Business NZ - Business Update No. 8

Tuesday 28 August Issue 8

Electricity contract caution

While the particularly high spot prices have dropped back, consumers coming off contracts over the next 8-10 weeks can expect 30-40% increases. Business NZ advises caution regarding signing on to long-term contracts as the market and supply situation remains volatile and committing to a 40% increase over a 3-year period may be unnecessarily costly. Yesterdays’ electricity summit noted that last week was good both for conservation and rainfall, and lake levels are up nationally, but the southern lake inflows are not improving, and thermal generation in Huntly and Otahuhu is being run hard, raising the risk of mechanical failure. Electricity retailers agreed that anyone whose fixed-term contract was ending would be given a month’s notice before being put on to the spot market.

ACC premiums down next year, but up in the future

ACC is proposing lower employer premiums for the 2002/3 year (down from 85c to 76c per $100 payroll) as a result of overcharging in 2000/1 and 2001/2. But 76c is still too high, as it includes a “prudential margin’ to buffer ACC against any unforeseen cost increases. Business NZ says the margin is unnecessary as ACC has the power to tax employers in such an event, and it should be scrapped as it reduces transparency and reduces ACC’s incentives to minimise operating costs. Longer term, the average premium is likely to be around 80c, as the costs of lump sum compensation are added to employer premiums.

Two more flashpoints coming for West Coast

A Grey District Councillor says West Coasters are getting nervous about two further proposed developments that will need the approval of the Minister of Conservation. Like the Macraes goldmine, the Pike River coalmine and Dobson hydro dam proposals would involve land swaps to take some land out of reserves and replace it with equivalent or better land. Councillor Tony Kokshoorn says the only optimistic sign so far is the PM’s statement that hydro dams needed to be built on the west, not east coast, as weather patterns are increasingly showing more rainfall in the west and less in the east.

German-style workers’ rights put frighteners on NZ business

Friday’s NBR article: “Wilson pushes German-style workers’ rights” shows the danger of current proposals on contracting out, say businesses who appeared before the Christchurch and Wellington consultations last week.

Businesses who fronted up to the Government’s advisory committee say the proposals are unrealistic and alarming. The proposals would mean employees having the sole right to decide whether they will take redundancy or keep their existing jobs in cases of contracting out or sale or transfer of a business. But insisting, for example, that new owners had to employ exactly the same staff at exactly the same rates would reduce any ability to improve the business, so why bother? Wellington and Christchurch businesses said the proposals would mean businesses would be closed down rather than sold as going concerns, and the benefits of contracting out would be stymied. Auckland businesses have their say on the proposals 5 September.

UK “acquired rights’ a legal minefield

The “German-style workers’ rights”, widely seen as an impediment to business growth in the European Union, are an issue for UK businesses, since they have now been incorporated under the terminology of “acquired rights’ into English law, where they are, according to Craig Ferguson & Co, UK solicitors, “the source of endless reinterpretation¡Kthis area is a legal minefield and care should be taken to obtain expert legal advice before acquiring business assets or entering into a contract for services in circumstances where, as a consequence, existing employees are likely to find themselves out of a job.”

(www.craig-ferguson.co.uk/acquired.htm)

Number 8 wire skills can be high-tech

Innovative pilot projects are leading to high-speed Internet access for the far north and far south of NZ. Northland groups propose to “bundle’ their local demand for a telecommunications provider to service - Communications Minister Paul Swain says he’ll make an announcement next month on the Government’s role in the project. And in Southland, Waiau College students have achieved high-speed Internet access for distance learning, by getting a BCL broadband wireless link to carry the signal from Xtra’s high-speed point of access in Invercargill to their school. Ernie Newman of the telecommunications users’ association says it shows the traditional “no.8 wire’ skills in rural NZ are transferable to fibre-optic and wireless. He says such projects are not financially self-supporting, but they will add to the critical mass and help establish viability over time

Business representation

ACC premiums

ACC is currently consulting on proposed levies for 2002/03. Business NZ’s view at this time:

- ACC should get rid of its “prudential margin’ which increases employer premiums.

- The Workplace Safety Management Practices Programme (which provides a discount for companies passing a workplace safety audit) should be changed to make it worthwhile for small businesses to take part. For many, the cost of the audit is greater than the discount achieved, so small businesses get levied to fund the discounts, but can’t get the discounts.

Submissions due 20 September. To contribute to Business NZ’s submission contact Peter Crawford pcrawford@businessnz.org.nz

Review of the Local Government Act 1974

Business NZ’s view at this time:

- The review proposals would increase the rates burden.

- Local government should address: eliminating rates differentials, reducing the rates burden, withdrawing from inappropriate activities, reducing service duplication, improving accountability and transparency, and lowering compliance costs.

- Any power of general competence should be limited to cover a range of specified functions, subject to the principles that: local authorities should not duplicate each others’ services or interventions or those of central government; that they should not compete with private and voluntary sector service providers, and that privatisation and user-pays should not be discouraged as funding options if they would be the most efficient and provide the greatest value for ratepayers.

Submissions due 30 August. Contact Nick Clark nclark@businessnz.org.nz.

Literacy for the workplace

Business NZ is on the steering group of a coalition of organisations working towards improved literacy in the workplace. The group is formulating minimum standards for workplace literacy, with a pilot study in manufacturing and food processing industries.

Contact Jeremy Baker jbaker@businessnz.org.nz

Growth stats

Building consents

The value of residential building consents issued in July was $328.3 million, 18% up from July 2000, while the value of non-residential consents was $206.6 million, 1.8% down on the previous year. There was strong growth in building consents issued in the lower South Island - 90 in Otago compared with 45 in July 2000, and 15 in Southland compared with 4 in July 2000, but there was a significant fall in consents issued in Canterbury.

Overseas merchandise trade (imports)

Provisional imports in the month of July were $2.8b, an increase of 14.8% from July 2000. Crude oil imports were up 35.7%. Imports of capital machinery and plant increased by 3.3%. Imports of consumption goods were 9.2% up on July 2000. Imports from ASEAN countries increased by 57% in the three months to July, in part reflecting growth in oil and processed fuel imports.

External migration

Short-term visitors in July were 11% up on July 2000, with a 3% fall in short-term departures. Most of the extra visitors came from Australia and Asia, especially China and Korea. Long-term arrivals increased 16% for the 12 months ended July 2001. There was a 46% increase from Asia, with an increase of 111% from China. Long-term arrivals from China, mostly students, have increased from 3,106 in the year to July 1999 to 8,679 in the year to July 2001. The UK is still the largest source of long term arrivals (14,683 in the year to July 2001), followed by Australia (11,169). Long-term departures were down by 13% in the month of July, but were still 9% higher for the 12 months ended July. Ireland has been a popular destination, with 1,204 NZers heading for Ireland in the last 12 months compared with just 410 in 1999.

What’s new on www.businessnz.org.nz

- Electricity crisis seminar

- Proposed employer premiums higher than they should be

- Big changes for business

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