In the political economy this morning, the economic winds are turning in the Government’s favour. Petrol prices are falling and both the manufacturing and services sectors expanded faster. A stronger currency is helping consumers and the only missing link is an improvement in business confidence.
1. Biggest sectors expanding again
BusinessNZ and BNZ published the Performance of the Services Index yesterday, which showed the both the services sector and the manufacturing sector expanded at faster paces in October.
“Combined, they were starting to form a picture that any near-term slowdown in economic growth will likely be contained,” Bank of New Zealand senior economist Craig Ebert said.
2. ‘Don’t tax our investors’
The stock exchange and the securities industry association joined those arguing for the status quo on tax and against any attempt to extend income tax rules to income from capital gains.
BusinessDesk’s Jenny Ruth reported on Newsroom Pro yesterday the NZX and SIA submitted a joint submission to the Tax Working Group saying the suggested changes to pull this type of income into the tax net would discourage retail investment.
The chances of significant tax change look slim when Tax Working Group itself was half-heartedly in favour of change under current chairman Dr Michael Cullen, and while so many of the existing power groups in the electorate are against it.
3. NZTA eyes used car testing rules
NZTA could be about to shake up its rules to stop car importers from testing their own vehicles, saying the current processes are a “potential risk to safety”.
The proposed changes come on the back of a Newsroom investigation by Thomas Coughlan, which found two of New Zealand’s largest firms, VINZ and JEVIC, were testing vehicles effectively imported by the same Japanese holding company – the Optimus Group – that they are part of.
Now the NZTA has sent out new rules for consultation. The rules would prohibit companies certifying vehicles they have an “ownership interest in” or carrying out entry inspections of vehicles “they or someone linked to them” had previously inspected at the border.
4. What the Wellbeing Budget might include
Professor Arthur Grimes, the Chair of Wellbeing and Public Policy in the School of Government at Victoria University of Wellington and former Reserve Bank Chair, has written a column for Newsroom Pro on what might be in Finance Minister Grant Robertson’s first Wellbeing Budget next May.
He writes: “Work within the Social Policy Evaluation and Research Unit shows that certain types of household are much more deprived than others. In particular, sole parent families with children are particularly deprived. Recent work within Treasury identifies other groups that face particular hardships.
“Based on this and other research, one can anticipate that a Wellbeing Budget might identify specific target groups (e.g. sole parent families) and specific target policy areas (e.g. mental health) that require the greatest attention to lift the wellbeing of the most deprived.
“Ideally, a Wellbeing Budget would also free up resources to address these needs by halting poor quality areas of expenditure – such as gifting money to rich people. But perhaps that is a bridge too far politically.”
5. When Brexit doesn’t mean Brexit
The NZ Initiative’s Dr Oliver Hartwich writes in his fortnightly column for Newsroom Pro that the draft Brexit plan is a divorce agreement that treats the two divorcees as if they were still a married couple.
He writes: “In sum, the draft agreement does nothing to take the UK out of the EU stranglehold. It does not restore Britain’s ability to conduct its own trade policy. It does not even give it full control of its fishing grounds.
“Worse, it removes Britain’s ability to make its own decisions, splits the United Kingdom into Great Britain and UK(NI), lets Britain pay for this privilege, and binds Britain into the EU’s current and future trade deals, whether it likes them or not.
“This is not Brexit; this is Britain becoming an EU protectorate.”
6. Has Microsoft NZ paid all its tax?
Microsoft New Zealand and the Inland Revenue Department are officially at odds after a lengthy audit of the software giant’s local books, BusinessDesk’s Paul McBeth.
IRD has been auditing Microsoft’s transfer pricing since at least January last year, initially covering the June 2013 to June 2015 financial years. The tax department later extended that through June 2017.
Microsoft first acknowledged the audit in its 2016 annual report. In the 2018 annual report, the directors again noted that they and their legal advisers believed the company had adequately assessed and provided for its tax through the period, while acknowledging the final outcome wasn’t certain.
The latest accounts say the matter is now in a formal tax dispute resolution process. The IRD’s website says the process starts with a notice of proposed adjustment and response, followed by a conference, after which the respective parties put forward their positions. An IRD unit staffed by independent experts then reviews the matter, and if either party is still unhappy it can be taken to either the Tax Review Authority or the High Court.
7. My pick of the links
Gordon Campbell: On how Malaysia has exposed our dodgy policies towards China
Richard Harman (Politik): Caught in the middle
MIchael Morrah (Newshub): Labour Inspectorate’s refusal to investigate workplace complaints slammed
Madison Reidy (RNZ): Businesses to bear cost of migrant pay increase
Simon Collins (Herald): Higher childcare fees and centre closures tipped as controls tighten
Josephine Franks (Stuff): ’Why on earth would I want to teach in NZ?’ The Kiwi teachers staying overseas
Sydney Morning Herald: Fairfax shareholders vote for Nine merger
Karl du Fresne: Ian Grant’s history of NZ newspapers
8. One fun thing
Brexit is hilarious from a safe distance.
This short video clip via Ell Potter on Twitter catches the mood.
“The sign language interpreter doing the Brexit Agreement on BBC News is perfectly conveying the perplexing fuckery of this situation #Brexit #BrexitChaos”