Business Update - Friday 29 August 2003 Issue 85

Friday 29 August 2003 Issue 85

SMALL BUSINESS STAGGERS The worst finding of the Business NZ-KPMG Compliance Costs Survey was the scale of the burden on small businesses. Bigger firms, benefiting from economies of scale and specialist advisers, have average compliance costs of $500 per employee per year. But small firms (5 or fewer employees) have an average compliance cost of $3,400 per employee per year. This is an unacceptable impost, making it impossible for many companies to grow. Future (annual) Business NZ-KPMG surveys will focus on this and other unwelcome findings to call for government accountability over compliance requirements. The report is on www.businessnz.org.nz.

WIN FOR NZ ON RULES OF ORIGIN Today's joint statement by NZ and Australian trade ministers on CER rules of origin could be a good win for NZ. The CER rules of origin have caused grief to NZ exporters for too long as Australia has insisted on a regime increasingly out of step with global and regional trading realities. Today's joint statement says there should be "equity of treatment for all businesses, whether they are integrated manufacturers or use outsourced manufacture." Business NZ's Simon Carlaw says it's a welcome step in removing unnecessary blockages in the CER.

GENERATORS PROFIT FROM "BIG DRY' There is little doubt that electricity generators profited from the dry winters of 2003 and 2001. NZEM statistics just released show spot market payments to generators in the first half of 2002 (a normal year) were around $800m. But payments for the first half of 2001 and 2003 were $1,224m and $1,985m respectively. The Major Electricity Users' Group is asking whether all the extra revenue went on alternative fuels to replace the lower hydro supply - and if not, where did it go? The windfall to generators was enough to cause a bulge in the Producers Price Index in the 2003 March and June quarters - see Growth Stats below.

RELIGIOUS CASE NOT LEGAL PRECEDENT The case of the Seventh Day Adventist employee who received a $40,000 settlement because he'd been unable to get Saturdays off work does not constitute a legal precedent, says Carter Holt Harvey Tasman in a memo to staff today. The company points out that the payment was made as a result of a negotiated settlement, not from a decision of the Human Rights Commission. The employee's concerns about working on Saturdays did not date from the time of the original employment agreement, but from a later period. By law employees are required to observe the conditions of employment they accepted when accepting the job, and subsequent changes to those conditions require negotiation with the employer; the employer is required to be reasonable but is not required to agree to changes if they are detrimental to the business. There is little NZ case law relevant to the issue, but since the Human Right Commission has defended the settlement as just, employers facing such cases in future should handle them with care.

CRITIC SIDELINED? Among the imponderables associated with the foreshore issue is the question of why Marlborough mayor Tom Harrison should have been maligned ("racist') in Parliament. There are suggestions he was just a random target to deflect criticism of the foreshore debacle. But the mayor, battling for better funding for South Island roads, has also been a staunch critic of the Land Transport Management Bill - legislation that's due back in Parliament around the same time as consultation on the foreshore is completed. A critic usefully sidelined, perhaps?

FEAR OF PENALTY Aviation safety may be threatened because of the new Health & Safety in Employment Act, says the Aviation Industry Association (AIA) in this week's Independent. Whereas the Civil Aviation Authority Act (CAAA) says parties involved in accidents are liable to prosecution only if they have deliberately or knowingly endangered an aircraft, the Health & Safety in Employment Act - which the aviation industry now comes under - imposes strict liability even if an offence under the Act was unintentional. The AIA says the CAAA Act encourages full and fearless reporting of accidents, which helps promote safety. But under the Health & Safety in Employment Act pilots and operators may be deterred from reporting incidents for fear of penalties.

HIGH DOLLAR STILL RILES NZ manufacturing showed very modest expansion in July, the latest month for which survey data are available in the ANZ-Business NZ PMI. The index for July was 51.6 (numbers above 50 indicate expansion). There was also an indication that orders from Australia (NZ's largest market for many manufactured goods) had started to pick up. But manufacturers surveyed continued to complain about the high dollar during July, the 11th month in a row that manufacturers have reported reduced export revenue as a result of the high Kiwi.

US-CHINA BLUES US manufacturers are also complaining of the effects of a high dollar - the $US as against the Chinese yuan. US jobs are suffering from "unreasonably cheap" Chinese exports - China is benefiting from market-opening trade agreements, low-wage workers, and its currency, which is pegged at a fixed exchange rate of 8.28 yuan to the $US - making it undervalued by as much as 40%, say critics. The US Manufacturers' Alliance calls it "currency manipulation". The US Treasury Secretary will visit China next week to try to persuade Beijing to float the yuan.

GROWTH STATS

LARGEST TRADE DEFICIT IN 18 YEARS

- The provisional value of July imports was $2,781m; July exports were estimated at $2,310m - this gives an estimated trade deficit of $471m, $65m more than predicted.

- A trade deficit is normal for July, but this July's deficit was the largest since 1985 (not including July 1997 when a frigate was imported).

- Over the 12 months of the July 2003 year, 10 of these months have seen imports exceeding exports, a continuation of the trend of the last 18 months.

GENERATORS' TAKINGS CAUSE PRICE INDEX RISE

- The Producers Price Index output index rose 0.3% during the June 2003 quarter, while falling 0.6% from the June 2002 quarter to the June 2003 quarter.

- The main contributor to the June quarterly increase was higher prices received by generators for wholesale electricity (also in the March quarter).

- Other increases during the June quarter were dairy products (+7%) and construction (+1.1%) - the construction index has now risen for 17 consecutive quarters.

- In comparison to outputs, the PPI inputs index rose 0.6% during the June 2003 quarter, while falling 2% from the June 2002 quarter to the June 2003 quarter.

- The most significant quarterly rise came from electricity generation and supply (+11.3%). But there were significant falls in the wholesale trade index (-4.5%) as a result of lower world crude oil prices, and the air transport index (-4.7%) due to lower fuel prices.

- The PPI inputs index has now fallen four times in a row during the year, after a series of annual increases from Sept 1999.

IMMIGRATION PLATEAU

- Short-term visitor arrivals were down 6,600 (4%) from July 2002 to 2003.

- Asian visitor arrivals were down 7,000 from July 2002 to 2003 because of SARS, but the fall softened by an increase in arrivals from other countries and was less than expected.

- Permanent and long-term arrivals exceeded departures by 3,000 during July, 500 lower than in July 2002.

- Annual long-term migration may have peaked, as the July year recorded a net gain of 42,100, similar to results over the last few months.

RISING BUILDING COSTS DRIVE CAPITAL GOODS INCREASE

- Capital goods prices increased 0.5% from the March to June quarter.

- Over the year capital goods prices rose 0.7% following four consecutive quarterly falls.

- Rising building costs are still driving the increase.

- Falling supplier prices and exchange rate improvements have resulted in the plant, machinery & equipment index falling for the sixth quarter in a row, dropping 0.7% during June. For more, see www.stats.govt.nz

WHAT'S NEW on www.businessnz.org.nz

- Business NZ-KPMG Compliance Cost Survey Report

- Compliance cost survey shows small businesses penalised

- ANZ-Business NZ PMI for July 2003

- Manufacturing steady

- Australia matters, so does CER

- Work-life balance - one size won't fit all

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