Exports, Jobs Threatened By Power Prices

Exports, Jobs Threatened By Power Prices

Over the last three weeks electricity spot prices have moved to unprecedented highs. Normal averages of around 5c per kilowatt-hour have climbed to around 23c with peaks of 65c - 80c. This has forced a number of major manufacturers exposed to the spot market to make emergency plant shutdowns with significant impact on local economies and export earnings. Last week Napier’s Pan Pac Forests wrote to the Energy Minister: "With spot prices averaging $330/MWh (33c per kilowatt-hour) yesterday, the Pan Pac pulp mill was completely shut down for about 24 hours. This morning we are operating at 40% of capacity. Export sales of over $1 million have been sacrificed over the last five days." Contact pwhitehouse@businessnz.org.nz.

TRANSPORT BILL A CHILD OF MMP

The Land Transport Management Bill bears all the marks of MMP trade-offs, and reflects the influence of the Greens over the Government. Though it purports to allow private investment in new road building, the restrictions are so tight that this would be unlikely to happen. And its consultation requirements are over the top – every man and his taniwha would have to be consulted at least once over new roading projects. Roading analysts say the current situation, where roads are under-funded and road users’ funds are siphoned off for non-roading uses, would get even worse under the Bill. Contact nclark@businessnz.org.nz.

WTO VICTORY FOR NZ

The WTO ruled this week that the 30% steel tariffs imposed by president Bush a year ago were illegal - a victory for NZ and several other steel-exporting nations. If, as expected, the decision is confirmed next month, those nations may impose trade sanctions of comparable value against the US. The US decision hurt many US manufacturers by raising the price of steel - effectively a 30% tax on their largest input. NZ Steel’s exports to the US were valued at $70m a year before the tariff was imposed. Trade Minister Jim Sutton said the decision underscored the value of the WTO disputes system that had already “enabled NZ to protect its access to Europe for butter, to secure the removal of unjustified safeguard tariffs on our lamb exports to the US, and to challenge successfully the unlawful export subsidies which Canada has been granting to its milk exporters.”

MANUFACTURING STEADY

The ANZ-Business NZ PMI for February 2003, released today, showed moderate expansion in the manufacturing sector. The PMI rating was 53.0, up 1.4 points from January. It follows a decline in the PMI during Dec and Jan, and is consistent with a seasonal decline in activity over the Christmas period. All component indexes showed expansion, led by the production sub-index, which stood at 55.1 (up 2.1 points from January). The PMI surveys manufacturing activity in a format that allows for comparisons with other manufacturing nations; a PMI reading above 50 points indicates expansion and below 50 indicates decline. The February survey reported manufacturers’ concerns about the high NZ dollar, the drought in Australia (a country which accounts for over one-third of New Zealand’s basic manufacturing sector exports), and high, volatile electricity prices.

COUNCIL BALKS AT GOOD FAITH DECISION

The Auckland City Council says last week’s ruling by the Employment Court in Auckland City Council v PSA could have adverse consequences for all employers. The PSA had argued it should have been consulted sooner about a consultant’s cost-cutting recommendations and the Court agreed, saying the City Council had breached the good faith provisions of the ERA. But the City Council says it consulted with all affected employees and no PSA members were potentially affected. The City Council says the Court appeared to have extended the definition of good faith and had not provided clarity on what constitutes a ‘proposal’. It’s considering whether to appeal. Contact aknowles@businessnz.org.nz.

SHUTTING DOWN FISHING GROUNDS

Commercial fishers will not welcome a proposed huge marine reserve at Great Barrier Island. It’s proposed to be 60,000ha (compared with e.g. Goat Island 520ha and Waiheke Island 700ha), going right out to the 12-mile limit, and would shut down significant rock lobster and game fishing grounds. Worse, the Government is planning legislation that would give the Conservation Minister sole charge of creating new marine reserves without having to get approval from the Fisheries Minister – it looks as if this large marine reserve plan will not be the last. Contact pwhitehouse@businessnz.org.nz.

LEAKY BUILDING OPTIONS

Following widespread concern over the leaky building syndrome, the Ministry for Economic Development has released a discussion document: ‘Better Regulation of the Building Industry - discussing the options’, available on www.med.govt.nz.

FOCUS ON FAMILY BUSINESSES

There’s a new website providing information purely on family business issues, including remuneration, succession planning, equity ownership, non-family executives, financial structure, resolving conflict. Check out: www.familybizz.net

GROWTH STATS

GDP

Economic activity increased 0.8% during the Dec 2002 quarter, following increases of 0.9% and 1.7% in the Sept and June quarters. For the year ended Dec 2002, the economy grew 4.4%; the highest annual percentage increase since the 5.1% recorded for the year ended Sept 2000. A 2% increase in consumer spending, a 4% increase in business investment and 2.8% a lift in exports all contributed to the rise in economic activity. Internal demand for the Dec 2002 quarter is now 4% higher than the same quarter a year ago, with household expenditure buoyant for the last 12 months as annual spending on durable goods and new housing investment were up 8.3% and 20.5% respectively - probably due to strong net migration gains. Although both export and import volumes were up (2.8% and 3.1%), the higher volumes for imports indicate continuing strength in the domestic economy. Growth was significant in the service industries, which rose 1.3% and are now 4.2% higher on an annual basis. Although GDP remains bullish for the moment, the question is how long this can last given the ‘death by a thousand cuts’ employment law initiatives inflicted on the business community, as well as concerns about the higher value of the NZ$ and problems with energy supply.

BALANCE OF PAYMENTS – DEC 2002 QUARTER

The current account balance was a deficit of $1.89b for the Dec 2002 quarter and $3.95b for the 2002 calendar year (3.1% of GDP), a reflection of a weaker merchandise trade balance. Most commentators expect the balance of payments deficit to deteriorate further, but not to the extent it did in 997 and 2000 when it peaked at nearly 7% of GDP.

IMPORTS

The provisional value of merchandise trade imports for Feb was $2,319m, down 1% from Feb 2002; mechanical machinery & equipment fell by $40m, electrical machinery & equipment fell $20m, and textiles & textile articles fell by $15m. Petroleum and petroleum products grew by $69m, and aircraft rose by $16m. The estimated value of merchandise exports for Feb was $2,340m, resulting in an estimated merchandise trade balance showing a $21m surplus (0.9% of exports). This is smaller than usual for a Feb month; over the last 10 years, Feb trade surpluses ranged between 1.6% and 19% of exports. It’s an indication of weak demand for NZ exports and an appreciating NZ dollar. At the same time, the domestic economy continues to suck in imports, although the trend for merchandise imports remains relatively flat.

EXTERNAL MIGRATION

There were 220,200 short-term visitor arrivals during Feb 5% up on the same month in 2002. Over the year, there were 2.071m visitor arrivals, up 7% on the previous Feb year. Almost 53% of these visitors were here on holiday, while 26% came to visit family and/or relatives. During the Feb 2003 year there were more visitors from all of the major regions. During Feb 2003 there was another net gain in permanent and long-term migration with arrivals exceeding departures by 6,700, compared with a 4,200 during the Feb 2002 month. The difference was due to 2,500 more permanent and long-term arrivals and no change in permanent and long-term departures. Over the Feb 2003 year there was a net gain in migration of 41,600, nearly 90% higher than the net inflow of 22,000 migrants in the previous Feb year. Compared with the Feb 2002 year, non-NZ citizen arrivals were up 10,600 in 2003, and NZ citizen departures were down 8,200. There were significant inflows over the year from China (16,200), India (6,400) and South Africa (2,500).

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