Annual Report New Zealand Institute of Economic Research
20 09 New Zealand Institute of Economic Research (Inc)
ESTABLISHED 1958
8 Halswell Street Thorndon PO Box 3479 Wellington 6011 New Zealand
Phone: +64 4 472 1880 Fax: +64 4 472 1211 email: [email protected]
Website: www.nzier.org.nz Chairman’s Report 3
NZIER Board Members 2009 4
Chief Executive’s Report 6
Public Good Work 7
Membership Products 8
List of NZIER Members 2008 9
Contents Summary Financial Statements 11 NEW ZEALAND INSTITUTE OF ECONOMICNEW RESEARCH
About NZIER ANNUAL 2009 REPORT
• The New Zealand Institute of Economic Research (NZIER) is an independent economic consulting and forecasting organisation specialising in quality economic analysis and research to help decision-makers in both the private and public sectors with strategic and policy advice.
• Established in 1958 and based in Wellington we are a non-profit incorporated society.
• We are independent of Government and any other organisation and we conduct our activities in an impartial and independent manner free from bias or any sectional interest.
• Membership is open to all.
• We devote the surplus on our operations to fund our public good research and other activities.
1 NZIER wishes to thank
• Major members, members and clients for providing the funding necessary to carry out the Institute’s work.
• The New Zealand Treasury and the Reserve Bank of New Zealand for providing a grant towards the cost of the Quarterly Survey of Business Opinion.
• Sir John Anderson, Professor Frank Scrimgeour, Dr John McDermott, Dr Arthur Grimes and Mr Jeremy Corban for sitting on the Awarding Panel for the 2008 NZIER Economics Award.
• The National Business Review for their support of the NZIER Economics Award.
• Dr Graham Scott, for providing the address at the 2008 Annual General Meeting.
• The Centre of Policy Studies at Monash University, in particular Dr James Giesecke, for collaborative research and work in the field of computable general equilibrium (CGE) modelling.
• The Ministry of Foreign Affairs and Trade for financial assistance with our participation in the Track II Study Group on a Comprehensive Economic Partnership for East Asia (CEPEA).
• The Foundation for Research Science and Technology for research funding.
2 Chairman’s Report
The past year was again successful for NZIER, despite an adverse economic environment.
NEW ZEALAND INSTITUTE OF ECONOMICNEW RESEARCH The Board is pleased to report a surplus of $11,213 for the financial year. This surplus is after funds applied to the Institute’s usual public good activities, the Research Award in celebration of NZIER’s 50th anniversary, and search and recruitment costs of its Chief Executive. Without the latter two expenditures, the surplus would have been in excess of $140,000. The balance sheet and liquidity position of the organisation both remain very healthy. Public Good activities
NZIER’s Constitution sets down that its objectives include conducting and promoting research into economic matters directly or indirectly affecting New Zealand, and advancing the understanding of economic matters directly or indirectly affecting the country.
In recent years, NZIER has been able to devote approximately $250,000 of its annual revenue from all sources to funding public good projects and activities.
During the 2008/9 financial year NZIER funded the hosting of international visitors, the preparation of conference papers – particularly on the implications of the global financial crisis for New Zealand, and a number of research papers. Examples of these include: human capital and the trans-Tasman brain drain, household wealth, and a review of employment policies during a recession.
The Board is also pleased that the 50th anniversary Research Award paper, by Law, Genç and
ANNUAL 2009 REPORT Bryant, was successful in stimulating debate about the role that migration policy can play in promoting trade.
A key achievement this year has been the development of a dynamic computable general equilibrium model of the New Zealand economy. The model has already been applied to a number of important public policy issues, such as our independent assessment of the Government’s fiscal stimulus package. It will prove to be a valuable and distinctive tool for our consultancy work for public and private sector clients. Governance
This year’s accounts are presented in a summary form, in accordance with Financial Reporting Standards 43: Summary Financial Statements. The full accounts are available on NZIER’s website, or by contacting the Institute by phone, mail, or email.
NZIER is a non-profit organisation, and its constitutional aims and objectives are educational. On 1 November 2008 the Charities Commission advised us that the Institute continues to be registered as a charitable entity under the new legislative provisions.
The Board continues to work effectively. The Board has two committees: the Audit Committee, which is chaired by Mr Paul Baines with Mr Norman Geary and myself as the other members, and the Remuneration Committee, which is chaired by me, with the Deputy Chairman, Mr Kerry McDonald, as the other member. Thanks
On behalf of NZIER, and personally, I thank all the Board members for their contributions to NZIER’s success during the last financial year. I also express the appreciation of the Board to the staff of NZIER, for all their work over the past year.
Michael Walls Chairman
3 NZIER Board Members 2009
The roles of the NZIER Board members are to:
• Be responsible for the Institute continuing to strive towards attaining its goals as they are agreed from time to time, and for the Institute’s strategic direction.
• Monitor and safeguard the continuation of the Institute in good financial health and morale.
• Ensure the employment of a Chief Executive of the Institute, on appropriate terms, and monitor the Chief Executive’s performance relative to those terms.
• Keep under review the performance of the Chief Executive and, through the Chief Executive, of the Institute’s staff.
• Give advice to the Chief Executive on questions of general business practice or standards within the knowledge of the Board and give advice on strategic planning initiatives and issues.
Mr M Walls Mr TK McDonald Mr P Baines Chairman Deputy Chair
Mr NMT Geary Professor VB Hall Mr R F Nottage CBE CNZM
Mr J de Raad (Chief Executive) Ex officio
Auditors PricewaterhouseCoopers Solicitors Kensington Swan Secretary J T Matthewson
4 NZIER AGM 2008
Held at the Intercontinental Hotel in Wellington on 28 August 2008. NEW ZEALAND INSTITUTE OF ECONOMICNEW RESEARCH
Chairman Michael Walls addresses the 2008 AGM
Dr Graham Scott addresses the 2008 AGM ANNUAL 2009 REPORT
John Gibson with the Economics Award and his wife, Geua
David Law accepts the 50th Research Award prize on behalf of himself, John Bryant and Murat Genç
5 Chief Executive’s Report
The 2008/09 year was marked by some exciting and some challenging events for NZIER.
In 2008 we celebrated NZIER’s 50th anniversary. Our history is nicely documented in The Evolving Institute through a series of essays by some of our previous directors (available at www.nzier.org.nz).
Among the highlights of the year has been our ongoing contribution to evaluating climate change policies for a range of clients. NZIER is committed to continue to making independent contributions to policy issues with potentially major implications for the economy. We have also had a strong voice in debates around the energy sector and commented on fiscal stimulus and employment policies. Our work in these areas has not always endeared us to some interest groups, but I am very proud of both the quality of our work, and of our strong independent stance.
The success of our investment in a computable general equilibrium model led us to invest further to develop a dynamic version of the model, with expert assistance from the Centre of Policy Studies at Monash University. Our capability in this area will provide our customers with analysis and insights that are more robust and credible than the standard economic impact studies that are on offer.
Our collaboration with the world-class Liggins Institute was another very exciting development over the last year. Our contribution to that collaboration will be to develop a robust methodology to evaluate the life course benefits and costs of interventions very early on in life, or even pre- birth. The work is still at an early stage, but the potential pay-offs in quality of life and economic terms are large, and this research may prove to be a very astute investment by the taxpayer.
Another notable highlight of the 2008/9 year was the growth of our involvement in trade and trade liberalisation policy and research, particularly where Asia and the Asia-Pacific rim are concerned. Our experienced and expert trade team continues to assist customers with everything trade-related, from modelling to strategic advice on sector structures and policy.
We have not been immune from the external environment. A sharp focus on costs in the wake of the prolonged recession, and the post-election focus on implementing the first 100 days agenda, slowed our consultancy business and affected membership numbers. This is reflected in our financial results.
Tighter public sector budgets and the focus to do ‘more with less’ presents an obvious business risk to NZIER, as public sector clients account for a significant proportion of our consultancy income. Despite this risk, we are excited by the business opportunities that are arising in the current economic environment. These include:
• Public sector clients now show greater demand for robust economic analysis to underpin policy development. NZIER is well equipped to assist clients with independent evaluations of the net benefit of existing and new policy, as well as prioritisation.
• Private sector clients are demanding greater certainty around economic issues when deciding on business strategy. A number of recent appointments, including that of a Principal Economist, have strengthened our capability to service this market.
The 2008 year also marked the transition to a new Chief Executive, following Brent Layton’s resignation from the position after five years of astute leadership. Such transitions always bring uncertainty and change. I thank all my colleagues and the Board for their support and encouragement during this transition period.
Jean-Pierre de Raad Chief Executive 6 Public Good Work
Each year NZIER undertakes or funds a variety of activities focusing on promoting and assisting research into economic problems directly or indirectly affecting New Zealand. These activities NEW ZEALAND INSTITUTE OF ECONOMICNEW RESEARCH are mostly funded from our own resources, and occasionally from sponsorship.
Public discussion papers
Part of our public good work involves preparing and publishing public reports on topics of importance to New Zealand. During the 2008/9 year the following reports were prepared:
• When will New Zealand catch up with Australia?
• Distance isn’t dead - an empirical evaluation of food miles based preference changes
• The unemployment challenge - Labour market policies for the recession
• Short term gain, long term pain? Impact of New Zealand’s fiscal stimulus - a dynamic general equilibrium analysis
NZIER Economics Award 2008
The NZIER Economics Award was established in 1994 to promote and recognise excellence in
ANNUAL 2009 REPORT economics of direct or indirect benefit to New Zealand.
The 2008 award was presented to Dr John Gibson. The citation presented to him can be viewed on the Institute’s website.
NZIER 50th Anniversary Research Award
NZIER established the 50th Anniversary Research Award in 2008 as part of its 50th Anniversary celebrations.
The research grant was awarded to David Law, Murat Genç and John Bryant at NZIER’s 2008 Annual General Meeting.
The paper on Trade, diaspora and migration to New Zealand can be viewed on the Institute’s website.
Further public good work
Some further examples of our public good work during the 2008-2009 year are:
• Preparing and publishing NZIER Consensus Forecasts.
• Digitalising NZIER working papers back to 1982, and making them freely available via the NZIER website.
• Responding to inquiries from the public and students who wanted information about the New Zealand economy.
• Providing comment for the media.
• Briefings for international visitors.
• Presentations at conferences and workshops.
7 Membership Products
NZIER offers its members a comprehensive macro-economic forecasting service. Successful organisations need a clear picture of the economy, and how it is likely to develop. Economic forecasts can help our members understand the economic circumstances that are likely to prevail in the future, allowing them to take advantage of economic opportunities and minimise the impact of downturns.
Quarterly Predictions
Quarterly Predictions contains detailed and comprehensive forecasts for the New Zealand economy. Each issue contains forecasts for four to five years ahead, with focus on the composition and drivers of economic growth in the coming two years. Empirical analysis is complemented by an examination of related economic and policy issues, and any risks attached to the forecasts.
During the 2008/9 year issues 174-177 were published.
Quarterly Survey of Business Opinion
Begun in 1961, NZIER’s Quarterly Survey of Business Opinion is New Zealand’s longest running and most comprehensive business confidence survey. The resulting indicators are a valuable tool for assessing the current state of the economy, and forecasting short term economic activity.
The survey samples manufacturers, builders, architects, wholesalers and retailers, and service sector firms. Information from these industries provides useful indicators of future investment patterns, and the likely direction and composition of economic growth in coming quarters.
During the 2008/9 year issues 188-191 were published.
CPI Forecast Summary Table
This specialist web-based publication is aimed at members of NZIER who are electricity line distribution companies subject to the price-path threshold regime under Part 4A of the Commerce Act 1986. It provides in one place the forecasts of inflation in the Consumer Price Index (CPI) of all the major forecasting organisations. This assists our members in setting their prices as the thresholds to which they are subject are defined in terms of movements in the CPI.
The CPI Forecast Summary table is published four times a year, in March, June, September and December.
8
NZIER Members 2008-2009
Major members NEW ZEALAND INSTITUTE OF ECONOMICNEW RESEARCH Air New Zealand Department of Labour Electricity Commission Inland Revenue Department Ministry of Economic Development Ministry of Foreign Affairs & Trade PricewaterhouseCoopers Reserve Bank of New Zealand The Treasury
Standard Members
3M New Zealand Ltd Contact Energy AAPC Properties Pty Ltd Croxley Stationery Ltd Accident Compensation Corporation Darroch Valuations AgResearch Deloitte Touche Tohmatsu Airways Corporation of New Zealand Ltd Department of Building and Housing AllianceBernstein New Zealand Ltd Deutsche Bank Amalgamated Engineering Printing & Dilworth Trust Board ANNUAL 2009 REPORT Manufacturing DTZ Darroch ANZ Banking Group Ltd Du Pont (New Zealand) Ltd APN News and Media Eastern Equities Corporation APR Consultants Ltd Economic Solutions Ltd ASB Bank Ltd Energizer New Zealand Ltd Auckland City Council Ernst and Young Auckland City Libraries First New Zealand Capital Auckland Regional Council Fonterra Co-operative Group Auckland University of Technology Fuji Xerox (New Zealand) Ltd Auguste Holdings Ltd GE Commercial Finance Aurora Energy Ltd Genesis Energy Bancorp New Zealand Ltd Golden Bay Cement Bank of New Zealand Goldman Sachs JB Were (New Zealand) Ltd Barclays Capital Bank PLC Gough Group BASF New Zealand Ltd Graham Scott (New Zealand) Ltd Bayer New Zealand Ltd Grundfos Pumps New Zealand Ltd Bayleys Real Estate Ltd Hastie Group Ltd Bell Gully Hay Group Ltd BOC Gases Ltd Holcim ( New Zealand) Ltd Boston Consulting Group Holden New Zealand Ltd Business New Zealand Honda New Zealand Ltd Cameron Partners Limited Housing New Zealand Corporation Canwest New Zealand Hynd Pipe Systems Ltd Capital Economics Ltd IBM CB Richard Ellis Ltd Industry Training Federation Cerebos Greggs Ltd Infometrics Ltd Chapman Tripp Ingersoll-Rand Architectural Hardware Ltd Citigroup Global Markets New Zealand Ltd Jetro Auckland Office Colliers International New Zealand Jones Lang LaSalle Advisory Ltd Commerce Commission Kiwi Property Management Ltd Connell Wagner Ltd KPMG
9
L.E.K. Consulting Palmerston North City Council Land Information New Zealand Parliamentary Library Landco Ltd Powerco Ltd Landcorp Farming Ltd Retirement Commission Lincoln University Rider Levett Bucknall Livestock Improvement Corporation Rio Tinto Aluminium (New Zealand) Ltd Macquarie Bank Rockwell Automation New Zealand Ltd Maersk New Zealand Ltd Sandvik New Zealand Ltd Manukau Institute of Technology SC Johnson and Son Inc Market Economics Ltd SCION Massey University Securities Commission Meat and Wool New Zealand Ltd Sky City Entertainment Group Ltd Meridian Energy Ltd Solid Energy New Zealand Ltd Ministry of Agriculture & Forestry Spotless Services (New Zealand) Ltd Ministry of Education State Services Commission Ministry of Social Development Statistics New Zealand Ministry of Transport Steel and Tube Holdings Ltd Ministry of Womens Affairs Tainui Group Holdings Ltd Mitsui & Co. (New Zealand) Ltd Te Papa Tongarewa Moore Capital Management Te Puni Kokiri Motor Trade Association Inc Te Runanga o Ngai Tahu NALCO Television New Zealand Ltd National Australia Bank The Radio Network New Zealand Defence Force The Royal Society of New Zealand New Zealand Industry Training Organisation The Todd Corporation Ltd New Zealand Lotteries Commission Toyota New Zealand Ltd New Zealand Meat Industry Association Inc Transpower New Zealand Ltd New Zealand Racing Board UBS New Zealand Ltd New Zealand Refining Co Ltd University of Auckland New Zealand Seafood Industry Council Ltd University of Canterbury New Zealand Steel Ltd University of Otago New Zealand Trade & Enterprise Vector Ltd Nissan New Zealand Ltd Victoria University of Wellington Office of the Controller & Auditor-General W Stevenson & Sons Ltd Office of the Minister of Finance Wallenius Wilhelmsen Lines New Zealand Omnicom Media Group Wesfarmers Ltd Open Polytechnic of New Zealand Westpac Opus International Consultants Ltd Westpower Ltd
10 NEW ZEALAND INSTITUTE OF ECONOMICNEW RESEARCH Summary Financial Statements for the year ended 31 March 2009 Notes
1. General Information
The summary financial statements are presented in New Zealand dollars, which is the Institute’s functional and presentation currency.
The summary financial statements have been prepared in accordance with FRS 43: Summary Financial Statements.
The summary financial statements have been extracted from audited financial statements authorised by the Board of Directors for issue on 2nd June 2009.
The full financial statements comply with New Zealand generally accepted
ANNUAL 2009 REPORT accounting practice and were prepared under the framework for differential reporting.
An unqualified audit opinion was issued on the full financial statements.
The summary financial statements cannot be expected to provide as complete an understanding as provided by the full financial statements.
The full financial statements are available on the NZIER website www.nzier.org.nz.
The summary financial statements are for New Zealand Institute of Economic Research (Inc.) as a separate legal entity. The Institute is designated as a public benefit entity for financial reporting purposes.
2. Public good work
In addition to direct operational expenditure of $141,403 (2008: $153,264) on a wide range of public good projects, the Institute incurred a further $101,940 (2008: $197,117) at normal charge out rates of staff time on Institute public good activities.
3. Related party information
At 31 March 2009, $25,056 has been accrued in respect of payments to be made to Board Members for services rendered during the year ended 31 March 2009 (2008: $21,953). A payment of $22,500 was also made to Board Members during the year.
11 Income Statement
for the year ended 31 March 2009
2009 2008
Note $ $
Revenue 3,567,685 3,715,518
Other Income 106,911 154,695
TOTAL REVENUE AND OTHER 3,674,596 3,870,213 INCOME
EXPENSES
Public Good Costs 2 141,403 153,264
Employee Costs - Salaries and Wages 2,753,242 3,111,926
Depreciation and Amortisation 124,479 91,820
Fees Paid to Auditors 14,214 20,909
Operating Expenses 615,223 520,006
Operating Lease 14,822 17,222
TOTAL EXPENSES 3,663,383 3,915,147
Net profit / (loss) attributable to members 11,213 (44,934)
12 SUMMARY FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 MARCH 2009 NEW ZEALAND INSTITUTE OF ECONOMICNEW RESEARCH Balance Sheet
as at 31 March 2009
2009 2008
Note $ $
ASSETS Current Assets Cash and Cash Equivalents 1,772,923 1,565,879
Trade and Other Receivables 240,525 439,370
Prepayments and Accrued Income 375,657 458,972
Total Current Assets 2,389,105 2,464,221
ANNUAL 2009 REPORT Non-Current Assets Property, Plant and Equipment 1,915,397 1,995,876
Intangible Assets 103,461 40,626
Total Non-Current Assets 2,018,858 2,036,502 TOTAL ASSETS 4,407,963 4,500,723
LIABILITIES Current Liabilities Trade and Other Payables 288,834 123,210
Employment Entitlements 743,224 1,206,182
GST Payable 40,586 52,228
Deferred Income 299,075 97,175
Related Party Payable 3 25,056 21,953
Total Current Liabilities 1,396,775 1,500,748
TOTAL LIABILITIES 1,396,775 1,500,748
NET ASSETS 3,011,188 2,999,975
EQUITY Accumulated Funds 3,011,188 2,999,975
Total Equity 3,011,188 2,999,975
13 Statement of Changes in Equity as at 31 March 2009
2009 2008
$ $
Equity at the beginning of the financial period 2,999,975 3,044,911
Profit for the Year 11,213 (44,934)
Total recognised income and expense for the period 11,213 (44,934)
TOTAL EQUITY AT THE END OF THE FINANCIAL PERIOD 3,011,188 2,999,975
Cash Flow Statement
for the year ended 31 March 2009
2009 2008
$ $
Net cash inflow from operating activities 313,875 246,382
Net cash outflow from investing activities (106,831) (157,432)
Net increase in cash held 207,044 88,950
Cash at beginning of year 1,565,879 1,476,929
Cash and cash equivalents at end of year 1,772,923 1,565,879
14 8 Halswell Street Thorndon PO Box 3479 Wellington 6011 New Zealand
Phone: +64 4 472 1880 Fax: +64 4 472 1211 email: [email protected]
Website: www.nzier.org.nz