Business News

-Dan Taylor -Trade Commissioner, Melbourne With a reputation for innovation, niche solutions and a strong results focus, New Zealand manufacturers enjoy a solid reputation in Australia. We also have the advantage of geography, language and legal systems, but New Zealand companies can’t be complacent, and still need to be smart operators to have the best chance of success across the Tasman. For companies that are smart and focussed, the attraction is clear. As well as being the only market of scale where we have geographic advantage, Australia remains New Zealand’s premier trade partner. The numbers are compelling – 23 per cent of our exports end up in the Australian market, representing NZ$10 billion annually. A quick look at the enormous breadth of the exported goods and services suggests that for almost anything New Zealand has to offer, there is a home in Australia. Australia’s recent economic success has been underpinned by a booming resources sector, and while prices have come down from their record highs, there is still plenty of upside. The once in a generation opportunities provided to New Zealand manufacturing businesses by the resources and mining boom remain, so long as companies focus on their core capabilities and are willing to put in the effort. WhatÕs particularly interesting from a manufacturing perspective is that as these mining and resources projects mature, they are moving from a construction focus to a focus on efficiency and productivity – an area where New Zealand manufacturers are well placed to take advantage of the opportunities. Investment into the sector is still strong, with $A260 billion of capital expenditure committed over the next 2 – 3 years, while export volumes are expected to triple from their 2001 levels by 2020. This drive for efficiency and productivity gains is also being seen in other […]

Inland Revenue’s latest tax tightening proposals will hit smaller businesses the hardest with extra compliance costs, the Employers and Manufacturers Association says. “The impact of the new taxes on car parks along with the proposal to tax the personal use of mobile phones and laptops will aggravate compliance costs for all businesses but especially SMEs,” said Kim Campbell, EMA’s chief executive.  “Its absolutely not worth IRD proceeding with this.  “A recent national survey or ours found 47 per cent of employers allow the personal use of smart phones, and 35 per cent allow personal use of tablets and laptops provided for business purposes. “72 per cent provide free car parks for their staff. * “Trying to tax things like this will simply see many employers ceasing to provide them. “Their employees won’t be happy, employers don’t want to do it, and the tax revenues collected will be at best miniscule.  “The cost to SMEs of tax compliance is typically three times more per person employed than for larger firms.  “IRD’s policy advisors would be much better directed to work out how New Zealand could cut its company tax rate thereby attracting more overseas companies to pay their tax here and lift their revenues rather than stalking small dividends like this. “At the same time cutting the company tax rate would boost investment. “Some of the thinking on taxing specialised work clothing, meals and accommodation allowances also needs to be reworked.”

BusinessNZ is not convinced of the merits of IRD proposals for taxing employee allowances.  The IRD proposals are aimed at making the rules easier to apply, but BusinessNZ Chief Executive Phil O’Reilly says the overall effect could be to make them more complex.  “The proposals contradict the Government’s stated goals around improving public services and removing compliance costs.  “Small businesses in particular could be faced with greater payroll and accounting costs. “There would be increased difficulties in working out expenditure in areas like protective or specialist clothing, travel accommodation, or use of communications devices. “An example is the proposal to tax any employee expenditure payment on smartphones and other communications devices, when there is mixed work and private use. “Given the increased blurring of the lines between work and personal time, the rapid changes in technology and increased nuances between ‘use’ and ‘cost’ with bundled services, this would be a backward step.  “The difficulty of determining what is work and personal time may be undermining the important principle that employees should not be taxed when there is no private benefit.  “Blunt tax changes in this area could lead to employers restricting teleworking, or even restricting the use of communications devices because of tax compliance costs. Given the need for greater use of technology and innovation, this is the opposite of what should be happening. “BusinessNZ believes the proposals should be withdrawn until formal feedback can be sought from taxpayers and interested parties.”      

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