| GUESTS: |
GARETH MORGAN – Economic Consultant |
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PETER DUNNE – Minister of Revenue |
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| BUSINESS |
CRAIG NORGATE – Director, PGG Wrightson |
| PANEL: |
GREG MUIR – Executive Chairman, Pumpkin Patch |
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| GUEST |
| PANELLISTS: |
DEBORAH HILL CONE – Columnist |
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BERNARD HICKEY – Managing Editor, Fairfax |
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| LISA |
For the first time in five years the handbrake has gone on the economy, fourth quarter results show negative growth, this week the dollar slipped below 60 US cents and business confidence is heading in the same direction. Has the much talked about recession arrived or has the country as David Lange once put it, just stepped out for a cup of tea. The Minister of Revenue Peter Dunne is with us this morning, but first let's hear from our business panel what do they think starting with Craig Norgate. Where are we at with the economy? |
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| CRAIG |
Yeah well I'll be really interested in what Gareth's got to say but I think that we've just about have the recession, yet again we've got a collapsing dollar that’s gonna turn business confidence around and certainly in the rural economy is going to kick start things again, from my perspective we've seen two quarters of farmers not spending, the towns are starting to feel that and complain about it and that’s why confidence is ready to desert but you know the dollar's coming off, some pretty awful external statistics are causing the Reserve Bank to rethink their position on interest rates, if we do see interest rates coming down frankly the dollar will fall further and I don’t know that we should be that happy as a nation that we fight our way to the future with a poor dollar. |
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| LISA |
Okay, Greg have we had the worst? |
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| GREG |
No I wouldn’t think we've had the worst but I certainly think David Lange's little analogy is quite apt, it is I think just a cuppa tea situation, you know certainly what we see at Pumpkin Patch and what we see at Hanover in the financial services business would suggest that the economy's slowing but I think you have to remember we've come off two quite exceptional years in New Zealand and so if you look at a sort of a more continuous glide path we are quieter than the last couple of years but by no means in a recession or even in difficult times. |
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| LISA |
Alright Gareth you’ve heard what they’ve had to say what do you think? |
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| GARETH |
Well I generally agree with what's been said, we're really changing horses from domestic leg growth that’s blown the balance of payments to bits now it's time for the currency to fall and we'll move to export leg growth, now obviously as you change horses you have to have a bit of a break and that’s all that’s happening. I think in terms of whether it'll be a soft or a hard landing I think a lot of it lies in just how fast and far this dollar does fall. I mean since the float of the dollar it's gone from 40 to 70 to 38 to 75 and now 61 heading down, I think within the next three or four months that currency's down at 50 cents then we've got a bit of trouble, but it's not there yet so it's too early to say that it would be a hard landing. I'd be reasonably optimistic just now. |
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| LISA |
What are your thoughts then you say if it got down to 50 we might be experiencing a few difficulties, not a reason to be happy, is it going to go that low in your opinion. |
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| GARETH |
Well you know who can predict what financial markets do. It's all greed and fear really, they run full steam one way then realise they’ve sort of made dicks of themselves and then turn round and run the other way and that’s really what we've got here and they're starting to run and there's a bit of panic selling and so on. I don’t think we should be too concerned at 60 cents, but what I'm saying to you is if in a couple of months you know we're don’t at 50 then the Reserve Bank would obviously have to look at the inflationary consequences of such a rapid fall in the currency. That’s the risk I don’t think we're there yet so there's no need to get too worried about it. |
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| LISA |
Alright Peter Dunne you’ve heard what our panel thinks do you agree or disagree with them? |
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| PETER |
I generally agree with the broad thrust of what they're saying, I think things are slowing down but we've got to put that into perspective, this is not going to be a recession we're going to have a slower period of growth than we've had in recent years and that’s been predicted for some time, I think we are at the top of a cycle and things will start to pick up over the next couple of years from here. |
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| LISA |
You have been talking about and it's been talked out bold reviews of company tax, a discussion document is well by the time line just a couple of months away. What can we expect, let's talk about company tax what should it be? |
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| PETER |
Well I'm not going to talk about the outcome of the review until we've completed it. |
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| LISA |
What's your view though. |
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| PETER |
Well I'm not going to get drawn on that today Lisa. What I'm going to say is that we have a set of proposals before us which will be designed to make our company tax regime more competitive initially with Australia as our major trade partner, but fundamentally change… |
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| LISA |
So what does the company tax level have to be to be competitive with Australia. Your view as Leader of your party, of United Future, as Leader of United Future what is your view? |
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| PETER |
Our policy at election time was 30 cents in the dollar. I think if you look at what the Australians are projecting then in fact you would say that that was a conservative view, but what we need to do is get the signals right so that people can make not just long term investments decisions but I go back to a point you made at the beginning of this piece. This is about firstly retaining investment in New Zealand and secondly to move on to attract new investment, so we do need to send some clear signals that make it easier for business to make the decision to stay here. |
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| LISA |
Alright Peter you’ve said the election thought was 30 cents what does our panel think about that. Surely to be more attractive than Australia we need to go lower. |
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| CRAIG |
Yeah well I guess from my perspective you know it's a bit like going to a dance to a certain extent. The headline corporate tax rate's just the ticket price. You know as a nation we've got a number of things that should attract people to this country aside from lifestyle and you know the skill and talent that we've got, the overall framework in terms of economic freedom is really important but unfortunately Australia's got all those sort of things as well, and if you're asking me what we need to be doing it's about stopping thinking about why we need to change the corporate tax rate and really starting to deliver. It's about credibility, there's been a lot of words and I really worry when we talk about you know bold corporate tax reviews Peter because if that means that we're going to have a lovely little instruction from the Minister on payroll taxes so that he can be very magnanimous in not imposing them on us, that’s not bold that just really gonna make people quite grumpy and turn us off. |
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| LISA |
Peter Dunne, your response to that? |
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| PETER |
Look, there's far more to this than fiddling around with the headline tax rate, I think Craig's absolutely right, it's about a whole package of measures and the discussion document will disclose those. The law change that takes effect today for instance in terms of some of the changes to depreciation and other measures that were announced in last year's budgets, it's about a 1.1 million dollar revenue loss to the Crown which is a tax cut to business. |
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| LISA |
We're looking forward from that Peter and we're talking about this review – so Craig's brought up payroll tax let's throw it into the mix, what do you think about that are we gonna have a payroll tax and what level would it be set at if we did? |
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| PETER |
No, I'm not going to get drawn down particularly lines… |
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| LISA |
As Leader of the United Future Party what is your view? |
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| PETER |
Lisa, I'm not gonna get drawn down that line, what I'm going to say to you is that when we put out our proposals around the middle of the year they will contain a number of options that people can look at, we will invited feedback upon them and we will make adjustments accordingly. I'm not interested in a smoke and mirrors game, I'm interested in making significant change that will benefit New Zealand business, build on the sorts of things that Craig was talking about in terms of lifestyle and other environment and make this an attractive place for people to do business in. |
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| LISA |
Alright well then let's go to our panel if you won't answer that question, Greg Muir a payroll tax, what are you views on that? |
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| GREG |
Oh look I kinda see it as almost an irrelevancy to people like Craig and I. I mean as Craig said to Peter before we are looking for I guess a more rigorous and sort of more over-arching review of where tax is taking us in this country and as Peter's title is Revenue Minister you know how do we start growing the top line in this country I think is quite a critical question that people don’t ask enough. I saw some research a year or so ago that said New Zealand has had the lowest level of export growth, both outbound exports and FDI into other countries of any developed country in the OECD in the last decade. You know New Zealand companies aren’t getting out there taking on the world. Now we're wonderful travellers, we see the world we do a lot but what can we do in the taxation base to encourage New Zealand companies to get out there to be more aggressive and take little companies and become an ice breaker or become a Fisher & Paykel Healthcare. |
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| LISA |
Right some serious concerns there Peter Dunne your response to Greg. |
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| PETER |
Well that’s precisely part of what this whole exercise is about. There's other information out there which I think is equally critical. We're one of the best countries in the world in terms of our capacity to employ labour, we're well above the OECD average but in terms of the productivity per unit of labour we are well below the average, we've got to do much more to enhance our skills base our productivity base, that’s how we start to grow companies in the way that Greg is talking about. We've also got to look at aspects of our international tax regime that may well be hindering some of the business development offshore that he's speaking of and that’s all part of this whole exercise as well. |
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| LISA |
Gareth can we bring you in here, what would a payroll tax do to productivity? |
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| GARETH |
I don’t think it would do much by itself just to penalise employment. I think the real issue in New Zealand is that the return on investments being so low for so long and we need to increase the efficiency of investment. So I'm one of those people who don’t actually think that our savings' problem is chronic as the sort of conventional view, I think it's rather what we do with those savings and it's the quality of investment that suffers. There is a major tax review coming and my main concern about it actually is that we replace one set of distortions with another and that as a result – I mean one of the things that really scares me is that somehow they tilt the field so that we all have to invest in New Zealand because of tax reasons no matter what the rate of return on the underlying investment is. Now if that happens we'll get such a poor result in terms of growth in the wrong sectors. Just think back to forestry investment you know that’s what they did with forestry, even if they say well Australia and New Zealand are one and let's have the same rules there and bugger the rest of the world – I'll tell you what's gonna happen, the capital will just all go to Australia, so I think they’ve gotta be very careful with what they're doing now and make sure that my investment decisions are the same before they impose tax would be the same as they would be after they’ve imposed the tax. Now you do not fix economies with tax policy, what tax policy is about is raising revenue for public services and it's gotta be done in the most neutral way possible, so as long as they keep that foremost in mind then I think that the tax review will be very positive. |
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| PETER |
And what I can say on that Lisa in the area of the tax treatment of offshore investments to which Gareth is referring, is that the decisions that we will be announcing in the next few weeks are designed to make the system as neutral as possible between various types and forms of investment so that if you like the mum and dad investors who are saving for retirement by placing their portfolio around the world aren’t going to be disadvantaged by the choices they make. That’s been a critical consideration of that whole exercise. |
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| LISA |
Right Gareth, how concerning is it that to date growth has been fuelled by borrowing and not by the tradable sector? |
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| GARETH |
Oh well that is, and that was referred earlier by Craig and Greg, but that is very concerning that we've had this sort of lopsided growth, but so has America, so has Australia and those economies have all run up really large deficits and now it's time to pay the piper the rest of the world are saying hey guys you know your engine room's not actually performing we're gonna drop your currencies as a result. Australia and New Zealand are suffering that now, the US will suffer that later this year, so it is concerning and you know I spose we just wish we could get more balanced growth in a sustainable manner, but unfortunately human beings don’t operate like that, you know it's greed and fear, they run one way then they run the other way and you get – that’s what business cycles are about. |
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| LISA |
What do we need to do to get this economy moving at such a rate that we're back up in the top half of the OECD, and should that be what we're aiming for? Craig we'll start with you. |
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| CRAIG |
Yeah I'm not so sure that the OECD's that relevant to the average punter in New Zealand, I mean I think you know let's focus on beating the Aussies first and at the moment that’s a bit of a forlorn hope. I don’t think there are quick fixes other than you know watching the dollar collapse and I don’t think we can be happy that we're all feeling as though we're a bit richer just because our dollar's so weak. You know sustainable growth and the future of this nation's really gotta be about the skills and talent about people so it's investment in education and investment in science and technology and a culture that really understands why we need a thriving economy, and that’s about half way through the next generation, it's not about today. |
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| LISA |
And keeping them here if we're skilling them up, keeping them here? |
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| CRAIG |
Yeah I mean fundamentally, I've got three teenage children and what I want is for them to have the choice to actually live and work in this country and value the things that I value, and I think that’s the case for a lot of mums and dads in New Zealand and if we're really being realistic about it you know two out of three of those children are going to end up somewhere else for the best part of their lives and that’s not something I'm happy about at all. |
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| LISA |
Greg, how do we kick start ourselves? |
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| GREG |
Certainly I would like to see a bigger focus on productivity from the government. From time to time you hear the buzzword productivity appear and it doesn’t have any real traction. When you look at there's an enormous part of the New Zealand economy now relies on the government as its primary form of income, I don’t think that’s healthy for an economy like New Zealand that is isolated and sitting at the bottom of the world. You know we should be looking to decrease the size of our government and get people into the productive sector that are making, doing, selling, creating things. The other thing I'd like to see is New Zealand expand its opportunity to be creative, you know one of our wonderful business alumni Chris Liddell once said you know the ideal model for New Zealand is designed in New Zealand made in a low cost economy somewhere and sold all around the world. Now that just happens to be Pumpkin Patch which is quite a nice little story but I think it's a wonderful model and you know we talked about some of the other examples before you know to get New Zealanders doing that type of thing I think can really add some value to this country. |
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| LISA |
Gareth to you? |
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| GARETH |
Yeah well I don’t think we should forget – firstly we shouldn’t get too down in the dumps, I mean we're going forward not backwards and sure we're starting from a position where we're a bit behind where we'd like to be but you know we are being given an unbelievable opportunity by globalisation essentially, the expansion of the world led by China. Now you know as their incomes rise their diet's change and they go from carbohydrates to protein and what do we make – we do milk and meat which is protein, that’s our core export activity. Now I don’t think exports from niche manufacturers and that – that’s great and they're all lovely individual stories but when you sort of look at the guts of this economy in terms of overseas earnings those are our main plays and we're being given a wonderful opportunity here, so I think you know don’t expect too much from the government I just think it's unfair to think that the government can deliver you know productivity wands, all the rest of it, I do agree with the comment that maybe if we can just get the size of this government down a bit and free up some resources for productive use I think that that’s got a lot of merits, and I think a lot of it falls on our own shoulders here in terms of playing to our strengths and quite frankly I don’t care if the manufacturer sector shrinks by a half as a result of globalisation because the upside in terms of what we're good at is just so much larger. |
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| LISA |
We'll go back to Greg Muir, Pumpkin Patch, some of that stuff applies to you, what are your thoughts on what Gareth was saying? |
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| GREG |
Look he's dead right, and for years there's been scaremongering about you know what if the factories close, what if these jobs move offshore, you know one of the things the government can be genuinely proud of in this economy is that we have such low employment, by world standards we are a genuine leader in that area, so – and people change, jobs move from one productive sector into another. Before I came in this morning I was watching a news programme from Australia on the TV and they were talking about Ikea coming to Adelaide and all the drama of furniture factories closing down in South Australia, and I thought to myself you know that’s an area where Australia is a long way behind New Zealand, Kiwis have accepted that that happens in the world and Kiwis that made furniture now do something else and they do something else that’s interesting, exciting and they're a productive part of the economy and I think that’s our adaptability to do what Gareth was saying is to move from making stuff that was local and indigenous to make stuff or do stuff or create things that’s available for the world, I think is a real talent for New Zealanders and something that we will build on in the next decade. |
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| LISA |
Craig I want to come back to you because you said something about the Aussies, you said it's not all about tax they're hungry for it, they're more innovative, tell me what do you think they have beyond their tax regime, what makes them winners in your head? |
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| CRAIG |
Well at times I think they have a greater sense of purpose than was we have, you know they don’t make excuses when they lose they hate it, and whether that be on the sporting field or in business, I mean a lot of New Zealand businesses have gone to Australia and struggled and that’s not about tilted playing fields that’s about attitude, and so you know I do think that for 20 years now we've been through a sort of a phase culturally of you know she'll be right, nothing's all that bad, but what that does is it takes the edge of us, and yeah I do I agree with Gareth, and it would be wrong for me to say anything other than that, I mean we're a biological economy we should be proud and excited about the fact that milk and meat are gonna feed the Chinese for the next 20 years. The challenge for us and frankly the Chinese as their incomes rise are gonna come and visit more and more, but those are primary industries, and the challenge for us not to just live off the back of that and to a certain extent the Australians have been in terms of their commodity industries. For us it is about the sort of things that Greg talks about, so what we look for in the agricultural sector is how we can take our knowledge and our skill and leverage that for advantage internationally as well. So we've gotta do more than just sell darn good food that has the best product safety of anywhere in the world and we've gotta move that into selling concepts, selling ideas, selling design, helping other people, because the only way that our generation will be able to live in the style that you know they want to become accustomed to is if we're doing it. |
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| LISA |
Peter Dunne can we bring you in here, you are sitting next to the man whose son is the man of the moment Sam Morgan, Craig's talking about innovation, how do we get more of that? |
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| PETER |
Well I think it's an attitude thing. One of the things that comes through from the growth and innovation study from some of the lifestyle attitude studies that have been completed in the last few months is that Kiwis on the whole like their lifestyle here, they like the fact that they’ve got a good clean environment to enjoy, they like the fact that they don’t have the pressure the pace of life of other countries. There's a conflict with that and then becoming a productive smart moving forward economy, I think we've got to address that attitude and balance, Trade Me is a really good example of a simple idea executed extremely well by bright and innovative people. We've got to encourage much much more of that and much more confidence in ourselves to be able to do it I think before we can be positive about where this country goes. The Australians are a good example, we might hate the fact that they hate to lose but it's the old half full half empty syndrome, and I think we've got to develop much more of the half full mentality than this chronic sense of it's half empty and you know don’t look to the government for that, the government's gotta be part of the process but it's actually a whole community process of saying what do we want for New Zealand, you know we're proud of this country, yes well let's deliver some of that pride in terms of the way in which we structure our economic activities, in the way in which we do business and the way in which we promote the advantages of being in New Zealand. |
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| LISA |
Right Peter can we just jump on to petrol tax there, it's been raised this morning, why are we squeezing businesses more why not hold off? |
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| PETER |
Well this was a decision that was made I think last year to have an annual increase of about a cent a litre to go towards fixing some of our chronic worrying infrastructure problems, and one of the things I'm proud of is that United Future was able to negotiate a bigger diversion of that petrol excise out of the consolidated fund into the roading fund, so we're going to get about 900 million dollars more over the next ten years. You’ve only gotta look and I'm sure your Auckland panellists will be familiar with this probably even as recently as this morning, the gridlock getting around our major city and if Auckland's clogged that has an impact for the rest of the country. We've got issues here in Wellington with roading, we've got issues right around New Zealand they’ve gotta be paid for somehow and I think that the painless increase of a cent a litre on the 1st of April rather than big bangs is probably the way to go. |
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| LISA |
Thank you very much to the Minister of Revenue Peter Dunne and thank you to our panellists. |
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| CHEQUE BOOK JOURNALISM |
| Presented by SIMON POUND |
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| LISA |
This week questions were raised about the way that television networks secure their stories. Does cheque book journalism ever have a place? Simon Pound reports. |
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| SIMON |
We're used to money being spent to promote the news but it's a different story when money's being spent to secure it. Accusations of cheque book journalism have been flying this week over TVNZ's dealings with the family of released hostage Hameet Sooden. |
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But first today cheque book journalism – has TVNZ really tied up the released hostage Hameet Sooden in an exclusive deal and how much did it cost? |
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| SIMON |
TVNZ's Bill Ralston says the network probably spent between 10,000 and 14,000 on travel expenses for two members of the Sooden family. This gave TVNZ preferential access to the family but not to Hameet. |
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In another event this week TV3 provided hosts for the Climate Change Conference in Wellington and a video uplink that could have cost organisers 10,000 dollars. The uplink allowed British Prime Minister Tony Blair to take part from Auckland. TV3 also received the only New Zealand television interview with Blair. |
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In a Radio NZ interview on Tuesday TVNZ News and Current Affairs boss Bill Ralston likened these two situations. |
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| BILL |
What's the difference between the Climate Change Conference deal that TV3 has done, no one's asking how much money was spent there to lock up a ten minute exclusive interview with Tony Blair, but everybody turns around and points the finger because we went to Dubai… |
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| SIMON |
TV3 News boss Mark Jennings disagrees. |
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| MARK |
In our case we had organised an interview with Tony Blair, the Brits had come to us, we were their preferred vehicle for this, they liked John Campbell's style of interviewing and felt he was the best person to interview Tony Blair. Two weeks after that the organisers of the Climate Change Conference came to us and asked if we could assist them with some links to get Tony Blair into this conference. It was basically no cost to us just a bit of time from our engineers. |
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| SIMON |
The British High Commission. |
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Owing to the very tight schedule of the PM's visit there was only time for one television interview. Given John Campbell's record of interest in climate change and in this particular conference he was the natural choice for the video link with Wellington. |
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| SIMON |
But this wasn’t what the High Commission told Agenda. They told us they supported our interviewing Mr Blair, but two days after the TV3 deal with Victoria University was revealed they said Mr Blair's tight schedule did not permit a quote "sit down interview". Is there a difference between paying for a story and only paying the story related expenses? Former Herald Editor Gavin Ellis… |
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| GAVIN |
No distinction at all, whether the money is a cheque that’s placed in your hot little hand or whether it's an airline ticket that’s placed in your hot little hand there is no real difference, they're arguing semantics. |
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| SIMON |
Because money clouds relationships. |
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| GAVIN |
The implications are that the person who's been paid becomes beholden to the payer to perform, to say things that they might not otherwise say, to reveal things that are perhaps deeply personal that otherwise they would not have revealed, that there are pressures on the subject that are a direct result of money changing hands. |
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| SIMON |
Mark Jennings also has reservations. |
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| MARK |
It's a grey area Simon and it's not one I feel particularly comfortable about and I have on several occasions tried to talk to my counterparts at TVNZ and trying to lay some ground rules around this. |
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| SIMON |
And if the cheque books really start to come out. |
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| GAVIN |
I'm deeply uncomfortable about it, as I said most journalists would hope that it did not happen. What we're seeing is a hotting up war between two networks. Now my guess is that ultimately there may be one winner, but more likely there'll be two losers. |
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| LISA |
Just a footnote to that discussion Front Page which produces Agenda sometimes pays expenses to people to enable them to appear in its programmes. Now joining us are our panellists, guest commentator Bernard Hickey – should you pay for the big one? |
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| BERNARD HICKEY – Managing Editor, Fairfax |
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No. It's dangerous and corrosive and eventually it becomes a deal with the devil. It leads you in the direction you see in London and in the States, I mean we've both worked in London we've seen how painful that is when people who have what they think is a great story, or an event has happened, some don’t go to the Police or don’t talk openly about it they go straight to an agent like Max Clifford or someone like that. It is a bad way to go. Luckily until now maybe not such a great thing there hasn’t been the sort of intense competition you get that you need to get that, but luckily till now it hasn’t happened much, New Zealand's starting to now obviously with the intense competition between the current affairs show, you see it in Australia where the current affairs show do pay for stories and it's painful. |
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| DEBORAH HILL CONE – Columnist |
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Yeah but they never – sorry Bernard but I'm not a purist about this because they're never the really hot story, I mean Louise Nicholas wasn’t paid Peter Kitchen got that story, you know the stories you’ve gotta ask well is the viewer missing out because the viewer basically or the reader is the person who doesn’t get the hard questions asked, they're always going to be patsy stories the stories that are paid for, so I don’t really think this is something that we need to get that hot about, or that worried about because the really important stories are never going to be those ones. |
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| BERNARD |
it's true – but it corrodes people's trust in a publication. |
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| DEBORAH |
Oh yeah if you pay the big bucks are you gonna tell the story truthfully or are you gonna act up. |
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| BERNARD |
That’s right and are the questions legitimate and are they gonna be soft, and eventually you start wondering you know how legitimate is this. |
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| DEBORAH |
Yeah well that would be a break on the publication itself because they’ll know that if they are going to start looking like Woman's Day for paying stories that people won't trust them and it won't be worth their while. |
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| BERNARD |
The danger also is that you get regulation that comes in, at the moment New Zealand's media seems relatively unregulated obviously in broadcasting it's a bit tougher than in print, but once you start getting this in and people start seeing privacy and the credibility damaged the regulators in the government get involved which is not what you want. |
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| LISA |
Can we change gear here and go back to the tax and the economy, your thoughts Deborah. |
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| DEBORAH |
Gareth Morgan has he gone soft? Is it since he's got bought out? I just so disagreed with him that he said you can't expect tax policy to deliver you transformation in an economy or to deliver you economic growth. Well I think that there was a whole missing part of that discussion which was about branch office syndrome and how New Zealand has become a branch office economy and if we did some ding dong big move to get international companies to come to New Zealand like Ireland did that would also have a flow on effect for the kind of ideas and concepts and entrepreneurs that we want to create, and so I mean I think that - and business almost seems to have got this paralysis where they’ve given up even asking or something like that that would put his on the world map for those international head offices. |
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| BERNARD |
I think Greg and Gareth were right, it's best for the government to step back and that means spending less and doing things less like putting up prices, if you think we've got an inflation problem look at the taxes and fees up 10% in the last year, that’s where the Reserve Bank should be applying the thumbscrews to the government not to business for higher interest rates. |
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| LISA |
Very quickly then so is the nation out for a tea break or is it an extended lunch break in terms of the economy. |
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| BERNARD |
Well the economy didn’t grow in the second half of last year the Reserve Bank hasn’t got a chance now to really get it going again until next year, it's gonna be very soft this year. |
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| DEBORAH |
I think the economy needs a short black rather than a cuppa tea and a lie down. |
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