Hive News Wednesday: Smith eyes capped liability building claims for councils

Finance Minister Bill English talks to reporters on the way into National's caucus meeting. Copyright Lynn Grieveson / Hive News

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Good morning all.

Building costs and the softening economy dominated Parliamentary debate yesterday with Bill English and Nick Smith responding to challenges from the Opposition.

Speaking after Sunday night's allegations of building materials costs rorts aired on 3D Investigates, Smith referred to the Government's moves to change anti-dumping laws and reform the standards system.

But he also talked in this Parliamentary question from Phil Twyford about moving to cap the liabilities for Councils from claims for faulty buildings.

This was recommended in June last year by the Law Commission in its report on joint and several liability. Here is Chapter 7 on capping building consent authority liability at NZ$300,000 for free-standing homes. The Government's formal response in December to the Law Commission report only noted it was considering the recommendations on liability caps without accepting the need for caps. Smith's response goes further.

"We are working through the complex liability issues, in line with the recommendations by the Law Commission, which noted that because councils face high liabilities, it should be capped," Smith said.

He went on to suggest the Government believed that standards authorities and Councils remained reluctant to recommend and approve the use of imported building materials.

"Then there is resistance from councils to innovative building technology, which reduces competition. I can assure the member that we are very open to competition from products with Chinese-sounding names," he added.

Smith called on Twyford to come forward with more specific allegations about anti-competitive practices in the plasterboard sector, given the Commerce Commission's report into the sector last year found no breaches of the Commerce Act.

Smith noted a doubling of plasterboard imports from Thailand since the removal of anti-dumping duties in Budget 2014.

"I would also note that one of the key issues is actually both designers and councils continuing to specify the tried and true, and that is why the Government is making changes to the Standards Act and to liability laws in order to encourage a greater and wider use of alternative plasterboard products," he said.

Building cost savings less expected

Meanwhile, Twyford publicised MBIE documents obtained under the OIA that showed the anti-dumping tariff moves produced 20% of the expected savings.

“Instead of saving the predicted NZ$3,500 on the cost of building a new house, a report by the Ministry of Business, Employment and Innovation found the scheme has ‘not resulted in a discernible impact on the price of construction materials’," Twyford said.

“MBIE estimated the savings per home were more likely to be between NZ$582 and NZ$728 mostly due to the failure of anti-dumping duties to change competition issues in the plasterboard market," he said.

“This report shows National’s big initiative to cut the cost of building materials hasn’t made a blind bit of difference. The real problem is anti-competitive rorts in the building supplies market that are stifling competition and driving up the prices paid by home buyers and DIY builders."

An economic 'pothole'

ANZ's Truckometer survey of vehicle movements in August, which showed the seventh fall in eight months, was the focus of Parliamentary debate on the economy.

The Heavy Traffic Index and the Light Traffic Index both fell 0.6% in August. "A loss of momentum is certainly now apparent, consistent
with a weaker economy, but the index is not capitulating as it did in 2008," ANZ's Sharon Zollner said.

Grant Robertson hijacked a patsy question from Paul Foster-Bell to Bill English to highlight the recent Truckometer reports.

"When the last three ANZ Truckometer reports have been titled “Potholes”, “Flat Tyre”, and “Warning: Dip Ahead”, and the last three ANZ business confidence surveys have been titled “Below the Belt”, “Flagging”, and “Slippery Slopes”, is it not time for him to stop patronising New Zealanders and start getting real about the state of the economy?" Robertson asked English.

In response, English said: "I read past the first line of all those reports, which is a time-consuming activity approximating work, and I do not share quite as negative an attitude as ANZ does."

"But New Zealanders do not need to be told that things are a bit difficult. If you are dairy farming this week, it is cold and wet, the price is low, and you do not need politicians pontificating about how tough it is," English added.

English said under questioning from Robertson that Treasury's downside Budget forecast for an unemployment rate of 5.5% now looked optimistic.

Asked about Treasury's more recent advice on unemployment, English said: "I would not want to repeat exactly—you know, to misrepresent Treasury in any way, but it has certainly indicated that unemployment is likely to be sticky around the 6 percent mark."

English tells Silver Fern farmers to 'put up or shut up'

Elsewhere, English said the Government had not been asked to help Silver Fern Farms with its finances as it faces having to sell a stake to Chinese investors to pay off debt. He said Silver Fern Farms' farmer-shareholders could invest if they wanted to keep control of New Zealand's second largest exporter.

English said the Government had not been asked to intervene and would leave any decision up to the Overseas Investment Office.

Speaking to reporters on the way into National’s caucus meeting on Tuesday morning, English also suggested that the government was looking at ways to speed up the process of applying for overseas investment office approval in response to “pressure” from disgruntled overseas investors.

English agreed that opponents of such a deal felt it represented the loss of a strategic asset that should stay in New Zealand ownership.

“That's right, including some of its current owners think that,” he said.

“But in order for that to happen they have to provide the capital that's needed to sustain the company. So the real test is not whether people have an opinion, it's whether they're willing to put the money up. And it's not as if these are new or unexpected issues - financing the meat industry's been quite a big issue for the past three or four years," he said.

“The owners of it, the New Zealand farmers who are the shareholders, have total control over that business now. It's in their power to keep control of it. We can't really force them to keep a business when they don't want to own it, ” English said.

English said there had been no requests for government assistance from Silver Fern Farms, and no direct discussions with the government about its financial situation.

“Not from the company itself,” he said.

“There's been various proposals from the MIE (Meat Industry Excellence) farmer's group over the years, discussions about whether the government should contribute to the rationalisation of the industry and it's certainly helped government understand the commercial pressures in the meat industry, but nothing's actually come from the discussions.”

Overseas investment process may be sped up

English was also asked if the government was considering tightening up the Overseas Investment Act. He responded that, rather than making it harder for foreign investors to apply for approval to buy land and assets, the government was considering speeding up the process after hearing complaints from applicants.

“There's a bit of pressure over speeding up the process,” English said.

“When you get around, the professional services and applicants you come across, they often complain about it.”

“People who are applying want to go through it faster. The government has yet to decide whether it agrees with that.”

“We get feedback from people who use it that it takes a bit long, that the hurdles are pretty high. Now some of that is intentional - the Overseas Investment Act is there to test the propositions for people coming in buying, particularly land. There's something like 23 tests that have to be met legally. Recent court decisions over Crafar Farms have raised the bar. So we are not going to reduce those hurdles but there are some issues about whether the processes take too long.”

“The market's always telling us that we should. We are just making it clear that we are not going to reduce the hurdles that they have to get over, but we are listening to the complaints about the processes taking too long.”

Asked if there was a risk applications could come under less scrutiny, English said that was “a fair question” but added “so far we are just speculating here.”

“The only way you can do it is more staff, more money. We are not talking about a major review of the process, but we can guarantee that the legislation won't be watered down.” “All I am saying is we are getting complaints and we are listening to those.”

Little calls for more follow up after OIO approvals

Andrew Little said he hoped any proposal to sell Silver Fern Farms to foreign investors would be looked at very closely by the Overseas Investment Office.

“Unfortunately their track record is not a good one,” Little said.

“They have a track record of approving deals and, in spite of promises made about jobs created and wealth created, the OIO never does any monitoring and follow-up to see whether that's actually happened.”

Little called for either the OIO or the Ministry of Business and Employment to be charged with following up applications to check that conditions placed on the deal are being met. “There has been a swag of applications made, “ he said.

“Every application that has been made has been approved and there has been no record, at least in response to Official Information Act requests, no information confirming there has been follow-up to see whether the promises made in applications and the conditions attached to applications have actually been met.”

“That is the failure of the OIO process to date.”

In other economic and financial news...

Statistics New Zealand reported the value of manufacturing sales fell 5.1% to NZ$23.4 billion in the June quarter from the same quarter a year ago, due largely to falls in prices and volumes for dairy, oil and coal products. Total sales volumes fell 0.2% in the June quarter from the March quarter. Economists began finalising their forecasts for June quarter GDP, which is due on September 17, for growth of around 0.4%-0.7% for the quarter.

ANZ reported its monthly inflation gauge rose 0.2% in August, which was slightly stronger than a typical August. "Overall trends still look sedate, though not as subdued as they could have been, given sizeable falls in vehicle licensing fees last month," Cameron Bagrie said. "We will be watching in upcoming months whether the slightly stronger rises in July (excluding licensing fees) and August are monthly noise or more material," he said.

Statistics New Zealand announced it had corrected its inflation data for the March and June quarters, which increased annual inflation in the June quarter from 0.3% to 0.4%. It cited a one-off processing error.

Todd McClay announced the release of a paper proposing the simplifying of rules for closely-held or 'look through' companies. "If the rules are not working as intended then they could be distorting business decisions as well as deterring more businesses from becoming look-through companies," McClay said.

The Taxation (Bright-line Test for Residential Land) Bill passed its first reading in Parliament last night and was referred to the Finance and Expenditure Select Committee for consideration.

Treasury published a new working paper on its Living Standards Framework.

Quotes of the day:

Andrew Little and Bill English in Parliament: on the Taranaki economy, which fell into recession in the June quarter according to the ANZ Regional Trends survey.

Andrew Little:

Given the number of jobs in Taranaki fell by 700 in the past year and the number of people who are unemployed shot up by 44 percent, is it not time to admit that plan A for the economy is failing?

Bill English:

The unemployment was particularly low in Taranaki because of its economic success. There are other industries there that are succeeding or being cushioned by the reduction in the exchange rate. One job, of course, that was not filled in Taranaki was by that member when he took a second thrashing in the New Plymouth seat.

Chris Finlayson telling Winston Peters in Parliament he would answer his question after Peters called him a 'clown':

I will, if he promises not to have late nights at the Green Parrot before formulating his questions.

Tweet of the day:

Danyl Mclauchlan after Jonathan Young asked a question about Jetstar in Parliament:

Kind of surprising it took National this long to embed native advertising into Question Time

Twitpic of the day:

Time Out Bookstore: On your left are books we can sell to any person at any age. On your right, an illegal book for all #IntoTheRiver

Ellinghausen: Question Time for the Treasurer (Joe Hockey)

Have a great day