The Letter
7 JULY 2003

KIWI 60C US

The Kiwi hit new highs this week – and exporters dependent on a low dollar hit the wall. The gaps between US and New Zealand interest rates give room for rate cuts but, unlike the US, the problem is inflation, not deflation. Once again, the Government sector is leading the way. Local bodies are raising rates faster than inflation. The Letter expects the Reserve Bank to use the deflating pressure of lower import prices and weakening economy to cut interest rates again.

A FALL OF WOOD

In the past six months, log prices have fallen more than 20 percent. The fall is greater than during the Asian crisis, and the log industry faces multiple hits. Shipping rates have climbed 20 percent. The Korean economy has stalled. The world soft wood market is being depressed by lower-cost producers from South America, and product from Russia. This time, however, the US market – which takes high quality finishing wood – has collapsed, putting many sawmills into receivership. To have continuing supply, mills buy forward. They’ve been caught by the speed of the price fall, and are going broke. Mill cutbacks have caused widespread job losses.

KYOTO DOUBLE-WHAMMY

In the 1980s, tax breaks were used to persuade landowners to convert to forest. Now Labour has nationalised – without compensation – forest owners’ carbon rights, wiping hundreds of millions of dollars of future value. From 2008, forest owners who do not re-plant will be hit with a carbon tax. Landowners are talking of harvesting premature trees to avoid the carbon tax – which will add to the glut of wood. While forest owners can ride out short-term price drops by not harvesting, this is not an option for the forestry service sector – there will be financial distress in the provinces.

IMMIGRATION CHANGES

The Immigration Bill, driven through Parliament under urgency, is a radical change. New Zealand is abandoning the points system, to return to occupational priority lists. Canada, Australia and New Zealand abandoned having civil servants decide which jobs were skilled and in demand, as the economy is changing too fast. The Minister’s example, of doctors driving taxis, is out-dated. Points system qualifications are now the only qualifications recognised in this country. The new system, with the tougher English language test, will lower Asian migration. What’s unclear is whether the new system will bring in the Government’s target of 45,000 new migrants. Population targets are hard to hit, and much depends on New Zealand’s economic performance vis-a-vis Australia and the UK. Auckland’s economy is largely dependent on continued growth. The radical, sudden nature of Labour’s changes make it a high-risk strategy. The U-turn is a reaction to Peters’ polling.

CONSTITUTIONAL OUTRAGE

Under urgency, the Government reversed Randerson J’s High Court decision, that the sudden imposition of a higher English language test at midnight on November 19 was illegal. Immigration Regulations say a permanent residence applicant must have their application processed by the rules in place when the application was received – immigrants give up their employment, move here and need certainty. The sudden change left some 20,000 applicants in limbo. The change was clearly illegal – Parliament retrospectively applied it, and effectively removed 20,000 previously qualified applicants – many who have had their lives on hold for more than two years, waiting for their visas to be processed. The Immigration Bills will be available on ACT’s website, http://www.act.org.nz/immigration, from Monday evening.

THE SOLOMONS

New Zealand has agreed to commit 40 police, and an undetermined number of military personnel, to the Solomon Islands. This is policing, not peacekeeping. The Australian, New Zealand and Pacific participants will arrest lawbreakers and run government departments – there is a proposal for Australia to take over the Solomon’s Treasury Department. The Solomon’s problem is more than law and order – crime is worse in Papua New Guinea. The State has failed, taxes have not been collected, and civil servants have not been paid. The government has paid ‘compensation’ to those affected by the tension, but outside of judicial process – friends first, leaving genuine claimants penniless and angry. A lawless, failed state is a security threat. There seems no alternative but intervention, but there is no exit strategy. Richard Prebble advocates paying a force of police recruited from Britain, rather than a long-term commitment of New Zealand Police.

PRAVDA TV?

TVNZ sources claim that Ian Fraser lobbied for Helen Clark’s sycophantic biographer, and Parekura Horomia’s media minder, Brian Edwards to have his own show. TVNZ already has former Alliance MP Pam Corkery having the last word of the day – she lampooned National’s billboards, and Bill English won’t appear on her show. The Letter wonders about Bill Ralston’s judgement: last election he predicted that ACT would not break the threshold – he’s been chosen for his ability to predict the news?

ROADING

Labour announced a roading budget with most Auckland projects delayed. There was a muted response because – rumour has it – Auckland mayors were told the Government is considering a massive, special roading package for the Queen city.

PRIVY COUNCIL REFERENDUM

ACT, National and New Zealand First have launched a citizens-initiated referendum to keep the right of appeal to the Privy Council. The idea of a Margaret Wilson-appointed Supreme Court is truly frightening. To get a referendum, approximately 310,000 registered voters must sign the petition – a difficult, but not impossible, task. The three parties have combined for this project, as all oppose abolishing the Privy Council. Attached is a petition form. Electronic signatures are not legal, so please print out the petition and freepost it back – if every Letter reader returned 10 signatures this week, as there are 35,000 readers, we would have enough signatures to force a referendum. Imagine the signal that would send. For info and petition instructions: http://www.act.org.nz/privycouncil.

This message has been brought to you from the ACT New Zealand Parliamentary Office

ENDS

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