Dr Cullen's Casebook, Issue 4

"Annual export growth remains strong and merchandise imports (ex-oil) are showing signs of slowing.

That should see New Zealand's trade balance gradually improve, helped by rising commodity prices, improved primary production and the low New Zealand dollar."

The slide in business confidence has exposed the Government to criticism. In my opinion, some of it completely over-blown. I accept that some of the fall reflects concern by some business people at certain aspects of our policy programme.

While we want to develop working relationships with business this does not mean that we will always see eye to eye. This does not mean that the Government will change our policies to suit business. And, most importantly, this does not mean that a relationship with business is maintained at the expense of other constituencies and interest groups in New Zealand.

It is my view that business concerns about our policies are out of proportion to what is being proposed. We are not 'lurching' to the left. What we are doing is engaging in a moderate re-balancing of policy in line with our election promises and with majority public opinion as reflected in the election result.

That there was a change of government in New Zealand and that policy change invariably follows seems to be understood overseas. Research put out recently by Deutsche Bank shows government policies have had little or no negative impact on foreign investors.

I am not alone in my concern over the potential damage that can be done to an economy if business goes too far with what one employer calls the deliberate "doom and gloom patter".

Gilbert Ullrich, managing director of Ullrich Aluminium accuses many of his fellow employers of "beating the political drum".

"These [business confidence] surveys have become little more than a political tool to undermine the Labour Government. Many employers are just doing their best to make sure Labour doesn't get re-elected. But you spread doom gloom and soon becomes a self-fulfilling prophecy."

In a similar vein, the Margaret Comer, corporate services manager for Gallagher Group, which employs 442 staff and is in the throes of building $7 million extensions to its Kahikatea Dr plant, says too much importance is attached to business confidence surveys.

"They are just a snapshot opinions at the time and a lot of business pessimism is unwarranted. I don't want to minimise the genuine difficulties business face - and there is real disappointment with government policies like the ERB - but there has been too much negativity".

I am confident the recent slump in business confidence will soon rebound and we can all get on with the business of rebuilding a New Zealand we can be proud of.

In fifty years time it is estimated that more than a quarter of the population - over a million people- will be aged 65 or over. Treasury forecasts that the cost of the retired baby boomers will more than double to almost 9 percent of GDP.

What are our options to deal with the rising cost of the baby-boom generations' retirement?

In a nutshell the fund would work by putting a portion of the Government's surplus into a fund each year and invest it, growing the fund to more than $50 billion during the next 40 to 50 years.

It may be that, in the absence of meaningful progress during this parliamentary term, the superannuation debate will become a defining issue for the 2002 election. I would be quite comfortable with this as I do not think the NZ electorate is as short-sighted or as selfish as some politicians seem to think. New Zealanders will not vote for tax cuts for the wealthy at the cost of insecurity in old age.

Federated Farmers won positive changes for its members during the passing of the first ACC Bill: the Bill was amended to remedy the fact that the old system of compensation did not reflect the cost of replacement labour nor farmers' fluctuating incomes.

These changes have been incorporated into a new product called ACC CoverPlus Extra. If you are self-employed, CoverPlus Extra gives you the opportunity to nominate a predetermined and guaranteed amount of weekly compensation to reduce the impact of fluctuating income or changing circumstances. But if ACC is offering additional services and lower average premiums why is Federated Farmers railing against the changes? Federated Farmers claimed farmers are paying 21% increase in their ACC bills.

Thier newsletter claimed self-employed farmers are charged a new ACC farming rate of $2.28 per $100 of wages of salary compared to $1.88 under private insurers.

Federated Farmers made a mistake with its figures. The standard ACC employer premium for livestock farmers is $2.28 - that's the rate Federated Farmers wrongly applied to the self-employed.

ACC self-employed premiums are made up of two components. Together they give an effective rate that actually decreases as the level of earnings rise.

ACC FACTS:

Average premiums cheaper under ACC - from $1.21 to $1.16 for every $100 of wages
This year employers will pay around $25 million less on accident insurance
Only 20% of farmers received the $1.88 premium rate under private insurers quoted by Federated Farmers.
ACC divides farmers into two premium groups - fruit, vegetables and crop growers and livestock farming.
ACC is cheaper for 90% crop farmers and 42% livestock farmers.
The rates of ACC premiums depend on the premium group and also whether the farmer is self-employed or an employer.
The self-employed make up over 70% of all farmers.
Self-employed farmers with earnings above $25,000 pay cheaper accident insurance premiums under ACC

Issue 4	News and happenings from the Office of Hon Dr Michael Cullen	July 2000