Archive for November, 2008

Encouraging Sounds From Geneva

November 30, 2008

WTO Director-General Lamy is coming closer to a decision on whether or not there will be a WTO Ministerial meeting before Christmas.  According to several reports he should be in a position by the end of next week to call a meeting of Ministers together.  Lamy will not be wanting to risk another failure like that in July.  This means that the ongoing discussions at officials’ level will need to have shown good progress before Lamy will call a Ministerial meeting together.  There have been several failed Ministerial meetings in this WTO Round.  My view on this is that the failures are entirely predictable.  The ground has not been sufficiently prepared for these meetings and too muich has been asked of Ministers.  Full agreement doesn’t need to be achieved before Ministers convene but the number of issues unresolved can’t be too numerous.  In Hong Kong, for example, there were over a hundred unresolved issues on agriculture alone.

This report from the IHT suggests to me that Lamy sees things pretty much like I do:

World Trade Organisation (WTO) chief Pascal Lamy said on Saturday he was increasingly inclined to call ministers to Geneva next month to pursue a global trade treaty that could mitigate the world’s economic turmoil.

U.S. President George W. Bush and other leaders have been pushing for a breakthrough this year in the global free trade talks, known as the Doha round, as a way to bolster the troubled world economy.

Lamy said it would be risky to convene a ministerial meeting unless the WTO’s 153 member governments are ready to make the compromises needed to finally clinch agreement in the delicate negotiations.

“Convening a meeting that will fail is a risk. Not convening a meeting, waiting for some time … is also taking a risk,” he told reporters on the sidelines of a United Nations aid summit.

“I have not yet made a determination but the answer should be reasonably clear by the end of next week,” Lamy added.

Local Government Forum

November 30, 2008

Many thanks to the Sunday Star Times for telling me something about myself which I did not know.  In his column today (page A11) Chris Trotter advises us all that there is a right wing conspiracy about to re-launch the privatisation agenda (a vehicle for ensuring that the right maintains control – apparently) by cunningly opening a new front – on local Government.  These right wingers are going to use a shadowy front organisation called the Local Government Forum to deliver this evil agenda. 

Well it so happens that I know a little bit about the Local Government Forum.  I have been a participant in its work for a couple of years and last week was elected its Chair.  So apparently I am chairing a group that  has an agenda that I don’t know about.  Thanks Chris and thanks Sunday Star Times for conveying this news to me.


November 29, 2008

I think that I have linked to all those that have linked to Dear John.  Should I have missed you or should you add a link to us please comment below.  Thanks to those that have linked to Dear John.

Is The Government’s Policy Prescription Enough?

November 29, 2008

Fran O’Sullivan asks some important questions of our new Prime Minister and Deputy Prime Minister in today’s NZ Herald:

During the election campaign Key clung to the notion that National’s “well-structured economic plan” would ensure the New Zealand economy is hermetically sealed from the global shocks.

But he should now be assessing whether National’s impending tax cuts package, infrastructure spending proposals and mechanisms to help newly redundant workers will be enough to stave off the worst effects of the crisis here and pave the way for New Zealand to move out of recession by 2010.

In the post below I report on an update of these policies provided yesterday to the NZCCI Conference by Bill English.

The answer to Fran’s question is obviously “no”.  But that said the policies are very much heading in the right direction.

The Government is very new and is still getting to grips with the enormity of the challenges it is being confronted with.  This is something of a shock to some Ministers.  Clearly more policy will need to be introduced, but I am comfortable that we are not seeing policy responses being rushed.  We already have a good example of what can go wrong if policy is rushed in the form of the Government guarantee of deposits in banks and some other financial institutions.

I guess that I am in something of a privileged position.  I have met John Key and Bill English (twice) since the election.  I have also met with of talked to a number of the other Ministers in the new Government.  These have been detailed discussions.  I am absolutely convinced that the new Government wants to meet the immediate challenges of the financial crisis and to get the economy growing again.  Much in the same way as Fran O’Sullivan seems to be challenging.

As Bill English has outlined to the media, October’s tax cuts, Government expenditure increases and the April tax cuts will put another $7 billion into the economy.  In an economy of this size this is a significant stimulus.  On top of this we have the stimulus that will come from the last and next cuts in the OCR by the Reserve Bank.  Our interest rates are still quite high compared to other economies of our type.  This means we can use this mechanism to stimulate the economy in a way that the US, Japanese and many European economies can’t.  This is a huge advantage.

What we have seen announced will not be enough, but I am confident that over the next few weeks more policy will emerge that will improve our policy response to the crisis further.  We will need these improvements because I think that things are going to be much worse post-Christmas.  I have real concerns about retail and I expect a substantial rise in unemployment.  But with increasingly better policy, with low interest rates, and with a healthy banking sector that is still willing to support good companies and ideas, I think we can get through this challenge and get the economy growing again.  To achieve this we will need a vastly improved export performance and stronger productivity growth.  These topics will be key themes for Dear John, and I hope the Government, in the weeks ahead.

Bill English Speech To NZCCI Conference

November 29, 2008

I had expected there to be media reporting on yesterday’s speech by Dreputy Prime Minister Bill English to the New Zealand Chambers of Commerce annual conference in Rotorua, but I caan’t find any on line.  So here is my summary:

  • The Government will proceed with plans to cut taxes again on 1 April and will pass necessary legisaltion before Christmas;
  • Government spending is a hige issue.  The books look worse than expected and there are some huge liability issues – eg ACC where liabilities outweigh invested funds;  The focus of reviews will be on the effectiveness of Government spending not on slashing;  There will be no cutting of safety net services;
  • There will be a general focus on productivity, including on productivity growth in the public sector;
  • Local Government needs reform and Rodney Hide will be active in that space;
  • There will be a review of regulation – to remove red tape and to improve the effectiveness of regulation.  RMA will be a priority – expect legislation in February – but the Building Act and the operation of the various acts around land transport and local Government will also be tidied up;
  • Rodney Hide ios also Minister of Regulatory Reform and will work with Bill English on this;
  • Infrastructure will be a priority.  There will be aa short term focus on those things that can be done quickly – the health, education and housing sectors will benefit short term and this will help soak up surplus labour and equipment from the construction sector.  Roading priorities will be part of a more long term strategy and will take longer to prepare but will benefit from the streamlining of regulation;  The Government plans to set up an infrastructure unit to coordinate activity in this space;
  • Bill stressed that there is no silver bullet there to solve our economic problems, rather the Government needs to focus on doing something like 100 tasks better.  Bill stressed the importance of the business community signalling to Government its priorities for those talks that need to be done better. 

Overall there was remarkable consistency between Bill’s vision and the NZCCI policy prescription.  Now we have to focus on getting the vision delivered.

Dreadful News For Air New Zealand

November 28, 2008

I am very sorry for the team at Air New Zealand following the news of today’s Air New Zealand Airbus crash in Europe, particularly for the families and friends of those who appear to have been killed in the crash. We work very closely with Air New Zealand at the Chamber.  CEO Rob Fyfe was one of our most recent speakers.

NZCCI Conference In Rotorua

November 28, 2008

I am at the New Zealand Chambers of Commerce Annual Conference in Rotorua.  We have around 30 Chambers throughout New Zealand.  In total the Chambers have 24,000 or so members making it the biggest business network in New Zealand.  The focus have been very much on how the network can provide the best possible support to members in the current difficult economic times.  Fran O’Sullivan and Brendon O’Donovan have left delegates in no doubt about the seriousness of the challenge we face as an economy.  A highlight was a talk on climate change policy by Chris Baker of Saunders and Unsworth.  This was seen by many yesterday as one of the best examples of what not to do when making public policy… Delegates are today looking forward to the address by Deputy Prime Minister Bill English.

Rotorua has done the network proud in its organisation of this event.  I particularly enjoyed the entertainment last night from a local Rotorua act “Off Broadway”.  Evelyn Falconer, Craig Davson, Heather Brockett and Alasdair Hay performed a great array of well known songs from Broadway musicals.  The performances were most professional and entertaining.  I would recommend this group to anyone organising a conference in Rotorua. Unfortunately their programme doesn’t include contact details or website address.  The Rotorua Chamber might like to provide advice on this………….

Update:  Contact number for “Off Broadway” is 0272245473

Herald Editorial Makes Same Mistake

November 27, 2008

Because the NZ Herald does not arrive most mornings in Wellington until mid-morning nowadays, we are sometimes (when we don’t have time to read the electronic version) a bit behind the times.  If we had read it first things we would have drawn attention to the fact that the Herald editorial makes exactly the same mistake as Vernon Small.

Look, business groups such as ours are well aware of the fact that we have to act on climate change.  We have been fighting hard for the past four years to achieve a consensus between Labour and National on the issue so that fringe groups such as the Greens at one end and ACT at the other do not have the influence they currently have on policy formulation.  We want a credible response and we want one that is going to be durable.  Policy uncertainty will deter investment.

The new Government knows this.  Inaction is not an option.

The problem with the last Government was that it chose not to listen to good advice on this issue and it chose to reject the offers of a consensus.  We can only guess that they did this because they somehow thought there was going to be electoral advantage in making this a partisan issue.

We have to have a policy in place by the end of next year otherwise we will be playing into the hands of those who, in Europe and elsewhere, are seeking to use climate change as an excuse for protectionist policy.  But we can’t leave the current policy in place.  It is bad policy that will impact very negatively on the economy.  Even some European Governments agree with us.  They are worried that the policy is too ambitious and that if we don’t change it we risk rendering some sectors in our economy non-competitive.  This will complicate the global process.  In our submissions to the select committee on the ETS we made this point and we made it constantly in our lobbying efforts.  The Government of the day chose to ignore us.  We really think that the New Zealand media should be doing more sophisticated analysis in this space.

We are confident that a robust scheme can be in place by the end of this year that will do the right thing for the environment and not leave our economy in tatters.  This will serve as a positive role model to the rest of the world.  Instead on unimformed sniping lets get behind the Government and get such a scheme implemented.

UK Travel Tax Nothing To Do With NZ Sustainability Policy

November 27, 2008

There is a seriously troubling article in today’s Dominion Post by Vernon Small. It suggests that New Zealand’s ability to influence the UK’s proposed travel tax that discourages long distance travel will be reduced because of the Government’s decision to review the emissions trading scheme.

However, Mr Key and the incoming Government have left themselves exposed on climate change.

Arguments about New Zealand’s sustainable moral mandate – its clean green reputation and the target of carbon neutrality – have been weakened by putting the emissions trading scheme on hold

This is not a factor in British thinking.  If it had been a consideration then, as we have posted previously, Britain would have focussed on fuel consumption or some other policy that gave an incentive to those who make an effort to improve efficiency or innovate to reduce greenhouse gas emissions.  Australia still has its emissions trading scheme plans progressing – is Australia being treated any differently than New Zealand in this policy?  The answer is no.

Finally can I remind Vernon that the UK scheme will not be in place for two years and that the Government’s new climate change policy will be in place by the end of next year.  This policy will be no less rigorous than that in place in the UK and EU.  In all probablility it will be more rigorous (not that hard).

Kiwirail – An Example Of What Governments Should Not Do

November 26, 2008

During the election campaign I was invited to be part of the audience for a debate on IT and telecommunications policy run by TVNZ and Internet New Zealand.  I was also asked if I would mind asking a question.  I agreed.

During the debate there were several comments made by Minister Cunliffe about the purchase of Kiwirail as an example of the government’s commitment to infrastructure investment.  So when it came to my question I introduced it by noting that we would rather have seen the money that had been invested in Kiwirail invested in fibre roll out as this would be more likely to have an immediate impact on productivity performance.  My comment was not appreciated by David (who I know quite well as we used to work together).  At the time my understanding was that we had probably paid too much for the railways and that we had been left as the taxpayer with an enormous liability in terms of essential investment in the upgrade of track, engines and rolling stock for the railways.

It seems that things may be even worse than i had realised a few weeks ago.  The very useful publication Transport and Logistics (from the same crowd that write Trans Tasman and the Main Report) carries this article today

Kiwirail value tumbles.The value of KiwiRail has slumped $242m just three months after it was bought. The Crown’s accounts for the three months to September reveal the value of KiwiRail has been slashed $242m, more than a third, since the Govt bought the business for $690m. The “fair value” of KiwiRail is now $448m. Expect the book value to continue sliding until the economic climate improves. National could use the value drop to reassess any further investment in the rail network and operations.

This is very annoying.  There were far higher priorities for Government investment in infrastructure than Kiwirail.  It is looking as though this investment is going to be a permanent drag on Government at a time when funds are becoming increasingly scarce.