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Employers Political Update Fri 30 Mar 2001

Employers Political Update Fri 30 Mar 2001 (No. 02/01)

0.5% growth in GDP for December quarter

Today's GDP result of 0.5% for the December 2000 quarter is slightly lower than expected, given our strong agriculture results. The agricultural sector recorded 1.6% growth for the quarter, the highest level in 14 years, led by the dairy industry with production up 5.7%. Transport and communication services increased 1.8%, led by road freight, road passenger and water transport, which rose on the back of agriculture increases. The strong agriculture result was offset by falls in construction and retail trade. Summer tourism boosted growth in value added in hotels and other accommodation and the level of activity in cultural and recreational services is now the highest recorded.

Agricultural advantage will see NZ through world slowdown

The Finance Minister says NZ's place in the business cycle will help see us through the current global economic slowdown: "We are in the early phase of the business cycle, where some of the drivers, like renewal of capital stock and expansion of capacity can keep activity moving through temporary fluctuations in export or consumer demand." He says last year's drop in business and consumer confidence is likely to trim only 0.2% of GDP off the current (June) year's surplus.

Kyoto Protocol would penalise NZ industries

President Bush's change in policy on the Kyoto Protocol should make NZ think again. Under the protocol, NZ cement and steel companies would incur significant penalties, making them uncompetitive on the world scene. Nor would our forestry industry be able to gain from a carbon credit arrangement since it would only apply to forests planted after 1990. The protocol would simply represent a massive trade subsidy from those countries signed up, to those who haven't.

Improved shop trading hours across the board must follow

The Shop Trading Hours Repeal Amendment Bill is confined only to garden centres, but is at least a step in the right direction. Given the limited time available for passing the proposed legislation before Easter, it's not feasible to seek extensions to apply this legislation to other retailers - but the move is inevitable in the medium term. In a diverse society like New Zealand, it should be the choice of individual retailers whether or not to open on any particular day of the week, whatever the nature of that day.

Insider trading changes might not catch big villains

The Government has again described the NZ market as "wild west" in announcing proposed changes to our insider trading regime. Acting Commerce Minister Trevor Mallard said the Stock Exchange would be required to inform the Securities Commission of breaches of securities law, and that the Commission would be adequately funded to pursue them. But ACT justice spokesman Stephen Franks says that's unlikely to happen, since "the Serious Fraud Office, the Police and the Commerce Commission all have to chase cheap and easy little villains because they can't match the pockets of the big villains." He says civil penalties are more easily prosecuted than criminal ones, and the Government is just trying to look tough without coming to grips with the real problems.

Multilateral, not bilateral, trade wanted

Concern at the global economic downturn and a return to bilateralism has prompted a call for another WTO trade round before the end of this year. A meeting of 19 nations including NZ, co-hosted by Japan and the EU, agreed they were all better prepared for another round than at the same point before the Seattle meeting, and with a "more practical" focus.

GATT '95 helped NZ dairy industry

Meanwhile, Dairy Board CEO Warren Larsen says the 1995 General Agreement on Tariffs and Trade positively influenced the Board's payout forecast. He said the 1995 agreement, which limited the subsidised export of dairy products by Europe and the US, started to bring agriculture under the discipline of the WTO, and had "a more profound impact on the international dairy supply-demand balance than is widely appreciated."

There's more than one way to get more science graduates

Criticism of the Government's plan to 'steer' the direction of courses at tertiary institutions appears to be growing, with Canterbury's Vice Chancellor saying the sector doesn't need either central steering or central locking. If the purpose of the exercise is to get more science and technology graduates, surely it would be simpler to ease the fees burden on those students, rather than having government intervention in tertiary institution management.

Bush moves rile unions

The US union movement is planning a "massive mobilization" for the 2002 US elections, in response to actions by President Bush who has recently: - signed legislation to repeal union-backed workplace safety rules - intervened to stop a strike at Northwest Airlines - ended the preference that unionised companies had in federally-financed building projects - issued an order to make it harder for unions to use membership dues for political activities But Bush's actions have drawn praise from the US Chamber of Commerce: "All that Bush has done so far is really level the playing field back to where it was when Clinton took office."

NZ management skills defended

The Business Roundtable's Roger Kerr this week leapt to the defence of Kiwi management, following articles in the Herald and Unlimited which said large-scale destruction of shareholder wealth was due to the poor quality of NZ business management. The problem is usually in the constraints and incentives of the policy environment, Kerr argues - taxes, tariffs, regulations and compliance costs. The large majority of companies (76% in 1998 and 80% in 1999) create value, while losses in value are concentrated by firm and by sector. "Business is about risk-taking which involves profits and losses; the fact that losses occur is not an indictment of business or business people. An absence of losses would almost certainly mean too little risk-taking and innovation was occurring."

Opposition says unemployment figures don't tell the whole story

The current 5.6% rate of unemployment is the lowest since 1988, but Bill English says it may not be due just to growth in employment. "Employment growth is a factor, but so is the continuing exodus of people from these shores." He says the country had a net migration loss of 13,000 people last year, and the unemployment rate can fall simply from the same number of people being employed in a shrinking labour market. The Libertarianz party also points out that while there's been an increase in full-time employment, actual hours worked are down by 2% since December 2000.

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