February 2013

Proposals by Inland Revenue to tax the personal use of work mobile communication devices like mobile phones, tablets and laptops are both unenforceable and contrary to government’s ambition to lift workplace productivity, the Employers and Manufacturers Association says. “Our members are angry about the IRD tax proposals,” said Kim Campbell, EMA’s chief executive.  “We’re being told at our current briefings that businesses think they’re not only unworkable, unenforceable and would collect tiny amounts of tax, the thinking behind them is also antiquated.  “On the one hand we have Communications Minister Amy Adams recently praising the workplace flexibility we now have with such devices, so anyone can work partly at home or elsewhere, and on the other we have IRD saying they need to tax these things because there’s been an increase in “working outside the traditional office environment.” “We think its petty and counter-productive. “If these so called ‘perks’ taxes proceed businesses will simply stop providing mobile phones and the like to employees, and employees will simply stop doing some of their work at home.  “Employers and employees will lose out, and so will IRD as productivity, output and tax revenues fall. How dismal is that!  “IRD has muddled its thinking over some of its other perks’ proposals too, to tax some workplace clothing, meals and accommodation allowances. “All these issues need far more thought.”  

BusinessNZ has welcomed the clarity provided by the Supreme Court’s decision on the proposed share offer for Mighty River Power.  Chief Executive Phil O’Reilly says the partial float provides a significant opportunity for the development of New Zealand’s capital markets and for wider investment possibilities for New Zealanders.  “The decision will provide a boost to business confidence and confidence in capital markets.  “The Court’s unanimous decision gives a clear way forward and the Government should now promptly execute its plan for the benefit of all New Zealanders.”  

The Government’s final report under the Business Growth Agenda lists useful undertakings to enable better access to capital, says BusinessNZ. Building Capital Markets is a useful component of the Agenda to build the New Zealand economy, says BusinessNZ Chief Executive Phil O’Reilly. “However, for it to achieve the Government’s goal of New Zealand becoming a magnet for foreign investment, much more must be done.  “The OECD’s Going for Growth report on the New Zealand economy, just released, says its top priority for change would be for New Zealand to “reduce barriers to FDI and regulatory opacity”.  “The OECD’s three recommendations are that FDI screening requirements should be clarified, that Ministerial discretion over FDI bids be removed, and that the revised Regulatory Standards Bill be passed. “These three simple actions would do more than anything else to improve the flow of investment and allow New Zealand businesses to get on with growing exports. “Business is supportive of these simple changes. The vagueness of FDI rules and Ministerial power over them are significantly constraining investment flow to New Zealand. The Regulatory Standards Bill would require all planned new legislation to conform to standards of transparency, accountability and cost-benefit efficiency. This Bill should not be left languishing on the Order Paper with little chance of being advanced, as is currently the case. “The Government’s initiatives listed in Building Capital Markets are welcome. Changes to foster more efficient private capital markets, along with better equities law and increased support for venture capital programmes are positive.  “But if the Government is serious about the goal of making New Zealand a magnet for investment, it must concentrate on fixing the investment and legislative rules that are holding us back.”  

For New Zealand exports to rise to 40 per cent of GDP, $200 billion in capital is needed by 2020, much more than is currently invested in our export economy. That’s the scale of the challenge presented by the Building Capital Markets report issued today, said Kim Campbell, chief executive of the Employers and Manufacturers Association.  “It means we need to complete the work identified in the five earlier reports of the Government’s Growth Agenda’s if adequate capital is to migrate here,” Mr Campbell said.  “The success of the Growth Agenda overall depends on it. “But if this Capital Market agenda did nothing else more than reducing the premium on interest rates we all pay to the levels of our trade competitors it would be a great result. “At present New Zealand’s perceived risk profile internationally means we effectively end up paying one per cent more in interest than our trade competitors – a huge sum.  “What we need now is clear unambiguous policy settings and tighter time frames to attract the foreign investment we all know we need.  “The Capital Markets report identifies the Crown’s own balance sheet, the domestic housing market, and private savings rates as important work streams – all laudable. “Further examination is needed on how ACC and KiwiSaver investments could be leveraged, along with the SOEs and other state uses of capital in order to achieve the best productive use from government controlled funds. “Our businesses must become less risk averse, more willing to innovate, and to accept capital from wherever it may come from, in exchange for growth.”  

 John Key recently claimed that the high dollar is a good thing, saying “For a lot of New Zealand consumers, their life’s actually a lot better because of the strong dollar.” This claim looks at only one part of the complex story of exchange rates which is harming our manufacturers and exporters, says the New Zealand Manufacturers and Exporters Association (NZMEA). NZMEA Chief Executive John Walley says, “Recent research shows that import prices have relatively little impact on overall consumer prices. In any event, to consume much at all, you need a job, which will become more scarce as exporters close or move under the current pressure.” “Although the high dollar does make imports cheaper, it is seriously hurting manufacturers and exporters, margins and competitiveness. This puts jobs at risk, and reduces the likelihood of reinvestment to improve productivity and employment.” “Manufacturing is a relatively high wage sector, with higher median weekly incomes than the average for our economy. Wage rates tend to reflect labour productivity, margins and investment. Supporting investment in the manufacturing sector is the only way to sustain and improve real wages and living standards.” “We cannot expect labour productivity to improve if policy settings starve margins and investment, slowing innovation and skill accumulation of our work force.”  “Our economy needs to operate in such a way that we can expect to build a strong export sector that will provide jobs and wealth in the long term, as a opposed to the short term overvalued exchange rate fools paradise.”  “Although a lower dollar may cause the price of imports to rise, there would be little identifiable impact overall on consumer price, as most New Zealand dollars spent relate to things that have costs in New Zealand dollars. We all visit the supermarket more often than the TV […]

Auckland-based innovation centre, The FOODBOWL, which offers food and beverage producers exclusive use of its world-class facilities, is swinging its doors open to the industry and public. More than 600 people, including equipment and ingredient suppliers and packaging companies, are expected to attend Open Days on March 13 and 14 that showcase The FOODBOWL’s progress, its capability and state-of-the-art processing halls. Food and beverage products developed by its customers will be available for sampling. And there will be display stands, designated networking areas, and seminars about accessing markets, particularly supermarket shelves. A group representing the East Gippsland Food Cluster will travel from Victoria in Australia to be part of the Open Days, themed “Innovation in Action. “There’s nothing quite like The FOODBOWL in Australia and they are envious about our government doing so much to support the food and beverage industry here,” said Sarita Males, The FOODBOWL’s chief executive. The FOODBOWL (Te Ipu Kai) has four main processing halls, a freeze drying unit, microwave thawing, and product development kitchen. The halls are divided into UHT and aseptic filling; twin-screw extrusion, milling, grinding, sieving and VBlending; high pressure processing, and general processing and retorting, Small and large companies can book the halls for their exclusive use, and each hall comes with staff facilities (kitchen, office and toilets) and red-line hygiene protocol. There are more than 150 pieces of ancillary equipment on site that can be configured to suit the individual processing system. The FOODBOWL, located in Verissimo Drive near Auckland International Airport, provides a competitive edge by offering customers use of its high pressure processing unit. Food products are pasteurised without using heat, harmful bacteria are removed, and the fresh taste and appearance are maintained, resulting in longer shelf life and increased food safety. The innovation centre, established at the end […]

Small, because we can’t get too carried away – just yet. Manufacturing is back in the black with a PMI reading in January of 55.2. This is 4.8 up on December and the highest result since May last year. A reading of over 50.0 is an indication that manufacturing is generally expanding. This was the highest January result since 2007. Activity is most certainly out there and we need to keep it going. Sometimes in a small country like ours we can navel gaze a bit too much and miss what is positive in the business market. Funnily enough the job losses – which sadly are more and more frequent – do not seem to have affected the efforts of our manufacturing sector. What is this – smarter ways of doing business, refined technology for greater competitiveness? What success means to one business may well be issues strictly applicable to that company. As ninety three percent of them are SMEs and without huge staff numbers, circumstances on a one to one basis may be almost tribal. Regional small engineering company with five employees seeks business opportunities from Tokoroa to Hamilton. Get the picture? Little things mean a lot and it doesn’t take too little for an SME to tip over if the growth isn’t there. Or to pick up the momentum and run with it. So getting back to the 55.2 let’s celebrate the going forward. Next month this figure may drop back down – or increase – and it may be your business that contributes to the momentum called growth. -Doug Green  

The causes and consequences of decreasing public trust in business, and what this means for societies and the global economy, will be the focus of a public lecture on Monday at the Victoria Business School. Harvard Professor and Victoria University alumnus Paul Healy will discuss recent cases and research findings that provide insights into the causes of the loss of trust, its ongoing impact, and the changes required to rebuild confidence. Professor Healy is the James R. Williston Professor of Business Administration and Senior Associate Dean for Research at the Harvard Business School, where he researches and teaches in corporate governance and accountability, strategic financial analysis and financial reporting. He cites Enron, the Madhoff Ponzi scheme, the global financial crisis and ongoing banking issues in Europe as just a few examples of many events causing public faith in business to decrease.  “People have a sense that the leaders of the firms involved in these scandals took a very narrow approach to management that served their own short-term interests, often at the expense of customers, employers, the company’s reputation and the financial system.  “This loss of trust is twofold: it’s in the individuals that lead corporations and the corporations themselves. That, I think, is the tragedy—as a result of ethical lapses some leaders failed to preserve the reputation of their own organisations and led them to their demise.” Professor Healy says as a result increased regulation is being placed on business, and while this is appropriate, some laws will likely end up being heavy-handed. Another consequence is economic growth also slows, along with opportunities to reduce unemployment, as investors move their resources into more secure locations than the stock market. Meanwhile, innovative new businesses find it increasingly difficult to raise capital. “Many of the challenges in the world today, such as […]

There may be a lot more people experiencing the languid Friday afternoons following the announcement today that Telecom is to lay off “hundreds of workers”. This comment is not forgetting other people across companies in New Zealand who are regularly being layed off with no recall and not much chance of  a new work environment. Corporately speaking,we have just had Peter Reynolds return to London with a large payout and now the return to the Board looks like it isn’t good enough.  With technology services it is an ever changing product market; different mobile phones are coming out every day and phone plans are very competitive amongst the players. So do you only get a job with Telecom if  you are a technician; and even then, what is your use by date? Why on earth would you want to work for them? –Doug Green

The Reserve Bank Governor, Graeme Wheeler’s speech yesterday was essentially more of the same – an ongoing attachment to orthodoxy reinforced by a reluctance to do anything new, believing it is best to do nothing as change always has its risks, says the New Zealand Manufacturers and Exporters Association (NZMEA). NZMEA Chief Executive John Walley says, “Mr Wheeler outlined the risks of each policy change and rejected each of them in turn. Best to live with the current choices and associated risks; all a bit hard to take when, as an exporter, your back is to the wall.”  “We saw technical analysis from John McDermott a couple of weeks ago and more from Mr Wheeler yesterday; all good analytic reasons for their position. Unfortunately the analysis seems to miss the fact that high quality, high value, high tech manufacturers don’t have the confidence to invest in New Zealand.”  “We agree with Mr Wheeler’s analysis that New Zealand has a structural problem in terms of balance of payments, savings, productivity and real investment. These are all manifestations of the existing “low risk” policy settings; the real risk is that nothing changes before it is too late for many exporters.”  “There is more to currency intervention than the spot market, as it has been demonstrated by many central banks around the world. There should be more than one lever and more than one target. The Kiwi dollar needs to be more than a one-way bet for speculators, and to move away from this, we need to target inflation and financial stability together by using policy tools in a complimentary manner.” “Discussion around the use of loan to value ratios (LVR), for financial stability reasons, is a major step that can crimp debt growth in a targeted way and avoid our exporters being […]