Forget the gloom over NZ’s economy
We read in the media these days about low and falling business confidence. This is a view which I do not share.
I have a wide range of business interests from tourism to commercial property development to casinos.
If the economy was in real trouble, or investment and business operation was becoming more difficult, you would think I might notice it. I don’t.
Business is seldom easy. It’s not meant to be. In business we are always assessing risk, anticipating change and reacting as skilfully as we can.
One of the less attractive aspects of business activity is that while we espouse competition and market forces as a mantra, in our hearts we wish there was less competition or none. Often, just like unionists, businesses seek to combine together for greater strength.
This is why I am sceptical when people purport to talk on behalf of industry interests or gather to lobby Governments on that basis. I just can’t shake the thought that someone is trying to leverage an advantage against the rest of you.
Is business really going through a bad run at present in New Zealand? Our economic and political system, in fact, rates highly for integrity, innovation, legal structures.
Though you might not think so if you were an Auckland motorway commuter or a tourist looking for a toilet, our physical infrastructure is relatively strong.
Our social systems are relatively cohesive and our environment and climate relatively benign. We have good resources and energy.
Tax rates are relatively low. Education levels are relatively strong.
You might almost think it was a good place to do business.
This is not to say that everything is perfect.
We have many social and environmental issues which need urgent focus and attention. But the main point is that we face a generally supportive and benign environment.
I have looked at the various reasons which have been given for confidence survey outcomes.
Broadly they may be grouped as a reaction to Government moves on industrial relations, tax or levy impositions, and climate change-motivated initiatives.
On climate change issues, I think there can be little surprise that a coalition with the current composition has made some moves in this area.
For my part, I think that a positive business investment response to the climate and environmental challenges we have is exciting and will be a mark of this generation shifting from the complacent and careless response of my own generation.
In respect to taxes and levies, there are few people who like more of these. But the business and higher earner tax burden in this country is not high and there are no imminent proposals that either should be so. We do need, and I am confident we will get, some tax changes which are necessary to improve capital allocation.
The final area driving negative survey outcomes is that of industrial relations reform.
There is a concern within many businesses that we will begin to experience labour cost increases and that view is well founded.
We are currently seeing, and I hope we will continue to see, shifts in the lowest rates of pay across the economy. Social policies will also play a role but pay rates which cannot sustain acceptable standards of living are socially demeaning and destructive. There is no free lunch and achieving a change at the bottom level will have costs in absolute terms for the owners of business currently paying such rates. The change will also reduce demand for some jobs but undertaken within a context which is structured and staged properly will be less damaging than the alternative of not acting. We are better to do this together than not do it and take the social costs and disruption which are the alternative.
There are good reasons for business to be thinking hard about our future. Technology is the obvious one. But I’m not so concerned about the pace or even scale of change. The biggest danger is the concentration of economic and social power in a small group of very large and pervasive networks.
We could all, in the extreme, become modern commodity supplying peasants for these mammoths. This challenge can’t be met by our small nation.
We can only meet it by being an open, intelligent, commercial and co-operative participant in the global process.
The last area I want to address is the challenge we face to the authenticity of business on society. This “social licence”, as it is sometimes called, does not occur as a right. It’s earned. And recently, this licence has been challenged not so much by anything which Governments or wider society has done but more because of failings within business itself. When business is conducted with excessive greed or insensitivity it can readily lose its legitimacy in society. When this happens, it can severely wound the goose which we want to be laying golden eggs.
I, for one, am determined and confident that this will not happen on our watch.