Business Update - 27 August 2004

Fri, 27 Aug 2004

BUSINESS UPDATE > COMPLIANCE WAY TOO HIGH Businesses are fed up with compliance costs - that's the message from this year's Business NZ-KPMG Compliance Cost Survey. An average business faced compliance costs of nearly $44,00 in 2004, less than last year, but still too high. Respondents' comments showed their frustration:

* "Make the process a lot simpler and get rid of a lot of the petty stuff relating to the ERA and Holidays Act." * "The Government needs to stop tinkering with PAYE. Each time they change something it cost us in time and fees to the bank." * "Make employees responsible for their own student loan, child support, court fees etc instead of the employer." * "One of the major points is not what it has cost us, but rather what we have been reluctant to do with our business knowing that if we expand or add employees we are going to be faced with more costs. This has a cooling effect on moving ahead and making what might be very positive decisions for the business. So far we've decided not to expand and that's part of the reason why."

* "Stop writing laws that stop good law abiding citizens from getting on with their lives. Deal with the rat bags and leave us alone!!" Mostly, businesses want improvement in tax and employment law. Small Business Minister John Tamihere said the report was a 'useful addition to the debate' - business will expect the Government to take action on the issues raised by nearly a thousand businesses that took part in the survey. Contact ssummers@businessnz.org.

TAX AMNESTY UNDER CONSIDERATION Inland Revenue wants your thoughts on possible amnesties for tax evaders. Good for the evaders maybe, but what about those who already comply? Information is on the IRD website. Contact nclark@businessnz.org.nz to give your views.

MMP = FEWER OPTIONS FOR BUSINESS MMP has reduced the chances of positive change for business, says Business NZ's Simon Carlaw. In a speech to the Hamilton Club this week, he said Government 'no-go' policy areas mean few improvements are possible in areas like tax or employment law. MMP multiplies the number of 'no-go' areas by the number of parties represented, and that reduces the ability for change even further. It's not good enough for political parties just to say 'if elected, we'll repeal' - that just leads to regular pendulum swings in policy that cause uncertainty and increase costs, he said. Contact scarlaw@businessnz.org.nz

USE DEBT TO FIX ROADS SOONER The Government should use increased debt funding to hasten the completion of roading projects in Auckland, Wellington and Tauranga - the conclusion of a new study of NZ's roading infrastructure The report, by the Allen Consulting Group, compares road systems in the NZ cities with those in Sydney, Melbourne, Toronto and Singapore which all have 'orbital networks' (road networks feeding into large ring roads). The report says the NZ cities need to complete their unfinished systems to 'join up the unconnected parts,' saying the reduction in transport costs would be a significant benefit to business. The report, which also recommends significantly increasing the number of passing lanes around NZ, was co-sponsored by Business NZ. Contact nclark@businessnz.org.nz

RIGHT TO MANAGE UNDER THREAT The employer's right to manage may be threatened by the new test for unjustified dismissals proposed in the Employment Relations Law Reform Bill. This was the view expressed by Business NZ's Tim Cleary in an address to the Employment Law Institute this week. Currently the Court must decide whether the employer's action fell within a range of possible reasonable actions, not whether the Court would have decided differently from the employer, but Mr Cleary said comments in the Explanatory Note to the Bill could be taken as permitting the Court to substitute its decision for the employer's - a departure from accepted legal thinking.

He said adopting the proposed test of 'legitimate interests' could lead to redundancy decisions also being decided in the same way - where the Court is able to substitute its decision for the employer's - to the detriment of the employer's right to manage. The Chief Judge of the Employment Court had also expressed concerns before the Select Committ GROWTH STATS

VISITORS STILL FLOCKING TO NZ

* Short-term visitor arrivals during July were up 19% on July 2003, reaching 173,300, the increase a sign of the bounceback from SARS in 2003. * Over the July 2004 year, there were 2.278m visitors, up 11% on the previous year. Holidaymakers accounted for 51% of the overseas visitors, followed by visiting friends and relatives (28%). * There were more visitor arrivals from Australia (+18,800), China (+3,200) and Japan (+1,500). Asian visitors are back up to similar levels to 2002 (41,300 for July 2004 compared to 44,200 for July 2002).

IMMIGRANT NUMBERS DECLINING

* Permanent and long-term (PLT) arrivals exceeded departures by 1,600 during July, compared with stronger net gains of 3,500 and 3,000 PLT for the July 2002 and 2003 months respectively. The number of NZ and non-NZ citizen arrivals fell in July 2003, while departures increased for both groups. * There was a net migration gain of 20,600 for the July 2004 year, down 51% from the 42,100 recorded during the July 2003 year. NZ citizen arrivals fell by 700, while departures rose by 3,600. Arrivals of non-NZers decreased by 12,600 and departures rose by 4,700. * There was sluggish or negative growth in net PLT inflows from most countries, notably China (down 66.8% to 4,746), and India (down 90.7% to 3,103) when comparing the July 2004 year with the year before. * There was also a higher 34.7% net outflow to Australia (12,716 for the July 2004 year compared with a net outflow of 9,436 for the July 2003 year).

INCREASED PRICE INPUTS, OUTPUTS

* The Producers Price Index (PPI) output index rose 1.3% during the June 2004 quarter, the largest quarterly increase since the Sept 2001 quarter. Over the year it rose 1.9% from the June 2003 to June 2004 quarter. * There were strong increases in the meat & meat product manufacturing (+7.4%), construction (+2.5%) and wholesale trade (+1.7%) indexes. * The major offsetting index was electricity generation and supply (-6.9%). * The PPI inputs index rose 1.6% during the June 2004 quarter, following a 0.5% rise during the March quarter. Over the year, it rose 1.5% from the June 2003 to June 2004 quarters. * The most significant quarterly rise came from the wholesale trade index (+3.0%), mainly due to higher prices in mineral, metal and chemical wholesaling because of higher crude oil and natural gas prices. In contrast, the electricity generation and supply index fell 11.1% due to lower bulk electricity prices because of higher lake levels.

CAPITAL GOODS PRICES RISE

* The Capital Goods Price Index (CGPI) increased 1.5% during the June 2004 quarter, compared with 0.9% for the March quarter. Over the year, the CPGI rose 3.6% from the June 2003 to June 2004 quarter.

* Rising building costs continue to be the main driver of an overall increase, with the increase in the residential buildings index for the year to the June 2004 quarter was 9.8%, the largest annual increase since the June 1995 quarter and the fourth largest rise since the creation of the index in the March 1990 quarter.

* The transport equipment index rose 0.2%, while the plant, machinery & equipment index fell for the tenth successive quarter, falling 0.1% during the June quarter. Respondents cited the exchange rate, followed by changes to suppliers' or manufacturers' prices as the most common reasons for price changes during the quarter. For more information see www.stats.govt.nz

WHAT'S NEW on www.businessnz.org.nz * Business NZ-KPMG Compliance Cost Survey 2004 * Small firms still worst hit by compliance costs * NZ's path to growth * Getting roading right * Thoughts on unjustified dismissals

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