Business New Zealand - BUSINESS UPDATE

BUSINESS UPDATE

WANTED: BUSINESS FRIENDLY COUNCILS Nominations open today for this year's local body elections. Potential nominees should consider the rates burden on business - 50% of the value of rates is paid by business, largely because of business differentials. And rates keep increasing (at twice the rate of inflation over the last decade), exponentially increasing the burden on business ratepayers. The Local Government Forum will be encouraging ratepayers to vote for candidates who'll keep councils focused on their core business and keep a lid on rates rises. Forum chairman Simon Carlaw says it's also important for people with business experience and expertise to make themselves available for election. Contact scarlaw@businessnz.org.nz .

PATCHY INFRASTRUCTURE It's a month since an outage on the national grid high voltage link across Cook Strait reduced the electricity flow from the South to the North Island, causing spot prices to rocket up in parts of the North Island - over $1,000 per half hour on more than one occasion - and the fault is still not fixed. Pole 1 of the link, installed in 1965 and upgraded in 1990, is still running but pole 2, installed in 1990, has significant problems and is running at only partial capacity. It's a graphic example of how the grid's disrepair is causing high electricity costs for business.

NATIONAL GRID NEEDS WORK The patchy state of the grid is highlighted by an NBR report that Transpower threatened to pull the plug if it couldn't get general indemnity against being sued - Transpower reportedly wanted changes to the Electricity & Gas Industries Bill to ban legal action by anyone affected by transmission failures, given that the liability could be huge in the event of a cascade failure. Those changes didn't eventuate, but the Bill does mean the Electricity Commission will be able to require Transpower and generator companies to reach agreement on, among other things, investment in the grid. Past disagreements between Transpower and generators over who should pay for upgrades of the grid have contributed to inaction on much-needed improvements. Contact pwhitehouse@businessnz.org.nz .

HOLIDAYS IMPACT ON STOCK EXCHANGE Public companies racking up large payroll costs because of the Holidays Act may have to issue revised earnings statements under Stock Exchange rules, warns EMA Northern. It says some large companies are reporting extra payroll costs of 15 - 20%, more than enough to trigger an earnings alert to the NZSE. EMA says it's concerned that the Labour Minister's review of the Act may not go far enough in addressing its perverse effects. Contact gilbert.peterson@ema.co.nz .

UNIONS ON WAR, NATIONAL SHUTDOWNS Intemperate language from the union movement recently... "It's war," said the engineering union's Andrew Little this week, calling on union members to "stop National gaining power" at the next election. "As the country's largest union, we are out to stop you." And Wayne Butson of the Rail & Maritime Transport Union bemoaned his union's loss in the Toll v RMTU court case last week - the court's decision meant the union could only take industrial action in the Auckland area, and couldn't "shut down the whole country...." he lamented.

COMPLIANCE COSTS SURVEYED Thank you to the 950 businesses who've taken part in this year's Business NZ-KPMG Compliance Cost Survey. The survey closed this week. Results come out next month. ssummers@businessnz.org.nz . LABELLING COSTS The body responsible for Australian & NZ food standards is suggesting that food producers be required to show country of origin labelling. Business NZ, Federated Farmers and the Food & Grocery Council say that would impose unnecessary costs while not improving public safety, since any such requirement would not add further protection beyond existing food safety and customer protection regulations. See: Business NZ submission .

DEPRECIATION REVIEW The Government is reviewing the tax depreciation rules, concerned that they may be providing a disincentive for capital investment and a bias towards tax-favoured but less productive investment. Information on the review is on www.taxpolicy.ird.govt.nz . Business NZ will be making a submission on the issue - contact nclark@businessnz.org.nz if you would like to contribute.

ONLINE PAYROLL A Government initiative to simplify tax is to subsidise an online payroll system, making it free for the first 5 employees of any participating business. The system will pay staff directly into their accounts, prints out payslips and reports, and calculates tax and holidays payments. The Government system hasn't started yet, but the organisers are offering the system now as if the subsidy was already in place, for a one-off set up fee (approx. $150). For more information contact philrichards@xtra.co.nz .

GROWTH STATS

HOUSING & ELECTRICITY PUSH INFLATION UP

* The CPI rose 0.8% for the June 2004 quarter, close to market expectations, resulting in inflation for the June 2004 year reaching 2.4%, compared to 1.5% in the March 2004 year.

* Eight out of 9 groups had increases in inflation over the quarter, again led by housing (+3.1%), which has made the most significant upward contribution to the CPI for the past 8 quarters.

* Breaking the housing group into its subsections shows strong increases over the June 2004 year in expenses of dwelling purchase (+16.5%), local authority rates (+10.4%), and purchase & construction of new dwellings (+8.8%).

* Household operations rose 0.6% during the June 2004 quarter, and 1.5% over the June year, mostly because of electricity which rose 2.8% in the quarter and 10.4% in the June year. The largest downwards contribution came from tomato prices (-18.3% during the quarter).

* Inflation is tipped to continue to rise over the next few quarters, so there could be another increase in interest rates on 29 July.

ASIAN MIGRATION FALLING

Permanent and long-term (PLT) departures exceeded arrivals by 100 during June 2004, compared with an excess of 1,900 PLT arrivals over departures for both June 2002 and 2003 months.

* There was a net migration gain of 22,000 for the June 2004 year, down 48% from the year before. NZ citizen arrivals fell by 300, while departures rose by 3,200. Arrivals for non-NZers fell by 12,600 as departures rose by 4,400.

* For the year ended June 2004 there were significant net PLT inflows from the U.K (9,446, up 11.5%), China (5,550, down 62.5%), and India (3,438, down 43.4%), with the decreases for China and India typical of a general reduction in net inflows from the Asian region. There was a higher 28% net outflow to Australia (12,422 for the June 2004 year compared with 9,673 for the year before.

VISITORS STILL COMING

* The number of short-term visitor arrivals during June (134,800) was up 20% on June 2003, a bounceback from the effects of SARS on tourist numbers in 2003.

* Over the June 2004 year there were 2.25m visitors, up 10% on the June 2003 year (51% were holidaymakers), with increased visitor arrivals from Australia (+11,800), Japan (+3,600) and China (+3,100). Visitor levels from Asia are now back to where they were pre-SARS (30,600 for June 2004 compared to 30,700 for June 2002).

WORK STOPPAGES DOWN

* There were six work stoppages for the March quarter, involving 624 employees, with 1,311 person days of work lost. The estimated loss in wages and salaries was $195,000. The six stoppages compare with 13 for the Dec 2003 quarter and 9 for the Sept 2003 quarter.

* There were 33 stoppages that ended in the March 2004 year, 7 less than the previous year. WHAT'S NEW on www.businessnz.org.nz

* Local body candidates: stop and think

* Submission on proposal for country of origin food labelling

* Manufacturing expansion lifts for June

* ANZ-Business NZ PMI for June 2004

* Skilled migrants shouldn't be scapegoats

ENDS

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