PM Jacinda Ardern challenges view that Labour-led governments hamper business; Says she wants perception to meet reality

Prime Minister Jacinda Ardern has made one of her first formal addresses to the New Zealand business community by acknowledging the negative impact her coalition government appears to have had on business confidence.

“If we’re speaking frankly, I should really name the elephant in the room, and that is the business confidence surveys. Oh I’ve seen them,” she admitted, as she started her address to the 200-strong group hosted by Westpac on Friday morning.

“They feel akin almost to being in high school and suddenly discovering the notes that people are passing around the classroom about you.

“I know that it is a reflection of the perception that exists about primarily the change in government.

“There is some hope - particularly in the fact that confidence as it relates to businesses’ individual activities is still high. And given that’s the marker that bears the most correlation to GDP growth, then I think we have some cause to feel at least comfortable with those numbers.

“We’re probably ok.”

Yet Ardern said she wasn’t satisfied with this, and wanted “perception to meet reality”.

Annual GDP growth is sitting at 3% and is expected to pick up next year, before dropping to 2.8% in 2021.

The (seasonally adjusted) unemployment rate is at 4.5% and is expected keep tracking down to 4.2% by 2021.

Treasury also predicts net core Crown debt will fall from 21.8% of GDP to 20.8% by 2021, in line with Labour’s Budget Responsibility Rules.

“So the forecast is good, but business is still carrying an umbrella," Ardern said.

According to ANZ's latest Business Outlook report, a net 38% of businesses were pessimistic about the year ahead in December, versus 39% in November. However, firms’ views on their own activity, which has the stronger correlation to GDP growth, lifted between November and December.

And according to the New Zealand Institute of Economic Research's latest Quarterly Survey of Business Opinion, a net 11% of businesses expect economic conditions to deteriorate over the first half of 2018.

It is worth noting these surveys have their critics, with Strategic Risk Analysis Limited managing director, Rodney Dickens, for example slamming them for having political bias and being out of whack with reality. 

Nonetheless, Ardern went on to say: “Now I could sit back and say, ‘Well look, that’s just the way it is'.

“The same thing happened under the last Labour Government. It was a continuous issue through the time Helen Clark was Prime Minister, despite having the strongest continuous economic growth since World War Two.

“I can either accept that’s just what happens to Labour, or we can try to find a way to challenge it.”

Ardern said this could be done by government and business making the most of its relationship, rather than continuing to “coexist in spite of each other and not collaborating in areas where we could make a genuine difference together”.

Ardern mentioned forming an informal group with business leaders.

Yet speaking to media after her speech, she said changing the business community’s perception of a Labour-led Government wasn’t just about relationship building.

“It’s what we do of course as well…

“I think what there hasn’t been enough emphasis on is where we have alignment. I do think we have alignment on making sure we’re addressing our sustainability challenges…. There are businesses out there now who are working even with homeless young people in Auckland.”

During her speech, Ardern said her goal was to “generate and share prosperity”, with perhaps more emphasis necessary on the “generate” side of things.

She didn’t make any new policy announcements, or mention any new areas of focus, but did reiterate Labour’s aim to increase productivity.

She said it was necessary to ensure everyone in society was engaged by either “earning, learning, caring or volunteering”.

Ardern mentioned Labour’s free first year tertiary education policy, highlighting the fact this would largely target those getting into polytechnics and trade courses, rather than universities.

She touched on the need to increase government investment in research and development from where it’s at now at 1.3% of GDP.

Ardern praised the work done by officials on the Comprehensive and Progressive Agreement for Trans-Pacific Partnership, saying we “need a more inclusive trade agenda”.

She acknowledged the Government’s Tax Working Group and said it would consider new ideas like tax breaks for those who invest in small to medium-sized businesses, and progressive taxation based on turnover.

She mentioned the incentives for a productive economy were wrong, so Labour was moving to close tax loopholes.

The Government’s aim to increase the minimum wage to $20 an hour by 2021, was also raised. 

Ardern touched on the need to have a clean, green, carbon neutral New Zealand, saying: “This is a brand exercise for New Zealand, as much as it is a responsibility.”

She also reiterated her commitment to reducing child poverty, regional development, addressing the infrastructure deficit and KiwiBuild.

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31 Comments

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Jacinda's issue seems to be she's confusing the governments books i.e. how much she can extort from the economy with business books and business profits to be more exacting........Reality is that business knows what's best if they don't well they soon will........that might not fit within the parameters of a socialist and that is perception can't meet reality.

The government books will look OK for awhile as it is past transactions that are still pumping things along.......but what this coalition is failing to grasp is the fact that forward transactions will not necessarily be as robust as the past. And there won't be a business out there that isn't reviewing every facet of expenditure and likely income.........

I think I might have to give Jacinda a bucket and a copy of Winston Churchill's quote!

Yes, it sounds like she delivered a lecture to them. Very much the school teacher who always knows best. Still I wasn't there so maybe not, but that is the impression the article gives. Business just does not trust Labour, and she doesn't sound like she wants to know why. Funny thing is, of course, that quite often business profits under a Labour government because they are able to respond to a good thing if Labour throws them a bone. Personally I don't trust Labour because they always seem to get their priorities mixed up, spending lots of energy on fashionable trivia and denying the existence of the difficult issues. They also tend to have a mindset that all people who are better off than them are parasites ("rich pricks", to quote Michael Cullen) rather than more useful, decent and productive than them (an impossibility from a Labour politicians' point of view).

National of course are just as bad at denying the existence of difficult issues, like excessive immigration and ridiculous house prices because, er, well, er, let me see now, ah yes, they are prone to complacency and self satisfaction, even though they should know better.

Which Churchill quote did you have in mind?

I recall Bob Jones saying some years back that Retail Trade tenants were perpetual wingers so noise on rental costs was the norm but they still remained his tenants. I wonder if Labour has the same view of Business, in that you don’t have to listen to them as they won’t stop being in business? They really seem like Labour's red headed step child (apologies to Gingerninja)

Look, Labour are young, inexperienced and commercially naive - but they are also learning, energetic and not weighed down with cynicism (hopefully).

But business people should always be pragmatists, so almost always we do just suck it up. These guys are the government and working with people is better than fighting against them for no clear gain.

In all likelihood, costs will rise, investment will be harder and regulatory burdens will increase. But life goes on.

The longer Labour is in power the more experienced and pragmatic they should become. They might even realise they actually need business people and stop hating us and equating success with evil.

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Success will always be equated with Evil in the eyes of socialists, it is part of their ideology. existence, and inheritance ... they have to create an enemy and demonise it well , that blood sucking monster living on the work and sweat of the poor workers !!
What else is new?
Productivity and sustainability means one thing for Labour....produce more so we can share (dish out ) more .... that will keep us in power and control ... for a while, that is !

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"The longer Labour is in power the more experienced and pragmatic they should become. They might even realise they actually need business people and stop hating us and equating success with evil."

Ha! That assumes they are possessed of common sense rather than business hating Corbynite ideological zeal, Comrade Ardern: "Capitalism has failed". David Parker (on water tax) "I'm not here to negotiate, don't push me or it will be 2c instead of 1c"

Well done, It is good that she realised that "The same thing happened under the last Labour Government. It was a continuous issue through the time Helen Clark was Prime Minister, despite having the strongest continuous economic growth since World War Two."

She reiterated, mentioned, touched on, and emphasised everything that drove the business sentiment down lately ... what else is new?

Maybe she thought using her charm will / might improve how they feel !
She sounded like she didn't want to sit back and tell them to suck it up , but she actually did.

She has to dish out ( recycle) a lot of money in the community to keep the local business machines oiled before they dry out and employment start rising again !! An artificial attempt to please and calm their voters and keep the status quo ! .... Majority of that money is actually taxpayer's money and most of that comes from business !!

Expect some serious discounts in goods and services in the near future as businesses will try to secure future transactions to keep up with mounting expenses and future shrinkage of the economy ...when that happens, watch unemployment numbers !!

"She pointed out annual GDP growth is sitting at 3%, unemployment is forecast to drop to 4% and net Crown debt is tracking to dip to 20% of GDP."

All based on previous policy settings of National govt. Not Labour's great leap backwards. Would any of these 'visionary' coalition members be willing to personally invest in business at the moment? Put their money where their mouth is? Labour has a deep cultural antipathy towards business. Have any of their MP's ever even run a business?

Businesses will stop spending and hiring (given back-to-the-70's industrial relations policies and huge hikes in minimum wages that will drive economy-wide wage and cost of living inflation who can blame them) and go into a cautious holding pattern.

GDP growth will plummet (driven in part by stagnant or falling house prices and drop in immigration and likely rising interest rates in next year or two) - with a recession likely in the offing before Labour's term is up.

Unemployment is going to start rising in near future, and govt debt will only rise given Labour's massive new spending and growing fiscal hole.

Wonder how many labour MP's even have a close friend who runs a business?

... how is it possible to have a " fiscal hole " ... and also to have a " debt mountain " ...

Couldn't we just get Fulton Hogan to push the latter into the former , and level them both off ...

... problem solved ?

Same thing happened last time. Most people forget that under Helen Clark New Zealand’s economy was systematically screwed down. We actually went into recession prior to the gfc. No mean feat. All bets are on that this Labour government will do the same thing.

Jacinda can use all her work experience from the only real job she has had. Working at the Morrinsville bakery......

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So what you're saying is that she has more experience working than every National MP except Gerry Brownlee.

lol, a little research will stop you embarrassing yourself with such statement - try linkedIn, that's a good start !!

I see you haven't provided any evidence. Maybe you should join linkedin. I hear it's good for people looking for jobs.

I leave job hunting to you Dictator...I have worked 40 years in my life and made my dough and bread ... I don't need a job ....good luck with your research ...lol !!

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Epic grizzling, folks

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Please be easy on them. We need to comfort our National supporting snowflakes at times of grief such as these.

Indeed. Why do the "business community" believe they are experts in economic policy when even the best economists can't forecast where the economy is going to be more that a year or two out?

Life must have got really miserable for that poor lot.
Red necks and blue rinse brigade will never overcome what is built in.
They need and expect to keep their revenue with the insurance of guarantees to socialise their losses.

I am going to say that Jacinda Ardern is no Helen Clarke and Grant Roberston is no Michael Cullen. Whether that is a good thing I will let you decide.

Few people I spoke about this think that she has done more harm and damage to business sentiment than good by today's showdown (lecture) ... She is made of the same cloth David Parker is made of, albeit more talkative with a wider smile ... Not a promising start !!
2020 is not that far away ...

I bet they were all as pale and stale as week old white bread. I guess that is life in a bubble.

Yes because the appearance or heritage of the person is more important than what they say. Lets all march back to the 18th century with Identity politics!!!

How do you get a good cross section of opinions if everyone is exactly the same. They will just be slapping each other on the back saying yes thats right old chap, haw haw haw, pass us the pinot old man.

If a world wide website is not a good enough cross section of opinion I dont know what is.

Most on here would be business minded so not exactly a great cross section of people on here either, I could guess the main demographic on this site.

.

It is a given that the OBN favours National and Jacinda can never be one, pun not intended.
Neither can Labour get into that club.
Acknowledge and move on what you want to do, Jacinda and Team.
Insha Allah, there won't be GFC during your term and business will keep ticking on, with wine and whine.

Meanwhile the trade unions begin to exercise the muscle that their effective control of the Labour Party bestows on them. Like a throwback to the grim days of NZ of old, Lyttelton watersiders are about to launch a three week strike over pay and work conditions, including ‘fatigue’ provisions. Anyone with a few grey hairs will rember all too well the way union Neanderthals pitilessly sabotaged this country’s economic progress in pursuit of their selfish ends. And will be justifiably apprehensive about where the harder leftists in the party could take the business environment.

Labour’s agenda on national awards and union empowerment are clear and business is not deceived by the temporary deferment of some of the more draconian moves due to negative sentiment. Nor by today’s placatory utterances from our shiny haired leader.

Good article on the demise of CricHQ, despite the support of NZ govt organizations. Relatively speaking, this is peanuts, but it's clear that govt support and approval don't necessarily mean that everyone wins.

Like all software startups it was hungry for one thing in particular: money, and lots of it. The cloud-based cricket platform received help from on high – the government’s international business agency New Zealand Trade and Enterprise (NZTE) introduced CricHQ to Singaporean-based private equity firm Tembusu Partners in September 2014

It has also been backed over the years by the New Zealand taxpayer to the tune of more than $2m in grants from Callaghan Innovation, the government’s business innovation agency – and the government funding was critical. A report prepared for CricHQ’s shareholders in 2015 showed that in 2012 money from government grants and advertising revenue were even at about $200,000. In the following year the money coming in increased dramatically to $1.8 million, but $1m of that was from Callaghan as a rebate for project development costs. In 2014 ‘revenue’ jumped again to $2.9m but again $1m was government grants. It became crystal clear in 2015 how crucial the grants were: without it revenue dropped away to $300,000, the report says, and the company booked a $5m loss.

https://thespinoff.co.nz/business/13-02-2018/the-rise-and-fall-of-crichq...

It's better to frame this in Michael Reddell's terms: Tradeable and non-tradeable sectors of the economy.

The core difference is that T does/creates/assembles stuff and sells it on more or less free markets.

NT's don't. NT's exist to support T's, devise and tune legislative and commercial environments (contract /employment/tax law etc) and provide national security/policy/enforcement to ensure T's environments remain generally conducive to Doing Stuff. But NT's have no 'revenue' in any commercial sense of the word: they survive by clipping the ticket on T's activities. NT's power is thus essentially obstructive: they can fubar the environment sufficiently to throttle T, or they can act light-handedly enough to allow very significant growth.

Ardern's speech needs to be seen in this light: the elephant consists of the economic deadweight that NT activity imposes, and the business community quite rightly fears another round of fearless, populist/popular policy changes which, as most such changes typically do, come with emergent effects and unintended consequences galore.

Of course prediction is hard, particluarly about the future. But the power that T has is that of controlling its own rate of production. This can be dialled up to capture market share, profits and efficiencies. It can also be dialled back to essentially break-even - hunker-down-and-wait mode. In the latter case, tax revenue falls, employment lessens, prices can rise and these all have significant consequences for NT. But, and this is the crucial point, NT cannot order T to produce more, or the same. (it can, of course, force lesser output....) But, in the general case of Wanting Growth, NT follows T......

So this address really is a plea for T to carry on Producing the golden eggs. Please. Pretty please.