A recap on pre-Budget announcements in the lead-up to Thursday's full Budget announcement. Video / NZ Herald
Max Whitehead is Whitehead Group Employment Solutions managing director and Small Business Voice chief operating officer.
OPINION
New Zealand is at a critical juncture. With the national debt escalating to $155 billion and the country borrowing $75 million each day, it is evident that immediate and strategic actions arerequired to stimulate the productive sector, the true engine of our economy.
Despite a significant increase of 16,000 public servants since 2017, the Government’s focus must now shift away from dismissals towards enhancing productivity within the private sector, which is crucial for sustainable economic growth.
New Zealand’s productive sector is struggling. Despite its pivotal role in generating national revenue, the country’s productivity ranks at the bottom of the OECD and continues to decline.
This decline is reflected in the alarming increase in business liquidations, up by 20 per cent, and company shutdowns, which have surged by 50 per cent in the past year.
Government departments’ preference for contractors over permanent employees is primarily a tactic to avoid stringent employment laws.
Currently, 93 per cent of New Zealand enterprises employ fewer than 20 people, amounting to 546,000 small employers.
These small businesses, the backbone of our economy, are grappling with rising costs of supplies and freight, coupled with an increasing incidence of violence and abuse against business owners.
An especially troubling trend is the exodus of skilled workers. The best and brightest talents are leaving New Zealand in search of better opportunities abroad, significantly impacting the productive sector.
Max Whitehead says the Government's use of contractors is often an attempt to evade employment law niceties - and it would do better to address the real needs of truly productive small business. Photo / Mark Mitchell
This brain drain hinders innovation and the overall growth potential of New Zealand enterprises.
Government spending has predominantly focused on public servants.
While transitioning public servants to beneficiary lists might reduce some immediate costs, it does not address the core issue of national debt.
Only by increasing productivity in the private sector can New Zealand hope to reduce its debt sustainably.
To stimulate the productive sector, the government should incentivise financial institutions to support businesses in investing in technology.
New Zealand enterprises desperately need advancements in artificial intelligence, robotics, drones, and sophisticated machinery. These technologies can help businesses operate more efficiently and compete on a global scale.
By providing easier access to loans and financial backing for such investments, the government can empower businesses to adopt cutting-edge technologies that enhance productivity.
This will not only make businesses smarter and faster but also enable them to outpace international competitors.
Solution 2: Simplify employment and health & safety laws
The overly complicated employment and health and safety laws have contributed to New Zealand becoming a nation of small contractors.
To foster a more stable and competitive business environment, these laws need to be simplified. Relaxing compliance requirements will encourage businesses to consolidate, creating larger, more competitive enterprises capable of leveraging economies of scale.
By streamlining regulations, businesses can focus more on growth and less on navigating bureaucratic hurdles.
This consolidation will also foster a more robust job market, providing greater job security and potentially reversing the trend of talent migration.
Solution 3: Simplify tax
Given that the vast majority of New Zealand enterprises are small businesses, tailored support is crucial.
Simplified tax codes, tax incentives for research and development, and reduced compliance costs can significantly aid these businesses.
Furthermore, improving infrastructure, such as transportation and digital networks, will help businesses reach wider markets more efficiently.
Solution 4: Fighting crime
To counteract the rise in violence and abuse against business owners, it is essential for law enforcement agencies to be adequately resourced. A safe and stable environment is crucial for economic activity and for attracting investment.
New Zealand’s economic future hinges on revitalising the productive sector.
By incentivising technological investments and simplifying burdensome regulations, the Government can create an environment conducive to business growth and innovation.
These measures will not only address the immediate financial challenges but also lay the groundwork for sustainable economic prosperity.
It is imperative for the Government to act decisively and strategically.
By focusing on the productive sector, New Zealand can overcome its current economic challenges and pave the way for a thriving, resilient economy.
The time for action is now, as the future of New Zealand’s economy depends on our ability to stimulate and support the productive sector.
