Swan Dive Or Belly Flop

We reported yesterday on the revised version of the think piece by Mark Weldon and David Skilling. We read this last night. Here are our views.

This is now a very significant document. It is an head on attack on some current elements of Government policy (eg the current R&D policy is described as "deeply flawed in design") and an endorsement of some of the ideas coming from John Key.

We agree fully on the need for an economic strategy. We have so called strategies right now but they are largely spin. It is great to see Weldon and Skilling try and and define essential components of that strategy.

Urgent Actions:

• We think that we should be cautious on fiscal stimulus. we think that tax cuts are a great way to get money flowing in the economy. We are less happy with expanded Government expenditure unless this can be linked to likely productivity growth - eg key infrastructure. We really need to focus on improving the quality of Government expenditure.
• We agree that RBNZ needs to keep cutting and like the goal of having our rates down to 2.5% to 3% above the Fed's rates.
• We agree with the recommendations on provisional tax- this is just common sense.
• Accelerated tax depreciation on capital investment is essential if we are to grow productivity.
• Still thinking about the proposed review of the imputation regime and suggestions re Deposit insurance.

Drive to increase local investment and performance

• We support debt financing of key infrastructure projects and agree with the note of caution. We like the idea of SOE bonds being offered to NZ investors and the idea of a 30-year NZ Government Treasury bond and long term infrastructure bonds.
• Reforms of the CCMAU process are fully in line with our own thinking.
• The idea of an ownership vehicle for the SOEs is also of some interest. We know the Singapore model well. It has made some mistakes though....
• We, like you, support the idea of having more coordination of the various NZ Government investment funds. We are comfortable with National's 40% vision in the short to medium term.

Improve growth environment for New Zealand business

• We support a compulsory savings scheme and agree that 2% is a good place to start.
• We are happy to see housing removed from the LAQC regime but would oppose a capital gains tax.
• Agree that we should try and develop an R&D scheme that works rather than one that creates more accountants jobs.
• Agree fully on the need to reduce corporate tax.

Win in the global economy

• We must get those well qualified and experienced Kiwis home.
• Very open to use tax incentives to attract firms to NZ. Also keen to go out and buy some with our investment funds - should they fit.
• Expanded investment offshore is critical. Integration with our FTA strategy is essential.

Public Private Sector Cohesion

In full agreement.

Summary

Thanks for doing this work. Lets hope that a new Government, whether it be Labour or National led picks up your ideas and runs with them.

New Version Of Swan Dive Or Belly Flop

The New Zealand Institute and NZX have produced a new version of Swan Dive and Belly Flop. We will read tonight and comment tomorrow (it will be better than watching the US election results come in - Democrats in control!! Sigh!).

It is on the NZX blog site.

Here is the media release summary

Today we have released round two of Swan Dive or Belly Flop? This version is very different, and, we believe much improved on, the previous version.
In terms of policy it has new ideas (e.g., lower corporate tax rate and the elimination of imputation, practical suggestions to improve public-private sector cohesion), significant refinements on previous ideas (e.g. refined proposals on provisional tax and depreciation), new analysis (e.g. on NZSF directing funds into the NZ economy in larger chunks, SOE performance, KiwiCo). Some of these were entirely “externally” generated via feedback, especially on this blog. All benefited from such feedback
In terms of “what next” Swanbelly outlines plainly the need for a broader economic strategy, of which SwanBelly, with its focus on the productive sector, could form a part. Most importantly, it lays out criteria by which the next government’s economic strategy can be evaluated, and concludes with a call to action for the new government to deliver a bold, clear economic growth strategy as a matter of urgency.
Over this process it has become clear to us, with Lloyd issuing his “goal for NZ”, the Unions and Bus NZ both putting out economic strategies, individuals working on detailed manifestos, as well as via the feedback from bloggers and well known civic leaders, that there is a deep need for urgent, cohesive, inclusive New Zealand response, and that this crisis may provide just the opportunity for us to create that.
Whoever the next government is, they should take on board, and ignore at their peril, that the public is thirsty to contribute, and has had enough of being ignored in policy formation, and the overall “direction of travel” of New Zealand. The opportunity, and the risks, are clear to whoever the next government leader is……
Post your thoughts and feedback on version two below. Don’t hold back.
Long term, we encourage you to continue to keeping visiting this blog and participating in an ongoing national conversations about the economic issues and opportunities facing New Zealand.
Download the Full media release here
Download Swan Dive or Belly Flop? - Version 2 Here

Lloyd Morrison Shows The Way

Good on you Lloyd. Lloyd suggests we adopt a common purpose. We agree. In this post from 16 June 2008 we suggested how we might deliver on Lloyd's suggested goal.

Anyway here is Lloyd's message. If you agree pass it on.

New Zealand lacks a common purpose. No one knows exactly what we want. We hanker for a return to the times when we were one of the wealthiest countries in the world. We want everyone to be better off, knowing that individual wealth does not result in freedom from crime and the social fallout of excessive disparity. However, there is no clearly articulated goal we are pursuing and no solid plan of how we can get there.
As a result, there is no definition or accountability for policies or policy-makers. Policies are often clothed with loose positive objectives and ultimately ineffective aims. There is no co-ordinated accountability for these policies (or politicians) in terms of their ability to contribute towards a common measurable outcome. Consequently, we continue our steady decline. As the attached analysis shows, current forecasts have our GDP per capita slipping below Kazakhstan and Botswana by 2025.
I’ve been discussing this with colleagues and friends, and we believe that NZ needs to embrace a common objective that will provide the means to deliver what we are seeking as a nation.
Whatever the objective chosen, it needs to be simple, clear, measureable, understandable, aspirational and, most importantly, catalytic in terms of driving positive change that makes the outcome achievable.
We’d like to stimulate a broader discussion over what that goal should be for NZ. To kick-off the debate, here’s our starter for ten: NZ should aim to be back in the top 10 countries in the world based on GDP per capita by 2025. Not just the OECD, the world. Unachievable? No way. Ireland, Korea, Singapore and Taiwan all achieved the required level of growth over the last twenty years. It will take real collective commitment and more creative thinking about our economy – but that’s exactly what an ambitious goal will generate.
I’m hoping you’ll participate in a broader discussion about an aspirational, measurable goal for New Zealand. Please read the attached document. Pass it on to your friends. Participate in the debate by emailing measurablegoal@hrlmorrison.com or contributing to the forum on www.blog.nzx.com. If you agree with what we’re proposing, show your support. If you don’t, please share your ideas for a national goal. Together, let’s take the first step in defining and delivering a better future for New Zealand.

Mood Of The Boardroom? Dump Clark

90% of thosed surveyed in this year's NZ Herald mood of the boadroom survey want John Key to be PM. Last election only 78% wanted Brash in the job.

NZX And NZ Institute Share Their Vision

Economy on the Edge: Swan Dive or Belly Flop?
10 October 2008 - The New Zealand Institute and NZX have called for immediate, bipartisan
action to ensure New Zealand not only survives, but thrives, under the emerging economic
storm conditions.
David Skilling and Mark Weldon today released their draft strategy, "Economy on the Edge:
Swan Dive or Belly Flop?". The draft strategy outlines their conviction that "deliberate, serious
and proportionate action is required" to ensure New Zealand firms can continue to grow and
provide employment for New Zealanders in times of serious capital constraint and economic
risk.
The draft strategy states: "New Zealand faces real risks, but also has, with bold action, real
opportunities open to it that could see us emerging at the end of this global tumult with an
economy that has re-tooled, and is positioned to grow faster than our OECD peers... or not."
"New Zealand is facing one of the biggest economic challenges in several decades, and this
demands an immediate, proportionate response by New Zealand’s political leaders. What we
have seen to date is not close to enough," said New Zealand Institute CEO Dr David Skilling.
"We believe that now is the time for bold, preferably bipartisan, leadership to ensure that New
Zealand can weather the storm and emerge quickly and strongly. We understand that this task
is complicated by the election season, but business as usual is not appropriate given the
changing financial and economic conditions," said Skilling.
The draft strategy outlines a series of immediate, short- and longer-term priorities for action that
will have a significant positive impact on the broader economy and the financial system.
Examples include:
• Deferral of provisional tax payments by businesses to year end for at least a two-year
period
• 100% tax depreciation on capital investment for the next two years
• Incentives for skilled Kiwi expats and new businesses to relocate to New Zealand
• Creation of an at-scale SOE Holding Company to finance investment and drive global
growth.

Longer-term, the strategy calls for compulsory KiwiSaver contributions and the elimination of the
tax biases that encourage speculative property investments.
"We have endeavoured to create a non partisan set of actions and practical steps to ensure that
New Zealand businesses can both keep their doors open and have strong growth prospects in
the future," said NZX CEO Mark Weldon.
"Releasing the strategy in draft form is a reflection of both the urgency of the issues and the
desire to stimulate a constructive conversation about the best way forward," said Weldon.
In releasing their draft, Skilling and Weldon are aware that they run the risk of any one of their
proposals being picked out and politicised, to the detriment of others. However, this is a risk
worth taking.
"We're not blind to the risks but we see the opportunities. And we need to take them now. Of
that there is no doubt."
Read the draft strategy and respond on the NZX blog at http://blog.nzx.com or by emailing
feedback@nzinstitute.org.

Rod Oram Rips Into Fonterra

Some quotes from Canon Oram this morning. We can't see this will be going down well with a dairy sector already in a bad mood this morning because of a time change designed to meet the needs of the townies.

FONTERRA'S NAIVETE in China came through loud and clear at its press conference this week. Responsibility for that, and the tragedy it triggered, comes back to the co-op's management and board. And to its shareholders for the corporate culture they promote.

It was clear from their comments Fonterra had next-to-no idea of what was going on in Sanlu, the large Chinese dairy company in which it has a 43% stake. Its links to its $200m investment ran only to three directors on the board and a handful of technicians. Only one spoke Mandarin.

Fonterra's inadequate management systems have left a widening trail of human and financial disaster. With its year-end results this week Fonterra wrote off $139 million of its investment in Sanlu, reflecting the cost of the product recall and the demise of the Sanlu brand.

All this is nothing less than a serious failure of Fonterra's management and governance. The root causes go back to its history and culture. Farmers had always kept their co-ops and the Dairy Board on a very short rope, with adverse consequences for finance and governance.

With such cost-conscious shareholders, the businesses always had to invest piecemeal. This resulted in patchwork of less than-ideal international holdings that Fonterra, created in 2001 by the mega-merger of the co-ops and the Dairy Board, is still trying to meld into a coherent global entity.

Shareholders' penny-pinching only makes management's job harder. It's obvious, for example, Fonterra should have devoted much more management resource to Sanlu to enable deep and functional relatuionahsips to develop.

Governance is the dairy industry's other great weakness. Farmers have always believed in excessive control of their co-ops. This resulted in bloody, highly personalised and dysfunctional politics in the old days of multiple co-ops and the Dairy Board.

Since the creation of Fonterra, the culture has got a little better. Farmers have at least accepted a few non-farmer directors who bring skills they lack. But the board is still far too short of people with deep international experience.

Moreover, the board fails at least three other good governance tests: van der Heyden and some of the other farmer-directors are far more intimately involved in the running of the business than they should be, blurring the division of labour between board and management; Ferrier is not on the board even though a chief executive should be; and risk assessment is woeful, judging by China.

Here endeth the Lesson

The San Lu Saga

Today's New York Times has a long article on the San Lu scandal in China. The whole article is worth reading as it is a good summary of the facts as we know them. Most importantly it portrays the New Zealand Government in a positive light

The problem was finally exposed in September when the New Zealand government, after discussions with Fonterra executives, contacted authorities in Beijing. Beijing officials say they knew nothing about the scandal until September, though a Fonterra company spokesman said the company believed the central government knew in August.
Chinese leaders have since responded forcefully, even as they have distanced themselves from responsibility for the scandal.

Poneke On The Bus Dispute

Poneke has a very interesting post up today based on feedback he has received from a Go Wellington driver. The comments on Union Boss Nick Kelly are most revealing

The general public also need to get all their facts straight as the media and the union hasn’t been putting the correct facts out there. I voted in favour of the deal and think the rest of the driving staff are idiots, especially since they look up to Nick Kelly.
Nick Kelly has never done anything for them. He doesn’t even try to get to know them. He comes in for his break at 11am and you never see him until 3pm when he goes out again. Never stops to talk to anyone. He’s only in it for his own personal gain. I for one will be resigning from the Tramways Union. Phil Griffiths [the former union secretary, who died in June] would have never let it all pan out the way it ended up panning out at such an early stage.

Remember that the Standard and Frogblog both supported the Tramways Union action.

Fonterra Scandal

Fran O'Sullivan is on Fonterra's case again today. With the news out that San Lu lied about the tainting of its milk products for as long as Winston Peters lied about his donations this year, clearly there is something very wrong with governance and oversight in San Lu where Fonterra is a 43% shareholder.

Fran asks why Fonterra Chairman Henry van der Hayden did not front up to the media? Good question. Last night in Wellington some were speculating that Henry might be wanting to hang his CEO out to dry on this. Clearly Fonterra needs to improve things following this scandal. The CEO's media management on this has been very bad, and his actual performance, particularly vis a vis the international media has been much criticised (he virtually exploded in one international interview).

Watch this space.....

Capital Gives Crow Frostly Response

The Dominion Post has not found huge enthusiasm for the planned boobs on bikes event in Wellington.

Wellington leaders have vented their spleen at the "moronic sleaze" porn king Steve Crow plans to bring to the Capital.
MPs and city councillors are concerned about the pornographer's plans to bring the Boobs on Bikes to the city on November 7 in the leadup to an Erotica Lifestyles Expo.
Cabinet minister and Rongotai MP Annette King said the event was "sleazy".
"People should remember that Steve Crow was a man who tried to make a pornographic film about a woman having a baby," she said through a spokesman.
Wellington City Council spokesman Richard MacLean said some residents had called yesterday requesting the council intervene and stop the topless parade, which drew an estimated 100,000 spectators in Auckland yesterday.
"People are saying we're a bit too sophisticated for this moronic sleaze, really," Mr MacLean said.

We expressed our view yesterday.

When The Knives Come Out

Fran O'Sullivan looks at the use of Government directorships and other appointments for Party cronies and favorites. She wonders who National will get to replace these people. The problem is that there are so many of these cronies in place that it might take some years to get rid of them all.

We actually don't think the replacement of these people is going to be to big a problem. Once the political taint is removed those with necessary skills (as opposed to political connections) will become willing to serve.

Should CEO's Be Following Fyfe's Lead

Jafapete will be amazed. There is an issue that we don't agree with Fran O'Sullivan on. Blanket salary freezes are too crude a tool. Fyfe can show leadership, but we are not sure this is a great idea vis-a-vis the rest of his team. Will they really perform better and more productively as a result of this freeze? We aren't sure. We know that if we tried this we would risk the loss of great staff. There is still a huge skill shortage.

The above said, while we have had at least on major disagreement with Rob Fyfe in the past we are very positive about his handling of Air New Zealand.

Oram v. O'Reilly

Phil O'Reilly replies to Rod Oram's article last week - see D6 of the SST. Surprise, surprise Rod Oram commends the sub-standard study that was produced earlier in the week by the Business Council for Sustainable Development (p.D2).

Every New Zealander Should Read Fran O'Sullivan This Morning

We agree with every word. Fran makes the case for taking more time to get the emissions trading scheme right, and the need for a bipartisan approach that will result in a policy that stands the tests of time. We quote some of her comments:

Helen Clark's Government is at a critical crossroads on climate change.
It can rush blindly ahead and enact legislation that will give rise to the biggest economic restructuring in a generation, with huge negative consequences for smaller Kiwi companies and workers in the medium term.
Or it can reach across Parliament and seek to forge a genuine multi-partisan consensus in the knowledge that Labour's chances to milk global warming as an election issue will be stymied.
National's John Key could use his vaunted street smarts to call Clark and offer to remove climate change from the election agenda so the two major parties can work together to forge legislation.

We thought that National had been offering this since the last election...

Clark, who has portrayed herself as an international climate change warrior by setting a goal for New Zealand to be one of the world's first carbon neutral countries, will not want to back down. She has so exaggerated New Zealand's record internationally on combating climate change - when emissions have continued to soar during her Government's time in office - that her credibility is jeopardised.

A bit mean Fran, but true

The real problem is that Kiwis are unprepared for the enormous changes that will follow the introduction of the Climate Change (Emissions and Renewable Preference) legislation.
The economy will undergo an economic restructuring that will dwarf the changes wrought by Sir Roger Douglas in the mid-1980s. Higher prices for basic inputs like electricity and fuels will ensure that many jobs are lost during the transition to a green-collar economy.
This is inevitable. It is the upshot of transforming to the new international paradigm where exporters from high carbon-emitting economies face emerging trade barriers.
Clark and other Cabinet ministers who were part of the Douglas-reform era Government, repudiate the "misery" that was inflicted by ripping the struts out from under farmers, companies and families during the 1980s without introducing measures to reduce the pain of adjustment.
But now they they seem hell-bent on repeating the exercise. Let's not be in any doubt. Jobs will go.
A report by Australia's influential Commonwealth Scientific and Research Organisation (CSIRO) this week forecast some three million jobs in that country's polluting industries could be under threat after an emissions trading scheme comes into effect in 2010. The Australian jobs market would recover from 2017 and then soar as new jobs were created in areas like renewable energy, energy and water-smart buildings, green appliances and other sustainable lifestyle products.

We made the 1980s analogy ourselves yesterday. Not a good time for jobs to be going. And which jobs will be going? It will be Maori and Pacific Islanders who suffer most.

Kevin Rudd's Government is already facing up to major transitional costs. But here, it's still head-in-the-sand territory.
The problem is most business/land/ agriculture lobbies point to negative consequences without conceding the potential upside, while the NZ Business Council for Sustainable Development points to new jobs that will be created but does not focus enough on the downside.
It is incongruous that Clark has not drawn on the 1980s to develop programmes to offset the transition.

Rudd has Penny Wong, we have David Parker. It is not just the NZ business Council for Sustainable Development that sees opportunity Fran. You are being far too narrow. Have you not noticed the big accounting firms rubbing their hands with glee? Then there is the NZX with their baby TZ1. And then there are the commentators like Rod Oram who make heaps on the speaking circuit.

Parliament's finance and expenditure committee hasn't grappled with the big picture, despite official reports warning of the consequences to jobs. It is an outrage that the select committee took a mere 16 hours to consider more than 60 reports on the Climate Change (Emissions Trading and Renewable Preference) bill and was given just three days to consider more than 1000 amendments.

Yes, this was not Charlie Chauvel's finest hour.

A reality check - it is a given that New Zealand does need to put a price on carbon emissions so that the transition to a low-emission economy gets under way.
But forcing through ill-thought-out legislation by making yet more absurd concessions to get minor parties like NZ First over the line in a re-election frenzy will not increase either Clark's reputation or that of her Government.
Business and environmental lobbies are now deeply concerned at the results. Environmental lobbies believe there are now so many exemptions that costs will unfairly fall on smaller businesses and families. Businesses warn of a transfer of wealth elsewhere.
Some of this worrying could be eased if the Government built a safety valve into legislation to protect against high and volatile carbon prices. But, as it stands, an economy where exporters are hostage to the vagaries of the dollar is about to be hit by more uncertainty.
Surely it is in New Zealand's interests for both major parties to come up with a solution that will stand the test of time.

Agree fully

All Is Well Within Business Council

A member of the Business Council For Sustainable Development has kindly seen to it that the attached letter, that was sent yesterday to all members of the Council, ended up in our inbox. Many thanks to that member. We thought that it only fair that we share it with all of our readers as there seems to be great interest from the media and others in the Council's "internal processes". Sean Plunket, for one, certainly seemed more than interested in this issue on Morning Report the other day.


26 June 2008
Dear Member,
I would like to clarify some of the recent comments on the background to the recent
report issued by the New Zealand Business Council for Sustainable Development on
the likely scale of the economic opportunities forgone and threats caused by any
delay in the implementation of an emissions trading scheme.
The Business Council has long been a supporter of the use of economic instruments,
and specifically a cap and trade system, for helping manage and reduce greenhouse
gas emissions. Our first significant piece of work in this area was published in 2003
and we have been a consistent advocate of this approach since then.
In the recent debate over the proposed Emissions Trading System as set out in the
Climate Change (Emissions Trading and Renewable Preference) Bill there have been
many comments about the risks to New Zealand business from the impact of the
proposals and the potential for job losses and economic decline. While acknowledging
there are risks (and we believe we contributed positively to the changes needed to
help mitigate those risks) the Executive Committee was concerned that the debate
was not considering the opportunities that a low carbon economy would present and
the impact of the reputational risks for New Zealand of doing nothing. We therefore
asked Peter Neilson to commission a small piece of work to investigate these issues.
The report identified potential gains which could arise form [sic] business opportunities that
were in the public domain. In many ways the approach taken in the report is
conservative – we have since heard it probably understates the opportunity from
forestry, many new opportunities are not in the public domain as they are
commercially sensitive and clearly the impact of innovation, one of the major benefits
of cap and trade systems, cannot be modeled.
As an organisation we decided long ago that not every member had to agree with
every piece of work and we continue to respect the right of members to do so. The
research should stimulate debate and open up discussion about the potential upsides
from the scheme and the risks of delay as we were concerned that these were not
being properly discussed. It has not sought to counter the specific arguments by
individual entities about the challenges the Bill would present to them, nor would that
be helpful. It is a view of the other side of the coin.
I thought this background note would be helpful to members. Unfortunately the media
are speculating about the propriety of our internal processes which is not helpful, but
the process described above was followed and the position is entirely consistent with
our past position on this issue.
Finally, please accept my apologies for the late delivery of the report. We started to
deliver this electronically at 11.00am Tuesday but it seems to have been ‘drip fed’ out
by the system with some members not receiving the report until yesterday. This was
not our intention.
Regards
Nick Main
Chairman

Rift Between Business Groups Bad News For Labour

We recommend that everyone read page 24 of today's National Business Review. Ben Thomas looks at the privileged role that the Business Council for Sustainable Development enjoyed with the Government and how things have this week blown up in the Council's face following the release of its rushed and substandard attempt to help justify the Government's desire to push the emissions trading bill through before the election. Thomas rightly sees the willingness of business to speak what it really believes (as opposed to meekly towing the Government's line) as very bad news for Labour. This is also bad news for Stephen Tindall, Nick Main and Peter Nielson - all of whom have lost considerable credibility this week. Many are speculating that the Business Council will not be able to survive, with this week's episode being the straw that broke the camel's back..

Thomas concludes

"That they [business] are now prepared, not just as associations but individually, [to] speak out with such vehemence means the balance of power may have shifted. That means another winter of discontent for the government. And if the electoral groundhogs in the business community are correct, the cold snap may be over by November."

Industry Speaks On The ETS

Dear Political Leaders and Members of Parliament

The undersigned are writing to you to express on behalf of our collective memberships, and in the national interest, our strong concern at the process underway to introduce an emissions trading scheme via the Climate Change (Emissions Trading and Renewable Preference) Bill. We request the opportunity to provide further written submissions on the vast number of changes proposed in its latest iteration.

The Bill, as reported back from the Select Committee, has not taken heed of the serious concerns raised by those in the productive sectors of the economy, the sectors that generate the export receipts and employment in New Zealand.

In what is one of the most far reaching economic reforms New Zealand has ever attempted, many submitters to the Select Committee were given only 10-15 minutes to present on their concerns, while the Select Committee considered over 60 reports in 12 hours, and had three days to consider over 1000 amendments to the Bill. The Departmental Report on the Bill is longer than the Bill itself. This is a very rushed process for a matter of such great economic significance to New Zealand.

The complexity inherent in the introduction of an emissions trading scheme is immense, even more so when it is the most comprehensive scheme in the world. A scheme including all sectors and all gases is something that no other government in the world has yet attempted, and there is no precedent to follow. A comparison of the only other mandatory emissions trading scheme, the European Union ETS, shows that the New Zealand scheme (because it is much more comprehensive and there are proportionally less free allocations) is five times more expensive than the EU scheme on a per unit basis and 10 times more expensive on a population basis (see attached appendix).

A combination of the emissions trading scheme and the heavy restrictions on new thermal electricity generation are expected to increase the price of electricity by up to 40%. The costs of the scheme will be ultimately borne by households as business will reflect the cost in their prices or be forced to down-size or relocate.

All the economic analysis undertaken[1] indicates the impact on the economy, on jobs and wages will be severe, particularly if other countries choose not to follow New Zealand’s ambitious lead.

As it is drafted, the effect of the Bill will be the loss of industry and agricultural production to other parts of the world where they do not face a cost on carbon, because the Bill fails to adequately address the loss of international competitiveness of our productive sectors.

There will be a transfer of wealth to developing countries as industry and agriculture are forced to buy units from international brokers to cover their emissions, and investment in New Zealand will become less competitive once an additional cost of carbon is factored in.

The reported back Bill fails to provide any safety valve to protect against a high and volatile price of carbon, in an international carbon market that lacks liquidity and where the price of carbon reflects political decisions made in Europe, rather than the least cost emissions abatement.

New Zealand business and agriculture are supportive of the need to take action to contribute to the global effort to address climate change and are prepared to take action. Indeed, many large industrials in New Zealand have already reduced their emissions below 1990 levels. We would be supportive of an emissions trading scheme that puts a marginal price on greenhouse gas emissions and would send a price signal to incentivise on-going improvements in emissions intensity.

If the Bill is passed in its current form, economic analysis shows the result will be increasing global emissions as our productive capacity progressively exits New Zealand, a wealth transfer from New Zealand to developing countries through the purchase of units on international carbon markets, fewer jobs, lower wages, higher electricity, fuel and food bills.
There is too much of importance in the Bill being left to regulation, which is constitutionally bad practice and likely to result in poor policy outcomes. We believe policy of this magnitude should have the scrutiny of the whole of Parliament. In addition, the administration of the scheme is to be put in the hands of Ministers and Officials. We believe a better approach would be an independent regulator, such as mooted for Australia.

We urge all political parties to act in the best interest of New Zealand Inc and take the time to get this complex matter right and we respectfully request that stakeholders now be invited to make written submissions on the reported back Bill.

[1] Castalia, Infometrics, NZIER, Motu, CAENZ

Yours sincerely

Mike Petersen, Meat and Wool NZ Chairman
Tim Richie, Chief Executive, Meat Industry Association
Owen Symmans, Chief Executive, Seafood Industry Association
Phil O'Reilly, CEO, Business New Zealand
John Pfahlert, Executive Officer, Petroleum Exploration and Production Association
Peter Bodeker, CEO, Wood Processors Association
Charles Finny, Director, New Zealand Chambers of Commerce
Doug Gordon, CEO, New Zealand Minerals Industry Association
Roger Kerr, Director, New Zealand Business Roundtable
Catherine Beard, Executive Director, Greenhouse Policy Coalition
Frank Brenmuhl, Board Member, Federated Farmers
Tony Friedlander, CEO, Road Transport Forum
Ralph Matthes, Executive Director, Major Electricity Users Group

Regulatory Review Committee Challenge To Way Overseas Investment Regulations Were Changed

The communist looking blog Watchblog has reminded us that a couple of business groups have challenged the way in which the Government changed its overseas investment regulations and have claimed that the changes were a breach of standing orders. We wouldn't use this terminology ourselves but this is what Watchblog has to say

Further the Government’s actions are being challenged by the New Right through Parliamentary avenues by Roger Kerr, who remains the head of the neo-liberal Business Roundtable and the Wellington Regional Chamber of Commerce Chair, Charles Finny. Both Kerr and Finny have written to Parliament’s Regulations Review Committee, which is chaired by National MP Richard Worth, to protest the Order in Council.

We have been doing some digging and find that the two "new right""neo-liberal" idols are to appear before Parliament's Regulations Review Commitee at 3.30pm on 1 July (might be worth a look in press gallery).

Political Interference In SOEs

There is a very disturbing article in today's Herald on Sunday by Fran O'Sullivan. She reports that Genesis Energy CEO Murray Jackson was forced out because the Government regarded him as "pro-thermal". This is disturbing at several levels. First, as Fran points out, if Minister Parker had been following Jackson's sensible advice he would not be in the pickle that he is right now. Second, we have a talent shortage in New Zealand and Jackson was a good operator. Third, if true, we have a breach of the Companies Act. The roll of the board is to act in the best interest of the company, not the shareholder, in this case the Government.

Fran compares the situation at Genesis with Air New Zealand and Solid Energy where the Chairman is John Palmer. Palmer is well prepared to stand by his CEOs in the face of strong political pressure.

Who is on the Genesis Board? There are some pretty good people there who should know their responsibilities as Directors well (one if the CEO of the Institute of Directors). But there is this fellow. Interesting that he is wearing his Green hat for the photo.

Leadership Shortage Looming

Brain Fallow writes today in the Herald about a looming problem over who is going to take over existing businesses. Do we have enough potential talent in the current talent pool? Probably not we say, which is why we need to attract the ex-pat New Zealand talent back home. See our post from yesterday.