Business knows how devastating wild weather is and it needs Government leadership on climate. Photo / Sylvie Whinray
OPINION
Chaos? Did somebody mention a coalition of chaos? I can’t remember an election with more erratic behaviour than we’re seeing right now from the parties of the centre-right. What’s business - the traditional backbone of the centre-right - got to say about this?
Act leader David Seymour has even threatened to withhold supply, which prompted a leading right-wing commentator over the weekend to warn of “Act causing chaos in the lead-up to every Budget”.
Business, you might think, would regard that as a major threat to the stable government it needs to prosper.
Act and New Zealand First, both seeking National’s favour, are at each other’s throats. But they’re not fighting over their economic policies, even though they’re starkly misaligned. Instead, it’s because they’ve both pinned their hopes on highlighting racial divisions.
There cannot be many people who believe stirring up racial division is good for business.
Let’s talk about Covid, because these days few people seem to want to. New Zealand went through the pandemic recognising that health and economic objectives were interwoven. The result: we had one of the lowest death tolls and one of the best economic recoveries in the world.
Yet National’s deputy leader Nicola Willis complained at her party’s launch on September 3 that debt has risen from $5.6 billion in 2019 to $73b now. She did not say the single biggest reason for this was the borrowing that financed the Covid response, which kept businesses solvent and employees in work. To maintain the flow of trade, that money even kept Air New Zealand flying.
For a long time, the Government managed the crisis with a calm and confident guiding hand. There are questions to be asked about what happened later, especially with managed isolation and the initial rollout of vaccines. But the economic policies remained reliable and businesses benefited enormously.
National, in contrast, bounced around in kneejerk negativity in its early responses to the pandemic. Eventually, it got the idea and went on to support the massive borrowing programme. At every single stage. Business was consistently enthusiastic too.
It takes a lot of nerve to complain about that borrowing now. Or is it just amnesia?
Maybe we’re supposed to think it’s irrelevant, because look at the mess we’re in! Inflation is back.
But inflation was a by-product of the policies that kept business afloat.
Terrible debt? Actually, government debt is only 57 per cent of GDP, which is well below the OECD average. Less than the United States, Germany, Britain and Australia and comparable with South Korea, Sweden and Ireland.
Well then, what about those high taxes? In fact, New Zealand is only the 39th-highest-taxed country in the world. We’re 40th when it comes to corporate tax and outside the top 50 for GST and other sales taxes.
Anti-business? New Zealand consistently ranks as the easiest country in the world for doing business in.
The Prefu was interesting. The Pre-Election Economic and Fiscal Update, announced last week, is Treasury’s independent and reliable description of the state of the economy.
“The. Cupboard. Is. Bare,” said Willis, when she got the Prefu. Actually, it revealed the recession is probably over, inflation is falling, unemployment remains low, wages are rising faster than inflation and our credit ratings remain excellent.
Turns out the New Zealand economy is behaving very like the economies of Australia, Britain, much of Europe and the US.
The business pages of this newspaper are full of stories of strong profits, companies bouncing back, entrepreneurs taking on the world and winning. Even if those stories do jostle for space with the constant howls of anguish of various columnists.
Hang on, there must be some bad news. Isn’t government spending out of control?
Is it? Labour has already been panicked into an $8b programme of spending cuts, which will undermine services almost everywhere. National and Act promise at least that much again.
They say they won’t touch frontline services in “essential” areas like health and police. That’s just dumb: closing the backroom almost always compromises efficiency on the frontline.
Imagine being a pilot with, I don’t know, Air New Zealand, and discovering the boss has sent most of the ground staff home.
And where did the idea come from that other public services are non-essential? No one will benefit from the environmental destruction caused by cuts to DoC budgets. You’d think the thousands of tourism and other businesses that depend on the great outdoors would be chorusing their concern right now.
How does every single business in Wellington feel about the impending decimation of the city’s only two strong commercial sectors: the public service and film?
Not all the increased spending comes from Covid. Finance Minister Grant Robertson has indexed superannuation and benefits. Cyclone Gabrielle was extremely expensive. Transport and hospitals are struggling to catch up after decades of neglect. Teachers, police officers and nurses have received big pay bumps - but most would say it’s still not enough for what those jobs now involve.
It’s not irresponsible to spend this money. It’s irresponsible to pretend that not spending it will help.
Deferring essential spending increases the cost of fixing problems later and makes worse the things that money is supposed to fix.
This is the standout lesson of the John Key government. It doesn’t reduce debt, it gives us mouldy hospitals and that condemns our children to hardship and more debt.
Business leaders often bristle at proposals for minimum wage rises, fair pay agreements, extended parental and sick leave, diversity commitments and health and safety regulations. Evidence, they suggest, that the centre-left doesn’t care about business.
It’s astonishing this idea still has currency. The entire social-democratic project of the last 100 years has been to build a society that is “fair” and “safe”. Not merely because fairness and safety are inherently valuable. But so that businesses can proceed with confidence to make a profit.
The current Government has stalled in many parts of its programme, but the progress in workplace relations is real. Business should relish that because it’s good for their staff, which makes it good for them.
Are others doing it better? Yes they are. National leader Christopher Luxon often cites Denmark, Ireland, Switzerland, Singapore and Israel as model economies we should copy.
But all of them have more extensive welfare services, very good public transport, higher taxes and a tax system that minimises untaxed income and directs investment into productive sectors rather than houses.
The higher incomes in the mecca across the ditch, Australia, attract a top tax rate of 47 per cent. And they have stronger unions.
Act leader David Seymour spoke enthusiastically to the BusinessNZ conference this month about the Swiss economy. But Switzerland has wealth and capital gains taxes and a social insurance fund for long-term illness and redundancy. Swiss cities, even quite small ones, have light rail.
The problem with Labour is not that it’s wrecking the economy with social democratic madness. The problem is that in tax reform, healthcare, climate action and more, it’s been too cautious and done too little.
This befuddlement undermines confidence, and that’s bad for business. But fixing tax inequities will be good for business, because it will direct capital where it’s needed. Better healthcare will help business, because it will boost the wellbeing of staff and customers.
And any party that fails to take climate change seriously should be laughed out of town. Election promises about tax cuts or anything else will mean nothing if there is no fiscal and social plan to address the next Cyclone Gabrielle and the droughts and wildfires the new El Nino weather pattern will almost certainly bring.
Business knows how devastating the wild weather is and it needs government leadership on the climate just as much as the rest of us do. Sneering at the “ute tax” is pathetic.
All of which is why the logical choice for business is to vote Green.
One other thing. Luxon has come under sustained criticism for the nonsense he’s dished up in his revenue projections. The tax policies sit at the heart of his budget plans, but he can’t explain them and won’t release the analysis on which they’re based.
Instead, he complained last week about excess compliance costs. “Labour treats business like children,” he said. Actually, pretending everything’s fine, handing out treats and hiding the costs: that’s treating business like children.
It’s surprising he does this, given his background. He must know no one would buy a business from a boss who can’t explain the company accounts.
Simon Wilson is an award-winning senior writer covering politics, the climate crisis, transport, housing, urban design and social issues, with a focus on Auckland. He joined the Herald in 2018.
Julian Fitter has been contributing to conservation for half a century.