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Business Update: Thu, 30 Sep 2004

Thu, 30 Sep 2004

Sneaky bargaining fee slipped in......Liability hits a nerve......Holidays Act bail-out for some......Business Update


Just when you thought the Employment Relations Law Reform Bill couldn't get any worse - along came bargaining fees. Slipped in during Parliamentary recess this week was an amendment to make non-union members pay fees to unions in workplaces where there is a collective employment agreement. Individuals would be allowed to opt out but workplace influences are likely to see many employees pressured into either the collective or the fee. Employers won't be allowed to object: the amendment says disagreeing with a bargaining fee isn't a "genuine reason" not to have it. The addition of bargaining fees brings yet another layer of compulsion to this Government's employment law.

CHICKENS HOME TO ROOST A recent report shows the liability from ratifying the Kyoto Protocol is big enough to warrant it being included in the Government's financial statements. The analysis by Castalia Strategic Advisors shows NZ facing a contingent liability of $9 - $14 billion over the next 20 years. The report shows that the expectation of carbon tax revenues does not absolve the Government from disclosing the liability. Business NZ said this week that the Government should now face up to the consequences of its actions and put its Kyoto liability on its balance sheet. The report is on

LIABILITY HITS A NERVE The call for the Government to put the liability on its balance sheet seemed to hit a nerve with the Energy Minister. Mr Hodgson resorted to name-calling by press statement: "Mr Carlaw is obsessive" and "incapable of dealing with the facts". Unfortunately the Minister himself failed to address the key facts: that the Kyoto Protocol will cost billions but fail to fix climate change since the countries that produce most pollution won't join. Business NZ will continue to advocate for a more meaningful and practical response to climate change than Kyoto.

TIME RIGHT FOR A TAX CUT NZ's operating surplus is so big that it shouldn't be frittered away on more pre-election spending. The surplus is now bigger than 5% of our gross domestic product - a record amount. The size of the surplus reflects some sound policy decisions made over the past 20 years by successive governments, but this isn't Government's money - it has been collected from the pockets of all New Zealanders, and it should be returned to them, not wasted in a pre-election splurge. New taxes of all sorts imposed over the last three years, many of which fall particularly hard on business, are also boosting the Government's GST take, giving the Government a double bite at the cherry - that's why the coffers are so full. The size of the surplus makes the time right for a reduction in the tax burden, says Business NZ.

NO SPECIAL TREATMENT FOR SOME Cut taxes and simplify the tax system - that's the message from Business NZ over the IRD proposal for a tax amnesty for 'certain industries' (IRD won't say which). Business NZ says evaders shouldn't get special treatment when honest taxpayers who make a mistake get punished so heavily, and cutting taxes and complexity would take away a lot of the impetus for evading in the first place. Our tax as a percentage of GDP is now the highest of non-European OECD countries, and rising faster too - revenue from company tax has grown by 72% since 1999. The OECD average company tax is 30%, compared with our 33%.

HOLIDAYS ACT BAIL-OUT Media reports say the Treasury has promised district health boards that they'll get extra millions to help them comply with the Holidays Act. The Act's been estimated to blow out hospital costs by around $26 million a year through its ridiculous 'relevant daily pay' and other provisions. Lucky old health boards having taxpayer dollars to bail them out, but ordinary businesses will have pay - a second time - out of their own pocket.


ECONOMIC GROWTH CONTINUES AT PACE * Economic activity increased 0.9% during the June quarter, following rises of 2.1% (March 2004 quarter) and 0.9% (Dec 2003 quarter). * Economic growth in the June 2004 year was 4.4%, up from the 4.1% in the June 2003 year. Real gross national disposable income (measures the real purchasing power of national disposable income) also rose 6.0%. * In the June 2004 quarter household spending grew 0.3% and investment in residential housing grew 6.6%. Business investment was up 5.3%, led by non-residential building construction and capital spending, leading internal demand to increase 2.2%. The main drivers behind external demand were increased export volumes (+2.9%), goods up 1.6%, and services up 7.5%. * Despite recent increases that have lifted the OCR to 6.25%, another increase by the Reserve Bank is a strong possibility taking into account continued strong GDP results.

TRADE DEFICIT FOR AUGUST * The provisional value of merchandise imports for Aug 2004 was $3,085m, up 18.6% from Aug 2003. The trend for the value of merchandise imports has risen 10.2% since April 2003, though the trend slowed over the last three months, increasing only 0.6%. * The overseas merchandise trade (imports) release for Aug 2004 indicated a trade deficit of $725m, an increase on the deficit of $376m for July, and a rise from that recorded in Aug 2003 ($299m). While a trade deficit is common for August, the deficit at 30.7% of exports for Aug 2004 was higher than the deficit percentage of 14.7% averaged over the past decade. When the purchase of one large aircraft valued at more than $100m is taken out, the deficit falls to $624m, although is still 26.4% of exports. * Imports increased for 18 out of the top 25 countries NZ receives merchandise from when comparing Aug 2003 with 2004. Australia (ranked 1st in terms of import value for Aug) increased 1.8%, while the US (ranked 2nd) had a minor fall of 1.5%. China's export growth to NZ continued to grow (+17.7%). Over the Aug 2004 year the value of merchandise imports was $33,929m, 6.8% ($2,153m) higher than for the Aug 2003 year. With the estimated value of exports at $30,098m, the estimated annual trade deficit stands at $3,831m, or 12.7% of exports.

MORE VISITORS, BUT SHORTER VISISTS * The number of short-term visitor arrivals during August was up 12% on Aug 2003, reaching 152,100, a bounce back from the effects of SARS on tourist numbers in 2003. * The number of stay days for all visitors during August was down 1% on Aug 2003, and the average length of stay was down 2 days to 16 days. * Over the August 2004 year there were 2.295m visitors, up 12% on the Aug 2003 year; 51% holidaymakers and 28% visiting friends and relatives. * There were more visitor arrivals from Australia (+10,500), Japan (+2,300) and the US (+2,200). The total number of visitors from Asia for the Aug 2004 year (36,900) is still lower than that recorded for the Aug 2002 year (40,600).

NET MIGRATION STILL FALLING * Permanent and long-term (PLT) arrivals exceeded departures by 900 during Aug 2004, compared with stronger net gains of 2,200 and 3,100 PLT for the Aug 2003 and 2002 months respectively. NZ and non-NZ citizen arrivals fell in Aug 2004, while departures increased for both groups. * There was a net migration gain of 19,300 for the August 2004 year, which was down 53% from the 41,200 recorded during the August 2003 year. New Zealand citizen arrivals fell by 1,300, while departures rose by 3,600. Arrivals of Non-New Zealanders decreased by 12,500 and departures rose by 4,500. * ??????Comparing the year ended Aug 2004 with July 2003 by country there was a significant increase in net PLT inflow from the U.K only (+3% to 9,200), while most other countries displayed negative growth. China (-68.9% to 4,221), and India (-50.4% to 2,875) typified the general reduction in net inflows from Asia. There was a higher 37.1% net outflow to Australia (13,003 for the Aug 2004 year compared with a net outflow of 9,483 for the Aug 2003 year). For more information visit

WHAT'S NEW on * Big Kyoto liability looming * Serious report hits political nerve * Undemocratic process for extreme diktat * Skills training investment should not be capped * Spend-up or tax relief?


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