Comment: Government needs to woo small business

The Government and Revenue Minister and Minister for Small Business Stuart Nash will be working to get business leaders onside. Picture / NZME

The new Labour-led coalition Government needs to redouble its efforts to reassure business – and small business leaders in particular – about its pro-growth, pro-business credentials.

The new administration takes over the Treasury benches at a time with much work to be done. The region's longest running cross-border longitudinal study of small business performance and sentiment, the Asia-Pacific Small Business Survey, shows a dramatic collapse in economic confidence.

Business leaders expecting economic growth has plummeted from 61.5 per cent to 39.9 per cent at the end of the National Government's tenure. Other surveys have recorded similar declines in sentiment, pessimism at odds with the strong fundamentals of the New Zealand economy.

Business sentiment is an important driver of economic behaviour and the Government will be paying attention. For if it is to deliver on its promises it needs the business sector pulling along with it, not acting like a chorus of Cassandras voicing opposition and running interference from the sidelines.

Those potential Cassandras will be reflecting the sentiment of grassroots business leaders, of whom the vast majority are small business, which remains the backbone of the economy. Labour will no doubt be working to get these people onside.

Exhibit One in this strategy is the appointment of political centrist and economic dry Stuart Nash as both Revenue Minister and Minister for Small Business.

It's important the sector has had its own personal ministerial advocate in Parliament (rather than as part of business, innovation and employment or similar) and a demonstration of the government's bona fides which has certainly been noticed.

Nash delivered a fair speech earlier this month at the International Fiscal Association Conference in Queenstown, where he outlined some of the government's agenda, including measures to make life easier for business.

The Accounting Income Method (AIM) is launched next month and should be a game-changer for small business.

As everyone knows, revenue can be lumpy and small businesses with tight margins can quickly incur tax debt under the provisional system. Under AIM, provisional tax will be based more on actual cash flow rather than last year's turnover.

IRD's Business Transformation, which integrates tax processes online, is expected to result in small business owners spending up to 14 fewer hours a year on tax compliance, another welcome measure.

Claiming policy started under the previous administration is not only good politics but good management, no matter the grumbles from the opposition benches.

But the government is also promising a range of new measures which, on the face of it, will provide a demonstrable difference to owners of small businesses.

Of particular note is legislation to improve contractual protection, a bete noire for small companies dealing with larger organisations. Franchise contracts are also in the government's sights after a string of incidents where franchisee rights were subordinate to the franchisor.

These are good practical measures to address clear areas of commercial inequity which will be welcomed by the sector.

The government, of course, also wants to urgently address issues of social inequity.

There is little to argue with the coalition's efforts to address the housing crisis. Similarly, the new Families Package must be applauded as New Zealand cannot afford to allow a quarter of its children to be raised in poverty – it's an economic disaster in the making.

But there will be grumbles about strengthening the bargaining power of workers and unions, which will create new issues with which the small business sector will need to contend.

What many are looking for the government to do – aside from proving the case for the need for such labour law change – is to show its compassion to the Kiwi battlers in the business trenches by supporting small businesses with a range of creative measures that make it easier to become more profitable and creates the right environment for companies to grow and generate meaningful jobs.

It also needs to show it is a responsible government that will keep to its Budget Responsibility Rules and deliver on bottom-line promises such as reducing core Crown debt to 20 per cent of GDP within five years.

The pay-off will be a turnaround in business confidence - and a much broader support base that government hopes will keep it in office come 2020.

Paul Drum is head of policy at CPA Australia.