Kirk Hope: reality is positive, but fears of heavy-handed regulation is hurting confidence

Wednesday, 20 June 2018

Current and predicted economic conditions should have business feeling confident.

The NZ economy is forecast to grow moderately at around 2-3 percent to June 2020.  NZ's terms of trade - a measure of the purchasing power of our exports and a key indicator of the state of the economy overall - is still close to an all-time high, driven largely by higher meat and dairy prices. 

Employment continues to grow and unemployment continues to edge lower.  Inflation remains under firm control; the exchange rate remains relatively stable against our major trading partners.

The Government's accounts are in reasonable shape with May's Budget largely meeting market expectations, despite major increases in both tax and expenditure over the forecast period.

The sharemarket has reached a new high, and consumer confidence remains robust.  

But looks can be deceiving, and business perception is not currently matching reality. 

Confidence dropped to an eight-year low in November on political uncertainty when the new Government took office, and is yet to recover. It has fallen again in the last quarter, as measured by the BusinessNZ economic conditions index (ECI).

One reason for the drop in business confidence has no doubt been the Government's decision to ban future oil and gas exploration without consultation, raising fears of further heavy-handed regulation in other sectors in the future.  

Also in the last quarter, the Government has proposed - via either legislation or a range of working parties - policies that will have major impacts on the labour market, and therefore on business. 

Each of these issues is a focus for business but combined, they represent a significant rewriting of the employment relations landscape that has been the platform for New Zealand's economic performance in the past decade.

All the changes have one thing in common: They have a direct effect on the ability of New Zealand businesses and their employees to prosper and grow.

Throw into the mix the looming threat of industrial action on several fronts and it's no wonder business confidence is low.

The employment law legislative changes that will be a significant factor in businesses putting a temporary hold on their hiring and investment plans include: The Employment Relations Amendment Bill;  pay equity; The  Employment Relations (Triangular Relations) Bill;  equal pay; fair pay agreements;  contractors as employees; The Future of Work Forum;  and The Hobbit law review.

These reviews and working groups together promise major changes to New Zealand's employment and industrial relations framework, with significantly increased regulation of the business sector and with the potential to add cost and reduce international competitiveness.

Many of the provisions of the Employment Relations Amendment Bill, for example, create extra work and compliance costs for employers; banning new petroleum and gas exploration will have significant implications not only for the workers and business affected, but the communities and downstream industries associated with them.

BusinessNZ will be taking the opportunity to participate constructively - and advocate robustly - on behalf of business on the working groups to which we have been nominated: the Tax Working Group, the Future of Work Forum, and the Fair Pay Agreements Working Group. 

Our objective is an outcome of clear direction and predictable policy settings, in order that business can invest and create jobs with certainty. 

Business confidence is critical to the wellbeing of our economy, our environment, our jobs, our communities, our families and our futures.

The current environment of uncertainty serves merely to drive continued nervousness.

Confidence matters. Once lost, it can be hard to regain.

Kirk Hope is the chief executive of BusinessNZ