How does a PM restore business confidence?
Jacinda Ardern gave us her answer today: she has set up an advisory council.
This may well be the result of her taking advice from some other advisory council, board or commitee – or the idea might have dawned on her without any advice.
Whatever, Ardern announced the new council while addressing the issue of flagging business confidence in a speech to a business audience
She mused on what business confidence survey results are actually telling the government and referred to “a business confidence paradox” which she proceeded to describe:
“When you line up business confidence with key economic performance measures over the last two governments there appears to be an inverse relationship between business confidence and the actual performance of the economy.
“For instance, average business confidence scores under the Clark/Cullen Government were much lower than the Key/English Government, despite Clark and Cullen delivering higher average growth, lower unemployment, lower debt, larger surpluses and stronger wage growth than their successors.
“We appear to have inherited a similar conundrum, we’ve run a strong surplus, have the best net international investment position ever recorded, stable and low interest rates forecast for some time which ought to spur investment and the lowest unemployment rate in a decade.”
She said she had discussed the paradox with both business leaders and representatives, colleagues and officials. The answers given her were diverse.
Certainty was one consideration.
“But certainty shouldn’t be confused for stasis and complacency, which are the enemy of progress, and for that matter the enemy of innovation.”
Ardern reiterated her government’s intention
“ … to retool our economy to make it work within the limits of our environment, shape it to deliver on the hopes and aspirations of all our people, and for our economic purpose to be bigger than just profit.”
She was advising her business audience – in effect – to adapt to the policy changes her government regards as essential.
“From reform of the Reserve Bank where we are including maximum sustainable employment as an objective, to getting active in the housing market, building modern transport infrastructure and setting ambitious emission reduction targets – we are renovating the existing legislative and policy architecture to bring it up to the new code our economy needs.”
“But as I said at the beginning, all of this does mean change, which means decision making.”
But are the government’s intentions being effectively signalled to business decision-makers?
She obviously thinks so.
“Much of our agenda is already set out in three public facing documents.
“These are the Speech from the Throne, The Coalition Agreement with New Zealand First and the Confidence and Supply Agreement with the Greens.
“Between them, these three documents set out the key policy areas that this Government will progress over the term.”
She led an MMP government at its best and its structure ensured a range of views was heard on every decision.
“Hardly a model for fast and unexpected change – in fact all change is negotiated, but a model that I believe serves us well. “
But her government’s sudden ban on new offshore oil and gas exploration blindsided the energy sector, which was not mollified at the time by her glib insistence that the transition to a zero-carbon economy “must start somewhere” or her promise that no jobs would be lost.
Now we must wait for business people to absorb the implications of the government’s business partnership agenda, because only today did she launch a publication that outlines this agenda and brings together the strands of this Government’s economic strategy.
“Our overall objective is to build a productive, sustainable and inclusive economy.
“On each score we have some way to go. When it comes to productivity, the OECD has said we are ‘well below leading OECD countries, restraining living standards and well-being’
“Our expenditure on R&D is half that of the OECD average, and over the past five years manufacturing output grew by just over half the rate of the general economy.
“When it comes to sustainability we also lagging behind. Between 1990 and 2016 the level of greenhouse gas emissions from the energy sector increased by 38 per cent.
“And on inclusivity, it’s clear that children and young people in particular are carrying a heavy load. In 2017 more than 200,000 children lived in poverty and roughly 73,000 15-24 year olds were not in education, employment or training when we took office.
“We need to transition from growth dominated by population increase and housing speculation, to build an economy, that as I said, is genuinely productive, sustainable and inclusive.”
Ardern laid out “the top lines of our economic strategy so everyone is clear about our key priorities that you can engage with us, but also so you can hold us to account against some key measurables”.
- Growing and more fairly sharing New Zealand’s prosperity. The gap between the highest and lowest income and wealth deciles must be reduced; real per capita income increased; the value and diversity of exports grown and home ownership increased.
- Supporting thriving and sustainable regions that benefit from an equitable share of sustainable economic growth. Key regions must show improvement in employment and income distribution figures and the number of businesses in key regions must grow.
- Delivering “responsible governance” with a broader measure of success. The Finance Minister is already working on the Government’s measures of success to ensure they better reflect New Zealanders’ lives. Next year NZ will be the first country in the world to deliver “a Wellbeing Budget”. An overhaul of how the Budget is written and the objectives it sets will be among the consequences.
- Transitioning to a clean, green carbon-neutral New Zealand. The country will be put on a clear path to a net-zero emission future and a healthy environment. The government is setting clear long-term reduction targets, has been working with industry to develop transition pathways and is talking to groups like the farming community about what can be done to reduce emissions while keeping industry profitable.
Ardern also mentioned work under way on industrial relations and immigration policies.
The speech was crowned by the announcement – here it comes, folks – of the establishment of the Prime Minister’s Business Advisory Council. Air New Zealand CEO Christopher Luxon will be its inaugural chair.
“Christopher and I will be putting together over the coming weeks a team of business leaders, committed to building a new economy, to advise on matters relating to the economy, our strategy and agenda.
“But this is not just a group that will provide thought leadership. Members of the group will be tasked with working alongside us to assist with addressing some of the big challenges we face. “
Ardern wants the council to report to her on the issues and opportunities they see and identify emerging challenges like skills, training and migration and the challenge of scaling New Zealand businesses up and growing our export-led wealth.
Moreover, she wants to work closely with and be advised by senior business leaders “who take a helicopter view of our economy, who are long term strategic thinkers and who have the time and energy to lead key aspects of our economic transformation agenda”.
Business should not have been blindsided by this announcement.
The new council adds to a plethora of working groups, advisory groups, consultative groups – whatever – set up on Ardern’s watch.
National’s Simon Bridges reckons there are 153 working groups.
A very quick check by Point of Order threw up these…
- The Primary Sector Council – to provide independent strategic advice to the Government on issues confronting the primary industries, with an immediate focus on developing a sector-wide vision.
- A working group led by Jim Bolger to make suggestions on how to create a sector-level wage-bargaining system – the government says fair pay agreements will be based on generally accepted minimum terms and conditions in the industry and be set by collective bargaining between unions and employers) .
- The Tax Working Group – to undertake yet another review of the country’s tax system.
- The Film Industry Working Group – to make recommendations on changes to the regulatory framework for film industry workers to restore the rights of film production workers to collectively bargain).
- A reconvening of the Joint Working Group on Pay Equity Principles – the original group , set up in 2015 to develop a set of principles to guide the implementation of pay equity. Reconvening it is aimed at proposing new legislation “to provide a fairer deal for women.”
- The central and local government working group on freedom camping – to address issues in the face of increasing pressure from freedom camping.
- Trade for All Advisory Board – comprising experts with a wide range of views, knowledge and experience who will make recommendations on progressive, sustainable and inclusive trade policy.
May we tender some advice? We recommend a new ministerial portfolio – Minister in charge of Working Groups – to try to keep this burgeoning branch of government in check.