Fonterra last week cut its farmgate milk price forecast to $6.75 per kilogram of milk solids. This probably wasn’t the kind of answer the government was looking for when the PM sought to pull NZ business out of its current funk.
The PM certainly got some favourable headlines in a media still obsessed both with her charm, motherhood, and gift for communication.
But it will take more than a Business Advisory Council to restore equanimity to the boardrooms where confidence has been eroded by the uncertainties induced by global trends, trade wars and unsettled commodity markets — but not least by the government itself with its so-called “reviews” and calls for “transformatory change”.
Change in taxes? Yes, these are being reviewed by Sir Michael Cullen (no great friend of business) and his panel.
Change in employment law? This is being reviewed by Jim Bolger (who was once a firm believer in the reforms of the 1980’s and 1990’s, but now thinks the “neoliberal experiment” has been a failure).
Climate change? Plenty of action there: the government’s consultative document modelling points to the prospect of the competitiveness of core parts of the tradables sector could be undermined and GDP cut by perhaps as much as 10 – 22%.
Adding to business uncertainty has been the government’s sudden ban on new offshore oil and gas exploration. As Point of Order noted in an earlier post, it blindsided the energy sector, which was not mollified at the time by Ardern’s glib insistence that the transition to a zero-carbon economy “must start somewhere” or her promise that no jobs would be lost.
Then there’s government’s negative attitude to mining, with Conservation Minister Eugenie Sage adamant there will be no more mining on conservation land.
So when the PM argues that NZ’s needs to transition from growth dominated by population increase and housing speculation, to build an economy genuinely productive, sustainable and inclusive, did she have anything concrete to offer beyond the platitude “we want to grow and share more fairly New Zealand’s prosperity” (and a Business Advisory Council)?
Commentator Michael Reddell found nothing in the speech about what the government proposes to do and how it believes the modest measures it does propose will deliver better outcomes.
Reddell went on:
“But by far the bigger issue, if the Prime Minister and the government are at all serious about the lines they ran, is ‘what do chief executives of businesses know about overall economic management, and the challenges of New Zealand’s longstanding productivity under-performance?’. In Paul Krugman’s words, a country is not a company”.
Former Finance Minister Ruth Richardson has a similar view: The primary responsibility for business success properly sits in the court of businesses.
And she makes a startling confession: “I never thought I would say three cheers for Winston Peters!”
In a recent speech on Being Globally Great from a Canterbury Base (reproduced in Kiwiblog), she said:
“This is an accidental government formed on the fly and governing on the fly. In the absence of coherently thought through policies, every significant initiative is parked with a working group or the hundreds of other names conjured up for the contracting out of government. Eventually the working groups eagle will have to land – do we really want to revert to the failed industrial regime of old, do we really want to tax the hell out of the very thing we so patently lack, capital, do we want to choke agricultural production with a rigid ‘ all gases are the same’ regime for tackling climate change?”
Richardson believes business is right to be very afraid. She speculates on what might be the rescue remedies.
“The primary government may come to their senses – or the coalition partners may start jerking them around. Think the curtailment of the 90 day rule repeal, no water taxes, capital taxes apparently off the table and the three strikes repeal on hold.
“I never thought I would say three cheers for Winston Peters! The welter of working group reports may be DOA. The adults in the room may be successful in urging course correction”.