Business and union leaders react to Government’s growth agenda
Thursday, 23 January 2025
The growth agenda Prime Minister Christopher Luxon set out in a “state of the nation” address on Thursday has been welcomed by business leaders, but there are calls for more detail and more urgent action.
Council of Trade Unions president Richard Wagstaff dismissed it as tired and “ridiculous”.
BusinessNZ chief executive Katherine Rich said businesses were finding the economy tough and the Government was right to “roll out the welcome mat” to foreign investors who had come to see New Zealand as a difficult place to do business.
An overhaul of the science and innovation sector was also welcome, she said.
But Rich suggested it was too soon to pass judgment on the likely impact of Luxon’s promise to boost competition in several key industries.
Auckland Chamber of Commerce chief executive Simon Bridges said the Government was talking about the right things from a business perspective “which is half the battle”.
But the measures that were being proposed to boost the economy were quite long term ones that would pay dividends over time.
More urgent action was also needed, he said, suggesting the Government should consider allowing visa-free travel from China to boost tourism and be more permissive also about travellers from India.
“It's an incredibly difficult business environment and not as if they then get to turn a corner and everything's rosy; this year is still very tough.
That required a government that was very bold around either “getting out of the way of business in some instances or really helping them in driving for growth in others”, he said.
“What we haven't quite seen enough of yet is the concrete actions and the tangible initiatives for business in the ‘here and now’.”
Luxon emphasised in a speech to the Auckland Chamber of Commerce that increasing economic growth was the Government’s main objective.
The focus on growth comes in the wake of a sharp deterioration in the Treasury’s fiscal forecasts in December and rising concerns over stagnant productivity growth.
The Treasury forecast last month that Government would need to borrow an additional $20 billion over the next four years over and above previous forecasts, in part because of tax revenues falling short of expectations.
Among the fresh measures to shake-up the economy, the Government will disestablish Callaghan Innovation and re-organise seven Crown research institutes into four new Public Research Organisations.
These will be focussed on the “bio-economy”, earth sciences, health and forensic sciences, and — newly — “advanced technologies” such as artificial intelligence and quantum computing.
Callaghan Innovation was established in 2013 by the National government led by John Key and given its name by party stalwart Steven Joyce.
Joyce promised in 2012 that it would be a “one-stop shop” that helped high-tech firms become more competitive by better connecting them with experts around the country and internationally.
But Science, Innovation and Technology Minister Judith Collins said on Thursday it had been “spread too thinly across too many functions” and had performed poorly financially.
New Zealand Trade and Enterprise (NZTE) will see its secondary role attracting foreign investment hived off into a new agency, Invest New Zealand, leaving it to concentrate on assisting Kiwi exporters.
Luxon also indicated the Government would take a more aggressive stance on competition policy, signalling it wanted to see progress in the banking, energy, supermarket industries in particular.
Commerce and Consumer Affairs Minister Andrew Bayly unveiled a raft of competition-related reforms late last year, but ran into some criticism from Labour that was a case of shutting the stable door after the horse had bolted.
Rich said it made sense to have a dedicated agency promoting foreign investment as the country needed to join others in putting its best foot forward and “hustling” for capital.
“The modern environment is highly competitive and many other countries have done a great job of not only welcoming greater investment but going to greater lengths to make it happen.
“There's huge optimism that the new agency will act with more powerful intent.”
The shake-up of the science and innovation sector also made sense as Callaghan had been trying to be “everything to everybody”, Rich said.
The country had not made the most of its research and development investments despite having great “scientists and an innovative economy”, she said.
Bridges said it would be wrong to view driving economic growth as being solely the responsibility of the Government.
The reason for the focus on government was because it held the levers on so many things that “keep business down” such as compliance and red tape, he said.
But it was a valid question whether too many businesses had become too complacent and lacking in ambition, he agreed.
“The point the Prime Minister was making is that, over time in New Zealand, a sort of a cultural complacency has crept in, in government and business.
“It's got to be a team effort and business needs to look to itself and what it can do as well.”
Rich agreed driving economic growth was “not just a matter for government”.
But she rejected the suggestion complacency or a lack of ambition by Kiwi businesses themselves might be partly to blame for moribund growth.
“There are many businesses that are just hanging on.”
Council of Trade Unions president Richard Wagstaff was dismissive of Luxon’s speech, describing it as shallow and full of “smoke and mirrors”.
“We have a prime minister who has presided over poor economic performance in terms of growth, employment and investment trying to pretend that he's somehow going to lead us out of it with no fresh thinking.”
It was “audacious” of Luxon to cite Singapore and Denmark as economic miracles, given they were taking “quite the opposite approach to economic growth” that the Government had set out, he said.
“They have what we need here, which is industry planning and serious investment in infrastructure and embrace a strong social dialogue with unions and businesses. These are precisely the things that this government has abandoned.
“Industry planning involves the Government working with businesses and unions to figure out ‘where are we, where we want to get to and how we get there’, and involves significant investment in skills.”
The Government was talking up ‘science’ as if it was its big idea but had axed hundreds of science jobs in the public sector, Wagstaff said.
“The issue that we should somehow start commercialising science; that's been said for at least four decades and what we need to do as well as that is invest properly in it and we have a shocking record.”
Wagstaff said he was particularly concerned by veiled comments in Luxon’s speech about healthy and safety reform.
“Countries that do health and safety better than us have far higher productivity. We are trying to model ourselves on them; he is trying to abandon it.
“It's really disappointing to hear these tired, old sound bites that really don't add up to a plan and certainly don't have any evidence of being successful,” he said.
Business Canterbury chief executive Leeann Watson said it was pleased by the message that economic growth would influence all decisions the Government made this year.
Local businesses had been calling for policies that helped the economy regain momentum, allowing them to grow with confidence, she said.
Views on health and safety appeared to be mixed, with the chamber reporting that 42% of Canterbury businesses believed current health and safety requirements “poorly or very poorly” balanced risk with cost and productivity.
“For growth to take off, there must be continued efforts to cut red tape, ensuring businesses are not bogged down by clumsy rules and regulations,” Watson said.
Rich said it should be a goal of the Government to bring down the corporate tax rate.
“The Government’s books are currently reliant on every cent from New Zealand’s high corporate tax rate to get back to a surplus so I can understand lack of movement right now.
“But it should be an ambition to bring it down over time or at least flag the aspiration to do so.”
Ambitions to be more like Ireland and Singapore can’t avoid an inevitable discussion of corporate tax, which has been a key factor in their economic success, she said.