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Some food for thought in Wellington

WHAT on earth is going on in New Zealand? The Foodland supermarkets group nurtures the modest ambition of buying the 83-store Woolworths NZ concern from Dairy Farm in Hong Kong, whose Australasian business plan has curdled.

Foodland was twice given written advice from the mandarins in Wellington that the proposed $NZ600 million offer could proceed. And twice they reneged on the assurances.

The company got the green light from the Commerce Commission. Then, grocery chain rival Foodstuffs, which controls 55 per cent of the market, took the case to the appeal court. Astonishingly, that body cheerfully threw out not only the Foodland proposal, but 10 other previously cleared acquisitions. Confusion reigned.

No problem, said the government, we will just change the law. Never mind that parliaments rarely pass retrospective legislation, and still less often thumb their noses at the judiciary. A special Bill has been cobbled together to wave through all the deals bar one – the Foodland plan would be blocked.

What the Kiwis plan to do is not only commercially curious, constitutionally flawed, and discriminatory, it also appears to be against the national interest.

Foodland was flabbergasted. The CEO, Trevor Coates, confined himself to telling the New Zealand press that his company had been “hung out to dry” and that the experience left him concerned about investment in the country. He plans to appeal the matter to the Privy Council in London.

It is New Zealand that should be concerned. On May 26, the government tightened up its competition laws.

But all the companies that had applications for transactions pending were told, in writing, that they would be treated under the old rules.

Getting parliament to reverse a legal ruling in order to preserve that position is one thing … to make an exception against just one Australian-owned company is another.

The shaky islands have not been getting a good press of late. There is a perception that Helen Clark fiddled while Air New Zealand and Ansett burned. The Air NZ share price has pancaked.

That is just another negative for the emaciated New Zealand Stock Exchange, which is being forced to watch as its best companies troop off across the Tasman in search of liquidity.

One day last week only $NZ30 million worth of shares was traded on the NZSE – about what Kerry Packer might drop at blackjack on a bad weekend.

The total market capitalisation is below $40 billion, compared with the $800 billion value of companies listed on the ASX. New Zealand needs more overseas patronage, not less.



Samurai may be back for another lashTHE Australian dollar is clinging grimly to the US50 cents life raft as foreign exchange traders try to think up new reasons to push it under.

That is not unambiguously bad news. As Citigroup chief economist Brian Parker puts it, the collapsible currency gives a “free kick” to exporters of goods and services in these troubled times.

Mr Parker is an optimist – a rare species among Australian economists. He thinks our economy has a good chance of avoiding the US-induced recession. We have only performed that trick twice, once in the 1960s and again during the oil price hike of the late 1970s. Time for the trifecta.

The dollar fell 8.5 per cent against the greenback in September, bringing the drop for 2001 to 12 per cent – only the Brazilian real, the South African rand and the Swedish krone fared worse. Australian interest rates are two percentage points above their US counterparts. That is beginning to ring bells in Tokyo. We might be about to see the return of Samurai bonds. These strange little critters were all the rage a few years back.

According to Craig James of Commsec, 2.5 trillion yen worth of Australian Samurai bonds were issued to yield-hungry Japanese investors in 1995-1997 (about $41 billion at rates today). That stampede had the side effect of helping drive the Australian dollar up from US74 cent to US82 cents. Remember the days you could holiday overseas without staying with the mother-in-law in Manchester?

The World Bank tested the water a few weeks ago with an $A815 million Eurobond aimed at the Japanese. The Samurai salvo was well received and we might soon see more.

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