Worsening crisis of confidence
Why NZ is heading for an investment crisis and full-scale economic downturn
The Government’s infantile style of dealing with business can only cause more despair. The current business confidence crisis is set to become an investment crisis and full-scale economic downturn.
Already Treasury has cut its growth forecasts while Statistics NZ reports unemployment is up. Inevitably, welfare spending will rise above budget, forecast tax-takes will fall and the Government’s projected debt-to-GDP ratio will increase.
The coalition’s budget rules mean its fiscal response can only be procyclical, cutting planned spending to keep within its debt-to-GDP cap.
The outlook risks being catastrophic not just to the thousands who will lose their jobs but also to the Government’s reelection hopes.
Jacinda Ardern and Grant Robertson have spent the week denying there is a crisis while also insisting it’s everyone else’s fault.
They are right that business confidence has slipped globally because of Brexit and Donald Trump’s trade war, but that does not explain why things are so much worse in New Zealand. Business confidence is plunging, not just in absolute terms, but also relative to the rest of the world.
Two years ago, New Zealand businesspeople were the second-most confident in the developed world.
Now they are the second-least confident, with pessimism as bad as during the Global Financial Crisis.
True to form, the Beehive’s response has included smearing those who collect the data and participate in the surveys. Trade Minister David Parker has led that charge, saying the studies are “junk”, a “survey of the emotions” and “the vibe of a self-selected subset of CEOs”.
Labour’s media surrogates have loyally argued it’s all just a tantrum about the colour of the new Government. But the Government is not “new”.
It was elected nearly a year ago and business confidence did not sink to its current depths immediately.
The real problem is that Ardern, Robertson and the rest of the Labour crew were either incapable, too lazy or too distracted to do any policy work during nine years in opposition.
The Government’s 100-odd working groups are designed to fill that gap, but their combined effect is to leave every area of policy open to radical change but with no real indication of the nature of that change or when it might happen.
We have no idea what taxes might be dreamed up by the Tax Working Group, let alone which will be implemented or at what rate.
The proposed independent Climate Change Commission means Parker and Nick Smith’s Emissions Trading Scheme might be replaced with something better or worse.
It’s unclear if the Government will streamline the Resource Management Act processes or expand the Auckland urban boundary. On water, some sort of tradeable rights scheme seems inevitable, with Ma¯ ori taking some percentage as with the fishing quota. But the Government is unable to indicate when it will happen, how it will operate or what it might cost.
Jacinda Ardern and Grant Robertson have spent the week denying there is a crisis while also insisting it’s everyone else’s fault.
Consequently, farmers and growers don’t know if their access to water will be restricted or a charge introduced. Potential new entrants, including iwi, don’t know if they might get better or cheaper access. Neither can invest until the policy is resolved.
Similarly, no one knows what Jim Bolger’s Fair Pay Agreements working group will conclude, with fears it will be the biggest reversal in industrial relations since Bolger himself abolished compulsory unionism in 1983.
Future immigration policy is unclear, despite its reduction being Winston Peter’s central political message for a quarter century. Almost every other important area of policy, including health and education, is equally up for grabs.
Meanwhile, businesspeople are right to worry Shane Jones might suddenly turn up at your competitor’s operation with a big cheque from his $3 billion Provincial Growth Fund.
After the oil and gas decision, there is no certainty internal coalition politics won’t mean your entire industry is suddenly declared unwelcome.
Alongside its diversions and smears, the Government tried this week to launch a charm offensive, with Ardern and Parker’s “Trade for All” initiative and Robertson’s people pointing media to a speech he gave at SkyCity.
The former is an Ardern special. A year-along “conversation” about what trade means to you, complete with yet another “advisory board”.
Robertson’s speech was the usual precis of historic economic data combined with vague references to an Economic Plan, written in the style of a high school debating runner-up.
The Beehive PR machine needs to remember it’s communicating with investors and business leaders, not infants. In fact, Robertson knows full well there is no plan. How could there be when absolutely any policy that counts, including even whether trade is a good thing, is to be left undetermined not just for weeks or months but, in some cases, for years?
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