More than 50,000 jobless in Auckland

About 51,000 Aucklanders are jobless, with job-market observers warning that figure is unlikely to fall any time soon, reports The Aucklander.

The unemployment rate climbed from 5.1 per cent in March 2009 to 7.3 per cent three months ago, the last official figure.

"The largest employment declines in Auckland have occurred in manufacturing, retail trade and construction. In addition, there has been a decline in employment in the financial and insurance service industry," says Benedikte Jensen, the Government's Labour Market Information head.

She says the labour market is not yet as robust as before.

"While employment is expected to recover in many of these industries, it is important to understand that because many of these sectors were severely affected during the downturn, it will be some time before activity and employment levels return to pre-recession levels," she says.

At the start of the year, only 38 per cent of businesses surveyed by the Northern Employers and Manufacturers Association thought they would hire permanent staff by the second half of the year - in other words, the next few months.

"My key message here is that it's improving but it's still very patchy," says David Lowe, EMA's employment services manager.

In the short term, more salespeople will be needed than administrators. "It's not unexpected that when businesses recover the first area they look for is sales to grow their businesses," he says. "Once they begin to generate work, obviously they need to get staff to look after the business."

Heather Walker, director of the NZ JobSquad and Mana Recruitment, says more jobs are being advertised, both online and in print. "Top shortages have been reported as IT consultants, engineering managers, nurses and midwives, local government staff and solicitors."

Mr Lowe says employers may be needing tradespeople as soon as the recession eases. "We are saying to businesses, if they think they are going to need these people in the next little while, they should think about actually getting them now so they get the pick of the bunch."

NZ trailing Australia on pay rises

New Zealand continues to lag behind Australia when it comes to salary increases, a survey has found.

The Hays Salary Guide - which examined salary and recruiting trends for over 1800 job functions in 16 sectors across Australia and New Zealand - found 43 per cent of Australian employers were planning salary increases in their next review, compared with 33 per cent in this country.

Thirty-three per cent of New Zealand employers were also planning to take on new staff this year, the survey said, while the number across the Tasman was around 10 per cent higher.

Hays New Zealand managing director Jason Walker said Australia was four to six months ahead of New Zealand in terms of its economic recovery and there was a risk of losing workers across the Tasman where more opportunities were available.

New Zealand firms needed to concentrate on retaining staff now, he added, in order to lessen the impact of a future skills shortage that was looking increasingly likely.

"We believe in the next 12 months ... we'll start seeing skills shortages and candidates in higher demand probably having more control over the recruitment process."

Employers and Manufacturers Association advisory services manager David Lowe said a "level of uncertainty" still existed among New Zealand employers regarding the economic recovery.

Salary increases were a permanent investment, similar to buying machinery, he said.

"It really comes down to the confidence people have in the future, and I think one in three [New Zealand employers planning salary increases] is a reflection of the improving confidence, but also recognition that people are still a bit cautious."

Lowe said a strengthening Australian economy was positive for New Zealand as that country was our biggest trading partner.

The survey also indicated 80 per cent of employers in New Zealand's mining sector were planning salary increases of between 3 and 6 per cent in their next review.

Forty-seven per cent of employers in the professional services sector, and 42 per cent in IT & Telecommunications, indicated they would give pay rises in the same range.

Eighteen per cent of employers planned to increase temporary workers, up from 12 per cent last year.

By Christopher Adams

G-20 Fails to Agree on Bank Tax, Calls for Joint ‘Principles’

By Gonzalo Vina and Theophilos Argitis

June 5 (Bloomberg) -- Group of 20 nations failed to agree on an effort to impose a global tax on banks that was aimed at making the financial industry shoulder the cost of bailouts, settling instead for a common set of guidelines.

G-20 finance ministers and central bank governors said in a statement in Busan, South Korea, that governments will take account of each nation’s “circumstances and options.” The result allows nations such as Canada, China and Brazil, whose banks suffered less during the global financial crisis, to skip introducing a tax. European countries and the U.S. have advocated the levy.

“If we’re living in an ideal world, a global financial tax would be a good idea but in reality, it is almost impossible to implement,” said Tomo Kinoshita, an economist at Nomura Holdings Inc. in Hong Kong. “There are too many obstacles.”

Today’s statement leaves in place an initiative to seek tighter global standards for capital levels at banks, which is a “more practical” way to help reduce the risk of financial crises, Kinoshita said. Banks have opposed the effort, warning that the costs may curb credit expansion and economic growth.

European governments and the U.S. have advocated a bank tax to be adopted in every major country to prevent lenders from relocating to jurisdictions that don’t charge the levy. The International Monetary Fund was asked by the G-20 last year to recommend how to tax the industry.

Ministers today said they now recognized that there’s a “range of policy options” open to countries and agreed instead to adopt “principles” that protect taxpayers and reduce the risks of further crises.

Canada’s Opposition

Canadian Finance Minister Jim Flaherty, speaking at a press briefing at the conclusion of the two-day G-20 gathering in Busan, said the plan lacked majority backing among G-20 nations and is a “distraction.” He said “there is no agreement” to proceed with a tax.

Instead, Canada has proposed that countries force lenders to keep “contingent capital” on hand to ensure taxpayers don’t end up paying the bill for any future bailouts. Such securities could convert to equity in a time of crisis to ensure that lenders remain well capitalized.

The IMF recommended that financial institutions’ non- deposit liabilities and the sum of their profit and compensation should be taxed to help pay for future bailouts. Led by Canadian opposition, G-20 officials at a meeting in Washington pushed back talks by ordering the IMF to study the issue further.

IMF Task

“The problem is not uniformity, the problem is to do things which are consistent and that do not create arbitrage in terms of regulation and taxation,” the fund’s Managing Director Dominique Strauss-Kahn said in Busan, Korea’s second-largest city. The principles will be written in a way that avoids inconsistency in the different systems, he said.

The G-20 separately said that “it is critical that our banking regulators develop capital and liquidity rules” tough enough to ensure lenders can withstand further crises. The rules should be agreed by November, with implementation targeted for the end of 2012, the statement said.

Chancellor of the Exchequer George Osborne said that Britain will push ahead with a plan to implement a tax and that he will unveil further details in his June 22 budget. The U.K. wants tax revenue to finance general government expenditure, marking it aside from other European nations who want the tax to fund future bailouts.

“If one country goes alone in the bank tax, there will be a risk of regulatory arbitrage,” said Venkatraman Anantha- Nageswaran, who helps manage about $140 billion in assets as global chief investment officer at Bank Julius Baer & Co. in Singapore.

Kiwis willing to miss mortgage payments

Up to 20 per cent of New Zealanders say they would be prepared to miss a mortgage repayment over the next 12 months, according to new research.

The latest Consumer Priorities Study by credit reporting agency Dun & Bradstreet showed that up to a quarter of New Zealanders said they would be late paying bills over the next year, with 20 per cent saying they might even skip a mortgage repayment.

In the past 12 months 21 per cent of New Zealanders were late in settling their credit card accounts, 20 per cent were late in paying their home phone bills, and 19 per cent were late in paying their mobile phone, internet and pay TV bills.

Tough economic times were cited by the majority of respondents as the reason behind their late payment, with 47 per cent saying they simply didn’t have enough money to pay on time. For others it was a case of laziness or forgetfulness – with 31 per cent saying they had just forgotten to pay their bills on time.

Different age groups had different problem areas with their financial obligations. People aged 18-34 were more likely to be late in paying their internet and pay TV bills, 35-49 year-olds were more likely to be late with their mobile and home phone bills, while older Kiwis were more likely to struggle to pay their credit card or council bills on time.

CREDIT WARNING

John Scott, general manager of Dun & Bradstreet New Zealand, said New Zealanders needed to realise that lagging in paying their bills would have a negative impact on their credit history.

"A late payment, or worse, recurring late payments, have disapproving effects on an individual’s credit history and can cause long term damage that takes years to amend," he said.

Mortgage lenders, banks, utility companies and other credit providers all rely on a person’s credit history when deciding if they want to do business with them.

Kiwis losing four homes a day to mortgagee sales

New mortgagee sales figures show ordinary Kiwis are losing their homes at a rate of four a day, as the effects of the recession still linger.

Terralink International's latest data shows there were 202 registered mortgagee sales in March of this year, and two thirds of the affected properties were owned by private homeowners.

At the height of the recession it was largely companies and property investors who were facing mortgagee sales.

But a year on Terralink Managing Director Mike Donald says it's now mums and dads who are unable to make payments on their family homes.

“Increasingly we’ve got mum and dad homeowners that are now struggling, for instance they have lost their job, haven’t been able to secure another job, run out of capital; it puts pressure on trying to pay that mortgage.”

In March there was an average of six mortgagee sales a day.

RadioLIVE

Govt's online tax calculator 'misleading'

The forecast inflation rate is not included in the online tax calculator which helps people figure out the impact of the budget on their taxes, Finance Minister Bill English confirmed today.

The budget last month included income tax cuts across the board. Budget documents showed the cuts off-set by the increase in GST to 15 percent.

Labour today said the Government had misled the public by overstating the benefits of the tax cuts.

It was "unacceptable" the Government's online tax calculator did not take into account Treasury's forecast of 5.9 percent inflation in 2011, the party's finance spokesman David Cunliffe said.

The calculator also did not include potential increases in rent, ACC and childcare costs, he said.

Labour's calculations said minimum wage earners would be worse off until 2014 under the changes.

Mr English said the online calculator included income tax cuts, the rise in GST and compensation in Working For Families, Superannuation and benefit payments.

It did not include forecasts, he said.

The calculator had seen 360,000 page views from New Zealand, Australia, the United Kingdom, Europe, the United States and Asia.

Mr English said the website was "conservative" in its estimates as it assumed people spent all their income.

Countering Mr Cunliffe's figures, Mr English said forecasts showed wage growth was projected to be greater than price increases over the next four years.

Mr English skirted around the subject of the calculator in Parliament today until Speaker Lockwood Smith told him to answer the question.

NZPA

House sellers drop their prices

House sellers have dropped their prices to the lowest level since January, as large numbers of houses remain unsold heading into winter, according to a monthly property report.

The average asking price fell 3.6 percent in May to $407,349, compared with April, property website Realestate.co.nz said.

With the large number of houses remaining unsold - it would take 46.9 weeks to sell the 51,980 properties on the market - a tipping point was reached in May where both high inventory and prices were unsustainable, chief executive Alistair Helm said.

"Last year we were in a similar situation, but it was the volume of sales that decreased. This year it's price," Mr Helm said

New listings were up 17 percent on a year ago, but fell 4 percent from April to 11,733.

There had been no evidence so far that the Government's budget on May 20, making property investment less attractive, had had any effect on asking price, he said.

The asking price was up 1.5 percent in May on a year ago, although it was still 5 percent below the market's peak in October 2007.

"While we've not seen a deluge of cheap property for sale, it does appear that we've peaked on price and there's an opportunity here for buyers," Mr Helm said.

Realestate.co.nz is half-owned by the Real Estate Institute of New Zealand, with six real estate companies owning the rest.

NZPA

Inflation makes savers the biggest Budget losers

There's been a lot of discussion about the inflationary effects of the GST increase since the Budget, but everyone is looking in the wrong direction. They're talking about consumers and interest rates and ignoring savers who are taking the biggest hit.

Labour is pointing to the combined effect of the GST hike, increased power and petrol prices from the Emissions Trading Scheme, and increased ACC levies as a sign the Government is increasing taxes and making consumers poorer. Even the Treasury is forecasting annual inflation will hit 5.9 per cent in 2011.

The Government responds it has structured the income tax cuts and various top-ups to ensure both middle and lower income earners are not disadvantaged.

Property pundits at odds over Budget

A property seminar promoter says the Budget will not force out landlords and drive down house prices.

Arron Davis, who runs Investments and Projects, disagrees with SuburbWatch's Kieran Trass who predicts house prices will fall 5 to 10 per cent in the next year.

Trass told Campbell Live moves in the Budget would be extremely detrimental to investment housing.

His prediction is based partly on the loss of the depreciation tax write-off.

"Many developers have sold negatively-geared properties, and used the tax benefit of depreciation to justify the purchase price in the first place, to people who now will lose the benefit of that depreciation.

Of course some people will exit the market," Trass said, adding that he expected rental property to be in short supply and rents to rise.

But Davis said the Budget would create a stronger economy.

"When the economy is growing and there is inflation, property prices go up," Davis said.

Davis, originally from Australia, said he had run about 500 seminars.

"The main financial impact for property investors arising from the Budget is changes to rules on depreciation - changes that will cost an investor on average only another $15 a week per home.

"The fact that GST will increase means that the cost of new housing and section prices has to go up which will bring along established home values with them," Davis said.

Richard Carver, director of house-builder Jennian Homes, said building would not get cheaper because rising GST would push up the price of land and buildings.

Any staged payments by people in the midst of building made after October 1 would incur higher GST, he said.

"Builders will be under pressure to have homes completed before the increase date," he said.

Andrew King, vice-president of the Property Investors Federation, said his organisation was not entirely happy with all aspects of the Budget.

But he was pleased that the Government had "seen through many of the false claims made against rental property and resisted calls for large and discriminatory tax increases for the industry".

Those claims partly centre on the value of residential property investment, variously estimated to be worth between $60 billion and $200 billion.

King said landlords would not consider big rent rises which had been predicted if harsher tax increases were introduced last week.

"Withdrawing the ability of rental property owners to depreciate their rentals is disappointing, although chattels can still be depreciated which will limit the adverse effect," King said.

The GST increase would have a minor inflationary effect on rental prices, although GST does not apply to mortgage interest costs which are often the largest expense for rental property providers, King said.

Reducing income to increase Working for Families entitlements was never a realistic reason for investing in rental property, he said.

The changes to loss attributing qualifying company structures was aimed to tax profits at the investors' top marginal tax rate rather than the lower company rate.

"There is concern about the level of losses that can be claimed and this will need to be looked at more closely."

Tax cuts: How much extra you will get?

CASE STUDY 1: LOW INCOME EARNER

Low-income couple Munish and Sarah Pathak have gained almost twice as much as expected from the Budget, despite paying GST even on their rent.

They will gain almost $27 a week from the income tax cuts, about $6 a week more than expected, because the tax rate on income between $14,000 and $48,000 a year has been cut from 21 per cent to 17.5 per cent instead of the predicted 19 per cent.

They will still pay an extra $14 a week in GST, as expected. But their net gain from the tax switch alone will now be $13 a week compared with the $7 they expected.

Mr Pathak, 26, works for 60 hours a week at $13.26 an hour, just above the minimum wage, as a security guard at Auckland City Hospital. He earns $41,371 a year gross, giving him almost the maximum benefit from the cut in the 21 per cent tax rate.

His wife, Sarah Pathak, 20, is a fulltime nursing student on a student allowance of $150 a week. Her allowance will go up by $3 a week in line with a 2 per cent increase in all benefits to compensate for the GST hike.

Article continues below

The couple pay $245 a week for a room in a hostel. Rents in such long-stay accommodation are subject to 60 per cent of the standard GST rate, so the GST on their rent will go up from 7.5 to 9 per cent.

Their net $13 gain could still be wiped out if their rent and other costs rise by more than 2 per cent.

Their landlord, Abacus Unitel general manager Mike Newman, said this week that their rent would rise by more than that because he held off the annual adjustment in February so he would not have to raise prices twice in one year.

"I don't think there will be enough balance," Mr Pathak said last night.

"With increasing GST, that means an increase in everything else like your rent. The tax cuts are not going to give you that much money anyway, so it will be pretty much the same thing."

CASE STUDY 2: AVERAGE INCOME EARNERS

Average-income couple David Hall and Anne Mason will be only marginally better off after yesterday's Budget - and could end up worse off depending on the impact on their investment property.

Mr Hall, a Hamilton teacher, earns the average wage of $50,000 a year. Ms Mason earned $12,000 last year as a part-time English teacher for foreign students, making their household income only fractionally short of last year's national median of $63,900.

Figures released with the Budget show that, if they have a typical spending pattern, they will pay $19 a week in higher GST from October, but income tax cuts of $25 a week will put them $6 ahead.

But they could be hit by three other changes.

First, they will get slightly less in Working for Families tax credits than they might have expected because the $36,827 income level at which credits start reducing has been frozen, instead of adjusting with inflation.

Second, they benefit from the 20 hours free childcare policy for most of the 24 hours a week that their 3-year-old spends in childcare. They are unsure how the Budget's changes in childcare funding will affect them.

Third, they own an investment property through a loss-attributing qualifying company, which currently allows them to deduct losses at Mr Hall's marginal tax rate of 33 per cent but have their profits taxed at the company rate of 30 per cent.

The Budget will make their company a "flow-through" entity. This appears to mean that Mr Hall's new marginal tax rate of 30 per cent will apply to both losses and profits.

"It will probably affect us slightly," Ms Mason said.

She noted that experts thought the Budget was "good for the economy".

"We might start spending more and feel more relaxed."

CASE STUDY 3: SUPERANNUITANTS

Superannuitants Les and Ngaire Williams will get a double boost from the Budget - they get the same tax cuts as everyone else, plus a 2 per cent lift in their pension.

World War II veteran Mr Williams, who is 90 next month, and his wife, 77, rely largely on their married superannuation of $489.42 a week, apart from a small "something in the bank".

Their super will go up in October to $511.06 after tax, a rise of 4.4 per cent, because of the combination of tax cuts and a 2.02 per cent increase in the actual rate of super.

They could also be hit harder than usual by the GST increase because they own their own house. The GST hike will be softened for many younger people still paying rent or mortgages, because rents and mortgage payments are generally exempt from GST.

But Mr Williams said the couple managed on their existing pension and were "not great high flyers".

Even if they spent their entire pension on items subject to GST, their GST bill would go up in October by only $10.87 a week, leaving them $10.77 a week better off.

Mr Williams was sceptical last night.

"They get out and quote a lot of figures but you have no way of checking on those figures whatsoever," he said.

"I thought Key shouldn't have gone on the way he went when he was going at Goff [on TV]. I thought Goff put it over quite well."

Other welfare beneficiaries will not get the same double benefit as superannuitants. For example, the gross unemployment benefit for a single adult will actually be cut by $5 a week to offset the tax cuts and keep the increase in the net benefit to just 2.02 per cent - up from $194.12 a week to $198.04.

Gross benefit rates will also be cut to keep the net increase to 2.02 per cent for sickness, invalid and domestic purposes benefits and student allowances.

Rich-poor gap basically same after Budget, English claims

A Budget that delivers thousands a week in tax cuts to the super wealthy and a few dollars to those on the minimum wage will leave the gap between rich and poor "about the same", Finance Minister Bill English said yesterday.

Labour and the Greens have strongly criticised the Budget for delivering windfalls in real terms to high earners while leaving lower-income earners with small gains to cope and facing a spike in the inflation rate next year to 5.9 per cent.

Speaking on TVNZ's Q+A , Mr English said that overall, the Budget would have no significant impact on the rich-poor gap.

"We've achieved a shift in our tax system without making that problem significantly worse in a static sense."

He said other measures in the Budget would make people save more and strive to earn more, as people would keep a greater share of their income.

Last week's tax package will give across-the-board cuts and reduce the thresholds when higher income taxes apply.

A chief executive on $5 million a year will get $4800 extra a week, while a minimum wage earner will be $6.36 better off.

But looked at proportionally, Treasury numbers show that household income across the board will rise by between 0.4 and 0.7 per cent of their current levels, taking into account tax cuts, GST, and other measures such as increases in benefits.

Prime Minister John Key has said those on higher incomes contribute greatly to the economy and need incentives not to take their skills and experience overseas.

Mr English rejected keeping the high tax rate of 38c for incomes higher than $100,000, which Labour has said it will look at.

"We've gone for a comprehensive tax package, we've decided to close as many of the loopholes as we can at the top end."

He said people such as Trade Me founder Sam Morgan, who infamously said he pays virtually no tax, can now focus on investing in economic growth and new jobs, rather than trying to dodge the tax system.

The highest income tax rate will be aligned with the trust rate at 33c, meaning there will no longer be a benefit for those hiding their incomes in trusts. But some business analysts have said the drop in the company tax rate to 28c will mean a new tax dodge will emerge as people hide their incomes in firms.

Mr English also said the Government had not considered state asset sales. He floated the idea on Friday at a post-Budget function by saying there would be strong interest in shares in Kiwibank, but yesterday moved to calm speculation about the issue.