Letter No.82
17 July, 1998

29 June 1998

Treasury forecasts negative growth for the current financial quarter. This officially signals that the NZ economy is in recession.

The government announces it intends to cut an additional $300m from its most recent budget. Looking for ways to hold the economy from sliding further into recession, Cabinet agrees to pare a total of $600m from the $5 billion social spending it agreed to at the formation of the coalition government.

Treasurer Winston Peters signals that the company tax rate may be reduced in order help businesses cope with the Asian financial crisis. Finance Minister Bill Birch notes this would also have to mean a reduction in the top personal tax rate, as well. One of the reasons for this is that, in the 1980's when company tax rates were lower than personal tax rates, wealthy NZ'ers legitimately formed themselves into companies to enjoy the advantage of the lower company tax.

The National Health Committee issues a damning report that clearly shows that poor people in NZ are experiencing the highest rates of illness and premature death. The committee, which provides independent advice to government, asks the health minister to provide strong leadership to turn around disturbing health trends. The thrust of the report is that poverty and poor housing are the underlying causes of ill health and disease and must be taken more seriously by government.

30 June 1998

The National Bank monthly business outlook survey reports business confidence improved in May.

The World Bank forecasts 20% unemployment in Indonesia this year.

Grey Power president Don Robertson points to the National Health Committee's report linking poverty and ill health as an indictment of market driven policies. He calls for an all-party accord on economic policy.

1 July 1998

Many legislative changes come into effect. From today, adult single sickness beneficiaries have their benefits reduced by $6. Unemployed, training and sickness beneficiaries aged 18 _19 who live with their parents have their benefit reduced by $24.56. The tax cuts take place that will see employers taking less PAYE tax from workers pay packets.

The citizens of Dargaville petition their council to keep their roading maintenance contract in town. The Kaipara District Council has tendered the contract to a Whangarei firm which has resulted in the loss of 40 jobs in Dargaville.

Brian Roberts of Destination Northland, tourism promotion agency, says Northland has created 80 new jobs in the accommodation and visitor industry during the last financial year.

Treasury is widely criticised for wrongly forecasting economic growth for the March to June quarter by $1 billion. The Treasury advice, which plays an important part in policy planning, predicted 0.3% growth when the economy actually contracted by -0.9%.

Indonesia is rocked with riots and strikes as its economy worsens. In one of several demonstrations, police and soldiers fire rubber bullets, injuring 26, as thousands of workers and students stage protests demanding better pay and social welfare.

2 July 1998

Christine Rankin is appointed as the head of the new Work and Income Agency.

Education Minister Wyatt Creech announces plans to put 590 new special education teaching positions into schools over the next three years. The positions are part of the Special Education 2000 policy aimed at providing more support for children with high and very high needs.

5 July 1998

Barry Finch, spokesperson for the Taranaki Secondary Schools Association, says that of the 590 new special education positions announced last week, 380 will be re-packaging of existing services. On the positive side, he says the other 210 resource teachers specialising in learning and behavior would provide guidance and support in a way that did not previously exist. Mr Finch also noted that 210 nationwide may have little impact.

BERL, Business and Economic Research Ltd, says that despite the second quarter of shrinking economic activity, NZ's economy is sound and can expect 3% growth over the next year. BERL characterises NZ's recent slump as part of a natural, local cycle and the current downturn began before the Asian crisis. The agency also notes that reducing government spending is likely to slow the economy even further.

6 July 1998

Cabinet meets to begin the process of determining what programmes will get the axe to accommodate the $300m cut in spending.

In a landmark decision, West Auckland's Te Whanau o Waipareira urban trust is recognised by the Waitangi Tribunal as a modern iwi. This gives the trust, and potentially other urban Maori groups, the same status as traditional iwi, allowing urban Maori better access to government funding and input into policy.

Work halts at Hyundai Motor Co in Korea. Workers strike for two days to protest planned mass sackings.

7 July 1998

The Police Association fears that the 445 staff cuts already announced are just the beginning. The comments come after consultant Doug Martin says that out-sourcing of 200 to 300 further jobs would save the department about $20m.

Labour MPs attempt to gain more time for community groups to make their submissions on the Social Security Amendment Bill, which includes the work-for-the-dole scheme. Labour Social Welfare spokesperson Steve Maharey says a number of groups are unhappy about the amount of time they will have to make oral submissions to the Bill.

TradeNZ senior trade commissioner for North America Rod MacKenzie says that export trade to America is booming. Exports to the US have increased 17% during the quarter ending in May. The US has overtaken Japan as NZ's second largest export market. Australia is still first.

8 July 1998

Church and Union groups uniformly criticise the proposed Social Security Amendment Bill during the oral submissions sessions. The one positive submission, from the Employers Federation, also acknowledges the scheme will probably displace existing workers.

9 July 1998

A leaked paper from the Public Prison Service recommends big changes to prison staff working conditions. The paper indicates prison staff will work 42.3hrs per week, receive no penalty rate for the extra time, most positions will experience a drop in pay, and staff will be given one less week of annual leave.

Tertiary students are likely to face fee hikes by as much $500 next year. Government had planned to begin a funding scheme for universities and polytechs on a per student basis from next year. Currently, government caps the number of student enrolments for which it pays. In many universities and polytechs the demand for student places is greater than the cap and the shortfall must be covered by raising fees, or to limit enrollments.

10 July 1998

Labour MPs announce they will hold an "alternative select committee" next week to hear submissions on the Social Security Amendment Bill. The move is in response to the fact that those presenting submissions had less than ten minutes each to address their concerns about the bill. Employment Minister Peter McCardle has been invited by Labour's Steve Maharey to attend the hearing.

14 July 1998

Australian unemployment is now at 8.2%. The Australian Bureau of Statistics reports that there have been 20,000 new jobs created in June, an increase of 2.3% in the number of people working. However unemployment increased as well because the number of Australians entering the labour force was greater than the number of new jobs.

The Accident Compensation Corp announces it has removed 2,000 long-term claimants from its books, and it expects to remove another 3,000 by next June. The moves are a result of the "work capacity assessment" designed to differentiate between injuries and illnesses. (Illness is not an ACC responsibility.) ACC corporate relations manager Alan Seay acknowledges that he does not know what has happened to the 2,000 former claimants.

It looks like the rest of 1998 will be an international garage sale of government assets from all around the world. According to an OECD report entitled Financial Market Trends, corporate bargain hunters will be snapping up many state-owned assets as governments everywhere raise money by selling their infrastructure. Hot items: telecommunications, transport and public utilities services.

Finance Minister Bill Birch tells a Melbourne audience that a cut in NZ's top personal and business tax rate in is not a matter of if, but of when. Mr Birch believes a cut in the top tax rate will encourage business and stimulate the economy.

Maori Affairs Minister Tau Henare releases a report that quantifies the gap between Maori and non-Maori. Closing Gaps, the first of what is to the be an annual report, shows large discrepancies between Maori and non-Maori in employment, income, educational achievements, health and life-expectancy. Maori make up a larger proportion of the unemployed than ten years ago and on average earn $10,000 per year less than non-Maori.

Creative Learning Environments Ltd has gone into liquidation, leaving about 600 early childhood training students without a course, no qualifications and around $4,500 of debt. The liquidator is seeking a buyer for the company.

Korean export industries lay dormant today as 50,000 workers strike. The strike is in protest of mass sackings.

The coalition government's minority party, NZ First, sacks its deputy leader, Tau Henare. Henare is apparently the victim of a surprise vote at a caucus meeting. There is media speculation that this may lead to the formation of a separate Maori political party.