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Business New Zealand Update

Business New Zealand Update

STATE PAY EQUITY WILL INCREASE PRIVATE SECTOR COSTS Business will be aghast at proposals announced yesterday to set up a state sector pay equity scheme – it will have an inevitable flow-on effect in the private sector. Arbitrary pay increases for state teachers and nurses will lead to increased pay claims in e.g. independent schools and private nursing homes for the elderly. The last time a pay equity scheme was introduced, in the last gasp of the previous Labour Government, it was quickly repealed with the change of government, being recognised as inhibiting business growth and the economy. Business NZ says the focus should instead be on equal employment opportunities for everyone regardless of sex, race or religion, and education for both employers and employees to recognise and accept the benefits of a diverse workforce. Contact

TRADE REALITIES CONFIRMED Recent speculation over difficulties with the US does not alter the fact that NZ has always been well down the queue for an FTA. The focus should now be on getting a positive outcome from the upcoming WTO round of multilateral trade negotiations and improving the CER relationship with Australia as well as continuing to work towards an FTA with the US, says Business NZ’s Simon Carlaw.

NEW ELECTRICITY COMMISSION Acting under urgency, the Government is to establish a new Crown entity, the Electricity Commission. The intention is to recruit an ‘international expert’ to chair the new body, which may be a difficult task, given the new arrangements have never been tried anywhere else. The Commission will be charged with governing the industry. The new regime includes extensive regulation-making powers with a first task of securing reserve generation capacity to insure against dry year risk. This should go some way to minimising extreme price volatility but the new arrangements do not address the need for serious long-term strategic planning regarding future energy supplies. Considerable uncertainties remain in this area, with the recent Waitangi Tribunal findings regarding oil and gas reserves introducing a further complication. Contact

OVERTURNED APPEAL COURT CASES SHOW PRIVY COUNCIL’S VALUE Cases where the Privy Council has found it necessary to overturn NZ Court of Appeal decisions are compelling reasons not to ditch the Privy Council. Recent commercial cases - including those where the Court of Appeal had been prepared to overlook an agreed contractual term - indicate the value of the Privy Council in protecting the sanctity of contract:

Clark Boyce v Mouat [1993]

Downside Nominees Ltd v First City Corporation Ltd [1993]

Applefields Ltd v NZ Apple & Pear Marketing Board [1991]

Valentines Properties Ltd v Huntco Corporation Ltd [2001]

Business NZ’s Anne Knowles told the justice select committee this week that the Privy Council continues to deliver value to the commercial community, providing an objective backstop as a court of final recourse that is dispassionate and impartial. Knowles says the proposal to jettison access to the Privy Council had profound constitutional implications and should have to pass the test of a three-quarters vote in Parliament or a general referendum. Contact

SOUTH ISLAND ROAD CONCERNS South Island mayors are the latest group to bridle at the underfunding of NZ’s roads. Business NZ is part of a consortium of business and road user groups (Get Real on Roads) incensed at the lack of funding for new road construction and concerned at the Land Transport Management Bill which would result in even more road user and petrol taxes being siphoned away from roads. This week a deputation of 14 South Island mayors called on the Transport Minister to explain why many South Island areas will get no new road construction for the next decade. It’s just one of the issues in this portfolio that are continuing to hamper business and hold back growth. All affected parties will be watching for Transfund's State Highways package due next month and can be expected to make their concerns public if there is no improvement in forecast spending. Readers of Business Update who are concerned at the safety and commercial implications of poor road expenditure are asked to send an email with the words: GET REAL ON ROADS to

EMPLOYMENT COURT NOT NECESSARY The Law Commission has called for submissions on the issue of whether a specialist employment court is needed. Business NZ has responded saying:

The role of the Employment Court was initially concerned with award and union matters and its jurisdiction covered union members only. As a result of changes in industrial law, it now covers all employees.

This has had the unfortunate effect (since the general courts are still prohibited from hearing employment–related disputes of union members) of chipping away at the High Court’s jurisdiction.

With the abolition of national awards and decline in union numbers, the Employment Court’s role has changed from union-related matters to that of appealing the decisions of lower level dispute resolution bodies.

But a specialist employment court is not the best recourse for appeal, because employment agreements are in essence contractual and a specialist employment court, by focusing on related employment issues, may be inclined read into an employment contract terms or conditions on which the parties themselves have not agreed.

With the high rate of employment dispute settlement now achieved at mediation and Employment Relations Authority levels, the case load of the Employment Court has reduced – in the first quarter of 2003 there were only 41 cases filed in Auckland, Wellington and Christchurch. This is well below the kind of critical mass of cases required to make a specialist court worthwhile.

The Employment Court should be disestablished and cases of the kind currently heard by the Employment Court should go instead to the High or District Courts, depending on the level of hearing required.



CAPITAL GOOD PRICE INDEX The capital goods price index (CGPI) fell 0.2% in the March quarter, but increased 0.3% over the year. Most significant contributor, for the second consecutive quarter, was the residential buildings index which rose 1.3%. Although four of the six subgroups recorded increases during the March quarter, a large fall (the fifth in a row) in the plant, machinery & equipment index (-1.8%) was enough for the CGPI to fall from December to March. This subgroup involves many imported items, so the higher exchange rate has depressed prices. The land improvements, non-residential buildings and ‘other-construction’ indexes rose 0.7%, 0.6% and 0.5% respectively. The transport equipment index fell 0.6%.

SHORT TERM VISITORS There were 150,400 short-terms visitor arrivals during April - 5% up on the same month in 2002. The timing of the Easter holidays may have played a part, as Easter was later (in April not March) this year. Visitor numbers over March-April were down 2,100 (less than 1%) from 2002, a contrast with March-April increases of 5-11% for the previous three years. During April 2003 there were more visitors from Australia (+13,300), the UK (+6,200) and US (+1,100). However there were fewer visitors from Asian countries, including Thailand (-3,500), Korea (-2,900), Japan (-2,300) and Taiwan (-2,100). In the year to April there were 2.069m visitor arrivals, with more visitors from all major regions. Asia had the largest increase again, up 48,800 (10.1%), with more visitors from Japan (+19,600), Korea (+17,000) and China (+16,300). Outside Asia, Australia made the largest contribution (+26,300), followed by the UK (+20,500) and US (+12,800).

LONG TERM MIGRATION During April net gains in permanent and long-term migration continued with arrivals exceeding departures by 2,200, compared with 1,700 in April 2002. The difference was due to a larger fall in permanent and long-term departures (-1,000) than in permanent and long-term arrivals (-500). By country, there were net gains from China (900) and Japan (600). Although there was a net outflow from Australia (700), this outflow continues to shrink (it was 1,300 in April 2002 and 2,000 in April 2001). In the year to April 2003 there was a net gain in migration of 42,000, nearly 50% higher than the net inflow of 28,100 migrants during the previous April year. Compared with the April 2002 year, non-NZ citizen arrivals were up 6,400 in 2003, and NZ citizen departures were down 7,100. There were significant inflows over the year from China (+15,400), the U.K (+7,700), India (+6,300) and South Africa (+2,300). While there was a 10,600 net outflow from Australia, this compares with a net outflow to Australia of 15,400 for the April 2002 year and 31,100 for the April 2001 year.

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