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Parliament Moves On Electricity Price Crisis

Parliament Moves On Electricity Price Crisis

Responding to business concerns about extreme and volatile electricity prices, Parliament yesterday announced an inquiry into the NZ electricity industry, to cover:

generation company requirements to give security of supply in dry years

the workability of separating generation and retail activities

getting genuine competition with no barriers to switching suppliers

whether line company profits have been excessive

the valuation of line companies’ assets when they were corporatised in 1993 and resultant charging decisions

how asset revaluations should have been treated for the purposes of price-setting

whether further reforms are needed so lines companies get a fair return on capital and consumers are charged fair prices

While these terms of reference do not cover all issues that are troubling the industry and there is the usual potential for political considerations to dominate, it is another sign that the Government is at last treating the issue with the seriousness it deserves. Submissions are due on 22 May. Contact:


A private members bill that would give redundancy payments priority over unsecured creditors would be detrimental to business. The Status of Redundancy Payments Bill would also remove the top limit on the amount employees could recover for wages/salaries and holiday pay. This would tip the balance too far in favour of employees over other unsecured creditors. Businesses that were unsecured creditors would be moved down the priority list, making further smaller business closures likely. If you would like to contribute to Business NZ’s submission on the Bill, please contact


There would be real dangers in replacing Privy Council access with a supreme court stacked with politically appointed judges lacking in commercial expertise. Past decisions by NZ courts have shown limitations in commercial cases (e.g. overruling contractual arrangements freely entered into) - we would have been stuck with these had they not been overturned by the Privy Council. The Privy Council is a powerful protection against inconsistent decision-making in commercial cases (many NZ cases taken to the Privy Council are commercial ones). NZ’s small population means we have a relatively small pool of judges available and equipped for important commercial decisions; having recourse to the Privy Council has helped make NZ’s legal system stable and attractive for foreign investment – this should not be compromised. Moves are building to get a referendum on the issue – please vote to keep access to the Privy Council in the interests of stable, consistent commercial law. Contact:


Fiscal data released by Treasury today for the first 8 months of the 2003/03 year show a surplus of $2.8 billion - $900 million more than forecast - largely due to lower government spending and higher than expected tax revenue, especially from personal income tax and GST. This will not continue. Last week the Finance Minister suggested that more should be spent on state housing, in part to boost the economy. Most businesses would regard tax relief or investment in infrastructure as a more effective way to boost the economy and grow exports; roading infrastructure in particular is crying out for more investment. Contact:


The Land Transport Management Bill, currently before select committee, will not solve the current under-funding of roads. It will result in less money for roads, more delays and more political interference. Less money for roads means not enough passing lanes, inadequate roading to service the manufacturing, farming and forestry sectors, and continued gridlock on Spaghetti junction and the Paremata roundabout. Business suffers and safety is compromised when roading is inadequate. To find out more, check Bad news for roads on


The ‘good faith’ concept is still causing problems for employers. Yesterday the Auckland City Council lodged an appeal against a recent Employment Court ruling on PSA v Auckland City Council. The Court ruled that the City Council breached good faith by not consulting the union sooner about a consultant’s cost-cutting recommendations and said consultation had to be with a union even if union members might not be affected. The ruling also said parties to an employment agreement have to be ‘energetic’ in displaying good faith behaviour. But no definition exists of what that might mean. The judgment also gives no guidance on what constitutes a proposal, or what it means to ‘pursue’ a proposal, or when an employer should consult over a proposal. Business needs more certainty on the issue – Business Update will report on the appeal as it progresses. Contact:



There were 14 stoppages in the Dec quarter (8 full strikes, 4 partial strikes, 2 lockouts). Relevant details for Dec quarter (comparison with the Sept quarter follows in brackets): number of stoppages: 14 (11); employees involved: 2,875 (14,749); person-days of work lost: 1,922 (23,461); estimated loss of wages and salaries: $295,000 ($3.4 million). Over the Dec 2002 year, work stoppages numbered 46 (the sixth consecutive year that the number of stoppages has not exceeded 50). The 46 stoppages involved 23,309 employees and the loss of 34,398 person-days of work. Manufacturing had 14 of the 46 work stoppages; health & community services accounting had 11. Education had the largest number of individuals involved: 17,249, which was 77% of the Dec year total.


Seasonally adjusted total retail sales for Feb were up 0.9% on Dec, the fifth monthly increase in a row. Core retailing group sales were up 1.7% (excludes motor vehicles services and retailing). Eight out of the 15 storetypes recorded increases in seasonally adjusted sales, led by accommodation, hotels & liquor, up $40.1m (largely because of strong accommodation results), and motor vehicle services, up $19.8 million. Motor vehicle retailing was down $35.1 million. The Feb increase in seasonally adjusted sales came totally from the North Island which recorded a 1% increase in sales. South Island sales decreased 0.5%, with Canterbury falling 0.8%, and the rest of the South Island down 0.2%.


Seven consecutive monthly increases in commodity prices came to an end in March, as the ANZ world commodity price index eased 0.1% from February. Lower world prices for timber, wool, aluminium, dairy products and venison offset higher world prices for wood pulp, logs, lamb, beef, seafood and skins, however the index still remains 5.2% higher than in March 2002. The NZ dollar index also fell by 0.3% during the March month, as the NZ$ strengthened on a month-average basis against the US$ and British pound. The NZ dollar index is now 15.5% below the same time last year, and 28% below its peak in April 2001. ANZ noted that some commodities (e.g. wool and beef) had been affected by the Iraq war, while others (e.g. wood pulp) were unaffected.


Merchandise exports for Feb were valued at $2,323m, $17m lower than estimated. The $4m merchandise trade surplus was considerably lower than normal for Feb months. The 2003 Feb surplus was 0.2% of merchandise exports, compared with an average of 10% over the last decade. The provisional value of merchandise exports was $300m lower in Feb 2003 than Feb 2002, largely because of falls in dairy products (-$110m), aircraft (-$64m) and wood (-$56m). Meat and edible offal increased by $26m. Export values were lower to most countries including Japan (-$70m), Australia (-$55m) and the Republic of Korea (-$47m). Over the past few months, China has overtaken both the U.K and the Republic of Korea to become NZ's fourth largest export market.


Business and Maori want referendum on Privy Council

Bad news for roads

Good faith definition lacking

GATS offer gets it right

Manufacturing conditions remain steady

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