Business News

The Budget has brought more helpful tweaking but still not the step change needed to turn around the economy say the New Zealand Manufacturers and Exporters Association (NZMEA). NZMEA Chief Executive John Walley says, “The more fundamental problems, such as a lack of export growth, have once again gone ignored. Generally the right sentiments are there but the action is simply too timid.” “The growth forecasts have been scaled back since last Budget but there is still some downside in the Treasury’s numbers. The Treasury’s numbers have been generally optimistic over the past few years so if growth doesn’t live up to forecasts, any surplus forecast will evaporate.” “Initiatives such as research and development spending, youth training and cracking down on tax avoidance are commendable (although research and development spending is far better directed through a tax credit rather than through a layer of bureaucrats), but are not enough on their own. The Government must also address the big picture issues such as the capital gains or land tax issue to have a really broadly based tax take.” “Overseas merchandise trade statistics released today showed exports down 17 percent on April last year – clearly what we have is not working, and we need far stronger elaborate exports to support the performance in primary sector. The increasing current account deficit projections should be keeping us all awake at night.” “In short, we really need is a mechanism to manage our exchange rate, an even more balanced tax system and incentives for productive investment,” says Mr Walley. “Unfortunately we are not really that much closer to getting those fundamentals right.”  

Today’s zero Budget will give business heart to invest and expand the economy, the Employers and Manufacturers Association says. “By reining in its spending thereby keeping in check its rising debt, the Government will give business the head room to grow the economy,” said Bruce Goldsworthy, EMA’s Acting Chief Executive. “There’s no way we can keep on borrowing the way we have been; Europe’s troubles point to what would happen if we kept down that track,” Mr Goldsworthy said. “The lesson from Europe is that Government spending need not, should not, and ultimately cannot dictate the pace of New Zealand’s economic growth. “Only business can do that. “The government’s role is to set policies that give business people the confidence to invest and employ people, which grows the economy – today’s Budget takes a sober approach to doing just that. “Particular Budget initiatives welcome by business include the setting up of the Future Investment Fund as a reservoir for the revenues from the sell down of state assets and charged with investing them in buying more government assets, especially for education and health. “The $385 million more to be invested in research, science and innovation is an important signal – the Advanced Technology Institute can’t come soon enough. “The commitment to maintaining investment in infrastructure is equally welcome. “In all, the Budget is a calculated response to today’s most difficult financial conditions that most thinking people will understand and accept.”  

Despite being presented as a ‘zero’ Budget, this year’s spending has been well focused on areas helpful for future growth, says BusinessNZ. With all new discretionary spending having to be matched by savings or tax revenues from elsewhere, Budget 2012 has nevertheless managed to reprioritise spending in a responsible manner, said BusinessNZ Chief Executive Phil O’Reilly. “Science and innovation have received significant funding this Budget, with big ticket items like the Advanced Technology Institute and the Performance Based Research Fund looking set to improve outcomes in commercial science and innovation. “New Zealand business increasingly finds competitiveness is dependent on innovation, and funding announced today for science and innovation initiatives will be well received by the business community. More funding for science and engineering tertiary courses also fits well with this. “The investment approach to welfare reform displayed in today’s Budget is highly positive, given the critical need for a more engaged, highly skilled working population. “Ongoing improvements in the tax system are also positive, although business would have liked to see more fundamental tax reductions to increase New Zealand’s international competitiveness. “The overall aim of getting the books back in the black is responsible and will be widely supported by the New Zealand community, although many would like to see a faster programme of reform in areas such as superannuation eligibility and interest free student loan expenditure. “It is to be hoped that a mandate for the decisions needed to grow the economy will emerge from the foundation of Budget 2012.”  

The forecast turnaround in the state of the nation’s accounts is highly dependent on bullish growth forecasts between now and 2016 say PwC. The other major contributor is rigorous control over crown spending. “We are surprised at the 29% increase in tax and GST forecast over the next four years” say PwC Chairman Mr John Shewan. “This is highly dependent on growth projections averaging 3% over this period.” Clearly, the Christchurch rebuild will have a significant impact on growth. It is sobering to note though that New Zealand has not managed average annual growth rates at these levels since the early 2000s, when the domestic and global economic climates were radically different. “The tax changes to limit the extent of deductions allowable against income from renting holiday homes does not go as far as expected,” says Mr Shewan. “It would have been reasonable to limit deductions to the actual days a property is rented but the Government has chosen not to go this far.” The Budget reflects impressive constraint on Government spending over the next four years. This constraint is in both core spending on departments and on transfer payments such as unemployment and domestic purpose benefits. The stand-out exception to the constraint framework is superannuation. Superannuation payments are forecast to increase by 29% over the next four years relative to an increase of just 1% in other areas. “The forecast hike in superannuation costs demonstrates the impact of the aging population,” adds Mr Shewan. “This is an elephant that will have to be addressed if we are to avoid inevitable hikes in taxes in the next few years.”  

We  hear that when the Christchurch rebuild is underway, Canterbury will be to New Zealand what Western Australia is to Australia. The place where work is available and skilled tradespeople are in high demand (as they are in other states of Australia, of course). If this is how the Christchurch rebuild is being seen then this is a golden opportunity to make the lot of workers better financially. Unless of course there will be thousands of workers still being paid the basic wage. And what is affordable? Will the workers flock into Christchurch without incentives to stay? Can their skills be rewarded for the job well done? -Doug Green  

  NASA astronaut Stephanie D. Wilson, a veteran of three space flights who has logged more than 42 days in space, will be making her next touchdown at this yearÕs eighth New Zealand International Science Festival taking place in Dunedin, from 30 June to 8 July 2012. Wilson was selected by NASA in April 1996 and, after completing two years of training and evaluation, qualified for her first flight assignment as a mission specialist. Festival director Chris Green says that having a NASA astronaut attend the 2012 festival is a “dream come true”: “At some stage of your life, you imagine what it would be like to be a NASA astronaut and travel into space. Festival attendees will be able to hear first hand from Stephanie what being an astronaut is all about Ð from the rigorous training it takes to become an astronaut to what they eat when they are on a space mission. We are really excited to secure her attendance for 2012.” In keeping with the festival theme of ‘what makes us tick?’, Stephanie Wilson will be involved in workshops for kids, a family fun quiz night, presentations in Wall Street Mall on the fourth of July (United States Independence Day) and a evening presentation open to the public. Originally from Boston, Massachusetts, Wilson completed her education at Harvard University, graduating with a Bachelor of Science degree in engineering science. She went on to gain a Master of Science in aerospace engineering from the University of Texas in 1992. Wilson was initially assigned technical duties in NASA’s Astronaut Office Space Station Operations Branch working with space station payload displays and procedures. She then served in the Astronaut Office CAPCOM Branch, working in mission control as a prime communicator with on-orbit crews. Following her work in mission control, […]

Recent events plainly demonstrate there is ample room for improving the bargaining processes leading to collective agreements, and the employment law changes announced today will go a long way towards achieving this, says David Lowe, Employment Services Manager for the Employers and Manufacturers Association. The changes will also re-instate an element of choice for employees who are not members of a union, Mr Lowe said. “Not everyone wants to belong to a union,” Mr Lowe said. “Individual employees should have the choice from the outset of starting work on whether they want to join a union; removing the mandatory 30-day union membership rule will reinstate that choice. “Employers will welcome the removal of the need to conclude a collective agreement. If the parties cannot reach an agreement they should not be bound to put the business at risk, as at present, and keep on negotiating endlessly. “The law on flexible working hours was designed to enhance or increase work place choices for employees but its effectiveness has been hindered by the bureaucracy required. “The other measures announced today will also help build confidence in the employment process and therefore help with investment and opportunities for employment.”  

The service sector in April displayed further signs of expansion, according to the BNZ – BusinessNZ Performance of Services Index (PSI). The PSI for April was 56.7. This was up 2.5 points from March 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 April 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 upwards swing in expansion for April was built on elements of the index showing some historic highs. “Both business activity and new orders – which make up the greatest proportion of the overall result – again showed healthy levels of expansion. Adding further impetus, the level of expansion for employment was only bettered by a result going back to mid-2007. Likewise, one has to go back 4-5 years to see stocks/inventories and supplier deliveries at such a high level.” BNZ Senior Economist Craig Ebert said today’s strong PSI would help in calming nerves over the weak-looking PMI of last week. “With regard to employment, the PSI and PMI are both upbeat – good news for labour markets.” The seasonally adjusted BNZ – BusinessNZ Performance of Composite Index or PCI (which combines the PMI and PSI) for April showed the two options for measuring the PCI still in positive territory, but a healthy service sector assisting in pulling up one of the measures. The GDP-Weighted Index (55.6) increased 1.1 points from March as the larger weighting of the service sector boosted the overall result. In contrast, the Free-Weighted Index (53.0) fell a further 1.8 points. All five sub-indices showed expansion in April. This was again led by new orders/business […]

Companies which accept online orders from Australia are being warned to tread carefully because they could be sued for infringing somebody else’s trademark. Intellectual property expert, Theodore Doucas of Zone IP, an intellectual property consultancy in Wellington (with an office in Sydney), says that in his experience – as a consultant and a former Assistant Commissioner of Trade Marks – a quarter of New Zealand companies that have filed their trademarks in Australia have had different objections raised by the Australian Trade Mark Registry (IP Australia). “That means up to 25 per cent of New Zealand companies which have their trademarks registered here may have their application with IP Australia fail because the mark is already taken or IP Australia do not consider it distinctive – it’s a huge and expensive problem for New Zealand companies who regard crossing the ditch as the next logical step in their expansion. “Don’t expect any favours from IP Australia. They have different case law and examination practice which they must apply.” He said it is important to remember that even a New Zealand company that is based here, but sells product in Australia over the Internet, is deemed to be trading in Australia and is at risk of falling foul of trademark laws. “There’s been talk about a single application, but it’s just that – talk. The offices don’t seem to be working together. We have had a lot of success registering trademarks in Australia, but most companies don’t think of trademarks in Australia when they’re just starting out in New Zealand. “In our experience, IP Australia is far more conservative than the New Zealand registry.” Mr Doucas said he knows of New Zealand companies that have been forced to rebrand in Australia – an expensive process. “One thing that start up companies […]

New Zealand companies need to be more active in undertaking cross-border mergers and acquisitions if we are to fully capitalise on our intellectual property, our clean-green image and the other advantages we have as a country. Martin Gray, Head of Lead Advisory for Grant Thornton New Zealand, said that New Zealand was on a par with the global average (30%) when looking at companies planning to grow through acquisition in the next three years, but below the global average (24% compared with 33%) for cross-border acquisition. “With our size, geographic isolation and intellectual property, it is imperative that we are above the global average when it comes to cross-border acquisitions. We need to be involved in thoseparts of the value chain that provide the greatest margin for the value we bring to the table. “Where is the New Zealand strategy to help our companies acquire businesses internationally so that they become more involved in this chain, thereby reaping larger profits? “For New Zealand our stars are aligned when you look at our products, our position in the market and our intellectual property in sectors experiencing strong growth,” he said. New Zealand companies seeking revenue and value growth identified three key drivers for attaining these goals: building scale (61%), accessing new geographic markets (59%) and acquiring new technology or established brands (41%). Gray has worked with a large number of New Zealand corporates on their international expansion, particularly into Asian countries. With over 25 visits to China alone he has first-hand insight into how Asian countries value New Zealand’s products and services. “Just look at how overseas companies are able to come to New Zealand and buy our companies for higher prices. Ratherthan complaining about what these companies are willing to pay, we should spend more time exploring why the price […]