Outlook: cloud persisting
Negative view of Government policies hasn’t improved, new Employers and Manufacturers boss tells Liam Dann
How is the business community feeling in 2019? Has that postelection gloom finally started to ease?
“No,” says new Employers and Manufacturers Association boss Brett O’Riley. “I think it’s probably gotten worse. I think people are incredibly nervous.”
O’Riley, in the job for less than a month, has been on the road, canvassing some of the EMA’s 8500 members.
And he’s no stranger to the business world, especially around Auckland, where he led Auckland City’s commercial development organisation Ateed until 2017.
O’Riley cites the deteriorating global economic outlook as an added pressure bearing down this year: the US/China trade war and “the seemingly delicate nature of our relationship with China itself, which is only becoming apparent now”.
“New Zealand business is definitely more exposed to global trends than they’ve ever been. The overhang of those issues affects sentiment,” he says.
Then, on the other side of the coin you have all potential change still on the Government’s agenda.
“It’s great having all of these reviews,” says O’Riley. “But a lot of those reports are now landing and people are concerned about: how real are these ideas? Are we going to have all this change at once?”
“People forget — businesses in New Zealand are pretty small.”
The average NZ business is run by an owner-operator, he says.
“Their ability to deal with that sort of regulatory change on one hand while they are dealing with market change on the other, is a real challenge.”
Though this interview predates Thursday’s ANZ Business Outlook, the latest numbers appear to back O’Riley’s anecdotal view.
While confidence wasn’t back to the record lows it hit last August, the ANZ survey does suggest a bounce-back late last year was short lived.
The monthly business confidence survey’s index dipped seven points in February, with a net 31 per cent of respondents expecting general business conditions to deteriorate in the year ahead.
ANZ chief economist Sharon Zollner says the bounce late last year is “at risk of petering out”.
“Anecdotally, the regional economy is booming, but there does seem to be a degree of wariness amongst firms,” she says.
“Increasing evidence of a global slowdown is likely playing a part, as well as the uncomfortable combination of elevated costs but limited ability to pass these costs on, which is impacting firms’ profitability.”
With a new set of employment law recommendations on the table after the Fair Pay Agreement Working Group’s report last month — and now the Tax Working Group suggesting a capital gains tax — it doesn’t look as though the tensions between business and the Government are going to let up anytime soon.
The prospect that O’Riley — who has a background in media, including time in the 1980s as a Labour Party press secretary — might have presented a softer, more Government-friendly face than his combative predecessor Kim Campbell, seem ill-founded.
He is highly animated about the policy shortcomings of the Coalition, as he sees them, in relation to a dynamic, rapidly changing business world.
There is a disconnect, he argues, between what the Government is saying about productivity, economic transformation, the “future of work” and the policy it is are putting forward.
Yesterday the Government released the terms of reference for the Productivity Commission inquiry into “the future of work”.
It’s essentially charged with making a national plan for dealing with — and making the most of — disruptive technological change.
It is an area O’Riley has long been passionate about.
His career history includes time at Telecom and he is a former chief executive of industry group NZ Information Communications and
Technology, and deputy chief executive of Business Innovation and Investments for the Ministry of Science + Innovation.
“I went to Singularity University in Silicon valley a couple of years ago and did the executive programme. That was all about disruption. The impact of robotics, artificial intelligence, block chain,” he says. “That was all about: we’re going to need to be more flexible and dynamic.”
EMA member businesses deal with that stuff every day, he says. “Then on the other hand we seem to have a policy direction that is back to the 1970s and 1980s with much more rigid workplace regulation — there’s a fundamental conflict in the middle of that.
“It’s our job to try and resolve that, to make sure we don’t encumber New Zealand business with an environment that makes it hard for them to be successful.”
The EMA and the current Government are certainly on the same page in believing that New Zealand needs to boost productivity — it is a particular passion of Finance Minister Grant Robertson.
“Successive governments haven’t really got their head around that,” O’Riley says
“Whenever we start to talk about change in the business community, the first question we have to ask ourselves is: is this going to improve productivity?
“When I look at the fair pay legislation, I don’t think that addresses productivity at all.”
"We seem to have a policy direction that is back to the 1970s and 1980s with much more rigid workplace regulation – there’s a fundamental conflict in the middle of that."
He recalls the Prime Minister making the point at the recent Business NZ breakfast, that the Government wasn’t going to pick sectors to focus on.
“They want a workforce that is going to pivot to opportunities,” he says. “That says to me flexibility, multi-skills, that says to me maybe we’ll have people with two or three jobs at the same time. Because they’ll be operating in a different mode.
“When I look at that as where we need to be, I’m concerned, and our members are concerned, that we’re on the other side looking at what is quite a traditional way of thinking about employment.
“The nature of work has changed,” he says. “We are a 24 by seven economy. We’ve got businesses that don’t export goods, they export services . . . how do we respond to that?
“How do we respond to demographics?
“People are going to be working longer in life because they want to, they are healthier, and we want them to. We are short of skills now.”
Another big issue for business right now is skills shortages and a tight labour supply.
“We have to be very careful with immigration policy,” O’Riley says. “Finding skilled people is really hard. There’s always a goal of getting as many New Zealanders into employment as possible, but right now we’ve got members screaming that they cannot find skilled workers.”
That’s across the board in everything from technology to construction.
He says the EMA has members with export orders lined up that can’t be filled because they can’t get the staff to process them fast enough.
The EMA understands what the Government is dealing with and what it is trying to achieve in broad “directional” terms, he says.
He gets that this is a Labourled Coalition, with a different ideological leaning to manly businesspeople.
But more balance is needed and more focus on the longer term impact of policies, he says.
“The devil is in the detail.