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Archive for the ‘Growth’ Category

Poland – EU subsidies delay farm reforms

September 3, 2014 Leave a comment

The recent ‘Special Report’ in The Economist outlined the benefits of Poland’s membership of the EU to the agricultural sector. Agriculture is the biggest beneficiary and ironically farmers were some of the most committed opponents of EU entry. They suggested that only 600,000 of the country’s 2m farms would survive entry. But their mood changed when Polish agriculture received 40 billion in 2007-13 and another 42.4 billion from 2014 – 2020. From the EU funds farmers’ incomes have tripled since entry, with half of the money coming from direct cash payments, regardless of need. But the agricultural subsidies are a mixed blessing as it encourages inefficiency in the sector as half the farms that receive assistance are just subsistence plots, and 92% of them are less than 20 hectares. But Polish agriculture accounts for only 3.4% of GDP but 12.4% of employment. However the rural population makes up about 39% of the total so therefore farmers are an important political constituency. The graph below shows the impact of the price support system.

CAP Int Price

Categories: Growth Tags: , ,

How manufacturing the iPhone Impacts on the World

August 24, 2014 Leave a comment

Here is a great infographic about the iPhone that I got from colleague David Parr. It shows the impact the iPhone has had on the global supply chain, jobs and the world in general. Some statistics from it are as follows:

1. To assemble 1 iPhone = 600 workers
2. 500,000 iPhones produced in 1 day (at peak)
3. 307,250 jobs have been created by Apple
4. 44% are sold in North, Central and South America. 9% are sold in Japan alone.
5. There are 330 manufacturing locations in China.

iPhone Manu

Aussie still relying on consumer sector

August 17, 2014 Leave a comment

The graph from National Australia Bank below shows the components of Australian GDP March Quarter 2014. This is particularly useful when doing GDP Expenditure approach in Unit 5 of the A2 Cambridge course where you can breakdown the equation C+I+G+(X-M).

C = Private Consumption
I = Business Investment
G = Government Demand
(X-M) = Net Exports

Consumption is still the largest contributor to Australia’s GDP. Over the next couple of years GDP  is expected to grow around 3% but key to meeting that target is a solid consumer sector. Household consumption growth in recent quarters has been solid, contributing 0.3 percentage points to growth in Q1 – only exports have contributed more to growth over the past year. However sustaining solid consumption growth in years ahead requires the labour market to improve and consumer confidence levels to recover from their recent lows.

Aus GDP Components

Categories: Growth Tags: ,

Productivity – Australia vs USA

July 31, 2014 Leave a comment

Interesting graphic from the National Australia Bank showing productivity levels in Australia and the US. Labour productivity is a partial measure of overall productivity. The Australian Bureau of Statistics ABS also measures capital productivity and multi-factor productivity.

Labour productivity is calculated by the (ABS) as Gross Domestic Product per hour worked, and can be measured across various industry sectors or over the whole economy. The national Accounts, which show GDP per hour worked increased by 2.2 per cent in the year to June 2013. That compares to a 2 per cent increase in 2011-12, and a 0.4 per cent decline in 2010-11. The last time GDP per hour worked exceeded 2.2 per cent growth was in 2001-02 when it reached 3.6 per cent.

Aus v USA Prod

Categories: Growth Tags:

The New Zealand economy cannot live on debt forever

July 26, 2014 1 comment

Brian Gaynor in the NZ Herald wrote a piece on the amount of debt in the New Zealand economy and the fact that the Reserve Bank needs some fresh ideas to stem the increasing trend. With the OCR increasing this week to 3.5% the disposable income of the floating mortgage holder will reduce and ultimately impact on their ability to spend – floating mortgages represent 33% of all mortgages in dollar terms. Although higher rates help those that have money in the bank however a lot of this is from overseas investors so interest payments leave the economy. Furthermore the elderly tend to have savings in banks but they are not seen as significant spenders. The higher interest rates also attract ‘hot money’ as NZ’s rates are higher than most other industrialised countries.

The amount of debt in the economy is a major concern especially when you consider how much is mortgage debt – see below. Also the fact that debt as % GDP is now 88.5% and 145% of disposable income – this is putting pressure on inflation not forgetting that people are living very much beyond their means.

NZ debt 2014

The RBNZ is concerned with this debt and introduced restrictions on high loan-to-value residential mortgage lending. They see that there is too much emphasis on housing which is being fuelled by greater access to debt. One only has to look at the Irish property to see how things can wrong – house prices dropped 50% between 2007 and 2012.

NZ Debt % GDP

Triple whammy for New Zealand Dairy Farmers?

July 22, 2014 Leave a comment

New Zealand Dairy farmers are bracing themselves for some tough times ahead with 3 pieces of bad news. There are as follows:

1. Last week saw a 8.9% drop in the Global Dairy Trade (see graph below) which has meant that prices have dropped 35% since February – their lowest level since December 2012. Farmers can expect revised payout forecasts of less than $6 a kilogram of milksolids to follow the 35% fall.To give you an idea of how the lower payout will influence the rural economy – a forecast of a $6.25/kilogram of milksolids would take $3 billion out of dairy incomes – Con Williams ANZ Bank.

2. The high NZ$ is still hindering farmers revenue. With the latest drop in the GDT you would expect some sort of relief to farmers with a fall in the value of the NZ$. However the NZ$ only fell from US$0.88 to US$0.87

3. On Thursday RBNZ Governor is making an announcement on the OCR (Official Cash Rate) and famers are hoping that Graeme Wheeler will not hike interest rates as originally indicated in the June Monetary Policy Statement. Inflation has been somewhat benign but interest rates seem to be influenced more by Auckland house prices and the Christchurch rebuild.

GDT - 2014

Why have prices dropped?

There has been a world supply shock especially in Europe. It is estimated that if Europe’s 27 milk-producing countries maintained their current volume increase this could knock New Zealand off the perch of top dairy exporter. Below are some supply figures which show that approximately 16bn litres will be added to the market:

New Zealand – 2013 production up 2bn litres
Europe - with the removal of milk quotas, European milk production is forecast to be 7.5bn litres more
China – Milk production is said to have recovered and could be up 15% this year which adds 4.5bn litres to the market
USA – higher milk prices and lower feeds costs are said to add another 2bn litres this year.

Therefore big surpluses accompanied by weaker demand would hit NZ dairy export earning considerably.
Source: The NZ Farmers Weekly July 21, 2014

China’s Ghost Towns – 50 million homes empty.

July 13, 2014 Leave a comment

Following on from a previous post on the Chinese Property Market. Property is the principle source of investment for most Chinese, who do not trust their banks or the stock market. But fears of a serious real estate slump are growing as about 50 million homes are empty. Chinese investors are therefore looking to invest in property markets overseas – Australia, New Zealand, USA to name a few. See video below from Al Jazeera.

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