Yesterday’s release of Treasury’s Pre-Election Economic and Fiscal Update (PREFU) provides a fairly sobering forecast of our ability to grow wealth in and for New Zealand, say the New Zealand Manufacturers and Exporters Association.

NZMEA Chief Executive, Dieter Adam says, “We have to face the reality of our lack of economic development in New Zealand. And now is the right time to challenge New Zealand’s leading parties to tell us what they are going to do to push our economy towards a more prosperous future for everyone.”

“For the next four years (2018 to 2021) Treasury forecasts a decline in the rate of absolute GDP growth in 2020 and 2021, with a similar decline in the export growth rate, down to just over 2% in 2020 and 2021. By then we’ll be four years away from the current Government’s goal of growing the share of exports to GDP to 40%, and further away from reaching that goal than ever.

“These observations sit alongside our own, and Statistics New Zealand’s data on exports of elaborately transformed goods, which have been in decline for the past 18 months or so.

“Treasury’s forecasts for the increase in GDP, as modest as they may be, are still based largely on a growth of labour inputs due to immigration for 2018. After that, miraculously, labour productivity will take over as the main driver of GDP growth. When it comes to explaining what this expectation is based on, given that for the last three years, for example, we saw virtually no productivity growth in our economy, the report remains silent, but states that “productivity growth may be slower than assumed if labour inputs grow more strongly than expected” - meaning if the forecast drop in immigration numbers doesn’t eventuate.

“So, what have we actually got here? An economy projected to grow at modest rates overall, especially in the second half of the outlook period (2020 to 2021), and growth rates for Real GDP per capita, the real measure of wealth creation, of 1.2% and 1.0% in the same period. And all of that based on a miraculous increase in labour productivity from around zero currently to between 1.5% and 1.8% from 2019 onwards.

“We suggest it is time we have a serious debate on how we can sustainably improve our ability to grow wealth in this country. Growing wealth, so we have more money to pay for a better health system, better education, and other public services. You can’t do that if most of the growth in your economy comes from immigration, or when many people’s perception of increased wealth comes from rising asset prices fuelled by ever-increasing private debt.

“Growth in wealth comes from growing the output per hour worked – and that, as the late Sir Paul Callaghan kept reminding us, will only happen if we achieve growth in those sectors of our economy that produce and export high-value products and services. Our manufacturers, together with other sectors of our productive economy, stand ready to contribute. It’s about time the major political parties did their bit by making this a key focus of their efforts” says Dieter.

| An NZMEA release  ||  August 24,  2017   |||

Published in BUSINESS
Thursday, 24 August 2017 09:13

Slightly softer growth expected in PREFU

A slightly softer growth forecast is the main feature of largely unchanged Pre-election Fiscal Update compared to the Budget forecasts three months ago, Finance Minister Steven Joyce says.

“The softer growth New Zealand has experienced in the six months to March flows through to a lower starting point in the 2017/2018 year,” Mr Joyce says.

“The net effect is that growth is slightly lower through the forecast period – averaging 3.0 per cent over the next four years rather than the 3.1 per cent predicted in the Budget.

“The other notable change is that Treasury expects the labour market to be tighter over the next four years, with lower unemployment and stronger nominal and real wage growth.

“Treasury forecasts unemployment to drop to 4.3 per cent by June 2020 and for the average annual wage to increase from $58,900 at March 2017 to $65,700 by 2021, a $1300 per annum improvement on the Budget forecast.”

Other changes to the forecasts include:

  • A smaller balance of payments deficit across the forecast horizon
  • Lower CPI inflation, especially in the 2017/18 year
  • Net government debt falling below 20 per cent of GDP in the 2020/21 year. New Zealand Superannuation Fund contributions remain scheduled to resume in that year.

Most other elements of the forecast remain very similar to budget predictions, with nominal GDP, migration levels and budget surpluses largely unchanged, although the timing of budget surpluses has changed.

“The Budget surplus is expected to be $2.1 billion higher in the year just finished,” Mr Joyce says. “However Treasury expects the lower growth forecast to result in surpluses that are $1.8 billion lower over the next four years. The net effect is about even.

“The Government’s strong fiscal management means that New Zealand is one of the few OECD countries to be posting fiscal surpluses. This hard-won position is underpinning the Government’s strong economic plan which is delivering jobs and steady real wage growth for New Zealanders.”

The large infrastructure spend committed to in Budget 2017 means that residual cash remains broadly in balance until the 2019/20 financial year.

“There is limited room for any additional expenditure beyond what is already proposed in these forecasts until the 2020 financial year when there is expected to be a $1.7 billion cash surplus. Anything significant in the meantime would involve more borrowing or raising additional tax revenues,” Mr Joyce says.

The PREFU forecasts include the following budget spending commitments:

• $7 billion in additional operating expenditure over four years in Budget

2017 which commenced on 1 July 2017.

• $1.7 billion per annum ($6.8 billion over four years) operating

allowance to be allocated for Budget 2018, increasing by 2 per cent

each subsequent budget.

• $32.5 billion in total capital infrastructure investment between 1 July

2018 and 30 June 2021.

• $6.5 billion over four years ($2 billion per annum in out years) for the

Government’s Family Incomes package commencing on 1 April 2018.

“Government annual operating expenditure in these forecasts increases from $77 billion to $90 billion over the next four years, which is sufficient for significant ongoing improvement in the provision of public services,” Mr Joyce says.

| SA Beehive release  ||  August 23, 2017   |||

Published in FINANCIAL
Tuesday, 22 August 2017 10:57

New regulations for fuel specifications

New regulations for New Zealand’s fuel specifications will support the growth of lower-emission fuels that are better for people, the environment and cars, Energy and Resources Minister Judith Collins announced today.

The Regulations set out minimum standards for fuel performance, and change incrementally over time to keep up with new technology and international best practice.

“There are four significant changes – three that enable greater fuel supply choice and market-led innovation in the fuel mix; and one to reduce harmful emissions:

· Introducing a total oxygen limit, which potentially allows a wider range of fuel blends;

· Increasing New Zealand’s limit for methanol in petrol from one to three per cent volume;

· Raising the biodiesel blend limit in diesel from five to seven per cent; and

· Reducing the sulphur level allowed in petrol from 50 to 10 parts per million.

“The changes carry multiple benefits for consumers and for our environment.

“Three of the changes – the introduction of a total oxygen limit, increasing the biodiesel blend limit, and increasing the methanol blend limit – could potentially allow more flexibility in fuel mixes, a reduction in harmful emissions and increased diversity and enhanced security of local supply.

“The other change of reducing the sulphur level in petrol is specifically targeted to reduce harmful emissions, which will have health and environmental benefits. This is consistent with the most stringent fuel standards in the world, most notably in Europe, Japan and the United States,” says Ms Collins.

All of the amendments will take effect from 2 October 2017, apart from the change to the maximum sulphur level, which will come into effect on 1 July 2018.

More information is available at: http://www.mbie.govt.nz/info-services/sectors-industries/energy/liquid-fuel-market/reviewing-aspects-of-the-engine-fuel-specifications-regulations-2011

| A Beehive release  ||  August 22,  2017   |||

Published in POLITICAL

Inflation targeting practises are similar across many central banks despite significant differences in their formal frameworks, says the Reserve Bank in its latest Bulletin article published today.

The Bulletin article titled “An international comparison of inflation targeting frameworks” looks at how New Zealand’s Policy Targets Agreement compares to nine other advanced economy central banks, and how the specifications in each framework compare to the actual practice of each central bank.

“In order to conduct the comparison we focused on five components of an inflation-targeting framework: the inflation target definition, communication of monetary policy, secondary considerations, assessment of inflation-targeting performance, and framework reviews and revisions,” says the article’s author, Senior Economic Analyst Amber Wadsworth.

“Overall we find that the formal inflation-targeting frameworks can differ greatly between the central bank, but, in practice, each bank operates in a similar manner.”

“The central banks we looked at have similar inflation targets and produce similar monetary policy reports and inflation targeting assessments. There is more variability in the financial stability considerations when setting monetary policy, and how the inflation-targeting frameworks are reviewed and revised,” says Wadsworth.

More information
Read the Bulletin – An international comparison of inflation-targeting frameworks
Listen to the Behind the Bulletin interview

| A RBNZ release  ||  August 16,   2017   |||

 

 

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Published in FINANCIAL

The Government has today outlined new measures to promote a more competitive economy, Commerce and Consumer Affairs Minister Jacqui Dean says.

“Competition is one of the key drivers of economic success which is why the Government is focused on creating a competitive economy which delivers results and choice for New Zealanders,” Ms Dean says.

“The Business Growth Agenda Paper, Promoting Competition, which I am releasing today sets out what actions we’re taking to lift competition for the benefit of New Zealand’s consumers.”

The Government has agreed on three broad areas of focus:

  1. Maintaining the effectiveness of New Zealand’s competition laws and institutions.
  2. Identifying barriers to competition, and opportunities to promote competition, in specific sectors and across the economy.
  3. Actively seeking open trade and investment policies which can mitigate the disadvantages of New Zealand’s small size and distance from major markets.

“New Zealand’s competition law and our Commerce Commission are important contributors to domestic competition, and are well regarded internationally and we are continuing to build on that.

“Other recent measures include passing the Commerce (Cartels and Other Matters) Amendment Bill last week which deters anticompetitive cartel behaviour.

“And following a review of the Commerce Act, the Government is progressing legislation to allow the Commerce Commission to undertake market studies to ensure markets are operating effectively,” Ms Dean says.

Read Promoting Competition here: http://www.mbie.govt.nz/info-services/business/business-growth-agenda/pdf-and-image-library/2017-documents/promoting-competition.pdf

| A Beehive release  ||  August 15,  2017   |||

Published in BUSINESS
Wednesday, 16 August 2017 07:58

New Ambassador to Iran

New Zealand’s new Ambassador to the Islamic Republic of Iran is Hamish MacMaster, Foreign Minister Gerry Brownlee announced today.

“New Zealand has a long-standing trade and economic relationship with Iran, established with the opening of our Embassy in Tehran in 1975,” Mr Brownlee says.

“Since the easing of United Nations sanctions in 2016 there has been increased interest in the Iranian market by New Zealand exporters.

“Exports last year were $151 million and the first export of New Zealand lamb in decades was sent to Iran in May.

“There is real scope for the further diversification of our trade relationship with Iran and New Zealand’s new Ambassador will play a key role in supporting this,” Mr Brownlee says.

Mr MacMaster is currently the New Zealand Ambassador to the Kingdom of Saudi Arabia, and has previously been posted to Turkey and Iran.

Mr MacMaster will also be accredited to Pakistan and Afghanistan.

|  A Beehive release  ||  August 15,  2017   |||

Published in DIPLOMATIC
Tuesday, 15 August 2017 11:31

Auckland to host APEC 2021 Leaders’ Week

New Zealand will host APEC in 2021, with Leaders’ Week to be held in Auckland from November 8 to 14, Foreign Minister Gerry Brownlee says.

“With Auckland also set to host the America’s Cup, 2021 will be a big year for the country’s biggest city,” Mr Brownlee says.

“We are announcing the dates as early as possible to provide some clarity for planning, which is already under way.

“APEC 2021 will be the largest event ever hosted by the New Zealand government and is a wonderful opportunity for New Zealand to shine on the international stage.

“APEC will bring world leaders to New Zealand and create significant opportunities to promote our economic interests with trading nations including China, the US and Japan.

“The Asia-Pacific is the fastest growing economic region in the world and APEC is its leading economic forum.

“APEC member economies account for almost half of all global trade, and more than 70 per cent of New Zealand’s goods and services are exported to APEC economies.

“It is expected that APEC will attract up to 22,000 international attendees to the 12 significant APEC-related events held throughout the year, with around 10,000 attendees expected for Leaders’ Week.

“While Auckland is confirmed to host the Leaders’ Week, we intend to spread meetings and events across other large cities, including Christchurch, to showcase the very best of New Zealand’s capability, innovation, culture and amazing landscapes,” Mr Brownlee says

| A Beehive release  ||  August 15,  2017   |||

Published in EVENTS

The Government’s planned investment in Defence over the next 15 years represents a huge opportunity for New Zealand companies, says Defence Minister Mark Mitchell.

Mr Mitchell told Defence industry representatives last night that the country needs a Defence Force that is equipped and supported to respond to a rapidly changing strategic environment.

“This requires investment. Over the next 15 years, the Government will invest up to $20 billion in new and upgraded military capability, including replacement of all our major platforms and the regeneration of the Defence estate.

“We have many companies in the Defence sector who are themselves investing and innovating in their areas of expertise. The Government’s investment in Defence promotes growth in the sector, creates jobs and means that the industry will have every chance to build on its achievements.

“While we are not builders of warships or military aircraft, New Zealand companies can support those capabilities with world-class products and systems, and also support them through life,” Mr Mitchell says.

“For every dollar spent on a new capability, four is spent supporting it through life, the bulk of which is spent locally.

“Each year the New Zealand Defence Force spends $600 million on maintenance and repair, training, and other commercial services.

“The Government is committed to ensuring New Zealand companies are given every opportunity to compete for a share of the investment in Defence.

“The products and services New Zealand companies produce are recognised as world-class, and where they can reduce the cost ownership for the Government we need to support them,” Mr Mitchell says.

| A Beehive release  ||  August 11,  2017   |||

Published in PRODUCTIVITY

Revenue Minister Judith Collins has welcomed a second round of negotiations between China and New Zealand tax officials aimed at updating the current double tax agreement signed between the two countries in 1986.

“The aim is to agree a new treaty, adopting modern treaty language and concepts, including agreed measures to deal with base erosion and profit shifting,” Ms Collins says.

New Zealand tax officials will meet with Chinese officials in Beijing next week for the second time since 2014, to discuss a new treaty.

Double tax agreements are an important facilitator of trade and investment between countries because they ensure businesses don’t get taxed twice.

They provide greater certainty for both taxpayers and tax administrators about how cross-border investment income will be taxed. They reduce compliance costs and lower tax on some income.

Tax agreements are also used in the global fight against tax evasion, with signatories agreeing to share more tax information under the global standard set by the G20 and OECD.

China is New Zealand’s largest trading partner in goods and second largest overall including trade in services.

“In this context, it is vital to ensure our double tax agreement with China is up to date and follows best practices,” Ms Collins says.

| A Beehive release  || August 11,  2017   |||

Published in BUSINESS
Friday, 11 August 2017 08:53

PM welcomes Croatian President to NZ

Croatia’s President, Her Excellency Kolinda Grabar-Kitarović, will make her first official visit to New Zealand next week, Prime Minister Bill English has announced.

“New Zealand has a warm and constructive relationship with Croatia. The large Croatian community that has made New Zealand home has made an important contribution to our business, cultural and political life over many years,” Mr English says.

President Grabar-Kitarović and her delegation arrive on Saturday 19 August for a series of events, including an official welcome at Government House in Auckland and a State luncheon hosted by the Governor-General.

“I am looking forward to discussing a number of issues with the President, including her perspective on recent developments in Europe and opportunities to enhance New Zealand’s relations with the region.”

The President will be accompanied by her husband Mr Jakov Kitarović. They will visit Auckland, Wellington, Rotorua and Taupo, and will meet with members of the Croatian community.

The delegation will visit New Zealand until Tuesday 22 August.

| A Beehive release  ||  August 10,  2017   |||

Published in DIPLOMATIC
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