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Molesworth & Featherston - 2 December 2003

Molesworth & Featherston

New Zealand's up-to-date business and political insight.
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2 December 2003

About Molesworth & Featherston: Molesworth & Featherston is compiled from informed business and political sources and published on Tuesdays to be New Zealand's most up-to-date business and political newsletter. For more info see FINE PRINT

This edition

In the complimentary edition this week of the only New Zealand publication to avoid leading with Lord of the Rings…Fish, employment law changes, transport, interest rate decision this week, changes to public finances, the government’s swelling coffers, Qantas launches a discount airline, a bit about the movies and review of Telecom’s Jetstream ‘service’.

The week (and month) ahead

Although there was a Cabinet meeting this week, the Prime Minister was apparently too busy trying on her new Weta Workshops cape and giving receptions to the Lord of the Rings crew to hold a post-Cabinet press conference.

Nevertheless as the chain-mail maiden flies to Nigeria for Chogm, there is a busy time ahead…the Government is clearing the decks for its summer holidays up a mountain somewhere.

Fishy stuff

Yesterday’s announcement that the moratorium on licence applications for marine farms has been extended until December 31, 2004 was the first of three in the area. Today should see the select committee report back on the scampi inquiry with an expectation there will be some ‘rough justice’ in the form of compensation for some parties. Then sometime in the next two weeks the Government will issue its latest position on the foreshore and seabed issue, although legislation will have to wait until next year. Then (puff puff) the way will be cleared to give Maori 20 per cent of new mussel farming and other aquaculture licences as compensation for losing the right to apply for title to the foreshore and seabed, allowing new aquaculture legislation to be introduced and then the moratorium can be lifted and everyone is happy. Right?

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Worker stuff

Thursday the amendments to the Employment Relations Act will be disclosed with insiders saying the in-fighting has been more spectacular than the likely outcome. The transfer of undertakings clause has been narrowed in its scope but deepened as it applies to those most vulnerable workers, such as contract cleaners. There will be some more union-friendly provisions but they are hardly draconian. A provision for arbitration of final resort when good faith has been severely breached has been hyped up by the employer groups but will be rarely used.

We predict the most far-reaching change will be the requirement to show ‘good faith’ when negotiating individual contracts. This could, arguably, mean that employers will have to sit down and indulge in real talks with each individual rather than just give them the union-negotiated deal and say thanks for not joining the collective. That in turn will increase compliance costs, if it is done faithfully, and might give employers some encouragement to negotiate en masse. It will assuage to some extent union calls for a ‘freeloaders’ impost on those who receive the union-negotiated improvements without joining up -- we hear any plans to impose a freeloading levy proved just too difficult to draft.

Transport stuff

The small but perfectly formed Transport Minister Paul Swain has two more big announcements before tucking into his Christmas ham.

One will beef up penalties for fast and drunk drivers, probably imposing licence demerit points on speed camera fines (although he has tried three times to do this before and been squashed by his Cabinet colleagues so a back-down would not be a surprise) and a lower blood-alcohol level. He is also likely to lower traffic-cop tolerance levels for speed above the legal limit, especially in built-up areas.

His second announcement, set down for December 12, will be the draft plan for more road funding (look out for a small to moderate petrol tax rise) including big bickies from the state -- but it will be applied to the whole country, not just Auckland, despite Auckland’s self-obsessed view of the package. There will be a new over-arching Auckland transport body -- either the existing ARC or something else – to try and sort out the spaghetti of rival interests.

Finance stuff

December 18 will see the December Economic and Fiscal Update and the Budget Policy Statement.

Finance Minister Michael Cullen is likely to announce a jump in the growth forecast to March 2004, from 2.2 per cent to 2.8 per cent or even higher -- suggesting the Institute of Economic Research’s 2.7 per cent forecast today may be a bit on the light side, but nothing serious.

More importantly the Reserve Bank Governor Alan Bollard makes a tough call on interest rates on Thursday -- does he put them up to slow the housing boom and risk a higher dollar, or do nothing and risk the housing boom feeding into more and more domestic inflation?

Our soundings suggest the RBNZ’s view is that the dollar is a major concern and the only way it can sensibly help it fall a bit is to ‘keep its head below the parapet’ by waiting for others -- Australia in particular – to blaze the higher-interest trail. With that in mind we would on balance put our money on the Guv to HOLD rates this week, although that is not a forecast because it is a tight call.

Opening the books

When the Budget Policy Statement is unveiled, it will have a greater focus on the next budget than has been the trend in past Statements.

The Finance Minister says the focus on the government’s overall fiscal strategy – which has previously been a feature of the BPS -- will be left to the Fiscal Strategy Report accompanying the Budget. (The Budget Policy Statement is published in advance of the budget and sets out long-term fiscal objectives -- such as how much debt is being repaid -- strategic priorities for the coming Budget and intentions for the next three years. The Fiscal Strategy Report compares Budget forecasts with short-term intentions and sets out the big numbers ten years in advance).

These documents are pored over mainly by economists, economics reporters – who actually believe them -- and Molesworth & Featherston editors looking for inconsistencies and subtle shifts.

The change is part of an overhaul of the way public finances are reported, announced last August. The Fiscal Responsibility Act is to be folded into the Public Finance Act in a Bill to be introduced this week, although the principles won’t change.

Cash and carry

Meanwhile Treasury's October tax figures show Dr Cullen’s coffers are over-flowing – still.

The government collected $600 million more in tax in the financial year to October (four months) than Treasury forecast in the Budget - a 4.3 per cent forecast error. The tax take is up 7.2% -- or nearly a billion dollars -- on the same time last year.

The bulk of the variance is in higher than expected company tax payments. This is largely historical, although PAYE appears to be running ahead of forecast, suggesting wages are rising ahead of Treasury’s budget forecasts.

Wing thing

Air New Zealand’s decade-long success with discount operator Freedom will be emulated by Qantas next May when it introduces Jetstar as a head-on no-frills competitor to Virgin.

Jetstar’s routes haven’t yet been announced, but a Tasman service, and certainly something that lost less money on the New Zealand domestic route, would make sense.

Qantas is spending $113 million on the new airline and has announced plans for a fleet of Airbus A320s. We’ll be watching to see whether the maintenance contract moves to Air New Zealand, now that it is also running an Airbus fleet. From the feeling old file: Jetstar’s CEO, Alan Joyce, is 37.

Meanwhile, regulators on both sides of the Tasman will be interested to read that Qantas – struggling so bravely it needed to merge with Air NZ to survive -- will this year make its largest ever profit from domestic operations.

Return of the Coin

It’s great to see New Zealand celebrating, and who doesn’t share a shiver of national pride at Peter Jackson’s success? We will be delighted if the Return of the King collects Best Picture or Best Director.

Yet, while we wouldn’t wish to be negative, we can’t help feeling there was a slightly provincial tone in the coverage of the Lord of the Rings premiere in Wellington.

To recap, both TV networks pre-empted their bulletins and went live in extended coverage from Courtenay Place. More than once reporters in live bulletin informed the nation we had ‘never seen anything like this’ and predicted we never would again. Mmmm. Well, with all that coverage, there certainly can’t have been many stones left unturned….

Did the film return more to New Zealand than taxpayers stumped up in tax breaks for the film’s financiers? Someone at BNZ Finance doubtless knows the answer to this. It is doubtful whether anyone else knows, least of all the IRD. The taxpayer contribution is in the hundreds of millions of dollars. It works like this: The film’s backers, extraordinarily wealthy individuals, stumped up the cash to shoot it. The intellectual property in the film was sold overseas and is presently being passed through a few loops before being bought back in a year or two. The New Zealand tax-resident funders of this circuit claim special tax losses on the transactions – for sums relating to the intellectual property value of the film, and which may be far in excess of the cost of making the film. The funding circuit ensures investors get their money back (from you) even if the film never sells a single seat. Although the New Zealand taxpayer has heavily subsidised the production, we shouldn’t feel lonely. German taxpayers have been equally generous, also offering tax breaks on exactly the same film.

Did the LOTR world premiere attract worldwide attention? A little. As the live wall-to-wall TV news bulletins went out in New Zealand, CNN, the BBC and Sky News all led with Iraq, and followed with international off-leads. None ran LOTR stories before we got tired and went to bed. None appeared to suspend normal news coverage to take live pictures from Courtenay Place. On the other hand, an op-ed by New Zealander Andrew Johnston in the New York Times reported the premiere marked ‘the end of a process that profoundly altered a country's idea of itself’. (Mr Johnston goes on to argue that since most New Zealanders are descended from European immigrants ‘[t]hey aren't accustomed to standing in a place and imagining what once went on there’. No Maori here then). The LA Times and BBC also carried stories. Ray Lilley’s Associated Press story did the rounds of wire services, unfortunately describing Wellington as New Zealand’s ‘usually sleepy capital’.

What about the film industry – they’re going crazy, right? Well Hollywood Reporter led with the box office battle between the Cat in the Hat and Haunted Mansion and couldn’t find space for the LOTR premiere among eight film stories.

So is it a shoo-in for Best Pic? The LA Times film critic Patrick Goldstein rates it an 8-1 chance, behind Clint Eastwood’s Mystic River and less than comfortably ahead of the cartoon about a disabled fish, Finding Nemo.

We’re still excited about it. And we wish the film well.

Ten out of ten?

Fawning as the LOTR coverage might have been, there was one story that seemed to run larger and less critically…the Herald’s weekend coverage of Helen Clark’s tenth anniversary of becoming leader of the Labour Party.

An open letter to the Telecom chief executive from one of our readers

Dear Ms Gattung

It’s not often we in the public can offer big business ICT a useful tip or two, but we think we have rumbled why you aren’t getting as many Jetstream sign-ups as you might like. It may be about the price, for all we know, but since we haven’t paid you a cent yet it is too early to tell on that score.

No, in our experience it is because we can’t actually get: a) one of your connect-up technicians to turn up when he said he would, b) a stable explanation of what it will cost and what will be involved, c) a technician who, if he turned up on time (see above), gives any sense he knows what he is doing faced with a slightly unusual situation.

It is, without a word of a lie, the worst and most frustrating service by a utility since we fought the great two-month wrestle of 2002 with Meridian Energy over a misread meter.

Shall we go through it quickly in detail?

A few months ago we were about to replace our computer and thought it would be nice to augment our Xtra connection with Jetstream. Phoned for the brochures, got an explanation of what we would need and went ahead. Bought an ADSL modem, installed internally in place of the manufacture-supplied one -- for an extra $300 -- and after the new gear arrived phoned Telecom to arrange a free connection (instead of standard $99 rate).

Were told that meant the $199 price instead of $298, which sounded a surprising amount for a free connection but agreed -- must have misunderstood something, or missed the small print. That would also mean a six-month contract, we were told. Must have missed that somewhere too, but no worrries, that sounds fine. Could we install it ourselves? Oh no, the nice man said. We will send a technician.

Went through what we had, including the modem, type of PC and operating system, the fact that there were three phone jack points plus a Sky Digital connection and it was agreed that -- as per the brochures -- this was fewer than five so we would not need a “router” but could have a “filter”, which was good because it was only $20 and we could buy one from a computer supplier. Arranged a morning when someone could be at home to meet the technician -- told it would be sometime between 8.30 am and 12.30 pm – so popped out and bought a filter as instructed and waited. Just after 11am on the appointed day the technician rang to say he was running late and would not be around until after 12.30 pm. Slightly annoyed, but arranged for him to arrive “on the dot” on Friday at 9am -- and arranged a late start of 10 am at work.

Late afternoon on Thursday the technician – let’s call him Jeff because that may be his name -- rang again to ask a few questions. We went through the same stuff again -- we have a PC, running a Windows NT operating system, three jack points plus Sky, internal ADSL modem....”Oooh!”, said Jeff, “I have here that we are to supply an external modem.” Jeff, it transpired, had never installed a connection with an internal modem but “it might be alright”. Did we have back-up disks in case anything went wrong? No. Should we? Again, Jeff said we should but it “might be alright”. Did we say we had three jacks plus Sky? That’s right. “Well it says here,” says Jeff -- apparently reading from an instruction manual – “you have to have less than five so that will be on the margin.” He might have to put in a router. But three or four is less than five, we suggest. Jeff agrees but doesn’t sound convinced. But he says he will bring three more filters just in case. Three more? Do we have to have a filter for each jack -- we have only bought one? Yes. And do Telecom supply them? We were told we had to buy one. No, Jeff could supply them.

So Jeff said he would come around at 9 am on Friday and it would take about two hours. Two hours? But we thought he only had to configure our brand-new machine and poke some filters into the jacks? Oh no, there was the configuration and the wiring ...

Wiring? Nobody mentioned wiring. About now, what with the cost, Jeff’s apparent lack of experience and the fact we seemed to need a full day off work to accommodate the technical visits, we asked Jeff to cancel the whole thing -- would he do that for us? Yes he would.

So the next day we rang the Jetstream helpline to discuss the problem. “You wanted the external modem didn’t you?” No, we have had an internal one installed. “Well it says here you wanted an external one.” No that was never the case.

We seek an assurance that Jeff has cancelled the connection (he hasn’t) and ask if Telecom could instead send a technician who knows what is required for our system and can explain it. “Oooh,” says ... let's call him Jeff because it may be his name. “There is no record of your cancellation, but I will put that through.”

Thanks. Not at all. Thanks for telling us.

We still want to get Jetstream installed though. Well, you will have to ring and start the whole process again, says Jeff2. Dare we do it?

Next day in the newspaper there is an advert for a Jetstream pack – FOR SELF-INSTALLATION -- for $199. Hmmm. Might give that a try, but does that mean that Jeff comes for free?

Quote of the week

“…and some people have got really dressed up for the evening.”

One news anchor Kate Hawkesby exclusively reveals a highlight of her night in glamorous Wellington for the premiere of the Lord of the Rings: The Return of the King.

Fine Print

Molesworth & Featherston is compiled from informed sources and published on Tuesdays to be New Zealand's most up-to-date business and political newsletter.

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