By Bernard Hickey
With 66 days left until the September 20 election, here's my daily round-up of the political and governmental news from in and around Wellington on Wednesday, July 16, including the latest allegations and denials around Kim Dotcom, a NZ$1 billion Research and Development tax break policy proposed by the Green Party and Labour attacking the Government over the 4.2% rise in electricity prices in the June quarter.
About 55% of the Consumer Price Index inflation generated in the June quarter came from the 4.2% rise in retail electricity prices in the June quarter, which was the second highest quarterly rise in power prices in 14 years. The previous highest was 4.5% in the June quarter of 2012. Without the increase in power prices, Statistics NZ said the 0.3% increase in the CPI would have been 0.1%.
Labour Energy Spokesman David Shearer said the Statistics NZ figures showed the Government's claims about increased competition in the electricity market were wrong. The 4.2% rise also clashed with MBIE figures released on Tuesday showing just a 2.3% rise in the quarter after discounts and incentives.
“The tragedy is that too many New Zealanders are living in cold, damp houses because they cannot afford to put the heater or the electric blanket on. Today’s CPI shows that the Government should be focussed on reducing Kiwi’s power bills, not covering them up," Shearer said.
MBIE released its updated statistics on electricity prices on Tuesday showing average residential electricity prices rose 2.3% in the year ended March 2014 from the previous year. The data now includes prompt payment, multi-fuel and online discounts, as well as incentive and retention payments, and rates paid by customers on fixed-term plans. The lines component rose 1.8% in the year to March, while the energy component rose 2.7%.
The Quarterly Survey of Domestic Electricity Prices (QSDEP)which is the advertised price and doesn't include all the discounts and incentives payments, found prices rose a further 2.3% in the June 2014 quarter, including a 6.7% rise in lines charges and a 0.7% fall in energy charges. It captures the annual price increases announced in April.
Simon Bridges said the March quarter figures showed the lowest annual price increase since 2001, which "showed competition strengthening."
"Discounts and other benefits from retailers are becoming the new norm in an increasingly competitive electricity market and the new data captures what consumers have actually paid for their power, rather than the advertised price," Bridges said.
He said the 6.7% increase in lines charges put through in April reflected regulated price changes and the 0.7% fall in the energy component in the June quarter reflected the increased competition.
Shearer said there was no excuse for the power price increases. "Prices here have continued to rise in a time of less demand when a fall in demand should result in a drop in prices, as is the case in other countries," he said.
Green Energy spokesman Gareth Hughes said the power price increases were above inflation and would contribute a significant amount to the June quarter CPI due on Wednesday. "Excessive electricity prices are a deadweight on our economy and a drain on strained family budgets," he said.
Kim Dotcom vs everyone
Kim Dotcom alleged the Government granted him residency to make it easier for the FBI and police to watch him and then extradite him.
He also promised to release information in the week before the election which he said would prove John Key knew about his situation and had acted in concert with the US studios and the FBI. Key has denied acting under pressure from the studios or knowing about Dotcom until the day before his arrest.
Immigration NZ CEO Nigel Bickel said his department made the decision to grant Dotcom residency after pressure from the German internet businessman's immigration advisors, not due to any political pressure from the Government. Bickel denied any conspiracy with the FBI to engineer any eventual extradition and pointed instead to the Government's aim to compete for very wealthy migrants.
Internet Party Leader Laila Harre said Key and then Immigration Minister Jonathan Coleman should front up to answer the allegations.
"It’s obvious John Key and Jonathan Coleman were warned that some classified papers were being released and they’ve done what smart National politicians do – hide and leave someone else to face the music. Mr Key shot off to Hawaii for a holiday a few weeks – this close to an tight election – and Dr Coleman issued a small statement blaming someone else, stressing that he, too, was on holiday," Harre said.
Green R&D policy
Green Party Co-Leader Russel Norman announced a Green Government would provide tax breaks and grants for Research and Development worth NZ$1 billion over three years.
Companies accepting the grants and tax breaks would have to promise to repay them if they were bought by foreign companies. Also, there would be a voluntary option for companies receiving large grants that they agree the Government take an equity stake in their business.
"A hybrid model of tax breaks and direct grants, underpinned by much higher levels of government funding, will mean more businesses invest in R&D transforming the way our economy produces wealth," Norman said.
New Zealand invested just over 1% of GDP in R&D, while the OECD average was closer to 2.5%. New Zealand patented about a quarter the number of new ideas of the OECD average. A Green Government would establish an expert innovation working group to review the R&D grants and tax breaks system. It would also diversity R&D funding away from the current Government's focus on primary industry research.
A Green Government would also fund an extra 1,000 places at tertiary education institutions for students of engineering, mathematics, computer sciences and physical sciences at a cost of NZ$50 million per year. It would set aside a further NZ$20 million to launch a campaign promoting careers in maths, science and engineering, and to re-establish student allowances for post-graduate students.
It would also establish a NZ$10 million seed fund to kick-start new social enterprises, simplify the taxation of stock options for qualifying start-ups, look at a new legal structure for social enterprises and create a special officer within Immigration New Zealand to support entrepreneurs who wanted to move to New Zealand. A Green Government would include a new points category for migrants who could attract local venture capital.
Reaction
Business NZ CEO Phil O'Reilly said he supported the Green backing for more funding for science and technology teaching, but he did not support more tax credits for all firms. He also disagreed with the plan to force businesses being sold overseas to pay back grants or grant equity to the government because the logistics would be difficult.
Economic Development Minister Steven Joyce said the Greens and Labour had been asleep on the Government's moves on Research and Development.
"It's good to see the Greens playing catch-up and endorsing our shift into encouraging more students in engineering, ICT and science careers, and our approach of dramatically increasing R&D Investment," Joyce said.
"However, to be credible, they need to drop the Helen Clark era knowledge wave rhetoric about the need to diversify and so on, and concentrate on pushing in the direction New Zealand is already going under this government," he said.
(Updated with more details, reaction)
Here is the full policy document.
I'll keep updating this through the day.
See all my previous election diaries here.
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