Global Opportunities Beyond the Radar

A Lack of Courage: Why NZ Is Moving in the Wrong Direction


Years ago, while at university, I had the world’s most boring summer job. At least until I got handed a fascinating survey.

I was interning with one of the Big Four accounting firms. Well, their New Plymouth office.

As an intern, you get handed first-run work. Dealing with bags of receipts and entering them into a system.

There is a stale, bored silence in accounting offices. The freezing works of the white-collar world. And unless you make it to a more client-facing senior post — or become a partner — your raison d’être is to process numbers.

The survey changed all that. At the time, one of the universities was conducting an annual survey of business results across the country.

That got assigned to me. So I had to go through every business on file and pull numbers from their financial statements. Revenue, cost, and profit numbers.

It soon gave me a clear view of which were the most profitable businesses in town. This would later pave the way to some of my investment strategies in the share market. Strategies we profile and follow in our Lifetime Wealth Investor newsletter.

Of course, I was sworn to strict confidentiality. But what I can tell you is this: if you want to buy into, own, or start a successful business, these factors will guarantee you the best profits:


A light bulb moment


So, the most profitable businesses served by this accounting firm?

Specialist medical professionals represent a good example. They have a moat, since it takes years of training to become one. The margins on their services are very high. Often beyond a clinic and some equipment, the capital investment required is not huge. And customers depend on their services to maintain their health.

But there’s another factor I noticed too.

The government often provides a key incentive to their business. Many medical professionals receive government payments to subsidise lower income patients. Or via work in public hospitals.

Much of the work done by lawyers and accountants comes about due to government regulations.

Real estate agents and property developers were also doing well due to government population policy. High rates of net migration has led to higher property prices.



Tax policy


So, with this latent power of the State, you’d think savvy leaders would aim for outcomes with wider benefit. Policies that could drive growth across a wider array of business activity.

Here’s what we know is needed:

Well, the Labour Party came out recently with just one change to the tax system. Should they be re-elected. A 39% rate for earnings above $180,000.

A little above what most members of Parliament earn. How convenient.

It will likely raise little. At this level, many will divert excess earnings into trusts (a 33% rate) or companies (28%). Top-performing employees may look to negotiate other rewards. Share options and capital allocations rather than higher salaries. And in a COVID-sapped environment, many on the upper pay scales are facing reductions anyway.


Driving growth and wealth


This is what we would like to see instead:

There is much you can do. We need business growth. More children and young people. More affordable homes for people to own and less investment going into rental speculation.

The courage to incentivise what is needed.

Businesses have to survive in the real economy. Beyond the game board of politics. That is clear from observing businesses — as I have done over 30 years.

That growth garden needs the right fertiliser.

And right now, there seems to be too much acid.



Simon Angelo

Editor, Wealth Morning

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