Business News

The Policy Targets Agreement (PTA) with the newly appointed Reserve Bank Governor Graeme Wheeler must have some serious revision say the New Zealand Manufacturers and Exporters Association (NZMEA). Wheeler was named as the Governor to replace Alan Bollard on Tuesday and will sign a new PTA with the Minister of Finance before taking over from Alan Bollard. NZMEA Chief Executive John Walley says, “The appointment of a candidate from outside of the Reserve Bank is a good sign as there seems to be a culture of support for the status quo at the Bank, despite overwhelming evidence that it is not in New Zealand’s best interests.” “Mr Wheeler and Bill English should be guided by the International Monetary Fund (IMF) which has described strict inflation targeting as ‘not optimal’ and said that ‘the consequences of adverse exchange rate movements have to be taken into account’ for small trade focused economies.” “Our Government and its officials still claim that we are following ‘best practice’ with our inflation targeting monetary policy but since the financial crisis best practice has changed. A more pragmatic approach where other prices in the economy such as the exchange rate are considered are now favoured and alternatives to an inflation target have been suggested.” A number of institutions have changed their opinion since the economic crisis: • IMF, Rethinking Macroeconomic Policy. • Swiss National Bank, Swiss National Bank sets minimum exchange rate. • Jeffrey Frankel, a professor at Harvard University’s Kennedy School of Government: The Death of Inflation Targeting. “The IMF has recently estimated that a 15 percent drop in the exchange rate would be needed to balance our current account,” says Mr Walley. “This should be a target for the Government and the Reserve Bank.” “In the longer term a there needs to be a more […]

Christchurch businesses are struggling with a cash flow crisis that threatens to cripple the region’s efforts to rebuild according to Lock Finance, which has specialised in business financing since 1889 and has a significant number of Canterbury clients. Lock Finance CEO Simon Thompson, who is also a part time consultant to the World Bank, explains: `Almost a third of our clients are based in the Canterbury region and a significant challenge for many of them is balancing the payments that need to go out with the timing of the work coming in. “The time taken by the EQC to approve work, together with the policies adopted by some major contractors mean that there is sometimes a gap of six months or more between money going out on wages, materials and running costs, and the money coming in for work completed.’ Business Mentors New Zealand Canterbury Coordinator Jill Taiaroa agrees that the mentoring service is seeing cash flow related distress among SMEs in the region: `There is a delay running through the whole system that is causing the problems. There are so many people in the chain, from the EQC, the larger players and then a lot of sub contractors, that there are inevitable long delays which impact on smaller companies’ cash flow making it very difficult for them to retain staff until the work is approved.’ Simon Thompson visits the region at least once a month and reports that on his last trip he met one client with a drainage contracting business who had a lot of work being processed by EQC but was unable to use those prospects as business finance equity and consequently was losing his best workers to projects in Queensland. Another client has 4,000 driveways and 300 swimming pools to repair; work which will keep his […]

The selection of former World Bank managing director Graeme Wheeler as the new Reserve Bank governor could be an opportunity for the bank to take a new direction on interest rates, as research by MYOB suggests even small cuts in the official cash rate could have a significant impact on New Zealand’s businesses. According to MYOB’s latest monthly panel interviews with business owners, 50% of businesses are affected either directly or indirectly by home loan rates. And a significant 79% of business owners said a fall in standard home loan interest rates of just 1% or less would have a positive impact on their business. “Graeme Wheeler will be an excellent new governor. By picking someone from outside the Reserve Bank, there is a real opportunity for a new vision and a new approach, and MYOB’s research shows that even a minor course change on interest rates would go a long way towards stimulating the economy and making life easier for New Zealand’s small businesses,” said Julian Smith. 14% of businesses interviewed by MYOB said they are directly affected by the cost of home loan interest rates as they had a mortgage themselves. 17% of respondents said they are indirectly affected because their customers or clients had a home loan. A further 20% said they are affected both directly and indirectly. Furthermore, 25% of small business owners use their personal home loan to finance their business. 35% of small businesses are financed through a business loan and a further 22% are financed through personal loans. “As this research shows, interest rates are very important for small business, as many business owners finance their business through loans, or rely on customers who are themselves supporting a mortgage. Even a small change to the OCR would go a long way towards stimulating […]

PIC CAP: Minister Steven Joyce views the Technopak’s world-first packing technology inside the NZ Food Innovation Waikato plant; Dave Shute, Plant Manager (L) providing an explanation. Hamilton, New Zealand – Economic Development and Science and Innovation Minister, Steven Joyce, joined 100 invited guests today at the Waikato Innovation Park to officially open its new spray dryer facility, New Zealand Food Innovation Waikato. The $11 million product development spray dryer facility is the only one of its type in New Zealand and is the Waikato component of the Government-sponsored New Zealand Food Innovation Network. Finance for the spray dryer came from Innovation Waikato Ltd debt and a Government grant of $3.95 million. Its capacity is one-half tonne/hour, making it one of the smallest commercial spray dryers in the world. Construction of the facility was completed in late April 2012 and took just eight months to take it from a bare paddock to a fully operational plant. Commissioning and testing was completed over the past month, with the first fresh milk converted to powder on 25 May. Fifteen Waikato companies have contributed to the project.

Forty years after starting out in business, self-made man Sir Ken Stevens has won the inaugural award, Exporters Champion for Exemplary Services to Export, at the Air New Zealand Cargo ExportNZ Auckland Awards 2012. Award winners were announced Friday night at a gala dinner at the Langham Auckland hotel. A ‘this is your life’ presentation acknowledged Sir Ken from childhood through to starting out in business in his late 20s with two small children, and growing it – Glidepath – forward to today’s global success. Sir Ken was New Zealand 2007 Export Champion and knighted the following year for services to export. Since then he has led trade missions to China, Vietnam and Malaysia, and addressed countless occasions to encourage businesses and inspire students. Si Ken is a real Kiwi bloke who loves his family, rugby, yachting and beer. The award acknowledges Sir Ken’s ongoing service to New Zealand business from exporters themselves, who know how hard a life of business travel can be on families, and how resilient and generous Ken himself always is. The company winners were: 1) Supreme Award and Winner of the Westpac Exporter of the Year Award 2012 (Total sales over $35 million) (The Supreme Award winner is selected by all the award judges from the winners of each category. The Westpac Exporter of the Year is a company recognised for excellence in building extraordinary and sustainable export growth.) Temperzone Ltd Temperzone Ltd designs and manufactures air conditioning systems for commercial, industrial and residential applications. The other finalists in this category were: Jack links NZ Ltd manufactures beef snacks that are a good source of protein and iron, with fewer calories, fat and carbs per serving than most other snacks. GMP Pharmaceuticals Ltd manufactures natural health products of Australia and New Zealand origin such as […]

A widening current account deficit needs Government policy attention say the New Zealand Manufacturers and Exporters Association (NZMEA). Statistics New Zealand released their Balance of Payments and International Investment Position for the March quarter this morning showing a current account deficit of 4.8 percent of GDP, up from 3.7 percent last year, and a larger deficit than was predicted. NZMEA Chief Executive John Walley says, “Addressing the current account deficit is much more important than addressing the Government deficit, and with Government’s bailing out financial institutions there is little to distinguish private debt from public debt in any case.” “Reducing the current account deficit is essentially about increasing export incomes and encouraging local savings so that our assets remain in our hands – much of the current account deficit comes from repatriated profits from foreign owned companies based in New Zealand.” “The Government must do its bit to encourage the rebalance. On the export earnings side a lower and more stable exchange rate is the key issue and making Kiwisaver compulsory would help on the savings side.” “The International Monetary Fund has estimated that a 15 percent drop in the exchange rate would be needed to balance the current account. The Trade Weighted Index is currently hovering around 70 – a 15 percent drop would take it to a far more acceptable level below 60. Government policy has to do more than simply go ignoring this requirement.”  

Mexico’s bid to enter TPP negotiations demonstrates the power of multilateral trade deals, says ExportNZ. The Trans Pacific Partnership started life as a relatively small agreement between four disparate countries – Brunei, Chile, Singapore and New Zealand – but is now the subject of negotiations with several major Pacific economies. ExportNZ Executive Director Catherine Beard says the decision by those initial four countries to work towards an independent trade deal, because of the lack of progress of the Doha world trade negotiations, was a good call. “The TPP has now attracted Mexico, the world’s 14th largest economy, into the negotiations. “Significantly, this move has occurred with the full support of the US, another member of the TPP negotiations, and a country whose full membership of TPP would have major benefits for New Zealand. “Full credit to New Zealand’s trade negotiators for this milestone in their work on behalf of our exporters and economy,” Ms Beard said.      

For the first time in 20 years the government is putting money into a wide-ranging review of New Zealand’s workplace health and safety system and Auckland businesses are being invited to have their say about it. The cost of workplace injuries in New Zealand is reported at $1 billion per year. “The changes coming out of this review will impact every business,” said Paul Jarvie, Health and Safety Manager for the Employers & Manufacturers Association. “A lot has changed in the last two decades – safety issues are quite different to what they were in the 1980’s,” Mr Jarvie said. “The review will be wide ranging and significant given the recent investigations into the Pike River disaster and the Christchurch earthquake. “Labour Minister Kate Wilkinson has said she wants to see workplace accidents reduced by 25 per cent by 2020. EMA wants to know what Auckland business thinks. “The review will cover the current health and safety legislation, incentives to operate safe workplaces, getting employees more engaged with safety, and enforcement options. “We want to see a shift in emphasis so safety inspectors can partner with businesses to support and encourage their compliance in the first instance. “So we support the role of the modern regulator as practiced in Australia, Japan and other countries where workplace safety inspectors are empowered to advise and assist businesses meet their obligations, and help them create a safe workplace culture while retaining their powers to investigate and police.”  

Phil O’Reilly Increased levels of new business/orders is assisting service sector expansion, according to the latest BNZ – BusinessNZ Performance of Services Index (PSI). The PSI for May was 56.8. This was almost identical to the April result (56.7) and the highest result for any month since November 2011. A PSI reading above 50.0 indicates that the service sector is generally expanding; below 50.0 that it is declining. The 2012 May result was also the second highest value recorded for that month since the survey began in April 2007. BusinessNZ chief executive Phil O’Reilly said that the solid and consistent result for May was pleasing to see, as it was built on key elements of the Index remaining strong. “Like last month, the key indices of new business/orders and activity/sales experienced a swing upwards, with the former at its highest point since November 2011. It is also the first time since 2007 that new orders/business have posted consecutive post-60 values. On top of this, the Northern region has gradually seen an improvement in overall activity levels, which is important in building momentum. “If we also take into account the improved manufacturing result via the PMI, combined, the sectors display a level of activity that is certainly encouraging heading towards the middle of the year.” BNZ senior economist Craig Ebert compared the impressive progress of New Zealand’s PSI to that of the USA, Europe, Australia and China. “New Zealand’s PSI is fast becoming something of a leading light on the global stage. It has overtaken America’s PSI, and unsurprisingly it’s far stronger than the Euro-zone’s, but who would have thought it would be far stronger than Australia’s? It is also fast catching up with the always sturdy, but recently slowed, Chinese PSI. “Add this to the much-recovered PMI and one gets […]

Manufacturing activity bounced back from April’s dip to show strong expansion for the current month, according to the latest BNZ – BusinessNZ Performance of Manufacturing Index (PMI). The seasonally adjusted PMI for May was 55.7 (a PMI reading above 50.0 indicates that manufacturing is generally expanding; below 50.0 that it is declining). This is 7.5 points up from April and is the highest level of activity since February 2012. For the first five months of 2012 the PMI has averaged 53.3, compared with 52.5 for the corresponding time period in 2011. BusinessNZ’s executive director for manufacturing Catherine Beard said the improvement in manufacturing activity was built on some crucial upswings from the previous month. “The key sub-indices of production and new orders showed a significant upswing from April, while the Northern and Canterbury/Westland regions went from decline to expansion in activity. Comments from manufacturers were also more positive, with Australia remaining a sizeable focus for export opportunities. Interestingly, a number of manufacturers could not identify a main positive influence. Instead, it was an overall steady increase in activity from various facets of their business. ‘With four of the last five months in expansion, 2012 is continuing on a better growth path than seen in recent years.” BNZ Economist Doug Steel said, “It is heartening to see a solid PMI result in May. While there are obvious risks from the European situation ahead, recent trends in the PMI suggest the manufacturing sector has made decent positive contributions to overall GDP growth in both Q1 and Q2 of 2012.” The increase in overall activity meant all five seasonally adjusted main diffusion indices also showed expansion in May. This was led by production (58.8), followed by new orders (57.3), which combined make up the greatest weight of the overall result. Employment (52.2) experienced […]