Businesses seem gloomy but health-sector companies are in good heart

The PM, Jacinda Ardern, received what her handlers would have perceived  as  unexpected  criticism  from the  media   after   she gave  a pre-budget speech to an Auckland business  audience.  One of those  in the  audience  was   said to  have   described   it  as  an   “ideological fairytale”;  others   apparently  were  disappointed   it had  “nothing for business”.   

Given   she  did list  as   two of the five priorities  in the budget as   being “creating opportunities for productive businesses, regions, iwi and others to transition to a sustainable and low-emissions economy; and supporting a thriving nation in the digital age through innovation, social and economic opportunities”,  the criticism itself  could be  regarded as  a    bit  “ideological”.

Surely   business  doesn’t  expect   government hand-outs,  even if  it  is labeled  a  “well-being”  budget?

But  there   seems  little   doubt    that   the   mood of  business  is downhearted   these  days.

Or is it  really?  Continue reading “Businesses seem gloomy but health-sector companies are in good heart”

Southland is doing nicely, thank you – and vegans should approve the land-use changes

Despite what  business  confidence  surveys  say,  the  NZ  economy  is  plugging along   steadily and  city-dwellers   may  not  have noticed  how  well  the   farming  industries have been   doing.

ANZ economists, surveying  the  country’s  primary   industries  this week,  talked  of   “elevated  returns”   at  the  farm  (or orchard)  gate.

They  say global economic concerns are yet to be felt in the  regions, with commodity prices generally very strong at present. Export prices  for  dairy products have steadily increased with the GDT price index gaining 24% since early December,  and  the  ANZ team  is  forecasting a $6.40/kg milksolid  price for the current season and a $7.30kg/MS price for next season.

They   also  note  returns  for  export  lamb   have been   very favourable,  with China  now  the largest  market  for  NZ  lamb  and mutton  (though   they  say  a  disorderly  Brexit  could be   disruptive for  the  trade to  the UK and European  markets). Continue reading “Southland is doing nicely, thank you – and vegans should approve the land-use changes”

Minister of Finance is ready to change gear – but he didn’t signal to what effect

Finance Minister  Grant Robertson was bullish in telling the party  faithful about the state of the economy at the   Labour Party’s  annual  conference in Dunedin earlier this  month.

One year after the election of the Ardern government’s  the fundamentals of the economy were strong, he said.

“We have just had the strongest quarter of economic growth in two years. We have a sustainable surplus that is allowing us to invest in infrastructure and keep debt under control”.

And  he rounded  off  his  gung-ho report of what the coalition has achieved :

“It is time to change gear on our economy”.

The   question  now  is did  he  mean changing  up to a  higher gear?  Or was he reckoning on dropping it down  one? Continue reading “Minister of Finance is ready to change gear – but he didn’t signal to what effect”

Confusing views of the govt’s leaders show up among business people

Surely  that  can’t be  right?   Grant  Robertson  rated  ahead of  Jacinda  Ardern?

But there  it is  in   black and white:  Robertson  scores  3.62  out of  5   while  Ardern  gets  3.3  in  a    poll of   150 CEO’s.

This is the result in the  “Mood of the  Boardroom”, an annual  survey reported by the  New Zealand  Herald.

 Yet  earlier in the publication, a report states unequivocally:  “PM Jacinda Ardern is  seen  by many CEOs  as the standout performer in the Coalition  government”.

 Confused? Continue reading “Confusing views of the govt’s leaders show up among business people”

Check out what most influences business confidence – its (no surprise) government policy

Economist  Donal Curtin deserves our plaudits for an idea he threw out in August, suggesting on his blog that somebody ought to ask New Zealand businesses exactly what’s bugging them when they report low levels of business confidence.

We should thank the New Zealand Institute of Economic Research, too, for acknowledging it was a good idea and doing something about in the latest Quarterly Survey of Business Opinion.

The institute included a question in its survey to find what influences business sentiment.

The survey results are clearly awkward for the government, showing a further deterioration in business confidence. A net 28% of businesses expect economic conditions to worsen – the lowest level since March 2009. Continue reading “Check out what most influences business confidence – its (no surprise) government policy”

It’s hard to find the policy beneath the platitudes in PM’s business speech

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”.

A bullish sharemarket contrasts with flagging business confidence

The New Zealand sharemarket’s top index hit a new record this week.

So given the slump in business confidence, is this just another outburst of irrational exuberance? Or do investors have a different take on the state of the economy than the business leaders who respond to confidence surveys?

The sharemarket has had a long bull run and some authorities think it is now overpriced. Yet those who have been predicting a downward correction are lonely prophets. Continue reading “A bullish sharemarket contrasts with flagging business confidence”