Business Debate: Is confidence really as bad as it seems?

Finance Minister Grant Robertson (left) and National Party finance spokesman Paul Goldsmith. Photo / File

BizDebates

The numbers are clear. Confidence surveys have shown the business mood hit lows not seen in about a decade.

But are these numbers an accurate reflection of what's actually going on in the economy? Or are they simply the result of unfounded mistrust in the coalition government's policy agenda?

Today we asked two of the heaviest hitters in New Zealand - Finance Minister Grant Robertson and the Opposition's finance spokesman Paul Goldsmith - for their views on the Business Herald's recent series and whether things are as bad as the confidence survey's show.

NAY: Grant Robertson, Finance Minister

The Herald's Building Confidence series contains some refreshing analysis of how New Zealand businesses are performing.

The underlying positive messages and views on how the Government can continue backing business to grow are similar to what I've been hearing when I visit Chambers and meet business leaders around the country.

Closing skills gaps, smarter immigration settings, more affordable housing for workers and greater support for innovation are all areas we're investing in. Sorting out long-term challenges like productivity and skills shortages won't happen overnight, but we're getting on with it.

At the same time, the record horizontal and vertical infrastructure investments that we've committed to in transport, hospitals and schools will help underpin demand and boost productivity.

It's worth pausing to take stock of the underlying strength of the New Zealand economy. Growth of 2.4 per cent continues to be higher than the long-run average and is stronger than nearly all the countries we compare ourselves to.

Unemployment is at a decade low of 3.9 per cent, wages are rising and the Government is running a surplus.

All are signs of an economy in good shape.

Robertson says unemployment is at a decade low of 3.9 per cent and wages are rising. Photo / 123RF

This was reinforced by the Herald's recent Mood of the Boardroom report which showed more than four-fifths of business leaders expect revenue growth over the next year, 75 per cent expect profits to grow or stay steady and 70 per cent expect to lift or hold staff levels.

Our underlying economic strength is particularly important when we look offshore at the volatility created by issues like the US-China trade war, Brexit and events in the Middle East.

The uncertainty created by global events was evident in the Mood of the Boardroom report. The top seven concerns raised by business leaders were all international. For context, all 17 international concerns ranked higher than the oil and gas decision, which was 34th of 38 global and domestic issues canvassed by the Herald.

The Building Confidence series puts paid to the negative narrative that all businesses are gloomy. Given our underlying strengths, one of the biggest risks to the New Zealand economy is that we talk ourselves into a downturn.

I acknowledge that the Government's work to tackle some of the big, long-term issues New Zealand is facing can sometimes cause conflict with parts of the business community.

But the alternative of not taking action would force future Governments into faster, quicker and more disruptive change. That's why we've been seeking consensus across Parliament, industry and the public on some of the big pieces of legislation, particularly in the environmental space.

We're getting on with the job of putting in place the framework and policies that will help us meet our international commitments over the next 30 years. We're doing that now to give businesses the certainty and time to make a managed transition to a more sustainable economy.

Robertson and Prime Minister Jacinda Ardern. Photo / File

That long-term outlook is central to the economic strategy we announced in September. This brings together the Government's policy work to achieve a more productive, sustainable and inclusive economy. It is available on MBIE's website.

The strategy identifies eight key shifts that will support the economy over the next 30 years.

We announced further investment in one of the shifts this week – ensuring that people are skilled, adaptable and have access to lifelong learning.

Skills shortages are by far and away the most pressing issue raised with me by businesses.

On Monday, Prime Minister Jacinda Ardern and Education Minister Chris Hipkins announced an extra 4,000 places for the Trades Academy and Gateway schemes to get our young people into trades. This builds on other moves like subsiding the costs of 2,000 new apprentices through Mana-in-Mahi.

The boost for Gateway was the first since Labour and New Zealand First were last in Government. That speaks volumes about the situation we inherited this time around as skills shortages grew worse over the last nine years. It is just one of the areas where we are having to make up for years of underinvestment.

The feedback we've been getting from businesses on investments like this and our economic strategy indicates that we're focussing on the right areas.

By working together on addressing the long-term challenges we all face, we can keep up the momentum and make sure the positive sentiment highlighted by the Building Confidence series continues.

YEA: Paul Goldsmith, National Party finance spokesman

New Zealand has a lot going for it. The world wants our goods and our terms of trade are still at high levels.

And yet growth per person has slumped to near zero and business confidence remains well below the floor.

Why? The international 'headwinds' and global uncertainty explain only part of it – and, anyway, we can't do anything about them.

Domestic factors, however are significant and controllable.

This Government has been irredeemably complacent about the sources of growth and is undermining several of them.

We know all the industries this government doesn't like, but few are convinced by Government ministers' apparent belief that critical industries can be replaced by slogans and wishful thinking.

Then, it has driven down business confidence by adding costs, creating massive uncertainty and by demonstrating incompetence, most famously with KiwiBuild.

On costs, think of the industrial relations space, continued regulatory expansion and additional fuel costs.

On policy uncertainty, just think of the impact of 18 months of uncertainty over a capital gains tax had on investment. And there are still countless working groups. The logical thing is for investors to keep their hands in their pocket and wait to see what happens.

Goldsmith: "This Government has been irredeemably complacent about the sources of growth and is undermining several of them."

If enough people chose not to invest in new businesses, new plant and machinery, new staff – then the economy slows.

Think of the impact of the oil and gas decision – not just directly on Taranaki, but indirectly following the way it was made – without any analysis or consultation. If they can do that to one industry, they can do it to others, the next time the PM needs to make a speech.

Think of the 'wellbeing budget – does anyone really know what it means? If you want 10 minutes of entertainment watch Deborah Russell, MP, chair of the finance committee explaining it in parliament.

Third, this Government has demonstrated incompetence in critical areas, starting with KiwiBuild, but also in the administration of immigration– which has ground to a halt - and the lazy manner of its spending, exemplified by Shane Jones' slush fund and the free fees policy. But perhaps most importantly it's been incompetent with transport infrastructure.

It is unforgivable mistake to walk into Government and on day one cancel or delay a dozen major roading projects - all over New Zealand – several of which were ready to go, and replace them with projects that were not ready and won't be for some time yet.

That is seeing a massive hole open up in our infrastructure pipeline – as the old National projects expire. It was entirely predictable.

So these things all weigh heavily on business confidence.

Less confidence means less investment, which flows through to fewer opportunities for Kiwis to get ahead.

So it seems to us the challenge is to restore confidence and revive our economy, by letting business, large and small, get on with it and by being disciplined and effective in government.

Goldsmith says the Labour Government has demonstrated incompetence in critical areas, including KiwiBuild. Photo / File

National recently released its Economic Discussion Document which outlines our thinking in three areas: responsible economic management delivering world-class services; a suite of policies a more productive and competitive economy that lifts household incomes; and third, an equal focus on reducing costs for households and business.

We have committed to lighting a regulations bonfire - will repeal 100 regulations in our first six months in Government and we will eliminate two old regulations for every new one we introduce, we're considering whether there's merit in targeted tax relief for small businesses- like in Australia, we will index tax thresholds to inflation, we will establish a small business payments guarantee and we will ensure Government departments pay contractors on time.

New Zealand should still being doing well. We've got a lot going us – so if we can get the settings right there's no reason why we can't succeed.