Peter Dunne has seen many business cycles while in Government. He says Jacinda Ardern should genuinely listen to the business whiners and naggers, not just pay lip-service to hearing their concerns.
Debates around business confidence are not new. They arise frequently for every Government, and invariably occur whenever a centre-left Government takes office. So they need always to be taken with a grain of salt.
The present case is no exception, although the degree to which all the players seem determined to talk past each other is unusual.
Over recent years, the whining from business lobby groups about economic policy and Government direction has become as tedious and predictable as the wailing from the unions about how tough things are for their members. Both have developed a grating propensity to completely overstate their case, and then wonder why they are not taken all that seriously anymore. The irony is both groups have become pathetic mirror images of each other, tired old stereotypes, reeking of vested interest, stolidly out of touch with today’s fast moving, ever-changing economic and social environment.
While the Prime Minister’s exasperation at some of the increasingly strident and self-serving criticism of the Government’s economic approach is understandable, it is not clear from her responses that she is any more in touch with the issue. Her assertion that business confidence will recover once business understands properly the Government’s commitment to economic growth is as patronising as it is superficial. Her subsequent pushbacks that there is even an issue to be concerned about leave the Government looking as deaf to criticism of its policy direction as business is to its efforts to date.
Now, all this needs to be put into perspective. Governments do not rise or fall on the level of business confidence, nor does business confidence set the bar for Government performance. The Prime Minister is correct to an extent when she airily says business confidence is a measure of how business is feeling about itself at any given point. It is the “vibe of the thing”, if you like.
However, while business confidence levels rise and fall and may not be the most steady measure of economic performance and wellbeing, the Treasury forecasts are a different matter. Treasury has a habit of overstating potential economic upsides, but understating the impacts of down times, so when it warns of falling confidence levels leading to economic slowdown and falling Government revenues impacting on the ability to fund spending programmes, it needs to be taken very seriously. All the more, since the Prime Minister’s pitch to business seems to be that the Government’s planned spending increases are designed to boost household incomes and so promote economic growth. Therefore, any slowdown will leave the Government exposed.
At the same time, it should not be overlooked that this “winter of discontent” coincides with the Government’s first year in office, in pretty much the same way as happened in the Clark/Cullen Government’s first year in 2000, and that they went on to recover strongly from that over the next eight years. It is possible the same could happen again.
The test is slightly different this time, though. Now, in addition to Labour’s ritualistic attempts to re-regulate the labour market to ensure the union funds roll in for the next election, there are also the Greens’ potential environmental cost impacts on business and the economy, and the destabilising impact of the capricious delivery of Provincial Growth Fund money to areas and projects at the whim of mainly New Zealand First ministers.
While negative business sentiment is not as visceral as it was in 2000 (there has been no Michael Cullen “we won, you lost, eat that” moment to fuel it as yet) it is likely to be more difficult to shift for the above reasons.
The next quarter will probably tell the story. If there are signs of growth slowing, and unemployment levels plateauing or even starting to rise slightly, then the economic funk will become intensified. With international uncertainty likely to rise as Brexit wrangles continue, and the US-led trade war becomes more pronounced, the emerging cocktail does not appear especially attractive.
The Prime Minister’s comments this week that she is prepared to “hear” business concerns rather than “listen” may have been just an unfortunate, but imperious, slip of the tongue designed to show she is now back in charge.
More probably, it was another sign of a Government understandably exasperated at ongoing carping nagging, not knowing quite what to do, but as determined as ever not to be swayed from its course. It does not bode well for constructive engagement any time soon.
The Government’s difficulty is that dealing with the vibe of falling business confidence levels is like grappling with spilt mercury – the effort has to be made, but its very nature makes it very difficult to achieve, let alone hold on to.