Does business want what our politicians are peddling at this election? Rod Oram delves into the latest Business NZ pre-election survey.
The pandemic is making New Zealand businesses far more focused on short term survival; but less focused on strategic issues which would help them to recover better now and contribute to strong economic regeneration in the years ahead.
Moreover, some economic issues low on many business people’s agendas are top of the campaign promises of National, ACT and New Zealand First. This suggests they are not listening carefully enough to the sector they consider core to their support.
These two broad themes, and detailed examples that support them, can be drawn from the pre-election surveys of its members which Business New Zealand carried out before this election and the two previous ones. These are links to the 2020, 2017 and 2014 surveys.
Interpreting the data requires three caveats, though. First, Business NZ, in partnership with Deloitte and Chapman Tripp, has achieved a good cross-section of respondents by company size, sector and geography. But the responses are not fully representative of all businesses. The samples are relatively small – 1,193 this year, 575 in 2017 and 1,147 in 2014 – and are all Business NZ members.
Second, this year’s survey closed on June 25 when the lockdown was over and the country was back down to alert Level 1. But seven weeks later, Auckland was back at Level 3 and the rest of the country at Level 2. For business and society at large, this second period has been far less restrictive and much more business has been done. That might have made some of their responses more optimistic and future-focused if the survey had closed later.
Third, while there is general consistency of questions across the three surveys, there are a few differences so not all data are directly comparable. Notably, this was, of course, the first survey that asked businesses how well they felt the government was handling the pandemic. The answer was: excellent 29 percent; good 42 percent, average 22 percent; and poor 7 percent.
This strong business endorsement of the Government’s actions to date has made opposition parties reluctant to criticise the Government’s pandemic track record or to propose future actions which are much different. That’s helpful, since a strongly science-based consensus is crucial to a country’s successful pandemic response.
The starkest response in this year’s survey is the answer to the question: Which of the Government’s current four wellbeings should be its highest property? The answers were: economic 86 percent; social 7 percent; environmental 6 percent; and cultural less than 1 percent.
That answer is all about the economy because the question gave no scope for respondents to weight their answers across the four capitals. However, answers to some other questions suggest many respondents are focusing almost entirely on the financial health of their company, which is vital, of course, rather than including other contributors to its survival.
For example, one question asks respondents to identify their top six topics for achieving sustained economic growth. The economic environment rated first, with 55 percent of respondents up sharply from 29 percent in 2017; investment, innovation and sustainability was second with 21 percent, down from 23 percent in 2017 and 35 percent in 2014; skills and human capital were third with 8 percent, down from 17 percent in 2017 and 23.5 percent in 2014; infrastructure was fourth at 6 percent, down from 13 percent in 2017 and 9.5 percent in 2015; the employment environment was fifth at 6 percent, unchanged from 2017; and international trade was sixth at 5 percent, down from 10 percent in 2017 and 11 percent in 2014.
These scores likely reflect a short-term focus on survival. But the de-emphasis of investment, innovation, sustainability, human capital and skills in the short term will still undermine a company’s ability to cope, recover and thrive in these intensely challenging times.
Similarly, concerns about the climate crisis have eased. In the 2017 survey, 27 percent of respondents said the climate crisis would have no impact on their companies. But this year, that answer of no impact jumped back up to 42 percent, just shy of the 44 percent in 2014.
The answers to a related question, however, are more encouraging: “Why are sustainability issues important to your business?” Customer expectations were top, attracting 65 percent of respondents, up from 58 percent in 2017; reputation was next with 60 percent versus 55 percent; future proofing 53 percent versus 52 percent; competitiveness 36 percent versus 31 percent. Scores were little changed for: reduced costs and efficiency; product positioning; attract and retain staff; and for sustainability not being an issue.
The three surveys hold a number of surprises. For example, 61 percent of respondents in the latest survey said they were prepared to pay their lowest paid staff the Living Wage, up from 44 per cent in 2017 (when the question was asked slightly differently) and 46 per cent in 2014.
Given the voluntary Living Wage is higher than the statutory Minimum Wage, the pledges of National and ACT to halt increases in the latter for a while may not appeal widely across business.
Similarly, higher government debt is not a fear for all businesses. In this year’s survey, 33 percent of respondents said they were “comfortable” with forecasts of net debt rising to 53.6 percent of GDP in 2023, while 60 percent said they were not comfortable; and 7 percent were unsure.
Broadly speaking four factors will largely determine the debt number: genuine demand for government pandemic financial support; spending discipline, economic growth rates; and tax rates.
The Business NZ surveys are surprising on taxes. Support for a capital gains tax has been consistently strong at 27-28 percent of respondents in 2014, 2017 and this year. But a willingness to pay a higher personal tax rate has fallen from 20 percent of respondents to 9 percent over that time.
Given many of those respondents have or will receive taxpayer funded financial help for their businesses in these Covid times, simple fairness suggest a minuscule increase in the top rate of personal taxation for those who earn enough for it would be an appropriate contribution to make.
As an important reflection on the subject of government finances, separate from these surveys, it’s worth noting that this week’s pre-election forecasts from Treasury led to some headlines about a “decade of deficits” in government budgets. Indeed, there are negative numbers all the way out 15 years to 2034, the latest date. But after the first five years, those are only projections because such distant forecasts are impossible to make.
Moreover, government revenues and expenditures are defined only as percentages of an unknowable GDP figure. The deficits are merely a sliver of a difference between those two huge numbers. If you go back to the 2011 pre-election Treasury forecasts, at the height of the enormous Christchurch earthquakes’ hit on government finances, you’ll see Treasury’s projections out to 2026 have been an equally unreliable guide to date.
As always, the future is ours to make. Which is why the lack of insight and ambition in the election campaigns is making them so disappointing. This was particularly on display in the three post-survey webinars Business New Zealand held with the leaders, finance and environment spokespeople of the five parties with MPs in the out-going parliament.
Labour and Greens made the best of the weak pitches about our future; NZ First’s “handbrake on bad ideas and extreme ideology” was the best it could manage; and National and ACT defaulted to their simplistic and tired old slogans.
ACT was the most brazen. The Debt Destroyer tool on its website enables its fans to cut government borrowing for Covid recovery by $39 billion, while rewarding citizens tax cuts of, as it happens, $39 bn.
If you’re seeking a more hopeful and realistic guide to the future, watch out for the launch on September 24 of the economic proposals from the Sustainable Business Council and the Climate Leaders Coalition. While many of their members are also Business NZ members, they are the enlightened and bold end of town.
It’s a big ask. But maybe in the last three weeks of campaigning before the election they can push politicians and business to offer us the resilient and prosperous future which we need to build, and can.