How Much is Government the Cause of the Fall of Business Confidence?

False because either-or is not the only choice pn152

Despite New Zealand's relatively healthy growth and prospects (subject, of course, to international events over which we have no control) business confidence continues to fall. 

Business confidence, of course, is only one economic indicator —and a not very robust one at that— of how the economy is faring, and likely to fare over the next 12 months.

But the  latest  MYOB Business Monitor Snapshot poll  (412 interviewed) of small to mid-sized businesses shows a sharp slump in both general confidence and - more worryingly - actual revenue, with petrol costs standing out as the biggest concern, with taxes and the minimum wage.  

MYOB general manager Carolyn Luey said that while this was concerning business operators were not panicking.
"New Zealand's economy continues to tick along and while more businesses are seeing their revenue fall, it is worth remembering that this comes against a background of a sustained period of growth," she said.  But businesses were now clearly factoring tougher conditions and a tightening of their own finances, she said. "This will have a flow-on effect throughout the economy, from hiring to investment, to payment and purchase arrangements with fellow businesses."

One has to ask to what extent the perception of Government policies and their execution, the actual policies and their execution may be responsible for this situation.   

Paul Glass, Executive Director of Devon Funds Management, offers his opinion in the NZ Herald. He says blaming Government is too simplistic but thinks Government should be more pragmatic and less "ideologically driven." Government, he says, lacks a clear strategy and its policies are poorly executed.  "We are clearly experiencing management by an unwieldy committee."  

False dichotomy, yes, because one can be both pragmatic and ideologically driven, but there is some truth in the accusation.  After nine years in Opposition, an unexpected election victory,  and the need to reconcile the interests of three parties, Jacinda could not simply step into National's, or even Helen Clark's,  shoes. 

Things had moved on. Election promises had been made, old policies needed re-examination,  and new policies  made to deal with new realities. Hence the number of advisory committees, the delays, and the sometimes contradictory statements made by different ministers.  All very necessary or difficult to avoid, but hardly reassuring, especially to business perception.

Nine areas of concern Paul Glass identifies nine areas of concern:

1. Free first year University study, likely to cost $1.5B over 3 years.  He say no one asked for this, and why "first year" when many would drop out by year's end.  I think he has a good point. Targeting areas of study, assistance to those most in need and assistance later in their studies, would have been better.

2. Aid support for Overseas Embassies and the Pacific, cost $1B over 4 years. He asks why this was a priority over pay increases for teachers, nurses and the police.  There will always be disagreement over priorities. What is given here cannot be given there. But there is evidence that our overseas representation had been neglected under National, and, in my opinion, the Pacific should always be our first aid priority, assuming it is given after consultation and taking into account Pacific Islands' priorities.

3. Labour Market and Reform, unknown costs.   Reform is long overdue but he doubts the Minister's credentials to effect change: "Andrew Little is a cloth-cap unionist who is still fighting a war that ended decades ago." What business needs is skilled labour and less tinkering with the 90-day rule. Government's policy is leaning towards employees.  Here Glass dons his business cap.

4. KiwiBuild, cost $2B and rising.  Glass agrees more housing is needed but does not like their "lottery" allocation, which leaves the new owners free to sell after three years. I agree. Allocation should be targeted to the more needy. 

5. Water Quality, costs unknown.  Glass thinks this has been put in the "too hard basket."

6. Increased Immigration, costs unknown.  Glass thinks there is "no clear framework" and that infrastructure needs  "to catch up"  with population growth  before further burdens are added by immigration.  I agree to a point, but am surprised he placed no responsibility on National for the present  situation.

7. Provincial Growth Fund, cost $3B. Here Glass reveals the laissez-faire "supply and demand" views of those who think governments should stay out of planning the economy. He refers to Government's policy as "a poorly defined slush fund (which) smacks of the Third World." Yet, surprisingly, he thinks Northland needs attention, but fails to ask why the attentions was not given before without Government "interference." 

 A significant number of businesses will not grow or relocate without  planning.  Government needs to work with private enterprise to implement its provincial growth and decentralisation goals. This will require  (a) New and improved physical infrastructure. Integrated roads, rail, sea, air transport and fast internet).  (b) Pinpointing  which economic activities, or groups of economic activity, can be relocated. Information Technology and call services  come  to mind. (c) Strong  positive "pull "tax and other incentives and negative "push" tax and other disincentives. And (d) not forgetting "lifestyle" advantages from moving. People living in the provinces need good access to health, education and other services.

8. Ban on Oil and Gas, cost $B's "lost". Glass admits to climate change but thinks the ban (which has since been relaxed a little) was imposed with no consultation; will have no benefit, and we'll be left having to import fuel.   He says we need policies to reduce fossil fuel use, for example, subsidized electric cars, e-bikes and solar energy, electrified public transport, improved vehicle emissions, and getting Fonterra to turn off its coal-fired dairy factories.  I have no  promise with his recommended policies, but if we are serious about climate change we also need to ban new oil and gas exploration and drilling.

9. Tax Working Group.  He says this has been long needed but does not say why, and he doubts any changes will be made before the next election.  I was surprised he was not more specific and had no position on a capital gains tax.

Comment. Overall, I found both Carolyn Luey and Paul Glass's opinions reasoned and valuable. Luey was not blowing a political trumpet and Glass only blew his some of the time.  Their opinions help us focus on the what's and how's of  Government policies, and on the importance of perception, even when it is limited or misguided. And here, once again, the media has an important role to play. 

Government needs to ignore and move on from its daily distractions and work even harder on getting its message across.

I'm reminded of what my Father wrote in my autograph book many years ago:  "If at first you don't succeed, try, try and try again."  

Or, as Jacinda would put it, "Let's keep doing this."

--ACW