For our take on the reign of Theresa Gattung and our disclosure of the latest quasi pyrimid selling venture from America, read on down. But first its time for some follow-up on the issue of the Dominion Post and the exports promotion lobby.
The misinformation was brought to the newspaper's attention together with references to a reliable source of the correct information but the newspaper refused to believe it, calling the complainant's reputation into question. The false information was asserted in an article on an apparent speech by the prominent businessman Kerry McDonald who is chairman of a minerals company. The paper advised that Mr McDonald had not contacted them concerning their report so they had no cause to think that the information was wrong.
We agree Mr McDonald should have been in touch but nevertheless think it implausible that the newspaper would not know that the information was wrong. It was so easy to check it out if they were in doubt. It obviously goes along with this business sector no matter what.
Mr McDonald seems to have faded from the limelight these days. He has not given any reason why he did not request a correction.
The issue was the subject of the Press Council's ruling 1051. It upheld the complaint of failing to correct but did not include the correct information in its decision narration or require the newspaper to publish it.
Then on page C2 on 30 September 2006 comes this article headed "Trading on the exchange rate might not be enough". It focused on NZ's low exports to GDP ratio compared to many small rich countries and what it claimed was relatively slow growth in exports. It started by conceding that there were reasons for these low stats that were beyond the country's control and gave a couple of such reasons. But it nevertheless wished for the low stats to still be seen as evidence that the country is under-performing in exports to its economic detriment, and went on to suggest that regardless of internal economic objectives the value of the New Zealand dollar needed to be lowered to promote exporting.
We claim this article is defective for many reasons which we will now attempt to number. We will at the same time to the Press Council's ruling (number 1075) on it. The same intrepid complainant was involved.
1 The article failed to mention physical isolation as a reason for the country's low exports to GDP ratio. It did mention absence from major trading blocs which probably results from the physical isolation but the physical barriers are far more important than the legal ones. In continental Europe where the EU fully operates we understand that it is no longer legal to stop vehicles at borders so presumably trucks cross borders to effect exporting at 100kph. If one attempts to export anywhere from NZ by truck, by crossing the border at even 200kph, it will end in absolute disaster. We cannot export fresh milk, or ready mixed concrete, or hot pies to name but a few products which we are otherwise good at producing. The air and sea links are costly in terms of time and money. Basic economics dictates that if you are less good at something you do less of it. This is the major reason from the lower Exports to GDP ratio and any discussion of such reasons cannot leave it out. The idea that the low ratio is the result of a high currency value is bunkum.
2 Having discussed the reasons for the somewhat low Exports to GDP and exports growth stats the article uses the following fascinating sentence to allow these reasons to be ignored. It says "But, irrespective of the reasons, our low level of external trade relative to gdp means we are subject to handicaps of economic insularity." The inference is if we trade ( ie export because that is the restricting aspect of trade) more and increase the ratio we can get rid of these handicaps. We say this is not necessarily so and there is nothing in the article to suggest that it is so. Exporting coal to Newcastle might generate a lot of dollars to some exporter if the NZ dollar value is low but somebody else might well have to import it back again and the country will have to bear all the freight costs. It would be possible to export everything we produce and import everything we consume but everyone knows that would be the absolute height of stupidity. Like most or all export advocators the article does not suggest where the line between not enough and too much exporting is, except to imply more exporting is needed. A lower exchange rate would make exporters and importers richer and that is what they always want.
Anyway measured worldwide exports are inflated by the dropping of all trade barriers in EU Europe making it effectively one country except for trade measurement and sport purposes. This is where most of the countries which are continually compared to New Zealand reside. Measured trade has also taken a big boost by the fragmentation of the Soviet Union, Yugoslavia, and Czechoslovakia. Trade amongst the fragments now counts. NZ is not involved in these phenomena except this graph compares its trade growth with that of the world and the OECD, which is involved.
The next slide, Slide 4 of this "Dancing with the Stars" presentation compares exports as a percentage of GDP of various countries. Australia is the only country shown which has a lower such ratio than NZ. The US, which has a much lower ratio, was there in earlier versions but it has now been removed. China was shown as having a slightly higher ratio than NZ.
Then in Slide 5 the theory that the more populated a country the lower its exports to GDP ratio tends to be is presented, for the purpose of showing that NZ is way out of kilter on this basis. China is dropped out of this graph while Japan and the US are brought in. It is great to have reserve countries on the bench which can be brought into play for specific purposes.
4 Well the Dominion Post says that this article of 30 Sept 06 was a "comment" piece although they had neglected to say so. A Press Council requirement is that a clear distinction be made between news and items of comment. But the Council, in Ruling 1075, came to the newspapers aid in agreeing that page C2 on a Saturday had long been reserved for articles of comment so presumably this would be what readers would be expecting as they turned to page C2, so the distinction would not be breached. Also there was a small photo and brief credentials of the author, Bruce White, advising that he was an independent consulting economist. The Press Council said that indicated that it was not written by the newspaper's regular staff but by an outside contributor, inferring that this indicated that it was a comment piece. Well we can see no reason why a person such as Mr White can't be called in to write up a news item or two on a subject with which they are familiar. It goes on all the time in the commercial world where one finds oneself a little shorthanded and knows of a suitable fill in that might be experiencing lean times. We can't see any reason why news reporters can't have their photos or credentials published either, especially if it was their first article as this one could be.
We can report that the tradition of Saturday's C2 being a comment page came to an end on 27 Jan 07 when the page most certainly contained regular news. To be fair the Council did not say that the page was used exclusively for comment. But if it is peppered with non comment from time to time that surely makes it more important that the nature be labelled.
Well the problem is that the Dominion Post just can't leave the NZ Institute alone. Its page C1 on 13 January 07 is primarily about trade deals between countries but on the top right hand side it proclaims "Exports in retreat" and regurgitates more from the old "NZ Institute" Dancing with the Stars presentation, particularly describing the graph it published on 30 September which we have referred to. It also refers to the "Institute's" observation that NZ has only one domiciled company (Telecom NZ) in the Forbes global 2000 index, which it describes as a measure of the country's "global failure". Fonterra apparently does not count because of its Co-operative status. Why a country at the end of the world should make a good base for large companies defies us, and having such parent companies registered here would not necessarily confer benefits.
The Dominion Post article of 15 November 2005 as mentioned above was attributed to Marta Steeman. Ms Steeman achieved her name in lines several millimetres thick and pitch black on page C1 of the Saturday 3 February 2007 edition for an article to mark the resignation announcement of Theresa Gattung as CEO of Telecom NZ. The headline suggested the article was about how Telecom would be after the exit of the chief but in effect it was a tribute to Ms Gattung and speculated about where she might be headed rather than where NZ's only Fortune 2000 company might be going . The tribute was tempered by another (one column) article on the page, not by Ms Steeman the heading of which said it wasn't all Ms Gattung's fault. That sort of implied that the exit was somewhat her fault.
Given Ms Steeman's accuracy record we think we should supply a paragraph or two giving our perspective on Ms Gattung's quite long and lofty tenure.
The story starts in the mid 1980s and involves mainly the Bank of New Zealand. This institution was then fully government owned when the successful business entrepreneur Sir Ron Brierley was appointed the Bank's chairman and an intention to privatise it was indicated. Now such entrepreneurs are invariably bent towards making money for themselves and not necessarily for any organisation they might be asked to head. This is not necessarily a criticism, it is just the way they are. And so it seems to have been as the bank went on a lending spree making for a huge spike on the sharemarket index with the businesses thinking all their Christmases had come at once. A company called European Pacific was formed by the Bank together with a company Sir Ron had founded and that of Americas Cup challenger heroes Fay and Richwhite, which devoted itself to bold and troubleshooting ventures involving these enterprises. Well such fun has got to come to an end. The bank failed owing about $1b, Sir Ron was relieved of his post and new managing director, one Lindsay Pyne, was appointed. The bank was bailed out by the government but just who had owed it the money and what recovery action was taken is not known. Fay and Richwhite's company took a large block of shares in the Bank but it had not been cured of all its ills. With the aid of it's auditors and other professionals, and we suspect the government and the parliamentary opposition who were about to be elected to office, and with European Pacific to the fore, an inflation job was done on the bank's 1990 reported profits. But this could not prevent the need for another bailout a short time later.
Into this potent mix came Theresa Gattung as the Bank's marketing manager. Rod Dean was working for the government Treasury department then we think and we think it was him that officially told the incoming prime minister Jim Bolger of need for the second bail-out. He subsequently criticised the apparent banishment of Fay and Richwhite to Switzerland and claimed to know who was responsible for this but we have no idea. Dr Dean went on to become CEO of Telecom and since the Bank of New Zealand was being sold we suspect he envisaged setting up such a liasion at Telecom. The Government had no shareholding in Telecom but had considerable influence over its monopoly status. So the Banks marketing manager and its external auditor moved over. Later Mr Pyne attempted to get on board and made it for a while and we may have played a part in scuttling that one. Perhaps there were others. Ms Gattung fitted in with a Government objective to have a women at the top of every sphere and so become the face of a government agency masking as a successful commercial company. That is one way of looking at it anyway. And the abuse of the accounting system continued. We particularly remember the rendering of the associated company Southern Cross Cables insolvent. Consolidation of this associate's accounts into Telecom's accounts was no longer required or allowed then, or so the relevant accounting standard said, ha ha. No consolidation meant that dividends could be treated as revenue which generated profits and Southern Cross had been made to pay over a whole lot of dividends that year to bring the Telecom profit up to par. It was probably all the dividends paid out which triggered the insolvency so it all worked out well. But the funds probably came from previous year's profits which had already been declared as profit by Telecom by way of consolidation. So is the Gattung legacy.
Our final topic is the emergence to another pyramid selling type organisation from America by name of ACN. It might be endorsed by Donald Trump but it is a scam nevertheless and designed to milk funds out of the country while the Securities Commission seems to turn a blind eye. It costs $400 to become a sales agent and it seems to be the recruitment of sales agents rather than selling the product where the emphasis is placed. No doubt it is claimed that the $400 has something to do with administration or training costs but we suspect it just disappears off shore. Not much training or administration is required. The product is domestic telephone toll services. They claim there is a margin for marketing built into the competitive price for such services and that is where the money comes from. Authorised sellers get 2% of the toll bill of all persons they sign up to join plus 2% of the bills signed up by sellers they have recruited plus 2% of tolls of those signed up by sellers who have been recruited by sellers who have in turn been recruited by the sellers concerned and 2% of tolls arising from one further level of recruitment. So recruiting is said to be the answer. It is time this destructive nonsense was stopped.
Our next episode will centre squarely on accountants. They could do a lot to stop this damaging propaganda.