Business Update

Baldock defends efficiency....Government drives inflation....Kyoto means more imported fuel.....

HOW MUCH PETROL TAX FOR ROADS? There are two main problems with the Land Transport Management Bill which is being rushed through Parliament now. The first is that it will allow even more petrol tax money to be diverted into the consolidated account with even less being spent on roads. But efficient business depends on good roads. So the Bill raises an important question for the Transport Minister: What percentage of petrol taxes should be spent on roads? Right now 75% of petrol tax gets siphoned away. Is that OK? Is 80%? Or 90%? Businesses would like to know what the Transport Minister thinks. What percentage of petrol taxes should be spent on roads, Mr Swain?

BALDOCK DEFENDS EFFICIENCY The second main problem with the Land Transport Management Bill is that it has removed the concept of 'efficiency' from the provision of roading - meaning the potential waste of taxpayer resources and the possibility of politics pre-empting other considerations in the funding and management of roads. United Future's Larry Baldock has risen to challenge - today he tabled a supplementary order paper that would allow for the important 'efficiency' word to be inserted at key points in the Bill. Business will be hoping a majority votes in favour of the Baldock move. Contact nclark@businessnz.org.nz .

GOVERNMENT DRIVES INFLATION The booming housing sector is certainly driving up inflation, but another far more insidious inflation driver is barely getting a mention. This week's CPI release showed that central and local government charges rose 3.1% during the Sept quarter and 5% in the Sept year. If the impact of such charges were removed, the CPI would have increased by only 0.1% during the quarter and just 1.1% during the year. Rates increases were the main reason, so Alan Bollard was dead right to take local authorities to task on big rates increases, but central government is also to blame, with petrol taxes increasing by 3 cents a litre in July for the ACC motor vehicle account. Monetary policy is being undermined by both central and local government.

KYOTO MEANS MORE IMPORTED FUEL An announcement by two electricity companies shows what happens when you sign up to the Kyoto Protocol: you have to use imported fuel. Contact Energy and Genesis Power this week said they were exploring building facilities to process stocks of imported LNG. Energy shortages are predicted from around 2008 (because of Maui's depletion, and a lack of new hydro plants and oil exploration activity as a result of the RMA and other constraints), making electricity generation problematic. Contact and Genesis say the options for electricity generation are coal (which is plentiful in NZ) or LNG, but "LNG is likely to be the preferred option based on present policy settings." So we're likely to be importing LNG rather than mining our own coal. 'Present policy settings' are code words for the Kyoto Protocol which will impose taxes on companies that burn co

SYSTEMS REQUIREMENT DUE SOON Health & safety employee participation systems will be a legal requirement in many workplaces in three weeks' time. The Health & Safety in Employment Act requires large organisations (30 or more employees) to have a formal employee participation system by 5 November. If this doesn't happen the employees or their unions, regardless of company size, must hold an election for a health & safety rep or for a committee (up to 5 reps), or ask the employer to do so and if the employer doesn't do it within two months, s/he may be fined up to $250,000. The same fine applies if employees aren't given the opportunity to be involved in health & safety matters. More information is on www.workinfo.govt.nz .

GIVE YOUR VIEWS TO SECURITIES COMMISSION The Securities Commission wants businesses of all kinds to take part in a survey on corporate governance (a separate exercise from the recent NZSE consultation over listing rules). Unlisted companies, family companies, subsidiaries, SOEs, local authorities, district health boards, cooperatives and trusts are all asked to take part, as well as listed companies. The survey will be used to develop a set of principles (not rules) to be used as a guide to corporate behaviour. If the response is wide enough, the principles will be seen as a consensus by NZ business, and publishing such a consensus internationally will aid NZ's standing with international investors, partners, suppliers and customers. The questionnaire is on www.sec-com.govt.nz. Submissions close 7 Nov.

KEATING ON PRODUCTIVITY, GROWTH Former Australian PM Paul Keating made a plea for increased productivity in a speech to an Australian accounting congress this week. His view: baby boomers will soon start leaving the workforce, leading to a tightening in the labour market and an increase in real wages. He says that increase must be paid for by increased productivity - if not, it will be paid for from profits, causing wage inflation to which central banks will respond by lifting interest rates, meaning investment will fall and recessions will ensue. Keating says China's vaulting growth could help prevent this scenario - but countries will need high productivity to keep inflation and interest rates down so they can take advantage of the new international trading conditions: "We cannot live only by the economic changes of the 1980s and '90s. We will run out of puff unless the under

DIFFERENTIATE, TELL A STORY Real-life lessons from successful companies were the feature of EMA Central's 'Thrive' event in Wellington yesterday. Tourism's Tamaki Brothers said the thing they learned from hard experience was the need to differentiate their service from others in the same market - how to be different. And Geoff Ross of 42 Below vodka said his important lesson was to use marketing to 'tell a story' that would be relevant to the intended customer. EMA Central, like EMA Northern, intends to run more 'Thrive' events in future. Contact: keith.bick@ema.co.nz .

GROWTH STATS

INFLATION WELL UNDER CONTROL

* Inflation continued to come under market expectations during the Sept quarter, with the CPI rising 0.5% instead of the expected 0.8%, giving 1.5% annual

inflation for the Sept 2003 year, the same as the June 2003 year.

* Seven of 9 groups recorded increases in inflation over the quarter, led by housing (+2%). Housing has been the biggest contributor to the CPI for the past 5 quarters, with continued increases in purchases and construction of new dwellings as well as higher rates and rents.

* Local authority rates increased 7.2% in the Sept 2003 quarter - the largest quarterly increase since the June 1990 quarter - mostly because of the Auckland region.

* Tobacco and alcohol prices were up 1.3%, mainly due to the increased tax.

* Transportation prices made the largest downwards contribution; higher petrol prices were more than offset by lower international air travel prices.

* Although inflation is tipped to rise over the next few quarters, there is little likelihood that it will be strong enough to warrant an increase in interest rates by the Reserve Bank in the short term.

WORK STOPPAGE FIGURES DOWN FROM 2002

* There were five work stoppages for the June quarter. However, due to the single work stoppage in the March quarter, details of the June quarter stoppages have not been published for confidentiality reasons.

* There were 31 stoppages in the June 2003 year, 15 less than for the June 2002 year.

* The June 2003 year numbers were slightly below those of the June 2002 year (2002 figures in brackets):

- employees taking part in stoppages: 18,179 (24,580 )

- person-days of work lost: 42,944 (55,849 )

- estimated wages and salaries lost: $7.6m ($7.9m).

* Of the 31 stoppages for the June 2003 year, 10 were in the health & community services sector, while 6 were in manufacturing.

For more information visit www.stats.govt.nz

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

* A question for Mr Swain

* Green Bill - red light for all road users

* Four parties stand up to be counted

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