Why Westpac CEO David McLean is right in urging the business community to get over the election result and get on with business

Why Westpac CEO David McLean is right in urging the business community to get over the election result and get on with business
Ardern and Robertson after the Westpac breakfast

By Jenée Tibshraeny

Westpac CEO David McLean is urging business people to get over the fact National lost the election, and I couldn't agree more.

Hosting the Prime Minister at a breakfast for business leaders on Tuesday, McLean said: “Business confidence is important - it has real economic consequences.

“But in my view it is also time for the business community to get over the election result and just get on with business.

“Getting on with business means taking up the offer from the Government to constructively engage.

“It means not talking ourselves into a self-fulfilling spiral of doom and gloom which could have adverse economic consequences for New Zealanders.

“Successful businesses are resilient and cope with change, including change in Government.”

Good call David McLean.

Bridges and Key none the wiser

The whole, ‘MMP is to blame for the Nats losing the election’ line is getting old.  

As is the rhetoric that somehow the economy would be in a vastly better position if National was in power.

It simply wouldn’t.

John Key, in all his National Party poster boy glory, has even admitted it.

A month ago he told Newstalk ZB's Mike Hosking that the factors that drove the economy when he was Prime Minister - strong immigration and house price growth, an abundance of cheap credit globally and a booming China - were either being “taken off the table or reducing”.

“If you want to continue to stimulate the New Zealand economy, the question is, what replaces those factors? And that's the question the Government ultimately needs to answer,” Key said.

He did not however answer the question himself.

When I asked National Leader Simon Bridges a fortnight ago what he would do, his initial reaction was to do exactly what the Labour-led Government is doing and invest more in health and education.

He then bumbled on, somewhat incoherently, about the work underway in various sectors. You can see his exact response here.

The economic cycle is apolitical

The reality is that the economic cycle has naturally come off its peak. The supposed “heyday” of banks dishing out money left, right and centre, asset prices increasing 20% a year and labour being cheap and readily available are coming to an end.

While he perhaps overstated the situation, there was an element of truth in Winton Peters pointing to the above and warning of a looming economic slowdown when he announced he’d form a government with Labour and the Greens.

Peters foreshadowed people putting blame on the Government despite it not influencing the factors behind a slowdown.

“That’s why we are putting this scenario out front, right now,” Peters said.

“Our [NZ First's] choice today relates to how best we mitigate, not worsen, their impact on as many New Zealanders as possible.”

In terms of mitigating these impacts, National would’ve needed a new bag of tricks. And as per the above, I honestly don’t think it had one.

What’s more, it would’ve faced the same bunch of global challenges we’re contending with now - the rise of protectionism, the threat of a nuclear war, concerns around the Federal Reserve increasing rates faster than expected, climate change, and so on.

So with the real factors affecting the economy being what they are regardless of politics, can those in denial of National losing the election honestly say the Labour-led Government is turning the light rain into a storm?

The policy piece that the Government can be scrutinised on

On the international affairs front, I agree with McLean who said: “Business wants a government that’s committed to a trade agenda, committed to fighting in New Zealand’s corner for access to markets. And I have to say, so far so good.

“After all, one of the first actions this government took was sign off on the CPTPP.”

In terms of uncertainty around policy changes, the two that stand out as being legitimately concerning for businesses are around industrial relations reform and the ban of new oil and gas exploration.

As I’ve previously written, the Government mucked up in the way it implemented the ban without a robust consultation process.

What message does it send to other industries when the Government prioritises ideology over evidence provided to it from its own staff? Or when it’s willing to stamp out an industry without consulting with it?

I also maintain the ban is inherently wrong, as gas is useful in the transition to a lower-carbon future.

As for the industrial relations piece, I haven’t formed a view on whether concerns are well-founded, but I can understand why they exist.

Requiring employers to bargain with their employees on an industry or occupation level, even if they don’t want to, is major.

Turning to the Government’s two other key economic-related policy changes - KiwiBuild and tax reform - these were very well signalled and address legitimate problems.

What’s more, if restricting foreigners from buying houses when we have a housing shortage, or levelling the playing field between the ways different asset classes are taxed, is enough to throw a business into a state of despair… well good luck to it.

A reality check for the diehard Nats

So, what would our business confidence figures look like if those who believed the fundamentals of the economy would be vastly different under a National-led Government, reconsidered their positions?

Sure, there will be some who have reason to believe the Government’s policies are ill-conceived enough to send the country downhill.

But I suspect many more will weigh up the pros and cons and realise their level of confidence doesn’t have much to do with the new government.

We are in a new stage of the economic cycle, the international landscape is evolving, and we need to evolve too. It’s this need for change that’s creating uncertainty.

But the faster businesses accept where we’re at, the higher the likelihood they won’t talk themselves into a self-fulfilling spiral of doom and gloom.

We welcome your help to improve our coverage of this issue. Any examples or experiences to relate? Any links to other news, data or research to shed more light on this? Any insight or views on what might happen next or what should happen next? Any errors to correct?

We welcome your comments below. If you are not already registered, please register to comment.

Remember we welcome robust, respectful and insightful debate. We don't welcome abusive or defamatory comments and will de-register those repeatedly making such comments. Our current comment policy is here.

72 Comments

24
up

Poor ‘Business”.
How will they cope without low wages and duopolies?

18
up

The Nats were elected to promote competition and that’s exactly what they did, but at the wrong side of the spectrum. More low skilled workers competing for jobs pulling wages down, and more buyers and renters competing for accommodation pushing housing costs up.
If being business-friendly meant looking the other way when businesses broke the law (migrant exploitation, visa fraud, cartelisation etc.), National were definitely the BFFs of NZ Inc.

Such shameful stories have been in the news since 2016; earlier pieces were about the poor working conditions of hospitality staff, now about construction workers.
Check out the hypocrisy: https://www.amnesty.org.nz/qatar-abuse-world-cup-workers-exposed
We are not there yet but if we continue on this road down modern slavery, we could join the ranks with lower Gulf countries in human rights abuse.

11
up

Interestingly, Burger King has now been barred from hiring migrant workers for a year after paying less than the minimum wage.

Sounds like a serious breach, for this to have been meted out.

Just last month I heard a first-hand account of a young Kiwi worker who was pushed out of his stable part-time job at a fast food chain to make room for student work visa holders and post-study visa holders who were given various "manager" job titles. Basically declined from reasonable, stable employment into losing all his hours, and losing his income that paid his rent, living costs etc. No, he wasn't a slacker. He was working hard to get by and grow his opportunities in life by working and studying.

Your picture of the PM and Grant Robertson sums it up

ventriloquist

Briliant comment. Unusual though to have two dummies!

16
up

Poor Nats supporters ....still sulking while the economy trucks along. Shares going gang busters!

Yes it's moronic is it not.

frazz - shares are forward bets on energy and resource availability. They're only up worldwide because there's nowhere else for Quantative easing to go - except to bid the price of existing housing up.

So poor Labour supporters too. If you think the massive draw-down we are currently indulging in, is a good thing, I feel very sorry for you.

@ sharetrader

Perhaps you're the dummy and the often low-quality-media is your ventriloquist~???

17
up

business are upset because they can no longer import a cheaper workforce and lower cost at will.
i had a discussion yesterday with my new manager about how our team was very bottom loaded and why we have so many less experienced staff and how we got here, when i went through the last four years, two went to aussie (housing), two went to competitors for more money, two went to outside Auckland (housing lifestyle),
for a team of only eight that was a huge hole that was never filled.
to attract someone experienced they will now have to pay overs and swipe from a competitor which they wont do so from next year we are outsourcing the minor tasks to manila

I was talking to a client over the weekend, who has already relocated 15 low skilled positions to manila. He is now talking about replacing the rest. These are skilled, high value positions. It is not necessarily just about cost, he also cited work ethic.

He cited work ethic?

Wow, he's a bit off the mark.

Sounds like that business lacks leadership.

Are you able to tell us what line of business this is?

Good try at the spin. You can’t increase a parasitic load without consequences. McLean will go down on my list of CEOs of negotiable virtue. The list is growing by the day.

27
up

Surprise surprise, when confronted with reality expat sticks his head in the sand and doubles down with rhetoric.

Want to shorten the 'list'?
Stop adding your own name to it everyday.


♫ ♫ ♬♩
He's making a list, he's checking it twice
He's gonna found out who's naughty or nice
Ex Expat is coming to town
(One day, in a crown limo spending up large)

Parasitic load...you're not referring to your taking up Working for Families, are you?

Leave him alone!

The value on his beach side property is slip slidin' away
Slip slidin' away
You know the nearer to your valuation
The more you're slip slidin' away
Slip slidin' away
Slip slidin' away

Parasites... Sounds like he means landlords.

25
up

Excellent post Jenee, Nice to hear some balance, despite the risk
of being added to Ex Expat's "ever growing list".

The trout are biting this morning.

25
up

Wouldn't blame the public for losing confidence in business, when 'business leaders' are showing themselves to be a bunch of petulant children who whine and throw tantrums rather than adapting to change and dealing with reality.

16
up

Exactly. What do these people really want. An indefinite continuation of the house price/cheap immigrant labour ponzie scheme. That can carry on for ever can't it. Wages for the majority of the population ground down so low that an ever increasing proportion have to be supplemented with social welfare. That way they know that wages have been ground down as low as they can be and any lower is unlivable.
The fact is these precious over indulged little wall flows are now facing the inevitable consequences that occur when a ponzie scheme is unwound. The have grown lazy with the endless supply of cheap labour, artificial demand from excessive immigration and the artificial consumer confidence from rising house prices. As our increasingly poor productivity figures show they have had it so easy that they have stopped managing their businesses efficiently and striving for innovation. It is not surprising that this change has come as a bit of a shock. As the man says they need to get over it, get on with it and face reality for a change. They don't have a choice, because if they do not, they will fail and those companies that do grasp the nettle will hoover up the staff, employ them productively and pay them accordingly.

13
up

Discussion in economic commentary has been about Zombie Companies built on cheap credit.

Makes you wonder if NZ has too many zombie companies based on cheap imported labour and government subsidies (WFF, accommodation supplement).

Case in point, the Restaurant Association lamenting the possibility that endless supply of cheap imported labour could impact some restaurant businesses. Given it's so much cheaper to eat out than in the past, are we socialising the true and long-term cost of eating out when we really shouldn't be, and supporting zombie companies in the process?

Yes. I am reminded of an evening when we popped down to a local restaurant after dinner for a dessert. despite there only being 3-4 parties in the restaurant we had to wait for ages. Almost a getting up and walking out delay. There were about 4 front of house staff who took our order very quickly. The rest of the time they stood around talking to each other. The hold up was with the single chef in the kitchen. My reading of the situation was that manager did not value his/her staff. If they had, they would have had a better balance between front of house and the kitchen and payed extra for serving staff who could step into the kitchen and help the chef as required. I have spoken to restaurant staff who are flexible and help like this and been told that it is rare for staff to do this because they are just paid minimum wage and get no thanks for it.
An example of management not worrying about productivity and throwing around excessive cheap labour without having to manage properly. If they had to pay higher wages they may have been a lot more careful how they manged and deployed staff, and rewarded good staff for good performance.

Well put. I have observed over my career how greedy, lazy and arrogant many companies are. And often very shortsighted.

Kakapo - Why aren't all those people who are in favour of this fascist dictatorship getting off their butts and showing those businesses how to adapt and change then? After all a bit of competition never hurt anyone did it?

The only thing this fascist dictatorship has created is blimmin hideous classism and that is why business confidence is very low!

The Upper Class = Politicians and bureaucrats.
The Middle Class = Public Servants.
The Lower Class = Private Enterprise.

This is what you get when journalists across the country fail miserably in understanding issues that undermine the constitutional arrangements of a country!

It's not the election result per se that is causing businesses to lack confidence.
It is the fact that we now have a PM who can evidently make policy decisions that will have a profound effect on the economy without any analysis of the consequences, without taking advice, without consulting her cabinet, and without talking to business.

17
up

"...we now have a PM who can evidently make policy decisions..."

Thank goodness for that.

Gee whiz, you're easy to please.
Sounds like you would be happy with policy decisions being made on the basis of a coin flip.
Cook Strait Suspension Bridge? Heads - $200 billion would be a bargain.
More money for subject teachers in short supply? Tails - let's do mindfulness instead.

13
up

One thing's for sure, if you want a bridge it's no use looking to Simon No-Bridges.

Simon Burnt Bridges

I think people should also remember that the last election was not the last election. If people don't like this government then they can vote for another at the next election.

Humans have an attention span shorter than a goldfish

http://time.com/3858309/attention-spans-goldfish/

15
up

“If you want to continue to stimulate the New Zealand economy, the question is, what replaces those factors? And that's the question the Government ultimately needs to answer,” Key said.

He did not however answer the question himself.

When I asked National Leader Simon Bridges a fortnight ago what he would do, his initial reaction was to do exactly what the Labour-led Government is doing and invest more in health and education.

This was a telling moment. National coming out and saying what they'd do is "What Labour's doing...but...but MORE!"

Meanwhile, Key had no answers. Business as usual, a smile and "At the end of the day it is what it is".

Nice. And no, I'm not a sentimental follower of Labour.

Who cares about the Labour Party? They are the relatively sane ones.

This government has Winston Peters in it. Whenever Winston gets in to government the economy crashes. Tax break for race horses, free money buckets of Shane Jones, a 3rd world staffed fishing fleet unmonitored, all pensions for forever, $billions for new Boeings - we are screwed.

Correction, unaha. Therm Horsies haveta be Good-Looking....gotta keep the breedlines 100% Pure..:-)

The thoroughbred breeding/training industry is to my mind an extremely good example of a niche, high value international export product. Like rugby however, one has to have a strong local product in order to sustain the momentum/interest.

Very niche, and adds little value to society, and only viable due to the hugely parasitic gambling industry. Wouldn't shed a tear if the horse racing industry fell over.

The New Zealand thoroughbred racing and breeding industry contributes about $1.2 billion to the economy each year, just behind the wine ($1.5bn) and fishing ($1.6bn) industries.

A high value export industry with lots of potential to grow. I'd far rather be subsidising that than subsidising the export education industry by dishing out residencies.

Good piece, but it misses a bit in the logic department.

Gas is not worth transitioning via - it is still a polluter, still makes it worse, and the infrastructure time-inertia is such that we're out of time even now to go zero. You don't want to live in a 2 degree warmer world, and we're committed to that even now. We have to make the double-hop to solar (which includes hydro and wind) and we have to do it within a decade. 2050 well into injury time..

But the essense of the piece stands - as I've stated before, where we have to go to survive as a species, is where the Fitzsimmons/Donald Green iteration was. Nobody occupies that space currently, but it's not Nat territory - their narrative is obsolete.

Sure, there those who's own little narratives hung themselves off the Nat one, but that just means their stories are obsolete too. It's a fascinating time to be living through.

Perfectly put - thank you for that. Make sure Jenee reads it - suggest she puts the hard word on the Energy Minister.

good link :0

If logic were applied then we would all (that includes you) recognise the ratio of heat capacities of water and air.
I take it you do know how much heat is required to heat 1 litre of water by 1 degree?.

If there is 1,500,000,000,000,000,000,000 litres of water do you understand how much heat is required to lift the temperature by 1 degree C ?........Try understanding the joules of energy required to do this.

Yes, about 10^24 J - the same that hits the earth during a year. Trap a small percent extra each year and compounding will do the job over time. The consensus is that emissions from 15 years ago are affecting us today so if we maintained the current level of GHGs (we won't) then the temperature will stop rising in 15 years time.

No surprises that the CEO of a bank that is being roasted by politicians across the ditch and no doubt wary of what might also happen here, would advocate playing nicely with the comrades.

Of course McLeans facile observation is correct that 'successful businesses are resilient and cope with change, including change in Government' and that is exactly what we in our businesses are doing, but that doesn't address or magic away the damaging impacts that will be the result of coalition policies.

Observing that we would be facing growth challenges anyway as a result of the business cycle maturing is irrelevant to the point under discussion. The debate is, or should be, objectively about the extent to which these industrial relations changes will impact viability - wherever we are in the cycle.

10
up

Meanwhile, from the World Bank;

how do you insert image in reply?

very handy.

10
up

Which is why NZ is home to so many tax avoidance shell companies................

The tax avoidance trustee business is what keeps an army of lawyers and accountants employed in this country. The tax dollars from their paychecks and business earnings keeps a portion of the economy afloat.
Even the high-and-mighty incumbents have carved out trusts and shell companies from the foreign buyer ban. Real estate is a safe haven for the wealth of tax dodgers, fraudsters and embezzlers.

The ease of doing business is all about setting up in business. Basically anyone can go onto the Companies Office website and in moments fill out the paperwork and await the name granting.
While on their site you can apply for GST number as well.

It should be called the 'Ease at Setting Up a Business Structure' rather than the "Ease of doing business".

This index? That's incorrect. See https://en.wikipedia.org/wiki/Ease_of_doing_business_index#Methodology

A nation's ranking on the index is based on the average of 10 subindices:

  • Starting a business – Procedures, time, cost and minimum capital to open a new business
  • Dealing with construction permits – Procedures, time and cost to build a warehouse
  • Getting electricity – procedures, time and cost required for a business to obtain a permanent electricity connection for a newly constructed warehouse
  • Registering property – Procedures, time and cost to register commercial real estate
  • Getting credit – Strength of legal rights index, depth of credit information index
  • Protecting investors – Indices on the extent of disclosure, extent of director liability and ease of shareholder suits
  • Paying taxes – Number of taxes paid, hours per year spent preparing tax returns and total tax payable as share of gross profit
  • Trading across borders – Number of documents, cost and time necessary to export and import
  • Enforcing contracts – Procedures, time and cost to enforce a debt contract
  • Resolving insolvency – The time, cost and recovery rate (%) under bankruptcy proceeding

Interesting research on fiscal-monetary policy coordination by the New Economics Foundation;

https://www.ucl.ac.uk/bartlett/public-purpose/sites/public-purpose/files...

NZ is one of the case studies presented from p. 22.

Related article linking to the above paper, is here;

https://neweconomics.org/2018/08/ending-the-fiscal-monetary-tug-o-war

It’s not because of the election result.

It’s because of a credit slowdown.

Nobody gives a shit about the government

'Threat of nuclear war'????
Where did that come from?

This is an opinion article. The thing about opinion articles is that the writer has license to state just about anything, and it appears that one doesn't need to provide any factual justification for said opinion.

The thing about publishing an opinion piece is that you are accountable to the public - thousands of people - and the scrutiny of a comment section whereby commenters have almost free licence to have a go... even for pointing out what is widely understood to be a nuclear threat from North Korea. My ability to supposedly write whatever I want without any factual basis stops at the point I kill my credibility and therefore my livelihood. Feel free to point out comments I have reported as fact (not opinion) that are factually incorrect before having a toothless go. 

Hear hear Jenée. Your detractor is speaking from his or her own "Truthbrary".

Jenee - I like your article and agree with many of your points. But I'm sorry but I just don't think one can provide nuclear war as a current credible risk of any significant likelihood.
North Korea has been posturing and sabre rattling for many years. As for that matter has Russia (in a 'slightly' less menacing manner).

Thanks Fritz. I see Donald Trump as a North Korea aggrevator, but fair call that its posturing on the issue isn't anything new. 

The article is right. Get up and get on with your business. These guys (& girls) were always going to do what they are about to do. It's their once a decade moment. It's the joy of a democracy. Sometimes the other side rules. The Nats had run out of ideas. That's what a decade in power does. Although to be fair to them, they were offering tax cuts, not more taxes. Simon doesn't need to show his hand just yet. Okay, they may role him before he does, but life's a lot about timing, and getting his right will be key (pun intended).

There is no plan. They have no plan.

I admit to an increasing poor memory so would welcome a reminder from this very symphatic bunch of mostly Govt suporters as to what this Govt has actual DONE, rather than just talk talk talk, to encourage business to invest (i.e the guys who employ people and pay wages which is THE most important aspect in the lives of the majority of the population)

I’m not sure what this current Government has achieved yet, I mean they did give the Foreign Buyer Ban the Royal ascent so kudos.

I have to say though I was pretty shocked when the previous government I voted for publicly said GST wasn’t going up only to pull a 180 once elected. That was the only thing i recall that bunch achieving.

Good article.
We all need to remember that life is much more multi-dimensioned than 'the economy'.
Sure it's important, but things have become far too weighted to the economy at the expense of other things over the past 20 years.
Rebalancing is needed.

It would interesting to see if those pessimistic business leaders are also property speculators/landlord types who see nothing but calm seas ahead for the housing market, but troubled times ahead for the business sector and those who they employ to produce outputs in the workplace and to also pay their mortgages in the form of rent - and fail to see any negative correlation or hold any cognitive dissonance in those views.

Because hey, that class of NZ citizen would never contradict themselves right? I mean how can business be so bad, but housing investment (which is a business right?) be so great? Makes sense...umm..