To inspire confidence, Grant Robertson must do more than repeat the message

Tuesday, 26 June 2018

Finance Minister Grant Robertson has held dozens of meetings with the business community since delivering his first Budget, but so far is struggling to get the message across.

OPINION: If you are prone to worry, 2018 is surely the year for you. A real pessimist must wonder what they should choose to fret about from a suite of options.

From climate change challenges, to the prospect of trade wars - if not actual wars - this year we are seeing it all.

At home there is plenty to be concerned about, if you want to. New Zealand typically gets a recession about once a decade, and it is a decade since the last one started.

The housing market appears set for a prolonged cooling, which could harm consumer confidence.

Add into this a new, mostly inexperienced Government, which being as broad as any New Zealand has seen, is inevitably unpredictable.

But cut through the mood and the picture is actually quite positive. Unemployment is low. Inflation is low. Interest rates are low.

After raising minimum wages, from next month, the Government's families package puts more money in the hands of people who are likely to spend every cent, boosting demand.

Hamish Rutherford: 'Business confidence can be self-fulfilling, as can pessimism.'

A recent rise in the price of oil might be a sign of difficult change, but may be temporary. Anyway, commodity prices tend to move broadly in the same direction, and New Zealand is a major commodity producer.

Business confidence has fallen materially since it became clear that the election was an open question in 2017 and has not recovered since.

There is statistical evidence that this is simply bias from the business community.

As one leading Labour figure put it, corporate New Zealand is in 'a grieving period' for the last government.

The problem is, business confidence can be self-fulfilling, as can pessimism. While the new Government has focused on more positive signals from each business about their own expected activity, it knows eventually, if confidence falls far enough, investment and hiring will decline.

As finance minister, Grant Robertson can control little of this, but has to deal with much of it. This seems to be a learning experience for the Wellington Central MP, who appreciates that the Government has a perception problem, but seems uncertain what to do about it.

Inspiring confidence is about more than simply repeating the message.

For Robertson, the shoe is now firmly on the other foot compared with barely nine months ago, when he was undermining National's track record on the economy.

In August and September 2017, Robertson was telling New Zealanders that the economy was in a 'productivity recession', where economic output was growing more slowly than the population was increasing. Kiwis, in effect, were working harder to produce less.

As it would turn out, a few weeks after Labour formed the new Government, Statistics New Zealand announced a major revision to its economic growth figures, which showed that in 2015 and 2016 the economy grew much faster than it had previously thought.

Last Thursday new figures showed that, in the first three months of the year, the economy grew, but at a slightly slower clip than the population.

Initially, Robertson said the slowing was because of a transition from an economy based on speculation in housing to one based on more productive things. By Sunday he was saying the period was too early for the new Government realistically to be held responsible for it.

Robertson also has a tendency to revert to soundbites, which while well-meaning, do not demonstrate an acknowledgement of the difficult realities of government.

On Tuesday he played down the degree to which the abrupt decision to end offering offshore oil permits has dented investment confidence, saying it was hardly ever raised with him.

If that really was the case, that seems likely to be a sign that business has not yet become comfortable being candid with the finance minister.

Previously he has said he has not been given feedback that the decision to give free fees for a year of tertiary education was poorly targeted.

When it emerged that Robertson had been the drawcard for a $600-a-head fundraiser for business figures and lobbyists, questions were again raised about what the attendees were paying for.

The answer from those who were there was not much. Robertson's performance was described variously as 'polished' and 'extremely on-message', which probably sound more favourable than they are.

People who pay $600 a head are not remotely expecting to curry favour or pick up commercial secrets from doing so; they are hoping to get insights, or the unvarnished thoughts of politicians – signs of which decisions are merely being made to fulfil political promises, and which ones are the genuine areas of focus where the new Government expects to make a difference.

Simply repeating the key messages is unlikely to convince people who make major capital decisions that the landscape is predictable or that, after fulfilling the promises to its support base, the Government is ready to make the hard decisions needed to keep the ship steady.