2013 will long be remembered for the summers we all remember from our childhoods, not the more recent wet and windy ones we had grown accustomed to of late. The long dry warm summer did however had a dark under belly being the economic impact that it bought to our regional economies. This has clearly had an impact on NZ as a whole when you look at the GDP figures. While Auckland may have been insulated from the rural impact, it did have some major impacts of its own largely at the retail level, where people simply did not go and buy the new winter stock stores had on offer from as early as February. Flat retail sales have a flow thru effect onto the local economy. Hospitality aside, retail sales figures and feedback from retailers has seen a poor start to the year for many.
On the other side of the coin, while the savings level continues to climb nationally, many clients seem impatient to get better returns. Chasing higher yields may seem a good idea, but we are not sold on the world economy being fixed just yet. We continue to caution clients to make sure their principal is secure before they worry about returns, as Cyprus showed us Europe and the USA still have a lot of issues to resolve. Many of these may take up to a generation to be resolved; so patience remains a theme for our investing clients. While we don’t give investment advice, we do ensure they have a clear understanding of the risks they face.
The IRD remains a worry to many taxpayers. Their audit and risk assessment activity is at an all-time high from our experience. There is a definite need to get more blood out of the stone. Some targeted areas like the cash economy are proving very successful for the IRD, with its recent focus on restaurants, bars and takeaways being lucrative. Many of their audits in this area have netted very large re assessments for the IRD so expect the IRD to maintain interest in this area. However, the IRD has also been over zealous at times, and we have had to fight their use of arbitrary ratios and surveys as the basis for taxation.
Finally we continue to see and hear stories of cut backs to NZ businesses. Expect more of this particularly as the Australian economy shrinks and slows down. It will be easier for Aussie bosses to get rid of workers in NZ than to get rid of their mates at home, even if the NZ businesses have already gone thru the downsizing exercise when we hit the global financial crisis a few years ago.
If you would like to discuss the points I discussed above or another area please feel free to contact me