Business might not trust the Govt, but should the Govt trust business?by Jane Clifton
The Ardern Administration and the business community are at loggerheads on the issue of trust – and there's fault to be found on both sides.
Confidence has to be earned, but that cuts both ways. As he methodically tries to reassure and gee up the hostile commercial fraternity, Finance Minister Grant Robertson must feel like a dismayed teen reader of the noughties’ self-help book He’s Just Not That Into You.
Everyone expected business would be anxious about the unexpected and unorthodox combo of parties now installed in the Beehive. But few predicted we’d be among global leaders in commercial pessimism.
It’s not just the fact that the Government has launched a cacophony of reports, reviews and policy maybes, the very uncertainty of which – never mind the eventual outcomes – will disrupt life for various sectors of the economy. Nor is this problem just about the unapologetic, state-wrought additions to employment costs.
It’s not even that some key ministers are openly disrespectful of business, notably Shane Jones, who likes to make forceful suggestions about which executives need the boot.
Nor is this situation due chiefly to Deputy Prime Minister Winston Peters’ fondness for predicting the end of capitalism, or that Labour Minister Iain Lees-Galloway said companies struggling with wage bills deserve to go under.
Bluntly, it’s that business itself often fails to inspire confidence. It’s not down to this or the previous Government that two big construction firms have fallen over, and that Fletcher Building, a totemic company of decades’ dominant standing, has returned a series of ghastly results in the middle of a housing and construction boom.
The reasons for these failings are multifactorial and, perversely, the boom itself is a factor. The key cause seems to have been elective amnesia about the primary cause of the 2008 global fiscal crisis: chasing unrealistic margins. The inability of too many companies to accept that profits cannot always rise, that returns cannot multiply indefinitely and that shareholders are not actual deities was the root cause of that catastrophically unsustainable conceit. What the building industry calls “price pinching” is an inverted form of this: we will get this contract at any cost.
Then there’s Fonterra. It’s not any government’s fault that it has lost a packet on overseas investments – unless you consider that it’s courtesy of long-standing legislation that Fonterra alone is allowed to be a sufficiently dominant company in its sector to be able to afford big overseas investments in the first place. But if governments lose money, business is among the first to become outraged.
Yet, as economist Cameron Bagrie points out, New Zealand companies have generally had a very poor history with their overseas investments.
Various sectors are in trouble for reasons outside any politician’s power, notably retailing and the media. Some sectors comprise near-cartels of dominant players that, if given a truth drug, would say they hate this Government because it’s beefing up the Commerce Commission’s powers to ensure fair competition, and that’s not in their best interests, even if it might be in the public’s. Plenty of companies big and small have been caught exploiting staff – even to the point of migrant slavery. The fisheries sector is persistently guilty of overfishing and dumping. Big retail chains often get pinged for misleading advertising. Justification for the rate of bank charges grows more slender by the day. And yes #NotAllFarmers, agriculture does pollute.
Although business is right to discern that a fair swag of future policy will make its life more difficult, there are other facets to this business-confidence crisis.
Unhappily, the net result of hostile business is less investment, less growth and less prosperity. Whichever way you cut it, the Government has allowed damaging uncertainty to bloom.
It may be tactless to reference that former idol of the business firmament, Sir Roger Douglas, but when anyone got inconveniently querulous about his policies, he’d give a twinkly squint and say, “Let the dog see the rabbit.” He meant: show people the advantage to them in what you’re doing and keep that front and centre. This Administration has allowed the potential advantages to business in some of its likely measures to get swamped. It will never wow the boardrooms with its labour-law reforms. But what about the reviews of petrol and electricity pricing? Couldn’t they result in lower costs for every business in this country? Putting aside the obvious observation – if not, why the heck are we bothering to review them? – why not say so? The rail and roading rethinks are controversial, but there must surely be downstream savings to business. What are they? For every company that has its wings clipped by new, stronger competition law, logic suggests there’ll be several that will gain an advantage.
Never mind Jones’ preoccupation with getting his “ne’er-do-well nephs” off the couch and doing something constructive; why aren’t the ministers responsible for the 31 reviews, 10 inquiries and 27 working groups (at last count) regaling us with all the potential benefits of them? It may be overly cynical to point out that the whole review process is already putting between $55 million and $122 million into private sector hands just in consultancy fees. But aside from good PR, an early public stocktake of “Reviewland” may wean this Government off one of its biggest faults: delayed gratification. If ministers don’t know what reforms they want, no review in the world will enlighten them. Reviews may ensure better policymaking but they also leave time for potential policy victims, such as businesses, to imagine the worst.
Instead, the Government has vowed to turbocharge its business ingratiation by talking up our free-trade opportunities. The only charitable explanation for the tactic is that it’s to disguise what’s really a mission to steady up the free-trade opponents in the coalition parties, who rival the business lobby in orneriness.
Business hardly needs trade opportunities pointed out to it. It’s a dog that needs to see some new, plump rabbits pretty quickly – if only mordantly to check for myxomatosis.
This article was first published in the August 18, 2018 issue of the New Zealand Listener.
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