Why the PM needs to take a breather
Attacks on business operators bum note after stellar efforts during lockdown
Jacinda Ardern’s predilection for making “captain’s calls” has been in full swing during the Covid-19 crisis. Her calm leadership is touted as instrumental to New Zealand now being seen as the “envy of the world” for getting the coronavirus, to all intents and purposes, eliminated within our island nation.
She — along with many others — has revelled in the nation’s success and she deserves considerable credit for keeping New Zealanders’ spirits up during the lockdown.
But the Prime Minister should take a rest.
It’s alert level 1 now and time for Ardern — who is a practised artist at self-promotion — to elevate and empower her Cabinet team to take the economic recovery forward.
Sooner or later, any long-term successful captain — or CEO for that matter — has to let the team play. If Ardern does not foster this team excellence it simply plays into the perception that her opponent Todd Muller is endeavouring to foster. The perception that the Labour Cabinet is simply the PM, three or four senior ministers, and, a bunch of “empty seats”.
Yesterday, she inserted a completely bum note into our first full day of alert level 1 by mounting angry tirades on multiple media channels against The Warehouse Group and Air New Zealand.
Ardern took issue with plans by the big box retailer to lay off 1000 people and with Air New Zealand for not giving cash refunds for now redundant bookings.
After months of prime ministerial cajoling it was off-key. It was almost as if she had decided to adopt Shane Jones’ well-established role as the Cabinet scourge of big business. It does not suit her. Directors, CEOs, managers and business owners around the country will respond better to political leadership that encourages them to invest more and stay the course so that over time their businesses do survive and grow again.
It is going to get extremely ropey, as Reserve Bank deputy governor Geoff Bascand reaffirmed on Jack Tame’s Q + A show on Monday night. Any level 1 spending blip might soon erode as redundancies mount up and people lose confidence. Bascand suggested house prices might also come off 10 per cent or more.
This just underlines the reality that retailers like The Warehouse Group, which has already booked considerable losses during the Covid19 lockdown period, will be waiting some time for margins to recover.
The Warehouse directors were gobsmacked when their public plan to operate — much like supermarkets
— was smacked down by Ardern herself during a Beehive press conference early in the piece. MBIE was still making its mind up about just who would be allowed to stay in business. The company did not make the cut; possibly for quite sound reasons when the mantra was to “stay home, save lives”.
The Warehouse Group was granted $67.7 million from the Government’s wage subsidy scheme to support the more than 11,000 jobs. This was split between its The Warehouse and Warehouse Stationery chains ($52m), Noel Leeming ($12.2m), Torpedo7 ($3.2m) and TheMarket.com ($400,000).
“The receipt of this funding is crucial to the group maintaining its workforce while stores remain shut,” it said.
The Warehouse has now reassessed its situation and had made the call on staffing levels. There is just not the appetite for big box solutions across the board and many consumers are making the switch to online shopping.
When employers, large and small, applied for the wage subsidy, their projected revenues had to be down 30 per cent. The subsidy was to keep staff connected to the company.
But no company can book revenue that simply is not there.
Other “larger companies” have also made tough calls.
Fletcher Building — led by senior directors under Bruce Hassall’s chairmanship — found its business operations had ground to a standstill due to the lockdown. In Australia, construction players were able to operate but Fletcher Building could not run that aspect of its business during the crisis. It also lost 1000 jobs.
Air New Zealand, the other subject of the Prime Minister’s wrath, has made the call on 4000 jobs and many more to come.
Air New Zealand obviously faces a solvency issue and can’t simply shell out cash it does not have to meet the demand for refunds at this stage.
If this is an issue for the Ardern Government it should get talks under way properly on an appropriate recapitalisation not mount a reputation-damaging fatwa against the airline.
Other major redundancies include Auckland Council (1100), SkyCity Entertainment (900), Millennium/ Copthorne hotels (910), Skyline Enterprises (600), Virgin Australia (600), Sudima Hotels (440) and Ngai Tahu (309).
Less public has been the impact of the crisis on the auto sector — proud companies, like Toyota, Ford and BMW; the first two of which have taken a big slap to earnings. Then there are major manufacturers like NZ Steel.
The agribusiness sector has been a shining star during the crisis with plenty of international demand for its products. On the domestic front My Food Bag has flourished.
Some 50 per cent of business leaders I surveyed after the May Budget said they planned to decrease staff within the next six months.
Yesterday, Ardern was showing the emotional strain on TVNZ’s Breakfast yesterday when host John Campbell probed her about the performance of her Cabinet minister Kelvin Davis dealing with the tourism sector fallout.
Ardern has no need to burn up her political capital in a destructive fashion by attacking companies whose leaders do not fire back.
Directors have been granted flexibility on solvency issues. But many company leaders I have spoken with in recent weeks have been pretty strung out themselves by the sheer weight and complexity of what they have been dealing with.
Perhaps it’s time “kindess” became a mantra for dealing with the business sector too?
It was almost as if [Ardern] had decided to adopt Shane Jones’ well-established role as the Cabinet scourge of big business. It does not suit her.