Bayly's Business Brief Nov/Dec 2022

Welcome to my business newsletter for Nov/Dec 2022 that includes a roundup of news from my portfolios and Parliament.


If you thought the economy was in trouble and Kiwis were struggling, I’m afraid there is much worse to come, with the Reserve Bank hiking the official cash rate by an unprecedented 75 basis points at the end of November. It’s the ninth rate hike in a row, with the Reserve Bank under the pump to try and put a lid on NZ’s rampant inflation.

The Reserve Bank is not only forecasting a year-long recession, but it also believes that inflation has not yet peaked. At a recent select committee meeting, Governor Adrian Orr admitted that for many people, tough times are ahead.

For those people with ever-growing mortgage repayments, this is really bad news. Almost half of all mortgages in New Zealand will come up for refixing in the next 12 months, which means that those already feeling the pinch of the cost-of-living crisis will have to find hundreds of extra dollars a week to meet their repayments.

Our food prices hit a 14-year high in October, driven by escalating supply chain costs. Fuel prices remain stubbornly high. Kiwi families are having to make difficult choices about which of the basics they must cut back on, and many families – for the first time in their lives – are having to turn to budgeting services for help.

Now, more than ever, New Zealand needs careful economic management and fiscal responsibility to get us through this difficult period.

Small Business

The Government introduced the Grocery Industry Competition Bill on 21 November which will be read under urgency in the House. Its objective is to improve competition and efficiency in the grocery industry for the long-term benefit of consumers, and to contribute to a trading environment in which businesses can participate confidently.

The Bill is in response to the Commerce Commission’s market study into the retail grocery sector in NZ, which found that competition within the sector was not working well for consumers, with the duopoly of Foodstuffs and Woolworths controlling 90 per cent of the market.

Competitors wanting to enter the market face significant challenges, including access to groceries and the impacts of the imbalance in negotiating power between major grocery retailers and their suppliers.

National agrees that changes are required to make the grocery trade more competitive, including establishing a Code of Conduct for the grocery sector, and the introduction of an industry regulator through the Groceries Commissioner.

The Commerce Commission identified supply-side restrictions and barriers to entry as two of the few reasons for the duopoly. Overseas investment rules must be reformed to allow more supermarket chains like Costco to enter NZ.

We agree with the Government’s actions in following the Commerce Commission’s recommendations. However, going further than what was recommended may lead to adverse and unintended consequences – a result that is becoming something of a recurring problem for Commerce Minister David Clark.

Building & Construction

One of the biggest issues the building and construction sector is going to face next year is the loss of skilled workers.

According to the National Construction Pipeline Report 2022, construction activity across the country is expected to decrease steadily over the next five years, driven largely by declining activity in the residential sector, which is forecast to decrease from $30.6 billion in 2021 to $19.6 billion in 2027.

Whilst there has been a rapid increase in the number of new homes consented this year, higher interest rates, tighter credit conditions and lower house prices are all starting to bite. Many consented buildings have not even been started, with developers walking away from projects. To date this year, 246 building firms have been placed in receivership.

Restrictions on access to credit remain, especially following changes to the Credit Contracts and Consumer Finance Act (CCCFA) which have made it much more difficult for vulnerable and first-time home buyers to obtain funds. This has in turn led to a reduction in the number of people able to acquire new homes, which has impacted those developers and builders who build homes on a speculative basis.

As less and less buildings are constructed, the industry faces uncertainty and increased risk, and ultimately becomes a less attractive proposition to attract new talent. It is imperative that we protect the workforce we have to retain skilled workers, and to provide certainty for the industry so that firms can invest in new talent and take on apprentices, knowing that there will be a certain pipeline of work in the long term.


The Taxation (Annual Rates for 2022–23, Platform Economy, and Remedial Matters) Bill (No2) is the revised Income Tax Bill that was immediately withdrawn following the furore over the proposed GST on fund manager fees in respect of KiwiSaver accounts.

It introduces amendments to seven different pieces of legislation and includes more than 190 amendments. It also introduces new rules on additional information disclosure and further changes to GST, particularly as they relate to digital services and property.

One of the worst parts of the Bill requires NZ-based digital platform providers to supply information about sellers’ earnings to IRD each year, and those sellers will need to pay GST. This substantially increases compliance costs and IRD has not indicated what they intend to do with the data.

Local companies such as TradeMe will need to provide data about their sellers when the company does not distinguish between new and secondary goods – for which the latter has different rules applied.

Digital platforms such as Uber, AirBnb and Expedia will be significantly affected, but just as importantly, sellers (such as those offering holiday homes for lease, for example, and those who rent out their baches) will have to add GST to the cost of their services as the $60,000 income exemption for paying GST on services will be removed. This increase will naturally be passed on to consumers.

The legislation also includes hefty penalties (up to $100,000) for both platforms and sellers who do not comply with the rules.

The Bill is currently before the select committee, with a report due back in March next year. I have recommended that National strongly opposes the Bill because it adds further financial burden and compliance costs on businesses and consumers.


The October BNZ–BusinessNZ Performance of Manufacturing Index (PMI) gave cause for concern, indicating that manufacturing activity, for the first time this year, was down. The main reason given for the contraction was the fall in new orders.

I met recently with members of MAKE│NZ, a group that is taking a new approach to supporting Kiwi manufacturers. MAKE│NZ is the brand of the New Zealand Manufacturers’ and Exporters’ Association (NZMEA), which can trace its roots back to 1879 via the Canterbury Manufacturers’ Association. I’ll be meeting with them again in December.

I’ve also been meeting with a wide range of manufacturers around regional NZ and have been impressed by their ingenuity, creativity and use of intellectual property to make goods that have very wide appeal on a global scale.

One such organisation is TRT Group in Hamilton. They specialise in designing, engineering and building heavy transport trailers used for transporting really big construction equipment, cranes, forklifts and whole houses.

Their innovative platform trailers, with wheels that swivel to go around corners, are in high demand, and the TRT Group can handle everything in-house, right here in NZ, from the initial consultation with the client and design of the concept through to assembly and testing.

One of TRT Group's modular platform trailers

Commerce & Consumer Affairs

Buy Now Pay Later (BNPL) schemes, such as Afterpay, Zip, Laybuy, Genoapay (Latitude), Openpay and Klarna, have proliferated in the last few years, and they are especially popular amongst those aged under 30 years.

However, BNPL products currently fall outside the strict definition in the Credit Contracts and Consumer Finance Act (CCCFA) because they don’t charge interest or fees or take a security interest over goods.

BNPL providers therefore aren’t regulated under the CCCFA as other lending institutions are, which means there is no obligation on them to check if consumers can afford the repayments, nor to offer assistance should consumers find they can no longer make the repayments.

Weekly or fortnightly payments for several purchases can very quickly mount up to several hundred dollars – money that is needed for food and rent. Penalty fees are applied for each missed payment, and these can mount up. Worryingly, some consumers are using credit cards to cover their BNPL repayments.

Of concern is that consumers are using BNPL to buy everyday essentials, not just ‘nice to have’ items, and there are recent signs that BNPL providers may be expanding into new areas including the payment of fines and alcohol sales. These moves have been widely criticised by community groups and those that provide free financial and budgeting advice for vulnerable people.

Consumers who default on their repayments can quickly find themselves with a bad credit rating, and this can affect their ability in the future to access other forms of loan, such as a mortgage or car loan or a credit card.

Belatedly, Commerce Minister David Clark announced in November that the Government wants to introduce better checks for BNPL schemes, including affordability checks for purchases above $600. However, Minister Clark has completely missed the mark (again) and these reforms will do very little to improve lending practices. It’s not necessarily the value of each loan that’s the problem, it’s the number of loans any one person may have and their total weekly commitments.

I have doubts about whether introducing a threshold would be sufficient to discourage vulnerable borrowers from entering into multiple BNPL contracts. Finance companies have told me about people they have come across who have had over 30 different BNPL loans.


I visited Singapore in the first week of November to better understand how the country approaches business productivity and the role of the Singaporean Government in fostering greater innovation and the creation of global value chains, as well as upskilling its workforce.

I met with ministers of state, representatives from Singapore’s key economic development agencies and venture capitalists. I also had dinner with the Acting NZ High Commissioner to Singapore, Mr Peter Kemp. My meetings with Senior Minister of State Mr Chee Hong Tat and Minister of State Mr Alvin Tan were especially beneficial.

Singapore has a clear vision for the future with a long-term strategy, driven by the Prime Minister and Deputy Prime Minister, to support activity in both the public and private sectors. NZ has no institutional arrangements to do this type of long-range planning.

Singapore deliberately targets and supports certain industries and sectors with the aim of implementing its 30-year plan to grow and position itself as a global player. It is not a matter of picking individual winners per se, but in picking industries where all significant firms are supported. NZ needs to have the courage to adopt a similar approach.

Singapore has deliberately built an active culture of funding R&D to drive economic growth, not solely for ‘public good’ purposes. Researchers are actively encouraged to leave academia to commercialise their ideas. NZ needs to substantially up its commitment to R&D, but also to build stronger linkages between commerce and academia.

Singapore has explicitly recognised that talent is the most valuable resource of all and has made a deliberate, sustained and intensive effort to encourage the best and brightest to move to Singapore through low personal and corporate tax rates, easy immigration settings, a safe environment, and high-quality public services.

It also encourages the best and brightest Singaporeans to actively upskill themselves by attending the best universities globally then bonding them back to the country. It also actively promotes and encourages entrepreneurialism and risk-taking; compare this approach to NZ’s relative animosity to these activities both culturally (‘top poppy’ syndrome) and at a policy level (high marginal tax rates for high-income earners).

Furthermore, there is an active strategy of rotating ‘high performers’ around the different public sector organisations and encouraging many to also gain private sector experience. The result is that these high performers are exceptionally well educated, have a rounded perspective on government, and are extremely capable of delivering results.

The hallmark of Singapore is its ability to successfully undertake partnerships with the private sector, on an industry-by-industry basis. NZ has much to learn from Singapore.

Meeting with Mr Alvin Tan, Minister of State for the Republic of Singapore.

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Kind regards

Andrew Bayly is the MP for Port Waikato and the National Party’s Spokesperson for Small Business, Revenue, Commerce & Consumer Affairs, Manufacturing, and Building & Construction; he can be contacted at [email protected]