New Goverment 2023, Company winners and losers

[Getty]

A new government, presumably National / Act
Which companies will benefit, which will suffer?

[strikereureka]

Looks like commercial property will suffer (more taxation), retirement village stocks may do okay (more taxation balanced out by high property prices and rent), the rest should prosper (more immigration, lower wages)?

[Valuegrowth]

Policy decisions could impact negatively or positively for listed companies in the short run. In the long run, only fundamentally sound strong balance sheet companies will create long term shareholder value. Other types of companies specially those who have mountain of debt are vulnerable to ever changing macro economy.

IMO overvalued assets including stocks are vulnerable to a bigger drop. Why do we see inflation because everything has rocketed world-wide. People were bit happy when oil dropped from $120 to below $70. It helped to a cushion against inflation to some extent, but now oil’s back to $90s.I prefer to stay sidelines until I see great value in markets. It doesn’t mean there are no value stocks in global markets. Intelligent investors will continuously look for great companies trading at a fraction of their value. My second category is dividend champions with high yields.

I consider other types of overvalued assets and stocks are very risky given the extended period of very high prices for assets. I don’t think they can control inflation using interest rates. Only way to control inflation is take action to bring down over valued assets. How can we expect increased purchasing power when there is an asset inflation. Asset inflation and wage inflation could lead to further increase in high cost of doing business. This could lead to rise in unempmloyment when comapnies cannot create jobs and when they start cuttinng jobs. I can see some industrial actions world wide as well. They are fighting for high salary or wages. When things such as housing, rent and other stuff unaffordable or overpriced we find vulnerable economies. On top of that we should not forget about the global debt explosion. It’s going to be a ripple effect. I am fearful more than before.

[Bjauck]

Looks like commercial property will suffer (more taxation), retirement village stocks may do okay (more taxation balanced out by high property prices and rent), the rest should prosper (more immigration, lower wages)? The further divergence in incomes and wealth, and the further development of a richer local landowner class supported by more immigration of workers from poorer countries (the further "Saudi Arabisation" of NZ) will probably mean more "Heliers" and eventually accommodation for the increasing numbers of non-home owning elderly. However a further deepening crisis in care will probably be needed before a National government would respond to non land-owners' needs.

In NZ wealthier wealthy and more struggling lower paid, will no doubt result in more expensive land and houses as a tax efficient vehicle for the wealthy; any economic growth the result of higher immigration rather increasing productivity.

[ralph]

Agree with all that Bjauck ,& yes a shame that these issues are not being attended to by any parties before they become big problems but all business will prosper with an act national coalition I would say depending on how the recession goes we will see confidence Improve.
And hopefully they will make improvements in things like the consent process for company's cutting out some unneeded red tape
HA I like the Saudi Aribasation of nz terminology quite apt but a sad indictment on our society .

[LaserEyeKiwi]

commercial building depreciation is being removed regardless of which party wins (both Labour & National has announced this). Possibility ACT opposes it but wouldn’t bet on it (personal tax cuts come first at the moment)

My Guesses for results of a National/Act victory:
- tax breaks introduced for build-to-rent developments
- likely less red tape for building developments
- eventually lower corporate tax rates
- slightly higher inflation as tax cuts put more discretionary income into consumer pockets
- longer term, less wage inflation for low wage industries (retail/fast food/supermarkets/tourism/cleaning services etc) as minimum wage increases will be non-existent/tiny under National/ACT, and also less costs associated with easier dismissals/trials etc.
- higher unemployment, especially if 10,000+ civil servants are laid off, along with thousands more government contractors.
- Wellington commercial building owners are going to suffer, also Wellington residential housing market collapses further, Ditto Wellington retail.
- higher immigration combined with a lack of per capita funding increases for public infrastructure and services will be good for private health providers, private security firms, property developers building exclusive/gated communities.
- no increase/cuts to benefits and mental health funding combined with stricter public housing rules (less tolerance for gang members etc) and the gutting of Kainga Ora will lead to even larger surge in crime. So good for private security related firms etc.
- good for incumbent monopoly/duopolies (supermarkets, building suppliers, banks, etc) as regulation fear dissipates.
- better opportunity for environmentally constrained industries. (Mining/oil/gas)

[Bjauck]

commercial building depreciation is being removed regardless of which party wins (both Labour & National has announced this). Possibility ACT opposes it but wouldn’t bet on it (personal tax cuts come first at the moment)

My Guesses for results of a National/Act victory:
- tax breaks introduced for build-to-rent developments
- likely less red tape for building developments
- eventually lower corporate tax rates
- slightly higher inflation as tax cuts put more discretionary income into consumer pockets
- longer term, less wage inflation for low wage industries (retail/fast food/supermarkets/tourism/cleaning services etc) as minimum wage increases will be non-existent/tiny under National/ACT, and also less costs associated with easier dismissals/trials etc.
- higher unemployment, especially if 10,000+ civil servants are laid off, along with thousands more government contractors.
- Wellington commercial building owners are going to suffer, also Wellington residential housing market collapses further, Ditto Wellington retail.
- higher immigration combined with a lack of per capita funding increases for public infrastructure and services will be good for private health providers, private security firms, property developers building exclusive/gated communities.
- no increase/cuts to benefits and mental health funding combined with stricter public housing rules (less tolerance for gang members etc) and the gutting of Kainga Ora will lead to even larger surge in crime. So good for private security related firms etc.
- good for incumbent monopoly/duopolies (supermarkets, building suppliers, banks, etc) as regulation fear dissipates.
- better opportunity for environmentally constrained industries. (Mining/oil/gas)

It sounds like you found the real manifesto!

[Walter]

Thanks for your interesting take LEK. House prices will rise as National plan to reduce supply by selling stock to foreigners. They also plan to increase housing stock ownership by landlords. Both of those things increase house prices, disadvantaging the younger generations.
Sacking public "servants" does FAG unless red tape is reduced. Sadly, National have a habit of bringing in their own regulations - their OTT AML Legislation comes to mind.
The tax cuts might not be as inflationary as you think as they are planning on taking money from the poor (who spend it) and giving it to wealthier people, who tend to hoard it.

[mistymountain]

I'm seriously Hoping that NZ may kick the Woke Anti Resource Agenda into touch.

And become more self sufficient with Energy.

Why import cheap higher polluting Indonesian Coal when we have the World's Best Coal on the West Coast?? Even the British Navy rated it better than any other global coals back in the 1880's when they were firing up their Navy.

Why Ban off shore Oil and Gas Exploration when we depend on these resources for our quality of life?

Why make Gold extraction so difficult when the World Gold Council continues to publish data showing that Gold is being purchased in record amounts by nations all around the world (except NZ has got NZ$0 on our RBNZ Balance sheet)? The irony is that Gold was one of the reasons why Dunedin became so wealthy and kick started the localities we enjoy today. Mind you that includes the Coast, Coromandel etc etc etc...

Why have no facility for refining energy when our domestic Supply Chain would come to a sickening halt if some Black Swan event impacted the Global refinery supply chain?

Cheers

[Valuegrowth]

https://firstgas.co.nz/how-new-zealand-could-become-a-green-energy-world-leader/
I'm seriously Hoping that NZ may kick the Woke Anti Resource Agenda into touch.

And become more self sufficient with Energy.

Why import cheap higher polluting Indonesian Coal when we have the World's Best Coal on the West Coast?? Even the British Navy rated it better than any other global coals back in the 1880's when they were firing up their Navy.

Why Ban off shore Oil and Gas Exploration when we depend on these resources for our quality of life?

Why make Gold extraction so difficult when the World Gold Council continues to publish data showing that Gold is being purchased in record amounts by nations all around the world (except NZ has got NZ$0 on our RBNZ Balance sheet)? The irony is that Gold was one of the reasons why Dunedin became so wealthy and kick started the localities we enjoy today. Mind you that includes the Coast, Coromandel etc etc etc...

Why have no facility for refining energy when our domestic Supply Chain would come to a sickening halt if some Black Swan event impacted the Global refinery supply chain?

Cheers

[Walter]

I'm seriously Hoping that NZ may kick the Woke Anti Resource Agenda into touch.

And become more self sufficient with Energy.

Why import cheap higher polluting Indonesian Coal when we have the World's Best Coal on the West Coast?? Even the British Navy rated it better than any other global coals back in the 1880's when they were firing up their Navy.

Why Ban off shore Oil and Gas Exploration when we depend on these resources for our quality of life?

Why make Gold extraction so difficult when the World Gold Council continues to publish data showing that Gold is being purchased in record amounts by nations all around the world (except NZ has got NZ$0 on our RBNZ Balance sheet)? The irony is that Gold was one of the reasons why Dunedin became so wealthy and kick started the localities we enjoy today. Mind you that includes the Coast, Coromandel etc etc etc...

Why have no facility for refining energy when our domestic Supply Chain would come to a sickening halt if some Black Swan event impacted the Global refinery supply chain?

Cheers
NZ refining did not refine NZ oil. Electrification of industrial processes and transport reduces our Black Swan exposure.

[LaserEyeKiwi]

NZ refining did not refine NZ oil. Electrification of industrial processes and transport reduces our Black Swan exposure.

would agree with this - electrification is the most obvious easy win possible for NZ.

[strikereureka]

commercial building depreciation is being removed regardless of which party wins (both Labour & National has announced this). Possibility ACT opposes it but wouldn’t bet on it (personal tax cuts come first at the moment)

My Guesses for results of a National/Act victory:
- tax breaks introduced for build-to-rent developments
- likely less red tape for building developments
- eventually lower corporate tax rates
- slightly higher inflation as tax cuts put more discretionary income into consumer pockets
- longer term, less wage inflation for low wage industries (retail/fast food/supermarkets/tourism/cleaning services etc) as minimum wage increases will be non-existent/tiny under National/ACT, and also less costs associated with easier dismissals/trials etc.
- higher unemployment, especially if 10,000+ civil servants are laid off, along with thousands more government contractors.
- Wellington commercial building owners are going to suffer, also Wellington residential housing market collapses further, Ditto Wellington retail.
- higher immigration combined with a lack of per capita funding increases for public infrastructure and services will be good for private health providers, private security firms, property developers building exclusive/gated communities.
- no increase/cuts to benefits and mental health funding combined with stricter public housing rules (less tolerance for gang members etc) and the gutting of Kainga Ora will lead to even larger surge in crime. So good for private security related firms etc.
- good for incumbent monopoly/duopolies (supermarkets, building suppliers, banks, etc) as regulation fear dissipates.
- better opportunity for environmentally constrained industries. (Mining/oil/gas)

The surge in crime (due to increasing costs of living, rents etc.) will only get worse with a NACT +/- NZF government, though hopefully they will take energy security seriously and roll back some of the anti-oil & gas measures taken by the current lot. NZ's GPD per capita has only been going down for close to a decade and this should continue (thanks Fair & Free media for pointing this out during the current election campaign /s).

Private sector employees (homeowners or not) will suffer due to loss of job security in a small country like NZ & likely move overseas, while public sector types will most likely find a way to bully the government & keep increasing their budgets/headcounts (Te Whatu Ora anyone?).

[ralph]

I'm seriously Hoping that NZ may kick the Woke Anti Resource Agenda into touch.

And become more self sufficient with Energy.

Why import cheap higher polluting Indonesian Coal when we have the World's Best Coal on the West Coast?? Even the British Navy rated it better than any other global coals back in the 1880's when they were firing up their Navy.

Why Ban off shore Oil and Gas Exploration when we depend on these resources for our quality of life?

Why make Gold extraction so difficult when the World Gold Council continues to publish data showing that Gold is being purchased in record amounts by nations all around the world (except NZ has got NZ$0 on our RBNZ Balance sheet)? The irony is that Gold was one of the reasons why Dunedin became so wealthy and kick started the localities we enjoy today. Mind you that includes the Coast, Coromandel etc etc etc...

Why have no facility for refining energy when our domestic Supply Chain would come to a sickening halt if some Black Swan event impacted the Global refinery supply chain?

Cheers
Seriously a lot of people hope that but I cannot see luxon wanting to upset the woke media.
Hopefully some good news for companies like nzk with the new salmon farms having to jump through less woke hurdles.

[LaserEyeKiwi]

The surge in crime (due to increasing costs of living, rents etc.) will only get worse with a NACT +/- NZF government, though hopefully they will take energy security seriously and roll back some of the anti-oil & gas measures taken by the current lot. NZ's GPD per capita has only been going down for close to a decade and this should continue (thanks Fair & Free media for pointing this out during the current election campaign /s).

Private sector employees (homeowners or not) will suffer due to loss of job security in a small country like NZ & likely move overseas, while public sector types will most likely find a way to bully the government & keep increasing their budgets/headcounts (Te Whatu Ora anyone?).

Te Whatu Ora is the one government department that has actually cut significant amount of bureaucrats

[Getty]

If 15000 civil servants are 'retrenched' a few Property companies may have to repurpose a few buildings.

[strikereureka]

They will get a good price when they sell their buildings off though? Reduced OCR (to the level of Australia) will also help commercial and retirement property companies?

[strikereureka]

Time to buy OCA/KPG etc. on Monday I reckon?

[Jaa]

The elimination of the clean car discount and tax by December 31 doesn't give car companies long to adjust stock levels. Disruptive for 2CC, CMO and Turners.

https://www.stuff.co.nz/motoring/133125500/electric-vehicle-rebate-and-ute-tax-set-to-be-killed-off-in-december

[blackcap]

The elimination of the clean car discount and tax by December 31 doesn't give car companies long to adjust stock levels. Disruptive for 2CC, CMO and Turners.

https://www.stuff.co.nz/motoring/133125500/electric-vehicle-rebate-and-ute-tax-set-to-be-killed-off-in-december

I think the used car dealers (ie 2CC, Turners etc) will be just fine. CMO may have more disruption to deal with.

[Jaa]

I think the used car dealers (ie 2CC, Turners etc) will be just fine. CMO may have more disruption to deal with.

Would expect a rush to buy discounted cars before the end of the year and few sales of taxed cars then a complete flip on Jan 1. That must be disruptive.

[Fortunecookie]

Would expect a rush to buy discounted cars before the end of the year and few sales of taxed cars then a complete flip on Jan 1. That must be disruptive.

So is it a short term or long term disruption?

[Baa_Baa]

So is it a short term or long term disruption?

The CCD doesn’t affect the bottom line of the retailer as it’s borne wholly by the buyer. It does affect buyer sentiment though, ergo the stock on hand and forward supply that the importers distributors and retailers will have to factor in.

Bear in mind also that this has been broadcast by National and Act for many months and the industry will have been monitoring this and adjusting as they saw confidence in Labour waning.

And one other thing, Act want to repeal the CCS as well which directly affects importers and down stream distribution and retail prices. National currently don’t support that.

There’s no doubt that the CCD and CCS have distorted the market and buyer behaviours, but in any event the supply side and buy side market has proven itself as more than capable of adapting to it.

[Fortunecookie]

The CCD doesn’t affect the bottom line of the retailer as it’s borne wholly by the buyer. It does affect buyer sentiment though, ergo the stock on hand and forward supply that the importers distributors and retailers will have to factor in.

Bear in mind also that this has been broadcast by National and Act for many months and the industry will have been monitoring this and adjusting as they saw confidence in Labour waning.

And one other thing, Act want to repeal the CCS as well which directly affects importers and down stream distribution and retail prices. National currently don’t support that.

There’s no doubt that the CCD and CCS have distorted the market and buyer behaviours, but in any event the supply side and buy side market has proven itself as more than capable of adapting to it.

"The CCD doesn’t affect the bottom line of the retailer as it’s borne wholly by the buyer."

It's exactly that.

So I was trying to understand what Jaa meant by disruption. There will be some short term adjustments, but It will ultimately come out in the wash.

[ValueNZ]

The CCD doesn’t affect the bottom line of the retailer as it’s borne wholly by the buyer. It does affect buyer sentiment though, ergo the stock on hand and forward supply that the importers distributors and retailers will have to factor in.

Bear in mind also that this has been broadcast by National and Act for many months and the industry will have been monitoring this and adjusting as they saw confidence in Labour waning.

And one other thing, Act want to repeal the CCS as well which directly affects importers and down stream distribution and retail prices. National currently don’t support that.

There’s no doubt that the CCD and CCS have distorted the market and buyer behaviours, but in any event the supply side and buy side market has proven itself as more than capable of adapting to it.
I think you're wrong about the CCD not affecting the profits of retailers, since the benefits of subsidies are split between consumers and producers. Retailers benefit as a result of increased demand in the market for EV's which leads to a greater number of sales of EVs at a higher price.

The removal of the CCD would therefore theoretically have the opposite effect, fewer sales at a lower price.

[Baa_Baa]

I think you're wrong about the CCD not affecting the profits of retailers, since the benefits of subsidies are split between consumers and producers. Retailers benefit as a result of increased demand in the market for EV's which leads to a greater number of sales of EVs at a higher price.

The removal of the CCD would therefore theoretically have the opposite effect, fewer sales at a lower price.

ValueNZ, you don't need to introduce theory, the facts are in the public domain and they don't support your supposition. There is very little net change in vehicles sold and there is until recently very little change in the prices of either high or low emission vehicles, it is the balance of low versus high emission vehicles sold that has changed.

Anyway it's hard to generalise. I'm not going to argue the toss on this, the data is in the public domain, we can all draw our own conclusions from what is essentially a social engineering experiment that may be about to end.

[Jaa]

"The CCD doesn’t affect the bottom line of the retailer as it’s borne wholly by the buyer."

It's exactly that.

So I was trying to understand what Jaa meant by disruption. There will be some short term adjustments, but It will ultimately come out in the wash.

It's obviously at least a 6 month disruption.

Imagine you are 2CC... what do you do? Get your buyers in Japan to load up on EVs, ship them to NZ, process them (a what 3+ month process?) and get them to your yards in the hope you sell them all by the end of the year? Because if you don't you will have to hold lots of EVs in stock no one will buy for a while. Or you could discount them cutting into your profit margin.

Or do you focus on a mix of EVs and gas guzzlers and end up not having enough EVs to sell in the last few months of 2023 and not enough gas guzzlers in the first few months of 2024 as demand whipsaws. Looking at their home page, I see both types!

You could also see big sales of both types and then a quiet period afterwards.

Pretty hard to get the balance right I would imagine. Inevitable there will be some stock write offs and/or margin impact.

Lead times might be even longer for Colonial with new cars.

[Jaa]

Heard Mathew Hooten say Winton Land could be affected by post election negotiations. One of Winston's demands could be the foreign buyer change National was proposing is axed. Would be on brand for Winston.

[Jaa]

"The CCD doesn’t affect the bottom line of the retailer as it’s borne wholly by the buyer."

It's exactly that.

So I was trying to understand what Jaa meant by disruption. There will be some short term adjustments, but It will ultimately come out in the wash.

The incidence of a subsidy or tax depends entirely on the supply/demand dynamics in that particular market.

This is one reason Labour's GST off vegetables was such bad tax policy. The supermarket duopoly clearly have enough market power to take most of the benefit for themselves. Labour should have proposed an anti-cartel policy targeting the supermarkets. Instead we got another pointless commissioner.

Both the new and second hand car markets are much more competitive and more sensitive to price signals. As the CCD proved, it was supposed to be revenue neutral but it stimulated demand too much, costing taxpayers millions and making it easy for National to attack. Reasonable then to think its removal will depress the market just as much.

[Rawz]

2CC chairman said petrol prices will continue to push people to EVs.

[Fortunecookie]

It's obviously at least a 6 month disruption.

Imagine you are 2CC... what do you do? Get your buyers in Japan to load up on EVs, ship them to NZ, process them (a what 3+ month process?) and get them to your yards in the hope you sell them all by the end of the year? Because if you don't you will have to hold lots of EVs in stock no one will buy for a while. Or you could discount them cutting into your profit margin.

Or do you focus on a mix of EVs and gas guzzlers and end up not having enough EVs to sell in the last few months of 2023 and not enough gas guzzlers in the first few months of 2024 as demand whipsaws. Looking at their home page, I see both types!

You could also see big sales of both types and then a quiet period afterwards.

Pretty hard to get the balance right I would imagine. Inevitable there will be some stock write offs and/or margin impact.

Lead times might be even longer for Colonial with new cars.


With reference to used vehicles I tend to look at it differently.
Before and after the removal of the CCD, there will be a set supply of used vehicles(with different mix) across the country at anytime. The purchasers will make purchasing decisions based on stock on hand. Sure they can bring their purchasing decision forward or delay it. But ultimately they must decide based on what is on offer. With that used vehicle dealers will monitor volume, price therefore margins. I think 2CC have and will do well because they have been operating for many years and they have a hand on the pulse knowing what their vehicles are worth at anytime. I don't think you can succeed without being good at that. Unless for some reason someone brought a significant amount of stock (I mean alot) to the market anytime, I cannot see how prices can be materially impacted across the boards because every used car dealership is in the same boat so to speak. In terms of the type buyers they attract, for the majority I don't think they have the luxury of time to wait to get the right car. I believe it is viewed more as a necessity. Quite different to new vehicles, where I think the mindset is different i.e I am paying a significant amount so I want it to be just right therefore prepared to wait.

I'm denying there is not going to be any volatility with stock and sales volume for the next few months. I think 2CC are well place because they have sold about 50% EVs/hybrids year to date and will likely to improve given the petrol environment.

But say I'm wrong and it takes 6 months to adjust. At the very worst consider it a one off event. It is not a long term disruption, it's just a blip if it is that.

[blackcap]

As well as being a one off blip, this change has been extremally well signaled and most firms on the pulse will have priced in (markets were giving Labour a 12% chance of getting in) the change of government and thus an upcoming change in rules and will have positioned themselves such.

If anything, it is a case of business as usual.

[Fortunecookie]

As well as being a one off blip, this change has been extremally well signaled and most firms on the pulse will have priced in (markets were giving Labour a 12% chance of getting in) the change of government and thus an upcoming change in rules and will have positioned themselves such.

If anything, it is a case of business as usual.

Agree. Things were were anticipated.

[Fortunecookie]

The incidence of a subsidy or tax depends entirely on the supply/demand dynamics in that particular market.

This is one reason Labour's GST off vegetables was such bad tax policy. The supermarket duopoly clearly have enough market power to take most of the benefit for themselves. Labour should have proposed an anti-cartel policy targeting the supermarkets. Instead we got another pointless commissioner.

Both the new and second hand car markets are much more competitive and more sensitive to price signals. As the CCD proved, it was supposed to be revenue neutral but it stimulated demand too much, costing taxpayers millions and making it easy for National to attack. Reasonable then to think its removal will depress the market just as much.

The supermarket seem to have alot of power over their suppliers. I think it is a similar situation in the states regarding Amazon. The respective US organisation are wanting to reduce their market power.
Apparently they are using AI to pick up vendors who sell for lower pricing on competing sites and if found to be the case they will kick them off their site. Sounds very similar to the Weetbix situation.


Anyway moving way from supermarkets.
A potential change is to do with CCCFA. I think the majority of people do not know the effects of the changes from late 2021 had on the economy.
At the time of the changes, it would have reduced the borrowing capacity of households between $50K to $100K, all else being equal.
My contention with those changes was that, plain and simple it was fundamentally flawed (idiotic). Some of those changes have rolled back.
You can argue well there was too much cheap money floating around at the time so we needed to tighten credit supply. I will counter and say CCCFA is to assist in the approach to lending and as opposed to being considered as another monetary tool by stealth that the Labour govt relied on(conspiracy theory I know).