Tim McCready examines what company leaders are prioritising in a Government response to Covid-19
A reduction of regulatory burdens, a focus on infrastructure and a reversal of the current ban on offshore oil and gas are among the top areas the business community are calling out for Government action in response to the Covid-19 impact on the economy.
BusinessNZ put questions to its membership for the Deloitte/Chapman Tripp election survey which was in the market through June.
There were 1193 responses from a wide range of companies — spanning the construction, tourism, manufacturing, agriculture and tech sectors. The survey provides a snapshot across the full gamut of New Zealand business — from those employing less than nine staff (47 per cent of respondents) to those employing more than 100 staff (15 per cent of respondents).
The survey provides a snapshot across the full gamut of New Zealand business — from those employing less than nine staff (47 per cent of respondents) to those employing more than 100 staff (15 per cent of respondents).
Company heads were surveyed across six topics: economic environment; investment, innovation and sustainability; infrastructure; trade; skills and human capital; and employment environment.
Of the six topics surveyed, the economic environment was by far considered the most important (55 per cent) to achieving sustained economic growth — significantly up from 29 per cent in the 2017 election survey. The second most important topic for sustained economic growth was investment, innovation and sustainability at 21 per cent, down from 23 per cent in 2017.
When asked to choose the top three Government Covid-19 initiatives in relation to their effectiveness for the business community, the highest scoring was the wage subsidy and leave schemes (78 per cent). The subsidy scheme, which began in March, could be accessed by businesses if they could demonstrate a 30 per cent decline in revenue or projected revenue compared to the year before. There were over 780,000 applications received with some $13 billion paid out.
The next most popular initiatives were: the small business cashflow scheme (55 per cent), fast-tracking of RMA consents for shovel ready projects (41 per cent) and the redirection of Provincial Growth Fund funding (30 per cent).
Infrastructure has been a key battleground in the lead-up to the election. National has announced huge transport infrastructure projects with a $31 billion spend-up including $17b for the upper north and $4b for Wellington and the formation of a National Infrastructure Bank. Labour has announced $6.8b in transport projects as part of its NZ Upgrade Programme and over $700m for shovel-ready transport projects to help with the post-Covid rebuild.
Executives were asked to rank various types of infrastructure as to which has the most potential to contribute to New Zealand’s business growth on a scale of 1-5, where 1=least potential and 5=most potential.
On average, transport infrastructure (encompassing roads, rail and ports) received the highest score with 4.19/5 in terms of potential to contribute to New Zealand’s future economic prosperity. This was also the case for the survey done in 2017. Telecommunications/broadband received a score of 4.14/5, water scored 3.84/5 and energy (encompassing electricity and gas) scored 3.69/5.
This research found that the current emphasis on infrastructure is strongly supported by business leaders, with 80 per cent agreeing that a focus on infrastructure spend is a useful mechanism to help the economy recover from economic shock. Just 10 per cent said it would not be useful, and another 10 per cent responded that they were unsure.
The BusinessNZ survey also asked respondents to consider the Government’s current infrastructure plans — including “shovel ready” projects — and assess whether they will deliver long-lasting economic benefit to New Zealand.
Some 37 per cent said that they will, 20 per cent said they wouldn’t. But perhaps most notably, the majority — 43 per cent — said they were unsure whether there would be a long-lasting economic benefit.
The Resource Management Act (RMA) looks to be gone under the next government whichever major party is in power. A government-appointed working group has delivered a report on how to simplify the 29-year-old RMA, recommending it is repealed and replaced with two separate pieces of legislation: a Natural and Built Environments Act and a Strategic Planning Act.
National Leader Judith Collins said the group came up with “almost exactly what National has been saying for three years”, although instead of National’s suggestion to have one law addressing the environment and the other urban planning and development, the panel has maintained the laws should each cover both areas.
In response to the coronavirus pandemic’s impact on the economy, Cabinet approved a law change in May to bypass part of the RMA process which will see consent decisions for eligible development and infrastructure projects temporarily fast-tracked. Instead of going to council with public input, a panel of experts chaired by an Environmental Court judge would determine whether a project can go ahead.
Some 80 per cent of company heads said that this rapid change in the RMA highlights the need for a full overhaul of the Act. Nine per cent said it doesn’t, and 11 per cent said they were unsure.
Last year, the Labour-led coalition government brought the four aspects of community well-being — cultural, social, environmental and economic — back into the Local Government Act. This change means that councils now have a legislative responsibility to promote all four well-beings.
Business leaders were asked which of these four well-beings should receive the highest priority over the next period. The overwhelming majority (86 per cent) said economic. The next most popular was social (7 per cent), followed by environmental (6 per cent). Cultural received just 0.3 per cent.
Sustainable business practice
Colmar Brunton’s 2020 Better Futures Report revealed that 76 per cent of New Zealanders don’t think business is doing enough to reduce its environmental impact, and 72 per cent of youth say it’s important their future employer is socially and environmentally responsible. Forty-eight per cent of Kiwis say they have deliberately switched over to a brand that is more sustainable.
BusinessNZ asked their membership whether these consumer demands for evidence of sustainable business practices have impacted how their business operates. Over half (53 per cent) of company chiefs said they haven’t impacted their operations — but most likely will in the future. This is up from 45 per cent from the survey results from the last election year in 2017. Interestingly, only 21 per cent responded yes, which was down from 35 per cent from 2017 and 27 per cent in 2014.
Despite this reduction in sustainable practices impacting business operations, the survey showed that sustainability issues are recognised by executives as important to their business. When asked why, the most popular response — chosen by 65 per cent of respondents — was down to customer expectations. Sixty per cent said sustainability issues are important because of reputation, and 53 per cent said for future proofing their business. Just 12 per cent of respondents said that sustainability issues are not at all important to their business.
Executives were also asked what the Government should do to support sustainable business practice in New Zealand. Of the options provided, almost half (49 per cent) said it should look at providing incentives for cleaner production and resource efficiency. The next most popular responses were building stronger links between New Zealand regional economics, services and products (44 per cent) and providing better services for commercial and industry waste management (40 per cent). Also proving popular with over a third of support from respondents were suggestions that the Government engage with business on how to transition to a low carbon economy (36 per cent) and that it commits to purchasing products and services from businesses that integrate sustainability (35 per cent).
Oil and gas exploration
In 2018, the Coalition Government passed the Crown Minerals Amendment Bill, putting an end to new offshore oil and gas exploration. While strongly supported by environmentalists, the ban was widely criticised for being done with limited consultation and without respect for proper standards of due process.
This criticism was supported in a report done earlier this year by the Parliamentary Commissioner for the Environment Simon Upton, who wrote: “When the ban was announced, limited analysis was offered and the stakeholder consultation process was truncated.” The National Party has pledged to reverse the ban if returned to government.
When asked whether the ban should be reversed in light of current events, some 59 per cent of respondents said the ban should be reversed, while 34 per cent said it shouldn’t. Seven per cent were unsure.
Support for free trade
Business leaders were asked to rate Government policies and programmes provided to New Zealand businesses in regards to international trade on a scale of 1-5, where 1=poor and 5=excellent.
Trade agreements delivered by the Ministry of Foreign Affairs and Trade (Mfat) received the highest score of 3.82/5, which was on par with the average score given in 2017. Other policies and programmes rated highly include non-trade barriers (via Mfat and the Ministry of Primary Industries) at 3.58/5 and information, advice and guidance (via NZ Trade and Enterprise) which scored 3.39/5.
Asked whether the Government should devote any resources toward achieving a free trade agreement with the United States given the Trump administration’s sentiments towards free trade, just under half of respondents – 49 per cent – said yes. Thirty-two percent said no, and 19 per cent were unsure.
A follow-up question asked which other countries New Zealand should pursue a free trade agreement with.
The majority said the United Kingdom (83 per cent), followed by the European Union (78 per cent) and India (58 per cent).
Unsurprisingly, in response to whether New Zealand should continue to seek international trade where possible or instead be more domestically focused, some 82 per cent of company heads were in favour. Only 16 per cent said New Zealand should be more domestically focused, and 2 per cent were unsure.
Skills and human capital
Earlier in its first parliamentary term, the Coalition Government announced reforms of the vocational education sector and the merger of 16 of the country’s institutes of technology and polytechs into one national body.
Education Minister Chris Hipkins has said the reform will lead to better outcomes for students, industry and the regions, whereas National’s then-tertiary education spokesperson, Dr Shane Reti, said the reforms will gut New Zealand’s regional education.
Executives were asked whether the Government’s reform of vocational education will result in better skills pipelines for business. They had mixed feelings — the majority, some 37 per cent, said they were unsure. A similar number, 34 per cent, said they would result in a better skills pipeline, and 29 per cent said no.
Supply of labour was another key concern highlighted by the BusinessNZ survey.
A majority, 51 per cent, said that the Government is not doing enough to support businesses with their changing staffing needs.
Just 17 per cent said enough is being done, while 32 per cent said they were unsure.
Expanding on this, the business leaders were also asked which skills and human capital issues the Government should be focusing on.
Of the options provided, the most popular said incentivising business to take on apprentices and/or provide more training (44 per cent).
The next most popular responses were: focus on science, technology, engineering and maths (STEM) at all learning levels (32 per cent), stimulating the economy to get people into jobs quicker (31 per cent) and taking a more company and industry-oriented approach towards developing solutions to skill gaps and labour market constraints (29 per cent). Lowest scoring options included focusing on the aging workforce (10 per cent) and increasing support for speakers of English as a second language (2 per cent).
Backing the 90-day trial
The 90-day trial period was introduced under the National government, which allowed employers to dismiss new employees within the first three months if they didn’t work out.
A Treasury study published in 2016 found no evidence that the trial periods had an impact on the number of people hired and the trials were subsequently watered down by the current government in 2018, so that only those firms with fewer than 20 employees could hire new workers on trial periods.
In the midst of the Covid-crisis, the National Party called on the Government to “urgently restore” the 90-day trial period for new employees, saying that it would help those who have lost their jobs during the pandemic get back into work.
The majority of those surveyed agree, with 73 per cent saying reintroducing the trial period would be of benefit to their business operations.
Some 20 per cent said no, while the remaining 7 per cent were unsure.
The survey also asked business leaders to indicate from a range of employment issues which are currently of greatest importance to them. The top-rated issue is access to skills and talent, with 31 per cent of respondents choosing this option. The next most popular responses were: managing employee costs/cost cutting (18 per cent) and employment relations legislation such as minimum wages (13 per cent).
The lowest scoring issues at the moment for respondents are emerging technology such as increased artificial intelligence and automation (7 per cent), the Holidays Act (3 per cent) and pay equity claims from employees (1 per cent).
There was scepticism from respondents on whether there will be significant impacts on the size and composition of their workforce as a result of emerging technology.
Just over half, 51 per cent, said there will not be a significant impact from the likes of artificial intelligence and robotics — which is a near identical response to the same question in 2017.
Some 40 per cent said there would be, and 9 per cent were unsure.