Saturday, May 06, 2006

John Armstrong: King's firm hand on wheel

Maurice Williamson likes to ask his audiences a couple of simple questions when he talks to public meetings about Auckland's traffic woes. Do they think congestion has been getting better or worse since Labour promised to fix the city's roading crisis? And, by the way, did anyone come to the meeting by public transport?

The answers speak for themselves.

At one meeting no one had travelled by bus or train despite the venue being well-served by public transport.

As for clogged roads, Transit New Zealand's latest state highway forecast confirms what Williamson's audiences already know from painful experience: traffic growth is continuing to grow at about 2 to 4 per cent a year, causing increased congestion, particularly for peak-period commuter trips and freight vehicles, at an estimated cost of about $1 billion a year.

Williamson has the patter to sell ice-cubes to Eskimos, but his is a clever sales pitch nonetheless. National's transport spokesman allows his audiences to draw their own conclusions about the effectiveness of Labour's roading policy.

He then holds out the prospect of more roads sooner by doing what Labour is not doing - allowing more flexibility for tolling roads, allowing private sector participation in road construction, and the Government funding new roads by incurring debt and then treating them as revenue-generating assets by tolling them.

The clarity of Williamson's message is in stark contrast to Labour's wonky handling of roading policy, something which Prime Minister Helen Clark has addressed by installing Annette King in the transport portfolio.

There was the bizarre episode in February when Transit revised its 10-year state highway construction programme because of an apparent funding shortfall. This would have forced the deferral of some projects and delays in start dates for others.

Conscious that the backlog of projects is already long enough, ministers were not amused. Money to make good the shortfall was quickly made available. Yet ministers had been told back in November that Transit would have to revise its plans.

The fuss vividly illustrated just how slow Labour is going in making progress on this infrastructure crisis, despite significantly increasing spending on roading.

Even a "top priority" project like the Western Ring Route, which will circle Auckland and take the pressure off State Highway 1, will not be completed until 2015 at the earliest.

Everyone agrees the infrastructure deficit is the result of historical low spending on roading relative to gross domestic product.

Labour trumpets its extra spending. But saying you have spent so many millions on extra roads and public transport does not soothe motorists stuck in ever-lengthening queues - just as Pete Hodgson's cataloguing of the amount Labour has spent on extra operations is irrelevant to those patients booted off surgical waiting-lists and referred back to their GPs.

Like the demand for elective surgery, Labour is constantly playing catch-up as traffic volumes escalate. It may still have valid reason to blame National for the roading crisis, but that now rings hollow after six years in power.

Labour must worry that public frustration sparks a different kind of road rage, one which finds expression at the ballot box.

Clark needs no reminding that when Auckland voters turn against a government they can really turn against a government.

However, when the Government allowed the Ministry of Transport to float something as potentially unpopular as congestion pricing - charging motorists to enter Auckland city - it was inviting a backlash.

Congestion pricing is putting the cart before the horse. This is a last-ditch solution used in cities overseas where there is simply no room for more roads. Yet Auckland motorists could find themselves subject to congestion pricing simply because authorities have neglected to build the roads which would enable them to bypass the city centre.

Letting congestion pricing get out of the bag is also a sign of bureaucrats running amok.

Enter King. Giving David Parker's job to the front-bencher shows that Clark wants to give Labour far more political grunt in the transport portfolio. Parker had too much on his plate and Clark was clearly worried that such a politically sensitive portfolio might not have got the attention it deserved.

There have been murmurs that officials were trying to bury Parker in paperwork. As a relatively new minister, he also does not convey the authority which comes naturally to a front-bencher of King's experience.

Both Parker and his predecessor in the portfolio, Pete Hodgson, hail from Otago, where, as Williamson jokes, a traffic jam is three cars meeting at an intersection.

King is not an Aucklander. But as a Wellington electorate MP she is well-versed in the capital's own protracted traffic project sagas, notably the off-again, on-again Transmission Gully as the main arterial route out of the city, and the planning consent nightmare of the inner-city bypass, now finally under construction after years of delay.

There are also parallels with her old portfolio where she was dealing with the Ministry of Health nationally and district health boards locally.

She is now confronted with a spaghetti junction-like tangle of separate roles and responsibilities held by a jumble of state entities, including Transit, the Land Transport Safety Authority and the Ministry of Transport.

That is further complicated by regional bodies such as the new Auckland Regional Transport Authority, and territorial local authorities such as the Auckland City Council, all of which have their own transport strategies.

King is saying nothing publicly about the approach she will be taking until she has been fully briefed by officials from the state entities.

However, she has been given the job because she is good at getting those developing policy and those lobby groups affected by it working in unison. She is good at knocking heads together - gently.

She is also good at communicating directly with voters. Expect Labour to start talking about completed roading projects in concrete terms of what they achieve, rather than merely in dollar sums.

And expect roading to get a big push in the Budget, now less than two weeks' away.

King is not going to make lavish promises about fixing Auckland's roads. There is no quick-fix.

What matters is that Labour remains credible on roading and that voters do not start looking at solutions on offer elsewhere.

Editorial: Flaws must be faced to avoid real disaster

The adage about learning from experience is particularly applicable to civil defence. Natural disasters, or events that suggest an emergency may be imminent, do not happen every day. Every possible lesson must therefore be extracted from them, and acted upon. The worst response is to try to paper over flaws, or attach the blame for these to a convenient scapegoat. Yet that is precisely what happened in the wake of Thursday morning's tsunami warning, which saw thousands flee their homes in panic.

The initial reaction of the Civil Defence Minister, Rick Barker, was to blame the BBC and other media. There was, he said, "no acceptance of a mess-up". Subsequent developments and disclosures have shown this to be the crassest of conclusions. The implications in terms of New Zealand's preparedness to cope with a major natural disaster are worrying. Even the jolt delivered 18 months ago by the Boxing Day tsunami seems not to have been sharp enough.

The earthquake off Tonga early on Thursday morning triggered a communication breakdown on several levels. About all that can be said, unequivocally, to have worked correctly was the transmission of an alert from Pacific tsunami warning officials in Hawaii to Civil Defence's National Crisis Management Centre. That centre, ignoring the fact that the international media had also received the warning, chose, effectively, to sit on it. Civil defence personnel in potentially affected areas were allowed to sleep on, and emergency advice phones remained unmanned.

The public, of course, would also have been unaware but for frantic calls and emails from overseas friends and relatives who had picked up the alert on the likes of the BBC and CNN. It goes without saying that this development should have been factored into the management centre's response plan. When it was not, and when no information was available locally, a degree of panic became inevitable.

Overseas broadcasters cannot, as it turns out, be blamed for that state lasting longer than it should have. They had no way of updating their bulletins when, as the tsunami warning centre has now conceded, there was a "messaging mix-up" and some media outlets did not receive the follow-up to the initial alert.

Obviously, Civil Defence officials must strike a balance between waiting for confirmation of an emergency and spreading unnecessary alarm. But, when there is only strictly limited time for evacuation, they should err on the side of warning the public. The lesson about the media's global reach merely re-emphasises that.

The lack of preparedness extends even to public alerts, however. Emergency instructions in the Yellow Pages telephone guide instruct people to "listen to your radio for advice and information". But Civil Defence has yet to sign an agreement with the radio networks to broadcast warnings. On Thursday, radio stations and other media were left to search fruitlessly for information that would clarify the situation.

Belatedly, Mr Barker has called for a review, and acknowledged that the flow of information to the media and all agencies involved in civil defence needs to improve. That, at least, is progress. Hopefully, the Civil Defence potentates will also now be on heightened alert when, on May 17, Auckland's regional system is tested in an international exercise modelling, appropriately, a Pacific Ocean tsunami.

The system flunked its first test, involving a once-in-100-years cyclone, in early December. A surfeit of shortcomings was identified, several involving communications. Lessons learned from the blunders then and from a genuine alert, no matter how shortlived, must be acted upon. The first step towards that is an unambiguous acknowledgment of their very existence.

Paul McIntyre: Costello spits tacks over rates rise

Up went official interest rates on Wednesday to their highest levels since early 2001 - 5.75 per cent - and didn't Australia's federal Treasurer, Peter Costello, kick up a stink.

Completely unnecessary, he said, reminding the world that next Tuesday's annual Budget would carry an alternative forecast on inflation and its likely impact on interest rates.

The only mob which won't give a toss about this week's rise - the first in 14 months - is the one living in the boom state of Western Australia. Its housing market and broader economy continues to travel at high altitude off the back of the global commodities boom. The big, flashy state of New South Wales, meanwhile, is trying desperately to get off the ground and the latest interest rate movement is not going to help, particularly as it faces a declining property market.

The latest annual growth rates of state economies show just how much Western Australia is benefiting from the resources boom: It's up 9.2 per cent, followed by Queensland on a very respectable 6.5 per cent, Victoria 4.3 per cent and New South Wales bumping along at 2.3 per cent.

A recovery in the New South Wales property market and broader economy is not expected now until next year. Benchmark Sydney house prices fell again in the March quarter, according to Australian Property Monitor figures released on Thursday, although the trend was the same for all eastern state capitals. No surprise that Perth was the only exception to the downward pressure on home prices.

It's partly this trend which has Costello begging to differ on the overall direction of the Australian economy with Reserve Bank of Australia governor Ian Macfarlane.

Macfarlane is worried about forecasts of further global economic growth and its positive impact on Australian exports along with return to credit growth in the domestic market. Indeed, one of the key reasons for the bank's interest rate rise this week was that households, which last year started to consolidate their balance sheets and slowly rebuild savings, have begun borrowing again and Macfarlane said the sobering effect of declining house prices on consumer spending might have stopped. The bank noted a rebound in credit growth since it touched a low in the September quarter last year.

"These domestic and international trends have added to inflationary pressures in an economy that has been operating for some time with rather limited spare capacity and low unemployment," Macfarlane said.

Costello, however, wasn't buying the central bank's rationale. "There is a lot of respectable opinion each way on this decision and it was a line-ball call which was taken by an independent bank," he said. "We note its decisions and we note its reasons but we will be producing our own inflation forecast in the Budget next Tuesday."

Prime Minister John Howard also had a view on the rate rise: "I don't think [inflation] is taking off. I think what the Reserve Bank is saying is that there are some inflationary pressures and pre-emptive action now will mean less action later."

That was also the view of Westpac's chief executive, David Morgan, who this week announced a 16 per cent rise in earnings for the six months to March but saw the bank's share price cut by 2.6 per cent on Thursday. Morgan, in fact, said he would have preferred an interest rate rise in February for Australia but is now calling for a easing in rates in New Zealand.

"On balance I would have recommended the move," Morgan said of the Reserve Bank decision. "I think this is a gradual and measured move in response to the slow build-up of inflationary pressures."

Access Economics director Chris Richardson, however, wasn't so convinced. "The Reserve Bank is clearly trying to slow the economy down and the Government is showing every sign of trying to speed the economy up," he said. "We would be better off if both did nothing."

Most most say the main impact of the rate rise will be as a warning shot.

Geoff Austin, head of retail products at the Commonwealth Bank, Australia's biggest home lender, is not concerned by the rise. 'If there were four or five increases in a row, you might see more stresses but I don't think a single rise of this magnitude will have much of an impact," he said.

And if it does get tough, there's always work in the mines of Western Australia.

Fran O'Sullivan: Wanted, a new breed of revolutionaries

New Zealand punches above its weight - it's the cliche our politicians trot out when they want to make us feel good about ourselves.

And certainly we (mostly) do when it comes to the All Blacks, our Oscar-winning film-makers, our America's Cup sailors, our fashion designers and - dare I say it - with our early focus on free markets and free trade.

But it's the other "ours" we slide over that really count - the areas where New Zealand punches below the weight it once used to enjoy.

This was brought home vividly to me in Sydney on Thursday night when the huge success of Australian schoolteacher-turned ideas entrepreneur Greg Lindsay was celebrated at the 30th anniversary of the Centre for Independent Studies.

The CIS had a huge influence on policy debate in the 1980s and 90s on both sides of the Tasman - not just the free-markets mantra, which now enjoys bipartisan support in both countries, but areas which have not caught fire here, such as social reform and the debate on democratic freedoms and personal liberty.

Australia's most prestigious independent think tank has had a profound influence on that country's policy choices, as Australian Prime Minister John Howard drove home in his speech to a 600-strong audience.

The story of how Lindsay started the think tank in a backyard shed is well-known to policy wonks on both sides of the Tasman.

Mining boss Hugh Morgan persuaded a few Melbourne mates to kick in $5000 each so that Lindsay could leave his teaching job and start raising hell by challenging the protectionist and frankly dull status quo of the late 70s.

I won't hold this against John Howard, but a clear omission in his paeans of praise for this orchestrator of new ideas was the fact that Lindsay, like other New Righters as we used to call them, found New Zealand Finance Minister Sir Roger Douglas a much more willing revolutionary than Australian politicians of that era.

Both Australia and New Zealand deregulated their financial markets. But it was Sir Roger who kicked the struts out from under our agriculture sector by taking farmers off welfare, starting the process that has made them among the world's most efficient.

So it went with labour market deregulation, taxation reform, and the corporatisation and privatisation process for Government-owed commercial enterprises.

I'm not suggesting Lindsay was responsible for the revolution here. Sir Roger, former Treasury boss Graham Scott and the Business Roundtable's Roger Kerr all have their fingerprints on our changes.

What I am pointing out is that there was a rich nexus of policy revolutionaries on both sides which worked together to keep the focus on the changes necessary to make both countries more competitive.

Unfortunately the first mover advantage New Zealand initially enjoyed - by making more courageous calls than Australia - has long since evaporated. Since "reform" became a dirty word when Labour resumed power in 1999 the focus has been on gradual improvements to the status quo.

The intellectual rigour and openness which should characterise our major policy debates has been suppressed. Too many senior public servants second-guess ministers, and those who persist in proffering free and frank advice that is not wanted get a clip around the ear.

One of the reasons I believe the Australia New Zealand Leadership Forum taking place in Auckland this weekend is so crucial to "our" future is that it enables New Zealand politicians, bureaucrats, business people and leaders in education and arts to form a new transtasman consensus on the way ahead.

New Zealand and Australia face major challenges: ageing societies, economic integration with East Asia, China's challenge to our leading role with the increasingly unstable Pacific Islands, our own security as under-populated countries in a world facing resource constraints.

But Australia is replenishing its declining human capital by raiding our skilled workers.

New Zealand was quicker to put a toe in the water on the East Asian integration. Australia is now signing better deals and faster.

Australia has moved in on what we used to consider our back yard. But Australia is seen as arrogant; New Zealand is not.

Australia has the comfort of knowing it has a US security protection blanket; we do not.

Both countries are pragmatically responding to China's regional diplomacy and signing resource deals, but have yet to face the real test of how we grapple with China's desire for "movement of peoples" to be acknowledged in our respective free trade negotiations.

But what stands out is that while these and other issues are likely to be touched on in this weekend's and future forums, not enough makes its way into broader public debates here.

Debates over regional security and trade are not examined here sufficiently in an adult way.

Worryingly, the External Assessments Bureau has stopped publishing an annual summary of the strategic environment facing this country.

Business people say they can find out more about China's free trade stance from the Australian Department of Foreign Affairs and Trade website than New Zealand's.

The beauty of this weekend's forum is that it will equip key players to better engage in these vital debates. But recapturing our first mover advantages may require a new bunch of revolutionaries.

Paul Thomas: Real-life not only spark for fictional fireworks

Double Booker Prize winner Peter Carey's new novel Theft: A Love Story has been denounced as a "misuse of literature" by his ex-wife.

She argues that because the book's protagonist, an Australian artist living in New York, has so much in common with Carey, Theft will be read as an account of their marriage and divorce and she'll go down in literary history as a vindictive, money-grabbing "alimony whore".

Carey has denied the book's about him, which I suppose leaves open the question of whether it's about her.

Novels in which real people are disguised as fictional characters are known as romans a clef, literally novels with a key. The key is the au fait reader's knowledge that enables him or her to identify the individuals on whom the characters are based.

I suspect Carey's denials will fall on deaf ears because a significant proportion of the reading public seems to think all novels are romans a clef.

In my novel Old School Tie, the main character, a feckless failed journalist, gets a freelance commission from the editor of New Nation, a successful monthly magazine that doesn't mind treading on toes.

This was in Metro's heyday and it seemed to be taken for granted that New Nation's editor Jackson Pike was Metro editor Warwick Roger in skimpy disguise.

New Nation was indeed based on Metro but it didn't follow that Jackson Pike had to be Warwick Roger. Pike wasn't based on anyone; I made him up.

In a subsequent novel Pike meets a grisly end at the hands of the people who were really responsible for the Rainbow Warrior bombing, as opposed to those two saps who ended up doing their truncated time on a Pacific atoll. Warwick's a friend of mine; if I ever did base a character on him, I certainly wouldn't kill that character off.

All novelists draw on their experience but the process of converting that experience to fiction generally involves more than simply changing the names.

Humbert Humbert's motel odyssey in Lolita was based on Vladimir Nabokov's own exploration of America; in real life, however, the author was accompanied by his wife rather than a nymphette.

And rather than simply modelling characters on real people, writers tend to borrow interesting bits and pieces of other people's experience.

I was fortunate that, at the time I was writing picaresque crime novels, several of my friends and acquaintances were considerate enough to get themselves into trouble with the law.

I worked with a guy in Toulouse who, late at night and under the influence, used a starting pistol to break up a catfight outside his apartment building.

What he didn't realise was that a senior Palestinian leader was over-nighting in the building and the French interior ministry had laid on security in the form of a crew of trained killers from some shadowy special forces outfit.

Thinking the shots meant an assassination attempt was underway, they stormed my friend's apartment and gave him a thorough working over. He was just lucky he didn't have the starting pistol in his hand when they kicked down the door. I used this incident to get the feckless failed journalist back to Auckland and on to Jackson Pike's radar.

Another acquaintance, seeking a discreet drug experience in the privacy of his Bangkok hotel room, made the mistake of buying his narcotics from a police informer and spent several weeks in the Bombat Drug Rehabilitation Centre. His ordeal in that wildly misnamed institution kickstarts my novel Inside Dope.

Then there was the friend who had the distinction of being the first person convicted of insider trading in New South Wales. His travails were fictionalised for background purposes in Final Cut.

The point is that while their (embellished) misadventures found their way into my books, they themselves didn't. These shenanigans aside, they were too normal and, when push came to shove, sensible for what I had in mind.

Closer to home, The Empty Bed was about the unravelling of a marriage. A reviewer commented that it came as no surprise to learn that Thomas' marriage had recently broken up.

This struck me as a somewhat gratuitous observation. For a start, 50 per cent of marriages in this country fail so there can't be many adults who haven't observed a marital crack-up at close quarters.

Second, the novel was conceived and embarked on almost four years before it was published, at which time my marriage was in good shape.

In fairness to the reviewer, the likes of Philip Roth and Hanif Kureishi (and now perhaps Peter Carey) have done little to discourage the perception that for writers relationship failure is just grist to the mill.

Perhaps the tendency to assume fiction must be based on actuality is a reflection of a dormant imagination. If you hardly ever use your imagination, it must be hard to get your head around the notion of someone spending their days making stuff up.

But sometimes it works the other way: with a single imaginative bound people conclude that they're the model for a character, invariably an attractive one.

As I had to ask one such Walter Mitty, the character in question is handsome, witty and charming - so where's the resemblance?

Brian Gaynor: Merger schemes deserve to be trashed

Two controversial issues stand out regarding the takeover offer for Waste Management, namely the process and the target company's valuation.

The main reason for the opposition to the bid, which is being presented as an amalgamation or merger under Part XIII of the Companies Act 1993, is the process, although the offer price is also a concern.

These amalgamations or schemes of arrangement, which require a majority of 75 per cent instead of 90 per cent under a takeover, have also been criticised in Australia. A recent report by the Financial Services Institute of Australasia (Finsia) had several important points to make about amalgamations or schemes of arrangement.

The study is called "Takeovers Package - Finsia's proposal to reform Australia's takeovers regime to improve the market for corporate control, remove existing anomalies and protect the rights of minority shareholders".

According to Finsia, schemes of arrangement have become increasingly popular in Australia and now represent nearly 40 per cent of all large (over A$1 billion) change of control transactions across the Tasman.

These schemes are derived from traditional English laws that were drafted before modern corporate takeover activity was contemplated.

Until recently amalgamations or schemes of arrangement were mainly used in the following situations:

* For complex transactions that couldn't be achieved by a takeover.
* For agreed mergers where the premiums were much lower than in hostile or contested takeovers.

Finsia, which is a merger between the Securities Institute of Australia and the Australasian Institute of Banking and Finance, argues that there has been a growing tendency to go down the amalgamation/schemes of arrangement route as potential bidders put a "bear hug" on the target company.

A "bear hug" is when the bidder offers a market premium price to the directors of the target company under an amalgamation or scheme of arrangement process but not under a takeover offer. The target company directors are forced to recommend this offer to shareholders under the threat that their refusal will be made public and will be subject to shareholder and market scrutiny.

Finsia believes that this "bear hug" strategy is successful because directors have become increasingly sensitive to public pressure, which has been heightened by greater shareholder activism and higher standards of corporate governance and director's duties.

The "bear hug" also reduces the prospect of a counter bid, as does the potential payment of a break fee (a break fee of $8 million is payable by Waste Management to Transpacific if the proposed merger does not proceed).

The reduced prospect of a competing bid is particularly relevant to Waste Management's shareholders because the company has an open share registry, and there would have been a greater opportunity for alternative bidders if its directors had not agreed to amalgamation.

These "bear hugs" have meant that a large number of change-of-control transactions in Australia, which previously would have been effected as takeovers, are now being achieved by amalgamations and schemes of arrangement.

This Australian analysis should be particularly interesting to New Zealand shareholders because the two most controversial transactions, Origin/Contact Energy and Transpacific/Waste Management, have been initiated across the Tasman and the directors of the New Zealand companies have vigorously supported the deals before an independent appraisal report has been commissioned.

Finsia is concerned that schemes of arrangement adversely affect rights of shareholders. Its biggest worry is that these schemes become effective if 75 per cent of shares voted at a meeting support the scheme, whereas 90 per cent of all shares are required for a bidder to move to compulsory acquisition. It believes the difference is difficult to justify as careful consideration was given to the compulsory acquisition threshold when Australia's takeover rules were drafted.

Finsia's takeover study recommends that the threshold for effecting schemes of arrangement should be brought into line with the compulsory acquisitions provisions of the takeover rules. This proposal would still be different from takeovers in that it would apply only to shares voted at the meeting as distinct to 90 per cent of the target company's entire capital under the compulsory acquisition provisions of the takeover rules.

Finsia believes this proposal would significantly reduce the advantages that schemes of arrangement have over takeovers, particularly in their ability to force dissenting minority shareholders to sell their shares. It proposes that schemes of arrangement resolutions would fail if more than 10 per cent of the shares on issue voted against the resolution.

The Australian analysis raises the prospect that the directors of Contact Energy and Waste Management have been trapped in clever "bear hugs", particularly as they rushed to endorse their respective deals before any independent analysis was available.

The Waste Management board has been caught in a particularly awkward situation because one minute it refers to the deal with Transpacific as a merger, yet in the next it quotes a statement from the Grant Samuel independent report that refers to the deal as a takeover. (The independent report was released after the Waste Management board had strongly recommended the deal.)

According to Grant Samuel's appraisal report, "The Amalgamation Payment cum dividend of $8.80 represents a premium of 25 per cent to the closing share price of $6.99 on 24 March 2006, the day prior to announcement of the proposed transaction and a premium of 32 per cent to the volume weighted average price of $6.66 in the month prior to announcement. The premium for control is consistent with the premiums for control observed in other successful takeovers of other listed companies in New Zealand and Australia".

Grant Samuel is correct, it is a takeover because Waste Management shareholders are being offered a premium, whereas in a traditional merger most of the control premium is retained and is available to shareholders of the merged group if an outside party makes a takeover offer at a later stage.

In addition, the name of a merged entity usually contains elements of the constituent companies and they contribute equally to the board and management. One company usually provides the chairman and the other the chief executive.

The Waste Management board is entitled to the view that the Transpacific offer is fair, but to agree to an amalgamation process, where the compulsory acquisition threshold is 75 per cent of shareholders instead of 90 per cent under the Takeovers Code, is totally unacceptable to many shareholders.

New Zealand shareholders have becoming increasingly sceptical about board recommendations because they consistently undervalue top quality New Zealand companies. Bill Gates would never have become an extremely wealthy man in this country because the first bidder to offer a 30 per cent premium for Microsoft in the late 1980s would have received support from a board with a majority of independent New Zealand directors.

On May 17 Waste Management shareholders will have the opportunity to question their directors and vote on the amalgamation proposal. Whatever the outcome, the process is unsatisfactory as far as New Zealand shareholders are concerned.

The amalgamation or schemes of arrangement process reduces the prospect of an alternative bidder and seriously curtails the ability of shareholders to stop the offeror from compulsorily acquiring their shares.

Amalgamations and schemes of arrangements should be available for complex situations, and when companies want to initiate a genuine merger with a limited premium for control on offer. But to avoid the increasingly common "bear hugs" they should be subject to the same 90 per cent shareholder threshold as compulsory acquisition under the Takeovers Code.

Richard Inder: Hitchhiker's guide to regulation

One of the most hilarious episodes in Douglas Adams' Hitchhiker's Guide to the Galaxy is his description of the colonisation of Earth by the Golgafrinchams.

The colonists, humankind's ancestors, were the useless and unwanted third of the Golgafrincham civilisation - telephone sanitisers, hairdressers, and advertising account executives.

Those who remained on the planet - the leaders and the workers, the people who actually did things - had concocted the fiction that Golgafrincham was threatened by a mutant star goat. They then packed the colonists into a ship called the "B Ark" with the promise that they would follow in two other ships, which were of course never launched.

They also arranged for the ship carrying the colonists to crash on Earth to ensure they never returned to Golgafrincham.

When they arrive on Earth, it quickly becomes apparent the Golgafrinchams are woefully unprepared to fend for themselves. This is aptly demonstrated by their efforts to recreate technology as basic as fire and the wheel. The former endeavour is delayed while a committee investigates matters such as what people expect from fire and how they will relate to it. The wheel is delayed because another committee cannot agree what colour it should be.

Adams does not often feature in the pantheon of great economists. But these points (and many other episodes in the classic "trilogy in five parts") are salutary, especially after two key regulatory decisions of the past weeks - the move to open up Telecom's network to competitors and the Electricity Commission's rejection of Transpower's line through the Waikato to Auckland.

Adams is arguing that bureaucracy can mire simple and vital decisions in complex and woolly thinking.

The commission's decision on Transpower gives perhaps the greatest pause for thought. Attached to the decision, commissioner David Close highlighted what he called his "deep and fundamental" reservations about the way the regulator had reached its conclusion.

Without getting into the detail, his objections centred on the grid investment test. This is an assessment of Transpower's proposals against alternatives the regulator concocts. It is also a key plank of the regulator's decision-making process.

Yet Close still voted with the commission to reject Transpower's plan. He believed the decision could be technically correct even if it was based on a flawed premise.

Close could be right about the flaws in the test, but his objection looks - at the very least - inconsistent when set against his vote.

Equally, commission chairman Roy Hemmingway can claim the test is valid. But Close's objections cast more than a grain of doubt over the commission's decision-making process. If such a lack of consensus is apparent in the public domain, what must discussions be like around the boardroom table?

Transpower and the regulator agree that the line is needed, the main point of difference is when. The commission says not until 2017 and not, as Transpower says, 2010. The commission says the delay will save New Zealand $250 million.

But the calculation of that $250 million difference is dependent on two very different views of the world. The commission, for instance, dismisses Transpower's view that the extra capacity of the line - which will make it easier to sell electricity generated by wind over the hills of the Wairarapa in Auckland - is worth $190 million.

The commission says that the line could be delayed even further if generators build more capacity closer to Auckland, suggesting it is willing to sanction the development of regional monopolies.

These are but two of the many differences between what is a rare alliance of the generators and Transpower, on the one hand, and the commission on the other.

No one suggests that Transpower should have untrammelled power to decide how the network is constructed and operated, but such a level of disconnection between those who are at the coalface and those who are watching is disturbing.

It is still early days for the decision to clamp down on Telecom. On first blush the measures announced by the Government - accounting separation, local loop unbundling and better access to wholesale broadband - look simple enough. And, if the $1.6 billion wiped from Telecom's sharemarket value is anything to go by, the measures should benefit many users.

However, the devil will be in the detail. For instance, local loop unbundling - which entails Telecom making available to competitors the copper pair linking the home phone to the exchange - is fiendishly complicated.

It requires the regulator to establish protocols as fiddly as the time of day when competitors' technicians are able to enter Telecom's exchanges and the exact number of square metres Telecom must make available in its exchanges for competitors' equipment. Deciding what colour a wheel should be may be simple in comparison.

John Gardner: The money game can be a wobbly business

That odd vibration you may have noticed in the wallet region this week was just a symptom of another great national achievement. According to a study reported this week the kiwi dollar is, with the Japanese yen, winner of the "world's wobbliest currency award".

The study by Victoria University's Professor Roger Bowden and doctoral student Jennifer Zhu pointed out that between late 2000, when the kiwi dollar stood at below US39c, and late last year, it had almost doubled to reach US74c.

Today, of course, the switchback has taken it to around US63c - not so much wobbly as wandering.

Professor Bowden came to the faultless conclusion that this was a bit of a problem for New Zealand importers and exporters. They've noticed that too.

Although he cast doubts on the effectiveness of inflation target guidelines, Professor Bowden suggests the problem isn't going to go away and that firms exposed to currency fluctuations should actively manage their risks.

And, of course, major companies do treat hedging as a major part of their business.

They have no option. Making the best mouse trap might bring the world flocking to your door but you will go bust if you lose 10c on every one you have priced in zlotys.

You can have a great year's business and yet make less than if you've had a poor trading year if the dance of the dollar catches you out.

There is, as seen from the outside, something insane about the world of money.

It is not unknown for companies who engage in currency dealing for the purpose of securing their profit to earn more from the currency dealing than from the million widgets they export.

It's a bit like the car dealers who do better by providing finance for your purchase of the old banger than they do from the car. The days of traders being so pleased to get cash you expected a discount have gone. They'd rather have a slice of the hire purchase interest, thanks.

The big players have taken this to the logical conclusion. A fascinating piece in The Business this week profiled Goldman Sachs, the phenomenally successful investment bank which in the first quarter of this year turned in a 40 per cent return on equity.

How they do this, as the article admitted, is something of a mystery, but what isn't mysterious is that they don't actually make or sell anything. They handle money.

That all this activity lies at the fringes of rationality is not surprising, because it all falls within the province of the science of economics, a field more contradictory and less endearing than the charm, spin, quarks, bosons, leptons and fermions of particle physics.

Whether economics is actually a science is open to question. As long ago as 1849 Carlyle called economics "the dismal science" and its ability to generate any certainties is dismal.

It is, of course, fashionable in these relativist days to argue that no science is anything other than a cultural construct and that no science enshrines definitive truths.

But physical sciences do exist on a basis of repeatable consistent results, a claim it is hard to establish for economics, no matter how complicated the equations it generates.

The practitioners of the dismal science employ an increasingly sophisticated barrage of statistical techniques and computer models to analyse growth, inflation, productivity and the movement of capital.

But the lights are still out. They seem not to have the answers to the most fundamental questions.

Admittedly the questions are tough and the irrational and complex nature of how people act can derail the best laid analyses.

In his book Critical Mass, which is largely concerned with applying mathematical approaches to human behaviour, Philip Ball chronicles a series of attempts to model stock market movements. None work.

A survey of doctoral candidates in leading American economics departments, published in the Journal of Economic Perspectives, found that only 9 per cent of them believed that economists agreed on fundamental issues.

And these people are governing our lives.

According to Professor Bowden, commenting on his study of our volatile cash, the Reserve Bank often raised interest rates at the wrong time, making the currency rise inappropriately.

Fair enough. But the Reserve Bank will not have made its decisions by studying the tea leaves or by reading the horoscopes column in the Woman's Weekly. They will have based their actions on solid analyses by highly trained, and probably highly paid, economists, perhaps just as eminent as Professor Bowden.

When I worked in developing nations their policies were guided by some of the best-respected brains in the economic business and their advice, tendered with great conviction, was not only often wildly differing but frequently calamitous.

Stephen Morgan, the chief economist at Morgan Stanley, has been saying for years that the world has been on the brink of economic Armageddon because of the imbalance between the United States current account deficit and the Asian-held reserves of foreign exchange. He may well be right. But it hasn't happened and now he seems to be saying it probably won't.

He will undoubtedly have cogent explanations for both of these positions, but one might be forgiven for thinking only psychics do better than economists in getting away with being proved wrong by events while not suffering any loss of reputation.

The suffering is left for the poor punter with the wobbly dollar or the developing nation squeezed to death by the wrong fiscal policy.