Business News

*By Kim Campbell Manufacturing in New Zealand has always been a vital, misunderstood and major component of our economy. Nothing seems about to change that. While various sub sectors of manufacturing might come to be labeled ‘food and beverages,’ ‘biotech’ or ‘marine,’ the new names don’t alter the activities described, which international analysts, economists and statisticians refer to as manufacturing. That’s no surprise; each of these sectors is involved in the transformation of goods to satisfy consumer and industry customer needs and they typically offer a range of back up professional consultancy and expertise to support their value proposition. For some, the value from the services they offer has overtaken sales of hardware. Manufacturing in New Zealand traditionally faces powerful forces: the need to process our commodity goods for buyers that often, ironically, want to import raw and undifferentiated. Many countries want to use the raw materials of others to keep their own populations employed. But as producers of them we should understand our own resources better than anyone else, and we stand to win the most value from them, provided we keep on investing sufficiently in the R&D that leads to a deep understanding of them. Besides the price earned from commodities is often volatile and fluctuates more than for highly transformed goods, hence contributing to our currency’s volatility. The second big challenge is we’re a long way from markets. Our products spend a long time on the water, and this together with a strong currency threatens our competitiveness. In responding to these challenges our manufacturers have adopted not one, but three routes to the future. These are first, to automate processing and handling. This has led in particular to expertise in efficient stainless steel fabrication, drying, canning, refrigeration and some extraction technology. The capability to produce a wide […]

Michael Bloomberg, mayor of New York and an astute and highly successful businessman, commented recently on the merits of a university education as against gaining trade qualifications. He says that being a tradesman is an integral and highly required skill these days because there is surety in the work to come. Be the trade electrical, building, engineering, painting or whatever…there is always a need for tradespeople. Houses are always being built and businesses have an on-going need for skilled staff to run the Factory Floor in manufacturing companies. With mounting student-loan debt and increasingly high unemployment, some people might question whether a university degree is still worth the cost. Mayor Bloomberg suggests that mediocre students skip university altogether and become plumbers instead. Of course, a university degree provides a student with a lot more options. A job as a plumber might cut down on student loans and time, but it may keep a person restricted in the longer term. In today’s economy it helps to have a wide range of skills. Even a lot of basic jobs require higher education, and while it might take more time for the job to start paying back, it will be ultimately worth it. A university education can be expected to pay back in the long term. Picking the right course to doÊis very important. With the thousands of graduates coming through our universities in New Zealand each year it is a question of where and when they can be employed to maximise the time, effort and money invested in achieving the qualification.  This is where our manufacturing companies and business leaders come into play. To create the level playing field so that available positions across the country are known. Might not be a bad idea to have a National Barometer of growth and […]

The Commerce Commission has released its draft determination of the amounts telcos will pay towards the $50 million Telecommunications Development Levy for 2011/12. The government uses the annual levy to pay for telecommunications infrastructure including the relay service for the deaf and hearing-impaired, broadband for rural areas, and improvements to the 111 emergency service. Telecommunications Commissioner Dr Stephen Gale said the levy‚”about one percent of revenue”, is paid by companies, or groups of companies, earning more than $10 million per year from operating a component of a public telecommunications network (fixed or wireless). Dr Gale said the levy allocation process was still relatively new and the draft determination explained the process used to identify ‚”qualifying liable persons”, and the methodology used in the Commission’s calculations. For the 2011/12 year, the Commission has identified 26 companies as likely to contribute. Submissions on the draft determination are due by 5 June 2013. A copy of the draft determination is available on the Commission’s website: http://www.comcom.govt.nz/tdl-2011-12/.    

The world is looking a little brighter for Kiwis compared to three or four years ago, as a flow-on effect of the consistent upswing in manufacturing and service industries, said Employers and Manufacturers Association manager of advocacy, Bruce Goldsworthy. Growth in business (even at small levels) has the positive effects of secure and increased employment and the availability of goods and services to improve people’s lives. Furthermore, this means more tax is paid, and Government services also become more certain.  Mr Goldsworthy says, “We have been cautiously watching the results of our own monthly surveys of member organisations in both manufacturing and services, as well as different bank surveys of business confidence and retail spending.  “We can now say the trend for the past six months shows the previous volatility has settled down and we see some consistent improvement. Based on these results, we can look forward to modest and continued growth. “We really need to look at how we are doing in relation to manufacturing in other parts of the world, as a major factor in our own situation is the level of global demand and supply. The most recent BNZ-BusinessNZ Performance of Manufacturing Index (PMI) statistics suggest that compared to our compatriots in other major manufacturing countries we are holding up pretty well.” For example, the PMI for April in the USA was 51.3, Japan 50.4, the Eurozone 46.8, Australia 36.7 and New Zealand 54.5.  When the Index is above 50 points it shows survey participants are in expansion, and below 50, that their orders, employment levels and other measures of activity are declining.  “Another encouraging signal from the April PMI was that the index for new orders stood at 59.4, well into positive territory,” Mr Goldsworthy says. Likewise in the April BNZ-BusinessNZ Performance of Services Index (PSI), […]

Service sector expansion for April built on the solid performance of the previous two months, according to the BNZ – BusinessNZ Performance of Services Index (PSI). The PSI for April was 56.1. This was up 0.5 points from both March and February (A PSI reading above 50.0 indicates that the service sector is generally expanding; below 50.0 that it is declining). Compared to previous April results, the 2013 value was the highest since the survey began in 2007. BusinessNZ chief executive Phil O’Reilly said that in the context of the survey’s time series, the strong April result contributed to the strongest three month result since the last quarter of 2007. “Unlike previous times where one or two months of solid expansion were followed by a drop in expansion or even contraction in the sector, the April result kicked on with stronger growth. Despite the slight dip in the number of positive comments (60% in April compared with 65% in March), there were numerous comments about the continued good weather providing on-going business activity, which helped boost the overall result.  BNZ senior economist Craig Ebert says, “The latest PSI echoes many of the features of the PMI, rocking along rather well with production and new orders leading the charge. Employment is a bit softer for now, but jobs growth is still the more general likelihood.”  The seasonally adjusted BNZ – BusinessNZ Performance of Composite Index or PCI (which combines the PMI and PSI) for April saw both options for measuring the PCI increase. The GDP-Weighted Index (56.1) increased 0.8 points from March, while the Free-Weighted Index (56.1) rose 1.5 points over the same period. This is the first time since December 2010 that both measures have produced the same value, and the highest value for the latter since May 2012. Like […]

A 52 strong trade mission flies out to Indonesia this weekend for two weeks of intensive briefings and meetings. The mission organised by Export New Zealand and the ASEAN New Zealand Combined Business Council is being led by Hon Maurice Williamson and Sir Ken Stevens, Chairman of Export New Zealand and executive chairman of Glidepath Group. Major events for the mission include a conference on New Zealand in Jakarta on Monday, May 20th, and the Minister’s opening at a Jakarta university of a photographic essay (and book) by Ans Westra – ‘The Crescent Moon’ – on Moslem life in New Zealand.  The delegation is made up of members of Export New Zealand, the ASEAN-NZBC from the food and beverage, education, geothermal and banking sectors together with a large contingent from sector group Aviation New Zealand. The mission is supported by ASB Bank and Commonwealth Bank Indonesia.  “New Zealand wants to forge much stronger relationships with Indonesia and this mission represents our commitment towards achieving that,” said Sir Ken Stevens, co-leader of the mission. “We want to show that the Prime Minister John Key’s state visit last year was not a once off event,” he said. “Collectively our mission presents a viable and formidable force to increase trade between our two countries.  “We’re looking forward to building new relationships and cementing those already in place across our diverse sectors.  “In particular we will be promoting New Zealand’s expertise in food and beverage and food safety, geothermal, education and aviation services. “The 20 strong aviation delegation is a special testament to our expertise in this field. We have world-class pilot training, airport development expertise and aircraft maintenance systems,” Sir Ken said. “The ASB Bank is delighted to support the strengthening business relationship between our two important markets,” said Mike Atkins, Head of […]

The Government confirmed today in the Budget it will push ahead with changes to the thin capitalisation rules that invest in New Zealand. The proposals were first announced for consultation in January this year. They would widen the thin capitalisation net to capture situations where a group of foreign investors “act together” to invest in New Zealand. The specific target is private equity arrangements. Revenue Minister Peter Dunne noted that further technical details still need to be worked through. Therein lies our concern. The current proposals hinge on a definition of “acting together” and the Government will need to be very careful not to cast its net too wide and discourage otherwise unrelated foreign investors from investing in New Zealand.  The initial proposals could have been implemented as early as 1 April 2014 but today the Government advised they would apply from 2015/16.  

BusinessNZ says Budget 2013 shows a careful and measured approach to spending in areas that have the potential to improve New Zealand’s competitiveness, such as a continued focus on innovation, internationalisation and skills. Chief Executive Phil O’Reilly says business will welcome the Budget’s $100 million-a-year International Growth Package, including business R&D assistance, National Science Challenges, the Marsden Fund and other support for innovation and productivity.  “Funding to attract more high-value tourism and to promote New Zealand’s international education sector are also practical measures to boost future export earnings,” Mr O’Reilly said. “Significant spending across the education and training sector is also positive, although the opportunity has been missed to make bolder reforms of interest-free student loans. “Welfare reform support announced in the Budget will help the move to assist welfare recipients into work, using an ‘investment approach’ – another improvement to the potential for greater employment. “Moves to improve the provision of social housing by extending the rent subsidy scheme to charities and non-government providers, and spending in areas to address child poverty will also invest in those in need. “ACC levy reductions announced in the Budget will be welcomed by business, however these have resulted from artificially high levies over recent years. We believe premiums should be set independently of Government to ensure they reflect insurance values rather than political considerations. “For the economy overall, the Government has made a positive move towards getting better outcomes from state assets with the announcement of a share offer for Meridian Energy this year, and is demonstrating prudent stewardship with its progress towards a balanced budget and lower debt and spending targets. “Bolder reform in the areas of retirement savings and age of eligibility for superannuation and interest-free student loans would also make a significant contribution to economic health,” Mr O’Reilly said. […]

Minister of Finance of Bill English’s fifth budget reconfirmed the Government’s track to a surplus of $75m in 2015. Hon Bill English has achieved this on the back of forecast GDP growth, rising tax revenues and continued expenditure restraint. The slower and costlier than forecast Canterbury rebuild costs have pushed the GDP growth track out further than previously expected.  Stronger forecast tax revenues has given the Government a bit more room to move in terms of additional new spending to the tune of $5.1bn over the four year forecast period.  The stronger forecast economic and fiscal position has given the Government confidence to undertake further fiscal rebalancing by reducing the stimulus applied to the economy which will free up resources for the private sector to take up the growth mantle. The Budget forecasts more Government costs to rebuild Canterbury, increasing the Government’s share of the rebuild from $13bn to $15.2bn. New initiatives include an internationally focused growth package with $100m per year additional support for tourism, R&D and international education. Health continues to consume ever larger amounts of Government expenditure with an extra $1.6bn of initiatives planned for the next four years. Overall, this Budget continues to walk the fine line between a credible path to surplus and damaging growth through the rapid withdrawal of stimulus.