Mood of the Boardroom: Go easy on spending, Grant

Finance Minister Grant Robertson has been applauded for implementing the wage subsidy scheme but business leaders have warned him to be careful with the latest Covid-19 spending.

An overwhelming 71 per cent of the Mood of the Boardroom respondents said they had confidence in Robertson's management of the economy during the Covid pandemic.

Only 12 per cent said they didn't, and 17 per cent were unsure.

Soon after the pandemic broke out early last year the Government provided an initial support package for business totalling $12.1 billion.

Then Robertson delivered in the May Budget last year the $50b Covid-19 Response and Recovery Fund, and the economy quickly bounced back after the first nationwide lockdown.

The country's gross domestic product (GDP) grew 2.8 per cent in the June quarter this year — double the analysts' forecast — and average annual GDP to June had risen 5.1 per cent.

The GDP increase in the previous March quarter was 1.4 per cent.

But the economic growth was disrupted when the country again went into lockdown in mid-August and restrictions ran well into September.

There was $5.1b remaining in the Covid fund, and by then people questioning how much money the government needs to borrow and how will it be repaid.

One university chief wondered whether "our children will need to pay this thing back" or taxes will have to go up.

He said the Government could not continue to put the country into lockdown, and businesses deserved more clarity on the long-term plan.

Robertson's main Covid platforms were the Resurgence Support Payment, the Small Business Cashflow Scheme, Business Debt Hibernation, and the Wage Subsidy.

By the middle of last month $2.3b of wage subsidies had been paid out in three tranches, and more payments were due.

The payments for eligible businesses were $600 a week for full-time employees and $359 for part-time.

The cash flow loan scheme provided assistance of up to $100,000 to businesses employing 50 or fewer full-time employees.

This includes sole traders and self-employed businesses.

Businesses claimed the Resurgence Support Payment if their revenue fell 30 per cent over a seven day period after an alert level increase and they met other eligibility criteria.

From the Mood of the Boardroom survey, a transport executive said some parts of Robertson's economic management have been really good, such as the quick moves on the wage subsidy, but spend is now looking political in nature and the wide stimulus has to stop as it is pumping house prices.

An investment banker said "we have to recognise the first six months involved a lot of decision making under extreme uncertainty.

Some big calls had to be made and not all of these would be right.

"However, the last 12 months has just been treading water and hoping for the best."

Tony Carter, chair of Datacom, said in some aspects like the wage subsidy Robertson has done really well, but much of the spending has been pretty low quality.

An accountant said: "The controls around the wage subsidy were too loose."

Another said: "A true assessment will become obvious over the next year or two when we can assess the impact of inflation and the cost of the debt burden that has been created."

Simon Bennett, executive director at Accordant Group, said "we have spent all the money on what was with the benefit of hindsight a very short lockdown relative to rest of world. I'm unsure what we would or will do if we are forced to shut down till Christmas like Sydney."

A professional director said Robertson was the most impressive member of the Labour Government who is willing to listen and respond. But others weren't so sure.

A software boss said he had zero confidence in Robertson, not helped by his smug portrayals of how well he is doing.

"He lacks humility."

A real estate leader described his performance as very disappointing. "This is illustrated by the shameful characterisation of borrowed funds as a Covid fund and then its use for unrelated purposes."

A food manufacturer said "I'm not sure I like his meddling in too many areas, such as Reserve Bank and Air New Zealand."

So, what more did the business leaders want to see on Robertson's economic agenda?

They wanted more fiscal discipline and accountability, and they are still waiting for a long-term recovery plan that will increase productivity and reconnect the country with the world in terms of trade.

Greg Lowe, Beca's group chief executive, said New Zealand and Australia both face similar challenges in re-establishing connections with the wider world that lead to increased trade for both goods and services. "Finding ways in which we might do that together could benefit both countries and speed up the long term recovery plan."

Kirk Hope, BusinessNZ chief executive, pushed for a more joined up economic approach to high quality growth and a greater level of trust in business to help deliver outcomes.

Two lawyers asked for "increasing per capita productivity in the economy," and "diversification of the New Zealand economy for long term growth."

Federated Farmers chief executive Terry Copeland wanted more support for agriculture to deliver the export earnings rather than ignoring the implications several key pieces of legislation is doing. "We need to invest in projects that create growth, not glory projects like the (Auckland) Harbour Bridge cycleway."

Doug Paulin, chief executive of Sealord, said rather than driving costs up through policy reform in many areas, Robertson should promote business growth and investment.

Mike Bennetts, chief executive of Z Energy, said "we need to ensure more effective and higher quality spend from both the Covid response and government budgets, and invest in enablers of higher growth and more socially equitable activities, such as infrastructure and technology."

A real estate leader wanted responsible management of the Crown balance sheet and affairs, particularly achievement by ministries of results for the dollars spent — education and mental health, for example, where the results have been appalling.

Don Braid, managing director of Mainfreight, suggested a reduction in State control and be more open to public-private partnerships to reduce the rise in bureaucracy. Braid also wanted more accountability to the economic agenda.

Stephen Jacobi of Jacobi Consulting said Robertson needed to look at capacity constraints as a brake on economic growth and recovery.

Craig Stobo, chairman of the New Zealand Local Government Funding Agency, wanted a review of the efficacy of government departments and agencies.

"Please explain the value add of the Infrastructure Commission."

Brett O'Riley, EMA chief executive, is looking for more coherence on the sector transformation process and how "our goal of building a flexible and highly skilled future workforce equates with policies like fair payment agreements."

Tony Carter asks: "How do we get government debt, which is a tax on our children, back down."

Maybe Roger Partridge, chairman of The New Zealand Initiative, has the answer: "Strengthen the fiscal capabilities and discipline of central government ministries."