Jacinda Ardern’s shock departure comes amid record economic uncertainty. But to some pundits it’s grounds for new optimism
Business confidence was down in the dumps before Jacinda Ardern announced she would step down as Prime Minister, a move casting further uncertainty onto the deeply troubled economy.
Earlier this week the New Zealand Institute of Economic Research quarterly survey of business opinion recorded business confidence at its weakest since the survey began in 1970.
Almost three-quarters of businesses expected conditions to worsen over the coming months.
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Ardern and her Labour Party may not have been overly popular with the business community, but according to the institute’s principal economist Christina Leung, her resignation would create unwanted uncertainty.
Business confidence always weakens before an election as businesses hold off on making any large decisions before they know the outcome and the policies and environment being brought into play.
“Businesses are always looking for someone who can come out with a clear plan of what they’re going do with the economy over the coming years so that businesses can plan.”
“She hasn’t dealt with some of our long-run economic problems and the biggest of those is our economic disease around productivity.”
– Simon Bridges, Auckland Business Chamber
In short, businesses don’t just have to think about on which side of centre the next government will sit, but they will also be faced with further uncertainty over who may lead until then, and what priorities they will bring.
Business confidence isn’t all that tightly intertwined with actual economic activity, but Leung said confidence can at times be a “self-fulfilling prophecy”.
“Businesses are feeling downbeat and cautious and we’re starting to see that drop off into hiring intentions,” Leung says.
“So if businesses are feeling cautious and are reining in their spending plans, then that in turn will lead to a slowing in actual activity.”
Despite the perception of National being the party of business and the fact the right typically enjoys higher levels of business confidence during its tenures, Leung says actual economic activity tends to go up more when Labour is in power.
Leung said Ardern could have also added value to “Brand New Zealand” through her high profile globally.
READ MORE: Scourge at home, ‘superstar’ in international markets.
Chance for confidence
Auckland Business Chamber chief executive and former National Party leader Simon Bridges heaped praise on his former adversary, saying she had been excellent in a crisis, and calling her a “decent person with a great personal style”. But ultimately, he says her stepping down is an opportunity for Labour to improve its track record with business.
“She hasn’t dealt with some of our long run economic problems and the biggest of those is our economic disease around productivity.”
“As much as this in itself represents its own level of uncertainty with change, I think it’s also an opportunity for something of a reset with a pretty grumpy out-of-sorts business community from SME level right up, as a generalisation.”
He said business attention would turn to who would pick up the role, something he wasn’t keen to weigh in on personally, other than that from a business perspective it was a shame Finance Minister Grant Robertson had ruled himself out.
“Business has suffered a succession of confidence dents. If confidence was a car, there’d be a whole lot of panels that need some attention, right?
“Labour has the kindness branding, and the Nats are running on competency – that Luxon is going to be the competent CEO type leader. But if you look at the actual economic policies, I find it hard to tell them apart.”
– Professor Robert MacCulloch, Auckland University
“The new Prime Minister’s first task, economically and in a business sense, is to try and gee up business confidence. I’m not suggesting that’s easy, but there are a bunch of relatively simple things they could do, including a reset on skills and immigration.”
Devon Funds Management head of retail Greg Smith is also of the view that a fresh Prime Minister could be a positive for business confidence and the introduction of a business-friendly politician or policies would sit well ahead of an economically-driven election.
“I think a lot of businesses are already looking forward to a potential change in government, which wasn’t really able to happen till the latter stages of the year, but maybe this allows scope for something a bit different before that.”
No difference
Looking at the bigger picture, University of Auckland professor of macro-economics Robert MacCulloch said Labour and National were “not distinctly different” when it came to hard and fast economic policy and nothing significant would change unless someone more radical came to lead Labour.
He believes the anti-Labour sentiment typical of the business community was more in the imagination of business folk and that both were aiming for the centre.
“Labour has the kindness branding, and the Nats are running on competency – that Luxon is going to be the competent CEO type leader. But if you look at the actual economic policies, I find it hard to tell them apart.”
With Ardern stepping down, provided Robertson is still Finance Minister, MacCulloch doesn’t see much of a consequence in terms of the economy, “although a lot of business folks will go on about it”.
