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Growth Issues Make Pm Lash Out

Growth Issues Make Pm Lash Out

Last week’s Knowledge Wave forum was notable for the PM’s ‘lashing out’ at the 51% of New Zealanders (in a Herald poll) who said they were not confident that the Government had a growth strategy to get us back in the top half of the OECD. Also notable was the PM’s apparent back-down on her Government’s stated goal of 4% annual growth to achieve the OECD target – she told National Radio that achieving the target by 2010 was “totally unrealistic” and if the forum put forward recommendations to that end, they’d be “put to one side of the desk”. Not surprisingly, the forum closed without recommendations. Economic growth is NZ’s biggest issue - the PM’s response speaks volumes.


Associate Revenue Minister Paul Swain says IRD will release a discussion document on FBT in 6 months. Business NZ has called for FBT to be levied at a single rate, and for using the depreciated cost of vehicles – moves that would trim costs and compliance time for employers. Business NZ also called for employees to bear the liability for paying FBT, rather than employers – though that’s a proposal that’s also likely to be ‘put to one side of the desk’. Contact

DISMISSAL LAW WORKS AGAINST BUSINESS This year the ERA is to be reviewed, and the CTU has called for changes on dismissals, saying that the test for unjustified dismissals now favours employers. Not so. Employers still bear the burden of proof: they are deemed guilty till they can prove their innocence to an objective third party. And there’s an incentive to bring unjustified dismissal claims since it means no stand-down period for the unemployment benefit. Then there are contingency fees used by those acting on behalf of disgruntled employees – “we’ll charge a fee only if we win the case.” And the procedural hurdles an employer must jump – many substantive cases have failed because the employer missed a single procedural step. Business NZ will strongly oppose any attempts to make unjustified dismissal provisions more onerous. You can help – if you’ve been stung by an ‘unjustified dismissal’ claim in the past, please send us your story so we can use it (can be done without your name being used) in the debate over the ERA review. Contact


The Holidays Bill which gets its first reading in Parliament today is more streamlined than the current legislation, but still needs more work. The advisory panel that included Business NZ overcame many technical issues, but was not able to influence political policy decisions - so the legislation may impose more costs and penalties on employers in some areas. Providing for time and a half plus a day off for every public holiday worked by every staff member including management was a policy suggestion that would have hit employers’ pockets hard: initial estimates were an additional 1% to annual wage costs. Business NZ argued that there needed to be an opt-out clause to take account of people on salaries and composite rates. Salaries don’t usually include a daily or hourly rate, and already include a component for working on public holidays - this would make it difficult to determine time and a half. The Explanatory Note to the Bill expresses the intent that if an employee’s remuneration already incorporates an amount for working on a public holiday this will meet the obligation. But this should be expressed more clearly in the Act itself so everyone understands what is intended. The Bill will be reported back in August and set to become law on 2 December. Contact

ROADING NEEDS CASH International statistics analysed by Business NZ show New Zealand spends less on roads than most comparable countries - less than 1% of GDP, compared with Australia's 2.3% and the OECD average of around 1.3%. For a country with high population growth and low population density we don’t spend enough on roads. This hampers businesses’ ability to move freight and people's mobility, whether for work or play. The Government's Land Transport Management Bill will not help, as it will mean more money being diverted from roading to non-roading projects. As well, its onerous provisions on tolling and public-private partnerships will effectively discourage the use of alternative revenue sources. If you are concerned let your MP know! Contact

DO YOU SELL SERVICES OVERSEAS? Are you an exporter of services? (education, engineering, finance, legal, travel, transport etc). The Government is currently consulting business and other interested groups on its negotiating position for the upcoming WTO negotiations on

services (GATS) and would like to hear from businesses that are facing difficulties selling their services in overseas markets - restrictions on market access, recognition of professional qualifications, preferential treatment for domestic competitors etc. More information is available from MFAT's website ( The closing date for comments or suggestions is 28 February and they should be made to

LET’S NOT RESTRICT EDUCATION BUSINESSES Education is causing some controversy in the GATS negotiations. Some public sector organisations are concerned GATS will let the private sector compete for public funding to provide some education services. This isn’t necessarily so – the Government could still take part in GATS while placing restrictions on who gets public funding. Business NZ believes it is essential to safeguard our growing export education industry, and restrictions on provision of English-language education would not be helpful. Contact

TRANS TASMAN TAXATION IGNORES DIVIDEND STREAMING The recent agreement on Trans-Tasman triangular taxation is a step in the right direction, but won’t go far enough to stem the flow of businesses crossing the Tasman. Finance Ministers Cullen and Costello favour a ‘pro-rata allocation’ solution, but the better option was ‘dividend streaming’, where all tax paid in Australia would be available to provide imputation credits solely to Australian shareholders and all tax paid in NZ available to provide imputation credits solely to NZ shareholders – the outcome would be as if there were separate listed companies on both sides of the Tasman. Business NZ believes the inability to ‘stream’ is a significant factor in the loss of NZ firms to Australia. Contact

Growth stats

DEFICIT IN OVERSEAS MERCHANDISE TRADE Although the gap between imports and exports has closed slightly, the updated merchandise trade balance still showed a deficit of $279m for Dec (exports were $2.39b, imports were $2.67b). The deficit was 11.7% of exports, higher than usual for a Dec month. Monthly trend values show exports have now declined 8.1% over the last nine months. Over the Dec quarter the seasonally adjusted value of exports fell 3.4%, following a 5.3% drop in the Sept quarter and a 0.6% decrease in the June quarter. Overall, the value of seasonally adjusted exports has been declining since a peak in the June 2001 quarter.

RETAIL SLOWING Although seasonally adjusted retail sales for Dec were up 0.4% on Nov, sales growth trended downwards during the Dec quarter. Eight of the 15 storetypes recorded higher sales than in Nov, with the largest increases coming from appliance retailing (up 5.1%). Department stores’ sales fell 4.7%; clothing & softgoods sales fell 3.7%. Retail sales were up through the South Island, but Auckland region was the only North Island region to record higher seasonally adjusted retail sales than the previous month (+0.8%).

EXTERNAL MIGRATION Over the Dec 2002 year, there were 2.04m visitor arrivals, up 135,000 or 7% on the previous year. The largest group was Australians: 632,500, almost identical to the Dec 2001 year result. Short-term departures also increased, up 7,000 (1%) to 1.29m for the year. The ranking of visitor arrivals by country remained unchanged, though arrivals from China were up 44% to 76,500 in 2002. Over the 2002 year, permanent and long-term arrivals increased by 14,900 from the 2001 year to reach an all-time high of 96,000. In comparison, permanent and long-term departures dropped by 13,600 to 57,800 for 2002.

CAPITAL GOODS PRICE INDEX Capital goods prices rose 0.2% during the Dec quarter and 0.9% over the year, led by a 1.7% rise in the residential buildings index which was largely due to higher construction material costs; it is the largest quarterly increase in this index since the June 1996 quarter. Other contributions came from the non-residential buildings index (up 0.3%) and the land improvements index (up 0.1%). The plant, machinery and equipment index fell 0.6% during the Dec quarter, the fourth consecutive fall in this index. The biggest drop was in the computer index (down 3.9%), due to exchange rates and competition in the computer market. The special purpose machinery index also recorded a significant decrease in the Dec quarter (-1.7%). The most significant upward contribution to the plant, machinery and equipment index came from a 1% increase in the furniture index.

What’s new on Trans Tasman tax solution a step in the right direction Holidays Bill Unions go back to the past for ERA review Employers still guilty till proven innocent Compliance costs – the Great NZ 7-Day Service Co Revisited

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