Business Update Friday 24 October
Friday 24 October 2003 Issue 93
NZ TAX TRENDS WRONG WAY The latest OECD data shows NZ bucking the trend towards lower tax. NZ has the highest proportion
of tax revenue as a percent of GDP of any non-European OECD country, having now overtaken Canada for that dubious
honour. 16 of 27 OECD countries had reduced tax burdens in 2002 compared to the year before, but NZ's tax revenue as a
percent of GDP rose from 33.8% to 34.9%. Only two countries - Slovakia and Luxembourg - had larger increases. While
slower economic activity (meaning less tax collected) was a factor behind lower tax burdens in some countries, tax cuts
were also a significant factor, with 15 countries reducing their top rate of personal tax and 12 countries reducing
their corporate tax rate. It is likely that these trends will have continued into 2003 and as a result NZ is fast
becoming a high tax country - if not yet by European standards then certainly by Asia-Pacific standards.
ELECTRICITY COMMISSION FLAWED The Electricity Commission is likely to bring reduced investment in the electricity
industry, according to a commentary by former Treasury head Graham Scott. The commentary says there are some 'strikingly
odd' features to the set-up, including a lack of checks and balances on the 'huge' powers of the Energy Minister, the
lack of effective requirements to consult with affected parties, and reduced rights of those parties to use the Courts
to address issues. Scott says we are moving towards a world of "regulated solutions based on technical and political
judgment......before long the legacy of voluntary agreements will recede into the past and the outcomes will emerge from
complex games within and between the regulators and the regulated...The effects of all this on the incentives for
private investors will be to induce great caution about making new commitments especially where prospective returns from
the investment in question are very vulnerable to the areas of greatest un
ACC LISTENING ACC recommendations for the 2004/5 levies have been pruned back and now propose no change to the average
levy in the employer account, a reduction in the average levy for the self-employed account and a bigger reduction in
the average levy in the motorist account. Initial proposals were based on a forecast 10-year interest rate of 5.5% but
subsequently 10-year rates have increased to over 6%, so ACC will earn substantially more from its investments,
requiring less from levies. ACC is also recommending sticking with the existing 130 levy risk groups as being more
responsive and involving less cross-subsidy than moving to 56 would have. Both recommendations are in line with
submissions made by Business NZ. Contact nclark@businessnz.org.nz .
HOLIDAYS 'GIFT' IS SUSPECT Should the promise of extra holidays be dangled like a gift just beyond the next election?
There's something suspect about policy promises that straddle electoral cycles and dishing out holiday benefits beyond
our means will certainly stifle growth. The justification for the proposal is that places like Australia and the UK
generally give more than three weeks, but then they can afford it - UK citizens have 25% and Australians have 30% higher
GDP per capita than NZers. Holidays should be increased only on the basis of increased productivity, and the decision
should be negotiated between individual employers and employees rather than being something conjured up by Government.
Bread and circuses are not the way to grow a sustainable economy.
NANNY STATE ALIVE & WELL Government moves re holidays and 'work-life balance' are symptoms of the growing Nanny State in NZ. Nanny is also
hard at work in roading, employment relations and pay equity: Roads - The Land Transport Management Bill now includes
the concept of 'traffic demand management' - i.e. regulations to ease road congestion by restricting your use of your
car. The crazy thing is that the congestion has only come about because not enough has been spent on roads. A better
answer would be to let more of the money collected from petrol tax and road user charges to be spent on roads.
Currently, three quarters of petrol tax gets siphoned off into the consolidated fund and other places. If petrol taxes
and road user charges were actually spent on road building and improvement, there would be no need for Nanny to ration
our use of roads. Employment relations - The Employment Relations Act Review is all about promoting collective
bargaining - but it would be more useful if it instead addressed unions' monopoly on negotiating collective agreements.
NZ workers are capable of making their own decisions about collective agreements and there is no logical reason why they
should be negotiated only through unions. Restricting collective bargaining to unions alone sends a message that NZ
employees are incapable of acting in their own best interests. Pay equity - The Government has promised to introduce a
form of pay equity in the public sector and has signaled it would like the private sector to follow suit. (Pay equity is
different from the fully supported requirement for 'equal pay for equal work', which was successfully introduced in the
Equal Pay Act 1972.) Pay equity involves a central bureaucracy ordering pay increases in women-dominated occupations on
the basis that there is a 'gender pay gap' (NZ women on average earn 12.9% less than NZ men). But this leads to
distortions in the labour market and wage inflation. The earnings gap - which is reducing all the time - exists largely
because of time out of the paid workforce for child rearing and because of choices made by women to study certain
subjects and work in certain occupations. There's no need to impose nanny-state, centralised wage fixing in response to
choices freely made by women.
THINK OF THE GOVT, GREENS WHILE IN TRAFFIC QUEUES If you have trouble getting out of the city this Labour weekend, or
find yourself stuck behind slow traffic without a passing lane in sight - remember the Government and the Greens. Their
Land Transport Management Bill, due to become law within the next fortnight, does nothing to improve the state of the
roads and will actually result in reduced road funding, as more petrol taxes will get siphoned off towards cycle tracks
and rail subsidies. This Bill should be changed to stop the vast flow of motorists' money away from roads. If you agree,
please tell your MP you want the Bill changed. Email GRR@paradise.net.nz to find out more.
GROWTH STATS
VISITOR NUMBERS IMPROVING
* Short-term visitor arrivals were up 12,300 (9%) from Sept 2002 to 2003.
* The number of stay days in Sept 2003 fell 2% compared with Sept 2002 and the average length of stay fell from 22
to 20 days.
* More visitors came from Australia (+10,700) and the UK (+1,700), but fewer from Asia (-1,400) compared with Sept
2002.
NET MIGRATION EASES FURTHER
* Permanent and long-term (PLT) arrivals exceeded departures by 2,400 during Sept, 700 fewer than in Sept 2002.
PLT arrivals have dropped over the last 7 months compared with the same months the previous year.
* Annual long-term migration continues to show signs of easing, as the September 2003 year showed a net PLT gain
of 40,400, compared with 41,200 for the August 2003 year.
GROWING AND GETTING OLDER
* NZ's population is now 4.024 million.
* Over the year to 30 Sept, the population grew by 68,300 (1.7%) - the largest growth in a Sept year in the last
decade, and largely due to net immigration, contributing 40,400 (59.1%) of the 68,300, compared with a natural increase
of 27,800 (40.1%).
* Half the population is aged over 35. Life expectancy is now 80.9 years for women and 76 for men.
* Our population is gradually getting older: 11.9% NZers are aged 65 years or more, compared with 11.2% in 1991.
WHAT'S NEW on www.businessnz.org.nz
* Holidays 'gift' brings unease
* ACC listening
* ANZCERTA rules of origin
* A question for Mr Swain Commentary on the Electricity Commission