economy


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Kiwi economy on the rise

Spending on durable goods, which includes passenger cars drives household spending up 0.9 per cent.

Economic performance, measured by Gross Domestic Product (GDP), grew 0.6 per cent in the September 2017 quarter, following a revised 1.0 per cent growth in the June quarter, Stats NZ said.

Household spending was up 0.9 per cent from the previous June quarter. This was driven by spending on durable goods, which includes passenger cars and services. 

Spending on durable goods increased 2.3 per cent, due to increased spending on clothing, furniture, audio-visual equipment and furnishings. 

Construction industry was the main instigator of economic growth
Construction activity rebounded in the September 2017 quarter, up 3.6 percent after falls in the previous two quarters.

Investment in other construction (infrastructure) and residential buildings reported strong increases. Expenditure on road and rail infrastructure were the key drivers of investment in infrastructure, which experienced its strongest increase since 2007. 

“Construction activity recovered this quarter, unwinding the previous two quarterly falls,” national accounts senior manager Gary Dunnet said. “This reflected higher construction-related investment, with investment in infrastructure and residential buildings also reporting strong increases.” 

Services Industry
Service industries continued to grow steadily, up 0.6 percent in the September 2017 quarter.

Industries that contributed most to this growth were health care and residential care; business services; and arts, recreation and other services.

GDP per capita up over the quarter
GDP per capita was up 0.2 percent in the September 2017 quarter, after a revised 0.5 percent growth in the June 2017 quarter.

For the year ended September 2017, GDP per capita was up 0.8 percent.

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Focus on emissions

Murray Sherwin, Chairman of Productivity Commission.

Agriculture is the largest source of emissions, primarily methane, in New Zealand. The second largest source is transport – particularly vehicles. These sources account for two-thirds of emissions, while forestry sequesters almost 30 per cent of the country’s gross emissions.

“Climate change is one of the most serious issues we face,” says Murray Sherwin, chairman of Productivity Commission. “How New Zealand responds to its international commitment to reducing GHG emissions will have major implications for our future.”

“The issues paper [on a low-emissions economy] gives us the opportunity to share what we know, and ask questions about important areas where more information and discussion is required.”

The inquiry aims to “identify options” for how New Zealand could reduce its domestic GHG emissions by moving towards a lower-emissions future. “Action to mitigate GHG emissions will require significant changes, which will have disruptive and potentially painful impacts on some businesses and households,” the issues report states.

“These changes mean the shift will be profound and widespread – transforming land use, the energy system, production methods and technology, regulatory frameworks and institutions, and business and political culture.”

Substantial and sustained reductions in global GHG emissions are required to limit rises in global temperatures and climate change.

Recently, New Zealand submitted its first nationally determined contribution under the Paris Agreement to reduce its emissions to 30 per cent below 2005 levels by 2030. The most long-term target, set in 2011, aims to cut them to 50 per cent below 1990 levels by 2050.

The commission says there are no technical barriers to generate more electricity from renewable sources. The relative cost and efficiency of renewables, such as wind power, make them a price-competitive option.

Wind generation could meet the increased demand from the uptake of electric vehicles (EVs) up to 2040.

Complementary technologies, particularly batteries, are also falling in price. New Zealand’s seasonal pattern of demand favours more use of wind than solar power.

Wind generation could meet the increased demand from the uptake of electric vehicles (EVs) up to 2040, with charging of EVs when there’s lower grid demand, such as late at night.  Distributed generation and possible use of batteries to even out peak load, and of EVs as “batteries”, are likely to require more flexible pricing and network capabilities than now.

Current policies include the government targeting an increase in the proportion of renewable electricity to 90 per cent by 2025. After the metal industry, the next biggest source of industrial emissions comes from HFCs used to replace ozone-depleting substances in refrigeration and air-conditioning units.

Intervention to cut emissions in some parts of the economy can have flow-on effects for demand and opportunities to reduce emissions in other parts of the economy. For instance, converting the vehicle fleet to electricity would increase the demand for electricity generation and increase demand for new renewable sources for New Zealand to meet its mitigation targets.

Effects of EVs on the overall demand for renewable electricity, could, in turn be managed through timing the charging of EVs, and the possible use of their “batteries” to store electricity for sale back to the grid.

Lithium-ion battery costs have reduced by 73 per cent over the past seven years, making EVs cost-competitive with ICEs far earlier than most predictions.

Forests could be used to produce a renewable source of woody biomass to generate heat for industry or biofuels. Norske Skog Tasman and Z Energy recently investigated this for New Zealand. The evaluation concluded that, while technically feasible, using biomass to produce fuel was of doubtful commercial viability given “the current global economic and energy outlook”.

The viability of using biomass for energy hinges on low-value feedstocks, short transport lines and efficient digestion of biomass.

The commission will be investigate if some core policies could be used to cut emissions, such as direct regulation, market-based approaches, and support for innovation and technology. An example of a standard-based approach is 2007 Land Transport Rule on Vehicle Exhaust Emissions, which is enforced by the NZTA.

An example of regulation is France is banning the sale of petrol and diesel cars by 2040. Then there are market-based approaches, such as the Irish government linking vehicle registration and annual circulation taxes to CO2 emissions. 

In New Zealand, the 2016 EVs Programme exempts light and heavy electric vehicles from RUC until they make up two per cent of their respective fleets.

As for supporting innovation, New Zealand may not need to develop many of the technologies required itself, but it needs to ensure they are able to be used effectively – for example, the country’s uptake of EVs in New Zealand illustrates this point.

Adaptive systems are also on the agenda. For example, lithium-ion battery costs have reduced by 73 per cent over the past seven years, making EVs cost-competitive with ICEs far earlier than most predictions.

Read more about the automotive industry’s views on emissions in the December 2017 issue of Autofile magazine.

 

One of the main weaknesses of manufacturing an EV battery is that it produces higher emissions than making an ICV.


THE PROS & CONS OF EVs – Productivity Commission

Strengths
Substantially reduce emissions compared with internal combustion vehicles (ICVs).
EVs already used in New Zealand.
Similar road performance to ICVs.
Substantially cheaper to use than ICVs – equivalent to about 30c per litre.
Electricity grid already established.
Most of New Zealand’s electricity is from renewable energy.
Ability to charge EVs by plugging in at home.
Cost of EV batteries likely to drop over time.

Weaknesses
Developing on-road charging infrastructure is expensive.
At present, smaller travel ranges than ICVs.
Manufacturing an EV battery produces higher emissions than making an ICV.
Charging EVs adds demand to the electricity grid.
It’s currently slower to recharge an EV than to refuel an ICV.
Disposal of EV batteries can cause negative environmental impacts.

Making cement from tyres

In June 2017, the government announced funding of $18.6 million to shift the heat source for making cement from coal to waste tyres. New Zealand generates about five million unwanted tyres a year, making them a viable ongoing industrial fuel source.

The substitution of rubber biofuel for coal by a major grant recipient, Golden Bay Cement – New Zealand’s fifth largest single emitter of GHGs – will cut emissions by 13,000 tonnes a year. The company will burn 3.1 million waste tyres a year – the equivalent of taking about 6,000 cars off the road.

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Free trade deal announced

Japan and the European Union, EU have concluded negotiations on a giant free trade deal.

Shinzo Abe said Japan and the EU will join hands and build an economic zone based on free and fair rules.

The deal, which the EU has called its biggest ever, must be signed and ratified on both sides. The broad outlines of the deal were agreed to in July. Once completed, it will forge an economic zone of 600 million people worth 30 percent of global GDP.

Prime Minister Shinzo Abe and European Commission chief Jean-Claude Juncker said earlier that the agreement, which was four years in the making, had “strategic importance” beyond its economic value.

“It sends a clear signal to the world that the EU and Japan are committed to keeping the world economy working on the basis of free, open and fair markets with clear and transparent rules fully respecting and enhancing our values, fighting the temptation of protectionism,” the pair said in a statement released in Brussels.

Through the deal, the EU hopes to get better access to one of the world’s richest markets, while Japan hopes to jump-start an economy that has struggled to find solid growth for more than a decade.

This will include opening up the EU market to Japanese cars and auto parts.

The two sides were aiming to finalise the specifics in the hope of signing the deal next summer and putting it into effect in 2019.

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Toyota on becoming import only

The demise of Australian vehicle production has meant that Toyota has transformed into an import-only brand, following in the footsteps of former manufacturers Holden and Ford Australia. (more…)

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Nissan Leaf off to a great start

Nissan Europe says the second-generation Leaf is selling much better than expected. 

(more…)

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Safety checks at Kobe Steel plant

On Tuesday Japanese authorities announced they are conducting safety checks at a Kobe Steel Ltd aluminum plant.

(more…)

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NZ First – Move Auckland port’s vehicle ops to Northland

Winston Peters has announced a plan for Ports of Auckland only this morning,  and charicteristically for the veteran politician, it has already received both sharp criticism and widespread coverage.

In a speech being delivered to the Economic Development Agencies Conference today, New Zealand First called for legislation be introduced to move all container operations from the Port of Auckland to Northport by the end of 2027. Northport is situated at Marsden Point, near Whangarei.

He also said he wanted to create special economic zones around Northport and Southport in Bluff, that come with tax free status.

Peters is the MP for Northland, and says that the move will be beneficial to both Aucklanders and Northlanders.

Ports of Auckland.

“Aucklanders want their harbour back while Northlanders want the jobs and opportunity that would come from Northport’s transformation,” Peters said.

Peters focused on the appearance of the waterfront, noting that the large numbers of vehicles moving through the port each day made it look like a parking lot.

Transport Minister Simon Bridges told RNZ’s Morning Report program this morning that forcing Ports of Auckland to move its operations north was a bad idea.

“The problem with what Winston Peters is saying effectively is that he is saying ‘I’m going to legislate for the freight to go to Northport’, to pick that winner. And to my way of thinking that’s a very heavy-handed way of doing things.”

David Vinsen, the chief Executive at Imported Motor Vehicle Industry Association (VIA) says that Peters is making promises he knows he can’t deliver on, and that the proposal is simply in the interest of getting headlines.

“We know what he is suggesting regarding cars does not make sense economically, does not make sense environmentally, does not make sense logistically.”

“What Winston’s done is what politicians in opposition do, they make promises they are not going to have to deliver on.”

Vinsen agrees that eventually the port may move, but it would be over the long term.

“Over time there are going to be significant changes to the way the port operates, and probably where it operates from, but a politician making kneejerk populist promises to satisfy popular reaction is not the way to do it.

Vinsen points to extensive studies carried out by Auckland Council’s Port Future Study and the NZIER that present in depth considerations on moving the port, and assess the full social, environmental and economic costs, all of which are large. He also dismissed Peters comments that the port was a “parking lot”.

“It’s a working port, thousands of vehicles are moving through all the time.” 

Auckland Mayor Phil Goff says that no one party will determine the future of Auckland port on its own.

“No decision will be made about the Auckland port unilaterally. “It would have to be made in negotiation with the Auckland Council on behalf of ratepayers, and this is an entity that returns us $60 million a year in dividends.”

Road Transport Forum Chief Executive Ken Shirley was also explicit in his condenmnation.

“We have heard for a while now how enthusiastically interventionist New Zealand First is on the economy but legislating to force goods from one port to another is next level, it is pure Stalinism,” he said in a press release today.

Ports of Auckland is owned by taxpayers and employed more than 600 people, and made $84m in profits last year.

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Franchises top $46.1b in NZ

The annual turnover of New Zealand’s franchising sector has topped $46.1 billion, according to a new report.

Massey University carried out the Franchising New Zealand 2017 survey in collaboration with the Griffith Business School, and estimated turnover in the franchising sector has grown 67 per cent in the past five years.

Report author Susan Flint-Hartle said franchise brands grew from 446 to 631 in that time, and 72 per cent of those brands were domestic. There are now approximately 37,000 franchises operating in New Zealand, according to the report, employing over 124,000 people.

“It is encouraging to see such large growth in franchising with an increase of around 185 new brands entering the market since the last report in 2012,” said Franchise Association chief executive Robyn Pickerill.

“Many existing brands have also experienced considerable internal expansion.”

The retail sector was identified as a key area of growth, seeing the most significant increase in turnover over the period studied in the report, followed by tourism and construction.

Record immigration has also boosted the franchise industry in New Zealand. Over half the survey respondents said there was significant migrant franchisee ownership, particularly amongst migrants from China, India, South Africa and the UK.

E-commerce is also growing in the sector, with 60 per cent of franchise brands now utilising online sales and Facebook.

“I think the sector is starting to embrace new trends, they are adapting to the online sales environment and using social media for customer and business-to-business communication,” said Flint-Hartle, but added she would still characterise it as a “slow acceptance.”

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ComCom to crack down on lending

Responsible lending is one key priority for the Commerce Commission for the upcoming year, according to a new report.

Chairman Mark Berry said that while there were a number of areas the Commission would always regard as a priority, the organisation would also focus on several “priority focus areas” in 2017 and 2018, which have been published for the first time.

“We will focus on responsible lending (including online lending) and credence claims,” Berry said.

“Despite the number of investigations and cases we have taken, our intelligence suggests some lenders are still failing to comply with responsible lending principles.”

The Commission’s announcement that it would take a hard line on responsible lending follows an update to the official Consumer Credit Fee Guidelines on June 30.

Numerous finance companies have been charged by the Commerce Commission for failing to comply with the Credit Contracts and Consumer Finance Act (CCCFA) by enforcing unfair fees.

Most recently, Acute Finance Limited was fined $22,000 by the Commerce Commission for unreasonable mandatory fees on their loans.  

“By failing to comply, these lenders are not only breaching the law, they are potentially putting people at risk of hardship,” Berry said.

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Falling petrol prices help stabilise CPI

There was no change in the consumer price index (CPI) in the June quarter, and was down 0.1 percent after seasonal adjustment, according to Statistics New Zealand.

The annual inflation rate was 1.7 per cent, down from 2.2 per cent in the year ending March 2017.

“Household basics like rent, food, and electricity all hit consumers’ pockets harder this quarter,” prices senior manager Jason Attewell said.

“Offsetting these price rises were falls in domestic airfares and petrol prices – which fell on average by 4 cents a litre.”

Transport prices fell 1.3 per cent, spurred on by a fall in domestic airfares (down 14.5 per cent) and petrol (down 1.9 per cent). Car rentals also saw seasonally lower prices for the quarter.

The purchase of vehicles was static, down 0.1 per cent compared to the previous quarter, but up 1.4 per cent when compared to June 2017.

The average price of a litre of 91 octane petrol was measure at $1.86 in the June 2017 quarter, down from $1.90 in March, but up from $1.78 in June 2016.

Falling transport prices offset an increase in food, which rose 0.7 per cent in the June quarter, and housing, which increased 0.8 per cent.

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Auto industry leads job boom

Wages for auto industry jobs grew 5 per cent.

New Zealand’s red-hot employment market shows no sign of running out of steam, according to the latest market report from Trade Me.

New job listings on the website were up 12.3 per cent year-on-year, the fourth consecutive quarter with double-digit growth in new listings.

“The job market has experienced unbelievable growth over the last year, and we’ve seen listings up in every region across the country which is very rare,” said Head of Jobs Jeremy Wade.

“Every region around the country, excluding the Bay of Plenty, is outpacing our three main centres for the second quarter in a row.”

The West Coast had the increase in year-on-year job listings, up 53 per cent, followed by Marlborough, up 47.4 per cent, and Gisborne, up 38.6 per cent.

The slowest job growth was in Canterbury, up 4.7 per cent, Wellington, up 6.4 per cent, and the Bay of Plenty, up 8.9 per cent.

Automotive was one of the strongest-performing industries, with 31.1 per cent growth in jobs ads. This was surpassed only by manufacturing and operations, up 32.5 per cent, and transport and logistics, up 32.8 per cent.

In their analysis of over 72,000 vacancies listed on the website in the second quarter of 2017, Trade Me reported that many sectors finally saw rises in wages and salaries following years of stilted growth.

Wade said sectors that were in demand for new staff were starting to offer new money. “We’re not seeing the wage growth we expected yet, but we’re starting to see some green shoots in what has been a pretty barren landscape for Kiwi job hunters,” he said. “The sectors needing people the most are starting to offer more.”

“The 13 sectors with the highest growth in new listings have all had jumps in wages, with automotive roles (average pay up 5 per cent year-on-year) and construction (up 8 per cent) leading the way.”

Auckland City was found to have the highest average earnings, at $71,725, beating Wellington, which had average listed wages of $66,853, for the second quarter in a row. Whakatane came in third, with an average wage of $59,982.

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