Government talks often of growth, but CEOs say action is long overdue

When fifty of New Zealand's top chief executives declare that the country has no growth strategy - it is time to sit up and take notice.

The Government is ambitious for New Zealand to once again take its place in the ranks of first-world nations at the OECD "rich man's club".

Relative living standards are slipping against our nearest neighbour, Australia.

But to do that, the economy must take a big leap and score repeated economic growth rates of nearly four per cent a year.

Trouble is, after a lot of talk - the target to get back into the top half of the OECD was first floated two years ago - business is fast coming to the view that there is no real game plan.

A Herald corporate survey - which went out to 120 top CEOs and company chairmen this week - featured a simple question: Did New Zealand have a growth strategy to sustain business success? The answer was a resounding 'No'.

Only three players conceded that there was a strategy - or the beginnings of one.

One even pointed to the 1980s economic reforms and called them a growth strategy.

We received a response rate of close to 50 per cent.

By press time on Wednesday, the faxes were still coming back from busy chief executives determined to get their message across.

Alstom's Geoff Hunt speaks for many when he says there needs to be a long-term vision for New Zealand.

"No-one is clearly describing what sort of country New Zealand will be in 10-20 years' time," said Alstom, whose survey was among the first to be returned.

"If no one is painting the future, then it is unlikely that all the necessary steps will be taken to get us there. Even worse, without a clear view of the longer-term future, it is probable that short-term decision making will in many cases compromise progress towards that better future."

Adds Bell Gully's Matthew Cockram: "There is a lack of coordination and vision at a national level about what we stand for as a country - the notion of people living here for lifestyle reasons - the impression given is that we do not value hard work and success."

In fact, Finance Minister Michael Cullen does lay claim to a growth platform.

But it has yet to feature some of the elements business wants to put it on an internationally competitive footing such as lower taxes, a kinder regulatory regime and an end to creeping policies - particularly at the labour level - that chief executives say are "anti-business".

Sprinkled through the survey responses are strong suggestions from chief executives that the Government is "playing favourites" by holding confidential dialogues with a select few and closing the door to established representative organisations.

Which to some degree it has.

When Growth and Innovation Advisory Board chairman Rick Christie invited a select group of business players to the recent "Goverment-Large Businesses Forum" he said there was "no quick fix".

"The forum is a valuable opportunity to explore what else has to be done to markedly increase New Zealand's productivity and create the kind of inclusive economy from which all New Zealanders can benefit," said Christie.

Papers presented by the Knowledge Wave Trust suggested three elements must be embraced to accelerate economic growth: Adopt a growth lens against which all policies should be evaluated, adopt a growth mindset and a growth programme of action-oriented initiatives.

Former Treasury secretary Alan Bollard suggested that weak government policy, weak business acumen, weak social consensus and a weak country might have something to do with New Zealand's poor growth.

Growth mattered, said Bollard, because capital, people and firms had one thing in common. They were mobile.

Growth would be driven by better labour utilisation and productivity.

It would be hard. There were no silver bullets. We needed to get focus on investment, innovation and global connectedness.

"Roosters may Crow, but Warriors battle on!" said his presentation slide.

It is the latter point that the chief executives are finding difficult to grapple with.

If this is the case, where is the strategy?

Six weeks later the frustration is palpable even among some forum participants, who are concerned about the lack of progress.

"We need to improve competitiveness and productivity in order for New Zealand to change our ability to attract and build globally competitive industries," wrote Deutsche Bank's Scott Perkins.

"The elements of this would be dramatically improving government productivity - which would ultimately involve tax reductions, and increased private participation in core social services, reversing anti-entrepreneurial regulations (recent labour reforms such as those dealing with stress). Stepping up targeted immigration, attracting foreign direct investment, securing free trade agreements and improving Government and private sector R&D outcomes."

There are fears that New Zealand is fast losing competitiveness against Australia.

JB Were's Clark Perkins writes of an urgent requirement to understand that a strategy "must be compelling when compared to Australia".

"We are regionally competing for foreign direct investment and need to be able to demonstrate a pro-growth policy bias which can deliver superior returns when compared to our major competitor for dollars and talent."

Others from the Knowledge Wave Trust camp say growth should be a "lens" across all initiatives. "The Government has sort of got their head around making growth a lens for economic initiatives and policy, but then do not apply it as a lens to other areas such as local government, environment, labour market.

"So ultimately a very piecemeal approach and one step forward, two steps back."

This chief executive chose to make the criticism on a not-for-attribution basis.

But others were less shy in coming forward.

Says Ports of Auckland's Geoff Vazey, "You can't have a knowledge economy and innovative businesses and 'no risk' labour regulation."

It is the Government's failure to listen - and act - on business's real concerns that the chief executives find so frustrating.

Cockram again: "The trend towards greater regulation and government participation (e.g. Local Government Act and ACC) emphasises a distrust of the private sector that is unhealthy.

"It reinforces a culture of dependence."

Others spoke on a "not-for-attribution" basis. Here are just three viewpoints from very senior figures.

* "A growth strategy does not exist. It is politically driven and influenced, also mixed up and muddled over the Maori situation."

* "The Clark Government is all window dressing and no substance. So far they have been incredibly lucky with the NZ economy they inherited. Not to be trusted as essentially they are anti/do not understand business."

* "It is very easy to criticise but there are no easy answers. The Government has sought answers by addressing demand and skill shortages. If only they would fix the Resource Management Act and the resulting delays/greenmail."

Auckland Chamber of Commerce chief executive Michael Barnett noted: "Parties across the political spectrum appear to agree on growth through productivity, but there is little understanding of the processes to achieve improved productivity nor an understanding of the consequences of achieving it by the wider New Zealand audience."

All pointed to roadblocks to growing business.

Barnett's counterpart, Alasdair Thompson, from the Northern Employers and Manufacturers, notes, "Right now growth is hindered due to a lack of both skilled and unskilled labour. Yet there are 107,000 people unemployed, many of whom cannot read, write or do sums. Any person unemployed should be tested for their literacy and numeracy skills and given intensive teaching in these areas.

"Likewise, immigration policy should be geared to meet employers' demand for skilled labour.

"With education costing taxpayers nearly $1 billion each year and with nearly $6 billion invested in its capital assets, not to mention the investment in teachers' training, we must demand and get a better result from education.

"We must reduce the rate of company taxation to say 20c to attract more corporate investment. Twelve OECD countries have reduced taxes; none except New Zealand have increased them in recent times".

Thompson's view is supported by Beca executive chairman Gavin Cormack who puts forward a simple remedy: "Reduce costs of compliance with regulation and simplify tax laws, including those with our major trading partners. Minimise government intervention in business and private choice and use savings to reduce taxes."

The difficulty is, as other chief executives point out, that this is part of the Government's pre-ordained mix.

Other roadblocks include:

* Lack of privatisation of non-essential government businesses.

* A corporate tax rate that is uncompetitive with Australia.

Carter Holt Harvey's Chris Liddell notes that business also has to adopt a growth strategy - not just rely on cost-cutting.

Says another chief executive: The other key missing ingredient is our ability to price well, and often our own distribution chains determine that.

"In the tourism sector, despite very high volumes and growth at present, the sector within NZ competes too much on price eroding yield when the client is happy and prepared to pay."

The Government is forming working partnerships with some chief executives to drive some major initiatives forward. But the decision not to operate on an inclusive basis is clearly now losing it hard-won trust.

Many of those who responded to the Herald's survey did so with a frank passion to see this country's economy solidly placed on a growth track. But they have been excluded from the inner sanctum.

However, the analysis is not lacking.

CEOs point to:

* Insufficient private investment in so-called growth industries - like biotech, creative industries and ICT - which have been singled out for Government assistance.

* Inadequate public investment and poor incentives to encourage private investment and venture capital.

There also needs to be "more urgency and resource commitment" with respect to the growth programmes in place, noted one chief executive who has cut teeth in the Government partnership process.

The executive promotes a review of the welfare system to improve incentives and encourage innovation in welfare delivery.

Raise the free trade agreement push with the United States to the highest priority; Consolidate and simplify government - reduce cost and refocus around outcomes.

Business Roundtable executive director Roger Kerr remains on the outside ... but his views still carry weight.

"The absence of a credible growth strategy is the highest impact on confidence" he maintains.

Most recent initiatives have been anti-growth rather than pro-growth. As things stand, there is no chance of achieving Government's growth targets.

Another CEO adds, the correct platform for growth was set by the reforms of the 1980s. A growing number of businessmen are now saying the same.

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