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Tax changes may benefit Australia

Proposed investment tax changes might see a slight tilting of investments in equities, says Arcus - but it may be the Australian rather than New Zealand stock market that benefits.

Friday, April 28th 2006, 6:53AM

by Rob Hosking

Because the changes impose a new capital gains tax on all offshore portfolio investment expect Australia it is expected that some of the existing international share allocations may come back to New Zealand assets.

This has led to the likes of NZX chief executive Mark Weldon welcoming the changes as they will increase New Zealanders’ investments in the home market.

However, Arcus chief investment officer Mark Brighouse says there is unlikely to be a huge influx of offshore investments being brought back into the home market.

Trade offs between post-tax returns volatility and diversification mean there is likely to be only a slight shift.

There is already a home bias, he says.

A current prudent investment spread is about 60% in equities and 40% in other assets such as bonds, property, currency and private equity.

A typical prudent allocation at present would be about 20% in New Zealand equities. A likely approach would be to keep the overall 60-40 split, but shift 4% from international equities into the home market.

The tax changes though mean New Zealand and listed Australian investments are treated the same, and are both effectively the home market.

And someone wanting to spread their risk a bit more might put that extra 4% into Australia, says Brighouse.

“We could well see these tax changes be of more benefit to the ASX than the NZX.”

Goldman Sachs JB Were strategist Bernard Doyle said last night that if the proposals go ahead in their current form then investors should seek greater diversification via Australia.

He says it is possible to get some good international exposure through some of the genuine multinational listed ASX companies such as BHP Biliton and News Corp.

Rob Hosking is a Wellington-based freelance writer specialising in political, economic and IT related issues.

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Lender Flt 1yr 2yr 3yr
AIA 4.55 ▼2.29 ▼2.59 ▼2.65
ANZ 4.44 2.89 3.25 3.39
ANZ Special - 2.29 2.69 2.79
ASB Bank 4.45 2.29 2.59 2.65
Bluestone 3.49 3.34 2.99 3.34
BNZ - Classic - 2.29 2.59 2.79
BNZ - Mortgage One 5.15 - - -
BNZ - Rapid Repay 4.60 - - -
BNZ - Std, FlyBuys 4.55 2.89 3.19 3.39
BNZ - TotalMoney 4.55 - - -
CFML Loans 4.95 - - -
Lender Flt 1yr 2yr 3yr
China Construction Bank 4.49 4.70 4.80 4.95
China Construction Bank Special - 2.65 2.65 2.80
Credit Union Auckland 5.45 - - -
Credit Union Baywide 5.65 3.95 3.85 -
Credit Union South 5.65 3.95 3.85 -
First Credit Union Special 5.85 2.95 3.45 -
Heartland Bank - Online 2.50 1.99 2.35 2.45
Heretaunga Building Society 4.99 3.50 3.40 -
HSBC Premier 4.49 2.25 2.35 2.65
HSBC Premier LVR > 80% - - - -
HSBC Special - 1.99 - -
Lender Flt 1yr 2yr 3yr
ICBC 3.69 2.25 2.35 2.65
Kainga Ora 4.43 2.79 3.04 3.13
Kainga Ora - First Home Buyer Special - 2.25 - -
Kiwibank 3.40 3.20 3.50 3.50
Kiwibank - Offset 3.40 - - -
Kiwibank Special 3.40 2.35 2.65 2.65
Liberty 5.69 - - -
Nelson Building Society 4.95 3.20 3.24 -
Pepper Essential 4.79 - - -
Resimac 3.39 3.35 2.99 3.35
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Lender Flt 1yr 2yr 3yr
SBS Bank Special - 2.29 2.29 2.65
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The Co-operative Bank - First Home Special - 2.09 - -
The Co-operative Bank - Owner Occ 4.40 2.29 2.59 2.79
The Co-operative Bank - Standard 4.40 2.79 3.09 3.29
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TSB Special 4.54 2.29 2.49 2.65
Wairarapa Building Society 4.99 3.55 3.49 -
Westpac 4.59 3.09 3.29 3.39
Westpac - Offset 4.59 - - -
Westpac Special - 2.29 2.69 2.79
Median 4.55 2.79 2.99 2.80

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