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Issue 121 – December 2014 $6.30
Publicatio n o f t h e E m p l o ye r s & M a n u f a c t u r e r s A s s o c i a t i o n Inc
Kiwi aircraft delivers $120m deal How to cut the cost of Christmas taxes
Inside • • • •
Thinking retirement? Big data Wage growth ahead China-Australia FTA a wake up call
2014: What happened? A bullying manager?
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BusinessPlus is published by : The Employers and Manufacturers Association (Northern) Inc
On the cover...
159 Khyber Pass Rd, Grafton, Private Bag 92066, Victoria Street West, Auckland 1142 Ph: 09 367 0909 or 0800 800 362 Email: ema@ema.co.nz Website: www.ema.co.nz
Eastern Highland Province villagers of Papua New Guinea gather in front of an Adventist Aviation Service P-750 during one of their regular missionary flights serving remote communities. A $120m deal has just been signed to make these aircrafts in China. The story is on p26.
Chief Executive: Kim Campbell Manager, Advocacy & Govt Relations: Mark Champion Manager EMA Learning: David Foley
CONTENTS
Manager, Strategy & Enterprise: Mauro Barsi Waikato Denis Quigan 07 823 9311
mob 027 203 0694
Russell Drake 07 838 0018
mob 021 686 621
export
04 Interest rate cut overdue
23 Exporters bullish
05 Business and Govt working together – internationally unique
14 in the lobby: Valuing
Bay of Plenty Terry Arnold 07 575 8401
Advocacy
development
mob 021 662 656
14 Funding Auckland’s transport Rotorua / Taupo / South Waikato / Whakatane Clive Thomson 07 348 0334 mob 0274 372 808
conundrumt
19
BusinessPlus Editor Gilbert Peterson Ph: 09 367 0916 gilbert.peterson@ema.co.nz
New H&S law requires fine tuning: EMA
news 06 Two thirds expect a pay rise next
24 Big award recognition for trade with India
24 One year anniversary of trade deal with Taiwan marked
year
25 Letter from Australia:
Writer Mary MacKinven
China-Australia Free Trade
mary.mackinven@ema.co.nz
Agreement a wake up call
features
Designer Ripeka Mikaere Advertising Sales
18 retirement: Starting to plan
6
for your retirement now makes
Colin Gestro (09) 475 9313
Owner-manager programme designed
colin@affinityads.com
to fit hectic business schedules
ISSN No. 1176-4953
07 Employer Host responsibility 09 Manufacturers dig their way back – 2014 in review
10 Business’s rates subsidy to Auckland $220 million a year
11
sense
20 technology: The power of big data and the cloud
advice 10 TAX TIPS: How to cut the cost of your Christmas taxes
12 EMPLOYMENT CHAT: A
BEPS tax scrutinised for
bullying manager, the meaning
avoidance
of your Christmas party, and
22 Temperzone sharpens focus on Indonesia
22 Managing consents and assets part of school life
closing down for a week?
16 Economics Update: Wage growth ahead
28 out and about
ADVOCACY By Kim Campbell
Interest rate cut overdue 2014 will go down as the year the New Zealand Reserve Bank raised interest rates prematurely in the expectation the past was still the best guide to the future. This year it has proved not to be so. Many of our international traders paid the price as exchange rates remained adverse longer than necessary, and higher interest rates held back investment. Early this year we called attention to the unstable basis of the Bank’s presumptions. We said interest rates did not have to rise this year. In January we said any increase in the Official Cash Rate would be precipitate, unjustified and speculative. The trading bank economists crowed the central bank’s analysis of impending inflation was right. It turned out not to be the case. The increase in the OCR has proved unjustified. To be fair the trading bank economists presumed the recovery that New Zealand has been enjoying is the same as in earlier times and would be accompanied by rising demand and increasing inflationary pressures. This time other big factors are in play, and they are new. Our trading fortunes lately have come to rely on different vectors than hitherto. Whereas the downturns and recoveries in the US and Europe previously determined to a large extent whether our economy contracted or expanded, this time there has been no recovery in either continent to speak of. Yet ours has performed well. Second, and fortunately for us our economy post the GFC has been buoyed by high dairy prices and demand for other goods from China. This is still relatively recent, and a very welcome development. Third, the world is awash with money seeking yields higher than the zero returns available in the big, wealthy economies. The cost of borrowing is at historically low levels. With New Zealand’s prudential management and our economy leading the OECD in the global recovery, our
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risk profile is also at an all-time low; the costs of borrowing reflect that too. Most dramatically, in response to the weakness of the world’s big economies, the price of oil has collapsed. The consequences of this have not been factored into deflation forecasts anywhere to the extent warranted.
producers during the early part of the year; other employment and skills rich exporters suffered. The Reserve Bank’s efforts to talk down the exchange rate - ‘The high exchange rate is a particular headwind for the tradables sector and the Bank does not believe it is sustainable’ proved limp.
Sure, high commodity prices continued to reward our primary producers during the early part of the year; other employment and skills rich exporters suffered.
With oil down 30 per cent, and more to come, the costs of production and freight, amplified by automation, are in serious decline. The spectre of deflation extends well beyond Europe and Japan. China’s growth targets also continued to decline. Despite all this mounting evidence, our Reserve Bank and bank economists blithely agreed that, because our economy had recovered and was performing well, interest rates had to go up. Such a decision, while inflation remained stubbornly below the mid-point of the Bank’s mandated inflation target, has to be questionable. With interest rates up, and the carry trade encouraged, our cross rates with the US and Australia have remained high, shredding margins on our $10 billion export trade across the Tasman. Sure, high commodity prices continued to reward our primary
Then there are the LVRs. These are said to have worked in the Auckland housing market. The evidence is unconvincing. A year ago Finance Minister Bill English also commented that house price inflation had peaked. Not yet. Besides, with no supply constraints evident anywhere else in the economy what with the large volumes of goods we import, any capacity constraints other than in housing, are imaginary. Easily outweighing the inflationary effects caused by the ongoing demand for housing in Auckland and Christchurch is the diminishing costs of the $50 billion of consumer goods, capital goods, industrial supplies and transport fuels we import each year. The upshot is the OCR is well overdue to be cut. kim.campbell@ema.co.nz
ADVOCACY at work
Business and Govt working together – internationally unique A round-up of Government responses to business’ needs was presented at EMA’s Policy Forum by Phil O’Reilly, chief executive of BusinessNZ, of which EMA is the major funder. Looking back over the past three years Mr O’Reilly compared government actions and business requests of them. He attributed some of the successes our unusually close relationship between business and government. Topics included the GFC recovery, the tax switch to GST, the share sell down in state-owned enterprises and the Government’s Business Growth Agenda. He said business wants the Trans Pacific Partnership trade agreement completed, the company tax rate lowered, the Government approach to mining for minerals and petroleum to be consistent, water pricing and supply to be equitable, the Resource Management Act to be amended and implemented with uniformity nationwide, and skills shortages addressed. Mr O’Reilly said New Zealand was well placed going into the future. Our man in China EMA’s chief executive Kim Campbell returned from a successful APEC CEO Summit in Beijing last month. He reported attending events of this stature benefit EMA and New Zealand business by building a better understanding of world affairs, and particularly helpful for developing closer relationships with the other New Zealand business people and politicians. He reported New Zealand was held is high esteem in the international business community. Kim went on to join the Auckland Mayoral-led delegation to celebrate the 25-year sister city partnership Auckland has with Guangzhou, along with a Los Angeles delegation. He was very impressed with Mayor Garcetti of Los Angeles who is tipped to become a contender to be the next President of the US. He also went to Chengdu for the opening of the new NZ Consulate
there, at the invitation of PM John Key. Back in New Zealand Kim was also a guest at a luncheon for the President of China, HE Xi Jinping in Auckland. Pay and safety on the agenda New Minister of Workplace Relations and Safety, Michael Woodhouse, met EMA’s representatives in Wellington to discuss some key concerns for business, namely pay equity and the health and safety regulations under development. The useful discussion allowed us to understand how we can develop further conversations in the New Year. Swiss delegation seeks intel from EMA
EMA hosted last month an official Swiss delegation led by the Swiss State Secretary for Economic Affairs, Marie-Gabrielle Ineichen-Fleisch (pictured sharing a joke with EMA CEO Kim Campbell). Kim outlined New Zealand’s business priorities and performance. A notable point outlined by Marie-Gabrielle was on how Switzerland conducted its public referenda. Indonesian trade mission follow-up New Zealand’s Trade Commissioner to Indonesia Tim Anderson presented an update on life and politics in the
world’s 4th largest democracy for businesses that had been on the trade mission to Indonesia earlier this year. Mission delegates also spoke about their successes that had come out of that mission for them. One reported he has returned already to Indonesia and is confident of achieving a $US 3million deal. Temperzone’s story is featured on page 22. Ministers Joyce and Goldsmith call by EMA was pleased to host visits in our Auckland office from Cabinet Ministers Steven Joyce and Paul Goldsmith. Mr Joyce is minister of four highly relevant portfolios: Economic Development; Regulatory Reform; Science and Innovation; and Tertiary Education, Skills and Employment. Mr Goldsmith is Minister of Commerce and Consumer Affairs. Employment, environmental and trade policies in development EMA’s Employers Forum members heard a presentation on the effects of immigration, and discussed policies most wanted from the Government to develop to make employing people easier. The Energy and Environment Committee discussed issues of major concern to business too. Easily heading their list so far is the Resource Management Act. Members of the Trade Committee discussed with representatives of the Ministry of Foreign Affairs and Trade the need to address regulatory costs and the lack of international alignment. One area of non-tariff barriers addressed was post-border documentation requirements in other countries (referred to as technical barriers to trade). Watch this space!
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NEWS
Two thirds expect a pay rise next year Most New Zealand professionals have a positive outlook regarding their earnings for 2015; 69% anticipate they will get a salary increase and 46% a bonus, according to the latest survey from recruitment consultancy Robert Walters. The Robert Walters Pay & Bonus Survey received more than 1500 responses from professionals in accounting, banking, financial services, human resources, information technology, procurement, marketing, sales and business support. It found that the number of professionals anticipating a remuneration increase is higher than the number of professionals this year
69% anticipate they will get a salary increase and 46% a bonus, according to the latest survey who reported receiving a pay rise (62%) or a bonus (34%). Expectations for an increase are higher in Auckland than in Wellington.
The survey also found 24% of professionals are looking to change roles in the next three months, and 69% will be looking at doing so at some point in the next two years. 31% are completely satisfied and not looking to change their roles. Robert Walters Wellington Director Sean Brunner said: “The best candidates are looking for work that will challenge and inspire, and help them to develop their careers. “As the survey results show, career progression has been rated as the primary reason professionals would consider changing roles. Salary is still an important consideration, followed by improved work/life balance and job security.”
Owner-manager programme designed to fit hectic business schedules Participants in the Owner-Manager Business Growth Programme who have attended 14 weekly sessions, 4-6.30pm, to learn about balancing the demands of staff, customers and hands-on operation. Trainer Lisa Mandic says the latest course had seven participants from diverse businesses: two from family firms, two general managers (one with 100+ staff and the other with about 30), one business owner in a franchise with 15 staff, and two who started their businesses from scratch and now have four to six staff each.
Lisa commends her students: “They are true entrepreneurs. They have devoted all this time to the course on top of their business roles – one signed in on Skype from the Bay of Islands for one session.” Next year the course will be called Equip: Owner-Manager Business Growth Programme.
Craig Garner and Lisa Mandic [EMA] and Daniel Sadler [Office Products Depot Newmarket]
You can register online at www.ema.co.nz to take part.
AdviceLine hours over Christmas and New Year
Monday 22 December.................................8am – 8pm Tuesday 23 December................................8am – 8pm Wednesday 24 December ..........................8am – 5pm Thursday 25 December...............................Christmas day Friday 26 December ...................................Boxing day Monday 29 December.................................9am – 5pm Tuesday 30 December ...............................9am – 5pm Wednesday 31 December...........................9am – 5pm Thursday 1 January ....................................New Year’s day Friday 2 January..........................................2 January Holiday Monday 5 January – Friday 9 January........8am – 5.30pm Monday 12 January onwards......................8am – 8pm
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Call AdviceLine on (NZ) 09 3670909 0800 300 362 (AU)1800 300 362
Employer Host responsibility On 1 December 2014, new drinkdriving laws came into effect reducing the legal blood alcohol limit from 400 to 250 micrograms of alcohol per litre of breath. Guidance from the Institute of Environmental Science and Research (ESR) indicates that most adults may be able to drink two standard drinks over two hours and are likely to remain under the new drink-driving limits for adults. A standard drink contains 10g of pure alcohol. This is approximately to equivalent to 330ml of beer, 100ml of wine or 32ml of straight spirits, containing 4, 12.5 and 40 percent alcohol respectively. In New Zealand, the label on the packaging of an alcoholic drink must state the approximate number of standard drinks it contains. (Source: Ministry of Transport) With the festive season upon us, the new law is perhaps a timely reminder to employers about host responsibility when alcohol is available at work functions. We recommend employers inform employees of the new law and put steps in place to ensure the health and safety of employees during and after functions. This could include: • Providing information about safe drinking • Identifying excessive drinking and stopping supply of alcohol if necessary • Providing food and nonalcoholic alternatives
•
Encourage people to arrange transport home or provide transport/taxi chits. Employers should also be aware that it is unlawful to supply alcohol to persons under 18 years without express parental consent, and any alcohol must be supplied in a responsible manner. You could be fined up to $2,000 if found in breach of this law. Although the new Health and Safety legislation due to be passed next year does not specifically address the issue or provide any specific rules, it may be reasonable to assume that employer host responsibilities may be greater as a result of greater health and safety obligations envisaged under the new legislation. Furthermore, it is in everyone’s best interest for employees to have an incident free festive season. We recommend employers also review existing policies around the use of company vehicles. You should state what the new legal limits are and/or reiterate the company’s rules around alcohol consumption and company vehicles.
0800 223 729 Ace Payroll for New Zealand employers.
For further information please see the Health Promotion Agency’s publication Serving Alcohol SAFELY at Workplace Events. This is only a guide. It should not be used as a substitute for professional advice. Please call our AdviceLine Team if you wish to discuss further. Visit www.ema.co.nz | Free call NZ on 0800 300 362 E-mail advice@ema.co.nz Follow us on twitter.com/ema_nrthn
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Keep your nger on the pulse Your people are one of your biggest assets. To make sure your business is performing at its best you need to get their pay and benefits ‘just right’. That’s where we can help. Using our market intelligence you can keep your finger on the pulse of market trends and act with confidence. The National Employers Wage and Salary Survey covers 216 positions. Our comprehensive reports include splits by industry, location and revenue bands: Salary reports: Reflect Salary ranges by position, location, revenue bandings and industry. Beneets and Conditions reports: Position specific analysis of benefits and conditions. You’ll find sample reports as well as a full list of positions and descriptions on our website.
www.nzsalarysurvey.co.nz The
National Employers Wage and Salary Survey is a joint venture between
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NEWS
Manufacturers dig their way back – 2014 in review Last century we used to say anything good for the Australian economy was good for New Zealand. When their economy went well they bought more of what we had to sell, and Australia remains today the major market for our manufactured goods and services. But the past two years have not been kind to Australian manufacturers. Hard on the heels of a ‘Dutch disease’ epidemic whereby the Australian dollar explored new heights on the back of high mineral prices – hard going for the competitiveness of their manufacturing exporters – came the announcement of vehicle plant closures. Reflecting this, Australia’s Performance of Manufacturing Index (PMI) has registered a shrinking industrial base every month since August 2012. In contrast on this side of the Tasman New Zealand’s PMI has been recording a steady, robust expansion, as high as 63 in November 2013 and 60.6 in October this year. Its been a remarkable run. Even more so because over the same period we have seen a large number of businesses laying off staff. Yet the unemployment rate has kept falling. This year the job losses have included 200 from Summit Wool Spinners, 120 at Fitzroy Yachts, 100 at Contact Energy, 84 at SafeAir, 120 to go at Holcim Cement, 100 at Croxley, 20 at ITL in Taranaki, 40 at Wellpack in Upper Hutt, 120 at Alloy Yachts, and several hundreds from various sawmills. Despite the jobs lost the official unemployment rate went from 6.4% a year ago to 5.4% and that also in spite the fastest population growth New Zealand has had in a decade. Average hourly pay across the economy went up 2.3% during the year too while those employed in
manufacturing over the past two years to September increased by 7000 to 247,000. At the start of the year our terms of trade were at heights not seen for a generation which was reflected in eye watering exchange rate levels. Yet manufactured exports held their ground.
interest rates were raised, the carry trade encouraged, and our cross rates with the US and Australia shredded margins on our $10 billion export trade across the Tasman. This recovery from the GFC this time has been different. New, big factors are in play.
Its been a remarkable run. Even more so because over the same period we have seen a large number of businesses laying off staff. Yet the unemployment rate has kept falling. The total exports of all manufactured goods were valued at $42,038 million (including dairy, processed meat, seafood, and wood pulp) for the 12 months ended September 2014 of which manufactured commodities and elaborately transformed manufactures accounted for $15,738 million. Food and beverage exports not counting dairy, meat and seafood, were worth $4,154.5 million, and industrial plant and equipment exports $2,603.8 million. The bare numbers show not much advance towards the government goal for exports to reach 40% of GDP by 2025. But in exchange rate adjusted terms they represent steady progress. With a more attractive currency and more competitive interest rates how much more headway could have been made? So what if the OCR this year had not been raised and the exchange rate underpinned? Early this year EMA said any increase in the Official Cash Rate would be precipitate, unjustified and speculative. It has proved to be so. Inflation all year has scarcely reached the bottom of the Reserve Bank’s mandated inflation target. But
China has rapidly become our major trading partner, Europe and the US have struggled and importantly, the price of oil has collapsed by over 30 per cent. The flow through effects of this will slash production and freight costs everywhere. Deflation is about to become more real than inflation, and China’s growth also continues to slide. A report this year, NZ Manufacturing Sector: Its Dynamics and Competitiveness covered 15 high growth manufacturing companies, all highly successful which they attribute to an intense focus on innovation, a willingness to re-invent themselves, invest heavily in R&D, and in skills and market development. Leading businesses like these – including F&P Healthcare, Orion Health and Gallagher – are showing what it takes to become a successful manufacturer in New Zealand, and how to break free of forces beyond their control, including the currency. In doing so they are blazing the trail for New Zealand as a whole, which is to be successful New Zealand must become a champion at innovation and the best place in the world to undertake R&D. BusinessPlus
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TAX TIPS Jo Doolan
How to cut the cost of your Christmas taxes Caught up in the spirit of goodwill and celebration, it is easy to forget about tax. But, we are told, tax loomed large in the origins of Christmas as Mary and Joseph were forced to travel from Nazareth to Bethlehem after an order from Caesar Augustus so he could conduct a census and ensure everyone was paying the right taxes. Others de-bunk this as a myth. But, regardless, the certainty is that taxes are an integral and oft forgotten cost of Christmas today. The good news is that you can cut your tax cost. At the risk of being dubbed the scrooge of Christmas, let’s not forget the cost of holiday pay and reductions in the cash flowing into your business means Christmas is often a time when the bank balance suffers. So instead of throwing a Christmas party at some swanky venue, you might like to consider having a “bring your own food and drink” party in the office or have a BYO picnic in the park and donate the money you have saved to a deserving charity. You could spice it up a little by having prizes for the best food, or the best dressed, or have a sports day. Rather than giving wine or food to your staff as gifts, let them vote on a charity they would like the money donated to, or buy goods that are
needed and, if the charity is nearby, get a delegation of your staff to deliver the gifts in person. Maybe your staff could go overseas to make the donation and, providing there is no personal element to the trip, this could also work for tax purposes. Plenty of deserving New Zealand charities are trying to ensure the Christmas season is a little more festive for those less well off. But before picking any charity, do a little due diligence to make sure it is registered and will not use your donations for excessive overheads rather than giving to those in need. This is especially important if the charity is offshore. You can also create the same sense of fun by having secret Santa presents, providing there are guidelines around not giving anything offensive. If this does not work for you, then the costs of hosting your Christmas party will be only 50% deductible for tax, and if you hold the party on your premises,
the extra costs of hiring anything like a DJ or wait staff or crockery will also be subject to the 50% rules. On top of this, do not forget the GST adjustments, meaning only half of your GST cost can be claimed. If you downsize the big bash to a morning tea on your business premises, the costs should be fully deductible, as the 50% entertainment expenditure limitation does not apply to light refreshments. Gifts such as bottles of wine or food hampers are subject to fringe benefit tax as the employee gets to choose when to enjoy the gifts. But the option of forcing your employees to drink or eat the gift before they leave your premises is not recommended, especially if they are driving home. Giving the gift to someone associated with the employee is not an option either as the rules are wide enough to catch this. The good news is you get a full deduction for the cost and there is no GST adjustment.
Business rates subsidy to Auckland $220 million a year Business fully supports the Auckland Plan and its aspiration to grow the city’s wealth faster, up from 3% to 5% a year. By achieving such a prescription the Plan would deliver more jobs, higher standards of living and an all-round better city. The Plan says “Auckland expects that its economic growth will be transformational, inclusive and equitable; built on innovation, a green economy and a business friendly attitude.” Great stuff!
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Of course to do this Auckland Council policy must fully back our businesses, and so far it has failed miserably. The prehistoric differential that the Council loads onto businesses is an example. For every dollar in rates paid by residential property owners the Council charges business properties $2.43 though businesses use no more of Council’s services, dollar for dollar, than households. Because of the differential businesses in Auckland contribute
far more to the Council’s income than other ratepayers. In fact in all our businesses subsidise other ratepayers to the tune of $220 million a year. The Shand Report in 2007 said levying businesses more in rates for properties of equal value like this was misguided. The practice means Auckland Council has some way to go before it can claim to be as business friendly as its Plan and serious about its ambitions for the city’s growth.
“Plenty of deserving New Zealand charities are trying to ensure the Christmas season is a little more festive for those less well off” Bear in mind some fringe benefits that come under the category of unclassified fringe benefits, are exempt from FBT if they fall under a minimum threshold. So if you pay FBT on a quarterly basis and give unclassified benefits that cost $300 or less per employee per FBT quarter (and in the current and previous three FBT quarters you provided benefits of $22,500 or less for all your employees) you are not liable for FBT. If you account for FBT on an annual or income year basis you will also be exempt from paying FBT on the benefits if the total taxable value of unclassified benefits provided does not exceed $1,200 per employee per annum or $22,500 per employer per annum. With the exemption remember that if you are one dollar
over everything is subject to FBT. Unclassified fringe benefits include gifts or entitlements provided to an employee that, unlike cars or cheap loans or similar, are not covered by specific FBT rules. Common examples would be gifts, or the cost of goods or services provided to the employee, where the contract is in the employer’s name. Most gifts given to employees other than food or drink are likely to fall under the fringe benefit tax rules so, unless you can qualify for the exemptions, you are in for a tax cost. If you are thinking of giving, or have given gifts other than food and wine to clients or business contacts, the cost of these gifts should be fully deductible for tax purposes. If, on the other hand,
the gift you are giving is food or drink related, the expenditure will be only 50% deductible. The cost of taking a client out for a pre-Christmas lunch or dinner will also be only 50% deductible. Again, anything under the entertainment tax regime will be subject to the GST rules that mean you get to claim back only half of the GST cost. This GST adjustment is done once a year rather than at the time you claim your GST expense so at least there is a timing advantage. Then there is always the option of giving a little cash bonus to each employee at Christmas so they can spend the money as they like. This, however, will be subject to PAYE. Making Christmas a little less taxing and more about the spirit of goodwill to all is a good option. At least you can be hung over and tax free at the same time. Joanna Doolan is a tax partner with EY and Claire Dilks is a senior tax manager with EY. If you have any queries about the tax status of your Christmas celebrations, email us joanna.doolan@nz.ey.com claire.dilks@nz.ey.com
BEPS tax scrutinised for avoidance Businesses are to get to have a say about the base erosion and profit shifting (BEPS) next year. Inland Revenue (IR) is progressing its review of the practices involved, and developing policy in line with work of the OECD. A public consultation process is to begin late 2015. Revenue Minister Todd McClay says “hybrid arrangements for instance, which can be used to achieve double deductions or deductions without corresponding income, are of concern for New Zealand.” “We recognise that some aspects of our domestic tax laws not addressed by the OECD can be beefed up.” One of two reports on BEPS released by IR last month recommended the consultation in mid-2015 should aim at strengthening New Zealand’s non-resident withholding tax rules, and introducing measures to improve the quality and usefulness of tax information. The first seven of the OECD’s deliverables from its 15-point action
plan were announced earlier this year, with the remainder to be finalised next year. The seven actions for revenue collectors were: • Address the Tax Challenges of the Digital Economy • Neutralise the Effects of Hybrid Mismatch Arrangements • Counter Harmful Tax Practices More Effectively, Taking into Account Transparency and Substance • Prevent the Granting of Treaty Benefits in Inappropriate Circumstances • Modifiy Chapters I, II and VI of the OECD Transfer Pricing Guidelines Related to Transfer Pricing Aspects of Intangibles • Modify Chapter V of the OECD Transfer Pricing Guidelines Related to Documentation • Develop a Multilateral Instrument to Modify Bilateral Tax Treaties The reports can be found at www. taxpolicy.ird.govt.nz
Profit in catching tax avoiders
IR’s proactive strategy to track down attempts to avoid paying tax in New Zealand is showing big dividends. IR has looked at property developers speculating in the residential market, particularly in Auckland and Queenstown. They visited 2,500 industry and other interest groups and monitored 26,000 properties and property-related issues. Over the past four years, Inland Revenue has identified discrepancies of more than $195 million with $52.4 million of that in the 12 months to June this year. Mr McClay says, “We spent $172 million on enforcement and compliance through tax auditing in 2012-13 for a return of $1.2 billion, a return on investment of $7.47 to $1. “For 2013-14, we spent $165 million for a return of $1.24 billion $8 for every dollar spent.” BusinessPlus
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EMPLOYMENT CHAT
A bullying manager, what your Christmas For the fourth time I’ve heard that one of our managers is belittling the woman who reports to her – this time in public. In the past the manager has denied all accusations so I haven’t been able to get very far. I’m getting a bit sick of this…so what now? – Harvey Dear Harvey I bet her direct report is getting more sick of it than anyone else! If you don’t act soon you might face a personal grievance claim, plus new recruitment costs. Not to mention lowered staff morale. You can bet others can see what’s going on and that the manager is getting away with it. I’m assuming the allegations are true, not just malicious. If so what makes you think four complaints are all lies? What makes you believe the manager? Seriously, you need to
rethink this quickly and maybe get some help with your investigations. Going through the correct procedures will save you a lot of grief and will uncover the truth, so you can take the appropriate next steps. Those next steps could be to offer management training or counselling to the offending party, and this could be part of a formal performance review, or undertaken separately. If an informal request to take up training results in no behavioural improvement you should be looking at disciplinary action and/or a performance review of the manager. The problem might also be a warning about recruitment: to ensure you match team members better in future (though this is hardly a perfect science…).
Is it a good idea to mix staff and clients at the Christmas party, and kill two birds with one stone
“Going through the correct procedures will save you a lot of grief and will uncover the truth, so you can take the appropriate next steps”
as it were, saving money on festivities? – Jim Dear Jim Just imagine your lecherous buyer getting drunk alongside your gorgeous sales rep. The mind boggles at the possibilities. Your staff party is not for networking, but celebrating and developing togetherness. Religious connotations aside, a Christmas party is for one united group to have an opportunity to let their hair down together, to shake off their corporate façade or their occupational differences and to be their informal, relaxed selves – hopefully! So, no. Think of the company’s reputation in the eyes of your customers, and the safety and comfort of your staff. If you mix the two groups of people with their different roles both groups may well feel shortchanged.
I need to close the firm down for a week so I can go to a trade show. No one else can do my job, we have a small staff and this is a great opportunity. Can I do that? – Ross Dear Ross You can close your business for a week if you wish, but you need to
Advice and Support when you need it! We’ve got a team of advisors, lawyers and consultants who’ll do more than take the case - they’ll help you build a workplace for the future.
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EMPLOYMENT CHAT
party means, and closing down for a week? The Holidays Act allows for an employer to require employees to take up their leave entitlements with not less than 14 days’ notice if you are unable to reach agreement with them. consider the impact on your staff and your other options for managing this. The obvious choice would be for staff to agree to take annual holidays for the week. A problem may arise, however, if your staff do not have enough leave to cover the period, or have already made plans for their holidays. The Holidays Act allows for an employer to require employees to take up their leave entitlements with not less than 14 days’ notice if you are unable to reach agreement with them. Where employees have no leave entitlement available then leave in advance or leave without pay can be considered, but you will need the employees’ agreement. There are special provisions where a business has a customary closedown every year, traditionally at Christmas time and for this you can require
staff to discontinue work. However, as you have indicated this is a unique situation, those rules do not appear to apply. With some planning and open communication with your staff you may find they are happy to take a week off. If not, you may wish to consider keeping the business open while you are away by making some other arrangements.
EMA members can start with our free AdviceLine team at phone 09367 0909 or 0800 300 362 (within New Zealand), and 1800 300 362 (from Australia), 8am-8pm weekdays. Alternatively, email advice@ema. co.nz or read or print information such as the A-Z of Employing – a manager’s guide on more than 100 specific employment topics, at www.ema.co.nz
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BusinessPlus
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IN THE LOBBY
Valuing development The Resource Management Act is being reviewed again. 23 years after it was passed, this law that affects so many businesses and individuals is still not fit for purpose. There are many problems with the RMA, not all of them easily fixed. One problem is its breadth. Over time the RMA has broadened to cover a vast number of issues that weren’t even thought about in 1991. The range of reasons for stopping you from developing your land is now huge. The original idea of the RMA was that people should be free to develop and use their property as they wished, as long as the environmental effects could be sustainably managed. It was meant to deliver more freedom, unlike the Town and Country Planning Act, the main Act it replaced. The Town and Country Planning Act was a thicket of rules that minutely governed what you could and couldn’t do with your property. The RMA was going to cut through all that by simply focusing
The RMA was going to simply focused on effects development would be ok as long as negative effects on others could be sustainably managed. on effects - development would be ok as long as negative effects on others could be sustainably managed. The RMA would ensure that anyone who’d be negatively affected by your proposed development could object and seek changes, but otherwise you were free to develop. What no-one foresaw was that an army of objectors would spring up, complaining about effects that did
not affect them personally. Special interest groups of many kinds have taken it upon themselves to block development ‘for the public good.’ Over time this has undermined the freedom to develop that the RMA was meant to safeguard. Of course the public good is critically important - we protect it with laws for safety, order and welfare, and with laws against nuisance, malfeasance and crime. But public good shouldn’t be a trump card in a simple, otherwise uncontested application for a resource or building consent. In the name of public interest the RMA is increasingly restricting private property rights. Along the way local authorities became more powerful as regulators and enforcers. Councils can make and apply rules on zoning restrictions, special vegetation areas, coastal set-back zones, heritage orders, outstanding landscapes, restricted activities and many more. These can wipe out legitimate development opportunities or make them uneconomic.
Funding Auckland’s transport conundrum By Kim Campbell
Nobody wants to pay more for anything but its either that or everyone in Auckland will be struggling with traffic gridlock within 10 years. That’s the stark choice highlighted by the modeling on Auckland’s transport future. If we keep on the present business-as-usual track, slowly building more roads and adding more public transport, by 2021 the time we take to get to work and deliver goods around Auckland will have become untenable. People who argue differently haven’t looked at the numbers. Doing nothing is really head-in-the-sand stuff. All the interests represented on the Alternative Funding Group set
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up by the Mayor agreed with the recommendations put forward. These interested parties included: • Auckland Business Forum • NZ CTU • Walk Auckland • Campaign for Better Transport • National Road Carriers • Child Poverty Action Council • Cycle Action Auckland • Environmental Defence Society The group was tasked to find the best way to get the money to develop Auckland’s transport networks so we didn’t end up not going anywhere. The funds needed for a transport package that will keep up with the ongoing crowds of people coming here is estimated at $12 billion over 30 years – an extra $400 million a year.
Over two years of work the group examined many things such as visitor room taxes, parking levies, road cordon charges, property betterment taxes, a regional sales tax, regional fuel tax, even a regional lottery. The problem was few of these raised much money, and when we focused on the things that would raise large sums, some of them were not very fair. For example there’s already a lot of pressure on rates revenues to be spent on other things, and to raise them for transport purposes affects people who may not use the roads much. Fuel taxes are likely to be of diminishing value too, as vehicles become more efficient and electric. In the end the group agreed its main recommendation was for a toll
Phil O’Reilly
This gradual takeover of private rights mostly harms the residential and small business sectors, as these do not have the benefit of streamlined processes that have been put in place for major projects. In the business sector the result is less development and fewer new businesses and jobs. In the residential sector the result is unaffordable housing. It’s a sobering thought that a law meant to be enabling has instead restricted business development and home ownership. How can this level of intrusion be rolled back? During the coming review of the RMA there will be many public submissions offering diverse solutions which might or might not help. Unfortunately the vastness of the 800-page Act and the many areas it regulates make it hard to get to the heart of the RMA’s many problems. Along with others, EMA and BusinessNZ will be making a submission on the areas where the RMA could be improved. We will ask for changes that encourage respect for property and on the existing motorway network. Auckland Council politicians will be left to decide whether to advance this, but the group considered it held several compelling advantages over other options which, amongst other things would convey to central government that Auckland is genuinely prepared to pay its way for a more successful city. Of course we have no law in place to enable such a toll, and neither do we have adequate governance arrangements to administer it and invest the proceeds to the public’s satisfaction. To do this we would need a Greater Auckland Transport Authority to combine the transport resources of Auckland Council, the NZ Transport Agency, Auckland Transport and the Ministry of Transport. Before going there Auckland has another elephant in the funding room
“Special interest groups of many kinds have taken it upon themselves to block development ‘for the public good”
discourage its violation. One key change we want is for compensation to be paid. We believe that where restrictions limit how you can use your property or reduce its value, you should be compensated. This is not an unreasonable call. The principle of compensation for takings is a fundamental point of constitutional law in most countries. But here in New Zealand the RMA says compensation is “not payable in respect of controls on land.” Changing this part of the law would be a substantial help. Requiring compensation for controls on land would discourage rash planning by councils. Vexatious objectors and special
interest groups not affected personally by a proposed development would also be discouraged, as they would be likely to face costs if compensation was payable. The benefit would be more than just compensating people for their loss – it would help discourage the pervasive devaluing of private property in the first place. The overall result should be better decision making. EMA and BusinessNZ will continue to advocate for this and other improvements to the RMA. Phil O’Reilly is Chief Executive BusinessNZ www.businessnz.org.nz
“Asset sales could delay the need for tolls but Auckland will end up paying regardless” – we really need to sell some of our publically owned assets. There’s a lot to choose from: a partial sell down of Auckland Airport shares; the Ports of Auckland business, though certainly not the land the port operates on; and numerous properties. One of the largest assets is the Auckland Electricity Consumer Trust’s $2 billion worth of shares held in Vector. These are Auckland Council property that the Council won’t control until 2073. They should be handed over right away to
invest in the infrastructure the city urgently needs now. Asset sales could delay the need for tolls but Auckland will end up paying regardless. Either we’ll pay by suffering traffic congestion and higher personal transport costs, along with the higher costs we pay in the goods freighted around the city. Or we could pay through a low per entry road toll. Or, we could pay by investing the proceeds of an asset sell down in new infrastructure. The choice is ours to make. BusinessPlus
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comment By Donna Purdue and Zoe Wallis
Wage growth ahead Wage growth in New Zealand has been subdued so far in this economic recovery, but as the labour market continues to improve, we expect there is the potential for wage inflation to move higher in coming years. For businesses, wages typically account for a large share of total operating expenses, so stronger wage growth is a cost that needs to be planned for. For employees, wage increases make a difference to their ability to spend and to save (which also has implications for most firms). Over the past year, a low inflation rate (of 1%) and rising wages (up 2%) has seen workers experience a real increase in their earnings. Here we discuss the drivers of wage growth and what that means for firms and employees. As the New Zealand economy continues to grow, so too does our labour market. Employment has increased 3.2% (or 72,000) over the past year, while the unemployment rate has fallen from 6.2% down to 5.4%. While the Canterbury rebuild continues to be a major contributor to employment growth (with job numbers rising over 10% yoy), recent labour market statistics show that the number of people in jobs increased across most regions during the past year (the exceptions were Wellington and the Hawkes Bay). Despite rising employment numbers and a falling unemployment rate, there has been quite a bit of talk about the lack of wage growth in the economy, with private sector wage inflation running at just 1.9% yoy. In our view there are a couple of factors keeping wage growth subdued. First, overall inflation in the economy remains relatively low – at 1% it is sitting right at the bottom of the Reserve Bank of New Zealand’s target band – and inflation expectations remain well anchored. Low inflation reduces employees’ bargaining power in wage negotiations. Second, an increasing population (driven by rising net migration), has boosted our supply of available workers. More prospective employees mean firms can source staff without
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Annual % change
Unemployment rate and wage growth
4.0
% 2
3.5
3
3.0
4
2.5 5 2.0 6
1.5
Wage growth (LHS)
1.0
7
Unemployment (RHS, inverted) Source: Statistics NZ
0.5 2000
Net %
2002
2004
2006
2008
2010
2012
Wage costs and difficulty finding labour
8
2014
Annual % change
4.0
100 80
3.5
60
3.0
40
2.5
20
2.0
0
1.5
-20 -40 -60
Difficulty finding skilled labour (adv 4 qtrs)
1.0
Private labour costs (RHS)
0.5 Source: Statistics NZ, NZIER QSBO
-80
0.0 1994
1997
2000
2003
2006
2009
2012
But everyone should get a slice of the pie
The news is still good for those outside of construction. Typically as economies continue to grow it becomes harder to find labour and this encourages firms to increase wage rates in order to attract workers. The latest NZIER Quarterly Survey of Business Opinion (QSBO) showed that 26% of businesses are finding it difficult to find skilled labour – this is almost the hardest it has been since 2008. This bodes well for wage increases across the economy, particularly as economic growth also continues to become more broad-based.
2015
having to ‘pay up’ in order to attract talent. In addition, more people are making themselves available for work, as reflected in the participation rate reaching record highs earlier this year. Where’s my share?
continue to outpace increases across the broader workforce.
While overall wages have moved higher, different industries and regions have experienced different amounts of wage inflation. For example, wages in the construction sector appreciated around 2.4% last year, while pay for those in public administration increased by less than 1%. Interestingly, since 2009 it has been unskilled jobs that have seen the biggest increase in wages. Those with a Bachelors degree or above have experienced a wage increase of 8% on average over the past five years, but those with no formal qualification have seen their wages increase by over 10.5%. However, the wage rates of skilled workers are still much higher than those of non-skilled worker in the overall economy. The increase in non-skilled worker wages across the country is likely to in part be due to increase in demand for construction labour. Given the large scale of construction work on the cards for the next few years, wage growth in the construction sector is likely to
So what does this mean for your business?
As the economy continues to improve, employment will rise further and the unemployment rate is likely to fall back below 5% over the coming year. Labour force participation is expected to start to drop back from currently near record-highs as our population ages and more people decide to retire - adding to a tighter labour market. Inflation is also expected to start pushing higher over the year ahead and that is likely to see employees starting to ask for pay rises. We expect wage growth will slowly pick up and could move back towards annual wage gains of 3%. While this might sound a bit of a tough call for businesses, higher wages encourage people to spend more and hence benefit company sales. As the saying goes - ‘a rising tide lifts all boats’. Important Disclaimer: All content is for information only and is not advice. The views expressed are those of the authors and are based on information believed but not warranted to be correct. Any views or information, while given in good faith, are not necessarily the views of Kiwibank Limited and are given with an express disclaimer of responsibility. No right of action shall arise or can be taken against any of the authors, Kiwibank Limited or its employees either directly or indirectly as a result of any views expressed or this information.
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RETIREMENT By David Shannon
BusinessPlus introduces a new series: This is the first in a series on Retirement Planning. Future articles will address the issues raised in this article in greater detail.
Starting to plan for your retirement now makes sense The world is going grey as populations age. Today, in New Zealand, working taxpayers outnumber non-working pensioners by 5 to 1. By 2050 the ratio will be down to 2 to1. Because the elderly consume far greater health care resources, and new technology will extend life and escalate health care costs, this greying is going to impact substantially on individual workers and their families. It will mean: • Cuts in real terms of governmentprovided pensions • Growing importance of savings and long term investments • Changing work patterns, with patchwork careers, mid-life retraining and later retirement. • A larger family role in long-term care.
promised pensions is a very risky retirement planning strategy. How employers manage the retirement of their employees in the new environment is increasingly critical
Some older employees may wish to delay their retirement because they won’t be adequately prepared for the transition from full employment to full-time retirement. But as they approach retirement age, they may agree to some variations in their employment activities. Yet at the same time, employers may want to retain some prospective retirees due to a shortage of new talent and as they wish to keep on their experienced people in key positions.
“The world is going grey as populations age. Today, in New Zealand, working taxpayers outnumber non-working pensioners by 5 to 1. By 2050 the ratio will be down to 2 to1” The reality is many New Zealand retirees will not be adequately prepared for these ‘extra’ expectations, especially if they continue today’s trends of increasing debt and decreasing savings. Relying on today’s Government-
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Employers should initiate the retirement discussion!
Employers could well take the initiative to open a discussion on retirement in the context of their employees’ intentions. To do this they can help prepare
for the new reality through such as Retirement Education Programmes which can include: • Retirement Planning for employees likely to retire within the next 10 or so years, and • Financial Literacy and Life-Skills Training for younger employees in preparation for retirement in the longer term. Retirement Planning Seminars from age 45 will assist them:
• Take the initiative in their own retirement. • Plan the timing and processes they need to consider for their retirement (or their possible re-employment) in co-operation with their employer. • Plan their financial resources to be able to retire at the appropriate time. • Have their personal affairs (investments, housing, family responsibilities, personal estate plans etc) organised to facilitate the changes required for retirement • Have the personal confidence to change their work required of them at the appropriate time.
Seminars for younger employees aim to give:
• A clear understanding of the impact of global aging and their long term employment and retirement plans. • The knowledge and skills to effectively manage their personal incomes, investments, debts and mortgages. • Awareness of the importance of
“The reality is many New Zealand retirees will not be adequately prepared for these ‘extra’ expectations, especially if they continue today’s trends of increasing debt and decreasing savings”
organising their personal legal affairs. • The knowledge to set financial goals and investment strategies Retirement education can be an important employment benefit and retirement seminars can be supplemented with Work Transition Programmes
In many cases people nearing a retirement age or considering it look for alternative forms of employment to bridge the gap between their reduced income and the amount they need to fund their lifestyles. An employer may risk losing talented mature employees if some
arrangements are not made to meet these income and employment needs. Benefits for the employer
Retirement training programmes can include: • Attractive and cost-effective retirement packages. • Allow prospective retirees to take the initiative in the retirement process. • Ensure better control over succession planning. • Offer phased retirement or reemployment. • Keep older staff motivated and productive, eg as mentors. • Financial education and retirement planning programmes
assist in the recruitment and retention of quality staff of all ages. Summary
Global aging – the greying of the world’s populace - presents an increasing challenge. Employers and employees alike need to be aware of how it will affect them, plan for it accordingly, and take action for their own best interests. For more information on Retirement Planning and Seminars on the topic for your workforce contact David Shannon daveshan@xtra.co.nz or phone him on 027 600 8793
New H&S law requires fine tuning: EMA Though business welcomes the new Health and Safety Reform Bill some parts of it are still unworkable or not appropriate to New Zealand’s scale of businesses, Paul Jarvie told Parliament’s Select Committee hearing today. Mr Jarvie is Manager, Industrial Relations and Safety, for the Employers and Manufacturers Association. “We have identified several ways to improve how the new law could be made to work better,” Mr Jarvie said. “We would like some definitions made clearer, and in other places the new law would greatly benefit from better guidelines. “For example the responsibilities in multi PCBU (person conducting a business or undertaking) worksites is unclear and needs more
work. “The definition of the term ‘persons making a decision that affects the whole or a substantial part of the business’ requires clarification. “The two year limitation on prosecutions is far too long and would introduce undue stress. We recommend retaining the current six month limit. “ While we totally accept the need for worker participation in health and safety matters the extent of the prescription required in the Bill at present for worker participation and representation is excessive. The State is in no position to regulate what a H&S rep should do in any particular workplace or how. “We recommend the law clearly outlines the options of worker
participation for its health and safety representatives, safety committees and other systems that have been agreed by workers as relevant to the size of their business and its risk profile. “We strongly recommend the term ‘workgroups’ is more tightly defined. “Judges hearing health and safety cases need to become more familiar with employment law and OH&S matters instead of at present where any district court judge can hear such cases. “We note Australia, on whose law ours is based, is already carrying out a review after two and half years to make things simpler and practicable. “We want our new law also to be kept as simple as possible and above all practicable.” BusinessPlus
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technology By Barry Murphy, Director of Consulting and Technical Services, Asia Pacific, Skillsoft
The power of big data and the cloud New Zealand organisations have developed a competitive disadvantage due to a lack of investment in optimising cloud and big data solutions. While United States and European organisations have been strong adopters of big data and cloud solutions, Australia and New Zealand have been slower to transition, which means that despite the need to compete globally, businesses do not have operations as sophisticated as they need to be to fuel their business growth. (International Data Corporation, 2013*).
Regardless of which solutions or applications are a priority, it’s time for organisations to review internal processes and technology to see if there are opportunities to migrate to the cloud A recent Gartner survey (2014)** showed IT leaders face significant challenges compared to their global counterparts, largely as a result of a leadership vacuum in regards to digital, and a lack of buy-in at leadership level. The report shows organisations in Australia and New Zealand are less likely to have appointed roles such as chief digital officers (CDOs) than their US and European counterparts. Further, IBM*** (2014) showed that globally organisations’ existing IT infrastructure is not optimised to address the proliferation of mobile devices, data analytics and cloud computing.
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Again organisations need buy-in at leadership level to make the best use of digital opportunities and develop a digital strategy that can carry them into the next phase of the business. For this to happen, it’s important leaders become digital-ready by making investment in the core of IT, including the ‘bring your own device’ (BYOD) revolution. Regardless of which solutions or applications are a priority, it’s time for organisations to review internal processes and technology to see if there are opportunities to migrate to the cloud. Cloud solutions complement modern business environment
A new report from Skillsoft, Leverage the Power of Big Data & the Cloud, studied more than 650 decision-makers and learners in 13 countries across the Asia Pacific region finding 27% of respondents admit they have a limited understanding of cloud solutions; 41% said they don’t understand what big data is about. The survey highlighted three top advantages in investing in cloud solutions, including: remote access to keep pace with an increasingly flexible workforce (27%); lower costs and reduced software/hardware expenses (17%); and increased business agility (15%). Cloud solutions also help organisations retain top talent, bolster productivity and improve workplace practices for their global workforce. Respondents highlighted the increased capacity to generate greater returns, be more competitive and increase efficiencies and productivity. Today’s business environment is very different to even five years ago with
technology
an increasing need and urgency for computing infrastructure that can complement business results. Given employees are spending more time on mobile devices, the importance of remote access via a cloud solution should not be underestimated. Employees underprepared
Whereas leaders surveyed indicated a need for employees to be able to deliver advanced reporting for benchmarking, statistical analytics and the development of predictive models for scenario planning, investment levels in cloud solutions were low, and in industries you wouldn’t expect. Finance/banking/insurance is the top industry group to have invested in cloud solutions (24%), followed by education and training services (19%) and computers/IT/technical services (just 14%). 60% of decision makers in A/NZ rated their organisation underprepared for leveraging big data. This is considerably higher than the Asia Pacific average of 39%. Despite these low levels of organisational readiness respondents acknowledge the benefits they would gain from the investment. They named increased business intelligence (67%), a higher competitive edge (54%) and stronger market insights (52%) as the biggest opportunities from adopting big data.
Train for gain
A lack of skills training is also evident. This underinvestment extends to educating employees on how to leverage cloud solutions and big data; 75% of respondents indicated an investment of 10% or less in training during the past 12 months. A staggering 46% of decision makers said they don’t currently allocate any training budget in this domain whatsoever. It’s surprising organisations haven’t fully embraced the importance of learning when implementing new technology in an era when business leaders are under increased pressure to provide evidence of a return on investment. With the right cloud solution, businesses can save significant time on administrative and compliance activities, providing the opportunity for greater investment in other areas of the business. After all, the key to embracing disruptive change and fostering an environment around lifelong learning can empower a business to nurture a smarter, more engaged and more effective workforce. *Worldwide and Regional Public IT Cloud Services 2013-2017 Forecast (2013) **Gartner CIO Agenda Survey, Gartner (2014) ***IT Infrastructure Matters, IBM (2014)
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Member noticeboard
Temperzone sharpens focus on Indonesia
Indonesia has become the major target for Auckland air conditioning manufacturer and heat pump supplier Temperzone. The company has set up an office in Jakarta staffed by two local Indonesian nationals, with help from New Zealand Trade Commissioner Tim Anderson and his team. The representative office is supported by Temperzone’s office in Singapore also where the manager also speaks Indonesian, says Temperzone chief executive Les Kendall. “We have completed many projects there in the last 25 years but are reinvigorating our efforts because we believe we don’t have our share of the market given the scale of Indonesia and the aspirations of the country economically!” he said. The company provides air conditioners, heat pumps, hot water heating technology using heat pumps, air movement equipment and air distribution equipment. Les said, “Our last major project involved the supply of nearly 1000 machines for a large mixed use development in Jakarta.
“We often quote against a cheaper providers but our reputation for quality, energy efficiency and ability to quickly customise a solution if necessary helps us win work over others.
further its exporting into the region. The $180 million company was founded in 1956 by the Les’ father, the late great Eric Kendall. Its global headquarters are in Mangere with offices also in Wellington, Christchurch, Brisbane, Sydney, Melbourne, Adelaide, Singapore, Shanghai and Jakarta. Staff number 380 in New Zealand and 600 throughout the total organisation. When asked the main reason for his business’ growth, Les says, “Sticking to its area of specialty and (l-r) Supply manager Carl Easton, CEO Les Kendall and logistics manager Steve Turner of Temperzone remorselessly seeking excellence in all aspects of business.” The benefits of doing business in “Many of our products are optimised New Zealand include the stable political for heat and tropical conditions, and environment and the people. The we’ve had success selling into many downsides are the currency being one parts of the Pacific recently. of the most traded in the world for a “Our products are built-to-last country of 4.5 million people, and its “industrial grade”, as well as meeting stubbornly over valued which seems high energy efficiency standards. unusual, especially with collapsing They often include energy saving heat commodity prices, he says. recovery options - we are a solutions He advises someone in their first provider.” Temperzone is also looking at how to year of business to “build a good team make the most of the ASEAN-Australia- around you and don’t be afraid to seek New Zealand Free Trade Agreement to expert advice if you need to.”
Managing consents and assets part of school life A new technology suite is to be built at Greenpark School in Tauranga, so its pupils aged 5-11 years can learn to cook and design and build small structures. It will also house a television station to deliver Te Reo (Maori language) via the internet. It’s exciting to get approval from the Ministry of Education to go ahead with the building, almost three years since the school applied, says principal Graeme Lind. The next step is to secure building consent. The suite’s funding is available, drawn from fees of the school’s 24 international students.
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The new suite In addition the school has complements facilities won the 2014 New Zealand devoted to the arts, primary school pupils’ including an art and a dance competition for Future studio and music suite, all Problem Solving. with specialist teachers. Greenpark School in Says Lind, “We are also Greerton (7km from the strong in sports, fielding centre of Tauranga) is one of 120 sports teams last year the largest primary schools Graeme Lind, principal for year 1 to year 6 pupils in and being on track to do the of Greenpark School same again this year. New Zealand and certainly “We cover a very wide the biggest south of Bombay Hills, Lind says. It has 75 staff curriculum base, catering to children at including full and part time teachers, all places on the spectrum from those teacher aids and administration staff with special learning needs to special educating 865 pupils, in 32 classrooms. abilities.”
Exporters bullish The 2014 Exporters Survey shows exporters are planning for growth and the business outlook is positive. In the next 12 months the majority (76%) of respondents said they expected business profitability to improve, 19% to stay the same and 4% to deteriorate. Most (90%) expected their business to employ more people or keep the same number. A clear majority (73%) said they are able to access enough skilled staff to grow their business. In the next twelve months, most exporters expected their orders across all markets to increase either slowly (51%) or substantially (31%). The ASEAN markets were most mentioned as the next new market exporters were intending to export to. The top obstacles to growth were reported to be exchange rate levels and the price competitiveness of products, followed closely by funding for developing overseas markets and overseas regulatory requirements. In the next 12 months do you expect your export orders across all markets to:
new market regions in the Export NZ’s National Manager Catherine Beard next months noted that exporters are managing the high NZ dollar with a combination of strategies including improving productivity, investing in new product development and hedging. “Also, we can see that these exporters are increasingly moving away from price as their competitive advantage,” she said. “Exporters say quality of product/service, innovation and customer service are their top three success factors. “In terms of Government assistance for exporting, more export market development assistance was the most
top three barriers preventing exporting, or exporting more
“Also, we can see that these exporters are increasingly moving away from price as their competitive advantage” popular, followed by R&D assistance. “Exporters would like to go to more trade shows with other New Zealand companies with the assistance of NZTE. “Those exporters facing trade barriers cite a number of difficulties – China was mentioned quite often and continues to be a challenging market to do business in. “There was rich feedback from exporters about the tariff and non-tariff barriers they face in many different markets. “We hope this detailed feedback is useful for our government officials who assist exporters in this area, and ExportNZ is keen to work with officials to help tackle barriers.”
rank the top three success factors that make you most successful in overseas markets
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Big award recognition for trade with India Congratulations to New Zealand commercial refrigeration company Patton for winning the Business Excellence in Export to India Award at the BNZ-Indian Newslink Indian Business Awards. This was the seventh year of the awards organized by the India-New Zealand Business Council, and held in Auckland last month. Patton manufactures and supplies commercial refrigeration equipment and though established in 1923 in Christchurch they are now headquartered in Auckland. The judges noted Patton now exports to several countries including India. They were very impressed with the way Patton is moving away from a traditional export model. In the last five years Patton has more than doubled its business in India and plans to double its trade again there in the next three to four years.
India is the world’s largest producer of milk and also the biggest producer of fruit and vegetables. Unfortunately up to 30-40% of the produce is wasted due to a lack of proper refrigeration and storage facilities. Patton sees this as a huge opportunity to grow in this market as the demand for refrigeration accelerates. CEO, Sameer Handa was at hand to receive the honor and took the opportunity to thank Indian Newslink Indian Business Awards and all Patton staff. Patton makes coolers and air coiled condensers and condensing units for all types of industrial and commercial needs. They established an on the ground presence in India in 2007 by establishing an office in Delhi. They now have eight sales offices throughout India as well as offices in Thailand and Australia.
Patton’s CEO Sameer Handa received his award from Indian High Commissioner to New Zealand, Mr Ravi Thapar with PM John Key.
Patton’s CEO Sameer Handa
One year anniversary of trade deal with Taiwan marked Primary Industries Minister Nathan Guy and Trade Minister Tim Groser have welcomed the one year anniversary of the Economic Cooperation Agreement between New Zealand and the Separate Customs Territory of Taiwan, Penghu, Kinmen and Matsu on Economic Cooperation (ANZTEC). Since then exports to Chinese Taipei have increased over 20% compared
with the same period the previous year, a $150 million increase. “Over 69% of New Zealand’s exports to Chinese Taipei are now tariff free, representing savings of around $78.4 million to date,” Mr Groser said. The agreement will see complete removal of tariffs on New Zealand’s current exports to Chinese Taipei, with 99% eliminated in four years.
Tariffs on virtually all dairy products were removed from day one, along with apples, cherries and wine. This has been a boost to all these industries, especially apple exports which have tripled from $13 million to $39 million. In the year ending September 2014, Chinese Taipei was New Zealand’s 7th largest goods export market worth over NZ$1 billion.
NZ-Chinese Taipei merchandise trade by selected exports/imports
Total NZ goods exports Total dairy exports Milk powder exports Butter exports Cheese exports Apple exports Cherry exports Wine exports Beef exports Kiwifruit exports Total NZ goods imports Non-crude petroleum oils imports Stainless steel imports Bicycles imports Computers imports
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Dec 2012 to Sep 2013
Dec 2013 to Sep 2014
% change
$ change
$734 m
$884 m
20%
$150 m
$256 m $163 m $46 m $30 m $13 m $8 m $0.6 m $115 m $50 m $592 m $61 m $31 m $21 m $23 m
$352 m $233 m $64 m $35 m $39 m $9.8 m $0.8 m $127 m $70 m $661 m $103 m $41 m $26 m $25 m
37% 43% 40% 18% 210% 18% 29% 10% 38% 12% 69% 32% 27% 9%
$96 m $70 m $18 m $5 m $27 m $1.5 m $0.2 m $12 m $19 m $69 m $42 m $10 m $6 m $2 m
Letter from Australia Marketing Specialist Bella Katz
China-Australia Free Trade Agreement a wake up call When compared with New Zealand, Australia is a bureaucratic beast on so many levels. Usually, all that complexity slows it down and prevents the Australian government and businesses from making swift changes or changing course speedily. Despite what New Zealand’s red tape feels like from the inside, I always look at my old home as a nimble start up compared to the corporate Aussie behemoth. Things just seem to happen quicker in New Zealand. Technologies are adopted super fast. Chief execs seem more amiable and approachable. Quirky companies are embraced by very different market segments. It’s a big part of New Zealand’s unique place in the world. You have the innovation. And you practically have a whole country of early adopters to get behind cool business ideas. On the flip side, New Zealand hasn’t had the luxury of a massive population. So companies that do well and want to expand need to look outside New Zealand very quickly. Our two countries have also always long maintained a friendly rivalry
It’s a big part of New Zealand’s unique place in the world. You have the innovation. And you practically have a whole country of early adopters to get behind cool business ideas.
because we’ve managed to play to our different strengths. But now both Australia and New Zealand consider China their number one trading partner, and with Australia having just signed a Free Trade Agreement with China, it’s going to get more brutal.
Zealand context, this FTA reaffirms several truths for me. 1. The New Zealand story (open hearts, minds, spaces) still doesn’t cut it as a primary positioning piece for the country. It’s not distinct enough from other equally green
“So companies that do well and want to expand need to look outside New Zealand very quickly” To many businesses, apart from the massive global Australian brands, China has seemed too hard. Suddenly, the FTA and the major attention it drew in Australia during the G20, has made it seem very possible. At the very least, the announcement caught the attention of many Australians. Maybe they thought: ‘We can get into China after all?’ The worrying part of all this for New Zealand is that the products and services of our countries do cross over in many categories. For example, we’ve flogged coal, while you’ve shipped milk powders. But there’s no reason Australia can’t develop a far larger dairy sector. You’ve positioned around cleangreen, but Australia is every bit as green as you are, and that card hasn’t been played to its full potential. When it comes to manufacturing, we’re both as likely to manufacture in China as back home, so Made in Australia vs Made in New Zealand looks much the same to Chinese consumers. I’m playing devil’s advocate because I think New Zealand is about to find itself coming up against Australia more actively in China and across more and more sectors. If I look at this in a broader New
countries and I find it pretty wishy-washy. More importantly, it doesn’t give credit to the awesome inventiveness of New Zealanders across so many sectors, including technology, manufacturing and design. 2. The planets have aligned yet again to require a deeper collaboration between New Zealand and Australian companies. Fonterra’s going to be okay, as they have numerous Australian market interests. But there’s nothing stopping smaller companies from other sectors from finding Aussie partners. Our two countries can bring together innovation with commercial acumen and take on China as a combined force to be reckoned with.
+61 (0) 410 400 657 bella@bellakatz.com.au Bella on LinkedIn www.bellakatz.com.au Skype: beharkatz BusinessPlus
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$120 million seals deal between Hamilton manufacturer Pacific Aerospace has set up a joint venture (JV) company in China for the manufacture, marketing and maintenance of one of its aircraft designs in Beijing. The JV is for the manufacture of the P750 plane and is underpinned by an order for 20 planes to be delivered from New Zealand. The JV is with the $56 billion Beijing Automotive Group which is owned by the Beijing Municipal Government and which made 2.2 million vehicles last year, says Pacific Aerospace chief executive Damian Camp. “We are pleased to be seen as a viable partner!” he says.
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Furthermore, one of China’s largest general aviation operators, Shandong General Aviation Services, has ordered 30 planes on top of the two already delivered from Hamilton. Two other Chinese customers have ordered three planes between them. Pacific Aerospace also has sales agreements with three other companies to develop the China-New Zealand Aviation Industrial Park. Camp says the park is in its early days of development and the aim is for other New Zealand aviation companies to take part. But it should be ready by February for the assembly of parts send by container to China. “A partnership that size provides a great opportunity for other New Zealand companies to be introduced [to the market], and strengthens our relationship with [partners]. It also sets up a pipeline for technology.” The total value of the deal is worth an estimated $120 million. Pacific Aerospace has been designing and building its trademark rugged, reliable planes for over 50 years. The Fletcher top dresser is legendary. Now the range includes the aerobatic military trainer as well as agricultural aircraft (which can
average up to 17 cycles per hour), and the multi-purpose P-750 XSTOL the uses for which include skydiving and aerial survey roles around the world. The company now employs around 110 staff designing, obtaining certification, machining and forming of metal and composite components, through to assembling the aircraft and their systems and flight-testing. Trade Minister Tim Groser was present for the delivery of the first two aircraft while in China for the APEC Economic Leaders meetings. He said, “Relationships like this demonstrate that we don’t just export dairy and lamb to China, but also our technology.
Member noticeboard
Pacific Aerospace and China “China is prepared to pay a premium for our wonderful suite of innovative export goods and services, and it’s fantastic to celebrate successes like this in the China market” “China is prepared to pay a premium for our wonderful suite of innovative export goods and services, and it’s fantastic to celebrate successes like this in the China market - and to build on them. “I am pleased that the government through New Zealand Trade and Enterprise has been able to support Pacific Aerospace in developing the China market. “It’s fantastic to see these relationships continue to develop and grow, reflecting the New Zealand and China agreement more broadly, particularly since we signed the FTA in 2008.” According to data from IFC International Inc, China’s aviation market is about to expand at an annual rate of 22%.
There for the signing and handover were Minister Tim Groser (Minister of Trade), Mr Wu (Shandong General Aviation Services), Damian Camp (CEO Pacific Aerospace), Christopher Verissimo (Chairman Pacific Aerospace). BusinessPlus
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Out & About
Seen at a Spring Briefing, EMA’s AGM
Sue Young and Damen Blanch [Countdown]
David Barlow, Fauzia Ali and Nui Kamu [Tyco NZ Ltd]
Raewyn McKenzie [EMA] and Matt Bellingham [Bellingham Wallace]
David Thomas and Richard Pearson [EMA board]
Graham Mountfort [EMA board], Liz Thomas and David Jack [EMA board]
Ali Roberts and Jason Stinchcombe [Hayes Knight] and Paul Yeo [EMA]
Mike Burgess [EMA], Andrew Hunt and Margaret Brown [EMA board]
Sharma Rajir, Kylie Blomquist and Denise Corlett [Northern Regional Alliance]
Sandra Johnston [Vitae] and Ilya Ruppeldt [Golem Productions]
Peter Atkinson [EMA] and Peter Tritt [College of Law, New Zealand]
David Foley [EMA] and Geoff Whitcher [University of Auckland]
Don McNicol [Main Price King], Bruce Goldsworthy [EMA] and Sir William Gallagher [Gallagher Group]
Andrew Phipps and Colleen Stairmand [EMA board]
Wendy and Jeff Williamson [Main Price King]
ExportNZ Auckland AGM
Gilbert Peterson [EMA/ExportNZ Auckland], Mike Riley [Compac] and Graham Kearns [Kearns Services, and chair of ExportNZ Auckland]
Glenn Baker [Exporter magazine], Barry Squires [Westpac Institutional Bank] and Leanne Moss [Exporter magazine]
Carole Wright [New Zealand Trade and Enterprise], Kirsty Reynolds [NZ Sugar] and Helen Thompson-Carter [Fabuleux Vous]
Andrew Bathgate and Robert Foster [BDO] and Craig Watkins [Douglas Pharmaceuticals]
Yvonne Theuerkauf [Ports of Auckland], Ian Watson [DSH Systems] and Darryn Grant [Auckland Tourism, Events and Economic Development]