Infrastructure: New Transport Minister Michael Wood says let’s get transport moving

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Newly appointed Cabinet Minister Michael Wood has high ambition for his transport portfolio. Some of the top-line goals he says are priorities, are to get the city moving, improve freight connections, safety, and progress decarbonisation.

“A lot of this work was set up in the last term, I really see this term as about driving those things through in a practical way and getting them done through projects and programmes,” he says.

Wood says the additional components since the Government’s last term is the “build back” aspect — the fact that infrastructure investment will also be a critical element of the economic recovery and rebuild from Covid-19.

“We are looking at a $54 billion transport pipeline over the next ten years that we’re able to deliver and that is going to be really significant on the jobs front, on the skills development front, on the productivity front as well.

Auckland light rail, a personal pledge
The coalition government was unable to reach agreement on light rail last term. Cabinet suspended progress on the flagship project until after the election. Since then, Wood has taken over the portfolio from Phil Twyford, and for him, making progress on the project is personal.

One of Wood’s key promises when campaigning in the Mount Roskill by-election in 2016 was to fast-track a light rail system from Auckland’s Wynyard Quarter to his electorate in Mount Roskill.

The project will connect the two largest employment hubs in Auckland — the central city and the area north of the airport — along with the Government’s largest housing development in Mount Roskill and Māngere.

“As much as anything it is about connecting up the network,” says Wood. “It is not just people using that line, but from it they will be able to access the western line, the northern busway, the southern line, the airport, out to Botany — and you’re adding greater additional capacity to the whole public transport network in Auckland.”

He is now getting up to speed with the detail of the two options put forward during the competitive bid process by Waka Kotahi NZ Transport Agency and NZ Infra (a consortium that includes the NZ Super Fund and CDPQ Infra, a Quebec-based pension fund). “There are questions that come up — methodology, the route, financing, ownership structures — and we need to work very carefully through those,” he says.

But Wood says the project will go ahead on his watch. The next milestone for the project will be a report from the Ministry of Transport, which was tasked by the previous Cabinet to do further work and consider the best option for the project.

“We want to get the decision right at this point,” he says. “As Auckland continues to grow, if we don’t make these kinds of investments we are going to choke on our own growth.”

Open-minded but cautious
As the new Minister, Wood is coming up to speed with several issues in the portfolio, including congestion charging and his level of appetite for public-private partnerships to fund and build transport infrastructure.

On congestion charging, Wood says he will soon receive a report from the Ministry of Transport with analysis into the impacts of various congestion pricing scheme options, and their technical requirements. He says he wants to see what the analysis shows, describing his position as “open-minded, but tinged with a bit of caution as well.”
“We haven’t got any international comparators with a fully integrated road pricing system that some people are proposing,” he says. “I’d be a little bit cautious about leaping into that although I am open-minded to the fact that it could be a useful tool for demand management and managing congestion.”

He says there is a sequence in question before Auckland could go down a congestion charging track, which would ensure that are effective public transport alternatives in place before imposing charges on people for using private vehicles.

It raises an equity issue — Wood says that while congestion charging wouldn’t necessarily change the way he moves around the city, for those on low incomes it would.

“I would want to see some good analysis and thinking around it before I’d be prepared to take it further,” he says.

Wood says he is also open-minded about the use of public-private partnerships to fund transport projects, but wants to take care to make sure the arrangement is right for New Zealand’s interests.

“I have a responsibility to look after the Crown’s position and make sure that any arrangements we enter into are done responsibly, that the long-term value is right and that the risk allocation is right,” he says.

Construction staff
Wood says while there are calls to keep adding to the transport pipeline, it will be important to ensure New Zealand has the workforce to deliver. An underdeveloped workforce strategy has been a long-term problem for New Zealand, particularly in the infrastructure sector.

“In the long-term, we have a vision to build up a largely domestic workforce that is capable of doing that work and capable of sustaining it over a long period of time,” he says, pointing to the Government’s free trade training and apprenticeship scheme that was put in place is part of the Covid-response as one way this is being encouraged.
“A lot of work done in the previous term was done by a group of ministers to get the construction sector to work more collaboratively on skills and training along with procurement and all the other range of issues. It’s a work in progress there.”
Wood says that at this point there will still be a requirement for the workforce to be supplemented with offshore labour as well — particularly in specialist areas.

Eye to the future
Over this term, Wood says he expects to deliver on the manifesto that Labour was elected to implement.

“That will include rolling out those investments that are already in place, but not yet delivered. The big programme that’s in the Government Policy Statement on Land Transport (GPS), the shovel ready projects and New Zealand upgrade projects, light rail.”
He says the Government is very committed to carrying forward its balanced approach to transport — “there are a mix of transport priorities — yes, roading, but also public transport, rail, walking, cycling, coastal shipping as well,” he says.

“We want to get the right solution to the particular transport problems we face in different areas and be mode neutral — starting out with what are we trying to achieve and then considering what mode and what investment is going help to get us there.”
Wood says the Government is very conscious that if it doesn’t keep up the core investment in maintenance on the state highway network and regional roads they will degrade very quickly.

“There is a big spend that is going on there as well — not necessarily building new roads, but making sure that they are maintained well and that there are constant improvements in terms of the safety profile of them as well,” he says.

He says another big aspect of his role will include the agenda around decarbonisation.
“Next year we get the first carbon budget from the climate commission — and transport is about 20 per cent of it.”

One thing that Wood makes clear: the next three years won’t be about reformulating plans and new strategies — it will be about delivery.
“After a lot of planning, the fruits of that are going to start to be seen,” he says.

— Additional reporting Fran O’Sullivan

Infrastructure: Bridging the troubled water gap (NZ Herald)

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Water is New Zealand’s most valuable asset and the biggest infrastructure challenge of the next decade.

That is the view of Fletcher Construction chief executive Peter Reidy, who says New Zealand’s water infrastructure is well overdue for investment as pipes reach the end of their useful lives.

Reidy says that more than a third of wastewater treatment plants will require re-consenting within the next decade, and almost a quarter are operating on expired consents. Conservative estimates are that the cost of upgrades and renewals will be measured in billions of dollars.

“The public’s environmental expectations are also increasing and the consequences of climate change, including more frequent and more intense droughts, require urgent attention,” he says.

Over the past three years, central and local government have been considering how to address the challenges facing delivery of three waters services (drinking water, wastewater, stormwater) to communities. The review followed the 2016 Havelock North campylobacter contamination crisis that exposed systemic issues in the regulation and provision of three waters.

The result has been the establishment of Taumata Arowai as a Crown water regulatory body to administer and enforce a drinking water regulatory framework, with additional oversight on improving the environmental performance of wastewater and stormwater networks.

In July this year, as part of the Covid-19 stimulus, the Government announced $761 million in funding to maintain and improve three waters infrastructure and to support the reform of local government water services delivery arrangements.

At the funding announcement, Local Government Minister Nanaia Mahuta said there are “massive looming costs across the three waters networks” and the current delivery arrangement, particularly for smaller rural and provincial councils, are not well-placed to meet them.

Although councils currently own and manage most water services, the investment from Government was made contingent on local councils opting in to the government’s wider reform programme.

Fletcher Construction supports the Government’s plans to reform the way we manage water.

“At the end of the day it is all about customers — improving environmental standards, value for money and productivity for customers,” says Reidy. “Having water utilities at scale will also allow for greater investment in digital solutions to water.”

Fletcher Construction has brought together two of its businesses — Fletcher Construction Infrastructure and Brian Perry Civil — to support the establishment of capital construction plus operations and maintenance for water assets to help local government meet their challenges.

In September, Fletcher Construction along with Fulton Hogan signed a $2.4 billion contract with Auckland Council-owned Watercare Services for the delivery of water and wastewater infrastructure for Auckland over the next 10 years.

Watercare said the long-term, collaborative partnership is a first for New Zealand. The planned programme of work — rather than discrete projects — is expected to help drive greater cost-efficiency and innovation. A key goal is Watercare’s aim to reduce carbon in infrastructure by 40 per cent by 2024, to reduce the cost of its infrastructure programme by 20 per cent by 2024 and to “improve the health, safety and wellbeing of all people involved in delivering our infrastructure by 20 per cent year-on-year.”

Reidy says the 10-year partnership with Watercare was secured under a new enterprise model which has audacious cost and sustainability goals. “This is a transformational model of partnership built around carbon reduction, safety improvements and cost savings that challenged our team to collaborate across their specialty areas,” he says. “Watercare has changed the way it partners and that has stimulated Fletcher Construction to respond in a way that puts safety, sustainability and innovation at the core of our model.”

Reidy says it is that kind of model that could work across the country.

“With Wellington Water we are also offering more than just a straight subcontractor model. And that’s because real progress can be made when deliverers are embedded within planning and project teams.”

Reidy says the Government has started this conversation, but we all need to collaborate together to find the solutions. “That’s critical for our cities, our waterways and our people,” he says.

Sustainability is a necessity now

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The Covid-19 crisis has not sated the appetite for investing 

When the Covid-19 pandemic struck, some suggested that investing sustainably is something best-suited to a bull market — a “luxury good” or “nice-to-have” — but among the first areas to be cut back when times are tough and the economy is receding.

Internationally, it seems that investors have not just stuck with sustainable investing, but have embraced it. Instead of a luxury good, sustainability is seen as a necessity and an idea whose time has come.

The new reality the world is facing has forced investors to consider risk differently, and has highlighted the interconnectedness between social, environmental and economic challenges.

JP Morgan ESG & Sustainability heads Jean-Xavier Hecker and Hugo Dubourg say: “Over the long run, Covid-19 could prove to be a major turning point for ESG investing, or strategies that consider a company’s environmental, social and governance performance alongside traditional financial metrics.”

Indeed, a survey run by JP Morgan asked 50 global institutions (representing US$12.9 trillion in assets under management) how they expect Covid-19 to impact the future of ESG investing. It showed some 71 per cent think it is “rather likely”, “likely”, or “very likely” that a low probability-high impact risk like Covid-19 would increase awareness and actions globally to tackle high impact-high probability risks such as those related to climate change and biodiversity losses.

More immediately, the pandemic has seen investors turn to sustainable and responsible investments as a form of safe haven. This is because companies with strong records on employee relations, environmental sustainability and corporate governance tend to do well over the long-term.

Closer to home, the Aotearoa Circle’s Roadmap for Action identified some of the domestic social inequalities that have been highlighted by the Covid-19 crisis, including:

·       Those on lower wages, and females, have been more impacted by job losses and have less certainty about when their jobs may return.

·       Those on lower wages have less capacity to absorb financial shocks, meaning their wellbeing has been more impacted by Covid-19.

·       Those without digital access or capability have been further excluded from accessing essential health and other services.

·       Those with essential jobs are the people we rely upon during a pandemic. Yet they receive little compensation above the minimum wage. This has led to the stark realisation that we need to value these people differently and need to re-think our ideas of value.

The Aotearoa Circle says the rapid behavioural change in response to the pandemic has shown how innovative and adaptive we can be.

It suggests that governments stepping in to become some of the largest consumers via various stimulus programs presents a crucial opportunity to serve two purposes: economic recovery and a climate change crisis recovery.

The Roadmap for Action says: “Our recovery needs to look to reduce the social and environmental imbalances that disrupt our society, and make our economy more resilient for the next generation.

“If the huge stimulus does not simultaneously contribute towards a more resilient, sustainable economy, or worse, sets us back in our response to those issues, there are real risks we leave ourselves further exposed, and we are putting ourselves at a higher risk of funding shortages to achieve such a transformation in future.”

Co-chair of the Sustainable Finance Forum and New Zealand Super Fund CEO Matt Whineray says while the pandemic and the consequential economic destruction looms large, the existential crisis that is climate change is not going away — and will continue to worsen.

“Responding to the pandemic in a way which exacerbates the climate crisis, would be a global policy failure,” he says.

While New Zealand may have lagged behind some of the large international markets, investment in areas that reduce global carbon emissions and address essential social services is rapidly growing.

For example, New Zealand’s sustainable bond issuance is becoming a relatively significant asset class of its own. ANZ/ Bloomberg’s analysis of sustainable bonds in New Zealand by year shows a dramatic rise in issuance from $106m in 2017 to $2.125b in 2020. Over the past three years, some $2.7b in wellbeing bonds have been issued by government housing provider Kāinga Ora to fund sustainable and affordable social housing.

There is also a growing expectation from New Zealanders that their KiwiSaver providers focus on responsible and ethical investment opportunities that deliver positive outcomes aligned with their values.

Further compounding this demand is the rapid growth in millennial investors. This will become even more significant as the largest ever intergenerational transfer of wealth occurs in the near future, putting some US$30 trillion under the control of millennials in the US alone.

A 2019 Morgan Stanley report says 95 per cent of millennials are interested in sustainable investing (compared to 85 per cent of the general population). The report also showed that 85 per cent of millennials believe it is possible for their investment decisions to influence the amount of climate change caused by human activities and 89 per cent say their investment decisions can create economic growth that lifts people out of poverty.

As the government and large corporates in New Zealand ramp up the delivery on their productivity, social and environmental aspirations, the call from investors for increased sustainable investment opportunities will be answered.

Investors will likely embrace the opportunity to provide some of the significant capital flow that will be needed to help ensure New Zealand’s economic recovery is long-lasting and sustainable.

Mood of the boardroom: How business leaders view Jacinda Ardern (NZ Herald)

Prime Minister Jacinda Ardern is admired by chief executives for her leadership during a challenging term in government, writes Tim McCready

Jacinda Ardern’s leadership has been tested over the past three years: the Christchurch terror attack, Whakaari/White Island disaster and pandemic are front of mind for respondents to the Herald’s 2020 Mood of the Boardroom Election survey.

They rate her leadership at 3.88/5 on a scale where 1= not impressive and 5=very impressive.

A property CEO says what Ardern has coped with in her three years at the helm is nothing short of unbelievable: “It’s hard to think of anyone who could have handled these challenges with the same deft touch as she has demonstrated.”

“Would I rank her as highly without those extraordinary events? Possibly not — but that’s hypothetical and irrelevant. Does she have some huge challenges in front of her as far as the ‘new normal’ is concerned? Goodness yes. Does that change how much credit she must be accorded for her performance to date? Not in my view.”

“It is hard to imagine a more difficult term for a first-term Government that has been out of power for three terms,” says Deloitte CEO Thomas Pippos. “The Prime Minister’s leadership in some of the key challenges the country has faced has been without a doubt very positive.”

CEOs rate Ardern’s integrity (3.57/5) and courage (3.67/5) among her top capabilities, along with her ability to adeptly communicate and demonstrate empathy. They say these are attributes that can be leveraged internationally to help New Zealand in its recovery following Covid-19.

“She has led the country through some of our most challenging moments in recent history, and her empathetic style has clearly resonated both locally and globally,” says Spark CEO Jolie Hodson.

The PM’s ability to form a coalition is also rated highly by CEOs among Ardern’s capabilities (3.51/5), having successfully negotiated her way into power following the 2017 election. Alongside this is her rating for political management (3.33/5) — demonstrated by her ability to lead a stable Government over three years — which many previously considered unachievable with Winston Peters’ involvement.

But executives say Ardern has been let down by her MPs and Labour’s inability to deliver on 2017 election promises including KiwiBuild and Auckland’s light rail.

“An outstanding leader on all fronts, sometimes let down by members of her team,” says the NZIBF’s Stephen Jacobi.

A healthcare boss says she is great at leadership in a crisis, but “lacks plans for a future pathway forward and has no credibility on implementation of any policy”.

This worries CEOs, as they say the “hard stuff” for New Zealand is only starting now and her ability in this is yet to be proven.

Ardern’s lowest scoring capabilities from CEOs are for her vision and strategy for New Zealand (2.56/5) and economic management (2.17/5).

Beca Group CEO Greg Lowe says when coming into power, the Prime Minister promised to govern for all New Zealanders. “While she has handled some situations very well, we are still lacking a long-term plan for New Zealand that we can all get behind and make progress on.”

Key Performance Indicators

The highest scoring KPI for the Prime Minister from CEOs is her management for the response to the Christchurch terrorist attack (4.50/5).

Says director Anne Walsh: “The Christchurch Call showed international leadership in bringing change globally as to how multinational digital companies operate differently in the spread of terrorism and misinformation”.

The handling of the two other major crises over the past year also rate among Ardern’s top KPIs: Whakaari / White Island (3.94/5) and the Covid-19 crisis (3.90/5).

“No one would wish them on any PM. Jacinda has demonstrated genuine compassion towards her constituents,” says Precinct Properties chair Craig Stobo. “She is an outstanding politician who may be able to govern New Zealand without a coalition partner.”

The Government’s Covid response is a key part of Labour’s election campaign, with Ardern pointing out that relative to other countries, New Zealand is more open. She says our recovery is on track to be better than Australia’s with lower debt and unemployment levels and fewer deaths.

Ardern’s charismatic performance has received admiration on the international stage this year, with stark contrasts made between her Covid-19 response to the likes of US President Donald Trump and UK Prime Minister Boris Johnson.

Her ability to leverage her brand for New Zealand’s international advantage has again rated highly with CEOs scoring this 4.23/5. Says Erica Crawford, “She is one of New Zealand’s best assets on the global scene, she needs to cheerlead New Zealand.”

Another high-scoring KPI for Ardern is her political performance (3.84/5).

It will be disappointing to Ardern that child poverty reduction, a portfolio for which she is responsible for and has expressed a strong desire to address, was her second lowest KPI, receiving a score of 2.10/5.

But one of the most troubling KPIs for executives is Ardern’s ability to build confidence within the business community — for that they rate her 2.13/5. They say that Ardern’s repeated calls for kindness and empathy in politics alone do not make a great leader: “you need a workable plan and know-how to deliver it with and through others”. A director says “she does not inspire confidence that she understands business — but she does need business to succeed to generate jobs and pay taxes.”

They say her success as leader is driven mostly by the figurehead aspects of the role. But notes a professional director: “the hallmark of great leadership is having a superb team around you — and apart from Robertson — she just does not have that”.

“Labour has a very superficial engagement with the business community,” says a multinational boss. “They do the bare minimum and have no ministers outside of Grant Robertson who really understand business at all.”

Mood of the boardroom: CEOs compare finance rivals Grant Robertson and Paul Goldsmith (NZ Herald)

Grant Robertson: Capable, calm, credible

Chief executives send a clear message to Minister of Finance Grant Robertson: You’ve done well, but the real test is yet to come. It is testament to his performance in the wake of Covid-19 that, asked whether Robertson has been a credible Minister of Finance, an overwhelming majority of CEO respondents to the Herald’s 2020 survey — some 91 per cent, said Yes. Just 5 per cent said No; 4 per cent were unsure.

This rating is up considerably from last year. Robertson’s rating in the 2019 Mood of the Boardroom survey had 54 per cent of respondents say Yes to that same credibility question and 29 per cent unsure.

He is the highest-scoring minister, receiving a rating from respondents of 4.18/5 for ministerial performance. To put this score into perspective, this is the highest rating a Minister has received in the Mood of the Boardroom Survey since then-Finance Minister Bill English in 2016, where he received a rating in John Key’s Cabinet of 4.51/5.

On his performance as finance minister, the word “capable” was frequently used. Fletcher Construction CEO Peter Reidy says he is “capable, calm and credible”.

NZ International Business Forum executive director Stephen Jacobi describes Robertson as “a source of strength and stability for the Prime Minister and the Government”. Says a transport executive: “thank goodness he is influential in cabinet”.

Beca CEO Greg Lowe says that Robertson has a good grip on the economy, its drivers and what makes it succeed. “He is a hardworking and capable minister,” he says. “Engagement with business is good but we could improve the teamwork between government and business.”

It was this influence that saw him fulfil Labour’s 2017 campaign promise to reduce net core crown debt to below 20 per cent of GDP in 2018.

“Robertson has done a superb job for three years,” says a government relations firm boss. “Where are the loony lefties now who cried out for him to spend spend spend when New Zealand had a sizeable surplus? He stared them down — thank God!”

Since the early days of the Covid-19 crisis, Robertson has proven his mettle in the eyes of New Zealand’s business elite. He has grown into this role and was superb throughout Covid — “whether we agree with his policies or not”, says a real estate boss.

He rolled out the  wage subsidy just days after the Government’s response to the pandemic was put in place. The subsidy was initially  for 12 weeks over the lockdown period,  then extended a further eight weeks for businesses still experiencing a significant hit to revenue. A third extension was announced when Covid  re-emerged in August.

The Government also introduced a temporary 12-week income relief payment for those who had lost  jobs, low interest and interest-free loans for businesses, and changes to the tax system to encourage investment.

Many top business leaders responding to the 2020 Mood of the Boardroom survey say their companies accessed the wage subsidy  —  41 per cent received the first iteration, 16 per cent received the second. “This was an excellent initiative. Quick and sharp response,” says a healthcare chief.

Some see it differently. A banking chair says  “as Minister of Finance, he has held the line in a number of areas, but has allowed Government spending to run riot over the pandemic”.

Independent director Cathy Quinn says the wage subsidy was “an important step to keep people in work and the economy going.”

But she says we now need business to adapt to the tough new environment as the Government can’t afford to subsidise indefinitely.

An executive in the transportation sector says “the real test will be if he gets back and whether he can drive quality spending as opposed to a lolly-scramble”.

Mainfreight CEO Don Braid says   Robertson has performed well under the conditions  — but notes “the real challenge now lies ahead”.

That challenge is New Zealand’s economic recovery, and the hefty Government debt. According to the Budget, Government debt will peak at 2024 when it hits $219 billion (just under 60 per cent of GDP).

Robertson insists New Zealand will pay down its increased debt  over time, through growing the economy. He has ruled out cutting significant public services and income support.

“When I look back to the late 80s and early 90s  I saw a different kind of approach to recovery from a downturn, one that was more of an austerity-based one — it was young people who bore a lot of the brunt of that.  I am determined we won’t allow that to happen.”

The Government’s approach was to invest in  young people now through training and job support.

Chair of Precinct Properties, Craig Stobo, says Robertson has been “unruffled and steady,” adding “the spectre of the 80s economic reforms informs his policy preference”.

It is unsurprising most CEOs focused on Robertson’s performance in relation to the Government’s Covid-19 economic response. However, there is   underlying disappointment that he has — so far — lacked long-term vision, and hasn’t used his position to deliver on the transformational change Labour campaigned on in 2017. A real estate boss says: “he lacks depth and strategic focus — it is all about the now.” Adds an executive recruiter: “I have severe concerns over his lack of focus and long-term thinking.”

The chief executive of an investment firm says: “He did a sound job in his first two-and-a-half years but he had the opportunity to create a massive lasting legacy and transformational change with the big spend up and appears to have wasted the opportunity on instead spreading money in every direction.”

Paul Goldsmith: Needs confidence, clarity

New Zealand’s top chief executives want Paul Goldsmith to find confidence and clarity.

National’s finance spokesperson has yet to make a major impact with many top business leaders, perhaps because he has been overshadowed during National’s leadership turmoil.

“Paul, like many in the opposition have been starved of oxygen in terms of public voice or debate,” says Deloitte CEO Thomas Pippos. Precinct Properties chair Craig Stobo has a similar view: “He has emerging credibility but low share of voice.” The 2020 Herald Mood of the Boardroom survey asked executives whether Goldsmith presented as a credible future minister of finance. Fifty-three per cent of respondents said Yes; 22 per cent said No.

The remainder — a significant 25 per cent — say they are still unsure, with many noting Goldsmith has lacked visibility at a time where strong opposition is needed.

“He’s been meek,” says an executive in the wine industry.

“He should have had a field day with this Government,” says an investment banker. “But he has been very quiet in Opposition.” Another high-profile banker says: “I haven’t seen enough to suggest he is a credible future minister of finance, but give him the benefit of the doubt.”

“Based on what little I have seen, he seems to be okay — but I am not ready to say ‘yes, he’s a credible future minister of finance’,” adds a recruiter.

This morning, Goldsmith will debate with Finance Minister Grant Robertson at the launch of the Mood of the Boardroom Election Survey. Several of New Zealand’s top bosses note that compared to Robertson — who received a positive response from 91 per cent of CEOs — Goldsmith lacks credibility.

Grant Samuel managing director Michael Lorimer says Goldsmith does not have a good grasp of the issues: “This was evidenced at last year’s breakfast debate and he has not improved since,” he says. “He needs to put up ideas — not just point out the faults in the Government,” says a healthcare boss. “While I don’t like Labour’s policies, I think Grant Robertson is a far better and more credible Minister of Finance.”

“He’s not as strong as Grant, but he has made some excellent suggestions and would be tested if he became minister, which would give him the chance to raise his credibility.” says an executive in the real estate sector.

But Goldsmith should take heart. The Opposition finance spokesperson is typically challenged when compared to an incumbent who has become established in the role.

Robertson also faced a hurdle connecting with the business community prior to taking the helm.

In the 2016 Mood of the Boardroom survey — when Robertson was up against  Bill English — one banker suggested Labour should replace him with “someone who understands the portfolio, like David Parker”. In the eyes of CEOs, Robertson is now their top performer.

Goldsmith took on the finance portfolio in June last year and was elevated to third in the party’s parliamentary rankings under Simon Bridges’ leadership.

He won praise as Opposition finance spokesperson in the early days of the Covid-19 pandemic.

Goldsmith commended the Government for the wage subsidy package and its Covid leave support. But he also called for more targeted and specific support for business with more rigorous measures around it if a wage extension was introduced — something that is now being debated as it comes to light that some large, profitable companies likely took advantage of the subsidy.

The tone he used to deliver his criticism of the detail in the Government’s economic response was in stark contrast to then-leader Simon Bridges, which drew strong condemnation and ultimately led to his demotion.

“Paul has continued to work hard and push on detail,” says a transportation boss.

Goldsmith retained the finance portfolio under Todd Muller’s brief stint as leader but dropped in ranking to number five — bouncing back to number three when Judith Collins assumed the leadership.

Despite his backing in the role by three leaders, CEOs say Goldsmith is still yet to prove he’s got the chops to run the government books. But they also acknowledge he is in an unenviable position, following in the footsteps of some high-performing predecessors — former National Party finance minister Bill English consistently rated top of cabinet during his tenure as finance minister.

“I compare him to Bill English — a hard act to follow,” says a CEO in the agricultural sector.

“I like Paul — and he is smart,” says a top lawyer. “But scratch beneath the surface and he can’t answer follow up questions.”

Another major concern raised by CEOs is Goldsmith’s lack of ability when it comes to communicating and connecting with the business community and the broader public.

“He is not really a retail politician, but he is extremely bright and is a very fast learner,” says a professional director.

“He is not yet credible, but he has the brain, if not the communication skills — he’s very dry,” says a lobbyist. A CEO in the transportation industry says he lacks mana and presence — “too much IQ and not enough EQ!”. Another CEO shares a similar view: “He’s dry, but capable.”

The head of an investment firm sends the following advice to Goldsmith: “He needs to command the key points and deliver them with more confidence and clarity.”

A real estate boss gives a backhanded compliment — referring to Goldsmith’s extracurricular interests: “He’s an excellent art historian.”

Mood of the boardroom: Wage subsidy a jobsaver for many (NZ Herald)

Some sectors have even taken on staff writes Tim McCready

Business leaders say the wage subsidy the Government implemented to support firms that had taken a revenue hit from Covid-19, was an important step to keep people in work and the economy going.

The Mood of the Boardroom 2020 survey revealed 41 per cent of respondents accessed the first round of the subsidy, and 15 per cent — the second round.

The subsidy was received across myriad industries, and those that took it up say it was a quick and sharp response that bolstered confidence and saved jobs. “I think this saved many jobs,” says a healthcare boss. “We did not make people redundant because of this, and they remain employed post the subsidy ending.”

“It was a significant help during times of extreme uncertainty to support staff and give them surety of employment,” says Fulton Hogan CEO Cos Bruyn.

There have been reports of some companies rorting the system and claiming wage subsidies they may not have been entitled to but some survey respondents say although they may have been eligible for the support, their businesses chose not to take it up.

LIC chief executive Wayne McNee says given how the business performed for the full year, the firm chose not to use it. A tech CEO says, “we felt it was a badge of honour not to need or use the wage subsidy in the first or second round”.

Chief executive Don Braid says Mainfreight applied and received $10.6m — qualifying under the rules. “But we returned the full amount when we recognised we were better off than others and could see improvement occurring.”

One CEO says their company accessed the first round, but repaid it in full as soon as it was clear the impact of Covid was less than projected. “It was hugely helpful in giving us the confidence to maintain full employment and remuneration at a time when some competitors were cutting one or both.”

But business leaders caution: “We need business to adapt to the tough new environment and the Government — and indeed New Zealand — can’t afford to keep subsidising business indefinitely.”

Business resizing — not just down

The buffer provided from the subsidy has no doubt saved jobs. Exactly half of the survey respondents say they haven’t had to downsize staff during the pandemic.

But even so there have been a significant number of casualties from the crisis — some 17 per cent say they have had to downsize by more than 10 per cent. Although some note the full impact of job losses will be revealed once the ventilator of the wage subsidy wears off.

The most dramatic reduction in staff numbers has been in the tourism industry.

But 8 per cent of respondents say they have upsized due to the impact of the  pandemic. These are from a range of sectors, including food and agribusiness, banking, investment, professional services and IT firms. There have been several reasons for the staffing increase.

“We are taking the approach of investing through this crisis,” says ASB CEO Vittoria Shortt. “This means providing permanent roles for contractors and recruiting more people into our business.”

Chapman Tripp chief executive partner Nick Wells says there have been fewer departures from the firm: “Few want to leave for overseas, so we have grown slightly compared to what we would typically expect.”

A professional director says one of her companies initially pushed pause on recruitment — “however it very quickly became apparent that the needs of our customers required us to accelerate progress in order to continue to help with their evolving needs.”

CEO Chris Quin says Foodstuffs North Island upsized 6 per cent at peak due to panic-buying and growth in online.

Mixed impact on production levels

CEOs were asked how Covid will impact production levels within their businesses. The result is mixed over the coming two quarters, with a few (4 per cent) expecting a significant decline of more than 80 per cent, but others expecting no impact or even growth in production levels.

A law firm head: “We saw a decline over the past three months that averaged out at 20 per cent. A trend in the right direction is now evident — but still down  year-on-year.”

Most in primary industry and food and beverage say they don’t expect to see a significant impact in the coming months. “Demand persists for premium infant formula in the China market,” says director Ruth Richardson. “Demand signals remain very positive,” says an agribusiness boss. “But we do have a lingering concern — perhaps through our approach of being constructively paranoid — that the music will stop and there won’t be enough chairs.”

As has been the case for many aspects of Covid-19, CEOs say  in many cases production levels will depend entirely on the pandemic — and therefore the future remains uncertain.

“It depends totally on expectations of further Covid incursions, shutdowns and the opening of borders to both shows, sports teams, artists and tourists,” says non-executive director Joanna Perry.

From a food and beverage boss: “This is a hard question to answer looking forward as it all depends on the Government’s ability deliver on its elimination strategy.”

Production is clearly not just a domestic issue. A slowdown in world trade growth (which CEOs score among their highest international risks at 7.64/10 on a scale where 1= no concern and 10=very concerned) contributes to general uncertainty and nervousness in the business community in terms of future production levels.

MinterEllisonRuddWatts’ Lloyd Kavanagh: “We need to plan for each of the scenarios, and be agile in adapting depending on what unfolds. We can’t  project one outcome when there are so many variables.”

 

 

Covid changes

The disruption in the way businesses operate as a result of Covid-19 has been a catalyst for businesses to adopt new technologies more quickly than they expected and accelerate their use of existing technologies. McKinsey estimates this rapid migration to digital technologies has seen us vault five years forward in consumer and business digital adoption in a matter of around eight weeks.

The Mood of the Boardroom survey asked CEOs how the Covid-19 crisis has changed the way in which their business is conducted.

On a scale of 1 to 5, where 1= strongly disagree and 5=strongly agree, the top-rated changes to businesses are: increased use of online meetings (4.63/5), increased use of technology (4.45/5), more flexible working (4.36/5), accelerated growth of e-commerce (4.33/5) and reduced international business travel (4.31/5).

Beca’s CEO Greg Lowe said he was surprised during the initial lockdown at the effectiveness of working from home both for Beca and for its clients.

“The increased use of virtual meeting technology has not only increased the skill levels of all of us, we have realised that we can be more productive from remote locations and carry out more of our business activity remotely than we thought.”

Beca managed to maintain its delivery to its clients with thousands of people working from home — but that this is not a sustainable business model in the long term.

“Building relationships, developing people, creating more effective teams, increasing productivity all needs some form of person to person engagement. While undoubtedly we will see more flexible working (for many reasons) and less travel, I do not believe that large numbers of people want to work permanently from home.”

The adoption of flexible working saw one energy CEO reduce their organisation’s footprint and rethink the use of office space. But an investment fund boss reckons the importance on office space from more people working from home is overrated — “but this will be impacted by economic factors”.

Precinct Properties chair Craig Stobo says “the Covid wave has accelerated the digital wave”. Another executive in the tech sector says New Zealand should “use this to become a digital nation!”

A property CEO says Covid has given their organisation a greater appreciation of the critical importance of business continuity planning. “It is no longer a ‘nice to have when we get to it’ item on the board agenda.”

An increased focus on staff wellbeing and social purpose was also mentioned from executives spanning various industries as a major change from Covid.

“We have had a complete rethink on the role of HR and how teams work — including salary and incentive structures,” said one CEO in the utilities sector.

Mood of the boardroom: Resurgence pops plans for transtasman bubble (NZ Herald)

Support for transtasman travel but only when safe, reports  Tim McCready

The transtasman bubble proposal should be progressed once the Covid-19 flareup in Australia is under control. That is the message from New Zealand’s top CEOs in the Herald’s Mood of the Boardroom survey.

The result was overwhelming — 94 per cent of respondents are in favour, 5 per cent are unsure. Just 1 per cent of respondents say we shouldn’t continue to progress the initiative.

CEOs placed myriad caveats — “only when safe”, “define ‘under control’”, “risk must be minimal before relaxing”.

“It’s something we should keep a watching brief on,” says a tech entrepreneur. “Nothing in Australia gives me confidence in their capabilities to contain.”

Deloitte CEO Thomas Pippos asks: “The question is what does under control mean? At one stage Victoria was considered under control.”

“The latest outbreaks seem to show this is less likely and riskier than first envisaged,” says Chapman Tripp chief executive partner Nick Wells.

Some CEOs say we shouldn’t be progressing until there is no community transmission on both sides of the Tasman.

“We need zero community transmission in each country and rapid tracing technology that crosses borders to even be considered,” says a dairy industry boss.  “Rapid testing may have a role to play when and if it becomes available.”

But others are amenable to travel with cases present in the community — so long as steps are taken to ensure the risk remains low.

“Progress on pandemic management and the use of technology can both be used to provide a quarantine-free system for travel with selected countries,” says Beca CEO Greg Lowe. “We just need to get on with solving the technical challenges so we can implement when the health settings are right.  No one wants to be unsafe, but we do need to have a plan.”

Australian Prime Minister Scott Morrison has said Australia is working on a “hotspot” model that would not necessarily require zero transmission.  He said this could also extend to Covid-free parts of New Zealand.

Morrison said all states and territories except for Western Australia had agreed to an update of the roadmap to recovery, with the goal to reopen their borders by Christmas. It will focus on testing regimes, data sharing and interstate borders — rather than issues like hospitality venue capacity.

Jacinda Ardern has said that — so far — Australia’s hotspot model will not be reciprocated holus-bolus. “Ultimately, for the hotspot arrangement, it doesn’t change the work that we’re doing on the bubble which is focused on putting New Zealand and Australia in the position to have quarantine-free on both sides of the Tasman. Right now though, neither country is in a position to offer that in its entirety because it’s just not safe.  “If a New Zealander chooses to go to Australia because there is no quarantine, they will know that they’ll be covering the cost of their quarantine on return to New Zealand.”

Back in May when a travel bubble with Australia looked promising, the Trans-Tasman Safe Border Group was established, co-ordinated by the Australia New Zealand Leadership Forum.

The group — made up of 11 government agencies, six airports, two airlines, health experts and airline, airport and border agency representatives from both Australia and New Zealand — submitted a blueprint for transtasman travel to both governments with the objective of removing the need for quarantine.

Auckland Airport CEO Adrian Littlewood was part of the effort, and said at the time “New Zealand and Australia have a great opportunity to really set some potential standards for travel restarting around the world.”

Its original aim was to have the bubble operational and flying by the July school holidays.

Prior to the Covid crisis, New Zealand was the most popular outbound travel destination for Australians, with 1.5 million visitors arriving from Australia in 2019, accounting for 40 per cent of all foreign visitors to New Zealand. Australia was the most popular outbound travel destination for Kiwis. New Zealand is Australia’s second largest source market for visitors, with 1.4 million visitors in 2019, accounting for 15 per cent of total visitors to Australia.

Unsurprisingly, a travel industry CEO is supportive: “It absolutely should be progressed — our economies and social structures are too intertwined.”

Chairman of the New Zealand Initiative Roger Partridge says the open border will be significant: “We all have an interest in Australia succeeding and expanding our ‘domestic’ marketplace for tourism by an extra 20 million people.”

Precinct Properties chair Craig Stobo reckons the industry should be innovative in its thinking. “We had 1.5 million Aussies come last year … tourism will have to go for a high-margin value proposition — not a low value volume growth strategy as we have done in the past,” he says.

Most CEOs agree quarantine-free travel across the Tasman is unlikely to happen soon.

“With the rate of community transmission and the time it will take to get this under control, we should not expect or depend on this opening up in the next three months,” says marketing boss Anne Walsh.

Mood of the boardroom: The show must go on — online (NZ Herald)

In any normal time, the political leaders would have been put through their paces and challenged by business chiefs on their election policies.

The 2020 election is like no other.

The Covid-19 restrictions in Auckland saw BusinessNZ move the conference online.

Instead of a pumping crowd, there was a sea of empty chairs. Mask-wearing journalists and a guy who sanitised the lectern in between four political leaders: James Shaw (Green Party), David Seymour (Act), Judith Collins (National) and Jacinda Ardern (Labour).

Winston Peters (NZ First) appeared through video-link and BusinessNZ’s members watched online.

Tim McCready summarises the show.

Jacinda Ardern

Labour Leader Jacinda Ardern was positive. She highlighted everything her Coalition government had done to support business through Covid, and reiterated “the best economic response is a strong health response.”

“Ours is a response I will defend as being among the very best in the world, because not acknowledging that would be a disservice to five million new Zealanders who made it happen,” she said.

2020 has not been easy: “For business it has been hard and disruptive — a pandemic sweeps away business as usual. It is incredibly hard for business to plan in a global pandemic.”

But she said there was a limited window of opportunity to leverage our reputation as a “clean, green, and safe nation”.

“We will launch an investment attraction strategy… and compete to win the global companies we want to invest in New Zealand and locate part of their business here.”

Ardern said New Zealand could use its standing to attract more investment like Microsoft’s plant establish its first data centre in New Zealand.

“We have a plan and we are rolling out that plan … “Supporting our people, our businesses, and our international reputation”.

Judith Collins

National leader Judith Collins spent a significant time pointing out the flaws in the current government — beginning with its response to Covid.

The prospect of yoyo-ing in and out of lockdown is a significant impediment to business, and she criticised what she called the “mind-blowing stupidness” that saw the Government allow corner dairies to open during lockdown period but not the butchers and greengrocers next door to them.

“Let’s put essential industries aside. We should be looking at what’s a safe industry.”

She was also vehement in her denunciation of Labour’s failure to fulfil its promises.

“We would not promise to build 100,000 houses in ten years. We would not promise light rail up Dominion Road and then not do it. We would not cancel or delay 15 roads. We will deliver on what we promise,” she said.

Collins spoke of her vision for New Zealand in the wake of Covid-19.

“It’s an opportunity for New Zealand which we can either ignore and worry about everything that might go wrong, or we can seize the opportunities.

“It is a time for vision. That vision does not mean going back to the past.”

Winston Peters

New Zealand First Leader Winston Peters joined via video link from his hotel room, while on his bus tour of the South Island. He started by criticising the Labour-led Government asking “what are we doing in lockdown in the South Island when [the re-emergence of Covid-19] is an Auckland issue?”

He said New Zealand is entering a completely new era — “we are not going to revert back to how things were just a few months ago”.

The Greens also came in for criticisim. “If you are sceptical that ‘woke’ is a problem, let me say: ‘Green school’.” Labour’s proposed Matariki holiday was also slammed, along with its proposal to increase the top personal income tax rate to 39 per cent — “taxing people will not regain our prosperity.”

As for New Zealand First, Peters said it is standing on several platforms, “one is the experience we bring to office and the moderating presence we have in Government. And if you doubt that, just two words: capital gains tax.”

He wrapped up saying he cannot believe the level of carelessness about the election: “Don’t stuff the country. That’s what the election is about. Don’t stuff the country. You’ve got two votes — buy some insurance.”

James Shaw

The Greens don’t always get an easy run with business. But many have an affinity with Greens co-leader James Shaw who was in his element at the BusinessNZ election conference.

He laid out three areas he thinks the NZ economy can expand on, which don’t require the physical movement of people.

Shaw pointed to NZ’s growth in weightless exports over the last couple of decades — particularly in the ICT sector.

He wants to establish a digital export office at NZTE to give the sector focus and significantly boost exports.

Sustainable agriculture was another opportunity with “value over volume” sitting nicely alongside environmental sustainability. “We need to move more towards supporting farmers and growers to enable them to take advantage of that and support them through the transition,” he said, adding that he’d love to finally be rid of the false narrative of town versus country.

But if he had to pick a winner for New Zealand, Shaw said it would be the development of electric transport. He said NZ has an advantage here — including using technologies developed for the America’s Cup: “We have a niche industry that is starting to emerge here that I think we could encourage and grow — that will ultimately lead to significant exports as the whole planet addresses the need to decarbonise.”

David Seymour

Act leader David Seymour opened up by likening the Government’s borrowing to “fiscal child abuse,” due to the amount of debt that future generations will have to deal with.

He told the BusinessNZ audience that New Zealand needs to stop comparing itself to Victoria and Sweden, and instead seek to do better. “Why are we not Taiwan?,” he asked. Seymour suggested we’d have a better outcome if we relied on both the public and private sector in our Covid-19 response, and not just the Ministry of Health.

In terms of encouraging future growth to aid our recovery, Seymour said we need to allow businesses to grow without restriction.

He said the current regulatory environment is unattractive to value-added tech — citing genetic engineering as an example — and thinks we could make good progress in this area if not for the “medieval superstitious genetic engineering rules”. It was a similar situation for fintech: “we might be able to get Kiwis back if our regulations weren’t so hostile.”

Foreign investment restrictions should also go: “We desperately need capital to raise productivity, we need to strengthen relationships and investment connections with democratic OECD countries.”

“There is no better vote you can give to raise the standard of debate in parliament and ensure we come out stronger as winners.”

Mood of the boardroom: Covid-19 restrictions are bordering on ridiculous (NZ Herald)

New Zealand’s border controls have become a major handbrake on business across most sectors and must be addressed, writes Tim McCready

Chief executives agree that New Zealand business needs to do everything possible to support economic recovery in the wake of Covid-19.

But hindering this is the capacity constraints at the border, preventing many overseas workers with essential skills and expertise from entering the country.

Some 48 per cent of respondents to Herald’s Mood of the Boardroom 2020 Election survey said that border restrictions have slowed business operations due to the inability to bring essential skilled executives, investors and workers into the country.

Companies can request to bring critical workers into New Zealand through Immigration New Zealand (INZ), with applications considered on a case-by-case basis. INZ says the bar for exemptions is set high to help contain the disease and protect the health of people already in New Zealand — but some of our top executives describe these exemptions as a “bit of a lottery”.

In early August — just prior to the re-emergence of Covid-19 in the community, Prime Minister Jacinda Ardern said the Government was looking at loosening the strict visa regime.

Since then there has been little change, although Ardern said at the recent BusinessNZ election conference that Labour would look to allocate a 10 per cent quota at managed isolation facilities to allow critical workers into the country, and would “keep looking at our ability to grow capacity” for a greater number of people to enter the country.

Executives agree that water-tight borders are critical, but they say this allowance for critical workers must be urgently addressed or there will be a very real risk to key projects, businesses and to the economy.

The lack of transparency in the process to determine whether an exemption will be granted or not is troubling to many executives who also raised questions on prioritisation following exemptions granted to America’s Cup syndicates, the Avatar film crew and to workers for a synthetic horse-racing track in Waikato.

Says one director: “It has taken weeks of negotiations and significant cost for the company (which is an essential industry). Perhaps most frustrating is the sense that those with the ears of the Ministers or those with PR value or high net worth can jump the queue — as we have seen on a number of occasions.”

There seems to be some merit in this claim, with some respondents saying they prefer to not go on the record in this story as they are using “back channels” to facilitate visas.

Workers in limbo

Ross Taylor, chief executive of Fletcher Building, says that businesses have a growing number of key people who would normally be able to come into the country, now stuck in limbo with no timeline of when or if they will be let in.

“These are not low skilled people, but people that bring key skills that are either not available here or are in short supply,” he says. “As such they do not displace potential jobs for Kiwis — they in fact allow us to keep growing and providing employment and development for Kiwis.”

The restriction on movement is acutely challenging for some of New Zealand’s leading professional services firms. KPMG relies on internal international hires to augment the lateral and graduate recruitment of its New Zealand staff.

Godfrey Boyce, KPMG chief executive, says overseas hires in 2018 and 2019 accounted for about 28 per cent of KPMG’s total lateral intake, but so far this year overseas hires are just 15 per cent of total recruitment — and none of these people have been able to enter the country due to the border.

“These overseas hires augment our significant domestic recruitment and are pivotal to us being able to service our clients and train and develop the significant number of New Zealand university graduates we recruit each year.”

He says this situation is impacting the two largest parts of KPMG’s business — audit and consulting.

“As a result of the economic consequences of the global pandemic our audit division is responding to the most challenging financial reporting season in decades and the vast majority of audits are taking considerably more time than prior years and our audit teams are working significantly longer hours,” says Boyce.

The inability to bring in overseas hires into the consulting division has put constraints on undertaking work in key industry sectors for New Zealand’s recovery, including financial services, government and infrastructure.

Deloitte chief executive Thomas Pippos says his firm has sought to bring 23 internationally-based people into the firm since the border restrictions began, and has now stopped progressing any more.

“Of these, a small number have been able to join our firm while still overseas and have been able work from international locations,” he says. “Slightly more roles are now having to be being reconsidered, but the vast majority of these roles are sitting in limbo until we have a clearer steer as to the way forward.”

Another CEO in the property sector gives an example of a recently appointed chief technology officer who is based offshore. “He is making it work and will continue to do so but not an easy situation to assess differing market needs without a visit — he only recognises his team from Zoom!”

For corporates with offices in other parts of the world, the border restrictions have brought additional challenges. ICBC — which opened its New Zealand office in 2016 — has key personnel seconded to New Zealand from its China-based head office that can’t get into the country.

ICBC NZ chair Don Brash says the deputy general manager position is one example: “The previous person in this role was transferred to another position in China at the beginning of the year. Her replacement was appointed months ago but of course can’t get into the country.”

The border restrictions have also been tough on the bank’s New Zealand-based expatriate staff who have had to get used to long periods of separation from their China-based families.

“Their China-based families can no longer visit New Zealand,” says Brash. “And when family members in China become seriously ill, the expatriate staff in New Zealand cannot visit them, since they would be unable to get back into the country.”

This is a growing concern for many survey respondents.  They say employees who are citizens of other countries and cannot visit family members may instead choose to return home overseas. This will leave critical roles vacant, with no suitable skilled workers to recruit from within New Zealand.

Major projects and infrastructure at risk

New Zealand’s top CEOs are concerned that this lack of skilled workers will put at risk high-profile infrastructure projects and other critical services.

The City Rail Link — the largest transport infrastructure project ever undertaken in New Zealand — is one of those major projects heavily reliant on skilled overseas workers. Chief executive Sean Sweeney says border restrictions will be a big issue for the project:

“We have a large number of specialist overseas workers who we need to get into the country, and the project also has a large fly-in fly-out (FIFO) cohort which has been effectively grounded, as well as a large group of overseas specialists who have relocated here for the project but do need to get home every so often to see family.”

This sentiment is echoed by another boss in the construction industry, who says the construction market relies heavily on skilled labour from offshore and the lack of skilled workers has impacted all of their major projects.

Vince Hawksworth, Mercury CEO, uses the current construction of the Turitea Windfarm and medium-term hydro generation upgrade programme as examples.

“These projects rely on access to multinational companies with key personnel required on site at critical times,” he says.

“The situation is further complicated where such resources are required for an extended period and there is a need to bring family through the border. This is relevant for projects with long duration. We are currently experiencing challenges in this regard.”

Beca CEO Greg Lowe  says Beca is an NZ headquartered regional multinational, which means its people often travel widely across the Asia-Pacific region in support of projects and clients to make sure the right people are in the right place. “Some of this can be done remotely in the short term, but not all of it,” he says.

Transpower chief executive Alison Andrew says her company is facing similar challenges and it simply isn’t possible to acquire all the skills needed in the New Zealand market.

“For example, we need people with highly sought-after skills in lines engineering, operations planning engineering and other specialist skills. We need to be able to recruit from overseas,” she says.

Andrew says Transpower also has specialised equipment provided by large international companies, and relies on their specialist resources to come in from overseas to install and commission, repair and maintain the equipment.

Some executives say they have been able to use technology to help mitigate this skill shortage in some instances. Said one construction sector CEO: “We’ve recently had instances where works are being completed while instructions are forthcoming via Facetime!”

Critical skills needed

The need for skilled workers is far reaching across nearly all industries. Agricultural companies’ huge demand for seasonal workers is expected to challenge the sector in the coming months.

Turner and Growers director Carol Campbell says these workers — many from the Pacific Islands — are highly skilled in performing vital technical and sometimes physically demanding work such as thinning, harvesting and plant training.

“While some of these workers have been unable to return home given border restrictions, right now New Zealand is facing a serious shortage of trained agricultural workers for the forthcoming harvest,” she says. “This is a major concern and could result in produce being left on trees and reduced exports.”

Campbell says businesses are actively recruiting to fill this gap but the reality is that the loss of deep expertise and knowledge will significantly affect the sector this year.

Mavis Mullens, who chairs the massive Māori farming company Ātihau Whanganui Incorporation, says sheep shearing will be impacted by this loss of expertise too. Her business has relied on overseas shearers for the past three decades. She says that roughly 20 per cent of the nation’s shearers through the main shearing season come to New Zealand from overseas.

“It normally takes three to four years for shearers to become skilled economic units,” she says. “As their competency lifts, they will often travel the world shearing where their ability to earn can be doubled.”

Sirma Karapeeva, chief executive of the Meat Industry Association says we have a major issue heading our way. “Eighty out of the 103 migrant halal workers currently in New Zealand on visas will have to leave with no certainty that companies will be able to recruit into those roles in the near future,” she says.

“Halal Certified exports account for $3 billion of export revenue. We cannot recruit sufficient numbers from a small pool of a tiny minority in our local community — we need to look to migrants to fill those roles.”

Pernod Ricard Winemakers says its top challenge will be finding the people to take on seasonal vintage workers due to the current border controls, but operations director Tony Robb is taking a pragmatic approach:

“Whilst these roles have historically come from all over the world and brought people to New Zealand, we are always keen to attract New Zealanders to these roles, and particularly for the coming season,” he says.

Responses to the survey show the demand for critical workers is also evident in the tech sector. Xero director Susan Peterson (who chairs Xero’s people and remuneration committee) says that while there is a strong pipeline of candidates in the New Zealand market for entry level and intermediate roles, it becomes difficult at a senior level.

“We struggle finding the critical skills required for these roles in the New Zealand market alone and have actively spoken and hired candidates from overseas in the past to fill these roles,” she says. “As a result of Covid and the New Zealand border restrictions we have had to pause at the ‘final offer’ stage a number of highly skilled overseas-based candidates keen to join Xero in New Zealand.”

Peterson says if the restrictions remain in place, Xero may need to look to source and base those people with senior and critical skills in other locations around the world.

Border rethink essential

What’s clear from the responses to the survey is that we must think of solutions to the current capacity constraints at the border, to allow in essential skills that are needed in our economic recovery.

Sir John Key told business leaders at the Covid-19 recovery summit in Auckland that there are things we can do faster, including “letting a bunch of other people come in that companies would happily pay for because they would create jobs.”

He said there was “huge accommodation” available that could be used for quarantining.

“You could use stuff that is Government-owned, like Whenuapai. I mean, there is no particular reason why we can’t scale it up… Just do more of it!”

At the same summit, Helen Clark said that major private sector partnerships are needed to scale up the quarantine system.

“If post-election the thinking can go to how to try to remove this choke point which is existing quarantine capacity that would help a lot, even on the existing two-week quarantine setting,” she said.

Sir Peter Gluckman and Rob Fyfe, who together with Helen Clark co-authored the paper ‘Re-engaging New Zealand with the world’ asked “Do we need to start exploring alternative strategies that might at the appropriate time allow increased border flow, thus allowing more of New Zealand to flourish?

“And when would that be? What would be the criteria?

“The internet and video conferencing can take us only so far. We will need face-to-face contact if we are to maintain and grow the flow of goods and services into New Zealand. This country needs its global connectivity.

“We have gained significant advantage through our stringent lockdown and early elimination of the virus allowing the domestic economy to reactivate.”

They said we will rapidly progress to a position of relative disadvantage if our trading competitors are able to engage with our customers and suppliers in ways that are not possible for us.

“The alternative would be to remain in a state of effective national isolation, which could even last into 2022 or beyond. That may be our best option now, but that won’t always be the case, and we need at least to explore alternatives.”

Clearly, CEOs agree. Fletchers boss Ross Taylor says there needs to be a parallel border entry process put in place for businesses that allows the movement of a limited number of key people.

“It should provide additional capacity above the current levels so it does not compromise the ability for New Zealanders to return home. And it should be user-pays — so at no cost to taxpayers,” he says.

This approach would resonate with most top executives. They are happy to meet the costs associated with a fast-track process and the associated health and safety requirements.

And if that’s a win for their business, that’s a win for the economy, and ultimately a win for New Zealand.

Mood of the boardroom: Debt mounts in wake of Covid-19 (NZ Herald)

CEOs are sceptical the Government can build a sustainable, added-value economy, writes Tim McCready

Chief executives are highly concerned over mounting government debt and forecast deficits as a result of dealing with the economic impact of Covid-19.

They scored the issue at 3.91/5 on a scale where 1=not concerned and 5=extremely concerned in the 2020 Mood of the Boardroom survey.

Finance Minister Grant Robertson has defended the increased debt: “The whole point of us saving for a rainy day, the fact that our Government kept net debt below 20 per cent, was to use it when the rainy day arrived. That’s what we’re doing here. Our debt levels still remain low compared with the rest of the world.”

Despite the 3.91/5 rating, NZ’s top executives are relatively sanguine  when it comes to their comments: “Even with the projected increase in government debt, New Zealand’s government debt will be modest by international standards,” says a banking chair. “But given our vulnerability to geological and geopolitical shocks, that seems very desirable.”

“At interest rates only just above zero, as long as enough goes into infrastructure, we will earn our way out,” says Simplicity boss Sam Stubbs.

Robertson says it will be important to build a sustainable economy that adds value. Some 81 per cent of CEO respondents were concerned about New Zealand’s ability to achieve this; 16 per cent are not. Just 3 per cent are unsure. “Growth in GDP per capital has been challenging pre-Covid. I can’t see any change mid-Covid,” says Precinct Properties chair Craig Stobo.

A Crown entity head noted, “to do this requires significant investment and transformation by our business sector who are struggling to do this at the speed required. The Government don’t produce a sustainable economy, businesses do.”

A real estate chief executive adds, “free up some of the restrictions — but not to the detriment of our health and risk of spread of coronavirus — and I think he would have greater chance of success.”

“Great soundbite, but we just haven’t seen the plan,” says a banking chief executive.

Others are less sceptical. A food industry executive says New Zealand has the ability to add much more value through its natural resources and services. “The challenge will be to act with speed!”

Weak support for tax increase

Respondents were asked if as part of the economic response to Covid-19, the Government should look to raise additional tax revenue through an expansion of the tax base or an increase in current rates (in any form).

The Labour Party has proposed increasing tax on the country’s highest two per cent of earners, with a new top tax rate of 39 per cent on earnings over $180,000.

Almost two-thirds — 65 per cent — oppose an increase in tax. But 25 per cent responded positively and 10 per cent are unsure. Of all the taxation questions, this one garnered the most responses from survey respondents, with most choosing to explain why they chose a “No” response: “Investment in growth is the only long-term answer and the opportunities are substantial,” says a food producer chief executive.

“We are going through a once-in-a-lifetime event, and should be prepared for a temporary increase in deficits to stimulate economic growth and then we have to transition to normalised settings of a balanced budget,” says a fund manager. “Tax should not be on the agenda for this year or next.”

Suggested a transport boss: “They should first look to cut wasteful spending, reapply those funds to grow and then if that doesn’t work look to reshape the tax base.”

The chief executive of a healthcare provider was more open to the idea. “I am happy to pay a little more.” A food distributor CEO was not adverse to a temporary increase in tax  to meet specific goals around the reduction of debt — “similar to how Germany raised money post-unification to pay the cost of creating one Germany”.

“The taxing of highest income earners is clearly necessary,” says independent director Anne Walsh. “In Europe I was on a 48 per cent tax rate to match my high income which allowed for this. In NZ there are high incomes with too low tax rates.”

“There should be probably be some form of increased tax take for those that can afford it!,” adds non-executive chair and director Joanna Perry.

Executives were asked where additional revenue should be spent if the Government were to raise tax. Some 62 per cent said it should be used to pay down debt, 55 per cent  to increase government spending to stimulate the economy, 6 per cent said it should go toward funding other government expenditure.

“It depends where we are in the crisis response — debt should be paid down after that response not during it,” says Chapman Tripp’s chief executive partner Nick Wells.

Not a time for tax reduction

The National Party has abandoned its original debt target and proposed a temporary reduction of tax rates which it say will help to stimulate the economy.

Executives were asked whether they support the Government reducing taxes (in any form), as part of an economic response to Covid-19.

The majority — 64 per cent — said no. One quarter, 25 per cent, said yes, and 11 per cent were unsure. “We are not in a position to reduce tax revenue,” says Mainfreight CEO Don Braid. Adds an investment fund boss: “Current tax settings are largely conducive to fostering a growth mindset.”

A banking chair suggested there could be a temporary reduction in GST,  to encourage consumer spending in the short-term. Anne Walsh says “removing GST on fresh meat, fruit and vegetables may be a fast way to improve nutrition and decrease health inequities in New Zealand.”

No to capital gains, no to wealth tax

The Labour party has campaigned on implementing a capital gains tax  for three elections, and last year the Tax Working Group’s final report included a recommendation for one. But after failing to reach a consensus in Cabinet, Prime Minister Jacinda Ardern ruled out a CGT while she is Prime Minister.

“Under my leadership, we will no longer campaign for, or implement a capital gains tax — not because I don’t believe in it, but because I don’t believe New Zealand does,” she said.

The Tax Working Group projected revenue from a CGT would increase tax revenue by $400 million in the first year to $5.9 billion by 2030/31.

Executives were asked whether the current fiscal situation warrants the decision by the Prime Minister being revisited. The majority — 59 per cent said no, 30 per cent said yes, and 11 per cent were unsure.

“As I recall, most of the positive revenue projected for the CGT arose from the assumption property prices would continue to increase faster than general inflation,” says a banking chair. “Because of that I am dubious about the projected revenue gain.”

A banking chief executive said  capital gains taxes made sense from a pure economic perspective, but “the cost of compliance and the actual outcomes make them pointless.”

A fund manager acknowledged that at some point  the need to balance   taxation of land versus other assets would need to be aligned. “But whether that is the tax working group’s proposal or another is not clear,” they say.

A similar rebuff was seen in relation to  a wealth tax. The Greens have proposed taxing those with net assets over $1 million at 1 per cent, and using  revenue to help  fund a  new welfare policy that would guarantee weekly income of at least $325.

An overwhelming 76 per cent of CEOs do not support it, saying it would drive talent away from New Zealand and would be  difficult   to measure and implement. The remainder, some 24 per cent, would support a wealth tax, but many would want to see changes to the Greens’ proposal — such as materially higher thresholds than that proposed or a Covid sunset clause.

NZ First moderation unlikely?

CEOs were asked if they believe NZ  First would moderate the tax rates if a Labour-Greens coalition government sought to raise them. A clear majority — 74 per cent — said Yes, 12 per cent said No, and 14 per cent said they were Unsure. But there was strong scepticism from respondents over whether that would eventuate:

“They need to hold the balance of power first,” says Stobo.