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Political Update Thu 21 Dec 2000 (No. 40/00)

Cautious growth in September quarter GDP figures released today show the economy returning to a level similar to the March quarter, with a 0.7 percent increase in economic activity in the September quarter, following a 1.0 percent fall in the June quarter. For the year to September, the economy grew 4.5 percent. Largest rises were in dairy production and manufacturing. Textiles, apparel, chemicals, machinery and equipment industries increased production but much of this went into inventories. Wood and paper products manufacture fell in this quarter. Increased construction of residential buildings was matched by falls in non-residential construction. Activity for finance, insurance, property and business services remained flat for a second quarter.

Economic update lowers growth projections The Government's December fiscal & economic update shows growth projections have been revised downwards. Treasury has lowered its growth outlook for 2000-01 to 2.2%, but predicts a rebound to 3.7% in 2001-02. The lower than previously projected growth scenarios will impact on the Government's fiscal position. Tax revenues are projected to be slightly down while projected expenditure is up marginally. While the current scenarios give no great cause for concern, the Government's front-end loading of expenditure in the last Budget means there's not much in the kitty for further initiatives in this term.

Tax review seeks submissions The Tax Review 2001 is seeking its first round of public submissions on tax policy issues by 16 March. The first round of consultation is on the best framework for tax policy, looking at macro issues concerning the appropriate mix of taxes (direct vs indirect), and whether NZ should adopt other types of taxes and/or remove current taxes. The first stage of review will cover broad macro issues; resultant micro tax changes will be considered in the second stage.

Super scheme goes to select committee The Government has cleared its first hurdle establishing its NZ Superannuation Fund, with the referral of the NZ Superannuation Bill to select committee. Submissions are open until 9 February. While the Fund might take the superannuation debate out of the political arena, it still has problems to work through - it reinforces a 'social welfare' view of retirement income with the establishment of universal entitlement at 65 years regardless of income or assets. It would be dangerous if Kiwis thought the establishment of the Fund meant individual responsibility for savings for retirement is no longer needed. The Fund is not a free lunch but has to be paid for out of higher taxation than would otherwise be necessary and/or reduced government expenditure on other activities and/or reduced retirement of public debt. Getting political consensus to support the Bill into legislation is likely to be more difficult than its passage to the select committee.

Conservationists get funding to go to Environment Court Businesses struggling with obstacles created by the Resource Management Act will now face better-funded opponents. A legal aid scheme to help conservationists fight business development plans has been approved as part of a $2.3m package agreed between the Government and the Green Party in the Budget. The Environmental Legal Aid scheme will provide funds to environmental groups to take cases to the Environment Court.

Biggest trade bloc support new WTO round The USA and the European Union, who have the biggest trade and investment relationship in the world, have pledged to work towards launching a new WTO round of multilateral negotiations.

Internet lessons learned The recent failure of many US dot.com companies has been a learning experience; a report by New York firm Charter Venture Capital (CVC) says it's now obvious that airline tickets can be sold online profitably, but kitty litter can't, and it's now obvious that advertising won't pay for an infinite amount of free online information. "Venture capitalists now ridicule the thought of putting money into the Business-to-Consumer sector. B-to-C is dead," says CVC. "Excuse some venture capital humor - we call it 'Back to Consulting.' " Business-to-Business sites also earn scorn: "Back to Banking," says CVC. "In general, the businesses that are most likely to succeed on the Net are those that worked before the Net."

ACC history less relevant now There's concern that some employers are asking prospective employees if they have previously made ACC claims. Putting too much weight on previous ACC claims that are unrelated to the ability to do the job could see fewer people who've been on ACC getting a job - and this could lead to the Government stopping work capacity testing altogether. This would be unfortunate for employers, because it would inevitably impact on premium levels.

Employers on Govt committees The following employer representatives have been appointed to 3 new govt advisory groups established by the Minister of Labour: Holidays Act Committee: Anne Knowles (NZ Employers' Federation), Tim Cleary (Meat Industry Association), Nigel Hillind (AMP); Transfer of Business/ Contracting Out Committee: Anne Knowles (NZEF), Jon Baxter (Ports of Auckland); Equal Employment Opportunities Committee: Robyn Leeming (NZEF), Barbara Burton (NZEF).

Microsoft case will deter others from temp practices in U.S. Microsoft will pay US$97m to settle a class action lawsuit where thousands of temporary employees accused the company of improperly denying them benefits. The claimants said they were actually permanent employees and deserved the same benefits as regular workers. The case may deter many companies from hiring workers as temps and keeping them for a year or more without providing permanent employee benefits. The Microsoft 'permatemps' said the company hired them through temp agencies to avoid paying stock options, pensions and health coverage. Microsoft started using long-term temps in the early 1990's after Internal Revenue found that it and other companies had wrongly classified as independent contractors thousands of full-time workers who should have been considered regular employees.

Opportunities under Bush High-tech, managed care and small businesses should prosper under George W. Bush's presidency, says international outplacement firm Challenger, Gray & Christmas. CG&C says defense, chemicals, energy, auto, pharmaceuticals, timber, law enforcement and tobacco industries will prosper. Bush's proposed tax cuts will benefit small businesses, and Bush is also less likely to sign more minimum wage bills into law because of the harm it would do to small business. Financial services firms will benefit if Bush can keep his promise to partially privatise Social Security, letting workers invest part of their Social Security contribution.

More long strikes in Australia Australia has recorded the most prolonged industrial disputes in more than a decade, says the Australian Bureau of Statistics. Most long disputes were in the largely publicly-funded areas of education, health and community services. Labour-governed states accounted for 76% of working days lost, with Victoria losing most. Most common causes were managerial policy and wages.

Happy Christmas to all Political Update readers!


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