What our business leaders are saying about New Zealand's economic situation:
CRAIG NORGATE
PGG WRIGHTSON
Craig Norgate warns New Zealand faces a difficult time if the Government continues to "borrow and spend too much."
Norgate contends as that a 'small trading nation", New Zealand cannot continue to pile up debt and needs to put its house in order. "Basically we squandered the good times," he says in reference to the golden economic weather.
PGG Wrightson is itself strongly focused on paying down debt so it can get itself back to a position where it can take advantage of new investment opportunities.
"It's a pretty tough credit environment right now," he says.
PGG Wrightson went through the wringer earlier this year with Norgate facing a nail-biting time until the company won a 21-month period breathing space from its banking syndicate to get debt down.
Norgate was also the force behind the planned $220 million merger with Silver Fern Farms which had to be aborted when bank funding failed to materialise.
The country's biggest rural services company recently had to cut its full-year profit forecast for a second time reflecting the continuing downturn in dairy activity and a reluctance of sheep and beef farmers to open their wallets as trading improves.
Norgate has, in the past, been critical over Fonterra's auction system claiming it is helping depress dairy prices. But he would not be drawn for this survey.
He says sheep and meat returns are "pretty good". But the upturn in the rural services sector will not occur until farmers determine it's time to start spending again.
The problem is that the level of the New Zealand dollar - particularly against the greenback - is eroding farmer returns and confidence.
"The kiwi will ultimately fall like a stone sometime," Norgate maintains. "The New Zealand economy may not be so bad in the long-term."
He indicates that banks have a big focus on liquidity right now: "The credit is there but the terms have changed."
Norgate is also much less optimistic about both the domestic and the global economies than he was a year ago.
Of particular concern is the potential for further interest rates increases which Norgate indicates would have a punishing effect at a time when his company is focused on reducing debt levels.
Access to equity and debt funding continue to be priorities.
On the international front he is most concerned about the continuing credit crunch, the strength of the United States and Chinese recoveries and protectionism.
PGG Wrightson is a major rural services company employing 2500 full-time equivalent workers. Its interests span agriculture, fishing and forestry.
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MURRAY JACK
DELOITTE
Deloitte CEO Murray Jack believes it's time for New Zealand to get some renewed focus on its relative economic performance vis-a-vis Australia.
"There's a sense of anticipation from business of 'what's to come' next from the National Government," Jack says. "The right sorts of noises are being made but there will be a point where business says 'show me the money'."
"As a nation we like to build a consensus around social things ... we need to build much more consensus around the platforms for growth." He suggests there should be much more debate over where New Zealand "places its bets" in relation to potential growth sectors and discussion over politically thorny issues like the qualifying age for national super.
Jack acknowledges the Key Government's first priority has been avoiding a credit rating downgrade. But he believes it's time the Government lays out its priorities and faces up to the need to so something about the trajectory around its spending as a percentage of GDP. It's not just about regulatory reform and slashing red tape, although that obviously is a piece of it.
"It's about where are we going in terms of research and development and innovation and tilting our education system to be more skills-driven."
Jack says it "would have been inappropriate" to have major cuts in Government spending this year (and maybe next year) and overall the balance of the response to the economic crisis has been "pretty good".
But in the longer-term, cutting Government expenditure levels would enable a gradual reduction of personal tax rates and high effective tax rates on the transition from welfare to work.
The Deloitte boss is strongly focused on the need for New Zealand to increase productivity. "There is a positive tone being set and an acknowledgement that productivity growth is crucial to economic growth and prosperity," says Jack. "However, apart from moves to reduce regulation, there are few specific policy actions designed to markedly improve productivity."
Also on his target list of growth-enhancing policies are improving New Zealand's infrastructure - particularly roading, telecommunications, electricity, and, rationalising the ports.
Jack says the surprisingly low unemployment rate indicates how constrained the economy was going into recession. "If you had asked me 18 months ago, 'What would your guess be as to the level of unemployment now,' it would be a lot more than 5 per cent."
He says the fact the corporate balance sheets were stronger going into recession has enabled firms to cushion the impact and not resort to the significant layoffs of the past. "Overall, New Zealand business is performing pretty well compared to the early 1990s where there was a lot of carnage."
Country needs to get its economic act together
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