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Business Update For 3 Sept 2004

Business Update For 3 Sept 2004

Holidays Bill Still Blows Out Wage Costs

The Holidays Amendment Bill does not fix the problem of relevant daily pay - the new concept that appeared for the first time in the ill-considered Holidays Act that came into force on 1 April this year. Relevant daily pay is the rate of pay that must now be used as the basis for calculating payment for holidays, sick leave etc. The trouble is, it's an inflated rate, containing all overtime, productivity incentives, attendance incentives, conditions allowances, overtime and other extra payments. By requiring relevant daily pay to be used to calculate holidays, sick leave etc (instead of ordinary pay) the Government is blowing out wage costs.

RELEVANT DAILY PAY IS A RORT By definition, an employee on holiday or sick leave is not working overtime or meeting productivity incentives or attendance incentives and is not suffering from the conditions that necessitate a conditions allowance - these only apply when the employee is actually at the workplace.

Therefore ordinary pay - which also allows certainty in budgeting - is the appropriate rate for calculating holiday and sick pay. Relevant daily pay is an expensive rort that has been imposed by a select committee more interested in appeasing unions than getting growth in the economy.

PERMANENT ANTI-ROAD BIAS? The Government's new Transport Bill could bring about a permanent anti-road bias. The Bill would codify the Government's silly 2002 "transport strategy" that puts things like walking tracks ahead of improving roads. Reliable, cost effective, and timely movement of goods and people is critical for economic growth, but the "strategy" implies that road transport in particular is a bad thing and we should reduce our use of the road system.

Turning the "strategy" into law would make it harder to improve our roading system in the interests of growth, Business NZ argues in a draft submission to the transport select committee. The Bill also removes the long established concept of 'safety at reasonable cost', an important check on transport agencies. For more information or to contribute to the submission, contact

FEARS OF 'RADICAL' SUPER PLAN News that National will oppose any attempts at compulsion in superannuation will be welcomed by many businesses. A Government working group's recommendations, described as "radical", would apparently force all large employers to sign up all employees to super schemes in a system similar to that for student loan repayments, only more complicated. Critics say the recommendations don't give any evidence to justify compulsion, and similar schemes in other countries haven't improved savings levels - moreover, docking contributions from everyone until they opted out could impose real hardship on low and medium income earners. The recommendations are now with the Government for consideration.

FASTER DEPRECIATION FOR EQUIPMENT URGED Depreciation rules should be changed to reflect changed business practices, Business NZ argues in a draft submission to Inland Revenue. Plant and equipment should have double-declining depreciation because more businesses are running 24/7 operations. This would also help to overcome the bias favouring long-lived assets (such as rental housing) over shorter term investments like plant and equipment, hastening economic growth. The submission also agrees with IRD's proposal for changing the definition of low value assets from $200 to $2,000 to curb compliance costs. For more information or to contribute to the submission, contact


A new IMF study says welfare and award-based wage setting are making some Australian states poorer than others. Regional Economic Disparities in Australia shows Australian states falling into two groups - one with higher incomes and productivity outputs (NSW, Victoria, Western Australia, the Northern territory and ACT) and the other with significantly lower incomes and outputs (Queensland, South Australia and Tasmania). The study says the low Income states have more rigid labour law and higher reliance on welfare payments, creating disincentives to work in those states.

The study is on: > SUCCESSFUL DIVERSITY AT WORK A booklet promoting workplace diversity is available from the Labour Department. It profiles businesses that have benefited from employing a diverse workforce and suggests considering migrants, older workers, people with disabilities and others to address skill shortages. Email info@dol.govt., putting "PeoplePower" in the subject line, to receive a free booklet.



* The provisional value of imports for July was $2,863m, up 2.8% from July 2003. The value trend has risen 11.1% since July 2003 following a flat period for nearly three years. * The imports release for July 2004 indicated a trade deficit of $373m, slightly smaller than June's $391m deficit, and a drop from July 2003 ($483m). The deficit at 15% of exports was higher than the average 10.5% deficit over the past 10 years. *

There was an increase in imports from 20 of the top 25 countries NZ receives merchandise from when comparing July 2003 with 2004. Australia (ranked 1st in import value for July 2003) and the US (ranked 2nd) both experienced falls, while China continued to record strong export growth to NZ (+23.2%). * Over the July 2004 year the value of imports was $33,459m, 4.2% ($1,339m) higher than for the July 2003 year. With the estimated value of exports at $30,065m, the estimated annual trade deficit stands at $3,394m, or 11.3% of exports. * Exports for July will be released on 6 Sept.


* The seasonally adjusted value of building work in the March quarter was $2,615.5m, up 6% from the Dec quarter, and up 16.5% from the June 2003 quarter. * Residential building contributed 66.2% of the total value for the March quarter, with $1,732.9m of the total going to new dwellings.

Over the March 2004 year the value of residential work increased 25.4% compared with the March 2003 year. * Non-residential building work in the March quarter was worth $882.6m, following values of $838.6m for the Dec quarter, and $873.6m for the Sept quarter. Non-residential work in the March 2004 year was up 5.4% on the March 2003 year.


* There were 2,347 building consents issued in July, compared with 2,621 in July 2003 and 2,738 in July 2002. Consents for dwelling units (excluding apartments) stood at 2,076 for July 2004. This was lower than the 2,348 recorded for July 2003, but slightly up on the 2,052 for July 2002. * Over the July 2004 year consents for 32,577 new dwelling units were issued - the highest total for a year ending July since 1974. * Despite these strong figures, the trend for the new dwelling units has been declining since Jan 2004, following a steady period of increases that began in April 2003.

* Six of the 16 regions had an increase in new dwelling units comparing July 2004 with 2003. The largest increases were in Canterbury (+34 units) and Wellington (+281 units). The Auckland region had the largest fall (-220 units). * Consents for non-residential buildings were worth $338m for July compared with $310m for July 2003 and $286m for July 2002. The values for consents in July were: office & administration buildings ($63m), education buildings ($62m) and shops, restaurants & taverns ($49m). Factories values increased by $45m for July 2004 over July 2003. Over the June 2004 year factories & industrial building consents were worth $418m compared with $347.7m for the July 2003 year. * Overall, the value of non-residential consents trended upwards in the first half of 2004. For more information see

WHAT'S NEW on * Relevant daily pay still bites * Holidays Bill still has major systemic flaw * NZ's path to growth * Thoughts on unjustified dismissals * Small firms still worst hit by compliance costs * Business NZ-KPMG Compliance Cost Survey Results


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