Nzx Open Magazine, Issue Two 2005 - "mettle"

2005

METTLE NEW ZEALAND’S PLACE IN THE WORLD ECONOMY Dr DON BRASH Sir RON CARTER Rt Hon. HELEN CLARK EION EDGAR Dr ALLAN HAWKE

CHRIS LIDDELL JIM McLAY KEVIN ROBERTS STEPHEN TINDALL Sir WILSON WHINERAY

Issue Two 05

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CONTEXT: WHO WE WILL BE, IS BEING DECIDED NOW Mark Weldon Chief Executive Officer, NZX

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NO NEED TO ACCEPT A SILVER MEDAL Dr Don Brash Leader of the National Party

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BUILDING A GREAT PLACE TO LIVE AND WORK Sir Ron Carter Founding Partner and Advisor to the Board of Beca Carter

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WORKING SMARTER, LIFTING GROWTH Rt Hon. Helen Clark Prime Minister

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NEW ZEALAND ECONOMY: WORLD BEATERS! Eion S Edgar Chairman, New Zealand Olympic Committee and Forsyth Barr Group Ltd

Cover image; This issue’s image requires very little explanation. We don’t know the dogs’ names and, whilst their breeding is no doubt impeccable, unlike the images featured on previous covers of OPEN they can’t claim to have influenced world thinking or artistic direction. They can, however, claim to be competing for the same resource. And no doubt the smaller of the two will have to rely on attributes other than brute strength to win the tussle.

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NEW ZEALAND’S PLACE IN THE WORLD: DEBATE REQUIRED Dr Allan Hawke Australian High Commissioner to New Zealand

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THE BEST SMALL COUNTRY IN THE WORLD Chris Liddell CFO, Microsoft Corporation

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CREATE THE RIGHT ENVIRONMENT AND GET OUT OF THE WAY

“Life brings sorrows and joys alike. It is what a man does with them – not what they do to him – that is the true test of his mettle.” Theodore Roosevelt

Jim McLay Executive Chairman, Macquarie New Zealand

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GIVING NEW ZEALAND THE EDGE Kevin Roberts CEO Worldwide, Saatchi & Saatchi

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AGREE OUR GOALS AND IMPROVE PERFORMANCE Stephen Tindall Founder and Director, the Warehouse Group Ltd

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HONEST STRUCTURES AND AN OPEN COMMERCIAL CLIMATE Sir Wilson Whineray Businessman, Philanthropist, ex All Black Captain

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MARKET TECHNOLOGY Chris Corke, PMP Chief Information Officer, NZX

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HALF YEAR RESULTS 2005

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GLOBAL TALENT COMMUNITY Ross McConnell Chief Executive, Kea

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NZX OPERATING METRICS

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MARKETPLACE

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MARKET UPDATE

‘Mettle’ isn’t a word in common usage these days. Perhaps NZX ought to launch a campaign to restore it to its rightful place in the New Zealand vernacular – a secondary objective, of course. We chose the term because it describes to a ‘T’ the characteristics of the small dog on our cover. A terrier will take on animals ten times its size. It will worry away at an obstacle until it has got around it (or dug under it, or chewed through it). It will chase potential danger down foxholes. It will, literally, run until it drops. Mettle is also a useful descriptor for what motivates our contributors in this issue of OPEN. Dictionary.com describes mettle as “Courage and fortitude; spirit” and “Inherent quality of character and temperament”. Sounds about right for a country which, until relaKtively recently, was routinely left off maps of the world but which regularly punches above its weight in the global arena. Which is all very well but, as you will read in these pages, New Zealand cannot live by pride alone. Nor can we rely on hosting another international sporting cup fixture to galvanise our identity – and our economy – in the long term. It will require some pretty heavy mettle to be relevant to, and compete within, global markets. Our contributors – all of whom share a passion for this country, regardless of where they choose to reside – make some very pragmatic suggestions that demonstrate openly their individual mettle. We respect each of them for their preparedness to put their names and faces to these contributions, and we trust that those contributions will prove their mettle as the debate continues well beyond the 2005 general election.

Rowan Macrae NZX Communications

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CONTEXT: WHO WE WILL BE, IS BEING DECIDED NOW M A R K W E LD O N C HIE F E XE C UTIV E O FFIC E R, NZX

Historians say the hardest thing in the world is to recognise history occurring when you’re right in the middle of it. It is generally only with the perspective of time and distance that a series of events, which at the time were hard to connect as being related, can be seen as a meaningful set of themes that set the path for the future. I am no historian, and prefer to look forward than back, but I both think and feel that right now New Zealand is in a five-year window where the themes for our future success, prosperity, lifestyle, and national identity will be determined. When I was 16, my swimming coach hammered home to me a metaphor of a large box of popcorn, the type you buy at the movies. The metaphor went like this. As a swimmer, you began each season with a full box of popcorn, which represented your highest potential performance. Each kernel in the box represented a 500 am practice. You could miss a practice, throw away a kernel, and there would be no discernable difference to your end performance. Throw away a few… still not much difference. At a certain point however, so many kernels were gone the difference is visible, the level is lower, and, crucially, you will not achieve your full potential. In my view, that is where New Zealand is now. A good few kernels (decisions made by both political and business leaders) have been chucked out. Where will we end up?

In this context it is my belief that the political and business leaders of New Zealand, now and over the next five years, will make a series of decisions which, in aggregate, will determine if New Zealand moves into a new epoch with a full box of popcorn, and the ability to determine our own future or, quite simply, not.

“To be very clear: New Zealand is in a competition with the rest of the world for people (talent) and capital (investment). How well we do in this competition will

For an example of what we could look like if our leaders make the ‘wrong’ set of choices, we need look no further than Guam. Guam is a ‘Presidential Municipality’. What that means in real terms, is that there are no great jobs on Guam, and success means leaving the island. This is a very real possibility for New Zealand, and our net emigration figures to Australia (in Guam you leave to go to the U.S.) are a portent of that possible future.

determine our future.”

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In this context we must be clear that there is no such thing as a domestic policy, or decisions, in a vacuum. To be very clear: New Zealand is in a competition with the rest of the world for people (talent) and capital (investment). How well we do in this competition will determine our future.

On the other side, and as identified by many of the leaders who have written in this magazine, is a vision of New Zealand as ‘the best small country in the world’. To me this is a real and achievable vision, but one that needs an additional level of definition to make it finite, definable, and hence achievable. Our national goal – Country of Choice A handful of leading global firms have as their goal to be ‘Employer of Choice’. To my mind, a great goal for New Zealand, and one that could be used as a filter to sort good policy from bad, and good decision making from bad, would be to set as our goal to become the ‘Country of Choice’. With this (or something similar) as a framework, we would be the first country in the world with a clearly stated national strategic goal, instead of operating under some vague sense of ‘national interest’ – which clearly fluctuates across time and across political parties. It would mean, in particular, that New Zealand’s leaders feel compelled to make decisions based on optimism and confidence as to what we can accomplish, rather than pessimism about what we can’t. It would also mean that we could define clearly the measures we could use to evaluate our success in heading toward that goal. Leadership and language implications of Country of Choice framework Globalisation means, quite simply, that the set of choices available to people and capital is growing, not shrinking. All the policies and decisions made by our political and business leaders within a Country of Choice framework would be designed to create a New Zealand that is far more competitive in these two areas. On a political level this would involve a set of policies that would make New Zealand more competitive and attractive to the globally mobile class of workers (including most New Zealanders). On a business level, it would involve leaders taking decisions and being accountable for the growth of meaningful ownership and career opportunities in New Zealand. Unfortunately, our current commercial/political language is impoverished, and characterised by the illusion and rhetoric of absoluteness. Our language is holding us back. We need to quickly change the language of politics and business, from one of hostility and baggage, to one that is constructive and focuses on outcomes. An area where the politics of language has created baggage that is increasingly

too heavy for this little country to carry any more, is the ownership of assets. The language is now polemic, so vicious, and so laden with guilt and accusation, that it actively prevents any meaningful debate on what is best for New Zealand. Under a Country of Choice framework, we would start with asking, in neutral terms, exactly what it is that we are talking about. The answer is, we are not talking about assets, or jewels, but about businesses. That fact is one casualty of the current national conversation. Secondly,

“We need to quickly change the language of politics and business, from one of hostility and baggage, to one that is constructive and focuses on outcomes.” with regard to those businesses, the language of debate is currently such that it would have you believe that the only viable outcomes are that the Government owns everything, or nothing. The reality is quite different. There are a range of different arrangements that would work for different businesses. Vector and Air New Zealand are great examples of middle ownership outcomes, both of which are proving successful. Australia allows Australians to invest in Qantas and banks, but has limitations on foreign ownership. Outcomes discussed in this way would be characterised by the language of responsibility, instead of insularity. Surely this is the goal: the best set of outcomes for New Zealand. Country of Choice – policy examples Take tax. The first question would be what we are trying, as a nation, to achieve out of tax policy in the context of a goal of becoming Country of Choice. Under this approach, tax policy would both: • redistribute income to ensure an adequate standard of living; and • create a set of incentives that grow savings, investment and productivity. If a tax policy did not meet both criteria – necessary to make New Zealand attractive as a place to both live and work – it would not pass the test.

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The measurable outcome of this approach would be whether, for example, as Chris Liddell says in this issue, we create an overall business environment (dependent on more than just tax policy) from which New Zealand-based companies could become “mini-multinationals” – making stuff in China, selling it in Europe and the U.S., while the intellectual property (and therefore the wealth) stay in New Zealand. In regulation, a Country of Choice policy would mean a competitive approach. With regard to Australia, we would start with the assumption we should offer a better framework for labour and for investment, rather than the same framework. This is not the current position. The same approach would also lead to interesting outcomes in education. It is clear, for example, that one of the single biggest competitive advantages the U.S. has over the rest of the world is in the quality of its doctoral programmes, which attract the best and brightest from around the world. The U.S. is then very smart in making it as easy as possible for these people to stay in the U.S., based on the theory that they’re talented and will find ways to add value to their new home. This is the opposite of a ‘points and needs’ approach, under which many of these people would fail to make the immigration grade. These people have as their sole qualification a proven ability to think. It is my view that, going forward, this attribute – more than any other – will drive New Zealand forward. What this would mean for education is a policy that revalues distinctive performance and research programmes, and an immigration policy based on potential rather than proof. It would also mean a high school education system based on excellence. Measures of success and outcomes In my view there are at least six measures you would hold yourself accountable to achieving if Country of Choice were adopted as our national goal. 1. A growing population, with an increased number of

scientists, designers, and other thinkers who will be the people who create real value and distinctiveness (that can be monetised) in the next 10 years. 2. The emergence of a new class of New Zealand company.

Distinctly from New Zealand, these companies could be technology, agriculture, brand or skill driven. These companies would be billion dollar plus market capitalisation companies, owned and run from New Zealand, with manufacturing and other inputs sourced and delivered in the most efficient way. They would be giants in small global slivers. We would understand that value flows to ownership, not inputs.

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3. A much greater level of outbound investment with New

Zealand companies exporting skills in areas that many economies (e.g., Vietnam with its 81 million people) desperately need. Exporting our skill and knowledge base will both drive domestic growth and improve our skill base. 4. Startling growth in trade to new places arising from the

networks our returning and new New Zealanders have around the world. 5. Business heroes would emerge. A country cannot run

on sports (or arts) alone. A series of business leaders who have achieved commercial success, in a way that is positive for New Zealand, would provide an example for younger New Zealanders that any dreamable career is possible from New Zealand. 6. Savings. Our savings pool would substantially grow,

fuelling investment in business and infrastructure. The story of New Zealand The story of New Zealand feels a lot like the first of all recorded stories, the Odyssey. New Zealand is a lot like Odysseys – we are a small country that by our size, location and natural resources, will always face a lot of challenges. More than any other country, we are in competition. With regard to people, with one million New Zealanders living overseas, it’s clearly a competition we’ve been losing. In the New Zealand version of the Odyssey, over the next five to 10 years, people and companies will emerge that are globally distinctive. As Sir Ron Carter says in this issue, New Zealand would be an aspirational place to work, as well as live. Add to this, the skills, relationships and opportunities in New Zealand at that point in time would be such that the options around our future would be wide, not narrow, and our national mindset would be one of optimism, not complaint. It’s also why we all feel so attached to this place, and why it affects all those who visit us in a similar way. We have people working at NZX who are not from New Zealand, and are unlikely to stay here their whole life. They do, however, really care about this country. It has that effect. But it’s also about opportunity, honesty and execution.

Mark is the Chief Executive Officer of NZX, director of Smartshares Limited and Chairman of Link Market Services Limited. He is also a board member of the New Zealand Olympic Committee.

NO NEED TO ACCEPT A

SILVER MEDAL Dr DON BRASH LE AD E R O F THE NATIO NAL PARTY

New Zealand is a small player in the world, too often providing a talented, skilled, hard-working labour force to our richer friends. New Zealanders are boosting the numbers of skilled people in the workforces of the rest of the developed world, and in particular in Australia.

Recently, the Government Statistician released the migration figures for the year to June 2005. Those figures told us that each week over the past year, 630 New Zealanders on average left these shores to move to Australia, permanently or for the long term. And the truly worrying feature is that the trend line of departures is increasing with every month that passes.

METTLE

The sad fact is that, in the past five years, the gap in average after-tax incomes between New Zealand and Australia has grown from $5,000 per year to $9,000 – nearly double. Until we address that difference in relative income, we will remain simply a breeding ground of talent for the rest of the world.

NZX’s objective for this issue of OPEN was to push the thinking on New Zealand’s place in the world and the world economy. To that end we sought the views of key figures in the fabric of New Zealand, including New Zealanders who choose to live here, those who elect to live offshore and some prominent non New Zealanders with deep knowledge of, and exposure to, New Zealand. We asked them to address four specific questions: 1. In your view, what is New Zealand’s position in the world today? 2. What ambition should New Zealand have for its place in the world and the global economy going forward? 3. What concrete steps do we have to do to get there? 4. How much time do we have, and what will the consequences of inaction be? Contributions appear in alphabetical order. Typically, the responses came from the heart as well as the head, which is hardly surprising given the passion each of our contributors has for this country. We thank them for their mettle. We appreciate their commitment to the future of this country.

There is no need for New Zealanders to accept a silver medal – to accept second place behind Australia – as our natural lot in life. There is no need for New Zealanders to accept that a considerable proportion – perhaps all – of our children and grandchildren will find their futures in another country. If New Zealand could close that relative income gap, we could have a country that Kiwis want to stay in, and want to return to. Once the human capital is in place, we can become an attractive market for trade and investment as well. To get there, we need to change our culture and our attitude. We need to understand that for New Zealand to get ahead, New Zealanders must be able to get ahead. What New Zealand needs is a government that is committed to wealth creation; one that can then afford to provide the standards of healthcare, education and other social services that we aspire to.

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Our RMA policy will also contribute substantially to another of the big commitments that will be outlined during this election campaign: a major catch-up programme with public infrastructure.

New Zealand also needs a government that understands it is sheer madness to see every dollar of growth confiscated by the public sector rather than being left in the hands of resourceful, entrepreneurial New Zealanders to fund new growth and higher paying jobs.

Together, these policies will provide a country New Zealanders are proud of, and proud to return to.

The key is restoring to ordinary hard-working New Zealanders the right incentives to work hard and to get ahead, for the benefit of their families and our country. To do that, we need to provide the right incentives in the tax system, in education, and in the welfare system so our children and grandchildren don’t feel the need to move to Australia to have a decent life.

In the year to June 2005, 33,019 New Zealanders left for Australia permanently. In the previous year to June 2004, 26,999 New Zealanders made the move to Australia. If we do not act very soon, this trend will continue. Sooner rather than later, New Zealand will push all of its brightest talent offshore. And without that pool of skilled New Zealanders, we will slip further and further behind those countries we traditionally measure ourselves against, and continue to stagnate in the bottom half of the OECD.

At present, our tax system punishes positive attitudes: it sharply reduces the reward for enterprise, skill and hard work. And our welfare system encourages a set of attitudes that are utterly destructive of selfreliance and self-confidence. These are terrible signals to send to the next generation of New Zealanders.

“Until we address that difference

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income, we will remain

We need to change the incentives, and send better signals about how to get ahead in life. That is why I’m committed to lowering the tax burden on ordinary New Zealanders. But that is only a start.

simply

breeding

But it is not too late. We can still act to reverse this trend, and make us once again a prosperous member of the global community. All it will take is a government that understands the changes necessary to allow New Zealanders to create the wealth they so richly deserve.

ground of talent for the rest of the world.”

Changes to our education system are critical if we are to lift our standards of literacy and numeracy, and if we are to see all young New Zealanders given a fair start in life. In tertiary education, a new set of priorities is needed. We will scale back the second-rate sub-degree courses that have been funded over the last five years – courses that few even bother to complete. Instead, we will remove the funding restrictions on trade training and apprenticeships, and increase the productivity of New Zealand’s workplaces. Our Resource Management Act policy is designed to reduce compliance costs and the enormous delays that contribute to them. The policy is symptomatic of our general approach to the growing raft of compliance costs that afflict the productive sectors of our economy.

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a

With the skills needed to compete with the rest of the world gone, we will slowly lose the capital and the trade needed to sustain our economy.

This election is about building a better future for our country. It is about restoring to ordinary hard-working New Zealanders the right incentives to work hard and to get ahead, for the benefit of their families and our country.

Don Brash was elected to Parliament in 2002, becoming Leader of the National Party in 2003. Dr Brash has served with the World Bank, and been Chief Executive of Broadbank, the New Zealand Kiwifruit Authority and the Trust Bank group. He was Governor of the Reserve Bank from 1988 to 2002. The views represented in this article are the express views of the author, and do not necessarily reflect the views of NZX.

BUILDING A GREAT PLACE TO

LIVE AND WORK S i r R O N CA R T E R FO U N DI N G PA RTNE R AND ADV ISO R TO THE BOARD O F BE CA CARTER

Implicit in any judgement about New Zealand’s position in the world today is the scale by which the position is measured.

experience abroad is healthy. If they then choose never to return, their loss must be balanced by an inflow of equal or better skills from elsewhere.

In terms of New Zealand’s GDP and income per head it is obvious that our position over the last 40 years has fallen considerably by comparison with competing western economies. However, if we measure ourselves as a country where people would choose to live, we score relatively better. But as a place where people choose to work (judged by the rate at which New Zealanders are leaving), it appears that we are losing out.

At present it appears that we are hollowing out our economy at the highly skilled level and also at the trades level – that this is happening when there is a great opportunity for employment is clearly of concern! Immigrants with a desire to live in New Zealand, and with a willingness to bring some capital with them, are not a sufficient substitute for the loss of superior talent.

I believe there is a connection between the chosen place to work and our relative position in the economic scale of success. Skilled persons leaving our shores to gain

A laudable ambition for New Zealand is to be a country which is so desirable as a place to both work and live that we will have a surfeit of applicants who will add both to our skills and our culture – not just immigrants who create

“Skilled persons leaving our shores to gain experience abroad is healthy. If they then choose never to return, their loss must be balanced by an inflow of equal or better skills from elsewhere.”

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a demand for housing and services. Desirably, the country needs persons who will add to its wealth creation as well as those who merely fill employment shortages. It seems clear that the solution must lie in the achievements of our education system – a system for which we should set goals to produce students whose knowledge matches the natural strengths of the country. It is demonstrably easier to do better at the things in which you already excel than to acquire new talents as yet untried and unproven. Hence a principle thrust, but not the only thrust, of education should be vocational – to teach those who will add to and refresh our economic strengths. For more than a decade governments have grappled with social equity, environmental and political challenges. Efforts have been made to strengthen awareness, through education, of the importance and relevance of these, and they seem to have succeeded. But has zealotry concealed deficiencies that have developed in other areas? Education authorities have delivered programmes of learning (strongly supported by unfocussed government funding) while education in technology has fallen below optimum. It now seems that there is a realisation that the lack of investment in infrastructure has built a backlog of need which has not only diminished our productive efficiency,

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but has also failed to provide jobs for those who underpin this area of productive wealth. As we now turn our attention to correct our infrastructural deficiencies, we lack the human resources to tackle the job at the rate required. Obviously time lost in training for necessary skills will reflect adversely in the economy for some time to come. I suspect we will be restrained in our growth while we restore a better balance between our professional and trade skill base and our resources that deal with important social, ethical and political matters. My hope for the future is that while we may, from time to time, need to put extra resources into a subject, we will have learned to continue to support wealth generation in all respects – not just those that temporarily capture some high ground.

Sir Ron Carter was Managing Director of Beca Carter Hollings & Ferner Ltd from 1986 to 1995, then Chairman of the Beca Group of Consulting Engineers. He is strategic advisor to the Board of Beca Group, director of Air New Zealand, TrustPower, Rural Equities, Cabletalk and the Auckland Chamber of Commerce, and Chairman of the Committee for Auckland. The views represented in this article are the express views of the author, and do not necessarily reflect the views of NZX.

WORKING SMARTER,

LIFTING GROWTH R t H on . H E LE N C LA R K P RIM E M INISTE R

New Zealand is a sophisticated country and New Zealanders are by world standards highly creative, highly motivated and entrepreneurial. The economy has performed strongly since Labour took office, achieving an average annual growth rate over the five years from 2000 to 2004 of 3.8 per cent. This was comfortably above the OECD average of 2.5 per cent growth and means that we are making progress toward the Government’s goal of returning New Zealand to the top half of the OECD league table in terms of per capita income.

approach, the Treasury and the Ministry of Economic Development have been regularly benchmarking the economy’s performance against other OECD nations across a range of indicators. The latest update, published in February, confirms that the Government’s focus on working smarter is right, and that the areas where we need to lift our game are precisely those targeted through the Growth and Innovation Framework – innovation, international connections, and skills and talent. It also suggests that the Government’s role in working in partnership with business, regions, and research institutions is paying clear dividends.

“One factor that we ignore at our peril, however, is the significance of stable fiscal policy...”

Our tax rates remain low by international standards. Most OECD nations have personal and company tax rates which are higher than ours, and the richest nations appear to have the highest tax rates. If we compare ourselves to Australia, even after the recent Australian spend-up on tax cuts, the base rates of income tax remain roughly comparable, but of course Australian tax payers also face a 1.5 per cent Medicare levy, compulsory superannuation payments, hefty rates of stamp duty on major purchases such as houses and cars, and a generalised capital gains tax. New Zealand has had a long and remarkably good ride in the last five years.

This Government wants to lift growth not as an end in itself, but to improve the living standards and life opportunities of all New Zealanders. Our approach is pragmatic, not dogmatic, and relies upon continuous evidence-based evaluation, rather than blind faith. Consistent with this

Clearly a general weakening of economic conditions has been forecast for quite some time, and current economic data is confirming what forecasters have been saying: that the New Zealand economy is heading for a soft landing.

That is certainly what is reflected in the ongoing strength of the dollar relative to the currencies of our trading partners, and in the ongoing strength of our stock market. One factor that we ignore at our peril, however, is the significance of stable fiscal policy in maintaining our economic credibility and our creditworthiness. The truth is, our economy is finely balanced at this point in time, and what is shoring up confidence in it is, in part, the credibility and prudence of this Government’s fiscal and economic management.

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We have deliberately lowered Crown debt, and are on track to get it below 20 per cent of GDP, as a strategy to lessen our exposure to external shocks. We have also kept tight reins on government expenditure as a percentage of GDP, and indeed have lowered that percentage over the last five years, while the rest of the OECD has remained static in that regard. We have maintained price stability, and have invested in future stability for the economy by establishing the New Zealand Superannuation Fund which mitigates perhaps the greatest risk we face in the next half century: the impact of population ageing on government expenditure. It is possible for a future government to free up some resources in the short term by sacrificing one or more of these props. However, the damage from loose fiscal policy, from tax cuts or expenditure blowouts in a time when the economy is experiencing a severe capacity constraint, would be immediate and difficult to reverse. This Government’s fiscal strategy is tailored to that reality. We have announced cuts in tax, primarily a set of targeted changes to the R&D and FBT regimes and the inflationadjustment of income tax thresholds. These are modest and affordable. We also continue to invest in restoring our infrastructure after years of under-investment during the 1990s, and we are providing additional investments in tertiary education and science. Once more, these are modest and affordable. The tax cut question is a red herring to those interested in what can drive our long-term prosperity. The important question is, what was it that enabled us to sustain growth at close to four per cent for the last five years, and how can we build on that obvious resilience in order to establish a more permanent growth track at that level or higher?

That means increasing the average level of skills in our workforce by a combination of targeted immigration, social policies which assist those with small children to continue their careers if they so choose, workplace training, and changes to our education system so that it continues to produce excellence at the top end, but also solves the problem of the long ‘tail’ of under-achievement. Hence the Budget’s tertiary education package which provides close to $300 million over the next four years to develop quality tertiary education which is highly relevant to the skills needed in the economy. It includes higher funding rates for technical and scientific subject areas, including science, the trades, technical subjects, agriculture, and horticulture. There will also be an additional $45 million to expand Modern Apprenticeships and Industry Training. By the year 2008, our goal is to have an extra 5,000 apprentices in training over our 2006 goal, or a total of 14,000. Previous Budgets have included measures to increase the affordability of quality childcare for working parents. We have also recast our immigration policies around the notion of active recruitment of the kind of talent New Zealand businesses need. There has never been a silver bullet which can overnight lift growth and transform the economy, and it is important that the economic debate is not reduced to simplistic slogans. The only way to secure lasting results is to work steadily and patiently across a wide range of fronts. Labour has done that over the last two terms, and New Zealand has made solid progress as a result. A source of particular pride is that, contrary to the experience of the 1980s and 1990s, we have been able to minimise the trauma of economic change and to take the public with us. Without that public support, no change can endure.

The answer is threefold: • Stable fiscal policy based on maintaining prudent levels of debt; • Increasing productivity through investing in relevant skills, physical capital, and intellectual capital; and • Overcoming our disadvantages in the global marketplace by better collaboration, improving our capacity to innovate and freeing up world trade. Lifting labour productivity is the next big challenge.

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Helen Clark entered Parliament in 1981 as Labour MP for Mt Albert and was elected to Cabinet in 1987. Over the next three years she held a number of ministerial portfolios, becoming Deputy Prime Minister between August 1989 and October 1990. She was elected Leader of the Labour Party in December 1993 and served as Leader of the Opposition until the November 1999, when she became Prime Minister and Minister of Arts, Culture and Heritage. The views represented in this article are the express views of the author, and do not necessarily reflect the views of NZX.

NEW ZEALAND ECONOMY:

WORLD BEATERS! E I O N S E D GA R C H A I R M A N , N E W Z E ALAND O LYM P IC CO M M ITTE E AND FO RSYTH BARR GROU P LTD

The New Zealand economy has delivered an extraordinary performance over the past five years, with GDP growth averaging around 4.0 per cent per annum. Unemployment over the past five years has declined form 7.3 per cent to 3.9 per cent, inflation has remained below 3 per cent and the New Zealand equity market has increased by 11 per cent per annum. This positions New Zealand as one of the best performing countries in the world. Reflecting the underlying strength of our economy, the New Zealand dollar is trading at record highs against most of its trading partners. Despite the obvious pressure this has placed on export businesses, the New Zealand manufacturing and agricultural sectors have remained competitive and grown export earnings by 25 per cent (approximately 5 per cent per annum). The platform for sustainable growth is in place and, looking ahead, it is vital that the New Zealand Government and private sector do not become complacent. To ensure the prosperity continues, a key focus by the Government and private sector must be to contain costs to ensure inflation remains under control. To continue to attract foreign investment and encourage free enterprise, I believe the Government should focus policy on three areas:

“While we can look back and be proud of our achievements of the past five years, the true test will be how we are positioned over the next five years.”

While we can look back and be proud of our achievements of the past five years, the true test will be how we are positioned over the next five years. Let’s hope whoever is elected will focus their aims on the above three areas and then we will be able to deliver a sustainable social policy that will benefit all New Zealanders.

• reducing government spending as a percentage of GDP; and

Eion Edgar is Chairman of Forsyth Barr, director of the Accident Compensation Corporation, Martinborough Vineyard Estates, Mr Chips Holdings and Scott Technology, president of the NZ Olympic Committee and NZ Soccer, trustee of the Arts Foundation, the Halberg Trust, Skegs Foundation and Project K, and Honorary Consul for Finland.

• retaining monetary policy goals of reducing the underlying volatility of economic growth and inflation.

The views represented in this article are the express views of the author, and do not necessarily reflect the views of NZX.

• lowering corporate and personal taxes;

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NEW ZEALAND’S PLACE IN THE WORLD

DEBATE REQUIRED D r A LLA N H AW K E A U S TRALIAN HIGH CO M M ISSIO NE R TO NE W ZE ALAND

I came to live here two years ago, having been a frequent visitor to your shores since the early 1990s, entrusted by Prime Minister Howard with “… the most important task of maintaining and developing the close and friendly ties which exist between our two countries”. I offer my piece in that spirit as a personal contribution.

Remembrance Day last year, has triggered questions about New Zealand’s modern identity, its attendant rituals and symbols, and how your Maori heritage fits into the scheme of things. This has been accompanied by a resurgence in the creative arts – the mirror to a nation’s soul.

It’s particularly poignant to be penning this article a few days after David Lange’s death.

Our nations seem obsessed by sporting prowess as the measure of success in the international arena. If our descendants are to enjoy a similar standard of living and quality of life and realise their aspirations, it’s about time we also gave due recognition to the deserving heroes and heroines in business, engineering, science, academia, agriculture and other fields of endeavour.

“No two nations on earth share a tradition of common values like the ANZAC tradition shared by the people of New Zealand and Australia”.1 This tradition was vividly demonstrated at the Gallipoli commemorative ceremonies marking the 90th Anniversary of ANZAC Day, attended by our Prime Ministers – serving to remind us that Australia and New Zealand have been bound together by geography, beliefs and common interests.

“...there is a discussion going on, largely under the radar screen of most Kiwis, about New Zealand’s place in the

world, what it stands for,

where it’s going and how it can get there.”

The past tense recognises that our nations are now embarked on fundamentally different directions and our cultures are moving apart. That trend, which commenced under Prime Minister Lange, has continued under successive governments, irrespective of their political persuasion. It seems to me that the re-interment of the Unknown Warrior, in the National War Memorial forecourt on

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I believe that there is a discussion going on, largely under the radar screen of most Kiwis, about New Zealand’s place in the world, what it stands for, where it’s going and how it can get there. This issue of OPEN should assist bringing that debate into the public arena. It may well feature in the election campaign and affect the outcome. My feel is that New Zealand wants to be known throughout the world as an independent-minded western nation, recognised as a voice for a peaceful and sustainable planet.

When Lange came to office, New Zealand faced a critical financial crisis. People like Douglas, Prebble, Caygill and Richardson, who drove the essential reforms that have underpinned your very long run of economic success, deserve greater credit. That momentum continues, but the essential challenge of the economic settings required to shift New Zealand up the ladder of the league table remains. The 20th Century growth sectors were government, health care, education and leisure – all four will change greatly in the coming decades.2 Five certainties seem set to drive governments:

Worldwide trade liberalisation and competition drive dynamic economic growth. Achieving open markets rests on successful conclusion of the DOHA round. This requires agreement on agricultural market access, domestic support and export subsidies, and matching advances to liberalise manufacture and service trade. The alternative may be complete collapse of the multilateral negotiation process and even the demise of the WTO and a rules-based international trading system. 1

A comment by Lt Gen Des Mueller, former Vice Chief of the Australian Defence Force 2 Peter Drucker, Management Challenges for the 21st Century

• the collapsing birthrate in the developed world; • shifts in the distribution of disposable income; • the meaning of performance in enterprises; • global competitiveness; and • growing incongruence between economic globalisation and political reality.2 Demographics will dominate, large-scale immigration from countries with different cultures and religions will create turbulence, clean water, clean air, infrastructure, energy, productivity and redefining retirement will preoccupy governments and policy wonks.

Dr Hawke was appointed Australian High Commissioner to New Zealand in 2003, and returns to Australia in February 2006 to become Chancellor of the Australian National University in Canberra. Amongst his posts are Deputy Secretary in the Departments of Defence and the Prime Minister and Cabinet, and Chief of Staff to Prime Minister Keating. The views represented in this article are the express views of the author, and do not necessarily reflect the views of NZX.

“Our nations seem obsessed by sporting prowess as the measure of success in the international arena.”

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THE BEST SMALL COUNTRY IN THE WORLD C H R I S LI D D E LL C FO , M IC RO SO FT CO RP O RATIO N

We live in exciting times! It is almost impossible to overstate the impact that China and India, and the positive (and negative) forces of globalisation, will have on New Zealand and on our world more generally. As I look at New Zealand, I see a nation capable of becoming ‘The Best Small Country in the World’ – a unique combination of outstanding lifestyle but also with significantly higher wealth for all our people. As Thomas Friedman points out in his excellent recent book (“The World Is Flat”), the economic barriers between nations, businesses and peoples are rapidly disappearing. This is both a tremendous opportunity, but also a very real challenge for New Zealand.

“The been

But our strategic challenges are also significant and, for this, political and business leadership of our country will be critical – creative and forward-looking leadership capable of identifying and building unique sources of competitive advantage. I believe there are several fundamental success factors.

From an economic perspective, our macro settings are broadly correct and give us a powerful platform for growth. However, we have a opportunity has never lot of work to do on our micro settings, in particular in the areas greater to create a ‘mini- of education, infrastructure and labour markets.

multinational’ based in New

We need to be significantly more Zealand – designed and owned committed to building capability for the new world through our in New Zealand, made in education system. We need to ensure that every phase of From an opportunity perspective, Thailand, assembled in China, education, from pre-school to it is now possible to compete university, aims to be the best in globally from any place on the sold in the USA – why not ? ” the world. We need a pervasive planet. The tyranny of distance culture of excellence across all is no longer the constraint it was fi elds, but also a better focus on the defining competitive – growth businesses can be located anywhere where there areas, e.g. science and technology. is a well-educated workforce and macro conditions which are conducive to business. Supply chains are increasingly operating seamlessly across borders – specialisation in a market niche is possible from anywhere in the world. Culturally, New Zealanders are well suited to this new environment. Relative to many others I meet, New Zealanders have a ‘can do’ attitude; we are innovative and entrepreneurial and we have a youthful and flexible approach to life in general – all vital qualities for the new world.

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New Zealand has great “raw material” as shown by our performance in some global studies (fifth in the OECD at fifth form level), but we trail off at the sharp end. As Paul Romer showed at the 2003 Knowledge Wave conference, we are near the bottom of the OECD in terms of our proportion of science and engineering graduates. We need to urgently address our infrastructure constraints – not only the old world infrastructure (roading, electricity),

but also the new world infrastructure. As one example, it is unacceptable that our broadband penetration is so poor relative to the rest of the world. We are in the bottom quartile in the OECD in terms of broadband penetration, despite Kiwis generally being early adopters of new technologies. Our people can never take full advantage of the opportunity of the digital generation without first class infrastructure. Technology is the lifeblood of productivity growth, and productivity growth combined with innovation will drive our standard of living. Finally, we need to create more flexibility in our labour markets to allow a broader base of people to participate in and enjoy the benefits of the changing economy. In the next decade, we will find ourselves competing increasingly with the emerging countries of India and China. And they will compete not just on lower costs, but on quality of output. For example, China will produce 3.3 million university graduates this year, India 3.1 million (all of them English speaking) – a massive potential future advantage. Nothing is more certain than that a large proportion of the jobs in New Zealand won’t exist in their current form in the future. Clearly, business leadership is critical. Our companies need to work out how to be great global collaborators: which role will they play with excellence in the global supply chain? The opportunity has never been greater to create a ‘mini-multinational’ based in New Zealand – designed and owned in New Zealand, made in Thailand, assembled in China, sold in the USA – why not ? How long do we have? The reforms of the 80s showed how long it takes, not only to change, but more importantly to gain the benefits from that change. The broad based nature of the challenge will require new skills, greater urgency and a significantly higher level of aspiration from our business leaders. What I do believe is that “Some people play the game, others change the way the game is played”. It is time we changed our game.

Chris Liddell is currently CFO of Microsoft Corporation. Previously he was CFO of International Paper, and before that CEO of Carter Holt Harvey. He was also previously a member of the New Zealand Stock Exchange. The views represented in this article are the express views of the author, and do not necessarily reflect the views of NZX.

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CREATE THE RIGHT ENVIRONMENT AND GET OUT OF THE WAY J I M M c LAY E X E C UTIV E C HAIRM AN, M ACQ UARIE NE W ZE ALAND

New Zealand: The last bus-stop on the planet; home to four million people and (so the jokes go) many more sheep, some of questionable parentage; a country that believes it’s so far from that which tears and tramples at the rest of the world it can eschew alliances; one that’s never been invaded (although Maori might take a different view on that); good at minority sports (netball and rugby?); but also a source of enormous talent, whether it was splitting the atom, helping discover DNA or dominating the world’s motor racing circuits and its greatest opera houses. But, above all, it’s a country that isn’t owed a living by anyone else.

“Overall, the objective must be to create conditions in which industry, commerce, the arts and sport can thrive and prosper; not where governments pick winners, but where they create the right environment and then get out of the way.” All-in-all, it’s not an easy starting point for deciding what should be our ambitions. A country’s ambitions should be those of its people, and suggest outcomes like achievement, success, example, recognition and prosperity. For policymakers, however, ‘ambition’ usually has more tangible measures: increased trade (including Free Trade Agreements), improved economic indicators, and participation in international fora (often punching well above our weight). But, in reality, the real policy priorities don’t much change: security (domestically and internationally), better education, economic conditions that encourage innovation and investment, world-class infrastructure, a pristine environment and lower taxation, leaving people to make their own decisions about where to spend. These translate into milestone objectives: top one third of the OECD (top half, the stated ambition, is simply recovering lost ground); genuine global free trade (and, on the way, FTAs, not least with the U.S.); an education system delivering across all deciles and educational levels; environmental standards that people want to meet; and, above all, tax and economic conditions (including the required infrastructure) that attract investors (and aren’t, as at present, a deterrent). Countries that trade together grow rich together. So let’s start with trade. The most obvious opportunity is enhancing our CER relationship with Australia; taking the final steps to a

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Single Economic Market (tax neutrality, common standards and a single border). Bureaucrats can slow these down, so business and governments must speed them up. We’ve got to tackle the disincentives to investment: tax, the RMA and sub-optimal infrastructure; and we need better education so we score across the board in international comparisons, not just at the top levels. And we need enhanced security in an uncertain world and an increasingly unstable region. Overall, the objective must be to create conditions in which industry, commerce, the arts and sport can thrive and prosper; not where governments pick winners, but where they create the right environment and then get out of the way. We’ve already missed too many opportunities by not following through on – and completing – the reforms of the 80s and 90s. Today, we face the consequences of that inaction: lowered prosperity (particularly compared with Australia), underperforming lower decile schools, crumbling infrastructure and a tax system that discourages innovation and growth. We’re less secure and (contrary to claims) haven’t always delivered good environmental outcomes either. An electoral system that prevents bold, decisive action doesn’t help either. Our political leaders should have the opportunity and the courage to act, and the strength of leadership to justify and explain those actions and account for them in accord with our democratic traditions. Only we can deliver these outcomes. Others won’t help us earn a living. And the consequences of inaction? They’re probably best summarised by American businessman Kenneth Klopp: “Kayakers and river rafters know that whatever you do, the river keeps running. If you don’t make a decision, life will make one for you. He who hesitates is lunch.”

Former Deputy Prime Minister, Jim McLay is Executive Chairman of Macquarie New Zealand, Chairman of Macquarie Goodman (NZ) Ltd (manager of publicly listed Macquarie Goodman Property Trust) and Chairman of Just Water International Ltd. He is also a director of a number of other companies. The views represented in this article are the express views of the author, and do not necessarily reflect the views of NZX.

GIVING NEW ZEALAND THE EDGE KEVIN ROBERTS C E O WO RLDWID E , SAATC HI & SAATC HI

Every world needs an edge. This is New Zealand’s position on our planet. The edge is the most innovative and generative place in any system. The action is at the margins, where there is freedom to create away from the orthodoxy of the centre. Ideas from New Zealand have advanced the world in many profound ways, but until now we have not had the metaphor and language to harness our unique global position. We’ve been stuck in a distant/isolated/small mindset and we need to turn these factors into leverage. The world needs us precisely because we are its edge. This is our role. We need to be emotionally compelling – edgy – because there are few functional advantages we can credibly advance. Our edge is the ace of hearts, and we must play this card in order to lift ourselves, to inform our risk-taking, to be our best. We need to embrace our edge positioning and revel in it. In 1998 Brian Sweeney and I started a website www.nzedge.com to advance the edge metaphor, to tell great stories of New Zealand achievement internationally, to embroider new myths (our current ones are pretty thin) and to kickstart a global sense of community. This last element is crucial for our ambition. A large number of New Zealanders, including many of our most ambitious, qualified, literate, talented and influential, have left our economy to test their ambition in others. We need to bring them back emotionally and work together as a global New Zealand family. How can we win the hearts of export markets when we ignore the contribution of our biggest export product – our people – to transforming our underperforming economic effort? Love starts with family. Love will create Aotearoa whanau whanui ki te Aonui – the global community of New Zealanders. Five million of us to take on the world and win. The steps we need to take to get there are: 1. Breed an edgier attitude. Our greatest successes are a result of outlandish talent combined with the grit of process. Ask Graham Henry. 2. My hope from the 2005 election is that the politicians who are entrusted with $47 billion of our tax contributions get serious about the teamwork that is required for us to win in the world. 3. Market the country. There’s one sure way of getting global attention and sales, and that is to advertise. Ask any retailer. We can’t just network, PR and event market our way to

glory. There is a reason why advertising is a NZ$800 billion industry – it works! Apart from tourism, New Zealand’s global advertising effort is non-existent. 4. Open New Zealand stores in a dozen of the world’s leading cities showcasing (and selling) the best of what we create. Marketing is about touchpoints, and the world needs to experience New Zealand magic in their own local environments. 5. Ferment creativity in every sector of the economy. The great advances in our society have come not from institutional incrementalism but from people with extreme ideas. Time to unleash and inspire. There is not a second to waste. We need a 100-day plan, not another 10-year excuse for doing nothing. The consequences of action will be: 1. An inspirational national attitude rooted in local uniqueness and high international achievement. 2. Clearly understood ways by which New Zealanders are needed to contribute to improving our international performance. 3. A dynamic economic and social flow between New Zealand’s offshore and onshore populations that will create global opportunities. 4. An irresistible global reputation for originality, beauty and spirit. 5. Exciting careers for young people who can be global without having to export themselves. 6. Increased self esteem, less dysfunction, more excitement, greater opportunity. 7. Full-blown participation in the world – as its edge. 8. The Rugby World Cup returning home!

Kevin Roberts is CEO Worldwide of Saatchi & Saatchi; Business Ambassador for the NZUS Council; CEO-inResidence at Cambridge University’s The Judge Institute; and Professor of Sustainable Enterprise at the University of Limerick Ireland and the Waikato Management School. He wrote “Lovemarks: The Future Beyond Brands” and co-wrote “Peak Performance: Business Lessons from the World’s Leading Sports Organisations”. The views represented in this article are the express views of the author, and do not necessarily reflect the views of NZX.

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AGREE OUR GOALS AND IMPROVE PERFORMANCE S T E P H E N T I N DA LL FO U N DER AND D IRE CTO R,THE WARE HO USE GRO UP LTD

What ambition should New Zealand have? We ought to aspire to be the best small country in the world. New Zealand should be the country location of choice because of the quality of life and the opportunities available here. This ambition requires that New Zealand be a world leader across economic, social, educational, and environmental measures – good performance in just one area is unlikely to be a sustainable approach.

“On key determinants of growth – measures like household savings, business investment, relative export performance and so on – New Zealand has either gone sideways or backwards.” And New Zealand should aspire to carve out a respected place in the global economy. We should aspire to make good on our creative, innovative potential and convert this systematically into commercial success. We have seen many other small countries – like Finland and Ireland – move ahead strongly over the past decade with a focus on innovation and technology. This sets an appropriate benchmark for New Zealand – achieving similar national success is well within our reach. We have seen some improvements in New Zealand over the past decade or so, but on many other economic, social and environmental outcomes we have gone sideways or backwards. The longer this process continues, the more difficult it will be for us to achieve these aspirations. On economic measures, we have done better over the 1990s, although there are concerns about the sustainability of this growth. And on key determinants of growth – measures like household savings, business investment, relative export performance and so on – New Zealand has either gone sideways or backwards.

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Similarly, there is a mixed record on social and environmental outcomes with some improvements on key areas but concern about our performance on others. So there is a long way to go. One measure of the gap between the current reality and my aspiration is the fact that we have tens of thousands of people leaving New Zealand every year. People are voting with their feet to find opportunities abroad. Estimates vary, but perhaps one million New Zealanders live offshore – the diaspora is a wonderful national asset, but we should also have a focus on ensuring that people have opportunity in New Zealand. As for steps, we can start by taking the challenge seriously, agreeing on the goals for New Zealand, and making a determined nationwide effort to improve performance to achieve these goals. Leadership from political, business and community leaders is critically important in mobilising action. But this is a process that all New Zealanders need to participate in and feel some ownership of. This cannot be a process driven by one political party or by one segment of society. Achieving these ambitious goals will require the commitment of everyone in the country. This is one of the lessons from countries that have made rapid progress. New Zealand is not on the verge of a crisis – we will not fall off the cliff if we do not take action now. But delay will mean that we forego opportunity and it will become increasingly difficult to achieve the type of outcomes that we aspire to. The sooner we start, the sooner the situation will improve.

As well as being founder and director of the Warehouse Group Ltd, Stephen Tindall is a founding member of the New Zealand Institute, a member of the Growth and Innovation Advisory Board, co-founder and director of Kea (see page 26), and founder and trustee of the Tindall Foundation and the Alay Buhay Educational Foundation. The views represented in this article are the express views of the author, and do not necessarily reflect the views of NZX.

HONEST STRUCTURES AND AN OPEN COMMERCIAL CLIMATE S i r W I LS O N W H I N E R AY B U S I N E SSM AN, P HILANTHRO P IST, E X ALL BLAC K CAP TAIN

I suspect that New Zealand’s place in the world has changed little over the last 50 years. We remain a small, relatively isolated nation in a world of over five billion people. And in the curious way the world works, we must understand that we are surrounded by people who are preoccupied with their own lives, and not with us. Having said that, I believe that this nation is warmly regarded as a solid upholder of liberal democratic values, has built strong social programmes, is a good and loyal friend and a reliable trading partner – all of this in an attractive and welcoming landscape. We must sustain all of the good things that are part of our society and build on them. This will mean an economic growth rate at least of the rate of those nations we like to compare ourselves with. However, as over the last 40 years we have fallen well short of this goal, the target should be to grow at a rate sufficient to claw back, over time, the ground lost. This will not happen without outside investment, and we must realise that no matter how decent a society may be, it can easily be forgotten. How others see us is a mixture of fact, myth and emotion – but in the end the face we present had better be an attractive one, or the world and its money will pass us by. Investment capital is fundamental to growth and jobs, and capital is fluid and has many options. Concrete steps to move forward must always start with Government. Government’s role is to create a climate that encourages people to act in a manner that is helpful to the growth of the nation. Government itself must protect a stable, open democratic system, free from favours or handouts to specific groups, a moderate, ungreedy Government which avoids Parliamentary privilege, holds down taxes, reduces its claim on surpluses. Further,

Government must ensure honest structures – legal, banking, accounting, stock exchange etc., that are essential for an honest, open commercial climate. From all of this flows the right to liberty, property, protection and freedom from discrimination of any type. Then add the stimulus to encourage personal initiative and risk taking: reduce unnecessary obstacles, welcome new technology and ideas, welcome scientific measurement over myth and superstition, allow people to keep rewards from their endeavours. And importantly, value education at all levels – schools, universities, technical colleges, apprenticeships, trade training, talk and tell. A fall-off in education standards relative to our trading partners would be disastrous. The consequences of inaction would be a continuation of the slide we’ve been on for 40 years – increasing actual wealth as a nation, but drifting backwards against our trading partners. This will lead to pressures on our social systems, education systems and an increase in skilled workers moving offshore. There is no cataclysmic timing for this – just a slow, steady, continuous decline. But, let’s not get gloomy and forget the many strengths we have – great country/great people. With the right ‘climate’ and right attitudes the future looks great. Sir Wilson Whineray is joint deputy chairman of APN News Media, director of Auckland International Airport and Nestle NZ, advisory board member of Independent Newspapers PLC, trustee of Eden Park and the Dilworth Trust, and patron of the NZ Rugby Union. His past offices include Chairman of Carter Holt Harvey and the National Bank of New Zealand, and All Black captain from 1957 to 1965. The views represented in this article are the express views of the author, and do not necessarily reflect the views of NZX.

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MARKET TECHNOLOGY AVAILABILITY IS THE WATCHWORD C H R I S CO R K E , P M P C HIE F INFO RM ATIO N O FFIC E R, NZX

NZX has long stated a zero tolerance for technology failure, and continues to drive for an environment where this becomes a reality. Notwithstanding some recent telecommunications issues, the NZX infrastructure is far more resilient than it has ever been. In line with our ongoing improvement approach, infrastructure and connectivity options are being continually evaluated to identify potential improvements. Towards this goal, there were recent presentations in Auckland and Wellington to discuss with Market Participants the existing infrastructure and proposed improvements. We have carried out significant work to ensure that the core functionality for our customer base is as robust as possible. We now have connectivity to two nodes – Auckland and Wellington – and there has been significant investment in the trading and settlement system infrastructure and the network linking us all together. NZX is fully committed to transparency and engages with our customer base to ensure the best and most appropriate technology improvements are agreed and undertaken in a timely fashion Associated with this is ensuring not only that NZX provides availability to the critical systems, but that the customer base can access it with resiliency built into their own infrastructures. NZX works continually with all users of our technology to ensure this happens. Another area of focus is disaster recovery. NZX routinely carries out disaster recovery sessions so all parties connected to NZX have the opportunity to experience

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first hand (thankfully outside market hours) manufactured disasters of various types. Through such exercises, these parties can ensure their systems operate as expected, and gain confidence that NZX is prepared to deal with issues in a timely and efficient manner. Planning these disaster recovery activities involves detailed scenario and risk evaluation of core infrastructure, ensuring that the points and types of failure are correctly identified. Using best practice risk evaluation mechanisms NZX applies to all scenarios the following questions: • Identify the risk • Qualify how likely the risk is • Quantify or determine the impact of the risk • Plan the response – Can it be avoided through business continuity? – Can the risk be transferred? – Can the risk be mitigated through disaster recovery? NZX has evaluated its core infrastructure and designed reliance and failure planning around the answers to these questions. NZX recognises how critical communication is during a failure, and has recently published the Unplanned Outages document to all connecting parties. It explains not only the mechanism for informing affected parties of issues, but also the scenarios whereby an issue may impact the market.

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HALF YEAR RESULTS 2005 This is summary of the commentary given by NZX Director Lloyd Morrison and CEO Mark Weldon at a media and analysts’ briefing following the release of the 2005 Half Year Results on 27 July 2005. Board Summary

NZX Markets

Lloyd Morrison: “The results for this half year reflect and support NZX’s strategy, which is to drive and support the development of New Zealand’s capital markets, and to benefit from their growth and evolution.

The primary measure for the Markets business performance is operating EBITDA, driven by consistent revenue growth. The two key measures from a revenue perspective are listings and transactions. Average daily trades are up 11%, and we will look to continue to drive performance in this area with the relatively new introduction of Direct Market Access. The listing of 17 warrants on the NZSX market, issued by ABN Amro and UBS, adds to the diversity of our offer and fills a gap for more sophisticated investors. We hope to see more of these products come to market.

When NZX listed we stated clearly that we could see there were a great many improvements to be made to the way the markets were operated, to the regulatory environment, to the relationship with listed issuers and Participants, and to the breadth and depth of investment choice for New Zealanders. It is important that we are clear about how these efforts translate into financial results. We believe strongly in the opportunities for growth presented to NZX by the changing nature of New Zealand’s capital markets. Our investments to date reflect this growth strategy. • In our core Markets business we have invested heavily to ‘fix’ the infrastructure. The improved infrastructure is poised to deliver growth opportunities. • In our Smartshares business we have invested to bring New Zealanders simple, low cost and transparent investment choices. • In Link Market Services we have made an investment to capture value from the increasing demands of both investors in and issuers of securities.”

There have been fewer listings than we would like. In addition, the takeover activity in the past few months is not healthy for New Zealand markets, as it deprives New Zealand investors of the opportunity to invest directly in those companies. However, there exists a massive pipeline of companies ready to come to market in this country. Many of them have already signalled such intention. Others are evaluating their capital-raising options and exit strategies from venture capital or private equity. There is a place for all three in this country, but the jewel in the crown – for companies, investors, and the New Zealand economy – is vibrant, diverse and liquid capital markets.

Management Discussion and Analysis

Two significant costs impacted the NZX Markets business result below operating EBITDA level: a write-down of the Sydney Foreign Exchange investment and the Access Brokerage investigation.

Mark Weldon: “Our markets have come a long way, but all the indicators are that they still have a long way to go. They’re growing in size and sophistication: in some very visible ways not as quickly as we would like; in other, less visible ways they are growing at a rapid rate. NZX’s solid Markets performance, and its judicious investment in competitive growth opportunities, mean we are wellplaced to create value from that growth, both for itself and importantly, for stakeholders in New Zealand’s markets.

The former reflects the delayed launch of futures and options products. NZX believes that bringing this set of products to the New Zealand market is critical to investor choice. Whilst the futures product has not found the institutional support that occurs in other markets of similar size, we are confident that the options products will generate market interest. The right set of ingredients, including a dedicated market maker from Australia and a committed NZX Participant with retail infrastructure,

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are in place to justify continuing to hold this asset on the balance sheet. We will continue to work to support this product development effort. The Access Brokerage investigation continues to be costly, in dollars, time, and opportunity cost when senior regulatory staff and others inside and outside this business work through the issues and their implications. However, this is what our regulatory role entails. We believe the coregulatory model is the right one for the health of New Zealand markets, and any higher cost model would not be appropriate. Growth businesses Now to NZX’s investments in growth beyond the markets: Smartshares and Link Market Services. Each is in the investment-intensive phase of its development. Smartshares were built without any established fixed cost base, and represent what we believe is the lowest cost funds manufacture and distribution business in New Zealand. Smartshares are well placed to capture increasing flows to savings products from a wide range of distributors. The Smartshares family of funds replicates and exceeds the offer made by highly popular exchange traded funds on global markets. Globally innovative features such as the Regular Savings and Dividend Reinvestment Plans in each Smartshares fund are giving New Zealanders the tools to save directly into the market rather than using bank accounts as middle-men. We can deliver this model efficiently and effectively on a large scale, and we have built a team to capitalise on it. It is important to put into context the impact that strong savings practices will have on New Zealand’s capital markets and related industry players. That we lag so far behind Australia in individual investments is not surprising given that our trans Tasman cousins have had the benefit of a compulsory retirement savings regime for a number of years. Recent developments in New Zealand, we believe, are the beginning of a behavioural shift that may take many years. Smartshares, along with other initiatives by the NZX Group, are positioned to contribute to New Zealand’s savings renaissance over the next five to ten years.

The key financial performance metric for Smartshares in the investment phase is revenue growth. In the medium term we expect Smartshares to break even on an operating basis. Revenue growth has been pleasing, particularly given the large net outflow from New Zealand’s managed funds industry during this period. Operating expenditure has increased along with revenue. Work that drives the increase has been completed in the first six months on three key areas: people, the introduction of product features, and the development of products for launch in 2005 and 2006. Over time, the fixed components of Smartshares expenditure will remain flat while revenue increases, leading to margin expansion with the growth of funds under management. The second portion of NZX’s current growth portfolio is Link Market Services. NZX’s decision to enter the registry space was again driven by recognition that change would create opportunity in the capital market landscape. Our market has been served by two registries: one commanding upwards of 85% of the market, and the other serving mainly smaller-cap companies. NZX believed that New Zealand issuers, and their shareholders, deserved the advantages of genuine competition amongst registry service providers, and that a strategic alliance with a proven Australian provider was the right way to go. Already Link has acquired a major client, Westpac’s 25,000 plus New Zealand holders, which demonstrates the successful development and adaptation of the OSCAR technology to New Zealand. I trust this commentary has provided a clear picture of the NZX Group. NZX has very high expectations and I cannot claim to be completely satisfied with the overall Group result. We have seen a weak period for listings, but we anticipate a more active second half. Looking forward, I am confident that there are strong indications of future growth. For the future, our strategy remains clear and consistent. NZX will continue to invest in areas of the business – and the markets – that enable us to bring positive change to New Zealand markets, and to secure value from the evolution of those markets.” For a full transcript of this commentary and to view the NZX Half Year financial results, go to http://www.nzx.com/aboutus/ investor

25

Global Talent Community It is well known that many Kiwis seek experiences beyond New Zealand’s shores at some point in their lives. Over the years, New Zealanders have earned a reputation for being among the world’s greatest travellers, adventurers and achievers.

are keen to assist others where they can. New Zealanders are renowned for never giving up and are incredibly generous in helping out their fellow Kiwis. We see Kea as helping to facilitate this process.”

This global talent network – incorporating its large expatriate community – presents enormous opportunities for New Zealand. The network can provide access to global markets, knowledge, skills and relationships, and help to promote trade, attract inward investment and migration, and stimulate business activity and innovation. New Zealand’s geographic isolation and small population makes it particularly important

With the support from public and private sector stakeholders, Kea has recently completed a number of important strategic projects. The new-look Kea (www.keanewzealand.com) includes an interactive web-portal that helps members of our global talent community to connect with each other, and presents Kiwi organisations with the opportunity to get a knowledgeable ‘foot in the door’ in international markets. The overriding objective has been to create mechanisms for Kea members to make tangible contributions to New Zealand’s development from wherever they are in the world.

“New Zealanders are renowned for never

giving up and are incredibly generous in

Kea is now working with a broad range of partners from the private sector, academia, the research community and central and local government, to create a global network-of-networks that can support New Zealand initiatives around the world. The support of organisations like NZX is critical to this endeavour; their success helps to attract people to the network and engage them with initiatives and opportunities that can benefit our country.

helping out their fellow Kiwis. We see Kea as helping to facilitate this process.” for the country to develop its global connectedness. Building a global talent network can help New Zealand make best use of its greatest asset – talented people – wherever they reside. Professor David Teece describes the initial vision of Kea’s founders: “We are extending the definition of our country to embrace New Zealanders abroad, by creating an expanded ‘virtual’ New Zealand nation. It’s anachronistic to think of New Zealand as being defined by its geography. It’s not just two South Pacific islands; it now includes over a million talented individuals living offshore who still consider themselves Kiwis. In today’s global knowledge economy, what really matters is the intangible assets you can access, not the real estate you occupy.” Kea co-founder Stephen Tindall has met up with New Zealand talent all around the world over 30 years of business travel. “They often ask what they can do to help New Zealand and

26

NZX CEO Mark Weldon says of Kea, “The community of offshore New Zealanders is almost undoubtedly our most under-utilised, under-leveraged and under-delivering asset. We the applaud private sector seeking ways to turn that into tangible value for all New Zealanders.” Understanding our place in the world, and connecting our country with global markets, will ultimately help New Zealand to become more competitive. Kea is pleased to be a part of this process, and welcomes the involvement of OPEN Magazine readers in New Zealand’s Global Talent Community. Ross McConnell, Chief Executive, Kea

NZX Operating Metrics - Half Year 2005 NZX metrics are available on a monthly basis and can be found at www.nzx.com/aboutus/investor/metrics MARKET CAPITALISATION ($m)

MARKET PERFORMANCE HY

Change

% of GDP

HY

Change

All Domestic Equity

68,985

20%

47%

NZX 50 Index

3,246

20%

NZSX

68,524

20%

46%

NZX 50 Portfolio Index

1,781

22%

NZAX

462

9%

n/a

NZX 15 Index

6,023

21%

NZDX

7,087

20%

5%

NZAX ALL Index

1,136

-3%

HY

Change

HY

Change

NZSX

308,812

11%

NZSX

273,916

9%

NZDX

12,070

-8%

NZDX

9,366

-10% 3%

TRANSACTIONS - NUMBER

TRANSACTIONS - NUMBER < $50k

NZAX

2,546

3%

NZAX

2,528

Total

323,428

10%

Total

285,810

8%

Daily avg

2,629

11%

Daily avg

2,324

9%

Direct Market Access

84,422

n/a

TRANSACTIONS - VALUE ($m)

TRANSACTIONS - ANNUALISED VELOCITY HY

Change

HY

Change

NZSX

14,043

17%

NZX 10 Index

60%

11%

NZDX

842

-4%

NZX 50 Index

45%

0%

NZAX

16

17%

NZX All Index

42%

1%

Total

14,901

15%

121

16%

Daily avg

ORDER NUMBERS

Number of Orders Daily avg

HY

Change

468,180

8%

3,806

9%

ISSUERS HY

Change

Added YTD

PARTICIPANTS

Companies

HY

NZSX Domestic

141

2%

2

Trading & Advising Firm

NZSX Dual Full

3

0%

0

Advising Firm

9

NZSX Overseas

52

-7%

0

Delivery & Settlement Participants

16

NZAX

24

50%

2

FASTER Participants

2

NZDX

46

21%

4

Futures & Options Firms

1

Securities Debt

92

18%

16

Futures & Options Introducing Brokers

4

11

Sponsors

43 1

ETFs

6

50%

0

Distributing & Underwriting Sponsors

Warrants

24

167%

16

MARKET DATA

HY

YTD

New equity raised ($m)

963

963

Primary Data Distributors

19

New debt raised ($m)

906

906

Real Time Data Terminals

7,064

SMARTSHARES

Funds Under Management ($m) Holders Number of Funds

HY

LINK MARKET SERVICES HY

Change

192

136%

Total Issuers

113

HY

10,467

163%

Listed Issuers

71

4

300%

NOTES: 1. All figures are measured at the end of the last trading day of the half year. 2. Change refers to the change since the same period in the previous year 3. All Domestic Equity Market Capitalisation includes all securities quoted on the NZSX and NZAX markets of New Zealand, Incorporated Issuers and Dual Listed Issuers. The Market Capitalisation of Dual Listed Issuers is calculated according to the proportion of revenue generated in New Zealand. 4. Market Capitalisation for the NZDX is the total nominal (face) value of all quoted securities excluding New Zealand Government Stock. 5. Number of Direct Market Access trades includes any trade that involves at at least one Direct Market Access side 6. The number of orders is the number of new orders. It does not represent any amended orders nor does it consider the number of trades that results from it.

27

MARKETPLACE For the half year ended 30 June 2005

DPNJhWZ_d]7l[hW][:W_boJejWbi

MAJOR MARKET EVENTS • 2005 has been a busy year for merger and acquisition activity – as is illustrated by the large number of takeovers in recent months. • Sky Network Television Ltd and Independent Newspapers Ltd are merged via a Scheme of Arrangement. Shareholders of both the former companies receive substantial capital repayments. • ING Property Trust completes a scrip-based takeover of Urbus Properties Ltd, effectively merging the two companies. The merged entity was promoted to the NZX 50 Index in July. • New Zealand Oil and Gas Ltd and BIL International Ltd have also entered the NZX 50 Index, while Kiwi Income Property Trust has been added to the blue-chip NZX 10 Index. • In small-cap takeover activity, Mainfreight completes a full takeover of Owens Group Ltd and Vertex Group Holdings Ltd is taken over by Masthead Equities Ltd. • The first IPO of 2005 was completed by Jasons Travel Media Ltd when it listed on the NZAX Market, raising $3.6 million. • Instalment warrants based on 15 leading NZX Listed Issuers have been listed. TRADING ACTIVITY Trading levels across the three markets NZX operates (the NZSX, NZAX and NZDX) have been strong this year. There are two metrics NZX uses to measure trading activity: value traded and number of trades. Each of the six months in the first half of 2004 saw a greater dollar value traded than the corresponding month in the previous 2005. This led to an overall increase in value traded of 15.3% for the six month period, to $14.9 billion. In five of the six months an increase in the number of trades also was recorded when compared with 2004 (January 2005 was the only month that lagged behind 2004). The overall increase in number of trades was 9.9%.

28

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NZX FIRM MARKET SHARE The resurgence in the popularity of investing in the New Zealand share market is benefiting all NZX Firms. Of the 16 broking houses accredited as NZX Trading and Advising Firms, 14 have reported an increase in the value of trading since the first half of 2004, and 14 have shown an increase in the number of trades. Among the top 10 NZX Firms, the big movers in terms of market share by value traded were Macquarie, Forsyth Barr and ABN AMRO NZ. By number of trades, Direct Broking, UBS and ABS Securities have moved up the most in the rankings since 2004. Market Share for Trades on all NZX Markets - First half of 2005 Top 10 By Value of trades ($ million)

Top 10 By Number of trades

Firm

Value

(%)

Prev* (%)

Firm

Trades

(%)

Prev* (%)

First NZ

3,242

21.8

(22.7)

First NZ

56,756

17.5

(15.9)

GSJBWere

2,489

16.7

(20.3)

ABN AMRO Craigs

40,370

12.5

(13.3)

UBS

1,861

12.5

(13.2)

GSJBWere

40,129

12.4

(10.6)

ABN AMRO NZ

1,823

12.2

(10.1)

Forsyth Barr

34,828

10.8

(12.1)

Macquarie

1,681

11.3

(8.5)

ASB Securities

34,764

10.7

(8.8)

Citigroup

1,552

10.4

(10.1)

Direct Broking

28,301

8.8

(6.4)

Forsyth Barr

900

6.0

(5.3)

Macquarie

27,094

8.4

(7.1)

ABN AMRO Craigs

629

4.2

(4.0)

UBS

17,216

5.3

(4.1)

ASB Securities

328

2.2

(1.8)

ABN AMRO NZ

16,519

5.1

(4.5)

Direct Broking

245

1.6

(1.5)

Citigroup

12,872

4.0

(4.5)

*Previous data is for the corresponding half year in 2004.

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NZSX MARKET – NEW LISTINGS Two new Listed Issuers joined the NZSX Market in the first half of 2004. ABN AMRO Equity Derivatives Ltd has listed a series of 15 instalment warrants on other leading NZX Listed Issuers. Instalment warrants allow investors to receive the same dividends and capital gains as a shareholder of the underlying security, but require payment of only part of the purchase price. Sky Network Television Ltd (SKT) listed as a new entity, after being created out of the merger of the former listed issuers Sky Network Television Ltd (SKY) and Independent Newspapers Ltd.

NZSX Market - New Listings Issuer

Security code

Date listed

Security details

ABN AMRO Equity Derivatives New Zealand Ltd

AAD

28 Apr 2005

Instalment warrants on 15 leading NZSX securities

Sky Network Television Ltd

SKT

28 Jun 2005

Ordinary Shares issued pursuant to Scheme of arrangement to merge Independent Newspapers Ltd and Sky Network TV Ltd

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GLOBAL INDEX RETURNS The performance of the New Zealand share market placed it in the middle of the range of global markets for the first six months of 2005. The US market experienced a slight decline, but weakening of the kiwi dollar against the US dollar over the six month period (from 71.9 US cents to the NZ dollar to 69.8 US cents) meant that New Zealand investors with unhedged funds in the USA may still have collected a positive return.

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&%#% -#% +#% )#% '#% %#%

Source: MSCI

MARKET RETURNS The NZX Equity Indices reported mainly positive returns for the first six months of 2005, with the exception of the NZX SmallCap Index. However, the SmallCap Index is still showing a strong return over 12 months, as shown in the table below.

&'#%

"'#%

NZSX Market - Total Index Return

AdXVa8jggZcXn

Index

Value

First Half 2005

12 Months

NZX 50

3246.49

5.9%

20.4%

NZX 15

6022.88

6.0%

21.2%

NZX 50 Portfolio

1780.82

5.4%

22.1%

NZX 10

3572.15

7.0%

20.3%

NZX MidCap

6887.67

4.7%

21.0%

NZX SmallCap

19758.80

-0.7%

21.7%

NZX All

3330.53

4.6%

20.7%

Most of the gains were recorded in Q2, when the market recovered from a disappointing Q1. The NZX 50 Index reached a record closing level of 3246.49 on 30 June 2005.

CO

NZX 50 INDEX ATTRIBUTION Of the 50 securities in the NZX 50 Index, Contact Energy had the biggest positive impact in this six month period. Contact Energy was responsible for 54.22 points of the index’s 182.05 point rise. Sky City was the security with the biggest negative impact, holding the index back by 19.94 points. However, on a 12 month basis, Sky City has given a positive return. The returns in this table include both share price movements and reinvested gross dividends.

29

Top 10 Positive Contributors to NZX 50 Index Security name

Index weight

Last price ($)

First Half 2005 Return

First half 2005 Index impact (points)

12 Month Return

Contact Energy

9.2%

7.70

22.4%

54.22

39.7%

Auckland Intl Airport

6.0%

2.39

23.1%

36.60

50.9%

Carter Holt Harvey

6.2%

2.28

12.2%

21.74

-2.0%

Independent Newspapers

0.0%

6.50

16.5%

21.26

43.8%

Telecom Corp of NZ

24.2%

6.01

2.2%

17.97

12.2%

Fletcher Building

6.3%

6.91

7.7%

14.99

62.7%

Waste Management NZ

1.4%

6.73

23.7%

8.74

51.5%

Westpac (NZ) Investments

2.3%

21.55

12.4%

8.50

23.7%

Sky Network TV

5.1%

5.70

16.3%

7.91

41.4%

NGC Holdings

1.1%

3.80

24.3%

7.20

48.7%

NZAX Top 5 Performers

Bottom 10 Negative Contributors to NZX 50 Index Security name

Index weight

Last price ($)

First Half 2005 Return

First half 2005 Index impact (points)

12 Month Return

Sky City Entertainment

3.9%

4.48

-13.8%

-19.94

1.7%

F&P Appliances Hdgs

1.8%

3.35

-18.7%

-14.13

-21.0%

Feltex Carpets

0.2%

0.60

-59.6%

-9.42

-59.3%

Nuplex Industries

0.7%

4.48

-20.7%

-5.92

-9.2%

Promina Group

2.0%

5.13

-5.1%

-3.33

29.4%

Lion Nathan

0.5%

8.11

-10.8%

-2.08

14.5%

Port of Tauranga

0.6%

4.95

-9.5%

-2.07

0.9%

Air New Zealand

0.6%

1.45

-9.3%

-2.00

-23.9%

Cavalier Corporation

0.4%

4.05

-11.2%

-1.66

-8.9%

Tourism Holdings

0.4%

1.83

-9.0%

-1.31

11.6%

NZX SMALLCAP INDEX PERFORMERS The NZX SmallCap Index comprises the domestic equity securities quoted on the NZSX Market but not large enough to qualify for the NZX 50 Index. From this segment of the market, the top performer was NZ Finance Holdings.

Top 5 Performers Security

NZAX MARKET PERFORMERS The NZAX All Index, which tracks the NZAX Market, had a rougher quarter than the indices for the NZSX Market. The NZAX All Index was down 9.8% for the half year to 1135.67. Several NZAX securities gave strongly positive returns, the most notable were Plus SMS and Livestock Improvement Corporation.

Security

Last Price ($)

First Half 2005 Return

12 Month Return

Plus SMS

$0.18

200.0%

-40.0%

Livestock Improv Corp

$1.50

39.2%

19.7%

Oyster Bay Mlb Vineyards

$3.20

18.5%

26.1%

Just Water International

$0.92

17.8%

27.4%

Ashburton BS Ordinary

$4.40

15.5%

-

First Half 2005 Return

12 Month Return

NZAX Bottom 5 Performers Security

Last Price ($)

A2 Corp

$0.16

-60.0%

-68.0%

The CACI Group

$0.18

-50.0%

-52.6%

Solution Dynamics

$0.98

-38.8%

-

Connexionz

$0.42

-36.4%

-

Southern Travel Holdings

$0.78

-36.0%

-

NZAX NEW LISTINGS Two companies listed on the NZAX Market in the first half of 2005. Avon Investments completed a compliance listing, and publishing company Jasons Travel Media listed after an IPO. The number of issuers listed on the NZAX Market had reached a record 24 as at 30 June.

Last Price ($)

First Half 2005 Return

12 Month Return

1.00

150.0%

-

Abano Healthcare Group

1.73

55.9%

51.8%

NZAX Market - New Listings

NZ Refining Co

44.75

52.8%

166.6%

Issuer

Renaissance Corporation

1.20

35.9%

97.7%

Cabletalk Group

0.78

30.0%

212.0%

Last Price ($)

First Half 2005 Return

12 Month Return

NZ Finance Holdings

Bottom 5 Performers Security New Image

0.09

-54.8%

-65.9%

Aust Prop Hldgs Group

0.021

-50.0%

-61.8%

Cube Capital

0.04

-48.7%

-41.2%

KidiCorp Group

0.132

-47.2%

-49.2%

VTL Group

0.67

-41.7%

-30.5%

30

Security code

Date listed

Security details

Avon Investments Ltd

AIL

05 Apr 2005

Ordinary Shares; Compliance Listing

Jasons Travel Media Ltd

JTM

30 Jun 2005

Ordinary Shares issued at $0.50 in IPO, raising $3.6 million

Want instant

NZX DEBT INDEX RETURNS NZX calculates a range of government bond, corporate bond and bank bill indices designed to track the performance of fixed interest securities in New Zealand. The table below shows the performance of the main indices to the end of June.

access to over 100,000 company

NZX Debt Index Returns Returns Index

announcements?

30 June 2005 Data

First half 2005

12 Months

Yield

Modified Duration

NZX NZ Government Stock Index

3.92%

8.10%

5.78%

3.98 years

NZX Corporate Investment Grade Bonds Index

3.44%

7.11%

6.75%

2.70 years

NZX 90-Day Bank Bill Index

3.44%

6.82%

7.03%

n/a

You can with i-Search

NEW LISTINGS It has been a busy period for listings on the Debt Market, with 10 new securities added in Q2 alone. This included four totally new Debt Issuers: CBA Capital Australia Ltd, Fairfax NZ Finance Ltd, Macquarie Fortress Investments Ltd and Wrightson Finance Ltd.

NZDX New Debt Securities Quoted Issuer

Security code

Date listed

Security type

Interest rate

Maturity date

CBA Capital Australia Ltd

CBAFA

19/05/05

Preference Shares

7.71%

Apr 2015

Capital Properties New Zealand Ltd

CNZ040

18/04/05

Capital Notes

8.00%

Apr 2010

Fairfax New Zealand Finance Ltd

FXFFA

27/05/05

Preference Shares

8.03%

Jun 2010

Fletcher Building Ltd

FBU190

2/05/05

Capital Notes

7.55%

Mar 2011

Try i-Search free for one month.

Macquarie Fortress Investments Ltd

FTNFA

23/05/05

Fortress Notes

11.50%

May 2012

To

New Zealand Government Stock

GOV380

3/05/05

Govt Bond

6.00%

Dec 2017

information please call the Market

Powerco Ltd

PWC070

19/04/05

Capital Bonds

7.64%

Apr 2010

Data team on +64 4 436 2879 or email

Sky City Entertainment Group Ltd (NS)

SKC020

17/05/05

Capital Notes

8.00%

May 2010

[email protected].

Wrightson Finance Ltd

WFL020

31/05/05

Capital Bonds

8.50%

May 2010

Wrightson Finance Ltd

WFL010

31/05/05

Capital Bonds

8.25%

May 2009

Free trial trial

i-Search

or

for

more

www.i-Search.nzx.com 31 To advertise here, contact [email protected]

MARKET UPDATE New NZX Director

NZX Conformance

Henry van der Heyden, Chairman of the Fonterra Cooperative Group, will join the NZX board of directors on 6 September. Mr van der Heyden was invited to join the board because of his experience in global business, networks, and strong record in governance and leadership.

In May, three new companies completed NZX’s rigorous conformance (previously accreditation) process to access NZX software and distribute NZX data.

Mr van der Heyden became Chairman of Fonterra in September 2002 and is a founding director of the cooperative. He has contributed to industry governance for 13 years, as both a director and chairman, and played a considerable role in the industry rationalisation that led to Fonterra’s establishment. Instalment Warrants April saw the listing of 15 new Instalment Warrants by ABN Amro, covering a wide range of some of New Zealand’s most prominent listed companies. These new investment tools enable investors to introduce increased leverage into their portfolio. Third party Instalment Warrants such as these have not been available in New Zealand for at least three years. They were joined by a Telecom Warrants (brought by UBS) in July and Vector (brought by ABN Amro Craigs) in mid August. For more information visit www.nzx.com. education/warrants. Options Adding to this new product diversity, five share options listed on the Sydney Futures Exchange (SFE) in August, covering some of the NZX market’s most liquid stocks. NZFOX products are New Zealand futures and options contracts listed and traded on the SFE. They are based on securities listed on NZX’s markets and New Zealand investors will be able to buy and sell them, in New Zealand dollars, through authorised NZX Futures and Options Participants. For more information visit www. nzfox.nzx.com.

32

Link Market Services Ltd passed NZX conformance testing to provide registry services to NZX and other listed companies, Bourse Data Pty Ltd of Australia became an NZX Data Distributor, and Capital Market Solutions Pty Limited (CMSPL) passed NZX conformance testing of its new back office system software, NOVA. NZX developed a formal conformance process for independent software vendors (ISV’s) and data distributors to ensure that the integrity of NZX IT systems is maintained and that the highest standards are met. The process is based on international precedents. Listings Jasons Travel Media (JTM) listed on the NZAX Market in June. Jasons specialises in tourism information both in print and on the web across the South Pacific region including New Zealand, Australia and South Pacific Island destinations. Allied Work Force (AWF) listed on the NZSX Market in July. Allied is New Zealand’s largest specialist blue-collar on-hire labour business, with 21 offices nationwide. The capital raised allows the company to continue to grow and to make acquisitions using a combination of cash and shares. Allied staff were enthusiastic participants in the share issue. New Zealand’s largest energy network infrastructure company, Vector, listed in mid August. Vector (VCT) has operations in the electricity, gas and telecommunications fields, and its IPO is the largest by a New Zealanddomiciled company since the $1.12 billion Contact Energy IPO in May 1999.

Listing Seminars NZX has recently completed a series of seminars on Listing. Entitled ‘From good to great - the story of listing’, NZX presented to over 60 companies nationwide on the benefits of listing, case studies of companies that have benefitted from listing, and distributed a ‘How to Guide’ on the listing process. NZX intends to run further seminars in November, incorporating presentations from companies that have recently listed. These forums are an ideal opportunity for companies (and their advisors) to understanding where listing fits in the continuum of growth and capital raising, and to receive first hand information on the benefits of listing, and the experience of becoming and being an NZX Listed company.

FROM GOOD TO

GREAT THE STORY OF LISTING

If you would like to register for future seminars, or to receive a copy of the Listing Books, please email listings@ nzx.com or telephone +64 (4) 4962855. i-Search 1.1 NZX’s market announcement system, i-Search, was upgraded on 15 August 2005. i-Search allows people to search the NZX market announcement system by company, listing rule references, announcement type, individual’s name, a keyword or a specific date. If you would like to find out more about i-Search, contact [email protected].

NZX is now running lunchtime seminars which offer you the chance to hear the story of listing from the companies themselves. These seminars cover: •

Benefits of listing,

•

Preparing for listing,

•

Going public, and

•

What to expect once listed

If you are a director of a great company or in an advising capacity to growing companies, you should attend.

Email: [email protected] or phone: 04 496 2855 to register (Events to be calendared later 2005.)

33

“If you don’t make a decision, life will make one for you. He who hesitates

is lunch.” Kenneth Klopp

34

MAKESURE YOURINVESTORS GETTHERIGHT INFORMATION

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