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.
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.
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.
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.
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.
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 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.
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”.
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
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).
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.
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]”.
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.
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
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 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”.
