Letter No.72
30 January, 1998

7 January 1998

Mortgage rates rise to 10.5% as the NZ dollar drops to a four-year low against the Australian dollar.

The Asian financial crisis continues as the Indonesian rupiah has fallen 72% in value over the last year, pushing the world’s fourth most populous country to the brink of a recession. The huge majority of Indonesia’s listed companies are unable to repay overseas debt and are technically bankrupt. There are general calls for President Suharto to step down and allow someone else to deal with the national crisis.

8 January 1998

The Indonesian textile industry has laid off 500,000 workers due to the Asian crisis. Thousands of panic-stricken residents rush to buy food and other items.

In France, thousands of French jobless continue protests by occupying unemployment offices. Today sees large-scale marches in Paris and in 50 other cities and towns throughout France. French polls show that 70% of the public are supporting the jobless in their protests.

In a belated attempt to win back the credibility of his socialist-led government, French PM Jospin announces an emergency fund to help the long-term unemployed.

9 January 1998

Back in NZ, coach company operators are furious at the government’s participation in an IMF bailout of South Korea, while they say unpaid Korean debts are putting NZ’ers out of work. Tour companies are in disarray and about 30 coaches are likely to be repossessed.

The NZ Tourism Board estimates Korean tourist numbers to drop by 70- 80% this year. Until this year, Koreans were the third biggest tourist group to visit NZ, spending an estimated annual $200m on local goods and services.

11 January 1998

The Economist Intelligence Unit in London says that NZ’s continuing high level of foreign debt poses the greatest threat to continued economic growth in 1998.

The US economy has created 370,000 new jobs in December, according to government statistics which show new evidence of solid growth in the economy, with few signs of inflationary dangers.

ACT calls for the government to bring forward its tax cuts to April 1st, to help the economy cope with fallout from the Asian crisis.

13 January 1998

Manufacturers fear a flood of cheap Asian imports into NZ as a result of the continuing Asian crisis.

The IMF says that the NZ government should take a tighter control on public spending in order to achieve a more balanced policy mix to address the challenges in the economy.

14 January 1998

Taumaranui’s Affco works will be mothballed with the loss of 260 jobs. Affco was the largest employer in Taumaranui, a town already hit hard by the recent closure of the mill at Tangiwai with the loss of 76 jobs.

About 100 Taumaranui workers have taken temporary jobs at the new Affco shifts operating at Wanganui and Wairoa.

The number of jobs advertised in the three main metropolitan newspapers in NZ fell sharply for December 1997.

15 January 1998

Laurie O’Reilly 1942 --1988, recent Commissioner for Children, dies at his Christchurch home today.

In Britain, PM Tony Blair launches a crusade to transform the British welfare system to one based on work. It will almost definitely involve cuts to existing benefits.

A recent University of Otago survey of budget advisory service clients has found that 17% are unaware of their full entitlements.

Ivan Sowry, of the Auckland People’s Centre, says that of the 2,500 cases his service investigated each year, almost 1,000 involved people getting the wrong money. Sowry says that an overworked and under-trained Income Support staff are failing to ensure beneficiaries get their full entitlements. He says some staff believe that it is their job to save the government money, so do not pass on information about various grants and benefits.

Indonesia’s President Suharto agrees to a package of economic reforms after meetings with IMF officials. Tariffs will be cut, barriers to foreign ownership of companies will end, as well as restrictions on investment. Fuel and electricity subsidies will be ended gradually.

16 January 1998

Eltham meat company Riverlands says it is desperately understaffed and is offering jobs to dozens of Taumaranui workers laid off earlier this week. The Riverlands plant has had a long-running contract-dispute which saw its employees locked out of the plant for seven months. Despite the recent closure of the nearby Waitara works, the Riverlands plant has still been unable to attract enough staff.

17 January 1998

The Taumaranui meat processor Wallace Corporation has decided to expand its operations and expects to create 100 new jobs by next summer.

18 January 1998

Amidst Asia’s financial crisis, the governments of the battered Tiger economies are preparing to expel millions of foreign migrant workers. Thailand and Malaysia plan to force out 2.5m workers, while South Korea is likely to send back 270,000 “guest” workers. It is expected that this forced repatriation will cause unprecedented hardships for some of Asia’s poorest countries.

Britain is to scrap its controversial policy of sending mentally ill people out of hospital and into “community care”.

150 jobs at Taranaki Healthcare are under review in the organisation’s latest phase of restructuring.

19 January 1998

Japanese car company Mitsubishi Motors confirms it will withdraw from car assembly in NZ in the light of the government’s decision to abolish tariffs by December 2000. Up to 300 jobs are expected to go when the Porirua plant closes.

20 January 1998

First cabinet meeting for the new year discusses the deepening Asian crisis.

NZ’s annual inflation rate has fallen to its lowest level in nearly six years. The consumers price index rose to only 0.8% for the year to December.

Hong Kong airline Cathay Pacific sacks 760 staff or 5% of its workforce, after the Asian crisis decimates its airline traffic.

21 January 1998

Heavy job losses are being predicted in Fiji after it decides to devalue of its currency by 20%.

In Indonesia, the rupiah currency falls even further to a record low of 12,000 to the US dollar, as markets fail to register confidence in the IMF rescue deal.

NZ Tourism Board officials leave for Asia to assess the size of likely losses to NZ’s $1.2 billion Asian tourist trade.

22 January 1998

More than 500 jobs are threatened after Palmers Garden World, Watkins and Brentex are placed in receivership. All are members of the Maine Investments group, which also owned the Levene chain which was recently broken up after it also went into receivership.

Clothing makers in Fiji -- caught by the sudden devaluation of the Fiji dollar -- want the NZ government to prop up their industry by waiving millions of dollars of tariffs on goods they sell here.

23 January 1998

Labour’s Steve Maharey criticises the British Labour Government’s push to slash welfare benefits. He says that the NZ Labour party does not support this path of reform: “Cutting benefits is absolutely wrong. You need to provide genuine opportunities for people to get off benefits rather than pursuing the mistaken belief that cutting benefits gives people an incentive to get off welfare. It is just a lie…”

Nursery owners around NZ are angry at the decision to place Palmers Garden Centres into receivership. The decision caught them by surprise and has left them owed with tens of thousands of dollars for goods delivered as recently as yesterday. The jobs of many of the nursery suppliers now depend on who might buy the business.

In Indonesia, the rupiah currency tumbles further to 15,000 to the US dollar, and the inflation rate is now in excess of 60%. Food shortages and skyrocketing prices are starting to threaten the country’s social fabric.

In France, angry jobless activists storm the Paris headquarters of PM Lionel Jospin’s Socialist Party, in protest at his refusal to agree to a hefty increase in unemployment benefits.

24 January 1998

PM Jenny Shipley signals that the government will be prepared to cut its spending should the Asian financial crisis worsen dramatically.

Fletcher Challenge Forests says that log volumes are down about 50% and are likely to average even less over the next three months.

The IMF has trimmed NZ’s growth forecast for 1998 down to 3.6%, from the previous forecast of 3.9%.

25 January 1998

The Asian crisis has dealt a blow to NZ business confidence, which is at its lowest level for seven years, according to Institute of Economic research’s December quarterly survey.

26 January 1998

The government is briefed by Reserve Bank Governor Don Brash and acting Treasury Secretary Mark Prebble on the impact of the Asian financial implosion on NZ. PM Jenny Shipley emerges from the briefing to say that the government’s July 1st tax cuts package and $5 billion spending package are still going ahead.

27 January 1998

Labour leader Helen Clark is not convinced that the government is taking the Asian crisis seriously enough. Clark: “The government is still presenting itself as content with the state of the economy when clearly the warning signs are abundant that there is trouble ahead …”

ACT NZ says the government will “come a cropper” over its failure to adjust either spending or tax cuts in the face of the sharp Asian downturn.

The Business Roundtable urges the government to scrap the Holidays Act, or to just declare holiday entitlements and leave it to employers and employees to negotiate conditions between themselves.

The Indonesian government puts a freeze on corporate foreign debt servicing.

The Asian crisis is likely to cost NZ educational institutions more than $60m in lost revenue this year.

28 January 1998

Treasury predicts that the Asian crisis will mean the projected surplus in the 1998-99 Budget will be cut by $300m.

The French National Assembly begins a debate on a controversial Bill to cut the working week to 35 hours. The French PM says the cuts to working time will create about 700,000 new jobs, but there is opposition from parties who say that costs will rise, and employers should be able to negotiate terms and conditions directly with their employees.

29 January 1998

Finance Minister Bill Birch says that the Asian crisis will not seriously effect NZ’s growth rate. His expectations: about 1% fall in growth over the next two years.

The Eltham company Pastoral Foods, which employs 300 full-time people, has been hit hard with the cancellation of Asian contracts, and is considering working reduced hours, or laying off half its workforce.

The ANZ Bank -- with the greatest exposure to Asia of the four major banks -- reveals that it has $A2.7 billion in loans outstanding to borrowers in South Korea, Indonesia and Thailand, the three hardest hit Asian economies.

Rebel NZ First MP Neil Kirton describes the proposed Code of Social responsibility as “… a responsibility mission by latter-day inquisitors and Calvinistic social reformers to uplift the great unwashed.”