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.Business Update 25 June 2004

Friday 25 June 2004 Issue 109

ACTION ON HOLIDAYS ACT Thanks to those who volunteered information on problems caused by the Holidays Act in engineering, manufacturing, processing, plastics, boat building, communications, transport, packaging, horticulture, restaurants, rest homes, hospitals and media companies. These included many examples of increases in sick leave since 1 April, along with increased payroll and compliance costs. The information was forwarded to Paul Swain’s officials today. Contact

PRESCHOOL POLICY MAKES NO SENSE The Government’s recent intervention into preschool funding makes no sense. It allows free attendance by some children in community preschools (the ones not run by private enterprise), but will skew the childcare market and impact on the workforce. The children to be subsidised are only around 30% of all kids at pre-school (most go to privately-run preschools or are outside the age limits for the subsidy). In areas where there are no community preschools, no one will benefit.

In other areas the policy will lead to an exodus from private centres to community ones, and there won’t be enough room in the community based ones to cope. This exodus will harm the viability of private sector preschools and could result in private preschools going out of business and working parents losing services and choice. Contact

WHAT’S HAPPENED SINCE APRIL Here’s some of what’s been happening since the Holidays Act came into force on 1 April: “The payment for public holidays and sick leave at the relevant daily rate has resulted in a 1% increase in our annual payroll cost. Every public holiday is now costing us an extra $9k.” “We have definitely had an increase in sick days: Mar 538.50 hours Apr 531.23 hours May 1119.38 hours!”

“Employee rostered to work on Easter Monday called in saying she was too drunk to come to work. Full marks for honesty, but according to the Labour Department she gets time and a half for this selfinflicted sick day.”

FREE TRADE WITH CHINA? Opinions are sought on a possible free trade agreement with China. The benefits would include access by NZ exporters to a massive and rapidly growing market. Drawbacks would include greater exposure to competition from cheap Chinese imports, particularly textiles, clothing and footwear. If negotiations proceed and then succeed it will mean that NZ is likely to be the first developed country to conclude an FTA with China. Contact

“There appears to be a lot more instances of single day absences. The general feeling I pick up is ”‘if you have the sick leave available you can have the day”. It has resulted in us being a lot less accommodating in our advancing additional sick leave and that is a real bugger for those that genuinely need it.” “Extra costs for public holidays alone is $90,000 a year”

NO NEW JOBS IN 50 YEARS A graphic example of the danger of high taxes came out of Sweden this week – the Ratio Institute estimated there’s been no net new jobs created in the private sector in Sweden in the last 50 years. Taxes in Sweden make up over 50% of GDP because of its generous welfare system. The high tax rate is causing the loss of industry and jobs to other countries, which over time is expected to lead to the need to cut welfare spending.

MAKE PARENTAL LEAVE A WELFARE BENEFIT Submissions have now closed on a Bill to increase taxfunded parental leave payments to 14 weeks (Parental Leave & Employment Protection Amendment Bill). Business NZ’s submission says this will mean employers having to keep more jobs open, without knowing whether the employee will return to work. It would be better to pay

CANADA COULD OPT OUT OF KYOTO The Canadian opposition conservative party says it will pull out of the Kyoto Protocol. The party is currently leading the polls for next week’s general election, but will need to win enough seats to form a majority government to be able to ditch the Protocol. This is still a live issue for NZ business as the NZ Government is still firmly committed to the Protocol, meaning carbon taxes and increased costs for many businesses. Contact

SKILLS WEBSITE The skill nz website is now in operation – for information on workplace and industry skills, check out

GROWTH STATS ECONOMIC GROWTH MORE THAN EXPECTED Economic activity grew 2.3% in the March 2004 quarter, higher than the 1.5% predicted, and the highest quarterly growth result since the Sept 1999 quarter. It followed rises of 0.7% and 1.5% for the Dec and Sept 2003 quarters. From March 2003 to March 2004 economic growth was 5%, and on an annual average basis it was 3.6%. Real gross national disposable income also rose 5.7% The March quarter increase was due to increased exports (+3.4%), consumer spending (+2.9%), residential investment (+9.8%), and business investment (+4.1%). There was strong growth in goods-producing industries (+5.1%), manufacturing (+3.8%), construction (+9.1), the services industry (+1.5%), and the primary sector, which increased 2.1%, following a fall in the Dec quarter. The strong GDP result may put pressure on the Reserve Bank to again increase interest rates if inflation pressures become evident in upcoming data releases.

VISITOR NUMBERS UP There were 132,700 short-term overseas visitors to NZ during May, up 30,000 (+29%) on May 2003. This yearly increase is higher than the large rise experienced from April 1991 to 1992 (+27%). Although the number of stay days for all visitors during May increased 8% from May 2003, the average length of stay fell from 22 to 18 days. During May 2004 there were more visitors from Australia (+9,500 or 23%), the US (+1,200 or 12%) and all Asian countries such as Japan (+5,600 or 93%) and China (+4,500 or 373%). The increase from Asia reflects the bounce-back from the negative effects of the SARS virus in 2002 and 2003.

NET MIGRATION STILL FALLING Permanent and long-term (PLT) departures exceeded arrivals by 600 during May, compared with an excess of 1,100 PLT arrivals over departures for May 2003. NZ and non-NZ citizen arrivals fell from May 2003, while departures increased for both groups. While there was a net migration gain of 24,000 for the May 2004 year, this was down 44% from the 42,500 during the May 2003 year.

NZ citizen arrivals remained unchanged over the May 2003 year in comparison with the previous year, while departures increased by 1,700. Arrivals for non-NZers decreased by 12,900 and departures rose by 4,100. There were significant net PLT inflows from the U.K (+20% to 9,700), Japan (-15.7% to 3,688) and China (-60% to 6,100). The Japan and China numbers were typical of a general reduction in net inflows from the Asian region. There were net outflows to Australia (11,900), compared with net outflows of 10,219 and 13,638 for the May 2003 and 2002 years respectively.

COUNCILS FLUSH WITH CASH, SPEND MORE Total operating revenue for NZ’s 86 local authorities was $1,170.6m for the March quarter, an increase of $33.2m (+2.9%) from the Dec 2003 quarter. Most of the increase was due to government grants and subsidies (+$10.8m) and interest revenue (+$10.6m). Total operating expenditure increased to $1,083.7m during the March 2004 quarter, up 0.8% from $1,074.8m in the Dec 2003 quarter. All expenditure items except depreciation (-$8.3m) were bigger.

Employee costs were $254.3m for the March 2004 quarter, up 0.4% on the Dec 2003 quarter. Over the March 2004 year employee costs grew $16.7m (+7%). The combined operating result was an $86.9m surplus in the March 2004 quarter, compared with a $62.6m surplus for the Dec 2003 quarter and a $59.6m surplus for the March 2003 quarter.

WHAT’S NEW on Economic survey of manufacturing Business NZ President address to ILO, Geneva ANZ-Business NZ PMI for May 2004 Skills Update In Business June 2004


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