Saturday, January 28, 2006

John Armstrong: Brash must lift game or go

A week dominated by job cuts topped off by Michael Cullen's stunning gaffe over unemployment forecasts - the National Party could not have hoped for a better run-up to Don Brash's big splash at Orewa next Tuesday.

Or could more have been done? Chewing the fat over lunch this week, one press gallery journalist mused that if he were Brash, he would have called a press conference on the back of the lay-offs and set out National's 10-point plan for fixing the economy.

In other words, National should have grabbed the opportunity then and there to ram home its message.

But apart from issuing one press statement, Brash largely left his finance spokesman John Key to needle Cullen, whose week of economic woe was crowned by him mistakenly suggesting unemployment will jump by 20,000 this year - way over Treasury forecasts.

True, Brash has rejigged his earlier draft of this year's Orewa epistle to give far more emphasis to the economy. And, understandably, his strategists would not have wanted to upstage Orewa, which offers a rare opportunity for a Leader of the Opposition to reach out to voters unobstructed by opponents.

Even so, the question remains: is National really going to take the bull by the horns or sit back and wait (and hope) the Labour-led Government's popularity will slump of its own accord so National can walk into office in 2008?

Ignoring Cullen's shocker - and that was a one-day wonder - Labour is unlikely to be the easy target it was last year when it proffered such gifts as Cullen's "chewing gum" tax cut and George Hawkins' mishandling of the police portfolio.

Labour is steering away from the controversial. Its political correctness agenda is dead. This year is going to be all about "management".

That puts the onus on Brash and the rest of his front bench to lift their game. Exactly how will be thrashed out at a three-day caucus in Taupo after Waitangi Day and before the resumption of Parliament the following week.

National's front bench is probably functioning at 70 per cent capacity - and that is being generous. Yet even a fully functioning front bench cannot carry a struggling leader.

Brash's shortcomings in Parliament could be tolerated last term because he was making such a big impact outside the House. National could close its eyes and believe his tenure as Leader of the Opposition was a brief interlude before he became Prime Minister.

Now, three years of unrewarding slog stand between Brash and occupancy of Premier House.

He is no longer the novice who could get away with playing the political innocent. Voters have fixed their opinions of him. He is going to have to make much more of an impact in Parliament to make one outside.

There is a common assumption that Parliament does not matter, that it is an irrelevant talkshop whose proceedings are watched by a few sad political junkies.

Well, sorry. To use a Brashism, that is baloney. Parliament does matter. It matters because politics is about power and therefore about winning. It is essential you be seen to be winning in the forum where you daily confront your enemy.

In Parliament, there is no place to hide. If the leader is struggling, it is painfully obvious. It is devastating to morale and ultimately corrosive of a party's self-confidence, drive, discipline and unity. Before long, the muttering turns to plotting.

Even making allowances for Brash, National cannot exude confidence about winning in 2008 if it is worried that every time the leader gets to his feet in Parliament he will get trashed by the Prime Minister.

It is those nagging worries which in part fuel the speculation Brash will be rolled.

Orewa will confront that speculation simply because it must do so.

It is understood Brash has taken on board some of the criticisms of his rather academic, wooden delivery which makes it so easy for Labour to brush him aside.

Expect a more aggressive Brash in coming months - but not aggression for aggression's sake. It will be aggression born of anger at Labour's way of doing things.

It is not clear how much of the "new" Brash will be unveiled next Tuesday - and it has to be stressed he is not going to try to be someone he isn't.

However, the intention is that Orewa at least shows him reinvigorated and driven by a renewed purpose which sends the message he is is here to stay and busy building a Government-in-waiting.

This year's speech will be different in other ways.

The two previous Orewa blockbusters on welfare and race were written in different circumstances with different objectives. They were all about re-establishing National's ideological identity with voters ahead of an election.

That done, National is now engaged in a post-election analysis of what went wrong. Brash and senior colleagues want to fix those things which caused unnecessary aggravation - such as the ambiguity over nuclear-powered ship visits.

Work is also under way on examining why some groups of voters were turned off by National - at-home mothers, for example, who feared National's tax cuts required Government spending on social services to be slashed.

Then there are the voters National simply ignored - well-off, environment-conscious urban liberals, for example.

National has learned it must hunt for votes in the most unlikely places to win an MMP election. However, there is no point unveiling radical policy at this stage of the electoral cycle.

As a result, Brash's colleagues are avoiding talking up next week's speech, instead talking down any likelihood of a leadership change in the near future.

One factor is the shift in power within the caucus. Bill English's burgeoning influence has seen the former leader move closer to Brash. Key too has joined Brash's inner circle, which also includes deputy leader Gerry Brownlee and, less overtly, Murray McCully.

Those harbouring serious leadership aspirations - English, Key and Brownlee - are now inside the Brash tent and working for him.

Brash is obviously punting on them blocking one another from grabbing his job.

Meanwhile, the line is being spun that Key will not mount a challenge because the second term MP realises he still needs more political experience under his belt.

At the same time, the finance spokesman is being warned that the caucus will not tolerate what one MP terms a "campaign of destabilisation" against Brash.

Key does not need to bother instigating one. He can wait.

If Brash cannot deliver the goods - particularly when the political environment is increasingly favourable to the Opposition - the mantle of leadership will simply fall on Key's shoulders by default.

John Roughan: A more neighbourly approach to trees

There was a fire drill in the building this week and the most remarkable thing happened. At the screaming of the alarm about a thousand people stopped what they were doing, waited a few moments in case it stopped, then unhurriedly gathered their valuables and wandered down the stairs.

They went out the front door on to the footpath, pressed the buttons of the pedestrian crossing and ambled over on the signal.

Across the street they gathered in knots of patient conversation or stole away to coffee bars or talked amiably into cellphones.

As far as I am aware, nobody had told all these people to do any of this. Somehow they knew that, if fire had broken out, it would be wise to leave the building.

Or more to the point, they knew that a fire is most unlikely to break out at the most convenient hour in the production cycle and this was obviously a test. These happen from time to time. They make me furious.

Like most others leaving the building, I should make light of the absurdity of it. But I can't. I seethe. There is something deeply insulting about the obligation.

At least it is not my duty to check the toilets in case somebody is trying to escape in there, or has fallen asleep, and ensure everyone leaves.

I try to imagine how much of this would happen in a real blaze. And then the penny drops. It would happen exactly like this.

If fire broke out somewhere in the building, only those in its vicinity would panic. Everybody else would hear the alarm, curse the inconvenience of another drill and take their time.

Calm would prevail. By the time most people smelled smoke they would be making an orderly exit, and if they stepped up the pace at that point, all the better. But when the alarm sounds they want us to think it's a drill. That's the point of it.

I suppose most have worked this out for themselves but I hadn't.

The realisation doesn't help my mood at all. It may be sensible to mislead us for our own safety but that only makes it more infuriating.

Until that accursed alarm I was thinking about trees again. Last week's tale of tree preservation - or, as some readers saw it, blatant interference with a neighbour's property rights - prompted several letters to the paper about a more important argument that has been raging in my neck of the woods.

The row concerns rough but regenerating bush in a large park taking up most of a valley that empties into an Auckland bay. I'd name the place but walking in the bush is pleasant and quiet and I'd like to keep it that way.

Anyone who drives through the park will think it has no more than the old pines visible from the narrow road. Down below, out of sight, a network of good tracks, bridges and boardwalks lace through fern and manuka and young rimu, totara, kahikitea and other natives slowly reclaiming the valley.

Most of the natives, and a good many exotics too, have been planted over the years by a residents' bush society. A few stalwarts give a great deal of time to weeding out gorse and ginger and other noxious weeds, and they say they have been fighting a losing battle lately against the seeds of rampant invaders such as the splendid acmena at the park entrance.

Acmena, like phoenix palms, are now on a green blacklist with privet and other well known pests that, left alone, will crowd out natives.

With $40,000 from the Lion Foundation the society is ready to rid the park of selected invaders and has obtained a council resource consent for the project.

But residents near the park entrance are understandably aggrieved. And maybe the rest of us should be, too. If the acmena are felled it will leave gaping holes while the bush society's promised replacements grow.

And what is an invasive weed, anyway? Who are we to decide some trees are more worthy than others? Should any species suffer for its vigour?

The aggrieved, themselves longtime contributors to the bush society, have formed a rival group to oppose the culling. They've posted public notices about the neighbourhood and gone to the Environment Court to challenge the resource consent. A formal mediation will be attempted on Tuesday.

I'm torn. It's a conflict of values. Are all trees valid or only natives? Is beauty more important than "biodiversity" (the green jargon that doesn't mean diversity at all; it means indigenous purity).

I'm not qualified to judge. I defer to the view of those dedicated volunteers I see working in the park. They've earned my support, for what it is worth.

That vote carries an obligation, I guess, to fell an acmena flourishing in my yard. So much for my righteousness of last week. I hope the neighbour who granted his gum a reprieve will understand.

Agreed, he ought to have a right to do what he likes with a tree on his property. And I had a right to make my interest known as forcefully as possible. Had he ignored me, there was nothing I could have done.

He didn't. He probably weighed up how much of a nuisance the tree presented to him against what it plainly meant to a neighbour and he did the decent thing. I'm grateful.

Editorial: The book is dead? Not by a long chalk

There is no safer prediction than that of death. Sooner or later, it always comes true and this week there were, not for the first time, confident prophecies of the death of the book.

Richard Charkin, the president of the British Publishers'Association, was quoted as saying he spends four-fifths of his time worrying about technology. Not surprisingly Paul Carr, head of a web-to-print publishing house, predicts an explosion of e-books and actual, physical books becoming quaint collector's items.

Let's hold on a minute. Newspaper people are only too aware that the print medium is under challenge as the growing popularity of our own nzherald.co.nz graphically demonstrates. But publication of the obituaries for the book may be a little premature.

The confidence with which the effects of technologies are promoted is matched only by the rapidity with which they are proved wrong.

Remember when computers would usher in the leisure age and the 20-hour week? Remember the paperless office? Instead, the hardest working piece of office equipment - and that which provokes the most screams of frustration when it fails - is the printer. Millions of trees are sacrificed and the paper mountains soar as people track down documents electronically but then make printouts so they can mark them, carry them around, screw them into their handbags and read them wherever and whenever they like.

The problem with new technology, as it was once called in this business, is that it almost immediately becomes old technology. There are rooms full of computer storage disks that can no longer be accessed, homes full of videos for which in a few years there will be no players, libraries full of microfiche for which the readers are museum pieces, shelves full of LP records that no longer get played.

Can you be confident that your children will be able to find the right bit of gear to see all those digital pictures you are fondly storing? There was no problem when the family snaps were thrown into shoeboxes under the stairs, provided the damp didn't get them. And there is no problem with a reading device when you pick up a book.

The book is a stunningly successful achievement, perfected over generations, compact, portable and exceptionally durable. Try dropping your e-paper reader down a flight of stairs.

Humans are physical beings and we retain physical and spatial skills. In the high-tech world of aviation where pilots can be reduced to computer minders, until things go wrong, air traffic controllers have remained wedded to using real strips of paper and systems designers have had to build on the controllers' physical experience to develop satisfactory electronic systems.

It would be falling into the nostalgia trap to think we can give up digitised information retrieval. Compare attempting to remember which textbook contains a particular reference, finding it, wading through the index and trying to keep the book open in six places with fingers and thumbs to the ease of hitting Control F.

And there are plenty of parents who would welcome any word delivery system that can get their children to read anything longer and more articulate than a text message

But when it comes to lying on the beach with a novel, safe in the knowledge it won't matter much if it gets sand in it or you spill the beer on it? The book is dead? Perhaps not yet.

Fran O'Sullivan: Australia's new man has big boots to fill

It's not often that you meet a diplomat who decides to "take as read" his role as a plenipotentiary for his Government.

But Allan Hawke - the congenial yet strongly focused Australian High Commissioner who has just "two sleeps to go" before heading back to Canberra - made great use (rather too much at times for the well-honed sensitivities of Prime Minister Helen Clark) of his "full power of independent action".

Hawke inadvertently stepped on toes - Clark's toes - when, in a speech on the Anzac relationship delivered within a week of arriving in New Zealand, he said the two countries were "finely poised on the fulcrum".

The relationship could "go one way or the other - in defence, in trade, in every way . That assessment will underpin my three-year term as High Commissioner".

Hawke was making the point that as the current generation of Aussies and Kiwis pass on the mantle of leadership, power and influence to the next generation, "the relationship we have taken so much for granted is at risk".

Clark's feathers were ruffled.

Hawke used the standard diplomatic fallback position - the media misinterpreted me - when it was asserted that he was "delivering a message to the Government".

He later ruffled feathers again when he tabled an ambition for a transtasman single economic market to be in place by June 2006 - the date he was originally expected to retire.

After the mild-mannered Bob Cotton, a High Commissioner who spoke his mind in public, this was a shock to the careful control that the Clark regime still exerts over bottomline discussions on foreign relations.

His face - and voice - were ubiquitous as he continued to promote these messages in a round of farewell interviews this week.

But Clark's focus was already on the new guy, John Dauth, Australia's permanent representative at the United Nations in New York since 2001.

New Zealand was "extraordinarily lucky" with the appointment and Dauth's "depth of experience" meant he could do a very good job, she enthused.

The subtleties of Clark's over-enthusiastic welcoming of Hawke's successor were not lost on some of the huge bunch of New Zealand's "great and good" who gathered at the Australian High Commission on Thursday evening to celebrate Australia Day.

The turnout was driven by two factors. First, the function was also Hawke's farewell. Second, the greater esteem (overlaid with some wariness) with which Australia is held after Hawke's 30 months in the job.

As one senior public servant observed - it would take a bit more than a Beehive "crop-dusting" exercise -to eradicate the effect Hawke has had in Wellington.

For his part, Hawke does not want to leave on a sour note. He has paid tribute to Clark's early recognition of the importance of Asia - "she was ahead of Australia".

I suspect Clark probably made her appreciation known privately when she met Hawke to discuss how the two nations could work together to leverage the new opportunities in the rapidly emerging East Asian regional architecture.

Hawke has managed to raise consciousness within New Zealand elites of the importance Canberra places on the relationship and to push the single market agenda along at machinery level.

He (rightly) laments the lack of business feedback on the economic agenda which has been undermined by local monopolies.

But what he has not managed to do is break the Beehive stranglehold against open discussion of the "non-discussables".

Issues such as the bilateral defence ties - which are still a thorn in Australia's paw, notwithstanding the diplomatic niceties which cloak the clear differences; the potential for reinventing a trilateral relationship between New Zealand, Australia and the United States; and the potential for New Zealand to join the US and Australian-dominated Partnership for Climate Change.

These are still ducked.

The recent concerted efforts of Foreign Affairs Minister Winston Peters to at least triangulate the New Zealand/United States/Australian relationship have yet to gel.

As a former Australian Defence Secretary, Hawke could be forgiven his alleged "obsessions".

But in truth his views line up with those of Prime Minister John Howard and Foreign Minister Alexander Downer.

Hawke lost his defence job after a tussle with his boss, Senator Robert Hill, and was posted to New Zealand - at his request - in a well-orchestrated kiss-off.

What is not well known is that Hawke was asked last year by the former head of Australia's foreign affairs to stand down early.

He maintains there was a clause in his contract that enabled Ashton Calvert to pull the plug if Australia wanted to make a shuffle.

The full importance of Calvert's request was not obvious until Hill was himself pushed out of the Howard ministry this week and shuffled off to New York to take Dauth's place.

But the departing High Commissioner is not bowing out of the brains trust that helps drive Australia's strategic focus.

He's now a member of Australian Foreign Minister Alexander Downer's Foreign Relations Council and will ensure more academic focus on the transtasman bilateral relationship when he takes up his new role as Chancellor of the Australian National University.

Where Hawke also scored was in providing his ministers with the "inside story and guidance on how issues are likely to play out" when they met their counterparts.

On that score Dauth has big shoes to fill.

Brian Gaynor: DIY investors often lack the right tools

Financial literacy is a hot topic around the world because there are major concerns that individuals have too much debt and don't have sufficient skills or knowledge to cope with an increasing array of financial instruments.

A survey in Australia found that 37 per cent of investors don't understand that their investments can fluctuate in value. A study in the United States showed that four out of 10 American workers were not saving for their retirement.

In Japan, it was found that more than two-thirds of individuals had little awareness of the concept of risk and return or the importance of a diversified investment portfolio.

The huge level of personal debt, the over-exposure to residential housing and the large inflow of funds to finance companies suggests that financial literacy is also a problem in this country.

Are New Zealanders aware that house prices could fall as well as rise?

Do individuals understand that it is prudent to have a diversified investment portfolio and not be over-exposed to residential property?

Are investors aware of the potential risks associated with putting all their money in one finance company? How many individuals understand the term "secured first ranking debenture stock" in the finance company ads?

The financial literacy issue has been highlighted by a recent 178-page report by the Organisation for Economic Development and the controversy regarding the under-funding of company pension plans in North America and Europe.

The OECD report concludes that financial literacy has become increasingly important in recent years for several reasons:

* Baby boomers will live longer and will have to provide for their own retirement.

* Financial markets are becoming more sophisticated with a vast number of new and complex products.

* Consumer debt is escalating as financial institutions encourage individuals to borrow more and more, particularly through mortgage and credit-card facilities.

* A large number of highly dubious investment products are being offered through the internet.

Surveys in 12 countries, not including New Zealand, demonstrated that financial literacy is low. Individuals claimed that they had a higher level of financial literacy than was actually the case.

In Australia, 67 per cent of respondents indicated they understood the concept of compound interest, but when asked to solve a problem using this concept, only 28 per cent demonstrated a good level of understanding.

A survey in the United States found that 65 per cent of respondents were sure or very sure that they could manage their own finances, but when tested, their performance was similar to individuals with limited financial skills.

The OECD concludes that this overconfidence is unfortunate because it discourages individuals from trying to improve their financial literacy.

The problem with company pension plans has also raised the issue of financial literacy. Most major companies in North America have had defined benefit pension plans for employees. These are schemes whereby the employee is guaranteed a specific payment per week when they retire.

If the performance of the pension fund is not sufficient to meet these payments, then the deficit has to be funded out of normal company activities. Most major companies have a serious underfunding problem because of the recent poor performance of US sharemarkets.

In recent months, a large number of companies have said they are moving to a defined contribution scheme or cancelling their pension plan, particularly for new employees.

A defined contribution scheme is where an individual makes a specific payment each week but the amount they receive on retirement is determined by the investment performance of the fund.

Defined contribution schemes are less attractive to employees because the pension payments may be far less than anticipated and individuals may have to establish their own investment plans to ensure that they have sufficient retirement income.

There is widespread concern in the Northern Hemisphere that individuals do not have enough financial literacy to establish their own investment plans. There seems to be a limited understanding of the concept of risk and return and the importance of diversification.

There is also a concern that under a do-it-yourself system individual investors will have a strong orientation towards residential housing, as it is easier to understand, and will shun the sharemarket because it is more complex and difficult to value.

These concerns are fully justified when one looks at New Zealand.

We have the ultimate DIY investment system for two reasons:

* In the late 1980s, Finance Minister Roger Douglas abolished the tax incentives for pension superannuation funds after advice from the Treasury. This encouraged many companies to close their pension funds. (The Treasury said the tax concessions gave individuals, particularly on high income, too much incentive to save.)

* When individuals adopt the DIY approach, they must go through either a pooled fund (unit trust) or make their own investment decisions. There is a strong incentive for individuals to make their own investment decisions because pooled funds are subject to a capital gains tax but individual accounts are not.

Not surprisingly, given the limited number of company pension plans and the capital gains tax on pooled funds, New Zealanders have an extremely low level of pension fund assets.

New Zealand's pension fund and life insurance investment assets represent 15.5 per cent of GDP compared with 108.7 per cent for the OECD as a whole. Only Hungary, Poland, Czech Republic and Turkey rank below us.

Bank lending and NZX statistics also indicate that under New Zealand's dominant DIY system there is a strong bias towards residential property vis-a-vis shares.

This is consistent with the concerns being expressed in the Northern Hemisphere and anecdotal evidence in this country.

This column received an unusually large number of email responses to the December 17 commentary on the small size of the NZX.

Most respondents said that they preferred residential property because they had more control over these assets and housing was easier to understand than the sharemarket.

The introduction of concepts such as ebitda, ebit, EV, wacc, risk-free rate, equity risk premium and other terms is making the NZX more difficult for individuals with limited financial literacy.

This week's dividend policy announcement by Sky City Entertainment doesn't help matters. Sky City is going to issue bonus shares, which can be converted into cash, because it "allows more efficient management of the company's capital and its imputation credit position".

Does this mean that the group's previous dividend policy, which involved a cash payment, was inefficient? Does it also mean that the cash dividends paid by other companies are inefficient?

New Zealanders' bias towards housing begs the question: Why are we almost totally relying on Reserve Bank Governor Alan Bollard to curb the overheated residential housing market - while crushing the export sector - when there are other instruments, including tax policies and financial literacy education, that could help achieve this aim?

Disclosure of interest: Brian Gaynor is an investment strategist and analyst at Milford Asset Management.

Richard Inder: Calan investors should sit tight

ING Property Trust's restart this week of its potential $172 million bid for Calan Healthcare Properties Trust is not a good look.

The blunder - which forced ING to relaunch its offer after discovering its Aussie affiliate was talking to Calan about another deal - would not be so bad if it were a cash-only deal. Calan's 5000 unit holders would then only need ask, is the price right?

But since ING is planning to make a $1.25 a unit bid made up of cash and units, investors have to consider the quality of management and strategy.

In this case, at least, ING management does not stand up.

ING managing director Andrew Evans - to his credit - admits the failing. Was a check made? "It did not occur," Evans said. "We will ensure that we have the systems and processes in place for anything else we undertake."

The restart has already blown back in ING's face. Investors who accepted the offer in the heat of the moment withdrew upon reconsideration.

But the debacle could have more serious consequences. If the bid turns nasty, Calan could frustrate ING by demanding assurances information did not pass to the New Zealand team that helped it pitch its offer. A rival bidder to ING could use the same strategy to get a stake in the game.

At the moment, the first of these scenarios seems remote.

Calan has been conciliatory, saying that the approach was an inherent recognition of its value.

But even if the bid does become a bare-knuckle brawl, the fight and the false start to the bid will not make much of a difference to the final outcome - Calan's management, led by Miles Wentworth, are on notice.

This is not because they have failed.

In the two years to December 31, which represents the bulk of Wentworth's tenure, the team has delivered a return to unit holders, according to ABN Amro, of 25.3 per cent a year. ING returned 18.7 per cent over the same period.

Calan's management have culled non-performing properties from the portfolio and built a solid platform for growth. Gearing stands at about 23 per cent of its $217 million gross assets.

Meanwhile, Calan's units have traded in line with the property sector and, on several days over the last couple of months, have exceeded their net asset backing per share.

One criticism of the team is that they have not delivered growth.

Its assets under management are not much above 2002's $210 million.

This is a weakness even Calan chairman Bruce Davidson admits to.

He says the Government's restraint on health spending and its dislike of public-private co-operation has forced the trust to look to Australia. (The planned deal with ING's Aussie arm was aimed at growth, not - as some have suggested - quitting its franchise across the Tasman.)

"It is not that there has not been intense effort. It has been a reflection of the market in New Zealand. There has not been the opportunity."

Still, it is not a bad performance for a company that, until a couple of years ago, was one of the least liked members of the NZX. The bottom line is that there may not be much light between the two managers.

The question of which has the best strategy may also be a tie - resolved by individual investment preferences rather than any inherent advantage one vehicle has over the other.

ING claims Calan's unit holders would benefit from its diversification. An $850 million portfolio spread across offices, retail and industrial property would, for instance, protect investors against a slowdown in healthcare.

Calan, however, sees strength in its somewhat narrow focus. As the population ages, spending on healthcare will increase and with that increase will come stronger demand for health-related properties.

The sector also offers the advantage of long leases (hospitals spend a lot of cash to accommodate facilities such as operating theatres and want an assurance they will not be turfed out before that investment delivers a return). Calan, says Forsyth Barr, has a weighted average lease term of 11.7 years against ING's five years and its properties have solid yields.

"It is a low-risk, medium-return business," Davidson says.

No, the winner of this contest will be determined by brute force and this is not a game Calan can win.

ING can spread its fixed costs, such as listing and directors' fees, across a bigger base. Its management and incentive fees last year, for instance, were just $576,000 more than the $2.1 million paid to Calan's manager, yet its portfolio is almost four times the size.

Property markets have over the last two years been swept by a wave of consolidation and Calan is just the next target.

Now that Calan is in play, others such as Macquarie Goodman or any of the numerous AMP funds are sure to take a look, especially since the number of targets is much diminished.

The only question to really be resolved is what price.

Its shares yesterday closed steady at $1.27, 2c above the proposed offer price. This suggests investors believe there is a chance someone else will enter the fray or that ING will offer more. (ING has signalled as much: Investors who accepted its first stand in the market will benefit from any improvement in terms.)

But even if ING only gets half the units, it will still wrestle the management contract from the incumbent. (It needs 75 per cent of units voted to win and will be in a strong position to achieve that.)

Whatever the outcome, unit holders are in a strong position. They, as Davidson says, should sit tight and see how the takeover develops.

Paul McIntyre: Supermarket boss hones his knife

Suppliers to Countdown, Woolworths and Foodtown had better hang on to their britches this year because the boss of Woolworths in Australia, Roger Corbett, is feeling pretty bullish about ripping some fat off supplier margins and extracting more efficiencies from his new New Zealand assets.

Corbett, who on Tuesday will attend his first meeting as a board director of the Reserve Bank of Australia, had plenty to say this week about the Kiwi assets Woolworths acquired in the break-up of the Foodland Group last year.

Basically, Woolworths has discovered some additional and unexpected financial upside by skinning its New Zealand operation the Australian way. That means local suppliers should expect a few king hits in coming months. Woolworths is a ruthless retailer, as most suppliers in Australia privately lament, but it's that same ruthlessness which has the stockmarket jockeys drooling with delight.

On Wednesday Corbett fronted the retailer's results for the December quarter and half-yearly figures and once again the market skipped, pushing Woolworths' share price up 61c, or 4 per cent, to A$17.18 on Wednesday. Corbett assured the world that the retailer was on track for a 10-15 per cent full-year net profit after sales rose 22 per cent to A$10.2 billion ($11.32 billion) in the December quarter and first half revenues jumped 18 per cent to A$19.1 billion.

Merrill Lynch is among those excited about Woolworths' fortunes out of New Zealand, forecasting earnings once the old Foodland stores are contributing for a full year to hit A$252.7 million in 2007 against a forecast A$110 million this year.

Woolworths' December results included just a two-month contribution from its A$2.2 billion acquisition of Foodland units but Corbett was upbeat about better earnings from the New Zealanders.

Certainly analysts are expecting Woolworths to replicate Australian supply deals across the Tasman, such as those in the dairy sector, where milk prices have been driven down to attract more shoppers. Corbett has found it necessary on several occasions to defend Woolworths' pricing policy on dairy products, in which farm gate milk prices have plunged along with processor margins while retail prices have stabilised at far less of a discount.

But already Woolworths' expanded New Zealand operation is making Corbett & Co happy - NZ's contribution helped boost total sales growth for the Woolworths supermarket division to 23 per cent, the biggest quarterly rise in more than four years. Indeed, New Zealand is already outpacing comparable sales in food and liquor for Woolworths' Australian group. Australian food and liquor comparable store sales lifted 4.2 per cent in the December quarter, exceeding market expectations by about 1 percentage point.

Sounds pretty flash until you look at the New Zealand numbers - comparable sales were up in the December quarter by 5.8 per cent. They're certainly good signs for a very new owner - and all the slashing and "synergies" are still to come.

On the Woolworths New Zealand investment, Corbett told the media this week: "We're certainly looking at opportunities to combine our volumes and looking at ways of developing a platform with suppliers to take advantage of base businesses to gain economies of supply and economies of cost and drive our business together." That's Woolworths doublespeak for a relentless focus on costs and driving down supplier margins, although Corbett did have some good words to say about his Kiwi management.

"It's a very well-run business and the people over there have done very well with very inadequate systems which don't even integrate the business - clearly there hasn't been any money spent on them in any way," he told the Australian Financial Review on Thursday. "So the economies of being able to inject into those businesses systems already developed and economies based on the capital cost and time cost ... are real big opportunities."

Hang on folks, Corbett's coming to town - until he steps down from the chief executive's role in September. A successor has yet to be announced although Corbett is being retained by Woolworths for five years on a A$600,000-a-year consulting retainer.

* Paul McIntyre is a Sydney journalist