‘Everybody wants unicorns’: Businesses want pumping economy, tax boost - but also spending cuts

Wednesday, 21 May 2025

“It’s been incredibly tough for business,” says Simon Bridges, chief executive of the Auckland Business Chamber.

Bridges was setting the scene for Budget 2025 from the business perspective. He’d recently taken the temperature of the business community in Auckland and found it largely pessimistic, needing ‒ but not necessarily expecting ‒ something it will like from politicians tomorrow.

There had been talk of economic green shoots for several years now, but businesses just weren’t seeing it in their receipts, he said.

“They have been holding on for a very long time, for years,” Bridges said.

The Government needed to give business owners some tangible signals and hope in the Budget that its “Going for Growth” agenda was working, he said.

Those signals should include some support, including the accelerated capital expensing for business that is rumoured to be on the cards as a means of boosting business investment and productivity.

But that’s spending which must come as part of a long-term plan and commitment to fiscal restraint, Bridges said.

“I have some sympathy for the fiscal restraint message,” Bridges says. “The Government is focused on getting out of structural deficit, but if that’s all they do they are prolonging economic pain because they are working against the cycle, and deepening the recessionary pressures.”

The Government was faced with a difficult task of balancing long-term structural reforms and fiscal responsibility, with giving business, and workers, a boost.

“Can this Budget chew gum and walk at the same time?” Bridges said.

Far too many young, and middle-aged people were “voting with their feet” and leaving the country, Bridges said.

The Baker Tilly Staples Rodway pre-Budget poll of business owners indicated hopes were not high for a happy Budget day, with just 28% thinking it would have a positive impact on New Zealanders’ wellbeing, though that didn’t stop them wishing for a cut to the company tax rate.

Just how bad sentiment is among business owners was shown in the Auckland Business Chamber’s May survey of businesses in only 38% expected the economy to improve over the next 12 months.

Half said their businesses had underperformed their expectations, and 49% had seen a decrease in revenue.

The top business concern was consumer sentiment, which remained in the doldrums, with bank chief executives reporting homeowners prioritising paying down their home loans now interest rates have fallen, rather than spending on lifestyle.

Independent economist Shamubeel Eaqub warned against “transactional” thinking from business driven by short-term desire for tax cuts and support.

There was an element of business wanting the impossible: tax cuts, but also properly functioning infrastructure and public services.

“Everybody wants unicorns,” said Eaqub.

In a Budget, a Government had two kinds of actions it could take: those that supported growing a long-term, prosperous society, and those that promoted shorter-term effects.

But a prosperous, harmonious society depended on adequately funded modern infrastructure, well-functioning public services, healthcare and education, Eaqub said.

“What are we willing to pay to create a better future?” Eaqub said.

Unfortunately, it seemed: “Nobody’s willing to make a trade-off.”

Katherine Rich, chief executive of BusinessNZ, said businesses’ focus was on the long-term settings.

“We’re not expecting any major new spending,” she said.

There was disappointment at the state of the economy. Manufacturing was out of recession, but the services industry remained in contraction, she said.

“Everybody’s trying to be optimistic, but many within business would have expected the economy to be firing more than it is,” she said.

Businesses she had spoken with wanted to see the steps the Government was taking to get the country back to surplus, reducing spending, while also closing the infrastructure gap and getting public services working effectively.

“We have to look for some improvement in the Government’s books,” she said.

The country was still spending more as a percentage of GDP than pre-Covid, she said.

New Zealand’s structural deficit was just about the worst in the OECD. Before Covid it was one of the best, she said.

“It’s important that the Government flags a route to surplus over a period of time,” Rich said.

Businesses were supportive in the project to cut red tape, and wanted to see the next “milestones” and priorities in its Going for Growth agenda.

“We’ve made New Zealand quite a tough place to do business,” she said.

She also called for the Budget to be used to send long-term signals, such as how the country will pay for superannuation and healthcare as the population continued to age.

She said BusinessNZ would be looking for what’s in the infrastructure pipeline, which was “still pretty empty”, and it would be looking at areas like vocational training and skills development.

There had been a loss of trust in government to spend money wisely, Eaqub said.

“The loss of trust in government really happened under the second Labour government,” Eaqub said.

But despite kicking that government out, trust in the Government to spend public money wisely had not improved, he said.