Saturday, December 17, 2005

John Armstrong: Key by a whisker from PM

David Benson-Pope should have known back in March that the fickle finger of fortune was not pointing his way when he was caught on camera in Parliament asleep, eyes closed and mouth open. Fate had decreed this was not going to be his year.

He was not alone in that regard. In judging 2005's winners and losers - and ultimately determining the politician of the year - it is easier to start with the losers.

The casualty rate was unusually high in 2005, the result perhaps of the long and fractious election campaign that effectively began as soon as MPs had returned from their summer holiday.

To the roll of losers, alongside Benson-Pope, add George Hawkins, Taito Philip Field, tax cut-plagued Michael Cullen (likely to stage a rapid recovery, however), Tim Barnett (missed out again on becoming a minister), Jim Sutton (levered out of the Cabinet), National's demoted health spokesman, Paul Hutchison, and poor man's maverick Brian Connell, whose future in politics is about as rosy as a turkey's at Christmas.

They were the lucky ones. They survived the election.

Out went John Tamihere, five largely faceless United Future MPs, five New Zealand First MPs who were equally anonymous apart from Dail Jones, plus two-thirds of the Act caucus.

Whatever you think of their politics, Parliament is the poorer for the forced departure of Jones and Act's Ken Shirley and Stephen Franks.

Although he went voluntarily, Richard Prebble, who had evolved into something of an elder statesman, also leaves a big hole.

The stepping down of two great parliamentarians in one year - Jonathan Hunt being the other - was unfortunate. To lose a third was absolute tragedy.

Few MPs develop a devotion to the institution in the way Rod Donald did. A passionate advocate of electoral reform prior to getting into the House, his boundless energy naturally switched to parliamentary reform once inside, particularly curbing the power of the Executive.

His understanding of the intricate workings of Parliament won him cross-party respect. It also gave him a better perspective on the politics of the possible - and that is what his former colleagues will sorely miss.

His death is not the sole reason the Greens are collectively this year's big losers. Helen Clark may have had no option, but the Greens were jilted by Labour.

It has left a bitter after-taste - and not just among Green voters. Labour voters also feel the Greens got a raw deal. Labour will surely pay a price in 2008 when it likely can least afford it.

But there is also a message for the Greens in their missing out on Government. They must sharpen up and present a more professional image so the likes of Peter Dunne cannot typecast them as "wacky" or "scary" and use that as reason for refusing to deal with them.

Given the rash of losers, the year's winners are correspondingly fewer.

It is tempting to cite National as the biggest, given the near-doubling of its caucus, which has inspired a quadrupling in morale.

The dynamics have shifted dramatically in Parliament, even if National is still coming to terms with the extra firepower it has in terms of questions and speaking slots.

But Labour still occupies the Government benches. Power is what matters. The year's biggest winner is the Prime Minister - by a country mile. But does that make her the politician of the year?

It is a difficult call. Helen Clark must be on the short-list, the other contenders being National's John Key and Bill English, one of whom will lead National into the next election.

In Clark's favour is her winning three elections in a row - and, more remarkably, winning the latest one with a higher percentage of the vote than when she came to power in 1999.

She has led Labour for 12 years, yet her ratings as preferred Prime Minister remain staggeringly high and are a crucial element in underpinning broad support for her party.

Yet Labour this year delivered its worst performance in Government since 1999 and, going into the final week of the election campaign, thought it had lost the "unlosable" election.

For Clark's part, there was the costly failure to get Cullen to cut taxes. There was the inexplicable inability to show some sympathy for the functionaries who copped it, so to speak, in the case of the speeding motorcade.

Her Cabinet ministers have caught the Beehive disease of trying to argue black is white when things are obviously black. The Benson-Pope affair has exposed the gulf between Clark's initial setting of new standards for ministers and the back-to-normal behaviour now that has them finding any old excuse to wriggle off the hook.

Some of Labour's discomfort is down to Bill English, who understands that for National to win the political argument it must puncture the notion that Labour is a better manager when it comes to running the Government.

In his shadow education portfolio, he has painstakingly chipped away at defacing Labour's reputation, most memorably spotlighting the NCEA scholarship debacle.

English's self-resurrection has seen his influence in the caucus correspondingly increase, with Don Brash promoting him to No 3 in the rankings.

But it is Key who has delivered the standout performance of the year. He has hardly put a foot wrong.

He is the first National MP to get the better of Cullen in Parliament. He did so at a time when Labour has had the huge budgetary benefit of a booming economy.

True, bulging Government coffers also made it easier for Key to write National's tax policy, but he delivered a package of cuts that found almost universal acclaim but which were politically watertight.

He ends the year snapping at Brash's heels in the preferred Prime Minister stakes, having hit 7 per cent in the latest One News-Colmar Brunton poll.

Key's success is in part down to obvious intellect, unrelenting drive, superb communication skills and absence of self-doubt. The competence and self-confidence make it easy to forget how far he has come in little more than three years in Parliament.

He has made it look easy. However, unlike his leader, Key understands that becoming a successful politician requires developing a whole set of new skills - such as anticipating what your opponent will do next.

He does the graft, and his consequent rapid maturing into a true political animal is why Key, in a photo-finish, just beats Clark for the title of politician of the year, with English picking up the bronze.

The year's other winners? Judith Collins jumped on to National's frontbench. Still to show real policy grunt, she has one vital ingredient National mostly still lacks - a killer instinct when it comes to hounding Labour ministers.

The other obvious winner is the Maori Party, which on early showing is going to have a huge impact on Parliament. Pita Sharples and Hone Harawira already seem so much at home they are in danger of overshadowing Tariana Turia. Labour's Maori MPs must be shuddering.

The Cabinet reshuffle saw David Parker - still in the category of David who? - fast-tracked from the backbenches into the heavyweight energy and transport portfolios.

Also deserving his promotion was Clayton Cosgrove, a Mike Moore protege who put his neck on the line for Tamihere and Hawkins - thus putting loyalty ahead of ambition.

Rodney Hide's epic victory in Epsom was almost enough to put him on the shortlist for politician of the year. But while that saved Act from oblivion, it did not save his colleagues. If anything, Act is more directionless than before Hide took over as leader.

Editorial: A man to take on the world

Sportsman. Politician. Businessman. Diplomat. Economic-rainmaker. Fixer. Leader. Winner.

Choose any of these labels and they can be worn, appropriately, by our New Zealander of the Year, Jock Hobbs. The NZ Rugby Union chairman won the accolade from a substantial field of achievers nominated by almost 1000 Herald readers and members of our editorial staff.

Our criteria for this award are that the person's achievements or actions in this year have been to the betterment of the country and its people. There is no doubt that through Mr Hobbs' outstanding range of talents and the manner in which he deployed them in 2005, his sport and the country will be better off.

The pinnacle of his success was leading the triumphant New Zealand bid to host the 2011 Rugby World Cup. Two bigger, richer nations in Japan and South Africa were said to have the inside running, but Mr Hobbs and his team out-strategised them for a surprise victory.

There was an immediate impact on the country's morale. We could still compete off the field in professional, global sport.

More importantly there will be long-lasting economic and sporting benefits to Auckland, where the biggest matches will occur, and the rest of the country. Success in that bid was the result of a strategy led by Mr Hobbs and his union chief executive, Chris Moller, over many months.

First, the Government was enjoined as a direct partner - a political master-stroke that provided certainty and a national commitment in the eyes of the International Rugby Board.

Then, Mr Hobbs employed his personal rugby charisma and business networking, with Mr Moller, in a succession of international sorties to court votes in rugby capitals. It was a direct, "whites-of-their-eyes" approach, with the necessary embellishments to convince delegates NZ would scratch other nations' backs as necessary.

Finally, the chairman assembled a bid presentation team of inspired range and calibre to hammer home in Dublin the messages he had personally delivered in restaurants and meeting rooms across the globe. He even advised the Prime Minister to change her speech so as to blend more subtly into the campaign's themes.

It was a remarkable achievement, against the odds. Yet the success was in keeping with Mr Hobbs' year. He presided over the national sport for its biggest challenge away from hosting a World Cup, that of hosting a Lions tour.

The All Blacks won all but one of their season's internationals and all of the trophies that were on offer.

The rugby union through its partners in Sanzar negotiated a new path for professional rugby with its broadcasting funders, including an expanded Tri Nations and two more teams into a Super 14. Mr Hobbs' union also recast the domestic competition, which will next year see expanded national provincial tournaments, in pools of teams.

Any individual's success in one year reflects past achievements. Jock Hobbs, the All Black captain of the mid-1980s, disappeared from view after repeated concussions and the underhandedness of the boycott-breaking Cavaliers tour to South Africa in 1986, of which he was a participant. In the mid-1990s, he returned to play a key role in thwarting the All Blacks being bought by an outfit named World Rugby Corporation. In 2002, he was back again, to be made chairman of the union.

New Zealand's successful bid for the cup was a surprise. Mr Hobbs' success in this Herald award less so.

No sports leader has won it since Sir Peter Blake in the mid-1990s. Then, too, it recognised a person of broad talents who had secured for the nation something that promised infrastructural development, economic benefits, sporting hope and joy and a chance to show the world what New Zealand can do.

Fran O'Sullivan: Poor nations need to lift their game

The World Trade Organisation boss, Pascal Lamy, will need to wave more than his magic wand to get an outcome from the talks going on in Hong Kong that means more than PR fluff.

What Lamy needs to wave is a big stick - not just at the rich nasties like the European Union, US and Japan which still cosset their farmers with absurd subsidies but at the poorer developing nations.

Lamy's magic wand - used theatrically at the opening ceremony for the six days of talks - was given to him by one of his secretaries in Geneva. "It's a plastic toy and certainly doesn't work," he later admitted on his daily blog.

The blog gives an insight into the pressures he feels trying to get 149 nations to converge their competing interests.

"Sometime I feel like a shepherd, sometimes like a nurse, or a mid-wife, trying to help members in a difficult delivery."

Lamy should abort the show in the hope that the embarrassment of failure might bring some much needed rigour to an organisation which has diverted so far away from its raison d'etre - trade liberation - that it risks being another "development" version of the United Nations, and just as ineffectual.

Take the incessant propaganda mounted outside the talks by a raft of South Korean farmers (called a "mob" by Hong Kong's excitable television journalists) who are pulling every stunt to try to ensure their "Down, down WTO" chants help push the talks over the brink into outright failure.

What those farmers would be better off doing is copying their Hong Kong cousins who decades ago jettisoned their ploughs for manufacturing tools in the first steps up a ladder of success that has seen this city state transform into East Asia's most significant financial capital.

It is not as if these farmers do not get globalisation. Their demonstrations are co-ordinated by text-messaging leaders who turn off the loud-hailers once the television cameras disappear.

Instead of confronting the fact that new technologies and more efficient practices by their international farming peers means their rice-growing industry has become frankly uncompetitive - and doing something about it - the rice-farmers want to be preserved on their farms like cultural icons. Who can really blame them?

French farmers did just that by persuading Paris to swap the domestic farming subsidies that propped up their small holdings for environmental and cultural preservation top-ups.

But it still does not get to the crux of the matter.

The problem is no one really wants to stand up to the righteous arguments mounted by the lesser developed nations - or their NGO allies like Oxfam - and probe the real reasons behind national failure.

They would rather beat the drums in favour of the "deserving poor", instead of examining how such countries can manage a transition to a more competitive global trading environment.

But if the WTO does not want to simply be labelled the "World's Protectionist Organisation" it needs to take a much more rigorous approach to understanding why some of these poorer nations are economic basket-cases.

Try corruption for a start.

The WTO should require an independent investigation into what happens to the tariff income that some of these smaller nations say is necessary to prop up social conditions.

Does it really find its way to the pockets of those farmers and small business people who will face significant costs as they either try to upgrade their businesses to compete globally or shift (as the Hong Kong Chinese did) into other industries?

Or does it just go into the pockets of high-ranking Ministers and Government officials - like Tonga - which this week became the 150th nation to join the WTO club.

Try economic liberalisation.

New Zealand, like Australia, is one of the few countries which removed subsidies and cut tariffs without waiting to make a trade off with other nations. We were verging on bankruptcy drowning under the weight of propping up a farming sector that invested its subsidies in sending their kids to private schools and taking overseas trips, instead of making farms efficient.

Two decades on we have one of the world's most efficient farming sectors - those who couldn't cut the mustard sold up and moved to town - or went bankrupt. But cutting tariffs enabled the rest of us to enjoy much cheaper imports putting cars (second-hand imports aside), stereos, clothes and many consumer goods within the range of ordinary people.

Kiwi farmers will say - and they are right - that they paid a huge personal price in bankruptcies and suicides as they went through the "adjustment process". But the World Bank is the place to help these smaller nations with handups - not US aid (which is basically dumping) or giving these smaller nations preferential access to rich countries' markets without requiring them to lift their game.

The problem is that the trade game is now being fought on moral lines (WTO: More Dangerous than bird flu reads one poster). The poor nations carry one big card - they can jettison the talks by walking out.

But the "rich" nations have no excuse either for maintaining tariffs into the 21st century. If they believe their free trade mantras they should "tear down their walls now" - anything less will not work.

John Roughan: Time for all of us to take a bow

When nominations were called for the Herald's New Zealander of the Year, my nominee was not an individual. The most remarkable achievement of the year, it seemed to me, belonged to us all.

The sum of the decisions we made at the September election was on reflection astonishingly good. By a narrow majority we resisted the twin temptations to disempower a national minority and take more tax cuts than we could probably afford. At the same time, we pulled the ship to starboard, ensuring government would be negotiated with parties on the right.

We left executive power deservedly with a party that has presided over economic stability but will not be able to indulge its left in what is likely to be its final term, and we lifted the Opposition to the point that it must moderate its attitudes in preparation for power.

In the electorates, Maori installed a new independent party which could change our politics, while Epsom ensured we wouldn't lose a character as delightful and dedicated as Rodney Hide and Tauranga called time at last on that imposter Winston Peters.

At every level it was a subtle and far-sighted set of decisions, a credit to collective common sense expressed through an electoral system that, for all its faults, permits such finely honed results. Hence my nominee for New Zealander of the Year was the New Zealand Voter.

Once we got around a table, I realised the superior case for those who brought us the Rugby World Cup. I remembered being surprised at my surge of excitement that morning when we awoke to the news from Dublin.

Hosting the cup had seemed a mixed blessing when I counted the cost of that joint proposal with Australia a few years ago. But having the whole tournament here suddenly brought immense possibilities. It could be a total national experience in a way that even the America's Cup was not.

Every corner of the country loves rugby. If I was planning this event I would make the most of the happy coincidence that the country is divided into five regions for professional rugby purposes and the World Cup is normally divided into five groups for the first phase.

Within each group there are four teams, one of the best five and several who would not ordinarily attract a crowd. Imagine if small towns that seldom see first-class rugby were invited to host one of the less likely teams, perhaps Argentina, Romania or Georgia, for the weeks of the round-robin phase.

The towns would take "their" team to heart, hosting them as warmly as only small towns can. And if at least one of the team's matches was played in its "home" town, tourists and television crews would be drawn deep into all regions and every part of the country would have a rare chance to participate intimately in an international event.

The possibilities are enthralling, quite apart from the spur it will give to the growth of stadiums, hotels and transport infrastructure between now and 2011.

The leader of the team that has brought us these possibilities is undoubtedly the individual who has done most for the national good this year. But that collective decision in September deserves a toast.

Maybe it is the season, but when I assess that state of the country these days it is hard to resist a certain euphoria. Work is plentiful, money is available, prices are stable, incomes are rising, business is good, welfare is generous, and if poverty persists we haven't heard much about it since Labour came to power.

For the past couple of years it has been hard to find an external explanation for the strong economy. The low dollar and high commodity prices of Labour's first years have long gone. So has the subsequent immigration wave. Yet the housing and consumption sparked by that immigration just keeps booming.

The problems we face are the problems of success. Foreign savers and fund managers have so much faith in us, the NZ Reserve Bank cannot convince them the interest rates they are getting will eventually stop us borrowing and the dollar will drop.

High exchange rates are hurting our exporters, which is something we should worry about. But that is because our exports are still pretty raw commodities, and as time goes by it is hard to worry about that too.

We have had an open economy with market-led investment for 20 years now. If more sophisticated exports were profitable to produce here it would be happening. Fairly raw food and fibre are probably our natural means of support, at least until the day we vote for a much larger population.

I would vote for that right now, but I am in a tiny minority. Polls suggest that open space and a pristine environment are more important to most than a bigger economic base. We could possibly double the population and still have plenty of open space but that is a debate that still awaits its day.

Meantime, we are doing fine living with one of the largest current account deficits in the developed world. We have been living well on the faith of foreign lenders for so long now that we must be doing something right. They simply see here a safe, stable, well-governed society that pays its bills. For that stability and quality we have ourselves to thank. Take another bow, New Zealand voter.

... and have a happy Christmas. This column will take a break for three weeks.

Paul Thomas: Recapturing the magic of cinema

Last week I argued that movies ain't what they used to be. My love affair with cinema began to cool around 1980 and within a few years we were just good friends. Come the nineties, we were officially estranged. When we bumped into one other, we'd be perfectly civil but we were just going through the motions. Once the magic goes, it's difficult to recapture.

Those who disagree with my thesis would probably argue that it says more about me than about the movies. They might even label me out-of-date and delusional, like the faded silent movie queen Norma Desmond in Sunset Boulevard.

"You used to be big," someone tells her. "I am big," she replies. "It's the pictures that got small."

In the spirit of getting my retaliation in first, I decided to put some meat on the bones of my argument. Where better to start than the heavyweight British film magazine Sight And Sound.

Every 10 years since 1952 Sight And Sound has asked critics around the world to nominate what they consider to be the 10 best films of all time. In 2002, as well as polling 145 critics, the magazine separately polled 108 directors whose tastes, predictably, proved to be more mainstream.

It needs to be said that everyone involved in this exercise takes cinema extremely seriously. Those who go to movies out of habit or treat them as an extension of TV, something to chill out in front of while guzzling popcorn, will find very little that rings a bell.

Having failed to make the cut in 1952, Orson Welles' Citizen Kane (1941) has topped every poll since. While the casual viewer might regard Kane as a powerful melodrama on a well-worn theme (man gains world, loses soul, true love etc in process), film buffs adore its array of technical innovations, notably deep focus photography.

By making the background as clear as the foreground, deep focus enabled a new way of storytelling. For instance, in the same shot an unfaithful wife and her lover can be exchanging suggestive whispers on the dance-floor while her husband watches from the far end of the ballroom, murderous intent written all over his face.

The most recent film in the critics' Top 10 is The Godfather, part two of which came out in 1974. Only one post-1980 film made their top 45 - 1982's Blade Runner.

The directors are marginally less inclined to fossick around in the mists of time - both The Godfather and Raging Bull (1980) make their Top 10 - and they also find room for two other relatively accessible movies: Lawrence Of Arabia and the end-of-the-world satire Dr Strangelove.

I could claim resounding vindication and leave it at that but that wouldn't be in the festive spirit or in keeping with this column's strenuous pretensions to being at the socio-cultural cutting edge. Besides, for all their merits, revolting Russian sailors (Battleship Potemkin, 1925) and post-war Italian neo-realism (Bicycle Thieves, 1948) don't really do the trick on those nights when we hanker for the aesthetic equivalent of red meat.

Therefore in case the golden summer we crave doesn't eventuate and in the hope that readers have access to an excellent video shop, here are my choice of the best 40 films of the last 40 years.

The Sixties: The Battle Of Algiers; Blow-Up; Bonnie And Clyde; Stolen Kisses; Bullitt; Z; Once Upon A Time In The West; The Conformist; Fellini's Satyricon; The Wild Bunch; MASH.

The Seventies: Claire's Knee; Investigation Of A Citizen Above Suspicion; Dirty Harry; A Clockwork Orange; The French Connection; The Godfather Parts 1 and 2; Just Before Night; Last Tango In Paris; Don't Look Now; Pat Garrett And Billy The Kid; The Conversation; Chinatown; The Man Who Would Be King; Nashville; Taxi Driver; Cross Of Iron; Apocalypse Now.

The Eighties: Raging Bull; Blade Runner; Betty Blue.

The Nineties: Miller's Crossing; Barton Fink; Unforgiven; Pulp Fiction; The Usual Suspects; Heat; The Big Lebowski.

So far this century: Mulholland Drive.

Not surprisingly, this list bolsters my case; indeed 25 of the 40 films came out between 1965 and 1975.

As is inevitable, there are glaring omissions, the most notable probably being 2001: A Space Odyssey which came in at number six on the critics' all-time list.

My take on 2001 is that it's a classic example of how once something has been deemed profound by a sector of the critical fraternity, many people will repeat the mantra rather than admit that they can't make head or tail of it. I could add that it does a good job of conveying the paralysing boredom of space travel.

Another notable omission is Jane Campion's lavishly praised The Piano. I'm sure I'm in the minority but it will be interesting to see which side posterity comes down on.

The nineties outperform the eighties largely because of the contribution of Joel and Ethan Coen who, with due acknowledgement to Quentin Tarantino, are the most talented and original film-makers of their generation. '

If you haven't seen a Coen Brothers movie, I urge you to do so.

Perhaps, though, you should make their acquaintance via something other than The Big Lebowski.

Brian Gaynor: Small but far from perfectly formed

Not surprisingly, given the huge investment deficit, we are poor savers and big borrowers.

The managed funds and mortgage debt figures in the accompanying table show that our borrowings are rising more rapidly than our investments and, unlike the Australians, we have far more debt than managed funds' assets.

In the past two years, the total amount of managed funds has risen by A$224.5 billion ($242.9 billion) in Australia and mortgage debt has increased by A$182.4 billion.

In sharp contrast, our managed funds' assets have risen by a miserly $12.2 billion and our mortgage debt has grown by $30.2 billion.

Another key difference between Australia and New Zealand is the percentage of managed funds invested in the domestic sharemarket.

Australian investors allocate 38 per cent of their managed funds to domestic equities and unit trusts, whereas New Zealand investors allocate only 14 per cent to these asset classes.

New Zealanders have more invested overseas and in interest- bearing securities than domestic equities.

Finally, the last two sets of figures in the accompanying table are the total value of the ASX and NZX and the number of listed domestic equities on each market.

The ASX is huge compared with the NZX in absolute and relative terms. At the end of last month, the NZX had a total value of $62.7 billion or 42 per cent of New Zealand's GDP. The Australian sharemarket had a total value of A$1.05 trillion. Or 116 per cent of Australia's GDP.

Back in the 1980s, the total value of the NZX represented 80 per cent of New Zealand's GDP.

The NZX is not only small but it is 48 per cent overseas-owned, the highest in the world.

The next highest is Australia, which is 40 per cent overseas-owned.

If we take these figures into account, the Australian ownership of the ASX is A$31,000 per capita and the New Zealand ownership of the NZX is a miserly $8000 for every one of 4.1 million inhabitants.

By comparison, Australians have, on average, A$34,300 of residential mortgage debt and each New Zealander has A$28,300 of mortgage borrowings. There are a number of reasons for our low level of investment and participation in the NZX including:

* Property is the preferred asset of most New Zealanders by a wide margin and financial institutions reinforce this by aggressively lending on residential housing.
* There are major tax advantages to investing in property through loss- attributing qualifying companies (LAQC). In effect, interest costs can be deducted from investors' income yet capital gains on property are non-taxable.
* Most New Zealanders identify property investment as ownership yet equity investment is seen as the purchase of shares rather than the part ownership of a company. The inability to link share purchases with ownership has been a major deterrent to equity investment.
* The NZX and the broking community have failed to establish an effective long-term education programme to convince individuals of the benefits of equity ownership.

The most disturbing feature is that the NZX is not attracting investors under 40, as they are much more interested in the leverage and tax advantages of property investment.

The average age of those attending annual meetings seems to be getting older and major investment firms confirm that the under-40s are much more interested in property than shares.

Because of this, we are borrowing more and more overseas to buy residential property and this is an important contributor to the huge current account deficit.

In addition, a high percentage of our major companies have been taken over by overseas interests and 48 per cent of the NZX is overseas-owned, including 74 per cent of the NZX's largest company Telecom.

These figures reflect the absence of an equity ownership culture and are major contributors to the current account deficit in the form of dividend outflows.

Young investors are not interested in the NZX because it is failing to attract new and interesting listings.

In the past 12 months, the total number of ASX listings has risen by 145 to 1631 whereas the NZX has had a net reduction of three companies to 158.

Since the middle of last year at least four New Zealand companies - BrainZ, Endace, Living Cell Technologies and Neuren - have listed on overseas sharemarkets.

Arguably they have much higher market values on these exchanges than they would have on the NZX because individuals in other countries are more willing to invest in relatively high-risk companies.

It is difficult to know if the NZX is small and cannot attract new listings because investors are not interested or whether investors are not interested because the NZX is too small.

Whatever the reason, the over- reliance on overseas debt-funded property investments has to be reversed because it is making a significant contribution to the current account deficit.

The lack of enthusiasm for equities means that a high percentage of our corporate sector is foreign-owned and this also contributes to the current account deficit.

A total reliance on Reserve Bank monetary policy to dampen our enthusiasm for residential property is hopelessly ill advised because it pushes up interest rates and the New Zealand dollar.

This also has a negative impact on the current account because it makes exporting more difficult.

* Disclosure of interest; Brian Gaynor is an executive director of Milford Asset Management.

Paul McIntyre: Scalp for Stokes in billion-dollar pay TV case

Finally, Kerry Stokes is likely to have a scalp in his blockbuster A$1 billion-plus lawsuit against Kerry Packer, Rupert Murdoch & Friends in the Federal Court.

The scalp is Ian Philip, chief general counsel for News Ltd who admitted this week in the box that he lied to Telstra, "possibly" defrauded the telco and destroyed documents he feared could be used against himself or News Ltd in a later court case.

Indeed, that court case has arrived after Kerry Stokes, chairman and the biggest shareholder in TV broadcaster, Network Seven, is taking 21 parties to court over what he alleges was collusion to put his pay TV arm C7 out of business by stitching up the broadcast rights to the rugby league and Australian Rules competitions in 2000.

The case has now surpassed 50 days in the courts, often involves 30 barristers in a day and has so far cost Seven more than $20 million.

For Stokes, News Ltd's Ian Philip was always going to be a hot target - from day one he was the only individual in the mammoth lawsuit to be sued and very early on he copped plenty of attention from Jonathan Sumption, QC, one of the United Kingdom's top three silks who is on a reported fee of A$23,000 a day to lead Stokes' case in Sydney.

Sumption alleged in the opening week of the case that the National Rugby League sold six-year broadcasting rights in 2000 to a News Ltd-led consortium for at least $50 million less than it could have because of "scandalous" conduct by Philip.

He claimed the Seven Network lodged a financially superior bid but was rejected because Philip misused his position on the NRL body which awarded the broadcasting rights.

Sumption said Philip had leaked three confidential C7 offers to its rival bidder, Fox Sports (a sports channel which Murdoch and Packer own 50 per cent each, carried by Foxtel), on whose board Philip also sat, and did not withdraw from the NRL committee when it awarded the rights to Fox Sports.

"He knew he could fix the [NRL] committee and he did so," Sumption told Justice Ronald Sackville nearly two months ago.

What emerged this week by Philip's own admission was that he did indeed fiddle a few things and the assumption now in some corporate and legal circles is that once this court case is over, Philip's tenure at News Ltd might be too, along with his reputation as a top corporate lawyer.

The heart of the trouble for Philip was a handwritten fax he sent to Telstra executive Bruce Akhurst on December 9, 2000, urging Telstra to contribute up to A$14 million to help head off a C7 bid for the NRL pay TV rights.

Last week Philip filed a new witness statement saying the fax contained six statements that "I knew were untrue or misleading".

Philip also told Akhurst that unless Telstra contributed between A$9 million and A$10 million a year, the NRL Partnership would accept the C7 bid.

"If Foxtel loses NRL, the impact will be tragic,"' he told Akhurst.

Philip said he knew this was false because he had already decided to vote against the C7 bid and the NRL committee's decision had to be unanimous to pass.

In a statement last week, Philip said he wanted Telstra to stump up the extra money "to avoid News Ltd being criticised for making the NRL accept a lower bid than the C7 bid".

Philip said he asked Akhurst to destroy the faxes because he feared Telstra might leak them to Seven, which might then sue him for breach of confidentiality.

On Monday, when asked by Sumption if he had succeeded in defrauding Telstra because it had been influenced by his fax to support an increased bid for the NRL rights, Philip said: "That's possible".

"Is it your view, Mr Philip, that in pursuit of an important business objective it may be legitimate to tell lies?" Sumption then asked.

"I don't think that's the right thing to do," Philip replied. "I was desperate to try to get funds from them to facilitate the acquisition of the NRL rights, and things were moving very fast."

"Looking back on it now, I think it was a silly thing to do, a very stupid thing to do," Philip said yesterday.

Richard Inder: Sceptics remain as NZX cleared

The Securities Commission largely gave the NZX a clean bill of health this week as it declared shortcomings highlighted by the collapse of discount broker Access had been largely corrected.

But investors should regard the conclusion with a fair dose of scepticism.

The commission's report - an analysis of NZX's conduct of its regulatory role before the September 2004 collapse - paints a disturbing picture of New Zealand securities markets.

The regime giving NZX the ability to perform its core regulatory function - ensuring broker compliance with its own rules - was established by a team largely without reference to the NZX board.

Inspection procedures were developed ad hoc, were not documented and supervisors - read NZX chief executive Mark Weldon - could not assess the methodology designed by the team.

No one in the team had experience in leading compliance teams or in designing inspection or audit programmes in New Zealand.

When asked whether NZX thought of sending one of the team overseas to observe the operation of a compliance team in another jurisdiction Weldon replied: " ... it was certainly something we will consider and will not exclude, but we did not obviously do it at that point in time."

NZX management did not monitor the performance of the team and instead took what the commission described as a "passive" stance, responding only to matters escalated by the ill-qualified team managers.

The effects of these and other shortcomings highlighted in the report were profound.

NZX rules, for example, state explicitly that client funds should be held in a trust account and used only to settle client trading obligations. (These rules are at the centre of a Serious Fraud Office case against Access and its chief executive Peter Marshall. Such client funds were allegedly used to keep the business running.)

Before the collapse of Access, there were widespread breaches of these rules. Geoff Brown, NZX head of markets, for instance, told the commission there were a number of brokers at the time that believed it was acceptable to pay for business expenses out of client accounts.

Yet one of the key members of the compliance team said at the time that there was nothing in the NZX rules that prevented a broker from paying his or her phone bill out of client accounts.

"That was our understanding," the officer told the commission.

In August 2003 the NZX team also highlighted shortcomings with Access' back office systems that prevented the broker from properly monitoring its client trust fund account and its capital adequacy calculations.

However, reviews of Access to ensure compliance with NZX's requirements were delayed several times. Excuses for the failure to review the broker included chief executive Peter Marshall's poor health, his holiday plans and the absence of key staff. In fact NZX did not revisit Access until it collapsed in September 2004.

This is only the start of the many failures included in the report.

More to the point, all this occurred despite Weldon asserting that the regulatory function of NZX was a "quality mark".

He told the commission: "Damage to the reputation of NZX as a regulator is our single greatest fear."

The commission's report concludes that since the collapse NZX had done much to repair the regulatory function. Measures included the creation of NZX Discipline to hear alleged breaches of NZX rules; taking on new staff and beefed up compliance standards among other things.

Weldon and other "senior market figures" had assured the commission NZX had adopted a more rigorous approach to compliance; a report by accountant Grant Thornton into broker management of client funds in the wake of the collapse has sparked a broker education programme and a review of procedures.

However, it is an inescapable fact the commission's confidence relies on the assurances of Weldon and the NZX board - the very people who must bear responsibility for the creation of what was a flawed compliance regime.

Secondly it relies on assurances from an industry that has shown itself reluctant to accept even the previously flawed regime. Weldon told the commission the first time a note was sent out asking a broker to supply certain information ahead of an inspection, NZX encountered resistance.

"It was like ... a whip being cracked ... and there was a response of shock and there was a response of resistance to change," Weldon said.

My own soundings of brokers suggests resistance continues to this day. And this is despite an assurance to the commission from a "managing principal" that "the benefits from the consistency and accountability of the current processes cannot be underestimated".

The Access collapse should not be dismissed as the result of shortcomings confined to one bad apple in the industry. The Securities Commission report shows such a failure was waiting to happen.

A more robust review of the legislation is warranted.