Big Income increases fora Few

Published HBT  10 March 2015

Government has overridden the Remuneration Authority decision to award a 5.5 % increase in MP’s salaries back dated to July last year. The Authority is an independent body established by Government to set the salaries of salaries for MP’s, Mayors, Councillors, Government Chief Executives, Heads of Crown Entities, and various tribunals.  

That a 5.5% increase was awarded means the Renumeration Authority had determined this was the extent of the movement in salaries for equivalent positions elsewhere. Clearly senior management have been receiving significant increases despite many other workers being limited to CPI increases, or changes in the minimum wage rate. 

Relativity is clearly the major driving force as demonstrated by the recent comment by authority chair John Errington “that the pay gap between ministers and executives in the private sector was growing and would have to be addressed”. To ensure the salaries under its durestriction are competitive the Authority consults with others, though exactly who is not clear. It seems likely however that professional salary surveys are a major tool, and it seems probably these surveys are contributing to the distortion of incomes that is occurring.  

These surveys are undertaken at regular intervals and produce a range of salaries for each category of job as defined by the knowledge and experience needed, certain dimensions such as turn over or number of staff, plus the freedom to make decisions, or level of authority. Most employers have a salary policy or preferred position in the range for senior staff. They may pay at the upper quartile, or the medium or somewhere else in the range. Few employer will admit to paying below the medium. 

When the review is undertaken the organisation inevitably finds it is paying below its preferred position, and as a result and almost automatically this becomes the reason for a salary hike. This of course is happening right across the country so there is a general upward movement. When the next survey is undertaken these increases are picked up, and again most organisations will find they are paying below their preferred position, thereby justifying yet another upward adjustment thereby ratcheting salaries to ever higher levels.  

Government may have justified the lust for fairness over MP’s salaries but the changes will do nothing to fix growing inequality.  Increases for Chief executives, judges, Government and Local Government Heads must also bought into line with the wider population. This must not stop some people being paid more because of greater the levels of skill and knowledge or stop salary increases for justifiable reasons including, improved performance and increased responsibilities. However the use of surveys is part of a system that feeds on itself to create compounding increases. 

Once those at the bottom were protected by trade union negotiated awards plus a more egalitarian attitude, but an abundance of lessor skilled workers means there is no pressure to improve their incomes. In fact the system now encourages those at the top to exploit those at the bottom with zero hour contracts and other income restraining measures. It also needs to be remembered that the people who have upheld this blatantly unfair system, including those in governance roles, are clearly part of the club that benefits. 

To some extent we should be grateful that we were alerted to the widening gap between the well paid and less well remunerated but doing something about this relatively small group does nothing to fix the growing disparity between those at the advantaged end of the gravy train and the rest. 

Air New Zealand final word

Published 13 March 2015

I must thank Air New Zealand’s Louise Struthers for her recent “Talking Point (23/02/15) plus the accolade of mentioning my name on 10 occasions.  Apparently she is upset by my comments regarding Hawke’s Bay air services,  yet actually confirms as accurate all the points I raised, including this area not being included in the new $29 “Night Rider” special fare deals, and the effective doubling the price of “stand by fares”. 

Later this year we will test her claimed commitment to Hawke’s Bay when Australian league teams the Dragons and Storm face off in Napier, an event that could easily be damaged by the lack of affordable airfares. Even the most committed supporters from Sydney or Melbourne are likely to baulk at paying $500 for return domestic flights.  

Ms Strutters needs to wake up to widespread dissatisfaction as often expressed in this newspaper including recent comments by 60 minutes TV Producer Belinda Henley(5/03/15). We need uncomplicated, affordable, readily available fares so we are no longer disadvantaged compared to the main centres,  Dunedin and Queenstown, where competition is better providing for travellers needs. 

Air New Zealand Must be Audited

Published 17 Feb 2015

Air New Zealand’s Louise Strutters latest effort to deflect criticism of their high Hawke’s Bay airfares have resulted in a response that is full of inconsistencies and inaccuracies, and is lacking in credibility. 

Their claims include:

1. Hawke’s Bay has not missed out on new nightrider flights.

This contradicts the company’s own official announcement that from February 20 through until March 19, every seat on additional late night services on selected regional and trunk routes linking Auckland, Nelson and Christchurch will be priced at $29 one way and Manawatu may included  later. We are now told that due to problems with Airways New Zealand, Hawke’s Bay presents challenges beyond their control.

2. Replacing 50 seat Q300 Bombardier aircraft with 68 seat ATR’s has increased capacity by 19% over the past 5 years. 

In fact if all flights had been upgraded the increase would be 36%. There is no way of knowing if their figures are true but the claimed increase does not tally with actual numbers through HB Airport. For 2014 there were 456 672 passengers compared with 406 000 in 2009, a 12.3% increase over 5 years.  However for 6 years from 2008 when passengers totalled 449 126 the increase was only 1.7%. 

3. Over the past year airfares on all three Hawke’s Bay routes, Auckland Wellington and Christchurch have been 10% lower than 5 years ago.  

In contrast on Feb 10 last year CEO Christopher Luxton was reported as claiming that average  fares from Hawke’s Bay to Wellington and Auckland had not changed in the previous 5 years. Additionally on Sept 1 he was reported as claiming regional fares had not changed significantly over the past 6 years,  yet at that time Informetrics pointed out official Statistics showed domestic fares had increased by 9.1% in the previous year alone. 

4. Hawkes Bay is benefiting from their new $ 169  “Got to Go “ fares available 90 minute before departure and introduced from Feb 1. 

In fact the airline discontinued $ 69 stand by fares on May 6 2013, and abandoned the Starfish program offering discounts of 15 & 30% for regular flyers on Feb 12 2014 meaning travellers are now actually worse off than previously.

Clearly the airline is simply plucking figures out of thin air every time they are challenged on the issue. In the light of these inconsistencies and widespread dissatisfaction it is high time the Commerce Commission, Government or some other official agency conducted a full audit of Air New Zealand’s regional operations. 

High Airfares Hurting Tourism

Published 5 Feb 2015 

Good news for some travellers now that Air New Zealand $29 Night rider fares are to be reintroduced and even extended to some provincial regions. Unfortunately it seems Hawke’s Bay is not included. This region always seems to miss out on meaningful improvements to air services and reductions in airfares. Airfares here are excessive and typically it is cheaper to fly over 1000Km to Dunedin and Queenstown than the just over 300Km from Auckland to Hawke’s Bay. 

Over the holiday period I endured the inconvenience of this issue first hand and I suspect this experience is fairly typical. I received about a months warning of visitors planning to arrive in Auckland from the UK, with a request that I arrange connecting domestic travel. The plan was to use Hawke’s Bay as a base to explore other parts of the North Island, but the only suitable flight to Hawke's Bay was to cost an outrageous  $269 one way, each. Palmerston North and Wanganui were no better, but Wellington was only $79 ( $45 with Jetstar) and Rotorua $89. Interestingly Christchurch was only $179, and Dunedin $169.  

So rather than travelling direct to Hawke’s Bay the visitors chose to instead start in Rotorua. The problem was repeated when trying to arrange return flights, and with fares still in excess of $200 they further reduced their stay in Hawke’s Bay and decided again to use Rotorua as a base. Just how much Hawke’s Bay missed out on is uncertain, but they were spending up to $1000 a day, suggesting a significant loss to this area.

This of course is just a continuation of Air New Zealand’s exploitation of Hawke’s Bay. It’s normal behaviour for monopolies to exploit a lack of competition but that does not make it right. The airline can continue these practices only because Hawke’s Bay’s leaders appear disinterested  in stopping this outrageous situation. Perhaps this is because their own travel is being paid for by taxpayers and ratepayers, or perhaps there are other motives such as the possibility of a seat on the airline’s board. 

Government, and not just the present administration also seems totally disinterested, despite owning over half the airline shares. Perhaps this easy money makes doing nothing more appealing than taking action. Strange because competition has been forced on many areas in the economy including electricity, telecommunications, and education just to name a few. All we are told in the interests of a better performing  economy.

It is about time the NZ Commerce Commission also showed some gumption and used their initiative to investigate this clear example of monopoly manipulation, instead of just coat tailing other regulators. This unimaginative copying happened again this week when they suddenly decided to look into Air NZ’s “drip pricing” practices. The fact the ACCC (Australia) had already started looking into these same practices  in their country shows our ComCom lacks either the knowledge or willingness necessary to stamp out uncompetitive actions in the transport sector. The same happened a few years ago when they discovered easy pickings by following the actions of overseas regulators over air freight charges.

For years Air New Zealand have been blaming high high regional airfares on high fuel prices including claims that jetfuel makes up a third of the airlines costs. Well perhaps they have not noticed the price of crude oil has halved in recent months and one assumes aviation fuel has fallen steeply inline with petrol and diesel. If the airline has got its hedging arrangements wrong this should not be a burden on travellers. The  Commission might like to start by forcing the airline to pass on reductions in jet fuel prices in the same way they forced down the price of  copper based broadband.   

We need to get it into our heads that Hawke’s Bay is highly dependant on air travel because of our relative remoteness. The few bogus experts that always seem to emerge when the subject arises need to be ignored. They clearly lack expertise on the subject are are simply condoning unconscionable  behaviour. 

With the endless regurgitation of statistics confirming our poor economic performance, we should start by looking at the unnecessary barrier being created by high airfares. Surely reducing airfares is one of the easiest ways to make Hawke’s Bay more attractive to visitors and business, and as a place to live.   

Air NZ aviation prices

Published DomPost Jan 2015

When fuel prices are on the up Air New Zealand are quick to tell us about it to justify their airfares, but now crude is plummeting the silence is deafening. It’s high time  the airline started to share with their customers the hundreds of millions of dollars they must now be saving from the halving of crude oil especially on regional services where fares are often in the range of excessive to obscene.  

Perhaps it is time for Government Ministers to have a quiet word in the ear of senior management and board members including perhaps a mention of the word “price control”. 

Shabby Treatment Shackles Bay

Published  5 Jan 2015 

Hawke’s Bay’s economic performance is not great.  We have near the highest unemployment figures in the country, and lowest wages. Our qualifications profile show we have one of the lowest proportion of university graduates, and highest numbers of people with few if any formal qualifications. 

Our influence in the affairs of the nation is declining as our lack of population growth makes us less relevant. Hawke’s Bay may have already lost its 5th place population ranking to Tauranga and Dunedin.

If we are going to have any hope of turning things around we must drop the pretence that everything is all right. It may be all right for some but far too many people are seriously disadvantaged by subsistence incomes and the inevitable deprivation, while our brightest young leave, either because we do not offer attractive education opportunities, or because they see no future in remaining. Those who think amalgamating our councils into a single administrative juggernaut will fix everything are delusional. We are controlled by a very influential, mutually supportive and well off elite who are either not capable or not interested in supporting changes that might not improve their own wellbeing. Amalgamation is a side show designed to divert attention from the real issues. 

Pastoral farming, viticulture, forestry and especially horticulture are the backbone of our economy but they are also a major part of our problem. Two many jobs are seasonal and are therefore unreliable and poorly paid. If it rains, or the crop is not ready the workers are simply not needed and not paid. Nor does the repetitious work appeal to our brightest and most talented.  That’s why the industry has become dependant on RSE  workers from overseas. We need to diversify our economy.

The new  Kiwi Bank call centre in Hastings is the best thing that has happened in decades but will only replace a few of the well paying skilled employment opportunities that have been lost with the departure of PDL,  Ericssons and the head offices of Richmond’s, Wliiiams and Kettle, and Farmlands. 

Our tertiary education offerings do not meet the expectations of many of our young. We are the largest urban population centre in the country without a university campus. It is a huge problem for a number of reasons. Firstly our young leave to obtain an education elsewhere and often don’t return. Secondly this vacuums millions of dollars from our region as parents fund their children’s living and education expenses in places like Dunedin, Palmerston North and elsewhere. But perhaps the biggest cost is we fail to get the economic injection of hundreds of millions of dollars each year from government and student spending, plus we miss out on the employment and other opportunities that a university campus would provide.

Our fundamental disadvantage is our isolation and this is exacerbated by Air New Zealand’s monopoly pricing and service levels. Whilst we think of ourselves as a tourist and conference destination  progress is stifled by air services that are simply not competitive in price or quality.  Its generally possible to fly a thousand kilometres from Auckland to Queenstown or Dunedin for less than the 300 Km to Hawke’s Bay. A year ago the Hastings and Napier Councils buckled when told it could require a $4 million annual subsidy and possible $10 million upgrade of airport facilities to implement trans-Tasman flights. Yet Napier has spent $18 million on a museum with a $4 million annual operating deficit that attracts fewer patrons than the facility it replaced, whilst Hastings has poured nearly $30 million into the Opera House in renovation costs, interest on borrowings and operating subsidies. It now needs millions more to make it safe in an earthquake. 

  

Other instances of unwise Council spending include the disasterous Art Deco buses and $12 million Civic Square development plus the $5 million ratepayer contribution towards a new CBD hotel in Hastings. Both will add significantly to both council debt and interest costs. Money that could instead be used to accelerate additional industrial development that will create jobs.  

 

We have too many representatives claiming to be working for us when in fact they are simply furthering their own vested interests. We need new people who will take us forward instead of trying to cover their past inacation and mistakes. It’s a long time since Michael Laws got Flaxmere a College, and Jeff Whitticar opened up Sunday trading for our wineries.

We are also far too willing to accept excuses from Government, and others for not doing the things that need to be done. To put it bluntly we get a shabby deal. There seems to be no problem finding the money for billion dollar motorways, subway rail systems, stadiums, and all sorts of other flash projects elsewhere, but Hawke’s Bay gets nothing. Its time our MP’s came to the party and obtained firm commitments for Government  starting with funding for improved air services, and a university campus. 

Amalgamation slaging match

Published `15 Nov 2014

The slanging match over debt is sidetracking the amalgamation debate. In the end debt will have very little impact on whether or not Hawke’s Bay will be better off with a single council. If amalgamation turns out to be wrong there will be no chance of going back to what we have now.

Is surely the supporters who must prove their case because it is they who are agitating for change and their motives are questionable. Some may be bitter because they have already been rejected as representatives by the community.  Others are members of the wealthy and influential provincial elite who crave more power than they already have, while others appear to be seeking a way to continue holding office without seeming like stale bread.

Where is the proof amalgamation is going to make us more efficient?  Centres with comparable populations to the proposed Hawke’s Bay Super Council such as Hamilton, Tauranga, and Dunedin have debt levels that are multiples of our combined debt, plus their rates are higher. 

The Winder report claimed at least 100 jobs could be eliminated with one council but similar staff reduction claims were made about Auckland, though these seem to have been conveniently forgotten now our largest city employs over 1000 more staff than before amalgamation, while salary levels have exploded with over 1500 staff earning more than $100 000. If this was the private sector such expectations would be realised, but in Local Government such savings are unlikely. For example we could see five chief executives being replaced with one earning double the present highest salary, plus four additional lieutenants each earning at least as much as the people they are displacing. 

Cost reductions in other areas such as roads, and the three waters are also unlikely because most of the spending in these areas by the existing councils is awarded by competitive tender meaning there is little if any opportunity for further cost reductions. 

Those claiming the Hawke’s Bay economy will perform better under one council need to provide evidence to support their position. Yes we have lost businesses and jobs. Yes our wages are low and unemployment high. But can those proposing amalgamation provide a single verifiable example of a business that has decided not to come here, or one that has left because of our Local Government structure?

The Local Government Commissions had a myopic view of the issue. Both Winder and the Commission seemed interested only in proving a predetermined outcome and in doing so completely ignored the concerns of the four councils opposing amalgamation. It is loss of control  over funding arrangements and spending priorities that that people are worried about not who actually does the work. The present structure actually has some advantages. We now have an element of competition( rare in local Government), and each area is able to concentrate on their strengths and needs. Perhaps it was this concentration of effort that made the difference in helping attract Kiwitbank to bring over 100 jobs to Hastings. 

The Local Government Commission and Winder could have looked at the possibility that poor quality investment decisions by our councils is a better explanation for Hawke’s Bay’s anaemic economic performance. The $18 million museum upgrade with $4 million annual running cost, plus the nearly $30 million( total cost to date) poured into Opera House are costly spend ups that have contributed very little to our economic performance. If we add the Art Deco Buses plus the cost of the proposed Civic Square upgrade it’s not difficult to tote up nearly $100 million of wasted opportunity. 

 

It’s actually possible many things could get worse with a single Council. We have only to look at Auckland to appreciate the sort of things that might happen here. The people who have been running our affairs for many years have the best chance getting elected to any amalgamated Council and If that happens why will the outcomes be any different?  

Hastings cavalier takeover attitude could also backfire. It will have a maximum of just one third of the representatives on both the Transition Board and the merged council and its representatives will easily be out voted by those whose concerns have until now been ignored.   

Amalgamation will be expensive and disruptive. We need to make sure it is worth it.