$5b extra cost with CGT

April 7, 2019

BusinessNZ has worked out the proposed capital gains tax would impose an extra $5 billion on the economy :

BusinessNZ has released an analysis of additional costs to the economy that would accompany the direct costs of New Zealand’s proposed capital gains tax.

It shows compliance costs of $1.6 billion, administrative costs of $210 million and deadweight costs of $1.5 – $4.2 billion, over five years.-

BusinessNZ Chief Executive Kirk Hope said the Tax Working Group’s report did not include compliance, administrative or deadweight costs, and these needed to be made explicit to enable public debate about costs before the Government made its decision on a capital gains tax.

Goodness me, how surprising.  The people proposing a tax based on an ideological view of fairness didn’t include the costs.

Compliance costs include Valuation Day requirements for all business assets to gain a valuation to enable the imposition of the capital gains tax.

Administrative costs are IRD’s costs of collecting the tax.

Deadweight costs are the costs of reduced economic output resulting from changes in supply and demand caused by the imposition of a tax. . . 

Those who want the tax keep repeating the same theoretical argument about fairness.

Those opposing it keep finding real, practical reasons why it isn’t fair, will add costs and sabotage the economy.

There’s more on this at BusinessNZ


Micro matters not minor matters

September 11, 2018

BusinessNZ says the Employment Relations Amendment Bill is harmful and oppressive:

None of the provisions that most concern business have been removed by the select committee considering the Bill. . .

55% of submissions were against the Bill and thousands of emails sent to Parliamentarians by concerned businesses. EMA, Business Central, the Canterbury Employers’ Chamber of Commerce and Otago Southland Employers’ Association ran a high-profile campaign asking the Government to explain the reasoning for the Bill’s harmful provisions.

“Given current low levels of business confidence, especially among small business, it is unfortunate that the Government has neither listened nor explained its justification for the Bill.

Low business confidence is not political pique. It’s based on genuine concern about policy like this which will make it more difficult, and expensive, to run a business.

“Business cannot support this Bill and will be making our position clear as this Bill progresses through Parliament.

“BusinessNZ is also considering pursuing a claim to the International Labour Organisation or International Court of Justice on parts of the Bill which are contrary to international law.

“Business strongly objects to this Bill’s ability to harm employment relations, jobs and commercial value in New Zealand enterprises.”

The EMA is bitterly disappointed no heed was paid to concerns raised:

The EMA, along with its fellow regional associations, actively lobbied and campaigned for four key areas to be modified as it believed these will not deliver to the Government’s stated aims of a high wage and high performing economy, nor help businesses to be more productive. The joint Fix The Bill campaign resulted in at least 2254 emails being sent to Government MPs seeking clarification on how the changes will help their business succeed.

The four aspects of the Bill that were particularly worrying for business were:

– Employers with 20 employees or more will lose the right to include 90-day-trial periods in employment agreements. However, findings from a nationwide survey of employers found that the 90-day trial periods were useful for businesses of all sizes, to give prospective employees a chance.

A trial period is not just good for employers, it’s good for other employees. If a new worker isn’t up to scratch it impacts badly on workmates.

– Businesses will be forced to settle collective agreements, even if they don’t or can’t agree

And even if they can’t afford them.

– Allowing union representatives access to workplaces without permission

Any access, any time is not conducive to productivity.

– Not allowing businesses a choice to opt out of a multi-employer collective agreement (MECA)

This will not only means saddle businesses with agreements they can’t afford, it will stop a business offering staff better pay and conditions.

With more than 50% of New Zealand businesses employing fewer than 100 staff, the EMA is deeply worried the changes in the Bill combined with the raft of other legislation in the pipeline will unduly burden smaller operators.

Furthermore, despite rhetoric from Government that it is listening to business, this is a tangible example that ideology rather than solid public policy driving decisions and does not bode well for business going forward.

Throughout this process the EMA has been puzzled by how any of the proposed changes to the industrial relations framework will take the country forward in terms of the Government’s goal of developing a modern, nimble and high performing economy.

Taking industrial relations back to the 1970s will not take the country forward and it will harm rather than help the economy.

Steven Joyce writes:*

. . .Economic policy is in fact a three-legged stool, fiscal policy, monetary policy, and microeconomic policy. You can’t successfully operate an economy, especially a small one like New Zealand, without all three working together.

Microeconomics is everything that operates at the firm level in the economy – all the regulations and policy settings that impact directly on businesses. These are things like employment law, immigration settings, competition law, resource allocation, innovation settings, tax policy and the government’s investment in infrastructure.

It is microeconomics that drives much of firms’ actual operating conditions. Along with interest rates and exchanges rates, it is access to capital, skilled people, resources, markets, the necessary infrastructure and importantly the consistency of those settings, that tell the owners of businesses that it is a good time to invest and grow their business.

If you start playing with those settings in an arbitrary way while ignoring the economic consequences of those changes, then firms will simply stop investing. They’ll either wait until there is more certainty, or not invest at all. . .

Microeconomic matters, including employment relations legislation, are not minor matters.

They have a huge influence on the business environment and economy.

Any changes which add to the complexities and risk of employing people will have the opposite affect from the government’s stated aim of developing a modern, nimble and high performing economy.

But this legislation shows that this aim comes a very poor second to Labour’s need to pay back unions for their financial and personal support.

The legislation will be good for unions but not the whose interests they purport to represent nor for the businesses which employ them.

* Hat tip: Kiwiblog


Some businesses won’t survive

May 14, 2018

Government changes to employment law will undermine flexibility and goodwill, Federated Farmers says.

Feds Dairy chair Chris Lewis said the 90-day trial provisions are highly valued by farmers as a means of giving them confidence to take on staff when the potential applicant has no experience, or a history of anti-social behaviour or poor job performance.

“Anyone can turn over a new leaf but without the security of the 90-day trial business owners can end up paying the cost of giving someone a chance.”

Recruiting, inducting and training new staff is an expensive and time-consuming business.

Employers want to get it right the first time but try as they might, that doesn’t always happen. The 90-day trial period reduces the risk should a new employee be the wrong choice.


Most farmers employ only a handful of staff but the Federation’s submission said it would be “unfortunate” if this option is removed for larger companies “because it is exactly those businesses that can afford to put resources into extra training and support for those who need it”.

The Federation’s farmer members do not have a hire/fire mentality, Chris told the committee. Many find it hard to attract staff to remote areas, and work hard to bring along employees who have the right attitude.

The Federation’s employment contracts are industry-leading, and farmers make use of an 0800 service and peer-to-peer advice, as they strive to be fair employers moving staff along a career pathway.

When a businesses get good employees it’s in everyone’s interest to do everything possible to keep them and keep them happy.

But if they can’t, or won’t, do their jobs or are simply a bad fit for the business and other employees, it’s better for everyone if they go.

The Federation’s submission said too many clauses in the Bill pit employer and employee against one another rather than facilitating an environment for negotiation and agreement.

 For example, farmers had no quibble that employees are entitled to paid rest and meal breaks but proposed amendments say that unless employer and employee agree an alternative in advance, such breaks must be taken at times set out in the Bill.

This is “unduly restrictive,” Chris said, because unexpected situations can arise on the farm.

 “If a cow requires attention during calving, or there is an urgency to finish harvest before rain sets in, it is reasonable for an employer to ask that an employee works on for a reasonable amount of time, and recoups their entitlement elsewhere.”

Tired and hungry staff don’t work well and can be dangerous, but in farming, and many other businesses, it is not always practical to stop work at prescribed times.

Farmers have no objection to employees joining a union or any other association, but current provisions in the Act requiring union representatives to obtain the permission of the business owner before entering the workplace should be kept.

“These farm properties are our homes,” Chris said.

The proposed law would allow union officials to wander into farmhouses without notice.

This is an abuse of private property.

On top of that farmers are being bombarded with messages to treat their property as a fortress because of biosecurity risks – most recently the devastating cow disease Mycoplasma bovis.

Health and Safety is another reason why visitors should be briefed and escorted into work areas. “Given the hazards on farm, the presence of an individual who is in what could be a very large area without the knowledge or permission of anyone else on the farm is extremely dangerous.”

It’s not only businesses which benefit from flexibility in the workplace, workers do too.

Business NZ chief executive Kirk Hope also has serious concerns about the proposals, which might be good for unions but not workers:

Here’s a simple example. If you are a working parent who needs to leave work at 3pm to pick up the kids, and the collective agreement says your hours of work must be 9-5, and if you haven’t opted out, you will need to negotiate with both the union and your employer to be able to pick up your kids. This is onerous and unnecessary.

Fourth, the legislation would compel employers to provide personal information about a new employee to a union. Given the recent furore around Facebook’s use of personal information for marketing purposes, I doubt if many would see it as fair and reasonable for legislation to compel your employer to provide your information to any third party, no matter who they are.

These are only a few of the issues. Currently unionisation in the private sector is around 12 per cent. As with any other business, adaptation and innovation is important for unions’ survival. Legislating to protect a marketing base for membership won’t help unions to adapt, innovate and survive.  

What the legislation will do is undermine trust by testing the boundaries of what most New Zealanders think as fair.

Business concerns won’t be allayed by the interview with Workplace Relations Minister Iain Lees-Galloway on Q&A yesterday when he said  that some businesses would not be able to operate under  the government’s plans.

It’s not just business owners who suffer if their businesses collapse, it’s also the workers, who Labour purports to support.


Rural round-up

August 16, 2017

Paying for water should be a consistent policy:

A consistent policy on water for everyone is required, says BusinessNZ.

An ad hoc policy on water charging would be prone to political manipulation, with regions, councils and businesses all lobbying for favourable royalty regimes, BusinessNZ Chief Executive Kirk Hope said.

“Business needs an agreed, consistent water policy that applies to all water users and where rights to use water are tradable, fairly apportioned and can be known in advance.

“It would not be helpful for business to have to operate and make investment decisions in an environment where the cost of water is determined on an ad hoc, changing basis. . . 

Unwanted, Unknown, Unnecessary – Labour’s New Water Tax on Auckland’s Rural Northwest:

The water tax recently proposed by Labour would deliver a sharp blow to the economy of Auckland’s rural northwest, says National’s candidate for Helensville, Chris Penk.

“It’s unwanted because farmers, horticulturalists and viticulturists provide a significant number of jobs in the region … and slapping them with a water tax would completely undermine this growth. And the inevitable price rises for consumers would hardly be welcome either.”

“It’s unknown because Labour aren’t saying what they’d actually charge. There’s almost no detail associated with the threatened tax, even on such key aspects as how much it’d be and where the money would go.” . . 

The realities of Mycoplasma bovis – Keith Woodford:

The recent outbreak of Mycoplasma bovis in South Canterbury has come as a shock to all dairy farmers. It is a disease that most New Zealand farmers had never heard of.

Regardless of whether or not the current outbreak can be contained, and the disease then eradicated, the ongoing risks from Mycoplasma bovis are going to have a big effect on the New Zealand dairy industry.

If the disease is contained and eradicated, then the industry and governmental authorities will need to work out better systems to prevent re-entry from overseas. And if the disease is not eradicated, then every farmer will have to implement new on-farm management strategies to minimise the effects. . . 

Slowing supply growth to impact NZ dairy supply chain – new industry report:

New Zealand dairy processors will struggle to fill existing and planned capacity in coming years as milk supply growth slows, leading to more cautious investment in capacity over the next five years, according to a new report from Rabobank.

The report Survive or Thrive – the Future of New Zealand Dairy 2017-2022 explains that capital expenditure in new processing assets stepped up between 2013 and 2015, but capacity construction has run ahead of recent milk supply growth and appears to factor in stronger milk supply growth than what Rabobank anticipates.

Rabobank dairy analyst Emma Higgins says milk supply has stumbled over the past couple of production seasons and, while the 2017/18 season is likely to bring a spike in milk production of two to three per cent, Rabobank expects the brakes to be applied and milk production growth to slow to or below two per cent for the following four years. . . 

Synlait Milk says US approval for ‘grass-fed’ infant formula will take longer –  Tina Morrison:

(BusinessDesk) – Synlait Milk, the NZX-listed milk processor, said regulatory approval for its ‘grass-fed’ infant formula in the US is taking longer than expected.

Rakaia-based Synlait is seeking approval from the US Food and Drug Administration for its ‘grass-fed’ infant formula to be sold in the world’s largest economy ahead of a launch of the product with US partner Munchkin Inc. The companies said in a statement today that the FDA process, which had been expected to be completed this year, is now expected to take a further four to 12 months. The stringent process, known as a New Infant Formula Notification (NIFN), includes a range of trials, audits and documentation. . . 

New Zealand’s beef cattle herd continues to grow:

Beef + Lamb New Zealand says that during the past year, New Zealand’s beef cattle herd increased by 2.8 per cent – to 3.6 million head – while the decline in the sheep flock slowed sharply as sheep numbers recovered in key regions after drought and other challenges.

The annual stock number survey conducted by Beef + Lamb New Zealand’s (B+LNZ) Economic Service highlights the continued growth in beef production, as farmers move towards livestock that are less labour-intensive and currently more profitable. . . 

Grad vets encouraged to apply for funding:

Associate Minister for Primary Industries Louise Upston is encouraging graduate vets working in rural areas to apply for funding through the Vet Bonding Scheme.

Since the Scheme was launched in 2009, 227 graduates vets have helped address the ongoing shortages of vets working with production animals in rural areas of New Zealand.

“The 2014 People Powered report told us that by 2025, we need 33,300 more workers with qualifications providing support services, such as veterinary services, to the primary industries,” says Ms Upston. . . .

Production and profit gains catalyst for joining programme:

The opportunity to look at their farm system and strive to make production and profit gains was what spurred Alfredton farmers, James and Kate McKay, to become involved in the Red Meat Profit Partnership (RMPP).

RMPP is a seven year Primary Growth Partnership programme aimed at driving sustainable productivity improvements in the sheep and beef sector to deliver higher on-farm profitability.

Encouraged by their ANZCO livestock rep, Ed Wallace, James and Kate joined the programme in 2015 and have had the opportunity to look at some key aspects of their farming system. This has included sitting down with local BakerAg consultant, Richmond Beetham, who has helped the McKays look at their ultimate goal of mating a 50kg hogget. Increasing weaning weights and looking to diversify their forages has also been a goal for the McKays. . . 

Fonterra Dairy Duo Claim Awards at Top International Cheese Show:

Two Fonterra NZMP cheeses have scooped silver awards at the prestigious international Cheese Awards held recently at Nantwich, UK.

One of the most important events in the global cheese calendar, the International Cheese Awards attracted a record 5,685 entries in categories that ranged from traditional farmhouse to speciality Scandinavian. Cheeses from the smallest boutiques to the largest cheese brands in the world vied for top honours in the Awards, now in their 120th year of competition. . . 

Dairy farmers spend over $1b on the environment:

Federated Farmers and DairyNZ have conducted a survey on New Zealand dairy farmers’ environmental investments, revealing an estimated spend of over $1billion over the past five years.

Five percent of the nation’s dairy farmers responded to the survey and reported on the environmental initiatives they had invested in such as effluent management, stock exclusion, riparian planting, upgrading systems and investing in technology, retiring land and developing wetlands. 

“It is encouraging to see the significant investments farmers are putting into protecting and improving the environment,” says Andrew Hoggard, Federated Farmers Dairy Chair. . . 

Criticism of farming gas emissions tells only half the story  – Paul Studholme:

It is imperative that political decisions on reacting to climate change are based on science, writes Waimate farmer Paul Studholme.

I write because of frustration with the sweeping generalisations and half-truths critical of the farming industry in this country that are presented by the mainstream media and environmental groups as facts.

One in particular, repeated frequently, is this: Farming produces more than half the greenhouse gases in New Zealand. This is only telling half the story or one side of the equation.

What is referred to here are the gases methane and carbon dioxide emitted by cattle and sheep. This is part of the carbon cycle. . .


Rural round-up

March 27, 2014

Guy prepared to help, but unwilling to interfere – Allan Barber:

Nathan Guy gave a very positive speech to Beef + Lamb NZ’s AGM on Saturday which covered three major points: what the government is doing for farmers, his vision for the red meat sector and thoughts on the discussions about industry structure.

Obviously, given MPI’s bullish view of agricultural exports, the Minister was extremely positive about economic performance. However he was at pains to point out the government’s role as an enabler, citing his focus on biosecurity resources, trade negotiations for market access, and investment in research.

He began by referring to his intention to strengthen resources at the border and to establish Government Industry Agreements (GIA) with various sectors which will ultimately involve the private sector in sharing the costs of biosecurity; different sectors are at various stages of negotiation on this issue. . . .

Project explores the potential of EID:

Warren Ayers farms 890ha of rolling country near Wyndham. The property runs 600 Perendale stud ewes and another 5,700 commercial ewes.

Lambing averages 135 per cent and lambs are finished to 17kg. Two-year-old replacement heifers are bought in annually for the 120-head Angus cow herd. Every year, all but the lightest 10 calves are sold at weaning. The policy is simple to manage and keeps the genetics of the herd diversified sufficiently that the same bull can be used for several years. For the past five years, the property has also wintered 650 dairy cows.

Warren has EID tagged his stud animals since 2006 and the commercial two-tooths have been tagged since 2009. . .

Fonterra begins construction on new IDR357 billion plant in Indonesia:

Fonterra today commenced construction on its first blending and packing plant in Indonesia, which will support the growth of its market leading consumer brands Anlene, Anmum and Anchor Boneeto.

Located in West Java, the plant is Fonterra’s first manufacturing facility in the country and its largest investment in a new manufacturing facility in ASEAN in the last 10 years.

Director General of Agro Industry at the Ministry of Industry, Panggah Susanto, joined Fonterra at an event in Jakarta to mark the official start of construction today.

Pascal De Petrini, Managing Director of Fonterra Asia Pacific, Middle East & Africa (APMEA), said that Fonterra Brands Manufacturing Indonesia Cikarang Plant will allow Fonterra to meet the ever-growing demand for dairy nutrition in Indonesia. . .

Dry conditions in Northland and Waikato remain a big concern:

Primary Industries Minister Nathan Guy says dry conditions in parts of Waikato and Northland remain a serious concern.

“Local authorities in Northland have announced the western parts of their region are in drought. This reflects the tough few months they’ve had as pasture has browned off.

“Cyclone Lusi has helped green tinges appear in some places, but the rainfall was erratic and insufficient. Western Northland and large parts of the Waikato remain very dry.

“The Ministry for Primary Industries is keeping a close eye on conditions here and elsewhere. I’ve seen for myself how dry things are on two trips to the Waikato in the last two weeks. . .

West Coast Northland drought declaration a relief:

The adverse event declaration covering drought in Northland’s West Coast the declaration will not provide a lot of direct financial assistance but will provide huge psychological relief.

“New Zealanders will get an inkling of what the guys on Northland’s West Coast have been going through. Not just since November, but since 2012 and even before that,” says Roger Ludbrook, Federated Farmers Northland provincial president.

“The big thing a declaration triggers is the Northland Rural Support Trust, so any farmer can approach the RST for free advice on farm management, or just someone to have a decent chinwag with.

“Beyond this, it doesn’t mean much financially unless the absolute worst happens. There is a safety net, but it is exactly the same as for any other New Zealander and carries the same eligibility rules.

“Then there is Inland Revenue and to be fair to them they aren’t unapproachable. . .

Drought-affected farmers encouraged to talk to their banks

Drought-affected farmers should talk to their banks said the New Zealand Bankers’ Association in response to increasingly dry conditions in parts of Northland and Waikato.

“We encourage any farmers facing hardship as a result of the lack of rain to contact their bank to discuss options for assistance and how they can work through these challenging conditions,” said New Zealand Bankers’ Association chief executive Kirk Hope. . . .

Fonterra profit down but revenue on track to break $20 billion:

Fonterra Cooperative Group’s half year results means it could be back on track to break the $20 billion revenue barrier; corporate New Zealand’s ‘four minute mile.’

“I think the fall in operating profit will grab attention instead of where it ought to be focussed, on revenue,” says Willy Leferink, Federated Farmers Dairy chairperson.

“This is real money coming into the New Zealand economy.  I mean revenue for the half-year is up 21 percent to $11.3 billion.  While we’ve got close to the $20 billion barrier in the past, this time, we’ve got a real chance of breaking it.

“That said, the declared drought in Northland along with drought-like conditions in the upper North Island could act like a brake.  We’ve also seen GlobalDairyTrade retreat in recent trading events due in part to increased volume. . .

Pengxin picks up former Fonterra executive Romanos for NZ Milk role, report says:

(BusinessDesk) – Shanghai Pengxin has hired Gary Romano, who resigned from Fonterra Cooperative Group last year during the botulism scare, to oversee the Chinese company’s overseas operations including its New Zealand farms, the NZ Herald reports.

Romano’s Linked In profile says he is “currently on the beach before becoming active again in 2014.” He resigned as head of NZ Milk Products at Fonterra last August as the company embarked on a global recall of whey protein concentrate. The bacterium was eventually shown to be harmless.

He will become chief executive of NZ Milk Management and a director of Pengxin’s two farm groups in the North Island and South Island, according to the Herald. Terry Lee, managing director of Pengxin’s Milk New Zealand unit, didn’t immediately return calls. . .

Samoa sheep farming increasing:

Sheep farming in Samoa is growing through a programme funded by the World Bank.

Under the Samoa Agriculture Competitiveness Enhancement Project, the World Bank is helping develop livestock, fruits and vegetable farming.

Sheep were introduced in Samoa in 2004, with the flock now grown to 700. . .

Macca’s hits milestone of three million kilos of Angus

AngusPure recognises programme as instrumental to success of Angus demand

McDonald’s New Zealand today announced it has sold a whopping three million kilograms of New Zealand Angus beef since 2009. With today’s launch of the promotional Angus the Great burger, the company expects to continue its contribution to the success of local Angus beef sales

This milestone is acknowledged by AngusPure’s chairman Tim Brittain, who says the ‘McAngus’ programme has been instrumental in helping grow the demand for Angus cattle, and that Kiwi farmers have been well rewarded since the original launch of the Angus burger range in 2009. . .


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