Stephen Summers: Seven pillars of growth

Stephen Summers

Every month, information flows into regional business associations in the form of survey data and feedback to newsletters from 300 manufacturers.

Mining that data illustrates much about the state of business here. And it makes it pretty obvious what the business community wants right now.

There is a surprising commonality, from directors of large firms to small owner-operators.

Some issues are regional, such as Auckland's roads or Canterbury's water allocation concerns, but there is a great deal of consensus about things such as tax, resource consents and regulations.

The data falls roughly into seven categories: trade, investment, infrastructure, fiscal policy, sustainability and so on.

They are pillars rather than categories as they support, or hold up, business. Take any one away and the business environment would not perform to potential.

One pillar that has caused much debate is sustainability.

There is a feeling that the green lobby has hijacked the notion of sustainability, making it into something that is only about organics and windmills.

In fact, all businesses care about sustainability.

A company that stays competitive by looking after its customers and stakeholders and the community - that's sustainability.

The environment is part of that, but it's not the only part.

Companies don't want to be bagged by conservationists with only a limited view of sustainability.

I have gathered a host of direct quotes from the data and any politician wanting to improve the environment for business could do well to consider them.

On trade, there is a call for more on-the-ground support for exporters in foreign markets and a widely expressed desire for policy differences with the US to be overcome in order to get a trade deal.

On the economy, there's favour for less wasteful Government spending to reduce tax levels.

On infrastructure, firms are saying they want more private investment allowed in roads.

They are also worried about what might happen to the price of electricity once the carbon taxes go on.

And there is a feeling that the state-owned power companies are just revenue pots for the Government - privatising more of them could bring more competition and drive prices down.

On actual regulations, the comments are really specific. There are clear perceptions about what is wrong with the Holidays Act, the ERA and the RMA. Any party that wanted to look after business would not have to look far to see how to do it.

Business New Zealand collated the data ahead of the approaching election and has also developed a set of indicators for change measuring achievement against these pillars.

This will allow us to determine whether the environment for business is improving. We are saying we have our eye on the business environment and we are going to keep reporting whether it is getting better over time.

Infrastructure

Indicators:How much we're investing in roads - expenditure on roading as a percentage of GDP. A good trend would be for spending to increase in the medium term, then remain reasonably constant at a level similar to other developed nations.

How much we're investing in power plant - percentage of growth in GDP per energy input. This indicator measures economic growth per input of energy, indicating the level of efficiency in energy infrastructure; a good trend would be for the percentage to rise over time.

Business-friendly environment

Indicators:

How much we're taxing business - average direct tax burden on the business sector as a percentage of GDP. A good trend would be for the percentage to decline and for NZ's percentage figure to be less than in trading competitors' countries.

How many hoops business has to jump through - trend of business compliance costs over time. A good trend would be one that consistently declined.

Sustainability

Indicators:

Workforce sustainability - number of new work-related ACC claims as a percentage of total employed. An indicator of the health and safety of people in the workplace and, hence, the sustainability of the workforce; a good trend would be an ongoing reduction.

Business sustainability - trend of business compliance costs over time. A good trend would be one that consistently declined.

Industry sustainability - capital investment growth. The amount of capital invested in businesses; a good trend would be significant ongoing increases.

Economic environment

Indicators:

Government spending - as a percentage of GDP. A good trend would be continued reduction.

Crown debt - as a percentage of GDP. A good trend would be continued reduction.

Tax levels - a good indicator would be taxation set at levels competitive with other developed countries.

Skills and productivity

Indicators:

Minimum education standards - percentage of school leavers with NCEA level 1. This is an indicator of NZ's ability to achieve minimum educational standards across the mass of population; a good trend would be significant ongoing increases reaching a high stable level.

Amount of training - numbers in formal industry training. This is an indicator of workforce upskilling; a good trend would be significant ongoing increases.

Enough skilled immigrants - skilled migration net inflow. This provides an indication of gains or losses of skilled workers; a good trend would be an ongoing net gain consistent with business needs.

Investment, innovation, entrepreneurship

Indicators:

How much investment - business investment as a percentage of GDP. This is a general indicator of the amount of investment in enterprises; a high percentage offers a better likelihood of strategic or transformational investment occurring.

How much R&D - private sector research and development as a percentage of GDP. This indicates investment targeted specifically at new products and services; a good trend would be significant ongoing increases.

Enough new businesses - business turnover. This indicates company entry and exit, or the rate of business creation and demise, as innovative firms arise and less productive ones disappear; a good trend would be a continued net gain of new businesses.

Trade

Indicators:

How much trade - external trade (exports plus imports) as a percentage of GDP. This is an indicator of the volume of trade; a good trend would be for the percentage figure to increase significantly over time.

How much foreign investment - foreign direct investment stock as a percentage of GDP. This indicator is useful for a small economy with relatively low levels of domestic investment; a good trend would be for the percentage to rise, along with improved export performance.

* Stephen Summers is an analyst for Business New Zealand.