Paying for poor policies

August 31, 2018

Business confidence has dropped to the lowest point for 10 years:

In the August ANZ Business Outlook Survey headline business confidence dropped a further 5 points to a net 50% of respondents reporting they expect general business conditions to deteriorate in the year ahead.

However, firms’ perceptions of their own prospects are a much better gauge of actual economic outcomes. This series stabilised at a net 4% expecting an improvement, well below the long-term average of +27%. By industry, manufacturers’ expectations dropped 11 points to become the least positive about their own activity (-4%), while retail and services improved somewhat.

Turning to the survey detail:

* A net 5% of firms are expecting to reduce investment, down 6 points. It is rare for this series to be negative.

* Employment intentions fell 8 points to -6%. No sectors are positive.

These two points are most concerning. Businesses reducing investment and with negative employment intentions will have a direct and negative impact on the economy.

* Profit expectations were flat at -17%. Retail and manufacturing are the weakest sectors at -27% (up 1%pt) and -28% (down 12%pts) respectively.

* Firms’ pricing intentions fell 2 points to +27%. They are strongest for construction but also lifted for retail. Inflation expectations were flat at 2.2%.

 * Residential construction intentions eased 3 points to +13%, while encouragingly, commercial construction intentions bounced 13 points to -4%. . . 

The economy is delicately placed. But it seems increasingly inevitable that wariness amongst firms will have real impacts, in the near term at least, as investment and employment decisions are deferred. . .

The outlook isn’t all bad.

But firms have real concerns about industrial relations policy, minimum wage hikes and costs more generally – and particularly about their ability to pass on higher costs and maintain profitability. Troubles in the construction sector appear to be starting to cause stresses in related firms. And exporting firms will be keeping a nervous eye on signs that global growth has peaked. . .

The Taxpayers’ Union says the drop in confidence shows the urgent need for tax reform:

. . .Taxpayers’ Union Economist Joe Ascroft says, “Businesses need more than a working group. They need real changes in policy direction, including tax reform. Business breakfasts with CEOs and Cabinet Ministers simply won’t cut it for the average small business.”

“Company tax rate cuts – accompanied by full capital expensing – would put a rocket under business investment and put an end to the doldrums. If focused at measures to boost productivity, the evidence shows that tax relief would flow through to workers in the form of higher wages.” . .

Tax reform would help and not just for businesses.

The lower dollar helps export returns but increases the cost of imports, including fuel, the price of which is also being boosted by extra taxes:

The Government’s obsession with fuel taxes shows it doesn’t care about the cost of living for ordinary Kiwis, National’s Transport spokesperson Jami-Lee Ross says.

“Now is the time for solutions to the cost of living, not new taxes. National is taking the initiative with a bill lodged today to repeal regional fuel taxes within three months.

“Fuel prices are sitting at record levels across the country and are set to rise further because the Government is proposing three additional rounds of national fuel tax increases totalling an extra 12 cents a litre of fuel in new taxes.

“In addition, there is an 11.5 cents a litre regional fuel tax in place in Auckland that will be rolled to other regions in a few short years. It adds to this Government’s sorry record of driving up costs for households and businesses and choking economic growth. . .

 

But tax is only part of the problem. The Government has several other poor policies that we’re all paying for:

The message from economists is loud and clear: the Government’s bad economic policies mean New Zealanders will be thousands of dollars a year worse off, says National Party Leader Simon Bridges.

“In the last three months alone NZIER has revised down their GDP growth forecasts which means every man, woman and child will be $1600 a year worse off on average by 2022. That is $6400 for a family of four.

“NZIER are clear that the decline in the economic outlook isn’t just sentiment. Profitability has deteriorated and businesses’ own activity, a measure closely correlated with GDP growth, has weakened. There are real implications for businesses, workers and New Zealanders trying to get ahead.

“The reason GDP growth is now faltering is because this Government has imposed a wide range of policies that are bad for growth. They have imposed more taxes, shut off foreign investment, significantly increased labour and compliance costs, banned oil and gas exploration and wasted billions on low-quality spending.

“And what was the Prime Minister’s solution this morning: another working group. The Government needs to understand that lower growth has real consequences for New Zealand families. Working groups do not drive economic growth, good policies and hardworking New Zealanders do.

“So the goal is simple. We must grow the economy if we want New Zealanders to be better off. A growing economy means more jobs, higher incomes and more revenue to pay for the things we need.

“We need to be pro-growth as that is the only way we can improve our standard of living. National wants New Zealanders to keep more of what they earn. Higher taxes, more regulation, compliance costs and a rising cost of living do nothing to help families get ahead.

 

Added costs and uncertainty are a poisoning business confidence and this week’s announcement of a business council is no antidote.


Rural round-up

February 28, 2015

Dairy commits $5 million to ambitious zero pest plan – Suze Metherell:

New Zealand’s dairy industry has committed $5 million over two years to the fight against stoats, rats and possums, which destroy native flora and fauna, and can carry bovine tuberculosis.

The Zero Invasive Predators scheme, or ZIP, formed after a $10 million injection from philanthropic fund NEXT Foundation, and a further commitment of $5 million from the Department of Conservation. The funds will be used to develop the Wellington-based conservationist’s barrier system, which aims to prevent the reintroduction of pests in cleared zones, without using fences.

New Zealand’s major dairy companies, including Fonterra Cooperative, Westland Milk Products, Open Country, Synlait and Tatua, have contributed to the programme, which is trialing its system on the 400 hectare Bottle Rock peninsula in the Marlborough Sounds. The dairy industry wants to eradicate possums because of the TB threat to dairy herds. . .

 Dairy funding for predator control welcomed:

The announcement that the dairy industry will join an initiative to tackle the predators decimating New Zealand’s native wildlife is another positive step on the way to achieving the long term goal of a predator-free New Zealand, Forest & Bird said today.

Five major dairy companies, including Fonterra, have committed $5 million to the Zero Invasive Predators (ZIP) programme, which was founded late last year by NEXT Foundation and the Department of Conservation. The partnership intends to find new ways to eradicate introduced predators such as rats, stoats and possums from large areas of land.

Forest & Bird Group Manager Campaigns and Advocacy Kevin Hackwell welcomed the dairy industry involvement in the campaign to stop the decline of our native wildlife due to invasive predators. . .

NZ business confidence gains in February as agri sector gets more upbeat – Paul McBeth:

  (BusinessDesk) – New Zealand business confidence improved in February as recent gains in dairy prices turned sentiment around in the agriculture sector, and as low interest rates stoke hiring and investment expectations.

A net 34.4 percent of firms are optimistic about the general economy, up from 30.4 in the previous survey, according to the ANZ Business Outlook. That was aided by a turnaround in agriculture to a net 15.2 percent becoming optimistic, having previously been dominated by pessimists. Firms’ own activity outlook showed a net 40.9 percent of respondents upbeat on their prospects, compared to 37.3 percent.

“General confidence, profit expectations and employment intentions in this sector (agriculture) have flipped from negative to positive,” ANZ Bank New Zealand chief economist Cameron Bagrie said in his report. “Higher dairy prices are no doubt working their magic. Such a bounce-back is particularly welcome considering challenges delivered by Mother Nature.” . .

 

Fonterra’s journey – Keith Woodford:

[This is the second of five articles on Fonterra that I have been writing for the Fairfax NZ Sunday Star Times. This one was published on 8 February 2015. The previous article was titled ‘The evolution of Fonterra’ ]

Last week I wrote about the battles that led to the formation of Fonterra in 2001. However, Fonterra’s structure and associated institutional culture have moved a long way since then.

Sufficient time has elapsed since Fonterra’s formation battles that they can now be seen in reasonable perspective. But subsequent events are still raw. In line with corporate policy, the participants have largely kept their opinions private, and the official line is a product of the public relations team. However, in a co-operative structure, it is inevitable that information does leak. One thing for sure, is that some of the internal debates have been vigorous. . .

Forest safety council underway:

The forest industry has established a safety council to make forests safer places to work. This was a key recommendation of the Independent Forestry Safety Review Panel that reviewed forest workplace safety in 2014.

The Forest Industry Safety Council will formally get underway in early April. But in the meantime a working group representing forest owners, contractors, workers, unions and the government is putting the building blocks in place. An independent chair and national safety director are being recruited.

There were 10 workplace deaths and 169 serious harm injuries in forestry in 2013. This led to the industry establishing the review panel which reported in late October 2014. . .

Sailor convicted after biosecurity ramp-up in Northland:

A sailor who appeared in the Kaikohe District Court last week (17 February) has become the first person convicted for deliberately concealing biosecurity goods on a visiting yacht.

The conviction follows increased biosecurity scrutiny of arriving yachts by the Ministry for Primary Industries (MPI) at Northland this yacht arrival season.

Sylvie Berthe Barre, 61, a retired French national, had earlier pleaded guilty to one charge of knowingly possessing unauthorised goods, and misleading an official. She was fined $3000.

She is currently staying in New Zealand on a three-month visiting visa. . .

2015 Northland Field Days Could Be Biggest Ever:

The 2015 Northland Field Days is shaping up to be the biggest ever according to organisers with more exhibitors, more competitions and better facilities than ever before.

From February 26 to February 28 people from Northland and beyond will flood into Dargaville for the Northland Field Days with high expectations

With over 450 companies exhibiting at the event this year Northland Field Days president Lew Duggan says interest has never been higher with exhibitors taking the extra effort to make site displays more dynamic and exciting than ever.

Those interested in getting a glimpse into Northland’s history will be getting a special treat this year say organisers but not one but two heritage organisations having displays at the event. . .

 Mammoth donkey heads for record books – David Farrier:

Jenny Clausen is famous in Taupiri for a very specific love – donkeys.

The locals call her the “donkey lady” thanks to the 30 or so donkeys she keeps at her and her husband’s dairy farm.

But Ms Clausen may also soon be in The Guinness Book of World Records for one of her donkeys.

Nutmeg is a mammoth donkey born and bred in New Zealand, and she’s bigger than your normal mammoth. . .

New Zealand and Australia Tie in the Trans-Tasman Wine Challenge:

New Zealand Winegrowers injected some old fashioned rivalry in ‘The Great Trans-Tasman Wine Challenge’ on Thursday evening in Auckland ahead of the New Zealand and Australia Cricket World Cup game at the weekend. The two nations channelled their trans-Tasman rivalry as they met head-to-head in a blind wine tasting.

After some rigorous judging lead by Bob Campbell MW and Nick Stock, the ‘dream team’ of top 12 wines turned out to be a perfect split from Australia and New Zealand with each nation claiming six places each. Australian wine, Campbells Merchant Prince Rare Rutherglen Muscat NV, was crowned “player of the match”. . .

 


Why business confidence matters

March 7, 2014

First the good news:

Finance Minister Bill English talked up NZ’s economic progress this week, telling Parliament Treasury’s Monthly Economic Indicators for February show the positive momentum in the economy in the September 2013 quarter continued into the December quarter. The number of people employed increased by 66,600 in 2013, unemployment fell to 6%, and total weekly gross earnings were 5.2% higher than a year earlier, reflecting the combined effect of wage and job growth. Labour force participation, the proportion of the adult population available for work, is close to a 28-year high. The rate of building consents is at the highest level since 2008 and has doubled since 2011. Consumer and business confidence are relatively high.

And why it matters:

English says the Govt is focused on a more productive and competitive economy, and that means working to rebalance the economy so more of it is exposed to world trade. “In the long term we need to see less Govt spending and less domestic consumption, and more focus on profitable export sectors that earn a living for NZ from the rest of the world. The importance of business confidence is it tends to drive investment decisions. So when business is confident about the future, it is more likely to borrow the money or raise it from other sources and invest in the plant and equipment and the opportunities for more higher-paying jobs. Without that confidence, we will not get the investment and the better-paying jobs.”

And for those who think the minimum wage is too low:

The ANZ Business Outlook survey shows 71% of firms are optimistic, the highest level since 1994. English says the Govt is focused on locking in gains from this positive outlook where it has a direct role in doing so. The increase in the adult minimum wage to $14.25 an hour, from $13.75 an hour, takes it to a level 19% higher than in 2008. The Govt has sought to balance the needs of workers and businesses to keep the minimum wage at around 50% of the average wage, and this relationship of the minimum wage at 50% of the average wage is the highest in the OECD. . .

Those who complain the minimum wage is still too low forget too things – imposing a minimum wage costs jobs and it’s a floor not a ceiling.

Apropos of which, does anyone know how many people receive the minimum wage, how many of those are full time, permanent employees and what ages they are?


Confidence levels soar

December 19, 2013

The good news keeps coming with confidence in agriculture at a 19-year high; manufacturing at a 15-year high and service at their highest level in 14 years:

New Zealand business confidence rose to its highest in almost 15 years this month, adding to evidence the economy is picking up pace.

A net 64.1 percent of firms are optimistic about general business conditions, up from 60.5 percent last month, according to the December ANZ Business Outlook survey. Firms seeing a pickup in their own business activity rose to a 19-year high of 53.5 percent from 47.1 percent last month.

ANZ’s composite indicator of business and consumer confidence indicates the two sides of the production-spending equation are in alignment, with the potential for annual economic growth to accelerate by more than 5 percent over the first part of 2014.

“That augers well for an economic expansion with real legs, said ANZ New Zealand chief economist Cameron Bagrie.

Confidence in the agriculture sector surged to a 19-year high of 54.5 percent, while manufacturing confidence hit a 15-year high of 56.1 percent and services reached the highest reading in 14 years of 68.5 percent. Sentiment in the construction sector at 66.7 percent and retailing at 65.4 percent remained “extremely elevated”, ANZ said.

The survey results are “incredibly strong” with firms’ profit expectations pushed beyond last month’s 19-year high to 39.7 percent from 37.3 percent. Employment intentions are the strongest in 19 years at 24.7 percent while residential construction intentions at 66.7 percent are the highest in almost 24 years and commercial construction intentions are robust at 41.2 percent.

Bagrie said the last time the survey recorded such high readings in 1994 and 1999, the economy was in full swing with GDP growth of more than 5 percent and the latest survey results “portend a booming economy”.

“All this momentum is occurring despite headwinds from an elevated New Zealand dollar and overwhelming expectations interest rates are going to be moving up,” Bagrie said. A net 71 percent of survey respondents expect higher interest rates over the year ahead and a net 31 percent of firms expect to raise prices.

One of the biggest challenges over the coming year will be ensuring supply can meet demand so inflation remains in check, Bagrie said. . .

The full report is here

  Survey results portend a booming economy. Many readings resemble 1994 and 1999 – years of incredibly strong growth.
  Our composite indicator, incorporating both business and consumer confidence, is signalling the potential for annual economic growth of around 5
percent by mid-2014.
  One of the economy’s biggest challenges over the coming year will be building available supply-side capacity and driving productivity growth to ensure the inflation genie doesn’t escape out of the bottle. . .

The last time we saw these sort of readings (in 1994 and 1999) an  economic upswing was in full swing.GDP growth was in excess of 5 percent, as flagged by this survey: who says business confidence surveys don’t matter!

Surfeit capacity was being eaten up too. There are similarities. Strong growth can follow extended periods of weakness or deep slumps. Recoil and pro-cyclicality
kicks in. Success breeds and feeds more success.

Throw together some localised one-offs: a city rebuild; plans to address housing shortages in the nation’s largest city; and a 40-year peak in the terms of trade,
and the growth picture takes on “tiger” as opposed to “tabby” characteristics. Suddenly the economic baton has been passed to this side of the
Tasman: yes, New Zealand can outperform Australia over the years ahead.

Challenges remain. The NZD is high; it will remain so. We’ll continue to see more flip-flops across the global economy than in all the footwear stores in Bondi
Beach. New Zealand’s balance sheet is weak. Candy is dandy but sadly NZ’s fiscal lolly jar has a distinctly empty rattle to it.

Despite these mitigating elements, the demand picture still looks remarkably assured. So assured that the question is not whether opportunities exist, but how successfully they can be seized. The emerging story across the economy will be matching demand with available supply. There will be frictions.

There is no silver bullet to easing such frictions. People and resources need to be mobilised. Get the right incentives and you’ll drive the right behaviours. At a
time when all and sundry are talking about the macroeconomic picture, there is another area of economics that deserves more attention. It’s the small stuff; what
happens at the firm and individual level. It’s microeconomics. Get the microeconomic story right and the macroeconomic one has more punch. Get it wrong, and the Reserve Bank will be forced to remove the “punch-bowl” as exuberance gets out of control. We don’t want popping champagne corks to switch to also popping the cork in the genie’s inflation bottle. . . 

confidence

Confidence matters not just to businesses but to the wider economy and to people.

Confident businesses are more likely to take the risk to invest more, produce more, employ more and pay more.

All of that means more tax which will help the government on its track back to surplus.


Rural round-up

June 3, 2013

Milking our cows in China – Sally Rae:

Dairy giant Fonterra has the ambitious target of producing up to one billion litres of milk from 30 farms in China by 2020, to cater for the massive burgeoning demand by Chinese for dairy products. Agribusiness reporter Sally Rae tours one of the Fonterra farms, near Beijing.

Visit Yutian 2 farm, a 90-minute drive east of Beijing, and, not surprisingly, you discover a slick, high-tech farming operation.

As Fonterra China Farms general manager Nicola Morris sums up, it is about taking the best of Kiwi ingenuity and farming systems, melding it with the best of American and European confinement systems – and doing it in China.

There are 3200 milking cows and 2700 young stock on the property, which is a housed operation involving high-tech, intensive dairy farming systems and three-times-a-day milking. . .

Agreement reached for China meat exports to restart:

Primary Industries Minister Nathan Guy has announced that an agreement has been reached in Beijing last night to ensure that New Zealand meat exports to China can resume on a normal basis, starting later today.

“The resolution is comprehensive and will allow normal trade to resume using NZFSA certification, including for product currently in storage, or en route to China,” says Mr Guy.

“This is an important step in resuming trade, now that containers are moving off the wharves and the backlog is clearing.

“It has also been agreed that New Zealand and Chinese officials will work together over the next month on new meat certificates which will allow reliable future access for New Zealand meat into China. . .

 

NZ business confidence gains as farmers shake off the drought blues:

New Zealand business confidence rose for the first time in three months, helped by a rebound in sentiment in the agricultural sector and increasing optimism from construction firms.

A net 42 percent of firms expect general business conditions to improve in the year ahead, according to the ANZ Business Outlook, up from 32 percent in the April survey. Firms seeing a pickup in their own business activity in the year ahead improved to 34 percent from 30.3 percent.

Sentiment in agriculture bounced back ahead of Fonterra’s announcement of a steeper-than-expected hike to its forecast 2014 payout to farmers and comes in a month when the trade-weighted index fell about 3.5 percent, extending its slide from a record high in April, and drought earlier in the year broke. . .

High Value Avocado Powder Exports Grow At Waikato Innovation Park:

The Waikato Innovation Park’s product development spray dryer is going green – avocado green, to be exact.

The country’s only open access product development spray dryer is helping Bay of Plenty company, Avocado Oil New Zealand, dry avocado pulp into a high value powder for use in cosmetic, nutriceutical and food products.

The dryer – known as FoodWaikato – is part of the New Zealand Food Innovation Network, a national network of science and technology resources that supports growth and development of New Zealand food and beverage businesses. . .

Ballance reduces prices for farmers:

Leading farm nutrient supplier Ballance Agri-Nutrients is reducing prices on most major fertiliser products across the board, passing on purchasing savings to customers.

Ballance Chief Executive Larry Bilodeau says prices on most of the co-operative’s core plant nutrients will be reduced by between $10 and $80 per tonne from June 4.

“During the past year we have kept prices very competitive when global prices were increasing. Now we have seen a steady pattern of price declines globally, so we are taking the lead to pass these better prices on to our shareholders and customers. . .

Food Co-operatives in New Zealand on the rise:

The increase in food co-operatives in New Zealand is enabling communities to take back control of their food supply, improve relationships between community members and achieve better health outcomes,” says Debbie Swanwick, spokesperson, Soil & Health – Organic NZ.

Food co-operatives provide better quality food, mostly organic, at a cheaper price.

“Stories of the average New Zealander’s desire to remove contaminants in their food (GE, pesticides and additives) by establishing an organic food co-operative in their region will feed the next generation well. New Zealanders seem to have picked up on this worldwide trend at a great rate,” says Swanwick. . .

James Cook Hotel Grand Chancellor Tree Planting with the Family Farm:

The management team from the James Cook Hotel Grand Chancellor have planted over 270 trees in support of regenerative agriculture in New Zealand.

With help from The Family Farm, nine management staff from the hotel journeyed to Mangarara Station in Hawkes Bay and took part in planting native trees on the farmland. Mangarara Station has been a sheep farm for more than 150 years. Through sponsorship from the Air New Zealand Environment Trust, Mangarara Station has undertaken an extensive programme of regenerative planting to help restore the land. The first planting of eco-sourced tree stock took place in 2008 and has now become an annual event. These plantings form the conservation estate which has been created by the owners of Mangarara as a gift to the nation. Mangarara Station was the first project to be supported by the Air New Zealand Environment Trust. . .

The answer lies in the soil (you have to have a sense of hummus) – Hot Topic:

Something a little different: soil expert Graham Sait talks about the importance of soil humus and its potential as a way to mitigate climate change at the recent TEDx in Noosa, Queensland. I’m not going to vouch for all his numbers, but as he devotes time to mycorrhizae he’s OK with this truffle grower…

Big Move for 2014 NZB South Island Sale:

New Zealand Bloodstock’s 2014 South Island Sale is set to make a bold move from its traditional August timeslot and be brought forward to April of next year.

The move to earlier in the year will mean that the 2014 Sale will relinquish its identity as a unique sale of untried two-year-olds and will instead form part of the 2014 National Yearling Sales Series as the new ‘South Island Session’.

As such, yearlings offered through the Sale will have the added benefit of now being eligible for the Karaka Million Series featuring the $1 million Karaka Million (Res.L) for two-year-olds and the $100,000 Karaka 3YO Mile (Res.L) for three-year-olds. . .


%d bloggers like this: