Business News

  Improved economic conditions have contributed to ASB recording a 27.6 percent increase in statutory net profit after tax to $568 million for the year ended 30 June 2011. For the prior year, the result was $445 million, excluding the one-off tax charge of $209 million. Commenting on the New Zealand economy and the ASB financial result, ASB’s incoming Chairman, Gavin Walker (left) says, “New Zealand is continuing along the road to recovery from the global economic downturn. Clear evidence of this is the significant reduction in ASB’s impairment charges over the year, down 42.4 percent to $72 million. Another key factor has been customers continuing to shift from fixed to floating rate loans, and the re-pricing of some new fixed rate loans has also contributed.” “ASB’s balance sheet remains strong, with a 7.1 percent growth in retail deposits to $33.7 billion and steady lending volumes. Demand for lending has definitely weakened as customers continue to choose to deleverage debt,” Mr Walker says. “On 27 May 2011, Moody’s Investor Services announced the outcome of its review of New Zealand’s four major banks, resulting in a one-notch downgrade of their long-term senior unsecured ratings to Aa3. ASB was the only bank to retain a C+ stand-alone rating for financial strength. Moody’s noted that this reflected ASB’s “stronger credit risk profile which has resulted in lower non-performing loan metrics compared to its New Zealand peers” as well as the Bank’s lower reliance on wholesale funding because of its higher proportion of customer deposits.” “Looking ahead, New Zealand’s improved export commodity prices, growing demand for limited housing stock in some regions and low interest rates are all expected to contribute to New Zealand’s steady economic recovery.”  

Make government a customer, not an investor   At a forum hosted recently by the New Zealand Computer Society in Auckland some participants talked about the role of government in fostering innovation. I was struck by the contrast between this and a lecture by visiting University of Texas professor Rob Adams the following week giving very clear and direct advice to aspiring entrepreneurs where he never mentioned government even once. The fundamental role of government, at least in a free society like ours, is to provide adequate infrastructure (UFB for instance), maintain security via police, customs, defence etcetera and ensure a social safety net is available for those unfortunate enough to be unable to look after themselves. That’s it. Everything else is up to the private sector, and if the private sector doesn’t generate wealth and jobs then there will be no tax revenue for the government to do anything. Where we get confused is between the government’s role as I have described it above, and its role as a provider of services. In many sectors the government has an extended role in that it delivers the majority of services. This is particularly true of health, one of the single largest areas of government expenditure. In health, probably 80 percent or more of services are delivered either directly by Crown corporations such as District Health Boards or supported indirectly through government subsidies and contracts. This makes the government a very important customer. This just happens to be the way we do things in this country, it’s not a universal model, and other countries do it differently – a fact we should be aware of when attempting to export our ideas. If we forget the idea that it’s the government’s role to provide corporate welfare and/or fix everything, then we can […]

Employers would support a bipartisan approach to KiwiSaver if changes are deemed necessary to increase New Zealand’s savings, the Employers & Manufacturers Association says. “Given that certainty is an important principle in any retirement policy a bipartisan approach to the scheme would be very helpful,” said David Lowe, EMA’s Employment Services Manager. “As it is we’re finding the constant fiddling with KiwiSaver by politicians is a significant cause for employer concern. “The feedback from employers, who are responsible for a large chunk of the scheme’s administration as well as paying in employer contributions, is that changes are disruptive and come at a cost to business. “Plus, the feedback from employees who have not joined KiwiSaver suggests the policy chopping and changing is a factor in putting them off joining the scheme.”  

Picture: Wood pellet plant   A major highway scheme and a world-first geothermal steam separation system are among Bay of Plenty finalists in the Innovate NZ Awards of Excellence 2011. Organised by the Association of Consulting Engineers NZ (ACENZ), the Awards recognise innovation in consulting engineering both in the structures or processes developed and in the means of providing engineering services to the client. Sinclair Knight Merz features for two BoP projects – for the many innovations used in the East Taupo Arterial (ETA) project, the 16.4 kilometre state highway bypass to reduce heavy vehicle traffic through Taupo, and for the Geothermal Steam Separation System at the $430m Nga Awa Purua power station at Rotokawa, Taupo. Innovative measures on the ETA project, once of the largest road schemes ever completed in the central North Island, included a steel network arch bridge over the Waikato River which reduced impacts on the river and addressed iwi concerns about placement of piers in the waterway. SKM was engineering designer for the Nga Awa Purua project, the largest single shaft geothermal steam separation system in the world, which provides enough electricity to power 140,000 homes. Holmes Fire & Safety worked on the new NatureÍs Flame Taupo Pellet Manufacturing Facility project at Aratiatia Industrial Park north east of Taupo. The company, established an internationally credible risk review and determined mitigation options for the major renewable energy project. Aurecon came up with a solution for a dynamic Flow Remediation in High Demand Wastewater Manhole project which was part of an overall sewer rejuvenation for Tauranga City Council. The project involved improving the flow within a 30-year-old existing high-demand wastewater manhole located immediately downstream of a discharge rising main from one of TaurangaÍs major pump stations.            

There is significant potential to improve the share of work that New Zealand firms win from major supply chains and the economic rewards for both the companies involved and the local economy are significant, according to a recently released report commissioned by the New Zealand Trade and Enterprise’s Industry Capability Network. According to the report, Australian experience indicates that there is the potential to boost the revenue share for New Zealand by up to $170 million for every $1 billion spent on major projects. Catherine Beard, Executive Director of Manufacturing for BusinessNZ says it is very important that New Zealand companies start winning a bigger share of large government, local government and SOE tenders, based on their merits. “In order to grow bigger companies in New Zealand that are more capable of entering into export markets, they need to get a fair crack at the larger local projects, which are typically a government spend. Too often we see an over-emphasis on price versus quality resulting in poor procurement results, requiring expensive remedial work being carried out. “We would like to see a renewed emphasis on “whole of life” procurement from government, which takes into account price, quality, durability, servicing and local industry capability building.” The report for the Industry Capability Network surveyed the local and international supply chain scene, and found that while some leading New Zealand companies can compete effectively in the major supply chain market, there is scope for more companies to win this sort of work and develop these relationships. Paul Linton, Director ICN says that the report indicates that procurement into the local market across a range of sectors is still vitally important for New Zealand companies. “The ICN continues to work hard to help buyers find competitive local suppliers for large projects and to help […]

BusinessNZ has released a report exposing reasons for exercising caution in making assessments about the relative stringency of Australia’s carbon pricing policy versus the New Zealand ETS. The report, prepared for BusinessNZ by Frazer Lindstrom and Castalia, examines Australia’s carbon pricing policy and what it means for NZ business. BusinessNZ Chief Executive Phil O’Reilly says the Australian scheme announcement is welcome. However, there’s a significant amount of water to go under the bridge before any changes are made to the New Zealand scheme because of the Australian proposals. “The report is an initial high level assessment that highlights some important issues to be considered when comparing the two schemes. “Let’s take time before jumping to conclusions based on headline carbon prices.”  

The herd instinct among forecasters makes sheep look like independent thinkers. -Edgar R. Fiedler  

Good news for the manufacturing sector is the timely indicator from the BNZ Business New Zealand performance of manufacturing index that manufacturing is expanding and actually stronger in May and June than it has been since June 2010. Manufacturing accounted for half the March quarter’s jump in GDP rising 3.6 per cent, on top of a 3.4 per cent increase in the December 2010 quarter. So it’s good to know that all industrious, creative, hard working producers of quality products are able to see the rise and potential for further growth in their markets. We’re extremely pleased to bring you in this issue the first of three chats with Sir Paul Callaghan (pictured left), who needs no introduction. In the first chat Sir Paul covers, How and Why we have got to Where we are now (Page 12). This is a monthly feature, where leading manufacturers and thinkers plan and project this country’s way back to manufacturing leadership through innovation, ingenuity, customer service and the use of technology. You can read (Page 9) how Waikato has edged into second place in New Zealand’s economic growth stakes behind Auckland being particularly strong in consumer confidence with employment and population growth encouraging spending in the region. The other good news, of course, for Waikato can be read about in our (Page 1) article on the North Island Grid Update Project which will employ up to 400 people by the end of the year. Some Christchurch companies have relocated and we will continue to bring their new details to you when they become available. Nothing like a strong and vibrant business community in that part of the Mainland.  

PIC CAP Sargon Elias (left) GM Velocity Trade Limited with Laura Dolphin, marketing executive, in their Auckland CBD online facility. If you are one of those people who ‘just know’ that the bank will always give you the best foreign exchange rate when you import machinery or are sending off an exhibition stand to an international tradeshow, prepare to be disappointed.That’s the claim of Sargon Elias, GM of Velocity Trade, and someone who has done his time in the foreign exchange market internationally and in New Zealand. And if you think he is shaving a margin and making a lot of noise, how about this for a statement to make you think again: ‘If your company has hired someone from the UK and they are selling a GBP400, 000 home (an average price), you can tell them the difference between going via their bank or using our services will be that they can buy a fairly decent second-hand car when they get here with the savings they’ve made.’ That got your attention? Velocity Trade Limited is a New Zealand-based foreign exchange company, FMA approved, part of Velocity Trade International – originally founded in Canada in 2007 – with offices in Toronto, London, New York, Auckland, Sydney and Cape Town. Their ‘secret’ or the basis of their ability to trump your local bank is they have ‘global access to wholesale interbank rates and advanced trading platforms’ with relatively miniscule overhead, according to Elias. Clients using their services get the rate at the exact moment they strike the deal, rather than a bank rate, which is fixed for some 24-hours or more. ‘Obviously, the larger the sums involved are, and the frequency thereof will dictate an even better deal for you,” says Elias, “and unlike the banks we are flexible when it […]

PHIL O’REILLY BusinessNZ and Landcare Research have partnered with the producer of the world’s most widely used sustainability reporting framework, the Global Reporting Initiative (GRI), to provide an accurate and complete sustainability reports database for New Zealand. BusinessNZ chief executive Phil O’Reilly said consumers are becoming increasingly aware of the environmental impact of products and services. “Businesses providing transparent and comparable reporting on how they manage their economic, environmental, social and governance impacts is a valuable way for them to respond to consumers’ concerns and demonstrate their commitment to sustainable development.” Landcare Research chief executive Richard Gordon says “Landcare Research’s association with BusinessNZ and the GRI is seen as a positive step towards establishing an information hub and make available timely and accurate information about sustainability reporting trends in New Zealand, whilst raising the visibility of New Zealand reporting organisations within New Zealand and internationally.” Phil O’Reilly added that as well as responding to consumer demand, businesses are themselves developing more sustainable and efficient production methods as a way of ensuring long-term profitability and viability. “Joining GRI’s global network of data providers, means we can gain a more accurate global picture of sustainability reporting, compare organisational performance over time, and measure that performance with respect to laws, norms, standards and voluntary initiatives. “This new partnership means we can also contribute to the GRI Framework’s continuous improvement and application worldwide.” The Framework is developed through a consensus-seeking, multi-stakeholder process, with participants drawn from global business, civil society, labour, academic and professional institutions. Landcare Research will carry out the data collection about reports published in New Zealand, and this will allow BusinessNZ and GRI to maintain and publish a complete and accurate database for New Zealand.