State of the Nation: Ardern is optimistic
In stark contrast to her first State of the Nation speech as prime minister, Jacinda Ardern has fronted up to a top business audience ahead of a raft of reforms that are likely to further unsettle the sector.
Ardern’s first State of the Nation speech was delivered at a Wellington church to a group of largely community and voluntary agencies and focused on poverty and children. The setting for yesterday’s speech was the Hilton Hotel in Auckland, attended by top chief executives and managers.
The PM spoke about the reasons for optimism in the economy – but acknowledged there were also economic clouds ahead. She also addressed the elephant in the room – a reference to her speech in mid2018 at the height of a chill in relations with business that saw business confidence plummet. ‘‘Last year I talked about the elephant in the room. Pleasingly, the elephant has gotten a little bit smaller in the past 12 months.
‘‘Perhaps it got to know its company and decided it wasn’t quite as scary as it first thought.
‘‘Either way, it’s pleasing progress and it is based on some strong fundamentals,’’ Ardern said.
‘‘Yesterday’s employment data showed wages are growing and unemployment is at 4.3 per cent, the second lowest in a decade.
‘‘The lowest was of course last quarter, and we are confident that we’ll reach our 4 per cent target by the end of our term.
‘‘Growth is relatively strong at around 3 per cent and is forecast to stay close to that level in coming years. Inflation is tracking at 1.9 per cent, and food price inflation remains low.
‘‘As you can see, on key economic measures the Government is delivering.’’
But the Government’s tax plans – including a contentious capital gains tax expected to be floated by its tax working group – and industrial relations reforms, could cause confidence to plunge again.
Ardern acknowledged that while economic growth remained strong, it was beginning to slow.
Trade tensions were a contributing factor and the concern for New Zealand was the flow-on effect from a further reduction in Chinese exports. ‘‘And then there is Brexit.
‘‘As all of you will have no doubt seen, the final form of Britain’s exit from the European Union is yet to be decided,’’ Ardern said.
‘‘Clearly, the risk of a no-deal scenario remains high. There is a lot of uncertainty around what such a scenario would mean, and while we are doing our best to create a buffer through, for instance, our recently signed mutual recognition agreement, a no-deal Brexit could still do harm to EU economies or disrupt financial markets.’’
New Zealand was well prepared, but needed to be realistic that if the global economy slowed, it would affect our own economic growth.
‘‘Now is the time to ensure we not only build greater resilience into our economy, but that we modernise it too.’’
Ardern said the Government’s plan included:
Doubling down on trade and broadening the trading base to protect exporters and economy
Reform of skills and trade training to address labour shortages and productivity gaps in the economy Changes to the tax system Addressing long-term infrastructure challenges
Transitioning to a sustainable carbon-neutral economy Investing in wellbeing
Ardern also signalled a big shake up in the tertiary sector to address skills shortages.
‘‘In the past our economy has been too reliant on buying skills through immigration. I want us to focus on how we can be better at growing the skills our economy needs.’’ Education Minister Chris Hipkins would announce ‘‘far reaching’’ proposals for consultation next week, addressing major structural issues in the current vocational training system.
Ardern said tax reform was an issue of fairness.
There would be time for everyone to see the report of the Tax Working Group, to debate what they said and to share views.
‘‘On key economic measures the Government is delivering.’’