A year of uncertainty and soothed fears for business

22 January 2019

4. Kirk HopeIt has been an interesting year for business in New Zealand.

The political economy - the environment for doing business - changed somewhat in 2018 following the election of a coalition that many said would be bad for business.

In fact, there have been some surprising policy moves led by the various Labour, NZ First and Green parts of the Government.

It was unexpected that a Labour-led coalition would sign up so strongly to Budget responsibility rules or pull back from imposing stiff cuts on business migration.

Also unexpected was NZ First's decision to drop its election promises of severe cuts to immigration.

Budget responsibility and the ability to gain skills from overseas are key issues for business, so these moves will have soothed some business fears.

The most unexpected move of the year - not in a good way - was the abrupt announcement of the decision to ban new oil and gas exploration in New Zealand.

The Green-inspired move took everyone by surprise and raised concerns about the impact on the Taranaki economy and New Zealand economy overall.

It was probably the key reason for low levels of business confidence in 2018 that are only now beginning to ease.

Less surprising was the Ardern Government's move towards greater intervention in the economy.

In some cases this has been very positive for business - for example regarding research and development (R&D) assistance.

Labour's policy to introduce R&D tax credits for all qualifying businesses in addition to the R&D support already provided by Callaghan Innovation has been well received by many businesses that previously would not have been eligible for any innovation support.

It's an important move because the ability to innovate is the main way for businesses to stay competitive.  Most New Zealand businesses must now compete in markets with competitors from many different parts of the world, and these days the only way to effectively compete is by creating new products, services and approaches to business.

Having Government help in the form of tax credits as well as funding support could make a big difference to many New Zealand firms' ability to innovate.

The NZ First-inspired Provincial Growth Fund is another intervention gaining positive mention by business in regional areas of New Zealand.

Businesses involved in activities such as aquaculture in Coromandel, goat farming in Southland, tourism and dairy processing in Westland, kiwifruit in the Bay of Plenty and forestry in Northland have all gained from the fund, while infrastructure for rail services, cycleways and digital connectivity have been boosted.

Perhaps the biggest gain for business this year was the successful completion of the CPTPP trade deal.  This huge trade agreement between 11 Pacific rim countries will significantly reduce the tariffs that New Zealand exporters must pay to sell their goods in large, desirable markets such as Japan and Canada.

The fact that the Ardern Government went so strongly after the CPTPP after being initially opposed to its predecessor the TPP may have been surprising, but it was a reversal that many in business welcomed.

Finally, the reversal most cheered by business was the Government's decision to overturn some of the more rigid elements of its new employment law.  The Employment Relations Act now contains more support for union activity in the workplace, but has also been stripped of excessive provisions that would have cornered businesses into multi- employer collectives against their will.

Looking at the effects on business of the first year of this Government, it's clear that not all policy moves in 2018 were expected and not all were bad for business.

In 2019 enterprises and their representatives will keep on engaging with Government and its three component parties to seek continuing improvements for the environment for business.

 

Kirk Hope | Chief Executive | BusinessNZ | www.businessnz.org.nz

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