Markets are softer with people sitting on their hands watching and waiting as to where and when they will invest their money. What we are seeing is the classic investment cycle of markets going up and down based on what's happening in the world.
It is worth noting the S&P/NZX50 has been a relatively strong performer over the last couple of years and, to provide context, the index is now back to where it was in 2020.
Our focus at NZX remains on successfully connecting people, businesses and capital every day.
Growth key to success
So, what's a little trading nation at the bottom of the world to do? As a country we have a productivity issue we need to overcome if we want to be internationally competitive.
Since Covid-19 struck in 2020, the Government has played a pivotal role with fiscal and monetary policy aimed at ensuring economic activity supported the retention of as many jobs as possible. They should be commended for their leadership.
The flipside of subsidising wages through increased borrowing and pumping more money into the local economy has been inflation. To power up the New Zealand economy, growth for long-term gain rather than consumption that keeps the wheels of commerce turning for five minutes has to be our way forward. And there is no silver bullet.
Over many years in many governments, MPs have talked about taking a "balanced approach" to the way an economy is managed. But if macroeconomic circumstances change and settings remain the same, then balance is no longer being achieved. In light of the changing economic environment, macro and microeconomic setting; and initiatives, regulations and legislation need to be looked at to ensure true balance exists — one that drives business growth, addresses resource constraints, and results in a higher standard of living for Kiwis.
This is the level of ambition the business sector would welcome and embrace, one that seeks the best outcomes for New Zealand and New Zealanders.
Time to work as a single team
As it was during the height of the pandemic, the Government needs to be bold and brave.
We need it to implement a New Zealand economic growth strategy that encourages investment, opens the border to more skilled labour, makes access to capital easier for firms to expand and export goods and services all-round the world, and removes costly and unnecessary red tape.
New Zealand businesses, who will be laser focused on revenue growth, cost control and managing risk, need to come to the party and work closely with the Government. This is the time for all parts of New Zealand society to work closely together.
Business growth is the key to a sustainable economic recovery for our country. Whether it is manufacturing, tourism, hospitality, import, export, infrastructure, construction — all these business sectors need to be able to tap into the resources they need. Alongside human and financial resources, capital markets play an essential role. They provide the finance for business to grow, innovate, invest in much-needed infrastructure, and create more and better paying jobs for Kiwis.
At its core, the New Zealand economic growth strategy needs to be a partnership with business. It also needs to be specific covering all the inputs necessary to promote and boost economic growth, including capital formation. To do that requires a frank assessment of present legislative settings and regulations ensuring businesses can operate in the most efficient way possible while still providing the right level of protection.
Look, here's something we prepared earlier
Fortunately, a blueprint developed by a wide range of leading industry experts in 2019, already exists: the Growing New Zealand's Capital Markets 2029 report. It has a 10-year vision that would create more opportunities for Kiwis to grow personal wealth, help New Zealand businesses to prosper, and help future-proof the country's economy.
There are many components to capital markets and the focus of the report is not limited to the listed market. It also looks at private markets, including crowdfunding, angel investment, venture capital and private equity.
The review has 42 recommendations — covering KiwiSaver, regulation, public sector assets and infrastructure, the promotion of public markets, tax, new products, and technology.
It is the opportune time for the Government to act upon the priority recommendations. There is no need to develop another plan — that work has been done.
The capital markets community, including NZX, would welcome the opportunity to work with the Government on rolling out the highest priority, highest impact initiatives that will benefit New Zealanders well into the future.
Working well with government
A good recent and practical example of working well with the Government to deepen New Zealand's capital markets was the work undertaken in the last two years by NZX and the Financial Markets Authority (FMA) on changes to the listing rules on direct listings.
Direct listing ensures easy and quick access into the system, allowing a company to list its shares directly on the exchange and begin trading publicly, without issuing new shares via an initial public offering (IPO). A direct listing offers a company immediate liquidity and the ability to raise further capital within three months.
The changes, approved by the Financial Markets Authority, streamlined, lowered the cost and simplified the direct listing process.
Since the listing rules were modified, Radius Care, Third Age Health, NZ Automotive Investments, Greenfern, and TradeWindow have become direct listings.
Joining forces to fund much-needed public sector assets
Another example of where business and the Government can work in tandem is the funding of infrastructure. A key recommendation in the Growing New Zealand's Capital Markets 2029 report is using capital markets to fund New Zealand infrastructure.
New Zealand has a significant need for infrastructure — estimated by Treasury at $129 billion over the next decade.
To improve our country's productivity and social outcomes, we are going to need new roads, hospitals, schools, and energy and water assets. Public markets can play an important role in partnering with the Government to deliver this capital expenditure freeing up government cash to spend on running the increasing costs associated with public health, education, policing and social services.
A good example is by utilising KiwiSaver and the three million Kiwis that have already signed up to it. What better way than paying KiwiSaver investors a return for the use of their capital by building New Zealand infrastructure that they, their children and grandchildren will benefit from.
This is the perfect cycle: people are saving, their KiwiSaver funds receive a steady income stream and return on investment and New Zealand receives new public assets that improve the nation's productivity and well-being.
And importantly the Government doesn't need to use its balance sheet by carrying all the debt and paying all the interest itself. It becomes an expense, not a balance sheet item.
Let's be brave
There is no doubt there is a significant opportunity to positively set New Zealand up for the long term if both the public and private sectors work closer together.
By collectively buying into a vision of how to best manage Covid-19, we've shown we can do that exceptionally well.
Let's do the same for our economy.
It was Charles Darwin who said it is not the strongest of the species that survive, nor the most intelligent, but the one most responsive to change. Now's the time for us to be street smart and make a positive difference that has us wisely investing in our nation's future and people.
• Mark Peterson is chief executive of the New Zealand Stock Exchange
The NZX is an advertising sponsor of the Herald's Capital Markets report.
