Business News

New Zealand falling behind in sustainable business practices

There is a growing demand by New Zealand businesses for a return to government intervention in sustainable development issues, said one of the keynote speakers at the recent Sustainability Symposium at the University of Waikato. Professor of Management Communication Juliet Roper says the New Zealand government has taken a hands-off approach to the environment and climate change, by claiming that too much regulation would economically disadvantage New Zealand businesses relative to international competitors. Yet despite initial relief from the business community, her research shows some businesses are now concerned about the repercussions for New Zealand’s ‘clean, green’ brand image. “New Zealand is falling behind the rest of the world in regulating for sustainable business practices, especially in comparison to European countries,” says Professor Roper. “We have been warned of the flow-on consequences of this for years by major UK retailers such as Sainsbury’s and Marks and Spencer.” “There needs to be more stringent legislation and that needs to be monitored for compliance. We all benefit from New Zealand’s clean, green image, so we need to back it up with some overarching policy,” says Professor Roper. The sustainability symposium attracted about 50 researchers from across campus to examine sustainability from a wide range of economic, social, education, health and cultural perspectives. About half of the academics who presented papers at the symposium were from Waikato Management School, which was the first business school in New Zealand to place a strong focus on sustainability and corporate social responsibility.

NZ manufacturers suffer, Australian assets look cheaper as dollar parity looms

New Zealand manufacturing exporters are facing record headwinds from the kiwi’s strength against the Australian dollar, with foreign exchange traders and strategists almost evenly split on whether the currencies will reach parity. The New Zealand dollar touched a post-float record of 96.77 Australian cents overnight and recently traded at 96.53 cents. Six of 13 strategists and advisers in a BusinessDesk survey today say the kiwi dollar will reach A$1 this year. The options market is pricing in a 56 percent chance of parity, according to Bloomberg data. The kiwi has gained about 9 percent against the Australian dollar since the start of the fourth quarter last year, making New Zealand products less competitive across the Tasman and reducing the value of sales when they are repatriated from the nation’s second-largest market. Exports to Australia dropped almost 4 percent in the fourth quarter, government figures show. The New Zealand economy is on a stronger path than Australia’s and the gap may widen amid signs dairy product prices are recovering while hard commodities such as iron ore and coal remain weak. A gap of 125 basis points in New Zealand’s favour has opened up between central bank benchmark interest rates and traders are betting Australia could cut rates again. “Australia is a mine and New Zealand is a farm,” said Fergus McDonald, who helps manage about $2.5 billion as head of bonds and currency at Nikko Asset Management NZ. “Economically speaking, New Zealand is on a better trajectory than Australia at the moment and our interest rates are probably going to be higher for quite some time, so that does support a little bit further strength in the kiwi.” The degree that ‘farm’ products are recovering will be known overnight, with the GlobalDairyTrade auction, after the price of whole milk powder soared […]

NZ construction activity seen rebounding after slump

New Zealand construction activity is rebounding from a slump during the recession as private sector work picks ups, according to a property consultancy. “Building construction activity is recovering strongly,” Rider Levett Bucknall said in its 2015 first quarter report on trends in property and construction. “After a deep slump during the recession, activity has rebounded strongly and has surpassed the pre-recession peak.” Public sector construction on health and education projects has remained resilient, providing a buffer during the recession, and now private sector projects for offices, shops, industrial and storage buildings are recovering, the report said. Investment intentions and building consents suggest construction activity will improve further through 2015, it said. Non-residential construction has been driven by the rebuilding of earthquake-damaged Canterbury and increased demand from an expanding Auckland, and further aided by earthquake strengthening. In Christchurch, the focus is shifting to the CBD as residential repair work nears completion, while in Auckland strong demand is emerging for new buildings as the city’s buoyant economy has soaked up vacant space, the report said. Demand for industrial properties is supported by strong growth in the logistics sector, underpinned by increased imports as domestic manufacturing wanes, it said. Still, farm building construction may slow as a slump in dairy incomes crimps farmer spending, the report said.

Labour’s new tilt for growth

The devil of the detail is still to come. By Bruce Goldsworthy Many commentators didn’t score Andrew Little’s State of the Nation speech on January 28th very highly. But its very early days for the new Labour leader, and his speech was all about scene setting for the party’s future. However, some things left unsaid will give manufacturers serious misgivings. Dr Oliver Hartwich of the NZ Initiative noted that Little wants to see his party on the side of those creating wealth, jobs and income, and his is a truly progressive vision. Importantly Little acknowledged “wealth had to be created first before it could be shared.” When has a Labour leader ever said out loud such a thing? Its especially good news for manufacturers. Little was quick to reference his own background in the Engineering, Printing and Manufacturing Union, and draw on his experiences with the likes of Fitzroy and Fonterra. He stated the economy is all about jobs, what is required to make higher paid jobs, and what works to keep jobs in New Zealand. To grow the pie, (before seeking to redistribute it) Little said he will shortly be discussing measures that create wealth across: • How to harness the power of small businesses. Small, nimble, flexible, innovative businesses are to be placed at the centre of growth and job creation. • Getting serious about housing affordability. • Ensuring Auckland operates as an internationally competitive city, breaking the gridlock holding it back. • Developing a manufacturing sector fit for the 21st century. Here we start to come unstuck. In noting 41 per cent of the jobs created last year were in firms with fewer than 20 employees the question inevitably arises: So 59 per cent were created in larger firms? The Little vision will also focus on […]

State of the Nation and Housing

John Walley, Chief Executive, New Zealand Manufacturers and Exporters Association. The political year was back in full swing when National and Labour leaders delivered their state of the nation addresses – both different in their content and stated purpose. Andrew Little’s speech aimed to set the direction of the party going forward, while staying away from policy detail. The focus was on jobs, claiming “the next Labour government will make sure that New Zealand has the lowest rate of unemployment in the developed world.” He tried to connect with business, emphasising the importance of business and government working together, in particular small business’s role in creating jobs and growth. Inequality was another theme, pointing to the OECD report which claimed our growth had suffered due to growing inequality. Rising inequality has a wider effect on everyone, and targeting this can improve growth and importantly for business, increase the level of skills and education in our workforce. He also talked about the need to create highly skilled jobs, while committing to removing zero hour contracts if in Government. He reiterated Labour’s focus on the manufacturing sector, and plans to expand on this in upcoming speeches. We hope they will continue to consider the recommendations from the Manufacturing Inquiry in 2013 in their policy platform. Lack of policy makes this speech hard to judge, but it has a lot of the right sentiment; in the end what matters is how the policy develops. John Key focused on housing, providing some details of their plans to increase the stock of social housing, through selling Housing New Zealand stock and enabling more community housing providers – 1,000 to 2,000 houses will be sold over the next year, leaving open the possibility for more sales in future. They are extending income-related rent to include community […]

Resource development framework has serious problems

New Zealand’s resource development framework has serious problems and needs urgent reform, says BusinessNZ. The Environmental Protection Authority today declined consent for Chatham Rock Phosphate to mine offshore for rock phosphate. The company had invested $33 million in its bid to meet EPA requirements for the enterprise, and now suggests it may in fact be impossible to achieve such consents under the current framework. BusinessNZ Chief Executive Phil O’Reilly says the EPA has no doubt carried out its mandate in good faith, but the framework itself is flawed. “The laws governing resource permits and consents offshore[1] and the law governing consents onshore[2] are seriously standing in the way of economic growth. “There is a critical need for improvement of these laws governing resource development. The whole issue of permitting and consenting needs reform. “In the Chatham Rock case, as with the previous Trans-Tasman Resources case, one part of government has issued a mining consent, while another part of government has declined access to the resource. This is an absurd situation. “The framework is effectively operating as a ban on new, innovative activities with uncertain impacts – yet all new activity has some element of uncertainty. “What companies will now risk investing millions of dollars to create jobs and grow the economy given New Zealand’s apparent ban on offshore mineral resource development?” 1. Crown Minerals Act, Exclusive Economic Zone and Continental Shelf (Environment Effects) Act 2. Resource Management Act

Wage growth needs productivity growth

The latest study by the Productivity Commission is a useful, although partial, insight into the economy, says BusinessNZ. The study Who benefits from productivity growth? – The labour income share in New Zealand measures the share of overall income earned by labour compared with that earned by capital. It shows that New Zealand’s labour income share, although gradually declining since the 1970s, has always been greater than that earned by capital in that period, and has on average increased since 2002. BusinessNZ Chief Executive Phil O’Reilly says the study indicates that the New Zealand economy is supportive of the working person. “The general decline in the labour income share since the 1970s reflects the growth of capital investment in technology in that period and sends the message that as workers we need to keep innovating, upskilling and building our technical capabilities.” But he said the study did not give a comprehensive picture of incomes, since it did not cover many service industries where most employment growth had occurred, and did not take into account significant income additions such as Working for Families and other income support. He cautioned that the study was about pieces of a static ‘pie’ without considering the dynamic effects of growing the pie. “The key implication of the study is the importance of productivity. If productivity grows – through innovation and technological skills – then real wages can grow regardless of whether the labour income share is growing or not.”

NZ jobless rate rises to 5.7% in 4th-quarter

New Zealand’s jobless rate unexpectedly rose in the fourth quarter, even as the participation rate climbed to an all time high, as employment lagged behind the record number of people entering the workforce. The unemployment rate rose to 5.7 percent in the fourth quarter, from 5.4 percent three months earlier, according to Statistics New Zealand. The participation rate rose to 69.7 percent, the highest since the series began in March 1986. Economists had expected the jobless rate to fall to 5.3 percent, according to a Reuters survey, with a participation rate of 69.2 percent. The New Zealand dollar dropped to 73.42 US cents from 73.82 cents immediately before the 10:45am release, and was recently trading at 73.60 cents. Strength in the labour market hasn’t translated into accelerating wage inflation. Ordinary time private sector wages rose 0.5 percent in the fourth quarter, unchanged from the third quarter pace, while wages rose 1.9 percent on the year, up from a 1.8 percent pace three months earlier. The data comes after the Reserve Bank changed monetary policy to neutral last week, noting inflation may weaken further. “Despite our expectations that the domestic economy and labour demand will continue growing at a firm pace over the coming year, we still think that any material lift in nominal wage inflation is quite some way off,” Satish Ranchod, an economist at Westpac Banking Corp, said in a preview of the data. Employment rose 1.2 percent in the latest quarter, for an annual gain of 3.5 percent.

Vocus and Spark form construction joint venture for fibre

Vocus Communications, the Australian fibre network and datacentre company, has entered into an agreement with kiwi telco Spark New Zealand to form a new construction joint venture, Connect 8. Under the joint venture deal, Spark will acquire half of Connect 8 for an upfront cash payment and an agreed level of annual construction spend while Vocus will also put up an agreed level of annual construction spent to the joint venture. The amounts weren’t disclosed. After an initial start up period, Connect 8 is expected to have an annual committed revenue pipeline of between $15 million and $17 million and will continue to build fibre and telecommunications assets for Vocus, Spark New Zealand and other New Zealand clients, Vocus said in a statement to the ASX today. Spark chief operating officer David Havercroft said the joint venture puts Spark in an even better position to help New Zealand businesses navigate a digital future in which fibre will become increasingly important. “Spark New Zealand already has 8000 kilometres of fibre cable in New Zealand. This, paired with the Optical Transmission Network (OTN), the core data transport network, onnects more cities, exchanges and data centres than any other network provider in the country, ” he said. The ASX listed Vocus describes itself as the leading independent provider of wholesale and telecommunication services in Australia and New Zealand, providing internet, fibre and ethernet, and data centre services. Vocus chief executive James Spencely said the joint venture and its committed pipeline will help smooth out earnings volatility from its construction division. The Vocus New Zealand construction division was acquired as part of its $115 million purchase last year of fibre line provider FX Networks, which owns a national 4132 kilometre inter city fibre internet network and had annual revenue of more than $50 million […]

Local government funding review short on new ideas

The Funding Review report issued by Local Government New Zealand today offers few new insights on how councils should pay for the infrastructure needs of the communities they represent and exist for, the Employers and Manufacturers Association. “A much wider range of revenue raising measures and techniques are used by local councils throughout the world than are mentioned in this report,” said Peter Atkinson, an executive researcher for the EMA. “The report’s authors appear either unaware of them or have not considered how they might apply in New Zealand,” he said. “None of the measures discussed would seem able to address for example, the large deficit facing the Auckland Council required to pay for needed transport infrastructure. “EMA has long stated that local government is at its best when it sticks to the core business of providing local roads, managing water supply and waste water, the management of community services and providing libraries and parks. “In considering council plans we often refer to the 2007 report prepared by David Shand. The present report would have been improved by a close analysis of it as no discernible advances toward best practice have been made. “Yet some funding challenges would disappear if councils adopted more of the Shand recommendations. Shand recommended rates be set on the basis of capital value, that differentials be abolished, and the removal of the 30 per cent cap on uniform annual general charges (UAGC). “We disagree with the report’s suggesting that local councils should have the ability to levy local income taxes, though there may be some merit in the suggestion that local authorities should have the ability to levy a small royalty on minerals extracted in their region.”

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