Promotion of Accounting Reform as the most effective Pathway to a Fairer Safer and more Prosperous Society. Comment and Support from all quarters is Sought to straighten out NZ's problem

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April 2006 Edition ---- to page back through Previous Editions click here

Sorry about no March edition, We did have near record traffic that month however, surfers presumably mulling over the February effort.

Those wishing to verify factual comments we made concerning the NZ Superannuation Fund might have some difficult since the biographical details contained on the Fund's web site have been significantly down-sized. Typically 3 paragraphs per staff member have been reduced one paragraph of slightly larger size that the previous ones. Hence the activities in the 80s is all gone. The new lineup does not include a Financial Accountant although an office person and a receptionist have been added. A good financial accountant could add a lot of stability to the Fund if they are prepared to tell any slippery management where to go, especially if they could get the backing of their professional organisation, a pipe dream perhaps.

It is suggested that interested persons write to the Superannuation Fund requesting a copy of these details as they appeared on the Fund's web site in early February. It has obligations to respond under the Official Information Act.

One wonders how these cuts come about. Disc space shortage perhaps, or the External Relations manager got a new pair of scissors. It is still disclosing details of its investments, Australian Wheat Board and all.

On 18 March the NZ Herald published a piece on the Chairman and Chief Executive of the Fund, each of which it is said declined to supply CVs or give interviews. The CEO Mr Costello apparently taught English at Taita College in the Hutt valley during the 80s. We believe that he was a very good teacher. Taita is in a state and low cost housing area similar we understand to the one where gun investor John Key. National Party spokesperson for finance and ardent supporter of Mr Costello , was brought up. Pupils might have considerably contributed to Mr Costello's financial understanding. The next secondary school up the valley from Taita College is probably the Silverstream college, attended in their time by one Michael Fay and also Bill English, a former National Party finance spokesman and minister. The former has made considerable donations to Silvestream and the school still gives him its respect it is understood. This paragraph is a mishmash and isn't really going anywhere but we say 80s experience is relevant,

It is very easy to produce hype about beating benchmarks etc when a Fund is in full investing mode. Stocks invested in get a boost by virtue of the investment. An additional investment at the end of the year which incidentally keeps the price on the rise could occasionally happen. The ACC's investment fund was going great guns for many years. It is still doing well but it is more subdubed now as the fund size matures. Both funds will be reducing to support baby boomers as will many other funds and it is then that the true returns will be seen, especially by post baby boomers.

Another AMP Henderson investor of the early 2000s is in the news for apparently failing to capitalise on the boom times in Britain. It would be interesting to know which investor bought the Tranz Rail shares.

We wish to now change topic to discuss Case No 1051 of the New Zealand Press Council.

The story seems to start last year when Mr Kerry Mcdonald, chairman of listed company Oceana Gold and of the Bank of New Zealand decided to give a speech on the current New Zealand economic scene at an Auckland minerals conference organised by the state sector organisation Crown Minerals. We think it might be that he really wished to get his opinions on the NZ economic scene published in newspapers and presenting them to the conference was a necessary round about way of doing so. The topic is rather peripheral to what one would expect at a minerals conference one would think. Either way Mr McDonald gave his presentation to the conference on 14 Novenber and a purported summary of it appeared in the Dominion Post the next day together with a photo of Mr McDonald which was attributed to the Sunday Star Times. We know of no other newspaper having run the story and think the coverage got might have been pre-arranged, and are sceptical about just who wrote the newspaper summary.

The article was headed "Kiwis trapped in "Prosperity Mirage" and focused on attitudes and NZ's poorer economic performance compared to Australia and perhaps the United States in recent times. There was some emphasis on inadequate exporting being part or much of the problem. The speech was described as being "hard hitting". We don't have much of a problem with anything we have mentioned so far. The problem comes with the prime factual material given in support of Mr McDonald's views.

Mr McDonald presented a table to conference, said to have been sourced from the OECD, which showed percentage increases in per capita exports from 1960 to 1999 to be 220 for NZ, 490 for Australia and 550 for the United States. We don' challenge the accuracy of this data but would question the relevance of going back to 1960. We often harp back to 1990 and get flack for that. Going back to 1960 does give a good contrast of figures though. In the early 1950s NZ hit an export prices bonanza which was probably still somewhat lingering in 1960.

The notation "increase 1960 to 1999" was in red on a white background on the table as we understand it. Quite a good colour for getting overlooked and this is what is purported to have happened since the Dominion Post reported the information as "The country's exports per capita are almost half that of Australia and 2 1/2 (2.5) times less than the United States".

From the World Trade Organisation's figures for 2004 at, NZ exported $US20.4b of merchandise and 7.8b of services. Dividing the total of 28.2b by 4m people gives $US6,900 of exports per person. Corresponding figures for the US are 819b, 318b, 1137b, 294m giving $US3,900 per person. Australia comes in at $US5,500.

An accurate statement couched in similar wording would be "The country's exports per capita are about 25% greater than that of Australia and 75% greater than the United States". 220 is of course 60% less than 550 and not 2 1/2 times less as stated. 2 1/2 times less would be minus 825 but it is hard to put an interpretation on negative gross exports. There are thus two independent mistakes purported to have been made here.

Shades of the purported mistakes in the 1990 Bank of New Zealand audit notes seem to appear here and one wonders whether they have a similar source of expertise. The Bank of New Zealand has of course changed ownership substantially or entirely since 1990 but some of the old culture could remain. The Bank's Chief Economist for instance seems to span both eras and has on occasion been most supportive of the older regime.

The Dominion Post advised that they received one only response from a reader questioning the validity of the statement and that was not from Mr McDonald or connections of his. This is a serious indictment on accountants and other commerce graduates within the readership of the Dominion Post. They have been trained in the basics of economics and arithmetic. In particular they know that small countries have a greater need to trade than large countries and that New Zealand has a large export sector.. They should know also that the expression 2.5 times less is ridiculous in a comparison of gross exports There exists a destructive element that says that if some attitude is in vogue, eg NZ needs to increase its exporting, then one must not present any facts which in themselves do not support the contention. Readers of newspapers are entitled to learn just as do those who attend tertiary institutions. Newspapers might not provided structure or comprehensive learning but much can be picked up over time if the information which they print is correct. There is no place for misinformation being supplied to any class of people. Accountants, claiming to have the pre-eminent business qualification, need to grow up and stop such instances and see they are promptly corrected when they get through, rather than having an attitude of going along with telling the blighters (the less formally educated public) what is thought to be good for them. There will be people with a good understanding of NZs need to export more per capita than the bigger countries but who are stupid enough to believe Mr McDonald and the Dominion Post who now think the country's exporting and the whole economy is in the wreck and ruin phase.

In this case the Dominion Post has squirmed and supplied all sorts of excuses against publishing a correction despite the (it says) one complainant claiming the inaccuracy on the day of publication. One would expect that its business staff too would have had basic economic tuition.

The Press Council has upheld the complaint but in its determination has not stated what the correct situation regarding NZ s exports per capita in comparison with those other countries is. It leaves the public thinking the error might be just outside its tolerance threshold with the complainant being a fuss-pot especially since, as the Press Council records, no-one other than the complainant had suggested that the published statement was wrong. Complainants should be able to expect better than that.

On 5 April the Dominion Post has printed the full Press Council determination word for word on a back news page. The readership is likely to quite different to that which read the original article on the front business page. Because it states the incorrect information and the fact that there was only one complainant and it was a long time before the Dominion Post recognised that there was an error, this readership is likely to think that the true situation is quite similar to the declared erroneous statement and it too will have been seriously misled. If the two readership sizes are similar then the deception has been effectively doubled.

The Dominion Post had an obligation to print the "essence" of the Press Council determination and by printing the Council's communication in full one might think that it would have done this. But it did not declare the authorship of the article despite the Council being supposed to be independent of it. This lends credibility to our suspicion that the 15 November piece was also someone else's work. Influence by confusion and discrediting of complainants seems to be what it is all about.

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