs of
their businesses or any fortunate activity. It to preserve the
interests of the critics and to enable the affairs of
Duval Group to be managed and what if you may said,
(40:12):
was a more orderly way.
Speaker 1 (40:16):
That's it for this compilation episode of The Front Page.
Speaker 9 (40:20):
You can read more about the stories featured in.
Speaker 1 (40:23):
This episode and extensive news coverage at enziherld, dot co,
dot and z.
Speaker 9 (40:28):
The Front Page is produced by.
Speaker 1 (40:30):
Ethan Sills and Richard Martin, who is also our sound engineer,
along with Paddy Fox.
Speaker 9 (40:35):
I'm Chelsea Daniels.
Speaker 1 (40:37):
Subscribe to The Front Page on iHeartRadio or wherever you
get your podcasts and tune in tomorrow for another compilation episode,
taking a look back at some
Speaker 9 (40:46):
Of the year's biggest stories.
Popular Podcasts
Las Culturistas with Matt Rogers and Bowen Yang
Ding dong! Join your culture consultants, Matt Rogers and Bowen Yang, on an unforgettable journey into the beating heart of CULTURE. Alongside sizzling special guests, they GET INTO the hottest pop-culture moments of the day and the formative cultural experiences that turned them into Culturistas. Produced by the Big Money Players Network and iHeartRadio.
On Purpose with Jay Shetty
I’m Jay Shetty host of On Purpose the worlds #1 Mental Health podcast and I’m so grateful you found us. I started this podcast 5 years ago to invite you into conversations and workshops that are designed to help make you happier, healthier and more healed. I believe that when you (yes you) feel seen, heard and understood you’re able to deal with relationship struggles, work challenges and life’s ups and downs with more ease and grace. I interview experts, celebrities, thought leaders and athletes so that we can grow our mindset, build better habits and uncover a side of them we’ve never seen before. New episodes every Monday and Friday. Your support means the world to me and I don’t take it for granted — click the follow button and leave a review to help us spread the love with On Purpose. I can’t wait for you to listen to your first or 500th episode!
Dateline NBC
Current and classic episodes, featuring compelling true-crime mysteries, powerful documentaries and in-depth investigations. Follow now to get the latest episodes of Dateline NBC completely free, or subscribe to Dateline Premium for ad-free listening and exclusive bonus content: DatelinePremium.com