Business News

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 […]

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.”

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 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 […]

Expansion in the manufacturing sector lifted during the last month of 2014, according to the latest BNZ – BusinessNZ Performance of Manufacturing Index (PMI). The seasonally adjusted PMI for December was 57.7 (a PMI reading above 50.0 indicates that manufacturing is generally expanding; below 50.0 that it is declining). This was 2.1 points higher than November, and a positive end to the year for the sector. BusinessNZ’s executive director for manufacturing Catherine Beard said that 2014 represented another good year for New Zealand’s manufacturing sector. “Over 2014, the PMI averaged 56.0, which was exactly the same as the average value for 2013. At the very least, the sector has remained in a position of healthy growth, with comments from respondents typically focused on ongoing and steady demand, both within New Zealand and offshore.” BNZ senior economist Doug Steel said, “The PMI results for manufacturing are consistent with broader indicators showing that the economy is in good heart. There is a lot to like with activity expanding at a solid clip with no inflation.” Despite the pick-up in expansion, four of the five seasonally adjusted main diffusion indices were in expansion during December. New orders and production (62.0 and 61.7 respectively) led the way during the last month of 2014, with both returning to post-60 point values. Deliveries (58.7) rose for the second consecutive month, while finished stocks (50.4) dropped to its lowest value since August. Employment (49.4) was in slight decline, ending a 14 month expansion streak. Three of the four regions were in expansion during December, with mixed results across the country. In the North Island, the Northern region (56.9) fell back from 62.0 in November, while the Central region (49.3) experienced contraction for the first time since August. In the South Island, the Canterbury/Westland region (60.0) experienced its […]