We could all be losers in a big business-union war

After a few months of playing nice, the gloves are coming off in the war between unions and big business, but the battle to influence the Government may see both sides lose.

For business, a very public fight against employment law reform is likely to worsen confidence in the economy, which is already threatening to drive New Zealand into a slowdown.

For unions, flexing their muscles to extract larger wage settlements might work in the short term, but in the end they risk a major slapdown from the Beehive.

Yesterday there was more evidence that the bottom lip of the corporate sector is dropping, with the quarterly survey of business opinion (QSBO) suggesting activity is weakening and profits falling. Leaving out the quarter of the Christchurch quake, the mood of the business sector has not been this blue since the financial crisis.

Business confidence is a story which has been developing since August, but is now starting to really matter. Ahead of the election it was easy to dismiss falling confidence as a blip which happens when a change of government is plausible.

For a few months after New Zealand voted it was possible to see political bias. There is strong evidence that general business confidence is heavily influenced by who is in government.

The latest QSBO – the leading survey of its type – suggests that, on the ground, the economy is slowing. If profits fall, so will investment and eventually hiring.

To make matters worse, there are early signs of rising inflation. The worst scenario would see the Reserve Bank forced to lift interest rates to curb inflation when confidence is weak.

Exactly how much of the problem is simply employers talking themselves into a gloom is unclear. Most of the drivers of the economy are still positive and this Government is intent on spending more.

There is a real risk that if New Zealand does get a slowdown, it will be remembered as the great corner office panic. Business confidence is selffulfilling, so the leaders of the business community might look in the mirror.

The recent push to demonise labour law changes will only increase uncertainty, possibly by more than the legislation deserves.

At the same time as BusinessNZ chief executive Kirk Hope sits on the working group on fair pay agreements – the most controversial aspect of Labour’s proposed employment reforms – the heads of his member organisations are waging a war of doom. Kim Campbell, who heads one of the Employers and Manufacturers’ Associations, BusinessNZ’s largest member, is describing the proposals as the ‘‘labour laws of yesteryear’’.

John Milford, head of Business Central, appeared to issue a threat, saying business confidence ‘‘is not going to improve as long as they [the Government] insist on pushing ahead with their proposed changes to industrial legislation’’.

If Milford really believes that, he should urge Hope to quit the working group in protest.

Union leaders are pushing back, as is certainly their right, but the movement in general could be wise to reflect.

Richard Wagstaff, president of the Council of Trade Unions, who is also on the working group, virtually dismissed business confidence on Saturday as ‘‘just a one-sided opinion poll of a handful of very wealthy people’’. He went on to say the views of business leaders matter ‘‘exactly as much as the views of everyone else’’.

The latter claim is absurd, hard though the union movement may find it to accept this.

Yes, business leaders are disengaged from many of the problems felt by many working people. And perhaps those same business leaders are confusing uncertainty from this Government with the fact that they simply don’t like it.

But business leaders are responsible for major investment decisions, which, for better or worse, determine whether the economy grows or contracts, directly affecting living standards.

Simply dismissing the significant influence they have on working people is alarming. The wider union movement should ask itself what it is trying to achieve, even though its instincts will tell it to ramp up pressure on the new administration.

So far, the Government’s handling of major pay negotiations has been weird. Nurses are now voting on a third pay offer, which is likely to be more than twice as big as the original, making a mockery of Health Minister David Clark’s recent claim that there was no more available.

The key message for unions is that threats work. But with business spreading panic about employment law reform and National claiming every strike is a sign that unions are in control, any threat of disruption should be seen through a political prism.

The Government would be forgiven for looking for a move to shore up its credentials as managers of a stable economy. If anything could prompt Labour to ditch it plans for labour law reform, it could just be the rising threat of industrial action from the unions it is trying to help.

The latest quarterly survey of business opinion suggests

. . . the economy is slowing. If profits fall, so will investment and eventually hiring.