Labour’s two levels of minimum wage

July 2, 2014

BusinessNZ is not impressed by Labour’s intention to create two levels of minimum wage if it implemented its immigration policy:

The policy released on the weekend says low-paid migrants push wages down for New Zealanders, and a Labour government would make it compulsory for businesses to pay migrant workers at least the living wage, after accommodation deductions.

BusinessNZ Chief Executive Phil O’Reilly says having a minimum wage for New Zealanders and a higher minimum wage for migrant workers makes no sense.

“Whether it is called a living wage or any other name, it would basically be a higher minimum wage for migrant workers.

“The policy appears to be based on advice from a Lower Hutt church agency that promotes an arbitrary wage level without bearing accountability for that advice.

“This is hardly the way to make public policy.

“New Zealand’s skills shortage is a complex problem. It requires the education system to be delivering more needed skilled people. It requires students to be making more realistic study and career choices. In the absence of these, many employers are forced to seek migrant workers.

“Labour’s policy proposal to require higher rates of pay for migrant workers than New Zealand workers does not address our skills shortage problem and would create problems of its own.

The idea would create problems for workers and employers.

Local workers on one wage would rightly feel hard done by doing exactly the same work as immigrants but knowing they were paid less.

Problems employers already have getting enough staff willing and able to work would be exacerbated if immigrants were priced out of the market.

BusinessNZ sees other problems with Labour’s policy:

Labour’s new immigration policy would mean Immigration New Zealand would be given the power to make employers train New Zealanders before getting the nod to employ workers from overseas.

BusinessNZ says the policy released by Labour this weekend appears to convey employers are to blame for skills shortages in New Zealand.

BusinessNZ Chief Executive Phil O’Reilly says Labour’s policy is “wrongheaded.”

“What Labour’s doing is a bit worrisome because what they’re saying is they are going to be much tougher on employers.

“They’re saying you’ve got to skill up your workforce before you come knocking on the immigration door.”

He says the government needs to work with businesses to help solve the skill shortage.

“You can’t just train them all up in a week. Sometimes, no matter how much good work government does with employers and the likes in terms of training for some of those skills, they go overseas too.

“This is always going to be an issue, with the gap between the skills a business needs at any given time and what the skills system in New Zealand can deliver them.” . . .

Sometimes businesses can afford to take on someone and train them, sometimes they need someone already skilled.

Locals are usually the preferred option as it is because there’s usually extra administration involved in hiring immigrants.

But sometimes an immigrant will be more suited to the job than a local and employers don’t need more hurdles to jump before they can fill a vacancy.

New Zealand needs productive businesses to contribute to economic growth.

Their ability to do that will be compromised by Labour’s policy which is a thinly disguised attempt to limit immigration and looks like its been written by unions.


More tax, higher costs, fewer jobs

June 2, 2014

The Green Party plans to impose a carbon tax on us:

. . . Co-leader Russel Norman wants to scrap the current carbon pricing system – the Emissions Trading Scheme.

In its place would be a tax of $25 per tonne of carbon on industry polluters. . .

Critics of the tax claim the tax is a burden on households, who pay higher electricity and fuel costs.

However, the Greens say their levy would be offset by a ”climate tax cut” on the first $2000 of income. 

”We can reduce our emissions without hurting household budgets,” he said. ”Households will be on average $319 better off every year under the Green party policy.” . .

Imposing a tax with one hand and giving a tax with another won’t make anyone better off because the tax will lead to other cost increases on fuel, power and food which will passed on, in part or full, to consumers.

Agriculture – which is currently exempt from the ETS - would pay a reduced rate of $12.50 per tonne. This works out as an 12.5 per cent hit on farmers’ income. This includes 2 per cent on the working expenses of the average farm. A Berl Economics report, released with the policy, said dairying will be ”adversely affected.”

Dairying won’t just be adversely affected by the carbon tax, it will be hit by other Green policies too.

But it adds: ”However, at the currently projected pay-out for milk solids, even dairy farms in the lowest decile would remain well above break even in the face of an emissions levy.”

What happens when the payout drops to its long-term average which is well below the $7 forecast for the coming season?

What about the environmental impact of less efficient farmers in other countries increasing production because our produce is more expensive which makes it easier to compete with us?

And what about the poor people who will face higher prices for dairy products, power and fuel?

Other gas-emitting industries – such as electricity and road fuels – are less likely to be affected because they would be able to ”pass-on any production cost increases to households.” . . .

That will be the households whose earners will be getting a tax cut, the benefit of which will be less than the cost increases from the extra tax.

BusinessNZ Chief Executive Phil O’Reilly said the levy may threaten jobs. 

“Our approach should be unlocking business solutions rather taxing business more,” he said. 

As a “small open trading economy” New Zealand should participate in international emissions trading schemes.

Federated Farmers president Bruce Wills said the tax will make dairy farmers “less competitive” in international markets. . .

Less competitive means lower returns which means less export income which means less economic growth which means we’ll be less able to fund the first world education, health and other services we need.

However green they want to paint it, this is a red policy which will add costs, put downwards pressure on wages and threaten jobs.

Bernard Hickey told last week’s  Alliance Group Pure South conference that the election will be close.

He then went on to list the policies that farmers could expect to adversely affect them under a Labour/Green coalition with whichever other left-wing parties they’d need to govern.

They included: capital gains tax, compulsory KiwiSaver and water restrictions and charges.

Those are three very good reasons to vote National and the Green carbon tax is another.

And Steven Joyce points out some inconvenient truths:

 

 

 


Labour no longer champion of poor

April 30, 2014

Labour once claimed to be the champion of the poor.

The monetary policy announced by its Finance spokesman David Parker yesterday is further proof that it has strayed far from that because it would hit the  poor hardest.

Labour’s plan to use New Zealanders’ retirement savings as a monetary policy tool would hit low and middle-income New Zealanders hardest, and not achieve what Labour thinks it would, Finance Minister Bill English says.

“This idea mixes up people’s own retirement savings – which require certainty over a long period – with the Government’s monetary policy, which the Reserve Bank reviews and can change every six weeks. The two are completely different and should stay that way.

“Labour’s approach will force people to save at least 9 per cent of their wages, plus more when the Government decides to up the contribution rate. This cut in take-home pay would hit hardest those low and middle-income families who are unable to save much, or who are focusing on paying their mortgages.

“Our current monetary policy settings are considered world-best practice. In the last few years we’ve come through a domestic recession and a global financial crisis and now have sustained economic growth, increasing wages and jobs and interest rates are just coming off 50-year lows.

“Labour’s ‘tool’ is a confusing solution looking for a problem. This is wishful thinking and there is no evidence it would actually work. Even if it did it would  require Kiwi families to accept a higher cost of living and higher compulsory savings at the same time, which would be a double squeeze on them.

“Labour has a recent history of over-spending in government. It should commit to spending less itself, rather than forcing householders to do the hard work for it.

“Low and middle-income earners would be paying the price for Labour’s lack of discipline,” Mr English says.

Compulsory savings isn’t going to appeal to people who have little or no spare money to save.

Compulsory savings with a variable rate which means you could be forced to save even more of the money you don’t have to spare will have even less appeal.

The idea behind the proposal is to give the Reserve bank and alternative tool to interest rates for fighting inflation.

No-one with borrowed money welcomes interest rate rises but at least most people have some control over how much they borrow and how quickly they repay it.

When interest rates go up they could choose to reduce their debt.

With compulsory savings they would have no choice about how much they pay, and no choice about reducing the amount they had to pay.

Increases in compulsory savings rate will hit everyone but interest rate rises affect  a relatively small number of people directly: *

Only  26% of single families and 55% of couples have mortgages.

Then there’s the impact on wages.

Labour’s compulsory scheme would require greater contributions from employers over time.

When working out what they can afford to pay staff it’s the total cost not where the money goes that matters so a greater contribution to KiwiSaver accounts will leave employers with less for wage increases.

Rob Hosking explains why Labour’s big tool won’t work:

. . . The  entire policy rests on the assumption a lower interest rate will also lead to a lower exchange rate. This is by no means a given. . .

The second issue is more political.

Forcing people to save more is not a costless move for them. Someone on an average income who suddenly has another chunk of their cashflow taken out of their weekly income is going to feel the pinch. . .

Forcing people to give up something is going to be fraught with political difficulty.

When it to implementation you can expect a wave of applications for exemptions, and this can be expected to lead to an administrative catscradle  and a political tangle. . .

BusinessNZ  chief executive Phil Oreilly has concerns about the workability of the policy:

. . . The proposed policy would ‘mix the targets’, he said. Instead of a sole focus on inflation, the Reserve Bank would also have to focus on achieving a positive balance of payments, stable economic growth and stable employment. This raises the risk of not achieving some or all targets.

“New Zealand’s external balance is a result of a number of factors, including over-consumption, over-regulation and inefficient government spending. It’s hard to see how the Reserve Bank can be particularly influential in changing these.”

Mr O’Reilly said there was potential for uncertainty and confusion from having different levers over interest rates and KiwiSaver rates.

“While the Reserve Bank would apparently retain control over its existing interest rate lever, it would probably need to go to the Government for the power to use the KiwiSaver savings lever each time it sought to do so. This would not only slow down the Reserve Bank’s decision-making ability, but would undoubtedly introduce politics into the decision making process. All of this would potentially add a great deal of political uncertainty to New Zealand’s macroeconomic settings.

 “New Zealand’s current Reserve Bank system is scrupulously apolitical. That is why other countries have followed our lead in monetary policy.

“Labour’s policy brings the risk of a future government politicising what has until now been an apolitical process.

“Can you imagine a future Government agreeing to a Reserve Bank recommendation to raise KiwiSaver rates three months before an election? “ Mr O’Reilly asked.

He said restricting immigration numbers as a way to reduce house prices could have negative consequences, potentially leading to wage inflation and constraints on firms unable to gain the skills they need.

“The policy announced today makes little mention of the key role played by other government policies in reducing house prices and making our economy more competitive. We note for example the recent Productivity Commission report on housing affordability which pointed to the key role played by land supply constriction in increasing house prices. ”

There would also be more uncertainty about incomes as a result of the proposed policy, he said.

“Income earners would be uncertain as to whether or not their KiwiSaver or their mortgage rates might rise, or both. This would have impact on private sector wage setting. . . “

So the policy won’t necessarily achieve it’s aim which is to reduce the exchange rate.

It would threaten the political neutrality of the Reserve Bank.

It would also leave people with less money to spend and it would leave them with no certainty over how much they would have.

Even the best budgeters are used to unexpected expenses but in the normal course of events we can all expect certainty over income.

With Labour’s proposed Variable Savings Rates, we won’t have any certainty.

It would be like being subject to possible changes in tax rates every six weeks and it’s the poorer people whom Labour used to champion who will be hurt most by that.

* Hat tip Lindsay Mitchell

 


Why stop at $15?

February 25, 2014

Labour Minister Simon Bridges announced the minimum wage will increase from $13.75 an hour to $14.25.

 . . The Starting-Out and training minimum wages will increase from $11 an hour to $11.40 an hour, which is 80 per cent of the adult minimum wage.

“Setting these wage rates represents a careful balance between protecting low paid workers and ensuring jobs are not lost,” says Mr Bridges.

“The increase announced today balances the needs of both businesses and workers and will have minimal impact on the wider labour market and inflationary pressures.

“This increase will keep the minimum wage at around 50 per cent of the average hourly rate, which is the highest rate in the OECD.

“The Government is firmly focussed on growing the economy and boosting incomes. Through our Business Growth Agenda we are creating opportunities to help grow more jobs in New Zealand, for New Zealanders.” . . .

That nearly half those surveyed think that’s not enough goes to show most people don’t understand the issues.

The only sustainable way to increase wages is by economic growth.

Without an increase in productivity and profit, an increase in wage rates will result in a decrease in job numbers.

The Green Party doesn’t understand that.

The Greens would have immediately raised the minimum wage to $15 an hour, Green Party Co-leader Metiria Turei said today. . .

Why stop there?

“Around 125,000 kids live in families where the adults earn less than the living wage. It is in the government’s hands to end poverty for working families and improve the lives of those kids. . .

Those families get Welfare for Families through which those with two children pay no net tax until they earn $50,000. Any increase in their pay will reduce their welfare. That’s less money from public coffers but they’ll be no better off and could be worse off if jobs are lost.

That living wage is an arbitrary figure and last week’s increase in it was based on different methodology from the original figure:

The ‘new’ living wage has shifted the goalposts and appears to be more about politics than public policy, says BusinessNZ.

Last year the living wage campaign said $18.40 should be the living wage, calculated on the basis of the living costs of a family of four.

The promoters now say the living wage for this year should be updated to the higher rate of $18.80.

“But the report shifts the goalposts,” BusinessNZ Chief Executive Phil O’Reilly said.

“The increase from $18.40 to $18.80 is not based on the same methodology as last year.

“Using the same methodology, for the same family of four, would show the new living wage should really be $22.89.

“If last year’s formula said $18.40 was needed for a living wage, and the same calculations now show $22.89 is required, why isn’t the campaign seeking $22.89 an hour?” Mr O’Reilly asked.

“Either the original calculations were flawed, or the campaign is just picking numbers out of thin air.”

Mr O’Reilly said decision makers could not have confidence that the living wage figures were soundly based.

“This switch in the figures used is important for taxpayers and ratepayers who are being asked to pay for the campaign. Wellington ratepayers are now funding the living wage policy for council employees and taxpayers would be funding it for all government employees under Labour Party policy.

“There can be no confidence in a living wage proposal set on an arbitrarily changing basis.”

The whole concept of a living wage which decrees everyone should be paid enough to support a family of four, regardless of what the work they do is worth, is flawed.

For the record, all our staff are paid more than the minimum wage.

That’s a decision we make in negotiation with them taking into account their skills and experience, what they’re required to do, the value of all of that and what the business can afford.


LabGreen power plan would be worse

February 11, 2014

The LabourGreen power plan would be worse for consumers than the current system.

The electricity market in New Zealand is extremely competitive, with consumers able to switch retailers to gain lower prices, and more consumers using metering and home energy management systems to save more. But the electricity proposals of the Labour and Greens parties would be less able than the current market to meet consumer needs.

These are among the key findings of an analysis of the electricity market commissioned by BusinessNZ and undertaken by Sapere Research Group.

BusinessNZ Chief Executive Phil O’Reilly says it is valuable to get rigorous analysis on a sector that is complex and sometimes poorly understood.

“The electricity market was established in 1996 and has operated under changing rules since then. The research makes it clear that under the current 2010 rules, the electricity market is developing towards a highly competitive, well-functioning market.

“The electricity market’s greatest problem has been a lack of transparency around prices. Energy companies have not explained price changes clearly enough, and this has led to doubts about whether prices have been unnecessarily high in the past. BusinessNZ is recommending that energy companies ensure that the reasons for future price changes are meticulously itemised. We also recommend investigating whether we should have rules for information disclosure around price setting.

“The Sapere research also notes that a segment of the market may be experiencing energy hardship in having to spend too great a proportion of their income on house heating. BusinessNZ recommends investigating options for policies within the market and the social welfare system to help alleviate this,” Mr O’Reilly said.

Sapere found the electricity market is achieving positive outcomes against five key criteria:
1. Secure supply of electricity
2. Efficient operation and market transactions
3. Efficient investment in assets
4. Social requirements
5. Environmental requirements

Sapere also analysed NZ Power proposals (Labour and Greens policies) against the same criteria. Sapere concluded that these policies would be less able than the current market to meet the five criteria, and would not resolve transparency or energy hardship problems. . .

The Labour Green power plan would make the electricity supply less secure, lead to less efficiency in operation and market transactions, less efficiency in investment, poorer social requirements and poorer environmental requirements.

Rather than fixing any problems, real or perceived, it would exacerbate them and the people who would be most disadvantaged by the added costs and poorer efficiency would be those least able to afford them.

That isn’t unusual when ideology comes before practical considerations.

Key findings of the report are:

• Outcomes under all of the public policy goals are for the most part positive but there are some areas where more effort should be applied
• Security of supply has improved under the market, and investment in generation, transmission, and distribution assets is keeping ahead of demand without government subsidy or direction
• Retail electricity price increases have not been transparent enough
• There appears to be insufficient action to address energy hardship experienced by some consumers who live in houses that are too cold and damp
• The NZ Power proposal would be less able than the current market to deliver against the five goals, and would not resolve transparency or energy hardship problems

BusinessNZ recommendations:
• Retain current electricity market framework as superior to the alternatives across a range of desirable policy objectives

• Aggressively pursue net-benefit positive improvements to the efficiency of the current market arrangements by improving price transparency:
i. Investigate rules for information disclosure around price setting
ii. Fast-track Electricity Authority and MBIE workstreams on price transparency

• Confirm the nature and size of the issue of energy hardship, acknowledging that efforts by the electricity market will benefit those affected only marginally

• Implement options to aid those experiencing energy hardship, in a systematic, whole of-government way (including the appointment of a lead agency), such as:
i. Requiring landlords who receive state money to make their houses available for social housing to submit their houses to a ‘warrant of fitness’
ii. Replacing the poorly targeted Low Fixed User Charge with a better initiative
iii. Reviewing initiatives in health and welfare that can help address energy hardship

The full report is here.


WTO delivers

December 8, 2013

The World Trade Organisation has delivered:

The World Trade Organisation (WTO) has agreed on its first-ever global deal aimed at boosting commerce. Analysts say it could add $1 trillion to the global economy.

The agreement – reached in Bali after marathon negotiations between trade ministers from 159 nations – simplifies trade procedures and also makes it easier for the poorest countries to sell their goods by reducing export barriers and allowing such nations more scope to use subsidies to safeguard food supplies.

It is seen as an important step for the WTO, which has struggled to make new trade agreements since being founded in 1995, the BBC’s economics correspondent reports.

“For the first time in our history, the WTO has truly delivered,” says WTO chief Roberto Azevedo. “This time the entire membership came together. We have put the ‘world’ back in World Trade Organisation.”. . .

The core of the deal is trade facilitation:

. . . This is about reducing the costs and delays involved in international trade. It is often described as “cutting red tape”.

Some analysts suggest the benefits could be large. An influential Washington think tank has put the potential gains to the world economy at close to $1tn and 20m million jobs.

It also estimates the cost of administrative barrier as double the cost of tariffs.

The rich countries have agreed to help the poorer WTO members with implementing this agreement.

Another important aspect of the Bali package is about enabling poor countries to sell their goods more easily. This part is about tariffs, and also quota limits on imports.

Rich countries and the more advanced developing countries have agreed to cut tariffs on products from the poorest nations.

The head of New Zealand’s International Business Forum says a new global trade deal agreed by the World Trade Organisation (WTO) will mean cheaper and faster exports.

International Business Forum executive director Stephen Jacobi says exporters’ goods will be fast-tracked through international customs as the facilitation part of the deal cuts down on red tape for traders.

“The main benefit of this agreement is that it will become easier and faster and cheaper to move goods around supply chains, to export our goods around the world, and indeed to import our goods from other countries.”

Business New Zealand chief executive Phil O’Reilly says the WTO deal will boost the confidence of trade ministers meeting in Singapore to try to reach agreement on the proposed Trans-Pacific Partnership trade deal.

The deal marks the WTO’s first global trade agreement since it was created in 1995 and follows years of failed attempts to secure the required unanimous approval from all its members. . . .

British Prime Minister David Cameron says the deal could be worth more than £1 billion a year to British businesses and £70 billion globally.

“. . . By slashing barriers to trade, this deal will also provide a lifeline to the world’s poorest people. Helping developing countries to grow is not only the right thing to do, but it also increases potential markets for us all. So this really is win-win and the World Trade Organisation is to be commended for this historic deal.”

Trade restrictions mean people get less for what they produce and pay more for what they consume and this hurts poorer people and poorer countries hardest.

Freer trade is fairer trade and poorer people and countries have the most to gain from it.


Boardrooms back Bill

July 25, 2013

Finance Minister Bill English has won well-deserved praise in the Herald’s annual Mood of the Boardroom  CEO’s survey.

Finance Minister Bill English has emerged as the hidden “star” of the Key Government pole-vaulting boss John Key for the second year in a row to emerge as the highest rated Cabinet Minister by leading chief executives.

“Bill English has really been an exceptional Minister of Finance,” said BusinessNZ CEO Phil O’Reilly. “He has been sober, boring and sensible but the macro settings have been just right. He deserves more credit for that.”

English’s “Southland determination” to get the country’s books back into order and “dour, no-nonsense personality” are cited by chief executives as making him the perfect foil for a populist prime minister. “He can just get on with the business,” said a financial markets chief.

The Herald’s 2013 Mood of the Boardroom CEOs Survey, in association with BusinessNZ, found widespread support for English’s management of the economy. . .

This matters.

Businesses which have confidence in the government and the direction in which it is taking the country are more likely to make the investments which boost economic growth and crate jobs.

The Finance Minister’s ability to deliver on his aim to post a Budget surplus in 2014/2015 has been buoyed by growing taxation returns off the back of stronger corporate profits; the proceeds of the partial privatisation programme and a determination to keep government spending under control.

In his post-Budget speech to the Trans Tasman Business Circle John Key spelt out how he would like New Zealanders to remember his government. Key said if the Government can achieve a step change in New Zealand, “in years to come they will say ‘I think that it held its nerve and fundamentally guided us through the global financial crisis and the Christchurch earthquakes and it set the country up to grow during a period of dramatic change in Asia’ and that is going to be a far bigger gift.

“New Zealanders will have jobs and families will have independence.”

That is a legacy every government should aspire to leave.

Seventy-two per cent of chief executives responding to the CEOs survey agreed that the Key-led Government has achieved that positive legacy; 9 per cent said No and 19 per cent were unsure. . .

“Most New Zealanders will not realise until much later what a great job Messrs Key, English and others have done steering New Zealand through the challenges of the last few years,” added First NZ Capital’s Scott St John.

“The way they have protected NZ households by maintaining fiscal discipline and keeping interest rates low has been very important.

“Amazing that we have come through the Global Financial Crisis with a short recession, low unemployment, Government debt at under 30 per cent, credit ratings OK and earthquakes,” added a wholesale trade CEO. “Overall it is impressive stuff. . .

It needs at least one more term to bed in the progress and achieve more.


Green’s not for growth

May 3, 2013

The Green party is soliciting funds for its election campaign with an email that says:

 . . . National’s policies of more mining, weakening environmental protections, poor economic management and growing inequality are not the recipe for a fair society and a better future.

 In contrast to National, we have the ideas to deliver a richer New Zealand. . .

Green is supposed to be the colour of growth but these Greens are really reds promoting the policies that have failed in the past.

Take their plan to bring down the exchange rate. Prime Minister John Key says currency intervention and printing money won’t work:

. . . “It didn’t work very well for Argentina, or Venezuela or Zimbabwe and it could never be done in New Zealand at the sort of magnitude we’ve seen in the United States,” said Key.

As for the New Zealand dollar versus its United States counterpart, Key used a seesaw analogy.

“It’s a bit like being a seesaw and if I weigh 85 kilos and you weigh 170 kilos, I’m going to go up when you sit on the seesaw and you’re going to go down. And that’s really the situation we’ve got at the moment.”

“We kind of weigh 85 kilos and the United States weights 850 tonnes. Right up to this point it (the US) has been very unwell. It has got everything from aids to bird flu. It has really been pretty unwell so the market’s just massively adjusting what they’re doing.”

When people say the Reserve Bank should be printing money, Key said you wouldn’t do that with base rates – the Official Cash Rate – at 2.5%.

“All you do is cut interest rates for a start off. The second thing was even if you printed money, it’s never going to work. I think they’ve printed US$5.5 trillion in the US. I mean it’s massive. So what would we print? NZ$50 billion or something? It wouldn’t make an iota of difference.”

“So my view would be I know we want to get the exchange rate down and I know it’s hurting a lot of companies. But it’s a cycle you’re going to have to ride through and all the Government can do is control the things that are in our control. So get out there and reform the Resource Management Act, make sure we don’t spend too much money, make sure we keep pressure off interest rates, manage the place well,” Key said. . . .

The reds want to increase the burden of government, their policies will lead to higher interest rates and they haven’t a clue about good economic management.

. . . Furthermore, he said intervention in the currency markets never works.

Here Key cited an example from his previous career at Merrill Lynch, where at one time he was head of global foreign exchange. One of Merrill Lynch’s biggest clients was the Bank of Japan, which used to intervene in the currency markets through Merrill Lynch.

“To tell you how bad it got, one night we were sitting there and the Bank of Japan rang up and the US$-yen was about 90 or something and they didn’t want it to go down lower. And the guy said to me ‘I want you to start buying dollars at 90′. And I said ‘how many do you want me to buy’, and he said ‘well, I’m going out for three hours so I’ll give you a yell when I get home.’ And I said ‘yeah, but how many do you want me to buy?’ And he said ‘I’m going out for three hours, don’t you understand the conversation?’

“I bought US$4.5 billion in three hours. He said ‘where is it (the US dollar-yen exchange rate)’ and I said ‘it’s 90, you bought US$4.5 billion. And he said ‘ah, well I’m off to bed now give me a ring in the morning’,” said Key.

“It never worked, it just never worked. I don’t know how much money they lost on intervention but it was massive.” . . .

Who do you believe – someone who has worked in international finance and has managed the country through the global financial crisis or people who want to print money and whose power policy would have a chilling effect on on private investment? Rob Hosking writes:

. . . There is something essentially frivolous about anyone who would cheerfully rip up the value of some of the country’s largest firms, and the value of the investment in those firms, simply for a political positioning exercise.

This is why the exchange caught by TV3 between Green energy spokesman Gareth Hughes and party spin zambuck Clint Smith was so telling.

For those who missed it, Mr Hughes was asked if the party was pleased at the reaction: Mr Hughes paused, turned to Mr Smith and asked “Hey, Clint – are we pleased?”

It was telling that he even had to ask.

But the almost palpable glee coming out of the Green and Labour camps at the destructive impact of their policy is highly revealing. 

It underlines – not for the first time – the problem with the makeup of both parties. They are dominated at the MP and the staff level by the sub-genus homo politicus.

That is, they are full of people who have done nothing in their lives apart from politics. All parties have a complement of this group, but with Labour and the Greens the group has reached critical mass.

This group has been involved in politics at university, moved from there to various political/union offices and then into parliament. 

There is little real world experience and everything is viewed through a very narrow prism of political advantage.

It’s the sort of attitude which means the value destruction seen this week can be just laughed off.

There will, unless we are careful, be more such frivolous policies to come.

I would use a far stronger word than frivolous and the business community certainly isn’t taking it lightly.

In an open letter to LabourGreen they say the policy would harm jobs, growth and investment, causing interest rates to rise, reducing KiwiSaver retirement savings and making people less well off.

. . .Business shares your concerns about constantly rising power prices and their impact on our global competitiveness. Businesses and consumers work hard every day to minimise their spending on electricity in order to stay in business and

to make their household budgets stretch further.
However, we do not think that electricity policies based on subsidies and greater state control are the right answers. Such policies have been tried in the past and have been shown to be incapable of meeting the challenges of a modern economy
with a complex, real-time electricity market.
 
Putting aside the sheer complexity of their implementation, policies that protect businesses from the full costs of the inputs they use ultimately dull the incentive to innovate and make them less, not more internationally competitive. Reducing retail
prices below the full marginal cost of production encourages households to use more than they should.
Of particular concern with the policies announced is their chilling effect on investment across the entire economy.
 
We are especially concerned at investment analyst reports noting the potential for $1.4 billion of shareholder value to be wiped off the books of the private power companies. A similar amount, if not more, will come off the value of the public power companies.
 
 
Capital destruction on such a scale will severely undermine business confidence.
It sends signals to investors, on whom the New Zealand economy relies, that their wealth and the benefits it provides are not welcome.
 
Investment plans and job creation opportunities are foregone.
 
Rather than remote and intangible, this dampening of investment intentions will have a direct and real economic impact on those of all walks of life who seek to accumulate wealth by working hard to save, invest and grow. It causes interest rates
to rise, depletes retirement savings held in KiwiSaver accounts and means that other economic opportunities such as first homes are foregone and new business ventures as savings are unexpectedly reduced.
 
Individuals are less well-off as a result.
 
With the good of all New Zealanders in mind we ask you to withdraw these damaging policies. We offer to work with you in increasing public understanding of the operation of the electricity market and in ensuring consumers, both small and large,
have better choice from one of the increasingly competitive electricity markets in the world.
 
Yours sincerely,
 
 Phil O’Reilly Chief Executive BusinessNZ
 
Ken Shirley Chief Executive Officer Road Transport Forum
 
Catherine Beard Executive Director Manufacturing NZ
 
Ralph Matthes Executive Director Major Electricity Users Group
Chris Baker Chief Executive Straterra

John Scandrett Chief Executive Officer Otago Southland  Employers’ Association

Raewyn Bleakley Chief Executive  Business Central–Wellington

Kim Campbell Chief Executive EMA

Peter Townsend Chief Executive CECC

Michael Barnett Director  New Zealand Chambers of Commerce

These people represent people who employ people, the ones who need certainty and confidence to make investment that creates jobs, earn export income and pay taxes.

These are people who work in the real world.

They know there’s nothing funny about bad policy that would take the country backwards, cost jobs and make us all poorer.

They know that Green isn’t for growth and it doesn’t mean go.

Green economic policy is bright red and it will mean stop to economic growth and job creation.


Powering back to socialist 70s

April 19, 2013

BusinessNZ calls the Labour/Green plan to nationalise electricity wholesalers economic vandalism.

Chief Executive Phil O’Reilly says the proposal would destroy a functioning market and replace it with heavy-handed bureaucracy.

“Inserting an army of bureaucrats between power generators and retailers would destroy price signals, so prices would not reflect the cost of generation.

“In that situation, the taxpayer would continue to pay ever higher subsidies of the electricity system. This is not sustainable.

“The Electricity Authority said only yesterday that the electricity market is as competitive as it has ever been. It can always be improved, and this is where the focus should be.

“It’s only competition that can drive prices down. Governments can’t do this, not without subsidising the sector from taxes.

“A state-controlled sector as envisaged by Labour would drive out private investment. Why would the private sector invest in generators when the state can determine the prices they can charge, while subsidising state-owned competitors?

“The private sector power companies would have to seriously consider their future in the market. Those who have invested heavily would basically find their profits confiscated.

“Interfering in the market in this way would send a signal to the rest of the world that it is not safe to invest anywhere in New Zealand. The knock-on impact from that, on jobs and growth, would dwarf any short-term benefit from artificially reduced electricity prices,” Mr O’Reilly said.

Energy and Resources Minister Simon Bridges says the Labour-Greens power plan is incoherent and will kill competition in the electricity market.

“Under the previous Government, electricity prices increased by 72 per cent. It has taken the National-led Government’s reforms to arrest these ridiculously steep increases on New Zealand households,” says Mr Bridges.

“The 2010 electricity market restructure is working. The market now has more players and much more competition than it ever had under Labour.

“New Zealanders are increasingly taking advantage of greater competition and are switching companies for a better deal – in some cases, saving up to several hundred dollars a year.

Since the Electricity Authority’s What’s My Number? campaign began in May 2011, there have been almost 700,000 consumer switches.

“Why scrap the whole electricity market when consumers can already save more than the economically illiterate promises the Opposition is making?

“These types of policies have been considered in the past and rejected for very good reasons. Consumers should be very afraid of them. They may look simple but all they will ultimately bring is higher costs to households,” Mr Bridges says.

Economic Development Minister Steven Joyce calls it a a half-baked Soviet Union-style nationalisation “plan”:

“This is truly wacky and desperate stuff obviously made up in the last minute in the Koru Lounge between comrades Norman and Shearer,” Mr Joyce says.

“Their crazy idea to have both a single national purchaser of electricity and to exempt Government-owned companies from both company tax and dividends would effectively demolish private investment in the electricity industry overnight. It would also raise real questions as to why any individual or company would want to invest in businesses in New Zealand.

“Even the idea of it is economic vandalism of the highest order, with the timing designed to try and disrupt the mixed-ownership company floats. What we are seeing here is a desperate Opposition that is prepared to sacrifice economic development in New Zealand on the altar of political opportunism.

“The sad truth is that Labour has no idea how to operate a competitive market that keeps downward pressure on prices. Labour made a number of reforms to the electricity market in the early 2000s and the result was power prices rising 72 per cent over nine years.

“This Government’s reforms have halved price increases while maintaining investment in generation and transmission. Labour’s suggestion today is no more than a belated apology for their mismanagement, with a back-to-the-70s solution that would only make things worse.

“You seriously have to question the quality of economic advice the Labour Party is getting. They really need to get a lot more serious if they are ever to be considered fit to manage the New Zealand economy.”

It’s not just the government questioning the policy.

Colin Espiner asks has Labour actually gone insane? As in stark, raving, Monster Loony Party mad?

I’m assuming the answer is yes, judging by today’s incredulity-creating announcement that, if elected next year, Labour will essentially nationalise the electricity industry. . .

The Opposition says it’s going to create a single buyer, NZ Power, that will buy all the country’s electricity generation “at a fair price” and then onsell it to consumers. 

It’ll pretty much give away a 300KW bloc to every household and then charge for additional units. 

At a stroke, Labour is proposing to dismantle the electricity market, ruin Contact Energy and Mighty River Power and decimate the Government’s share float plans for both MRP and Meridian. 

Oh, and sell thousands of mum and dad investors down the Mighty River, since MRP’s share price would almost certainly plummet if the company was forced to retail only through a government department at whatever price it deemed to be fair. 

Already Contact shares dipped 3 per cent on the news, and that’s just a taste of what would come if this policy was ever implemented.

I’m no fan of high power prices – and I don’t own any Contact or MRP shares – but what Labour is proposing is essentially nationalisation a la Brazil or Argentina. This is Third World, funny-money stuff. Goodness knows what the financial markets will make of it. And what message does it send to overseas investors? . . .

It’s extremely rare that I agree completely with Economic Development Minister Steven Joyce, but his comment today that the plan was “a return to the 1970s-style monopoly provision of electricity…Only North Korea and Venezuela did not think such ideas are nuts” is pretty much spot on.

I agree with Joyce that Labour is virtually sabotaging the economy. 

It is, in my view, also an indication that Labour does not believe it has any hope of winning the next election. In my experience, only political parties that know they have no realistic hope of winning an election propose things they know they will never have to try to implement. . .

There is no virtually about the economic sabotage this policy would inflict.

I was in parliament for Question Time yesterday.

The Government benches were enjoying themselves and Ministers made the most of the opportunity Labour and the Green Party gifted them:

Hon STEVEN JOYCE: The Electricity Authority yesterday released its review of the electricity market in 2012. The report showed 18 percent of customers, around 32,000 people a month, voted with their feet by switching electricity providers in 2012, presumably for lower prices. For the benefit of the Opposition, that is called “competition”. Since November 2008 annual electricity price increases have halved from the 8 percent year-on-year increases suffered by hard-working New Zealanders during the previous 9 years. This follows a number of pro-competitive reforms by this Government, which apparently the Opposition is not aware of. We have reconfigured State owned enterprise assets to increase competition, created the Electricity Authority and made it responsible for promoting competition, allowed line businesses to compete in the retail space, and funded promotion of consumer switching through the What’s My Number campaign.

Todd McClay: Has the Minister seen any other proposals to try to lower electricity prices?

Hon STEVEN JOYCE: Well, weirdly, yes, I have. Just before lunch today I received one report, which I believe came from the “North Korean School of Economics”. Apparently, the suggestion there was that nationalising the entire electricity industry would somehow lead to lower power prices. . .

That got a point of order call from Winston Peters to which the Minister responded:

Hon STEVEN JOYCE: If I could perhaps clarify my answer, I should clarify that I received a report from the local branch of the “North Korean School of Economics”.

I’d like to believe Espiner’s theory that this is the policy of parties which know they’ll lose the next election and therefore never have to implement it.

The only other explanation is that the people promoting them are so economically illiterate they don’t understand what they’re talking about.

Either way, it shows they haven’t learned from history because these policies would power us back to the socialist seventies and it would be all downhill from there.


Rural round-up

January 31, 2013

Central Hawkes Bay shearing record bid cancelled -

A World sheep shearing record attempt which was to have taken place today in Central Hawke’s Bay has had to be cancelled because the lambs selected for the event would not have met the requirements of the World Sheep Shearing Records Society.

Secretary Hugh McCarroll, of Tauranga, said the judges, including one from Australia, inspected sheep and deliberated for more than six hours in the woolshed at Moa Stone Farm, east of Ormondville, before making the decision after 9pm.

The judges, who had gone to the shed for the traditional day-before wool-weigh, where a sample of lams is shorn to ensure they meet an average minim of 0.9kg of wool per lamb, found many were “bald”about the head.

“There was just not enough top-knot,” he said. “All of the judges commented as they arrived driving past the sheep in the paddocks, there’s not a lot of top-knot on these sheep.”

“It was very disappointing,” he said. “They hadn’t done enough homework. It’ll be a bit of a wake-up call for everybody.” . . .

Fewer horses sold at Karaka but clearance rate up:

New Zealand Bloodstock’s 2013 premier sale wrapped up at Karaka on Tuesday with 323 of the 441 lots sold.

The total raised of $51.05 million was $3.085 million less than in 2012, with 27 fewer horses sold.

The sale average of $158,054 is a 2 percent increase on last year’s figure, while the median was unchanged at $120,000. . .

Meat Sector PGP Could Halt ‘Race To The Bottom’:

Federated Farmers Meat & Fibre is excited by Beef+Lamb New Zealand and its partners winning Primary Growth Partnership (PGP) funding that could supercharge New Zealand’s red meat exports.

“We should not be in any doubt that the international demand for red meat is there but the problem is articulating that into the returns our farmers and our country need,” says Jeanette Maxwell, Federated Farmers Meat & Fibre Chairperson.

“In the year to December 2007, red meat exports represented around 58 percent of dairying’s export value. But in the year to December 2012, that figure has fallen to 45 percent. . .

PGP project suggests meat industry ready to cooperate – Allan Barber:

Yesterday’s announcement of the Red Meat PGP Collaboration Programme for Greater Farmer Profitability at a total investment of $65 million is fantastic news for the whole industry. The key words are ‘collaboration’ and ‘farmer profitability’. The first of these has usually been notable by its absence, while the second combination of words has only been evident at irregular intervals.

 Half the funding will be made available from the Ministry for Primary Industries’ Primary Growth partnership fund, while 30% will come from farmers through Beef & Lamb New Zealand and Meat Board reserves and the balance from six meat companies, two banks and Deloitte. . .

Achieving virtual scale for our largest industry – Pasture Harmonies:

Scale matters in exporting according to the World Bank…..so here’s a way to get virtual scale for our biggest industry.

The World Bank’s recent report ‘Export Superstars’, shows that company size matters when it comes to countries’ exporting. Little SME’s don’t cut much mustard.

Business NZ chief executive Phil O’Reilly , in commenting on Rob O’Neil’s Stuff story that the World Bank wants us to think big, says

“New Zealand has some unique challenges to overcome in its incredibly small scale and being the most isolated developed economy in the world.”

O’Reilly goes onto say:

“one effective model is the aggregation of small businesses into groups allowing them to in some ways act like and gain the advantages of large businesses.”

Given that NZ Inc’s biggest business is the conversion of solar-derived pastures into various proteins and fats, through thousands of small on and off farm businesses (and even the large ones are mere tiddlers in the world scene), wouldn’t it make sense to aggregate if we could? . .

Future of postal services: Rural delivery a lifeline says Rural Women NZ:

Rural Women New Zealand says while it understands the need for NZ Post to look at its business model in the face of a dramatic decrease in mail volumes, the special role of the rural delivery service also needs to be acknowledged and preserved as far as possible.

“We appreciate that NZ Post has consulted with us extensively about the future options it’s considering,” says Rural Women New Zealand national president, Liz Evans. “In turn we have emphasised that the rural delivery service is a real lifeline for many people.”

The RWNZ Enterprising Rural Women Awards, now in their fifth year, have revealed the increasing number of small businesses in rural communities and beyond. . .

Bee decline could sting industry:

A scientist at the University of Canterbury warns a declining number of bees could threaten the New Zealand economy and more needs to be done to help farmers protect native species and pollinating flies.

Ecology professor Jason Tylianakis says there are about 430,000 hives throughout the country and the pollination of crops and clover is worth $5 billion to the economy each year.

He says honey bees are under pressure worldwide from diseases and pests, and managed hives are also at threat due to pests and chemical sprays. . .

Sealord signs WWF Tuna Pledge and commits to bycatch below 1%

Evidence of the lowest bycatch using information from every catch will help ensure New Zealand’s most popular tuna brand offers consumers even more sustainable seafood products.

Sealord has also become the country’s first signatory of the WWF’s Western Central Pacific Tuna Conservation Pledge which brings together brands, harvesters and manufacturers focused on ensuring tuna fishing is well managed.

“WWF welcomes Sealord’s decision to sign the WWF Tuna Conservation Pledge and their support for targeted conservation measures that reduce bycatch in their supply chain,” says Alfred Cook, WWF’s Western Central Pacific Tuna Programme Officer . . . .

NZ Wineries Whet Consumers’ App-Etites:

A new range of smartphone apps are helping wine and food enthusiasts connect with wineries throughout New Zealand. The applications, created by NZ Wineries, are designed to keep consumers up to date with the latest news, wine releases, special offers and events in wine producing regions.

Graeme Bott, an emerging winemaker and founder of NZ Wineries, says the apps are a great way to bring the New Zealand wine industry and consumers closer together.

“We wanted to make the engagement between wineries and shoppers/tourists seamless. Through our apps, we can send instant notifications to our users informing them of wine updates in their specified region.” . .

And (hat tip Frankie) the official ambassadors for The Year of Natural Scotland:

Click to enlarge image ponies-in-sweaters.jpg


TPP – threat or opportunity?

December 9, 2012

Is the TPP a threat to democracy?:

Almost three quarters of a million people around the world have signed an online petition that brands the Trans-Pacific Partnership (TPP) agreement a “threat to democracy” and a “corporate takeover”. . . .

“Many hundreds of thousands of people from around the world have sent a blunt message to politicians and corporations who tout the TPPA as a model for the 21st century that it does not represent not their 21st century”, said Jane Kelsey, who has been asked to present the petition to the negotiators. . .

Or is it of seminal importance for jobs?:

The Trans Pacific Partnership is of seminal importance for developing job opportunities in New Zealand, says Kim Campbell, chief executive of the Employers & Manufacturers Association.

But alongside our ongoing struggle to win access for our agricultural products we need a completely separate work stream dealing with intellectual property, Mr Campbell said.

“It is evident that in terms of the TPP, intellectual property is a complicated rat’s nest full of ambiguity and vested interests,” he said.

“Well-resourced groups have the capacity to subvert the TPP process if we are not most careful to ensure it is robust and enduring.

“Hence the need for caution and precision over the agreement’s terms and conditions.

“New Zealand business will be paying close attention to the details of this part of the agreement because tomorrow’s globally integrated business world will be driven by intellectual property.

“And we are 100 per cent committed to New Zealand negotiating a high quality TPP agreement for the job opportunities and economic growth prospects it can undoubtedly deliver.”

Business NZ sees the importance of the TPP for people:

The Trans Pacific Partnership will help build more successful communities, says BusinessNZ.

Speaking at the Trans Pacific Partnership Forum in Auckland today, BusinessNZ Chief Executive Phil O’Reilly said the TPP has the potential to raise living standards around New Zealand.

“This trade agreement goes beyond the 20th Century approach of simply seeking to reduce tariffs and border restrictions.

“It recognises the fact that industry now relies on complex supply and value chains involving producers in many different locations and countries. New Zealand is deeply involved in many international value chains and the TPP will enable more New Zealand businesses to trade more effectively in more countries, and that means increased growth and more jobs for New Zealanders.

“The particular value of the Trans Pacific Partnership is that it involves many of the fastest growing economies on earth. Economic growth in the Asia Pacific region is surging and the TPP will help unlock that growth for New Zealand’s benefit.

“It’s appropriate that New Zealand’s negotiators are focused on protecting and advancing our interests including public health, intellectual property, the environment, and the Treaty of Waitangi, and success in these areas will mean a high-quality trade deal that is sustainable in the long term,” Mr O’Reilly said. . .

Both sides of this argument are right about the need for caution over some of the details.

But one side is anti-trade in general and using that bias to oppose the TPP in its entirety.

The other realises the importance of trade for maintaining and creating work opportunities here and earning the export income which will support the first world economy and society to which we aspire.


Denmark, Finland and New Zealand 1 = least corrupt

December 6, 2012

Denmark, Finland and New Zealand tied in first place in Transparency  International’s Global Corruption Perceptions Index.

While welcoming this recognition for New Zealand, the local chapter of Transparency International is promising that its newly launched National Integrity System assessment will provide a much more nuanced and detailed report on the country’s vulnerability to corruption.

“Our ambitious National Integrity System Assessment will give the most detailed answer yet to the question, ‘What factors cause New Zealand to rank consistently at the top?’” Says Suzanne Snively Chair of TINZ and NIS Steering Group Co-Chair.

Snively continues, “The NIS assessment is more ambitious and comprehensive than any previously conducted. The strong support we are receiving through funding agencies and participants indicates a commitment on the part of New Zealanders to remain a high trust society. New Zealanders are recognizing that not only is this ranking a source of pride, it represents a significant competitive advantage and economic benefits for New Zealand business.”

Lack of corruption is something most of us take for granted.

It’s usually not until we travel to other countries where the institutions and people can’t be trusted as they can be here that we understand and appreciate the value of integrity.

We met the head of an international bank a few month ago and were discussing which countries it operates in.

We asked if it had plans to do business in a couple of countries in South America.

His answer was swift – no, you couldn’t be sure you’d get your money back.

New Zealand’s high trust society is both a national treasure and an economic asset. Forbes magazine ranks New Zealand first on its most recent list of the Best Countries for Business thanks to a transparent and stable business climate. According to Phil O’Reilly Chief Executive of Business New Zealand “New Zealand’s high trust public sector is it’s greatest competitive advantage.”

We need inward investment and we’re far more likely to get it than other countries where transparency, stability and trust are less common.


Land & Water Forum’s final report generally welcomed

November 16, 2012

The Land and Water Forum’s final report fleshes out the detail of a new consensus for a major reform of water laws and practices in New Zealand,”  Forum chair, Alastair Bisley, said.

“The breadth of this consensus provides a once in a generation chance to resolve the entrenched problems surrounding fresh water.”

The Forum is recommending integrated decision-making in catchments, continuous improvement of management practices and clearer rights to take and use water within set limits.

Mr Bisley said: “Our reports together provide a comprehensive and detailed blueprint to maximise opportunities from fresh water for us all – farmers and fishers, power generators and recreationalists, citizens and tourists, cities and industries.

We want to grow the economy and improve the environment. Our recommendations apply to both urban and rural catchments. They provide for iwi to play their role as Treaty Partners and stakeholders.

“We call for community decisions at catchment level – within national frameworks and bottom lines from central Government.”

The Forum proposes a collaborative approach at both national and catchment levels to set and implement objectives for waterways, prescribe limits for takes and discharges where these are required, and to find fair, efficient and accountable ways to implement the limits.

“The Forum believes all water quality solutions should be tailored to individual catchments,” said Mr Bisley.

“Good management practice by land and water users is the basic tool. Incentivising it is the preferred approach. Regions are accountable for managing within limits. Industry schemes, catchment-wide initiatives and regulation may all help to ensure the limits are achieved within the agreed timeframes.

“Water available for users once limits have been set should be allocated with long-term economic welfare in mind.

“All authorised takes should be brought progressively within the allocation system.

“As catchments become fully allocated, consents should be clarified and strengthened to preserve their value. Water should be made more easily transferable between users while limits are preserved.” . . .

He described the report as a once in a generation opportunity :

 . . . While there were some notable non-signatories to the outcomes of the four year experiment in consensus decision-making, the forum managed to get 95 percent of its 60-plus members from industry, local government, iwi, environmental groups, recreational users and farmers across the line on 67 recommendations.

Among signatories are the national farming lobby, Federated Farmers, although their objection to any system requiring water rents saw the forum make no recommendation in that area.

The system it promotes would see the government establish national guidelines and standards for freshwater catchment management, which would be used by regional councils as the foundation for collaborative processes at a local level to establish “scarcity thresholds” for freshwater resources. . .

Dairy NZ has welcomed the report:

DairyNZ says the key to setting and managing to water quality limits is collaborative decision-making at a catchment level.

Commenting today on the release of the final Land and Water Forum (LAWF) report, DairyNZ chairman John Luxton says, “We recognise, as the LAWF report does, that this kind of community-driven catchment process needs to become the centre of water quality and quantity management.

“That is how we will make a difference to water quality – catchment by catchment across the country. Communities understand that, because people can relate any impact to the place where they live and work and their local waterway, so will take some ownership of the actions.”

He says that dairy farmers are already involved in these kinds of processes throughout New Zealand. . .

Beef + Lamb New Zealand Welcomes Third Land And Water Forum Report:

The final report from the Land and Water Forum strikes a balance between preservation and production, says Beef + Lamb New Zealand.

As a member of the forum we sought recognition for sheep and beef farmers as stewards of our rural land, while preserving opportunities for those who manage water sustainably.

It has been a long and complex process, says Beef + Lamb New Zealand Western North Island Farmer Director, Kirsten Bryant. “But, ultimately, one in which the voices of water users of all different types have been heard and in which we have all worked together for the good of all of New Zealand.”

She welcomed the emphasis throughout the process on local people making local decisions, within a national framework. . .

Meridian Energy also welcomes the report:

Meridian Energy today welcomed the release of the Land and Water Forum’s (LAWF’s) third report.

Chief Executive Mark Binns congratulated the Forum for pulling together a complex and diverse group of water interests.

“There are a range of views on the right approach to manage New Zealand’s fresh water resources. This forum has enabled all parties to put their views on the table,” says Mr Binns.

“Recognition should go to Chair Alistair Bisley and all Forum members for their four year collaboration. The result is three quality reports that will help improve water management for New Zealand.”

The water allocation report marks the conclusion of the Forum’s work. “LAWF’s collaboration provides an opportunity for making positive change to the way New Zealand manages its water. This framework is capable of protecting the environment and enabling economic growth,” says Mr Binns.  . .

Business NZ says the recommendations are positive:

The third report of the Land and Water Forum brings useful recommendations for improving New Zealand’s freshwater management, says BusinessNZ.

Chief Executive Phil O’Reilly said water was essential for many business activities which drive New Zealand’s economy and on which many New Zealanders rely for employment and income growth.

“Businesses require the confidence to invest in infrastructure and other capital projects knowing their rights to use water are clearly understood and secure.

“Investors are risk averse and any changes in the right to take or use water over time need to be clearly understood.

“It is important that transfer and trade in water rights are facilitated to the extent possible allowing water to move to its highest valued use, without unnecessary restrictions from regulators.”

Fish and Game says cherry picking would derail a water clean up:

Fish & Game NZ says the release of the third and final Land and Water Forum (LWF) report will only have an impact on improving freshwater management if the Government accepts all of the Forum’s recommendations, which are interconnected, and not pick and choose those which suit.

In these three reports the Government now has the bones of a blueprint – reached by consensus – for how to manage the public water resource, says Fish & Game NZ chief executive Bryce Johnson.

“All three reports must be treated as a package deal,” he says. “LWF’s second report recommended the need for a national objectives framework for water quality but the Government took it upon itself to develop these outside the forum framework. We’ve never had reasonable justification for that decision, which is odd given all the expertise was around the LWF table.

“LWF has been deliberating on these issues to reach a consensus for fouryears now and during that time freshwater quality and quantity has continued to deteriorate,” says Mr Johnson. . .

Federated Farmers supports the recommendations:

“Despite what is said at times about our environment, we must never forget we still enjoy some of the highest quality water on earth,” says Ian Mackenzie, Federated Farmers water and environment spokesman.

“LawF recommendations are about setting a pathway to protect and over time, improve our already high water quality. It is about better managing our most precious natural resource to fulfil our social, economic, environmental and cultural needs.

“Farmers support this aspiration and Federated Farmers is committed to playing our part in achieving it.

“We know the way we farm will need to change. Perhaps what needs to be fully understood is that change is also needed beyond agriculture. LawF covers all water, rural or urban, so we are all in this together.

“At the heart of LawF recommendations is for communities to adopt a collaborative process in setting water quality limits. This mirrors the one we have gone through on LawF itself. It is a very good way to understand issues in depth.

“Any collaborative process must be genuinely informed by what limits mean for individual communities. It is about striking a balance between what is feasible and what is not.

“Federated Farmers does take issue with some regional councils rushing to set limits. This fails to inform or involve the community in what will affect jobs, a community’s standard of living, or for that matter, its makeup.

“There are also some local councils who believe they ought to be exempted because they cannot achieve limit objectives and therefore, shouldn’t have to. It is the kind of thinking some farmers may have harboured decades ago, but not now.

“For agriculture, the regulatory process should embed Good Management Practice (GMP), the inclusion of farm environmental plans and where appropriate, Audited Self Management (ASM).

“Good Management Practice provides a holistic way to address water quality issues than the nitrate myopic approach suggested by many regional councils.

“Good Management Practice should further help communities decide where limits should be set, so as not to cause social and economic damage. I guess this is about empowering communities to find the right balance.

“LawF recommendations are a roadmap and Federated Farmers supports them,” Mr Mackenzie concluded.

Te Wai Maori Trust says the report is a practical and sensible solution to fresh water management:

New Zealand’s future as a leading primary sector producer as well as our nation’s 100% Pure New Zealand brand depends on our ability to sustainably manage the valuable fresh water resource. The third report of the Land and Water Forum (LAWF), released today, provides a responsible yet practical way forward to freshwater management, the Te Wai Maori Trust says.

Te Wai Maori Chairman Ken Mair today called on the Government to implement the recommendations, which found that iwi rights and interests must be resolved for any freshwater management regime to be stable and durable in the future.

“There are a range of competing uses for fresh water throughout the country – from dairying to crop farming, urban demands to tourism uses. But the Government will not be able to resolve them in a durable manner until it engages with iwi over Maori rights and interests in fresh water,” Mr Mair said. . .

Regional councils say the report cements their role:

Chair of the regional sector group Fran Wilde said the report cements the role of regional councils in managing New Zealand’s freshwater resource and highlights the need for a more supportive national framework for collaborative decision-making.

“Regional councils are at the forefront of water management and use a variety of methods to manage and enhance water quality,” said Ms Wilde.

“There is strong support among councils for collaborative decision-making regarding water quality management and we have a number of successful examples of this in action.” . .

Environmental Defence Society endorses Land and Water Forum Report:

The release of the third and final report from the Land and Water Forum has been welcomed and endorsed by the Environmental Defence Society.

The Forum originated at the 2008 EDS Conference where an initial support group from a wide range of interests, including farming and environmental, agreed to try and find a better way of managing freshwater.

“It’s been a long road since then, with the Government getting behind the exercise and the core group expanding to include representation from all key stakeholders and from iwi. Four years on there is now a package of measures that need to be taken together and implemented by Government,” said EDS Chair Gary Taylor. . .

However, Irrigation NZ says last minute changes weaken the report:

IrrigationNZ says last minute changes to the Land and Water Forum’s Third Report, ‘Managing Within Limits’, have weakened its integrity.

“IrrigationNZ has spent the past year collaborating in good faith to reach agreement on how water quantity and quality is best managed in NZ. A package that provided a sound platform to support sustainable future growth in New Zealand had been produced. However, last minute changes, particularly to the water allocation section, mean IrrigationNZ now questions whether the Land & Water Forum is the collaborative consensus- based process it claims to be?” says IrrigationNZ CEO Andrew Curtis.

While Mr Curtis says there are many positives within the final report, including the need for; community-driven catchment-based water management; industry ‘Good Management Practice’ as the preferred route; development of community water infrastructure to address over-allocation; and a move to plan-led water management – IrrigationNZ has major concerns about parts of the water allocation chapter.

Certainty is the key if irrigators are to invest in sustainability. Irrigators need long-duration consents and an explicit right of renewal,” says Curtis. “Short durations and uncertainty of renewal will produce reactive and high- risk thinking which creates scenarios prohibitive to capital investment. If the community wants environmental gains without job losses or food price increases, then New Zealand must implement a resource management system that allows for long-term investment and thinking.”

There is also a need for community-driven water infrastructure solutions to be consented for over 50 years. This would improve the viability of initial and on-going capital investment. In return for this, IrrigationNZ agrees consents need to adapt in a timely manner to environmental limit changes. “This is the most logical package for water allocation,” says Curtis. Having recently returned from an overseas study tour of irrigation developments in the UK, Israel and Australia he says, “It is also consistent with water allocation internationally.”

“Irrigators have committed to more sustainable farming practices. Certainty, long-term thinking and catchment-based water management are the only way water quality and quantity objectives set by the wider community will be achieved in New Zealand.”

The full report can be downloaded  here.


Left don’t learn from history

October 10, 2012

The statistics on the youth unemployment rate are unequivocal – it increased far more steeply than rate for older adults when the youth minimum age was axed by Labour.

But have people and parties on the left learned from that? No.

Yesterday Labour Minister Kate Wilkinson announced a starting-wage for young people and immediately got this response:

Lower wages no solution – from the Council of Trade Unions.

Poverty pay won’t give young people skills or jobs - from the Service and Food workers Union.

More youth to pack for Australia – from  Hone Harawira.

National offers young workers a hefty pay cut – Metiria Turei.

And low wage no future at all from David Shearer.

None of these people have joined the dots between increasing the cost of employing young people and the sharp increase in the unemployment rate for that age group.

The Employers and Manufacturers Association has a far more positive view of the starting-wage:

Everyone concerned about our alarming rates of youth unemployment should be celebrating today’s announcement on the Starting-out wage, says David Lowe, Employment Services Manager for the Employers and Manufacturers Association.

Then they will be looking out for more ways to help, he said.

“Without an incentive an employer with a choice between an experienced worker and an inexperienced worker will choose experience every time,” Mr Lowe said.

“Though there is no silver bullet for creating jobs for young people, the Starting-out wage offers a vital first step up the employment ladder.

“Unless there is an incentive for taking on the added issues of employing youth workers, young people will continue to be over represented in the unemployment numbers.

“The Starting-out wage will restore a form of youth rates that were abolished in 2006 and which proved, as predicted, to hurt the very people its supporters were trying to help.

“Independent research from Pacheco at the time found job opportunities for youth would fall by nearly 20 per cent for all teenagers if youth rates were abolished, but that turned out to be very conservative.”

BusinessNZ also sees the starting-wage will benefit the economy and communities:

Chief Executive Phil O’Reilly says having to pay unskilled teenagers at adult rates makes it hard for many young people to get a job.

“Not being able to get that initial job prevents many young people from gaining workplace skills, further reducing their future employment chances.

“A starting-out wage at 80 per cent of the minimum wage for the first six months’ employment will make it easier to employ a young person so they can gain those vital workplace skills.”

Mr O’Reilly said the policy announced today would particularly benefit teenagers who were vulnerable to being trapped on a benefit through being unable to compete effectively for a first job.

Costings indicate that with accommodation and other applicable subsidies unaffected, a teenager on a starting-out wage would earn more than if on a benefit.

“Getting more young people into jobs – especially including those currently on a benefit – will benefit the economy and communities all through New Zealand,” Mr O’Reilly said.

If employers have to pay people the same rate they are almost always going to favour age and experience over youth and inexperience.

Enable them to pay younger people a bit less in recognition of the bigger investment required in training and the bigger risk with people with no work experience, and they will be more willing to take them on.


Councils’ purpose needs clarity

September 16, 2012

BusinessNZ says the purpose of local government needs to be properly established in new legislation:

Chief Executive Phil O’Reilly says the purpose statement in the current Act is very broad and permissive, and has resulted in a number of councils taking on, or investing in, too many non-essential activities exposing ratepayers to unnecessary risk and cost.

“The current Act allows councils to ensure communities’ ‘four wellbeings’ – social, cultural, economic and environmental – and this very broad purpose statement has allowed councils throughout New Zealand to continue to expand their operations into the provision of services which more appropriately should be undertaken by the private sector, if at all. Moreover, councils have backed projects with marginal or negative economic returns. Businesses often bear a disproportionate share of these costs given the significant use of business rating differentials by many councils.

“The Amendment Bill has a more restrained purpose statement and is a significant improvement on current legislation, but should to be tightened further.

“A clearer definition of local government’s important role is essential,” Mr O’Reilly said.

Amen to that.

Although Tourism New Zealand is concerned events and festivals will be at risk.

“The tourism industry is concerned that the Local Government Act 2002 Amendment Bill could restrict councils investing in events, festivals and other visitor infrastructure if it is passed in its present form,” TIA Chief Executive Martin Snedden says. . .

TIA is calling for local government to continue to be allowed to invest in the visitor industry, which creates jobs and income in communities around the country. Support from visitors makes possible a range of events and festivals that residents also enjoy, enhancing that community’s vibrancy and well-being. . . .

Events and festivals do attract visitors and add to the vibrancy of communities but current legislation has enabled councils to back them at great cost with questionable return.


Accountability requires good information

August 9, 2012

Education Minister Hekia Parata announced that achievement education for schools will be publicly available on a Ministry of Education website, Education Counts,.

It will allow parents to see how their child’s school is performing and will allow the Government to see how well the system is doing as a whole in order to raise achievement for all learners.

Public Achievement Information will include National Standards data, Education Review Office (ERO) reports, schools’ annual reports and NCEA data. Over time other relevant national and international reports will be added.

National Standards data, reported for the first time this year, will be published on the website in September in the format that schools’ submitted it.

“I accept that the data is variable. It is the first year, and no consistent format was required so that was to be expected. It can only get better and better both in quality and its use over time and we want to work with schools to do this,” says Ms Parata.

Using a variety of data is a good idea because it will give a much fuller picture of a school’s performance than just one source, especially if that was reports on National Standards which the Minister admits is inconsistent.

Business New Zealand has welcomed the announcement:

BusinessNZ Chief Executive Phil O’Reilly says more accessible information is
essential to improve school performance.

“Accountability for performance requires good information. . . “

Unions and the left are painting this as an assault on schools and teaching. It’s not, it’s merely a tool to improve transparency and accountability.


Partner schools could help those other schools can’t

August 3, 2012

 

The government’s announcement on the framework for Partnership Schools has found favour with Business NZ  which says choice and flexibility are good for learners.

The inclusion of another option for quality schooling is welcome, says BusinessNZ.

Chief Executive Phil O’Reilly says all learners deserve a bright future and this requires choices and flexibility for learners and their families.

“One of the strengths of the New Zealand schooling system is the variety of different types of schools.

“Tai Wānanga, state, private and integrated schools, tertiary-high schools, service academies, and trade academies all bring different strengths and values to their learners and communities,” Mr O’Reilly said.

“Partnership schools will be a welcome addition to this suite of education options.

“The partnership school model will provide options for flexibility and innovation that some other learning options currently available are not able to provide.

“The focus has to be on meeting the needs of the learners and ensuring that their potential is realised“Business is particularly interested in improving outcomes for all students by ensuring that they are well equipped for success in work and further learning. Our hope is that increased choice and flexibility for learners will result in improved achievement for many more of our young people.”

New Zealand’s education system does very well for most pupils but it’s failing with the long tail of under-achievers who leave school with no qualifications and without the skills needed to get and hold down a job.

An alternative system provides an opportunity to help those the current system can’t.

 


It’s up to business

July 29, 2012

Anyone who has taken a modicum of interest in politics in the last four years should be in no doubt about the government’s economic plans.

They might not like it but they should understand it.

But a majority of respondents to the Herald’s mood of the boardroom survey say the government has failed to articulate its plan.

Just how much does a political party have to do to get its message across?

Almost every speech from Prime Minister John Key, Finance Minister Bill English, and any other minister who mentions the economy spell out the plan quite clearly.

Perhaps those who haven’t got the message should follow this advice:

Can’t understand why the Business leaders aren’t aware of the present National Governments long term PLANS. I have certainly had no trouble finding and understanding where National wishes to position NZ, such that the sons and daughters of not only Business Leaders, but all NZ’ers will have a future in NZ.This is a vastly different future to that which Parker is planning for when he rolls Shearer next year, a possibility, regardless of the recent labour conference change of rules.
The information is out there, if one looks; BUT you are unlikely to find it headlined in the written, or voice media. They are too Socialist.
Perhaps the Business Leaders should step out of the Cocktail circuit, and visit their local National Party office for a briefing; or if they wish have both, hold the Chardonnay glass in the left hand, and lookup the National website using the Right hand.

However, in spite of what respondents to the Herald survey said, a BusinessNZ survey show its members do understand, and support, what the government is doing:

BusinessNZ chief executive Phil O’Reilly said the “standard response” that might otherwise be expected from business was that the Government should cut spending. But the results from his organisation’s survey were consistent with what members were telling him.

“They are supportive of this kind of track the Government’s taking. You don’t want to get so much austerity that you push the economy into recession – at the same time you don’t want them to just blast money everywhere in the hope of getting the economy moving faster because a lot of it will be low-quality spend.” . . .

O’Reilly said the SME Snapshot results largely reflected what business people told him every day. That included the widely held view among members that they generally supported the direction of the Government’s “relatively conservative economic reform programme”.

Building business competitiveness, reducing Government spending as a proportion of GDP, improving New Zealand’s international situation, and building innovation and skills were all regarded as important.

“There will be some in the business community that will have concerns about the pace and execution of government policy, but they broadly support it.

Regardless of what businesses know and understand about government’s plans, the good ones treat governments like the weather, enjoy it when it’s good and do all they can in spite of it when it’s not.

The businesses that get on with their businesses, concentrating on what they can control, are the ones with the best chance of success which will be good not just for them but for the wider economy.

This point is made by Liam Dann:

. . . In reality business knows that there is little point in looking to Government for any major new spending in the next few years.

So what next? Where does all this leave business in 2012? Where will the circuit breakers for this economic cycle come from?

We are going to need strong and innovative leadership from the business community to turn the tide. And we are going to have to see some of that dogged optimism translate into business spending.

Teasing the public out of its recessionary mindset will be a slow process but it is a chicken and egg scenario. Business can lead the way by being proactive and trying new things. It is never easy because there are many reasons why we can’t afford to do something. But if the alternative is slowing sinking in the mire of a stagnant economy – can we afford not to?

Governments come and governments go, so do recessions.

The global financial crisis one isn’t going anywhere fast and it will have an impact here.

But where there is crisis there is also opportunity and businesses which realise it’s up to them and do what they can about it will help turn the tide.


Speakers lets sun shine on access

July 26, 2012

Proving once more that sunlight is a good disinfectant, Speaker Lockwood Smith has released a list of members of the public who hold access cards to Parliament:

Dr Smith said that members of the public were only given approved visitor status if they had been security cleared and agreed to their names being public.

“The benefit of being an approved visitor is that the person does not have to be security screened each time he or she comes to Parliament. Instead, an approved visitor can access the public areas of Parliament through a security cleared entrance”, said Dr Smith.

 CARD HOLDERS
Name Organisation
Nicholas Albrecht Vector
Tim Clarke Russell McVeagh
Peter Conway Council of Trade Unions
Daniel Fielding Minter Ellison Rudd Watts
Charles Finny Saunders Unsworth
Helen Kelly Council of Trade Unions
Tony O’Brien Sky TV
Phil O’Reilly Business NZ
Leigh Pearson L.A. Pearson Limited
Barrie Saunders Saunders Unsworth
Mark Unsworth Saunders Unsworth
Jordan Williams Franks & Ogilvie
Rasik Ranchord Parliamentary Breakfast Group
 Philippa Falloon Former MP’s spouse
Lady Jane Kidd Former MP’s spouse

Ag entry to ETS postponed to 2015

July 3, 2012

Changes to the ETS announced by the government are designed to maintain incentives for emission reductions, without loading large extra costs onto households, employers and exporters.

“Today’s decisions are a reflection of the balanced and responsible approach this Government has taken to reducing greenhouse gas emissions.  They offer Kiwi exporters, employers and households certainty in a challenging and changing world economy,” Climate Change Issues Minister Tim Groser says. . .

“We have considered in-depth the recommendations of the ETS Review Panel, listened to what those affected by the ETS are saying, and reviewed what our trading partners are doing.  We also considered feedback through community consultation, including written submissions, a series of regional meetings, and hui.

“The National-led Government remains committed to doing its part to reduce greenhouse gas emissions, but it is worth noting that we are the only country outside Europe with a comprehensive ETS.  In these times of uncertainty, the Government has opted not to pile further costs on to households and the productive sector.

“The Government remains an active and engaged participant in the on-going discussions focused on global agreements, and the changes announced today offer us useful flexibility to adapt in the future, while still demonstrating our commitment to doing our fair share,” says Mr Groser.

Not surprisingly the left reckon this is disastrous.

However, Business NZ says the government has taken a reasonably balanced approach to carbon pricing in its amendments.

The protections – companies having to surrender carbon units for only half the carbon they emit, and a cap of $25 per tonne in the price of emissions –recognise the fact that New Zealand is ahead of most of the world in accepting a price on carbon.

BusinessNZ Chief Executive Phil O’Reilly says the changes will maintain incentives for emissions reduction while shoring up New Zealand companies’ ability to compete against companies in other countries.

“The move recognises the financial constraints not only on businesses but also on consumers.  It guards against increases in the price of electricity and fuel that would otherwise occur because of an unequal international playing field.

“This is not a softening of the ETS.  The changes announced today will not reduce the costs currently faced by New Zealand business and consumers.

“We should remember that the current cost of carbon, although relatively low, is still more than is being faced by our trade competitors, and will doubtless increase as the global economy recovers.

“While these amendments do not make the environment harder for business, neither do they make it easier.  Moreover the frequent reviewing of the scheme’s design also loads uncertainty costs onto New Zealand business.

 Federated Farmers says the changes, which include delaying the entry of agriculture into the scheme, are one step towards reality:

The New Zealand Emissions Trading scheme (ETS) has taken a big step towards forward, yet remains the harshest treatment of any agricultural production system on earth.

“The Government realises even tougher measures would hurt not just agriculture but the wider economy,” says Dr William Rolleston, Federated Farmers Vice-President and climate change spokesperson.

“Both our Chief Executive, Conor English, at the Rio+20 Earth Summit  and our President, Bruce Wills, at the World Farmers Organisation, got the same message; targeting primary food production in ETS-type policies is anathema to sustainable primary food production.

“In a world preoccupied with the survival of their economies and with food security, there is no point in trying to lead where others will not follow.

“Yes biological emissions account for some 47 percent of New Zealand’s emissions profile.  They also represent 68.1 percent of our merchandise exports and indeed, 100 percent of the food we eat. 

“New Zealand is able to not only feed itself, but produces enough food to feed populations equivalent of Sri Lanka. 

“This is why it is positive the Government has listened to Federated Farmers and will keep agricultural biological emissions out of the ETS until at least 2015. 

“We have retained the one-for-two surrender obligation we asked for, along with the $25 fixed price option. Federated Farmers also wanted offsetting for pre-1990 forests and opposed the reduction of pre-1990 forest allocations. The Government has listened to that too, but those who do offset will be penalised. 

“We are pleased the Government has chosen not to further complicate matters by imposing additional restrictions on the importation of overseas emissions units.

“Despite what some Opposition parties are likely to say following these changes, our ETS remains the harshest on any agricultural production system, anywhere in the world. 

“Unlike other countries where agriculture is given special treatment, farmers here, just like every other business and family, pay the ETS on the fuel and energy we use.  This not only impacts a farm’s bottom line, but the cost of turning what we produce into finished goods for export.   

“Australia’s new Carbon Tax is really aimed at Australia’s 300 largest companies.  Meanwhile, Australian farmers are being financially rewarded for boosting soil carbon levels on-farm. 

“Since 1 January, all agricultural processors in New Zealand have been filing emission returns accounting for agricultural biological emissions.  We are still counting emissions no other government is contemplating, including our cousins across the Tasman.

“While agriculture emissions here grew 9.4 percent between 1990 and 2010, the dollar value these generated for NZ Inc exploded almost five-fold.  Our sector’s emission growth needs to be put into context alongside a 59 percent increase in electricity emissions and 60 percent for transport.

“What’s more former Labour Cabinet Minister, the Hon David Caygill, found emissions in every single unit of agricultural product have fallen some 1.3 percent each year, for the past 20 years. 

“We do not need an ETS to improve our productivity.  Global competition has done that for us. 

“That New Zealand’s farmers are among the world’s most carbon efficient, is an inconvenient truth New Zealanders are not hearing from Opposition politicians. 

“We can do more but that will be through productivity gains and research leadership exemplified by the Global Research Alliance on Agricultural Greenhouse Gases.

“In a world of increasing food deficit, our hope is for Opposition parties to realise being a carbon efficient food exporter is global leadership,” Dr Rolleston concluded.

The Kyoto Protocol was the triumph of politics and bureaucracy over science and negotiations have yet to reach agreement on its successor.

There is nothing to be gained for the environment and a lot to be lost from the economy if agriculture is forced into the scheme when none of our competitors faces similar costs.


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