What business is lobbying government for - Bryce Edwards’ Political Roundup

THREE KEY FACTS

• The Herald published the latest Mood of the Boardroom report on Thursday.
• It details precisely what CEOs are saying about a wide range of topics.
• Business leaders have given their verdict on the Government in the survey.

Dr Bryce Edwards is Political Analyst in Residence, Director of the Democracy Project, School of Government, Victoria University of Wellington.

OPINION

Business interests are constantly lobbying politicians and officials about the changes they want made to the economy, politics and society. They are a powerful voice in the halls of power, but their influence is usually hidden and secretive. That’s why it’s helpful that each year the New Zealand Herald publishes its “Mood of the Boardroom” report, detailing precisely what CEOs are saying about everything from company tax rates to levels of spending on defence.

The 22nd edition of the Mood of the Boardroom was published on Thursday, providing an idea of what 103 top businesses are lobbying the Government about. Below are the Top 18 takeouts about what CEOs want from government and other observations from the business elite.

1) CEOs want tax cuts for business

New Zealand has a company tax rate of 28%, which has been gradually decreasing over the years, accompanied by an increasing proportion of the tax take coming from people’s incomes and expenditures. Unsurprisingly, the business elite want to continue that trend and are therefore asking the coalition Government to cut company tax further.

BusinessNZ is leading the charge, with its former National MP and grocery sector lobbyist, Katherine Rich, recently installed as its new chief executive. Rich told the Herald that New Zealand needs to match Australia’s lower tax rate of 25%, or we will lose investment to the other side of the Tasman.

Thomas Pippos of Deloitte has written an article for the Herald reporting that two-thirds of business leaders want the 28% company tax rate reduced to 25% by 2027. And he reports that some businesses want the rate much lower still: “NZ Windfarms chair Craig Stobo suggests we look at Singapore, which has a headline corporate tax rate of 17%.”

2) Business is lobbying for tax relief for the ultra-rich

New Zealand needs to attract more of the ultra-rich to live and invest in this country, according to CEOs surveyed by the Herald. Many of those surveyed advocate for reducing barriers to high-net-worth individuals by making tax responsibilities more attractive.

In his summary of the Mood of the Boardroom, Pippos highlights a plea for tax reform, saying that “taxation of trusts at 39% and the removal of tax depreciation of buildings” are two problems that need to be fixed for the ultra-rich. He also wants the Foreign Investment Fund (FIF) rules made more investor-friendly. Pippos quotes a company director saying: “This is a major deterrent to the introduction of new capital and personal networks to NZ that must be addressed with urgency”.

Pippos cites that other CEOs want action on these issues: “77% of respondents remain concerned about our ability to successfully compete in attracting capital and labour, including around our tax settings. With this amount rising to 85% of those supportive of developing more permanent rules to attract and retain high net worth individuals in New Zealand who otherwise face challenges with their pre-existing investment structures integrating into the domestic tax rules.”

3) CEOs are open to a capital gains tax

One of the more surprising outcomes from the survey of CEOs is their openness to a capital gains tax being implemented. Although business leaders and the wealthy have traditionally opposed greater taxation on income derived from the increasing value of assets, the mood seems to be shifting. The survey shows 41% of CEOs were open to a capital gains tax.

Many CEOs also raised the need for a capital gains tax in discussions about the Government’s structural revenue deficit. Some CEOs state an awareness that further taxes on employment and consumption aren’t viable, and a capital gains tax is the only viable alternative. There’s also some awareness that existing or greater state expenditure will be increasingly necessary in many parts of the welfare state, especially health and education. Not surprisingly, therefore, 77% of CEOs see the need for structural changes to be made in the tax system.

4) A growing demand for radical structural economic reform

Get ready for radical economic reform if the business lobby gets their way. There seems to be widespread hunger among the business elite to see a significant shake-up of the economy and state. Respondents to the Herald survey believe that the current Government’s focus on fiscal prudence and incremental reforms is insufficient to address New Zealand’s economic challenges. They argue that a more ambitious and transformative agenda, potentially reminiscent of Rogernomics or Ruth Richardson’s reforms, is needed to drive significant economic growth and improve productivity.

According to the report’s main author, Fran O’Sullivan, “It’s now time to pivot hard and focus on bold moves necessary to spur economic growth. That’s the prevailing sentiment in the 2024 Mood of the Boardroom CEOs survey”.

It’s not yet clear whether the National-led Government is willing to deliver such extensive reforms. Yet, O’Sullivan also reports that Finance Minister Nicola Willis wants to install a new Treasury boss who can provide radicalism: “When it comes to hiring a new Treasury Secretary expectations are clear. Willis is known to favour a successor who has the policy chops and verve of a Graham Scott or Murray Horn who led Treasury through the major economic reforms of the 1980s and early 1990s”.

Notably, the outgoing Treasury Secretary, Caralee McLiesh, recently warned that New Zealand required structural changes, especially in terms of the deficit. According to the Mood of the Boardroom, 77% agree.

Much of the focus of the CEOs is on the Government’s need to engineer greater economic productivity – which is seen as the big missing ingredient in New Zealand at the moment, which is reminiscent of what CEOs were lobbying for prior to the Rogernomics reforms. Outlining the extent of the problem, economist and business leader Cameron Bagrie says in New Zealand, “Productivity for the whole economy averaged 1.4% per annum between 1993 and 2013 but averaged only 0.2% per annum over the last 10 years.” Hence, many CEOs specified that the Government needs some bold new policies to stimulate economic growth proactively.

5) Business wants deregulation of the economy

The demand to “reduce red-tape” and regulations of the economy is a very strong theme coming from the business sector in the Herald’s report. Numerous CEOs argue that over-regulation is a burden on businesses and is stifling economic growth.

BusinessNZ’s Katherine Rich most strongly lobbies for this. She says that New Zealand has too much regulation that is not fit for purpose, and argues for “streamlining” of rules for business. Similarly, Deloitte’s Pippos argues that over-regulation in New Zealand “creates a deadweight cost on the economy”.

For this reason, CEOs are positive about the Government’s establishment of a Ministry of Regulation. Its importance in the Government’s agenda is rated as 3.5 out of 5.

The Employers and Manufacturers Association says that it is also lobbying for specific deregulation for its members – a “tidy up” of the Holidays Act. It also wants the Government to make the education system more responsive to the needs of business.

6) Public sector reform being encouraged

CEOs are already highly supportive of Nicola Willis’ financial cuts to public agencies – 83% of respondents support her imposition of the 6.5% budget cuts, with some respondents wanting bigger cuts.

Businesses also appear to want reforms to make the public sector become closer to the private sector. Reporting on this, Bill Bennett says: “A clear majority of respondents (81%) support more private-sector appointments to the public sector. Only 3% are against and 16% are unsure.” Furthermore, he reports, “Another leader would like to see the public sector offer secondments to private sector executives.”

CEOs also want the public sector to prioritise the private sector’s needs more with 66% wanting the number one priority of agencies to be supporting economic growth.

7) Business is lobbying for the state to fix infrastructure

The state of New Zealand’s infrastructure is a core concern for businesses. CEOs were asked: “How confident are you that New Zealand is investing enough in the renewal of critical infrastructure, such as state highways, local roads and water systems, to maintain these assets for the long term?” On a scale of 1 to 5, businesses registered an average confidence rating of only 2.1/5.

The business elite are, however, very pleased with the Government’s new National Infrastructure Agency and the development of a 30-year infrastructure project pipeline – they rated this as the Government’s most important reforms so far with a score of 4.4 out of 5.

8) Business wants Public Private Partnerships to be utilised more for infrastructure

There’s a strong belief that the private sector should be entrusted with government contracts to build, own and maintain public infrastructure, using “public private partnerships” in which the state pays for public infrastructure to be delivered by private contractors who operate for profit.

Asked about Public Private Partnerships (PPPs), 95% of CEOs said the Government should be open to funding critical infrastructure in this way. CEOs believe PPPs help harness expertise and resources from the private sector.

However, the report also conveys that some CEOs strongly dissent on this, believing that PPPs end up being too expensive and the contracts too complicated.

9) Businesses are backing the fast-track act

The Resource Management Act is unpopular with business, and there seems to be a consensus in the boardrooms that the Government’s new Fast-track Approvals Bill process is the right way to deal with the infrastructure deficit. Overall, the CEOs rate the importance of the fast-track act as 4.1/5, and therefore one of the most essential new reforms.

10) CEOs complain about ‘short-termism’ and flip-flopping

There’s a frustration amongst business leaders that National and Labour governments continue to cancel each other’s reforms, and then fail to deal with some of the big problems and challenges. The political system is deemed to be mired in “short-termism”.

Some CEOs agree with the politicians that the electoral term is too short, and therefore want elections less frequently. For example, Mainfreight’s Don Braid says: “A longer political cycle of four or, even better, five years would allow government to plan and deliver rather than worrying about political consensus.”

In general the business leaders seem to want National and Labour to find more bipartisan agreement on policies, producing a more stable business environment. And unsurprisingly, there’s an expressed need for all governments to consult more with business interests.

11) Business contentment with a business-friendly coalition Government

It’s no surprise that business leaders are generally happy with the new coalition Government and the business-friendly political parties and politicians involved. What is interesting is that the politician they rate the highest is Education and Immigration Minister, Erica Stanford, who has received an evaluation of 4 out of 5.

In contrast, Prime Minister Christopher Luxon only gets a rating of 3.7/5, making him the sixth-best performer in the Government, according to CEOs. Other party leaders in the coalition are evaluated even lower: Winston Peters is just behind Luxon, on 3.66/5. And David Seymour gets rated 3.4/5.

Education Minister Erica Stanford and Prime Minister Christopher Luxon. Photo / Mark Mitchell

12) Businesses want to see business-orientated reform

It’s no surprise that two of the highest evaluated ministers are Finance Minister Nicola Willis and Infrastructure Minister Chris Bishop – both rated 3.9/5. These are the ministers delivering the core demands of the business sector (along with Stanford in Education).

Again, it’s not surprising that the reforms that businesses see as most important are those relating to economy, infrastructure and their business operating environment:

• Infrastructure reforms: 4.4/5
• Education reforms: 4.2/5
• Crime reforms: 4.1/5
• Building international connections: 4.1/5
• Fast Track Act: 4.1/5

In contrast, business appears to have little interest in the Māori-Crown relations, Treaty, and related culture war reforms, giving this area a rating of only 2.9/5. Similarly, the importance of the repeal of NZ’s smokefree laws is given a rating of only 1.97/5.

13) CEOs don’t rate the current opposition parties

While Labour was in power, the business CEO gave many of the last ministers very high ratings – especially politicians such as Jacinda Ardern, Grant Robertson, and Andrew Little. Yet, now in opposition, the remaining frontbench Labour MPs are being rated very lowly. Labour leader Chris Hipkins gets a derisory 2.3/5 for his performance.

He’s being surpassed by Kieran McAnulty (2.8), Barbara Edmonds (2.7), and Ayesha Verrall (2.4). The lowest performers on the frontbench, according to the CEOs, are: Willie Jackson, Willow Jean Prime, and Jan Tinetti (all about 1.9).

Other opposition leaders are also rated poorly by business at the moment. For the Greens, Chlöe Swarbrick receives a rating of 2.5/5, while co-leader Marama Davidson is on only 1.8/5. Te Pati Māori’s Debbie Ngarewa-Packer and Rawiri Waititi share the same rating of only 1.7/5.

14) The tearing of the social fabric concerns business

Businesses make their best profits when society is stable and prosperous. But increasing social divisions and turmoil are threatening this stability at the moment. And business elites are worried about what this means for business.

Tim McCready explains: “The lack of societal cohesion and its impact on economic stability was also raised as another point of concern.” Commenting on this, business director Rob Campbell says, the “instability and uncertainty of social, economic, and environmental conditions dominate”.

Economist Cameron Bagrie also writes about this in his article, saying: “Businesses are aware of the corrosiveness a divided society has on the economy, recognising a key role of government in wealth inequality is ensuring minimum levels of welfare and income [67% of respondents]”.

Several CEOs are quoted expressing their concern about increasing strains on the social fabric. Blair Glubb of Uno Loco says that one of his top concerns at the moment is: “Divisive social policies that weaken New Zealand as a brand and as a society.” Simon Bennett of Accordant lists two major concerns in this area: 1) “Inequality. We need social cohesion and incentives for people to get a lift up” and 2) “Separatism. We need one country one people”.

Paul Newfield of Morrison states his major concern is: “Widening social division: We need to move away from small-minded divisive issues and focus on building a better New Zealand together.” And Silvana Schenone of Jarden lists the following as their major concern: “Social ‘unrest’: Many issues: Relationship with Māori, crime, youth education, drug use. We need to heavily invest in education, opportunities in New Zealand for young people. We need to encourage all sectors to work together.”

15) Business’ favourite government department is Mfat

Business leaders were asked to rate the effectiveness of government agencies. The top rating was given to the Ministry of Foreign Affairs and Trade (Mfat) – with an average score of 3.7/5. This isn’t surprising as the department is particularly pro-business, and prioritises the role of supporting private enterprise overseas. And related to this, relatively high scores were given by CEOs to New Zealand Trade and Enterprise (3.5/5) and the Ministry for Primary Industries (3.3/5). The Department of Prime Minister and Cabinet (DPMC) also scored very highly, with 3.6/5.

In contrast, however, Treasury – which used to be a favourite of business – is now only rated at 3/5. One CEO is quoted: “Treasury is improving but it’s a pale imitation of the quality ideas shop it was a decade ago”.

At the bottom end of CEO assessments are: Ministry of Business, Innovation and Employment (MBIE) at 2.6/5, the Ministry of Transport, and the Ministry of Education. The lowest rated agency was the Ministry of Health on 2.1/5.

16) A concern to walk the fine line on China Vs US

Most CEOs think that Prime Minister Christopher Luxon is doing a good job of the fine line he’s walking to satisfy both Washington and Beijing. According to Fran O’Sullivan, “72% of respondents to the NZ Herald’s 2024 CEOs survey believe he has struck the right balance”.

Some businesses, however, are reliant on New Zealand’s good trading relations with China, and are being reported as having concern that Luxon is too focused on traditional alliances. One exporter CEO is quoted saying “He does need to be careful to play too much to US interests” and Cordis hotel CEO Craig Bonner says Luxon is “too hawkish”.

17) Business is pro-Aukus and wants greater defence spending

Most CEOs want New Zealand to join up to the second pillar of the Aukus military alliance: 53% said they are in favour, 12% are opposed and 35% unsure. Amongst those speaking out in favour, Air New Zealand chair Therese Walsh stated: “We are too small to lose the protection of these nations”. And Foodstuffs North Island CEO Chris Quin wants involvement in Aukus to “keep our people safe”.

Economist Cameron Bagrie writes in the report that New Zealand should “Expect pressure from our Aukus ‘friends’ to lift defence spending. And most CEOs say they are keen on this: 64% are favourable, against 23% in opposition, and 13% are unsure.

Republican US presidential candidate Donald Trump and Democratic Vice-President Kamala Harris. Graphic / NZME

18) CEOs want Kamala Harris to beat Donald Trump to be US President

Former Prime Minister John Key has recently expressed his backing for Republican candidate Donald Trump to win the US presidency. But he seems to be out of sync with New Zealand CEOs who are heavily favourable to the Democrat nominee Kamala Harris.

The Herald’s Tim McCready reports “82% of respondents favour Harris, while only 4% support Trump, with a further 10% unsure and 4% opting for ‘other’.”

Time for a ‘Mood of the Waiting Room’ report?

The Herald’s Mood of the Boardroom report is invaluable reading for those that want to know where the current coalition Government is headed. The sources interviewed and surveyed by the Herald offer insights into the vested interests present in New Zealand society, and about what they are lobbying politicians about.

Obviously, the individuals and the organisations represented in the report have a concern to promote economic growth, reduce costs, and enhance profitability. This is evident in their calls for lower corporate taxes, streamlined regulations, and infrastructure development.

Of course, these demands are only one side of a big struggle going on at the moment. And perhaps it’s now time to hear about the voices in “the staffroom”. Or given problems in places like the health system, we need to hear more about the “mood of the waiting room”.

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