2005

METTLE
NEW ZEALAND’S PLACE IN THE WORLD ECONOMY
Dr DON BRASH CHRIS LIDDELL
Sir RON CARTER JIM McLAY
Rt Hon. HELEN CLARK KEVIN ROBERTS
EION EDGAR STEPHEN TINDALL
Dr ALLAN HAWKE Sir WILSON WHINERAY

1
Issue Two 05
 4 CONTEXT: WHO WE WILL BE,
IS BEING DECIDED NOW
Mark Weldon
Chief Executive Officer, NZX

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

9 BUILDING A GREAT PLACE

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

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

13 NEW ZEALAND ECONOMY:

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

Cover image;
14 NEW ZEALAND’S PLACE IN
This issue’s image requires very little explanation. We
THE WORLD: DEBATE REQUIRED
don’t know the dogs’ names and, whilst their breeding Dr Allan Hawke
is no doubt impeccable, unlike the images featured Australian High Commissioner to New Zealand
on previous covers of OPEN they can’t claim to have
influenced world thinking or artistic direction. They 16 THE BEST SMALL COUNTRY
can, however, claim to be competing for the same
resource. And no doubt the smaller of the two will have IN THE WORLD
to rely on attributes other than brute strength to win Chris Liddell
the tussle. CFO, Microsoft Corporation
2
18 CREATE THE RIGHT “Life brings sorrows and joys alike. It is what
a man does with them – not what they do to him
ENVIRONMENT AND GET
– that is the true test of his mettle.”
OUT OF THE WAY Theodore Roosevelt
Jim McLay
Executive Chairman, Macquarie New Zealand ‘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
19 GIVING NEW ZEALAND
secondary objective, of course.
THE EDGE We chose the term because it describes to a ‘T’ the
Kevin Roberts characteristics of the small dog on our cover. A terrier
CEO Worldwide, Saatchi & Saatchi will take on animals ten times its size. It will worry away
at an obstacle until it has got around it (or dug under
20 AGREE OUR GOALS AND it, or chewed through it). It will chase potential danger
down foxholes. It will, literally, run until it drops.
IMPROVE PERFORMANCE
Mettle is also a useful descriptor for what motivates
Stephen Tindall
our contributors in this issue of OPEN. Dictionary.com
Founder and Director, the Warehouse Group Ltd describes mettle as “Courage and fortitude; spirit” and
“Inherent quality of character and temperament”. Sounds
21 HONEST STRUCTURES AND AN about right for a country which, until relaKtively recently,
was routinely left off maps of the world but which regularly
OPEN COMMERCIAL CLIMATE punches above its weight in the global arena.
Sir Wilson Whineray
Which is all very well but, as you will read in these
Businessman, Philanthropist, ex All Black Captain
pages, New Zealand cannot live by pride alone. Nor can
we rely on hosting another international sporting cup
22 MARKET TECHNOLOGY fixture to galvanise our identity – and our economy – in
Chris Corke, PMP the long term.
Chief Information Officer, NZX It will require some pretty heavy mettle to be relevant
to, and compete within, global markets.
24 HALF YEAR RESULTS 2005 Our contributors – all of whom share a passion for this
country, regardless of where they choose to reside –
26 GLOBAL TALENT COMMUNITY make some very pragmatic suggestions that demonstrate
openly their individual mettle. We respect each of them
Ross McConnell
for their preparedness to put their names and faces to
Chief Executive, Kea
these contributions, and we trust that those contributions
will prove their mettle as the debate continues well
27 NZX OPERATING METRICS beyond the 2005 general election.

28 MARKETPLACE
Rowan Macrae
32 MARKET UPDATE NZX Communications

33
 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, In this context it is my belief that the political and business
but I both think and feel that right now New Zealand is leaders of New Zealand, now and over the next five years,
in a five-year window where the themes for our future will make a series of decisions which, in aggregate, will
success, prosperity, lifestyle, and national identity will be determine if New Zealand moves into a new epoch with a
determined. full box of popcorn, and the ability to determine our own
future or, quite simply, not.
When I was 16, my swimming
coach hammered home to me a “To be very clear: New In this context we must be clear
metaphor of a large box of popcorn, that there is no such thing as a
the type you buy at the movies. Zealand is in a competition domestic policy, or decisions,
The metaphor went like this. As a in a vacuum. To be very clear:
swimmer, you began each season with the rest of the world for New Zealand is in a competition
with a full box of popcorn, which with the rest of the world for
represented your highest potential people (talent) and capital people (talent) and capital
performance. Each kernel in the (investment). How well we do in
box represented a 500 am practice. (investment). How well we this competition will determine
You could miss a practice, throw our future.
away a kernel, and there would be do in this competition will For an example of what we could
no discernable difference to your look like if our leaders make the
end performance. Throw away a determine our future.” ‘wrong’ set of choices, we need
few… still not much difference. look no further than Guam. Guam
At a certain point however, so many kernels were gone is a ‘Presidential Municipality’. What that means in real
the difference is visible, the level is lower, and, crucially, terms, is that there are no great jobs on Guam, and success
you will not achieve your full potential. In my view, that is means leaving the island. This is a very real possibility for
where New Zealand is now. A good few kernels (decisions New Zealand, and our net emigration figures to Australia
made by both political and business leaders) have been (in Guam you leave to go to the U.S.) are a portent of that
chucked out. Where will we end up? possible future.

4
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.
5
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.
6
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.
METTLE
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.
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.
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.
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.
7
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.
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.
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 self- “Until we address that
reliance and self-confidence.
These are terrible signals to difference
send to the next generation of
New Zealanders. income, we will remain
We need to change the
incentives, and send better simply
signals about how to get ahead
in life. ground of talent for the
That is why I’m committed
to lowering the tax burden on rest of the world.”
ordinary New Zealanders. But
that is only a start.
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.
8
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.
Together, these policies will provide a country New
Zealanders are proud of, and proud to return to.
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.
in relative 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.
a 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.
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.
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.
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
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.
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.
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.”

9
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,
10
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. “One factor that
Our tax rates remain low by international we ignore at our
standards. Most OECD nations have
personal and company tax rates which are peril, however, is
higher than ours, and the richest nations
appear to have the highest tax rates. If we the significance
compare ourselves to Australia, even after
the recent Australian spend-up on tax cuts, of stable fiscal
the base rates of income tax remain roughly
comparable, but of course Australian tax policy...”
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
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.
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.
11
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 inflation-
adjustment 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?
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.
12
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.
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:
• lowering corporate and personal taxes;
• reducing government spending as a percentage of
GDP; and
“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.
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

The views represented in this article are the express views of the author, and do not
underlying volatility of economic growth and inflation. necessarily reflect the views of NZX.

13
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 Remembrance Day last year, has triggered questions
visitor to your shores since the early 1990s, entrusted by about New Zealand’s modern identity, its attendant
Prime Minister Howard with “… the most important task rituals and symbols, and how your Maori heritage fits
of maintaining and developing the close and friendly ties into the scheme of things. This has been accompanied
which exist between our two countries”. I offer my piece by a resurgence in the creative arts – the mirror to a
in that spirit as a personal contribution. nation’s soul.
It’s particularly poignant to be penning this article a few Our nations seem obsessed by sporting prowess as the
days after David Lange’s death. measure of success in the international arena. If our
descendants are to enjoy a
“No two nations on earth share
similar standard of living and
a tradition of common values “...there is a discussion going quality of life and realise their
like the ANZAC tradition
aspirations, it’s about time we
shared by the people of New on, largely under the radar also gave due recognition to the
Zealand and Australia”.1
deserving heroes and heroines in
This tradition was vividly
screen of most Kiwis, about business, engineering, science,
demonstrated at the Gallipoli academia, agriculture and other
commemorative ceremonies New Zealand’s place in the fields of endeavour.
marking the 90th Anniversary
of ANZAC Day, attended by world, what it stands for, I believe that there is a
discussion going on, largely
our Prime Ministers – serving
to remind us that Australia and where it’s going and how it under the radar screen of most
Kiwis, about New Zealand’s
New Zealand have been bound
together by geography, beliefs can get there.” place in the world, what it stands
for, where it’s going and how
and common interests.
it can get there. This issue of
The past tense recognises that our nations are now OPEN should assist bringing that debate into the public
embarked on fundamentally different directions and our arena. It may well feature in the election campaign and
cultures are moving apart. That trend, which commenced affect the outcome.
under Prime Minister Lange, has continued under
My feel is that New Zealand wants to be known
successive governments, irrespective of their political
throughout the world as an independent-minded
persuasion.
western nation, recognised as a voice for a peaceful and
It seems to me that the re-interment of the Unknown sustainable planet.
Warrior, in the National War Memorial forecourt on

14
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:
• 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.
“Our nations seem obsessed
by sporting prowess as
the measure of success in
the international arena.”
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
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.
15
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 But our strategic challenges are also significant and, for
overstate the impact that China and India, and the positive this, political and business leadership of our country
(and negative) forces of globalisation, will have on New will be critical – creative and forward-looking leadership
Zealand and on our world more generally. capable of identifying and building unique sources of
competitive advantage.
As I look at New Zealand, I see a nation capable of
becoming ‘The Best Small Country in the World’ – a I believe there are several fundamental success factors.
unique combination of outstanding lifestyle but also with From an economic perspective, our macro settings are
significantly higher wealth for all our people. broadly correct and give us a powerful platform for
As Thomas Friedman points growth. However, we have a
out in his excellent recent “The opportunity has never lot of work to do on our micro
book (“The World Is Flat”), settings, in particular in the areas
the economic barriers between been greater to create a ‘mini- of education, infrastructure and
nations, businesses and peoples labour markets.
are rapidly disappearing. This is multinational’ based in New
We need to be significantly more
both a tremendous opportunity,
but also a very real challenge for
Zealand – designed and owned committed to building capability
for the new world through our
New Zealand. in New Zealand, made in education system. We need
From an opportunity perspective, to ensure that every phase of
it is now possible to compete Thailand, assembled in China, education, from pre-school to
globally from any place on the university, aims to be the best in
planet. The tyranny of distance
sold in the USA – why not ? ” the world. We need a pervasive
is no longer the constraint it was culture of excellence across all
– growth businesses can be located anywhere where there fi elds, but also a better focus on the defining competitive
is a well-educated workforce and macro conditions which areas, e.g. science and technology.
are conducive to business. Supply chains are increasingly New Zealand has great “raw material” as shown by our
operating seamlessly across borders – specialisation in a performance in some global studies (fifth in the OECD at
market niche is possible from anywhere in the world. fifth form level), but we trail off at the sharp end. As Paul
Culturally, New Zealanders are well suited to this new Romer showed at the 2003 Knowledge Wave conference,
environment. Relative to many others I meet, New we are near the bottom of the OECD in terms of our
Zealanders have a ‘can do’ attitude; we are innovative and proportion of science and engineering graduates.
entrepreneurial and we have a youthful and flexible approach We need to urgently address our infrastructure constraints
to life in general – all vital qualities for the new world. – not only the old world infrastructure (roading, electricity),

16
but also the new world infrastructure. As one example, it
INVESTING IN THE
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
SHAREMARKET
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 HAS NEVER BEEN SO EASY
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 If you don’t have much time,
next decade, we will find ourselves competing increasingly
with the emerging countries of India and China. And money or experience in the
they will compete not just on lower costs, but on quality
of output. For example, China will produce 3.3 million
sharemarket, Smartshares
university graduates this year, India 3.1 million (all of them
English speaking) – a massive potential future advantage.
offers a wide range of
Nothing is more certain than that a large proportion of the
jobs in New Zealand won’t exist in their current form in
diversified share portfolios.
the future.
Clearly, business leadership is critical. Our companies need
Choose from one of our
to work out how to be great global collaborators: which
role will they play with excellence in the global supply
four products and get
chain? The opportunity has never been greater to create your investment in the
a ‘mini-multinational’ based in New Zealand – designed
and owned in New Zealand, made in Thailand, assembled sharemarket started.
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. smartshares
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.
The easy way into
the sharemarket

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
www.smartshares.co.nz
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.
Investment Statements can be downloaded from the
Smartshares websites. Units in the funds have been
accepted for quotation by NZX and will be quoted upon
completion of allotment procedures. However the Special
Division that regulates Smartshares Limited takes no
responsibility for the offer.
17
 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
18
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), under-
performing 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-in-
Residence 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.
19
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.
20
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, un-
greedy 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.
21
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
22
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.
 Risk Taker?
Are you up for
the challenge of trading
currencies?
Corporate and private clients can take advantage of
the opportunity to turn risk into profit within a
framework that will minimise potential losses and
build short and long term wealth.

NZX is committed to:

• Minimising the probability of a failure
through working with our customer base
to continually improve our infrastructure,
whilst
• Being fully prepared and able to manage
any failure.
This will allow NZX’s customers to proceed
confidently in the knowledge they can access
a robust and stable market.
Preparation
Disaster
Mitigation
• Longest established futures brokerage in New Zealand
• Leading margin foreign exchange broker – deliverable facility
• Covering all major international markets
• Currency and equity options
• Qualified advisors
• Comprehensive trading tools and research resources
• State of the art settlement services
• 24 hours a day, Mon-Sat dealer desk
• 100% New Zealand owned
If you would like to know more about how trading in the foreign exchange
market can enhance your portfolio, call or email New Zealand’s leading
margin foreign exchange broker, or visit our website.
Call 0800 500 580
info@omf.co.nz

Confidence Experience
OMF3946

www.omf.co.nz

23
 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
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.
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.”
Management Discussion and Analysis
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 well-
placed to create value from that growth, both for itself and
importantly, for stakeholders in New Zealand’s markets.
24
NZX Markets
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.
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.
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.
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,
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 co-
regulatory 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.
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
“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.”
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
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.”
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.
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.
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%

TRANSACTIONS - NUMBER TRANSACTIONS - NUMBER < $50k

HY Change HY Change

NZSX 308,812 11% NZSX 273,916 9%

NZDX 12,070 -8% NZDX 9,366 -10%

NZAX 2,546 3% NZAX 2,528 3%

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%

Daily avg 121 16% ORDER NUMBERS

HY Change

Number of Orders 468,180 8%

Daily avg 3,806 9%

ISSUERS

HY Change Added YTD PARTICIPANTS

Companies HY

NZSX Domestic 141 2% 2 Trading & Advising Firm 16

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 Futures & Options Introducing Brokers 4

Debt 92 18% 11 Sponsors 43

ETFs 6 50% 0 Distributing & Underwriting Sponsors 1

Warrants 24 167% 16 MARKET DATA

HY YTD HY

New equity raised ($m) 963 963 Primary Data Distributors 19

New debt raised ($m) 906 906 Real Time Data Terminals 7,064

SMARTSHARES LINK MARKET SERVICES

HY Change HY

Funds Under Management ($m) 192 136% Total Issuers 113

Holders 10,467 163% Listed Issuers 71

Number of Funds 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 '* 500

*%%
Newspapers Ltd are merged via a Scheme of
Arrangement. Shareholders of both the former %
) ) ) ) ) ) * *
0%
c%
)
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g% eg% Vn% c% a%) j\% Ze% Xi% dk% ZX% c% ZW% Vg% eg% Vn% c%
*
?V ;Z BV 6 B ?j ?j 6 H D C 9 ?V ; B 6 B ?j
companies receive substantial capital repayments. KVajZd[IgVYZhb CjbWZgd[IgVYZhG=H

• 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
$3.6 million.
• Instalment warrants based on 15 leading NZX Listed
Issuers have been listed.
NZX FIRM MARKET SHARE
The resurgence in the popularity of investing in the New
Zealand share market is benefiting all NZX Firms. Of
the 16 broking houses accredited as NZX Trading and
Advising Firms, 14 have reported an increase in the value
of trading since the first half of 2004, and 14 have shown an
increase in the number of trades.
Among the top 10 NZX Firms, the big movers in terms
of market share by value traded were Macquarie, Forsyth
Barr and ABN AMRO NZ. By number of trades, Direct
Broking, UBS and ABS Securities have moved up the
most in the rankings since 2004.
Market Share for Trades on all NZX Markets - First half of 2005
Top 10 By Value of trades ($ million) Top 10 By Number of trades

Firm Value (%) Prev* Firm Trades (%) Prev*

(%) (%)
TRADING ACTIVITY
First NZ 3,242 21.8 (22.7) First NZ 56,756 17.5 (15.9)
Trading levels across the three markets NZX operates (the
GSJBWere 2,489 16.7 (20.3) ABN AMRO Craigs 40,370 12.5 (13.3)
NZSX, NZAX and NZDX) have been strong this year.
UBS 1,861 12.5 (13.2) GSJBWere 40,129 12.4 (10.6)
There are two metrics NZX uses to measure trading activity:
ABN AMRO NZ 1,823 12.2 (10.1) Forsyth Barr 34,828 10.8 (12.1)
value traded and number of trades. Each of the six months
Macquarie 1,681 11.3 (8.5) ASB Securities 34,764 10.7 (8.8)
in the first half of 2004 saw a greater dollar value traded than
Citigroup 1,552 10.4 (10.1) Direct Broking 28,301 8.8 (6.4)
the corresponding month in the previous 2005. This led to
Forsyth Barr 900 6.0 (5.3) Macquarie 27,094 8.4 (7.1)
an overall increase in value traded of 15.3% for the six month
ABN AMRO 629 4.2 (4.0) UBS 17,216 5.3 (4.1)
period, to $14.9 billion. In five of the six months an increase in Craigs

the number of trades also was recorded when compared with ASB Securities 328 2.2 (1.8) ABN AMRO NZ 16,519 5.1 (4.5)

2004 (January 2005 was the only month that lagged behind Direct Broking 245 1.6 (1.5) Citigroup 12,872 4.0 (4.5)

2004). The overall increase in number of trades was 9.9%. *Previous data is for the corresponding half year in 2004.

28
 DPIN+&?dZ[n
((%%

('%%

(&%%
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 '*%%

) ) ) ) ) ) * *
c%
)
W %) ) ) ) * * *
g% eg% Vn% c% a%) j\% Ze% Xi% dk% ZX% c% ZW% Vg% eg% Vn% c%
*
?V ;Z BV ?j ?j ?V ?j
as a shareholder of the underlying security, but require 6 B 6 H D C 9 ; B 6 B

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
GLOBAL INDEX RETURNS
Sky Network Television Ltd (SKY) and Independent
The performance of the New Zealand share market placed
Newspapers Ltd.
it in the middle of the range of global markets for the first
six months of 2005. The US market experienced a slight
NZSX Market - New Listings decline, but weakening of the kiwi dollar against the US
Issuer Security Date Security details dollar over the six month period (from 71.9 US cents to
code listed
the NZ dollar to 69.8 US cents) meant that New Zealand
ABN AMRO Equity AAD 28 Apr Instalment warrants on 15 leading
Derivatives New Zealand Ltd 2005 NZSX securities investors with unhedged funds in the USA may still have
Sky Network Television Ltd SKT 28 Jun Ordinary Shares issued pursuant collected a positive return.
2005 to Scheme of arrangement to
merge Independent Newspapers
Ltd and Sky Network TV Ltd
JejWbH[jkhdie\=beXWbCWha[ji"<_hij^Wb\(&&+
&'#%
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. %#%

Source: MSCI
"'#%

NZSX Market - Total Index Return AdXVa8jggZcXn CO

Index Value First Half 12 Months

2005
NZX 50 3246.49 5.9% 20.4%

NZX 15 6022.88 6.0% 21.2%

NZX 50 INDEX ATTRIBUTION
NZX 50 Portfolio 1780.82 5.4% 22.1%
Of the 50 securities in the NZX 50 Index, Contact Energy
NZX 10 3572.15 7.0% 20.3%
had the biggest positive impact in this six month period.
NZX MidCap 6887.67 4.7% 21.0%
Contact Energy was responsible for 54.22 points of the
NZX SmallCap 19758.80 -0.7% 21.7%
index’s 182.05 point rise. Sky City was the security with
NZX All 3330.53 4.6% 20.7%
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.
Most of the gains were recorded in Q2, when the
market recovered from a disappointing Q1. The NZX The returns in this table include both share price
50 Index reached a record closing level of 3246.49 on movements and reinvested gross dividends.
30 June 2005.

29
Top 10 Positive Contributors to NZX 50 Index
Security name Index Last First Half First half 2005 12
weight price 2005 Index impact Month
($) Return (points) 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% NZAX MARKET PERFORMERS
Independent Newspapers 0.0% 6.50 16.5% 21.26 43.8% The NZAX All Index, which tracks the NZAX Market, had
Telecom Corp of NZ 24.2% 6.01 2.2% 17.97 12.2% a rougher quarter than the indices for the NZSX Market.
Fletcher Building 6.3% 6.91 7.7% 14.99 62.7% The NZAX All Index was down 9.8% for the half year to
Waste Management NZ 1.4% 6.73 23.7% 8.74 51.5% 1135.67. Several NZAX securities gave strongly positive
Westpac (NZ) 2.3% 21.55 12.4% 8.50 23.7% returns, the most notable were Plus SMS and Livestock
Investments
Improvement Corporation.
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%

Bottom 10 Negative Contributors to NZX 50 Index NZAX Top 5 Performers

Security name Index Last First Half First half 2005 12 Security Last Price First Half 12 Month Return
weight price 2005 Index impact Month ($) 2005 Return
($) Return (points) Return
Plus SMS $0.18 200.0% -40.0%
Sky City Entertainment 3.9% 4.48 -13.8% -19.94 1.7%
Livestock Improv Corp $1.50 39.2% 19.7%
F&P Appliances Hdgs 1.8% 3.35 -18.7% -14.13 -21.0%
Oyster Bay Mlb Vineyards $3.20 18.5% 26.1%
Feltex Carpets 0.2% 0.60 -59.6% -9.42 -59.3%
Just Water International $0.92 17.8% 27.4%
Nuplex Industries 0.7% 4.48 -20.7% -5.92 -9.2%
Ashburton BS Ordinary $4.40 15.5% -
Promina Group 2.0% 5.13 -5.1% -3.33 29.4%

Lion Nathan 0.5% 8.11 -10.8% -2.08 14.5%

NZAX Bottom 5 Performers
Security Last Price ($) First Half 2005 12 Month Return
Port of Tauranga 0.6% 4.95 -9.5% -2.07 0.9%
Return
Air New Zealand 0.6% 1.45 -9.3% -2.00 -23.9%
A2 Corp $0.16 -60.0% -68.0%
Cavalier Corporation 0.4% 4.05 -11.2% -1.66 -8.9%
The CACI Group $0.18 -50.0% -52.6%
Tourism Holdings 0.4% 1.83 -9.0% -1.31 11.6%
Solution Dynamics $0.98 -38.8% -

Connexionz $0.42 -36.4% -

NZX SMALLCAP INDEX PERFORMERS Southern Travel Holdings $0.78 -36.0% -

The NZX SmallCap Index comprises the domestic equity

securities quoted on the NZSX Market but not large enough NZAX NEW LISTINGS
to qualify for the NZX 50 Index. From this segment of the Two companies listed on the NZAX Market in the first
market, the top performer was NZ Finance Holdings. half of 2005. Avon Investments completed a compliance
listing, and publishing company Jasons Travel Media listed
Top 5 Performers after an IPO. The number of issuers listed on the NZAX
Security Last Price ($) First Half 2005 12 Month Market had reached a record 24 as at 30 June.
Return Return
NZ Finance Holdings 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 Security Date Security details
code listed
Renaissance Corporation 1.20 35.9% 97.7%
Avon Investments Ltd AIL 05 Apr Ordinary Shares; Compliance
Cabletalk Group 0.78 30.0% 212.0%
2005 Listing

Bottom 5 Performers Jasons Travel Media Ltd JTM 30 Jun Ordinary Shares issued at $0.50 in
2005 IPO, raising $3.6 million
Security Last Price ($) First Half 2005 12 Month
Return Return

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
NZX DEBT INDEX RETURNS
NZX calculates a range of government bond, corporate
Want instant
bond and bank bill indices designed to track the
performance of fixed interest securities in New Zealand. access to over
The table below shows the performance of the main
indices to the end of June.
100,000 company
NZX Debt Index Returns

Index
Returns

First half 12
30 June 2005 Data

Yield Modified
announcements?
2005 Months Duration
NZX NZ Government Stock Index 3.92% 8.10% 5.78% 3.98 years

NZX Corporate Investment Grade 3.44% 7.11% 6.75% 2.70 years

Bonds Index

NZX 90-Day Bank Bill Index 3.44% 6.82% 7.03% n/a

NEW LISTINGS
It has been a busy period for listings on the Debt Market,
You can
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
with
Ltd and Wrightson Finance Ltd.
i-Search
NZDX New Debt Securities Quoted
Issuer Security Date Security Interest Maturity
code listed type rate date
CBA Capital Australia Ltd CBAFA 19/05/05 Preference 7.71% Apr 2015
Shares

Capital Properties New CNZ040 18/04/05 Capital 8.00% Apr 2010

Zealand Ltd

Fairfax New Zealand FXFFA 27/05/05

Notes

Preference 8.03% Jun 2010

Free trial
Finance Ltd Shares

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 trial i-Search or for more
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 data@nzx.com.
Wrightson Finance Ltd WFL020 31/05/05 Capital 8.50% May 2010
Bonds

Wrightson Finance Ltd WFL010 31/05/05 Capital 8.25% May 2009

Bonds

www.i-Search.nzx.com

31
To advertise here, contact open@nzx.com
MARKET UPDATE
New NZX Director
Henry van der Heyden, Chairman of the Fonterra Co-
operative 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.
Mr van der Heyden became Chairman of Fonterra in
September 2002 and is a founding director of the co-
operative. 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
NZX Conformance
In May, three new companies completed NZX’s rigorous
conformance (previously accreditation) process to access
NZX software and distribute NZX data.
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 Zealand-
domiciled 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’,
FROM
GOOD TO
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
GREAT
listing, and the experience of becoming and being an THE STORY OF LISTING
NZX Listed company.
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 is now running lunchtime seminars
NZX’s market announcement system, i-Search, was
upgraded on 15 August 2005. i-Search allows people which offer you the chance to hear the
to search the NZX market announcement system by story of listing from the companies
company, listing rule references, announcement type,
individual’s name, a keyword or a specific date.
themselves.

If you would like to find out more about i-Search, contact

These seminars cover:
data@nzx.com.
• 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: listings@nzx.com 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
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35
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36 Zealand Exchange Limited, 2005. Printed September 2005.
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