Business still fears a hostile Labour agenda lurks

By FRAN O'SULLIVAN

Missing in action: Labour's clear strategy, or bold action agenda, to lift New Zealand's national performance.

Two weeks into an election called for the most opportunistic of reasons, Labour - which barring the most unexpected calamity will be the party to form a Government after the July 27 election - has yet to inspire outright confidence that its second-term agenda will be business-friendly.

Prime Minister Helen Clark has again copied Tony Blair's gambits - such as posting election commitments on a "credit card" - but merely at the tactical level.

The strategic focus which propelled Blair to sell Labour's intention to break through a glass ceiling with his "Ambitions for Britain" is lacking.

New Zealand Labour's failure to spell out a broad second-term agenda has left a vacuum.

This was supposed to be the election that would rid the country of MMP, giving Clark and her Labour colleagues the ability to run New Zealand unmolested by any minor parties' wishes.

As Business Herald editor Jim Eagles reveals today, business leaders still fear the impact of a new policy juggernaut on the employment law front.

After three years of the devil they have got to know - if not completely trust - business hopes that a second term Labour, unshackled by coalition ties, would use the opportunity to set a bold path to boost economic growth are diminishing with Labour's poll ratings.

The economy has performed well. Conditions are benign. But growth is not sufficiently buoyant to elevate this country back into the top half of the OECD "rich men's club".

Business now must factor into its calculations the prospect that, by calling an early election, Labour has simply brought forward the replacement of Jim Anderton's "Alliance" as its coalition partner, with either the Greens or New Zealand First.

Two devils they neither know nor completely trust.

Either party will demand compromises from Labour as the price of Parliamentary support, even if that support does not extend to formal coalition partner status.

The opportunities for conflict are many.

Greens co-leader Rod Donald has signalled that his party will not be content to play political yes-man to Labour.

Donald says the Greens will not be fobbed off with soft portfolios like Conservation - the party will want real Cabinet influence over economic strategy.

The prospect that the Greens will hold out for a Government role at least as powerful as that occupied by Anderton during the last Parliamentary term is deeply worrying for Labour.

Latent hostility has emerged between Prime Minister Helen Clark and Greens co-leader Jeanette Fitzsimons over Corngate - but the Greens have made GM a central campaign issue, robbing Labour of the ability to campaign on Clark's leadership and the party's record in Government.

A big gulf exists on free trade, but there is sufficient broad support between Labour and the right-of-centre parties for New Zealand's World Trade Organisation agenda and bilateral pushes to continue.

Respected political commentator Colin James' analysis of the divide between the major parties over their prescriptions for getting growth up to 4 per cent a year (see "Different recipes ... " C8) is instructive. National and Act both want to cut taxes, Labour's Finance Minister Michael Cullen does not believe that will spur growth.

The difference is deeply philosophical.

Not surprisingly, the Business Herald's survey of senior business leaders shows they support the National/Act axis.

Cullen's personal politics define his policies.

A Social Democrat - with recidivist anti-business edge - Cullen's super-bright intelligence and waspish wit, which he turns on adversaries, quickly alienated the less-nimble within business when Labour took power in 1999.

But muttering about the "Finance Minister from hell" long ago ceased.

A Government charm offensive in late 2000 brought an end to the "Winter of Discontent" - the damaging standoff with business over the Employment Relations Act - and a good working relationship has been formed.

Cullen has been aided by the strong performance of the New Zealand economy over the last three years.

Economic growth - at 3.2 per cent for the year to March - is more than twice the 1.5 per cent average of our 14 top trading partners.

Most economic measures are positive: Unemployment at 5.3 per cent - a 13 year low; the current account deficit has shrunk from 6.7 per cent of GDP to 2.2 per cent - a 13 year low; inflation is close to Reserve Bank forecasts; and increases in weekly earnings have largely offset interest hikes on mortgage payments.

Cullen cannot claim parentage for these results.

But he can state with good authority that his fiscal management has ensured the Government's accounts are in order. The Budget surplus for the June 2002 year is expected to be near $2.4 billion - more than enough to feed his pet Superannuation Fund.

fxdrop 4, 60 I N AUGUST 1987, David Lange's Government was swept back to power on the back of unrealistic expectations inflated by a sharemarket boom. Three months later the market crashed.

Fifteen years on, Labour has been smart enough to call an election before conditions sharpen.

For there are looming negatives which will hit business. BNZ chief economist Tony Alexander points to:

* Tightening monetary policy.

* The fastest rise in the NZ dollar against the greenback since 1985.

* Loss of any hope of tax cuts or business-friendly policies in next three years.

* Loss of the loose labour market that made managing fluctuating output levels so easy in the past decade.

* Worries about a rural sector slump due to the halving of dairy commodity prices in New Zealand dollar terms.

* Talk of El Nino droughts.

Such conditions will test Labour's financial stewardship in the second term.

But while $1.5 billion will be sucked out of the rural economy next year, there appear to be no crises in the making of the order of the 1987 Crash, or, the 1997 Asian Crisis - both of which had a huge impact on New Zealand.

But there will still be flashpoints.

Take five broad issues which have the potential to escalate into standoffs between a Labour-led Government and Business.

The Wilson juggernaut Former Labour Minister Margaret Wilson has already foreshadowed a review of the Employment Relations Act to identify whether any "fine-tuning" is needed.

Labour wants to extend what it calls the social partnership model into business, believing effective employment relations involve much more than simply negotiating pay and conditions.

The measures which Wilson has foreshadowed include reviews of the Holidays Act and redundancy laws.

But a proposal to examine pay equity in comparable occupations has been criticised by business as crossing the line into social engineering.

Wilson's agenda is hardly secret.

What does concern business - and ought to give rise to strenuous lobbying - is the prospect that Labour's Cabinet, bereft of experienced business people, is prepared to dump on business employment law changes which will profoundly burden them, at a time when small to medium-sized business in particular are cavilling at the existing compliance burden.

The further absurdity of ratifying an ILO convention which could pave the way for damaging general strikes ought to be at the front of the business agenda.

Immigration Labour has attacked NZ First leader Winston Peters' policies as racist.

But Peters will demand greater vigilance on this score if Labour is forced to negotiate with him for second term support.

Immigration policies have recently been relaxed to enable businesses to sponsor foreign employees on "talent visas".

But there is a fine line between sponsorship and abuse.

Australia has recently been forced to crack down on language schools which had been used as fronts for people smugglers.

The prospect of boat people arriving here would harden the resolve of any leader.

This is an area where Government and business will quickly find themselves at odds if the requisite checks are omitted. NZ's place in the world Clark was quick to step up to the plate and commit New Zealand's special forces to the Afghanistan front after September 11. She is also pushing for a free trade agreement with the US.

There will be winners and losers when and if the negotiation gets under way.

Inevitably New Zealand's anti-nuclear stance will be raised as an obstacle. Clark has said in this campaign that the stance remains unchanged.

Flashpoints will emerge if Labour is not able to keep the upper hand with potential coalition partners - particularly if the US invades Iraq - or backs away from closer relations to avoid local fallout. The innovation agenda Clark has forged close relationships with a raft of well connected chief executives.

But these players have reservations over Labour's ability to set a quick agenda.

There is an expectation that Labour will use the second term to forge ahead with plans to lift the level of foreign investment.

But the "partnership" model between business and government will evaporate if it is not tended.

Reserve Bank Cullen will get strong support from Peters for any plans to modify the inflation targets agreement with the Reserve Bank.

The Finance Minister wants the bank to show greater flexibility in its application of the 0-3 per cent target range.

But as yesterday's CPI figures show, the 2.8 per cent achieved gives little credence to Cullen's criticisms that the bank has been unduly inflexible.

Business is concerned that Cullen is simply using the bank's monetary policy stance for election reasons, to attack former governor Don Brash, who will shortly face him across Parliament as a National MP, and to duck the radical changes that would truly spur economic growth.

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