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Activity in New Zealand’s manufacturing sector expanded for the fifth month in a row in January and is sitting “modestly in expansion mode,” BNZ economist Doug Steel said. However, the recovery has come off a low base after seven quarters of decline, and growth is still not strong enough for net job creation in the sector, Steel said.

The BNZ-Business NZ Performance of Manufacturing Index (PMI) recorded a seasonally adjusted expansionary score of 52 in January, down slightly from 53 in December. A score above 50 indicates an expansion of activity in the sector, while a score below 50 indicates contraction.

January’s PMI indicated “classic signs of a sector in the early stages of recovery,” Steel said, and was consistent with BNZ’s view that manufacturing GDP posted positive growth in the fourth quarter of 2009.

Forward indicators suggest the employment situation in the sector would turn around mid-year, Steel said.

“For now, in the manufacturing sector, rising productivity – the result of production picking up and employment lagging – is turning profitability around. In fact, according to the January Quarterly Survey of Business Opinion, profitability in the manufacturing sector has just ticked positive for the first time in six years. Long may it last,” he said.

Here is the release from Business NZ:

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Timaru-based South Canterbury Finance has released an updated investment statement following an announcement to the stock market last week in which it foreshadowed a loss in the half year to December, and said it would have to restate its financial statements for the year ended June 30, 2009.

Included in the memorandum of amendments to the investment statement was confirmation Group Credit Manager Peter Bosworth resigned on December 3, following CEO Lachie McLeod’s resignation in late November. It has already been reported that Chief Financial Officer Graeme Brown resigned on December 18, although had signaled his intention to resign several months earlier.

The full memorandum of amendments and new investment statement are reproduced below. We welcome your views and insight on the documents:

South Canterbury also commented further on its relationship with South Island Farm Holdings and the restating of its June financial statements:

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Progressives leader Jim Anderton began his speech to Parliament yesterday by pointing out John Key’s hypocracy on GST.

ASB, which is owned by Commonwealth Bank of Australia, reported a NZ$10 million net loss in the six months to December 31 after a big tax bill for structured finance transactions, a slight tightening of net interest margins and a near doubling of bad debt costs.

Commonwealth bank’s full half year profit results (pages 26-28) show ASB’s cash net profit after tax was A$138 million in the six months to December 2009, down 33% from A$206 million in the same half a year ago, but up from A$126 million in the half year ended June 30, 2009. Here is CBA’s full presentation to analysts.

ASB said its net interest margin fell by one basis point (0.01%) in the six months to December from the six months to June. Downward pressure on the interest margin came from higher funding costs and increased competition between banks for local deposits, ASB said. Bank funding costs are under pressure, partly because of the Reserve Bank’s push for banks to have more stable long term and local funding, and partly because of a global shortage of funding.

ASB’s loan impairment charges almost doubled to NZ$127 million in December from the year before. Total provisions stood at NZ$340 million, compared to NZ$157 million in December 2008. Total provisions represented 0.53% of total assets at December, from 0.4% in June, ASB said.

ASB paid ordinary dividends of NZ$70 million to its New Zealand holding company, but did not send any dividends across the Tasman to CBA: “with our parent committed to supporting its businesses in New Zealand, especially during these challenging times, no dividends were paid across the Tasman to the Commonwealth Bank of Australia,” it said.

However, ASB then said it had lifted its salary freeze placed on employees paid over NZ$50,000 “With the emerging recovery in the economy”.

Here is the full release below from ASB:

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Here we will include reaction to John Key’s comments on tax. For Bernard Hickey’s report on Key’s speech, which include his views, see here. (Update 1 includes NZICA comments. Update 2 includes Wellington Regional Chamber of Commerce, further KPMG comments. Update 3 includes comments on Agribusiness sector.)

Watch Key’s comments on tax on our video page here.

The full speech can be found here.

Here is what KPMG Senior Tax Partner John Cantin said on Key’s GST comments:

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Watch on our video page here.

Watch on YouTube here.

Alex Tarrant presents 90 seconds at 9am in association with BNZ, including news that today is Tax D-Day for New Zealand when Prime Minister John Key delivers his speech to open Parliament after 2pm. Key is set to outline changes in New Zealand’s tax system to be brought in at the May 2010 Budget. The changes will likely focus on residential property investors and savings should be enough for a cut in the top income tax rate from 38% to 33%.

Bernard Hickey is in Wellington today and will be live-blogging from Parliament.
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