ANNUAL REPORT 2015

Chairman’s report ....................................................................................................................................2

Chief Executive’s report .........................................................................................................................4

NZIER Board ...............................................................................................................................................5

Economic consulting .............................................................................................................................6

Public Good work ....................................................................................................................................6

Membership services .............................................................................................................................7

List of NZIER members ..........................................................................................................................8

Summary financial statements .........................................................................................................10

Contents

NZ Institute of Economic Research Inc.

Wellington: Level 13, 215 Lambton Quay, Grant Thornton House PO Box 3479, Wellington 6140, Phone: +64 4 472 1880

Auckland: Ground Floor, 70 Shortland Street, Shortland Chambers PO Box 503, Auckland 1140, Phone: +64 9 973 4340

0800 220 090, econ@nzier.org.nz, www.nzier.org.nz

ThanksPremium 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.

Professor Bob Buckle, Dr Bill Kaye-Blake, Ms Lesley Kennedy, Dr John McDermott and Dr Grant Scobie, for being •part of the Awarding Panel for the 2014 NZIER Economics Award.

Adam Creighton of The Australian for providing the address at our 2014 Annual General Meeting.•

Contents About NZIER

The NZ Institute of Economic Research Inc (• 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 a share of the surplus on our operations to fund our public good research and other activities. •

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Chairman’s report

2015 was an eventful year for NZIER. A Chief Executive left, a Chief Executive joined, and we opened a new office in the heart of Auckland’s central business district.

It was a typical election year in that demand tapered off in NZIER’s core Wellington market, particularly in the public sector. However, towards the end of the year NZIER’s Auckland presence began to generate consulting projects and the Wellington market started picking up again.

Financial results

NZIER’s revenue during the 2015 financial year was 12% lower than the record year of 2014, but expenses were also 4% lower, reflecting strong cost discipline during a year in which the establishment costs of the Auckland office were included in the expenses. These high establishment costs, together with the lower revenues typical of an election year, led to an operating loss for the financial year of $130,806, after applying $323,799 to public good activities during the year.

NZIER’s net asset position and its current ratio were both satisfactorily strong at the end of the financial year, and its cash flow position was good throughout the year.

Public Good

At the heart of NZER’s mission is its public good programme, which seeks to educate and encourage debate on economic issues affecting New Zealand. NZIER funds the activities and projects which comprise the public good programme itself, and this ethos underpins the approach of the Board, the Chief Executive and the staff to all its activities.

During the financial year NZIER spent a total $323,799 on public good activities, as I have said. This sum includes funds devoted to the annual NZIER Economics Award, which NZIER sponsors. Its purpose is to recognise excellence in economics of relevance to New Zealand. The recipient is chosen by an independent Awarding Panel, to the members of which NZIER is grateful. In 2014, the Award was presented to Professor Marilyn Waring, of the Institute of Public Policy at the Auckland Institute of Technology.

Auckland office

NZIER’s Auckland office, located at the heart of Auckland’s central business district in Shortland Street, opened its doors in September 2014, and was fully staffed by February 2015. The formal opening of the office took place in early March 2015. The Right Honourable John Key, Prime Minister of New Zealand, was the guest of honour at the ceremony, and gave a speech in which he recognised the important contribution to policy debate made by NZIER’s independence of thought and analytical rigour over many years.

Since opening its doors the Auckland office has since been steadily increasing its presence in the Auckland regional economy, signing up new clients from both the public and private sectors.

Staff

NZIER continues to enjoy a high reputation for the calibre of its staff. The quality of the economists who have joined NZIER during the year, both in Auckland and Wellington, are exemplary.

Michael Walls, Chairman

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Chief Executive

Jean-Pierre de Raad left NZIER in September 2014 to pursue new opportunities after six years as Chief Executive. For myself, and for the Board and NZIER staff, I wish to record our very sincere appreciation of Jean-Pierre’s hard work at NZIER, in all his roles, and in particular for his achievements as Chief Executive. His sincerity, integrity, skill and vision have been outstanding.

The Board appointed returning New Zealander Laurence Kubiak to replace Jean-Pierre de Raad. Laurence Kubiak took up the helm at NZIER after a series of commercial and strategic roles for companies active in international markets such as British Telecom, Shell and BP. This appointment reflects NZIER’s determination to become a still more commercially focused and client-centric organisation, which was also signalled by its establishing offices in the central business districts of Wellington and Auckland.

Governance

The Board’s workload has been comparatively full during and after the 2015 financial year, with the establishment of the Auckland office, the implementation of a new business plan, and the process of transitioning to a new Chief Executive. The previous financial year’s committee structure has continued, with Audit, Remuneration, and Investment Committees operating well. I extend my particular thanks, on behalf of NZIER, to the chairmen and members of those Board committees.

Mr Norman Geary has indicated that, for personal reasons, he would prefer to resign from the Board in the near future. However, because of the importance which the Board attaches to having a Board member resident in Auckland, I have asked Norman to continue in office, until such time as we feel able to appoint a suitable replacement for him to the Board. Norman has very kindly agreed to do so.

Thanks

On behalf of NZIER, and personally, I again thank all the Board members for their contributions to NZIER’s success during the last financial year.

I repeat my thanks to the retiring Chief Executive, Jean-Pierre de Raad, and again extend a welcome to the incoming one, Laurence Kubiak. Finally, I would like to thank all the staff of NZIER, for their commitment to NZIER, and for their real achievements on its behalf.

Michael Walls, Chairman

23 July 2015

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Chief Executive’s report

NZIER is a unique organisation. It is an economic consultancy, an experts’ group, a think-tank, a research body, and a membership organisation all combined in an institution that crosses the public and the private sectors in New Zealand, and has strong international connections. It enjoys an enviable reputation for independent thought and authoritative analysis.

After more than fifty-five years of engagement with the most pressing economic issues facing New Zealand, its influence runs wide and deep, touching commercial enterprises, government organisations and citizens from all walks of life.

It is a source of great professional pride to have returned to New Zealand to lead NZIER, and a great personal privilege to work alongside the exceptional people who preserve and extend that enviable reputation. NZIER people are talented, passionate and committed to maintaining the uniqueness of the Institute. Joining the NZIER team has been a humbling experience.

NZIER had a challenging year in 2014/15. It was an election year, so demand was relatively weak in the Wellington market, resulting in lower revenues than the previous year. It was the year in which we opened our Auckland office, so we bore the establishment costs of this important new venture at the same time as revenues were going through the trough of their seasonal cycle. It is therefore very pleasing to recognise the strong commitment of the Board to the success of the Auckland office. This commitment was expressed as moral support, helpful guidance, and substantial financial support from reserves.

NZIER undertook some substantial, high-profile programmes of work during 2014/2015. Some of the highlights were as follows.

Our study of the Ports of Auckland, which required skillful navigation through a •controversial issue, and continues to generate media coverage six months after the report was complete.

Our continuing work on regional economic development, including new models of •migration and spatial equilibrium, which has played a key role in returning the issue to the public agenda.

Our quantitative modelling and regulatory advice in the energy and telecommunication •sectors.

Our work on housing, urban form and infrastructure, which is always in demand, •particularly as it relates to the Auckland economy and quantifying the inherent trade-offs in land use decisions.

The expert witness services we provide to a range of clients, particularly in respect of the •Resource Management Act.

NZIER’s Insight on disruptive technology, which has generated a great deal of public •interest.

NZIER’s Policy Advice Benchmarking work, which goes from strength to strength. Last •year we reviewed the policy advice papers of 20 government agencies and ten local government organisations, and provided practical advice on lifting the quality of their analysis and communication.

We continue to invest in our in-house technical capability. The development work we carried out on NZIER’s intra-regional computable general equilibrium (CGE) model during the year has left us with the most advanced capability in New Zealand for assessing regional policy and commercial initiatives in a robust fashion.

I thank my colleagues for these achievements, and the departing Chief Executive for his skillful leadership of the organisation throughout his six year tenure. I also thank the Board for their guidance and support as we work together to grow the contribution, influence, and long term success of NZIER.

Laurence Kubiak, Chief Executive 23 July 2015

Laurence Kubiak, Chief Executive

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NZIER Board

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.

Michael Walls, Chairman Kerry McDonald, Deputy Chair Paul Baines

Sir John Anderson Norman Geary CBE Viv Hall

Laurence Kubiak, Chief Executive Ex officio

Auditors Grant Thornton

Solicitors Kensington Swan

Secretary J T Matthewson

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Public GoodEach year NZIER undertakes or funds activities to promote and assist research into economic problems directly or indirectly affecting New Zealand. These activities 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 economic topics of importance to New Zealand. During the 2014/15 year the following reports were published:

Disruption on the road ahead! •

The home affordability challenge •

Regional economies - shape, performance and drivers•

Big city life? Challenges and trade-offs for Auckland city•

NZIER Economics Award 2014

The NZIER Economics Award was established in 1994 to promote and recognise excellence in economics of direct or indirect benefit to New Zealand.

The 2014 award was presented to Professor Marilyn Waring for her courage and persistence in campaigning for full recognition of the economic worth of contributions made outside of the formal labour markets.

A copy of the full citation can be viewed at nzier.org.nz

Further public good work

Some further examples of our public good work during the 2014/15 year are:

Preparing and publishing NZIER’s• Monetary Policy Shadow Board

Preparing and publishing • Insights - feature pieces on topical economic and policy issues

Preparing and publishing NZIER’s • Consensus Forecasts

Responding to inquiries from the public and students looking for information about the •New Zealand economy

Providing comment for the media•

Briefings for international visitors•

Presentations at conferences and workshops•

NZIER’s Public Good publications are available from www.nzier.org.nz/publications

NZIER provides independent economic consultancy to businesses and government agencies.

We help our clients take advantage of opportunities and solve problems by applying our expertise in economics and knowledge of our clients’ sectors.

Please visit nzier.org.nz for information on our consultancy services and examples of our work during the 2014/15 year.

Economic consulting

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Membership servicesNZIER 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.

Our standard membership services are listed below. In addition, we offer our members customised analysis and strategic briefings.

Information on becoming a member is available at www.nzier.org.nz/about/membership

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 2014/15 year issues 202-205 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 2014/15 year issues 212-215 were published.

CPI Forecast Summary Table

This specialist web-based publication provides the forecasts of inflation in the Consumer Price Index (CPI) of all the major forecasting organisations in one place.

The CPI Forecast Summary table is published four times a year in March, June, September and December.

Membership products are available at www.nzier.org.nz/publications

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Members 2014-2015

Auckland Council

Beyond Recruitment

Commerce Commission

Electricity Authority

Greater Wellington Regional Council

Horizon Energy Distribution Ltd

Jones Lang LaSalle Advisory Ltd

Ministry Business, Innovation & Employment

AAPC Properties Pty Ltd

Accident Compensation Corporation

Aggregate & Quarry Association of NZ Inc

AgResearch Limited

Airways Corporation of New Zealand Ltd

Allegion (New Zealand) Limited

AllianceBernstein Australia Limited

ANZ Banking Group Ltd

APR Consultants Ltd

ASB Bank Ltd

Auckland University of Technology

Australian High Commission

Bancorp New Zealand Ltd

Bank of New Zealand

Bayleys Real Estate Ltd

Beef and Lamb New Zealand Ltd

BOC Limited

Business New Zealand

CablePrice NZ Ltd

Cameron Partners Limited

Canterbury Development Corporation

Canterbury Earthquake Recovery Authority

CB Richard Ellis Ltd

Cerebos Greggs Ltd

Citi Investment Research and Analysis

Colliers International New Zealand

Commission for Financial Capability

Competition Economists Group

Darroch Ltd

Deloitte

Deutsche NZ Ltd

Du Pont (New Zealand) Ltd

Embassy of the United States of America

Emerging Sovereign Group

Ernst and Young

Fairfax Media Ltd

First New Zealand Capital

Fletcher Building Ltd

Fonterra Cooperative Group

Genesis Energy

Goldman Sachs New Zealand Limited

Grant Thornton NZ Ltd

Grundfos Pumps New Zealand Ltd

Hay Group Ltd

Holcim ( New Zealand) Ltd

Holden New Zealand Ltd

Honda New Zealand Ltd

Infometrics Ltd

Inland Revenue Department

Jetro Auckland Office

JP Morgan

Kiwi Property Group Ltd

Kiwibank

KPMG

Ministry of Foreign Affairs & Trade

New Zealand China Council

New Zealand Home Loans

New Zealand Trade & Enterprise

PricewaterhouseCoopers

Reserve Bank of New Zealand

The Treasury

Vero Insurance New Zealand Ltd

Premium members

Standard members

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Lincoln University

Massey University

MediaWorks TV Limited

Mighty River Power Ltd

Ministry for Primary Industries

Ministry for the Environment

Ministry of Education

Ministry of Social Development

Ministry of Transport

National Australia Bank

New Zealand Defence Force

New Zealand Lotteries Commission

New Zealand Refining Co Ltd

New Zealand Rental Group

New Zealand Steel Ltd

Office of the Controller & Auditor-General

Omnicom Media Group

Palmerston North City Council

Parliamentary Library

Powerco Ltd

Productivity Commission

Rank Group Limited

Rider Levett Bucknall

Rio Tinto Alcan New Zealand Ltd

Sandvik New Zealand Ltd

Sky City Entertainment Group Ltd

State Services Commission

Statistics New Zealand

Steel and Tube Holdings Ltd

Tainui Group Holdings Ltd

The Todd Corporation Ltd

The Warehouse

Toyota New Zealand Ltd

Transpower New Zealand Ltd

UBS New Zealand Ltd

University of Auckland

Vector Ltd

Victoria University of Wellington

Wareham Cameron and Co

Waste Management NZ Ltd

Waterman Capital Ltd

Westpac

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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 10 June 2015.

The full financial statements comply with New Zealand generally accepted accounting practice and were prepared under the framework for differential reporting.

An unmodified 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 comparative figures shown differ from the prior year’s financial statements due to the reclassification of certain items. This has not impacted the net surplus/(deficit) or net asset position of NZIER.

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 $133,349 (2014: $98,734) on a wide range of public good projects, the Institute incurred a further $190,451 (2014: $244,922) at normal charge out rates of staff time on Institute public good activities. The total resources applied to public good work was $323,799 (2014: $343,656).

Summary financial statements for the year ended 31 March 2015

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Statement of comprehensive incomefor the year ended 31 March 2015

2015 2014

Note $ $

Revenue 5,347,978 5,939,851

Other income 136,575 120,813

Total revenue and other income 5,484,553 6,060,664

Expenses

Direct public good costs 2 64,355 22,850

Employee costs - salaries and wages 3,756,556 4,514,701

Depreciation and amortisation 131,046 137,256

Fees paid to Auditors 12,068 12,250

Contract expenses 504,367 349,512

Operating expenses 1,127,321 786,133

Operating lease 19,646 27,191

Total expenses 5,615,359 5,849,893

Net profit / (loss) attributable to members (130,806) 210,771

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Balance sheetas at 31 March 2015

2015 2014

Note $ $

Assets

Current assets

Cash and cash equivalents 681,600 1,520,718

Investments 1,598,122 1,522,188

Trade and other receivables 1,291,098 1,199,820

Prepayments 36,517 34,758

Accrued income 394,100 465,601

Total current assets 4,001,437 4,743,085

Non-current assets

Property, plant and equipment 558,680 580,346

Intangible assets 55,067 59,432

Total non-current assets 613,747 639,778

Total assets 4,615,184 5,382,863

Liabilities

Current liabilities

Trade and other payables 286,618 168,058

Employee entitlements 924,407 1,630,044

GST payable 155,643 180,627

Deferred income 356,925 381,943

Lease inducement 51,512 51,306

Total current liabilities 1,775,105 2,411,978

Total liabilities 1,775,105 2,411,978

Net assets 2,840,079 2,970,885

SUMMARY FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 MARCH 2015

Equity

Accumulated funds 2,840,079 2,970,885

Total equity 2,840,079 2,970,885

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Statement of changes in equityfor the year ended 31 March 2015

2015 2014

$ $

Equity at beginning of the financial year 2,970,885 2,760,114

Profit / (loss) for the year (130,806) 210,771

Other comprehensive income - -

Total comprehensive income (130,806) 210,771

Total equity at the end of the financial year 2,840,079 2,970,885

Cash flow statementfor the year ended 31 March 2015

2015 2014

$ $

Net cash inflow / (outflow) from operating activities (742,639) 509,705

Net cash (outflow) / inflow from investing activities (96,479) (525,172)

Net increase in cash held (839,118) (15,467)

Cash at beginning of year 1,520,718 1,536,185

Cash and cash equivalents at end of year 681,600 1,520,718

NZ Institute of Economic Research Inc

Wellington: Level 13, 215 Lambton Quay, Grant Thornton House PO Box 3479, Wellington 6140, Phone: +64 4 472 1880

Auckland: Ground Floor, 70 Shortland Street, Shortland Chambers PO Box 503, Auckland 1140, Phone: +64 9 973 4340

0800 220 090, econ@nzier.org.nz, www.nzier.org.nz