Business News

Manufacturing activity continues to push forward with another healthy month of expansion for August, according to the latest BNZ – BusinessNZ Performance of Manufacturing Index (PMI).  The seasonally adjusted PMI for August was 57.5 (a PMI reading above 50.0 indicates that manufacturing is generally expanding; below 50.0 that it is declining). While this was 2.0 points lower than July, compared with previous August results the 2013 value was the highest since the survey began in 2002. Also, over the last four months of 2013 the PMI has averaged a strong 57.8. BusinessNZ’s executive director for manufacturing Catherine Beard said that comments from manufacturers show a healthy and stable environment for growth at present.  “Those providing positive comments continue to focus on opportunities relating to orders and sales. At a domestic level, many of those involved in the building and construction sectors are seeing strong demand for their products, but equally various offshore customers are providing a steady stream of orders for New Zealand goods.  BNZ Economist Doug Steel said the PMI results were important, suggesting the trend in manufacturing activity remains positive following a tough second quarter, as a decline in food processing on account of drought coincided with what looks like a pause in an otherwise strong construction upswing. The PMI average in July-August 2013 is the highest 2-month average PMI reading in over 9 years. It bodes well for a bounce in manufacturing, following the disappointing Q2 results. Given the ongoing healthy levels of activity in the sector, all five seasonally adjusted main diffusion indices were again in expansion for August, which has now occurred for the last four months. New orders (60.9) led the way for August with another post-60 result. Production (58.3) experienced a slight dip in expansion levels during August, while deliveries of raw materials […]

Chief Executive, Business NZ, Phil O’Reilly, says the proposed reforms are sensible and address a key problem: the RMA is doing a poor job of delivering good decisions that appropriately consider both environmental and development factors. “We need a better decision-making framework so the environment can be protected and development can also occur. “The RMA currently gives precedence to the environment (section 6), while development (section 7) is subservient to it. “The proposed reforms would merge the principles in sections 6 and 7 so that decision makers would be required to ensure environmental and development issues were both taken into account. “The criticism has been made that merging those sections wouldn’t work, since environment and development are in conflict with each other. “This criticism is unfounded. The RMA was always meant to be able to weigh up all of the important values to reach decisions that delivered sustainable management of the environment. But we can hardly call the operation of the RMA to date a success. Let’s take this opportunity to lift our vision of sustainable management up from the minutiae to what is strategically important. “Reforming the RMA so it can actually do that job is well overdue, and it’s good it is finally being addressed. “Let’s not use changing case law as an excuse for inaction as this is a product of any legislative change. “We should improve the RMA’s principles and trust decision makers to get the balance right when considering development proposals, while appreciating that there are sound appeal processes if a good balance isn’t achieved. “Merging sections 6 and 7, along with other proposed changes to the Act, would go a long way towards improving environmental outcomes while facilitating investment and jobs,” Mr O’Reilly said.  

 The employment law changes currently before Parliament are part of the catch up process needed to reflect common practices already in place in today’s workplaces, David Lowe, Employment Services Manager for the Employers and Manufacturers Association told Parliament’s Transport Industrial Relations Select Committee today.  “The present law limiting a worker’s right to discuss flexible working arrangements to those with dependents is out of date,” Mr Lowe said. “It’s sensible that anyone can ask for flexible work hours for any reason, as proposed by one of the amendments. “Another seeks to change the current law which sets out precisely when coffee breaks can be taken. This is unworkable and openly flouted by employees and employers alike. “The law should simply require that reasonable breaks are provided then let those involved work out the details how it should apply to them. This is what happens now – the amendment is just catching up with the modern workplace.  “Industrial action, the ultimate weapon, can cause long-term issues both within the workplace and for customers. The changes proposed are welcome as they will encourage strikes to be well considered and as orderly as possible.  “Employers acknowledge and accept union bargaining is central to our employment law. But a change is needed for when, despite everyone’s best efforts, that bargaining becomes destructive. “The change proposed allows those involved to ask the court to let them take a break, cool off, then start again. We think this is a reasonable response to any situation that for any reason becomes emotionally super-charged.  “However it is absolute nonsense to suggest any of these changes will decrease wages,” Mr Lowe said.  

The Youth Guarantee and other skills training schemes are clearly getting traction so it’s great they’re being expanded and added to, says Kim Campbell, chief executive of the Employers and Manufacturers Association, commenting on the training package announced today.  “We’re much encouraged by the government focus on getting younger people either into skills training or work,” Mr Campbell said. “The expansion of these programmes broadens the suite of initiatives to help do this.  “Their success is registered in the fall in the youth unemployment rate – amongst 15 to 19 year olds it was 27.6 per cent two years ago at the end of the June quarter down to 24.1 percent this year. “That’s still far too high. Over 30,000 unemployed young people represent a massive waste, and a future liability. “Expanding these schemes is the right response, and this will also help ensure the success of them by encouraging employers to take on younger workers at every opportunity.  “It’s difficult to imagine a better way to deploy the taxpayer’s resources.”  

 New Zealand is the 18th most competitive country in the world, according to this year’s Global Competitiveness Index*.  The Index ranks countries according to their performance on factors such as innovation, market size, market efficiency, infrastructure, business sophistication and others. This year New Zealand has overtaken five countries, including Australia, to move its overall ranking to 18th place, up from 23rd place in last year’s survey. BusinessNZ Chief Executive Phil O’Reilly says this year’s results again highlight the strength and integrity of New Zealand’s institutions while pointing to the need for improvement in areas such as innovation, infrastructure, exports and bureaucracy.  “New Zealand ranks well on many issues, but the critical ones supporting innovation-driven exports are in need of improvement.  “With one of our most problematic factors being ‘an inadequately educated workforce’, the consequences for innovation are obvious. Our economy has a critical need for more relevant skills. We urgently need to see more of the right applied skills coming out from our secondary and tertiary education institutions.  “At the business level there is a great need for collaboration with higher research bodies to drive higher-value higher-technology products. With the establishment of Callaghan Innovation, we should see improved outcomes in future for business development based on science and technology.” Mr O’Reilly said better industry-university collaboration (20th ranking) and more company spending on R&D (34th ranking) would help grow the numbers of new, innovative goods and services, while the low placing (74th) for size of foreign markets indicated the scope for extending more exports to more markets. Some key findings for New Zealand:  Institutions – New Zealand was ranked 2nd place overall for strength and integrity of institutions, achieving 1st place for ethical behaviour of firms, judicial independence, absence of bribes, and absence of diversion of public funds. Other New Zealand […]

The latest New Zealand Manufacturers and Exporters Association (NZMEA) Survey of Business Conditions completed during August 2013, shows total sales in July 2013 decreased 2.62% (export sales decreased by 3.7% with domestic sales decreasing 1.74%) on July 2012. The NZMEA survey sample this month covered NZ$551m in annualised sales, with an export content of 44%. Net confidence fell to 9, down from the 13 result reported last month. The current performance index (a combination of profitability and cash flow) is at 104.7, up from 98 in June, the change index (capacity utilisation, staff levels, orders and inventories) went down to 102 from 103 in the last survey, and the forecast index (investment, sales, profitability and staff) is at 104.33, up on June’s result of 102.67. Anything less than 100 indicates a contraction. Constraints reported were 55% markets, 18% production capacity, 18% skilled staff and 9% capital. Staff numbers for July decreased year on year by 0.48%. “Sentiment and our composite indexes are generally positive; however sales and employment continue to contract year on year.” says NZMEA Chief Executive John Walley. “We are relieved to see the Reserve Bank of New Zealand (RBNZ) finally move to introduce limits on high loan to value ratio mortgages, creating more space around interest rates.” “Recent falls in the value of the New Zealand dollar (NZ$) are overdue, and RBNZ comment around interest rates in the future has taken some pressure off the currency. The NZ$ is still overvalued but any move towards a more sustainable level is welcomed by exporters; a measured realignment over time would be the preferred path for those significantly hedged.” “The expected tapering of the Federal Reserve stimulus should help the US cross rate; but a long term policy response is needed to provide better currency stability into the future.” […]

Victoria and Otago Marketing academics provide expert comment on the Fonterra crisis: Although it is good news that Fonterra received the ‘all clear’ from the Ministry for Primary Industries yesterday, a lot more needs to be done to restore New Zealand’s reputation, say academics from Victoria University of Wellington and the University of Otago. Dr Hongzhi Gao, Senior Lecturer in Marketing at Victoria Business School and Senior Research Fellow of the New Zealand Contemporary China Research Centre, says the New Zealand government and business communities still have a big job ahead to ensure the official findings filter through to the global market. “Negativity was so widely spread overseas that a proper public relations campaign needs to be planned and implemented in key dairy export markets, including China. If it is done well, the crisis may be turned into an opportunity for New Zealand’s brand,” says Dr Gao.  Associate Professor Dr John Knight, Department of Marketing, University of Otago, says Fonterra is to be congratulated for carrying out a precautionary recall. “However, Fonterra needs to ask itself, how did this fiasco evolve in the way it did? With the benefit of hindsight, what could have been done differently? “If such an event occurs in future—and obviously we hope it doesn’t— Fonterra needs to avoid causing unnecessary hysteria by only releasing accurate and verifiable information. For instance, the mention of a ‘dirty pipe’ conjured up visions of unsanitary conditions and poor manufacturing standards—visions which could do lasting damage to New Zealand’s reputation for having control standards as high as anywhere in the world.” Dr Knight suggests that at the first hint anything was wrong in March this year, an initial cautionary recall should have been carried out, notifying all channel members that products based on the contaminated whey ingredient were to be […]

By Bruce Goldsworthy, EMA, Manager of Advocacy and Manufacturing Services. The crisis in manufacturing makes grim reading, but thankfully for New Zealand its happening in Australia, not here. Unlike their counterparts across the ditch, Kiwi manufacturers are showing every sign of resilience and investor confidence. The evidence for the Australian story is most bleak in their Performance of Manufacturing Index (PMI). The Australian PMI is operated by the Australian Industry Group on the same basis as here and in every major country. For the past 25 months Australian manufacturing has been shrinking. The decline accelerated in July, with manufactured exports going down even faster than sales on their domestic market. New orders in July were at 40.5 on the PMI. The July result at 42 was down 7.6 points from a rare ‘high’ of 49.6 in June. In contrast, New Zealand’s PMI for July was a seasonally adjusted 59.5, and proving durable. For the first seven months of 2013 it averaged a healthy 56.3 expansion. Remember the farther the PMI measure is above, or below, the mid 50 point the larger the expansion or contraction occurring. The commentary on the Australian PMI is telling. A third of respondents noted extreme weakness in local demand, bad news for our exporters dependent on Australian sales. As it is Kiwi exporters to Australia are finding margins slashed due to the fall in the Australian dollar. In less than two months the currencies switched from 78 cents to 88 cents. But Australia’s manufacturers have yet to see any respite from the fall, though they expect to. Two weeks ago we read of the Business Council of Australia lamenting the drop off of big new investment projects – down 30 per cent – with one of their members, chief executive of Woodside Petroleum, Peter Coleman […]

The extent and cost of drugs affecting the workplace and work output has raised the alarm with the Employers and Manufacturers Association.  Over half of the workplaces responding to a recent EMA survey* said they have had to take disciplinary action with an employee over a drugs issue. “Nearly half of the employers (46 per cent) said they had to fire someone as a consequence of drug use,” said David Lowe, EMA’s Employment Services Manager. “In all 56 per cent reported they have had to take disciplinary action over the use of drugs. “63 per cent said drug use had resulted in a safety risk in their workplace. “The survey also found 45 per cent of employers may not be complying with current legal requirements in relation to the effects of drugs in the workplace.  “For example, randomly testing all areas of the workplace to ensure it is drug free is generally unlawful, but employers find they need to carry out such tests to maintain safety and keep a productive workplace.  “We say the drugs causing the problems are illegal, and make workplaces unsafe, and penalise productivity. “Employers taking a strict line against them are doing the right thing and its time the law was updated to support them. “Employers confirmed the effect of drug use doesn’t differentiate between work and home. “Drugs taken at home affect work and if they’re taken at work they affect home life. “Employers reported the issues being raised are not only about safety; they reported problems with such as mood swings, rudeness to colleagues and customers, poor quality work, wasted materials, and rework. “72 per cent of respondents said they believed drug use had resulted in lost productivity.  “Safe workplaces require the law to be clearer on drug use in the workplace and the […]

The Reserve Bank of New Zealand (RBNZ) has released the details on restrictions to high loan to value ratio mortgages, which will come into effect on the 1st of October. This is a positive step forward in addressing some of the issues immediately facing our economy; this and more tools will be needed, say the New Zealand Manufacturers and Exporters Association (NZMEA).  NZMEA Chief Executive John Walley says, “We are happy to see the RBNZ explicitly recognising that actions beyond interest rates are needed. This helps to avoid significant negative effects on manufacturers and exporters that are associated with increasing the OCR; increasing the cost of capital and putting further pressure on an already overvalued exchange rate.” “For a long time the export and import competing sectors have struggled with an overvalued currency, meanwhile the domestic economy and in particular the housing market is driving economic imbalance and threatening financial stability. The single interest rate lever cannot address both issues simultaneously.” “Restricting the amount of high loan to value ratio mortgages that banks can hold is an important and long needed change; low equity loans carry the highest default risk in the face a financial shock.”  “There are other interventions open to the RBNZ and more might be needed, to better balance our economy.”  “I have already had a number of calls from exporters welcoming the move, and the evident commentary against the policy from those in domestic economy, suggests the RBNZ has, at long last, started to move in the direction of a sustainable, balanced economy.”