Conversations about the future workforce have been running hot lately, particularly following the release of OpenAI’s ChatGPT. Recently, both IBM and British telecommunications giant BT Group cited automation and digitisation when announcing job cuts.
Automation is transforming almost all industries. Farmers are harnessing the power of automation to optimise every aspect of their operations, from herd management to milk production.
A recent Goldman Sachs study predicts that generative AI tools could see 300 million full-time jobs lost or diminished worldwide, leading to significant disruption in the job market.
Business leaders were asked whether Government should change the tax settings to accelerate investment in automation to lift productivity.
They overwhelmingly responded yes, with 68 per cent of respondents saying it should, underscoring the potential seen in automation to significantly boost productivity within various sectors.
“Technology can deliver significant efficiency, productivity, and sustainability benefits, and incentivising uptake across all levels of the economy will bring substantial benefits to New Zealand,” says Spark CEO, Jolie Hodson.
An education boss says “we need to ensure there is more investment in R&D to support locally led and developed AI and automation expertise, or this will become a process of offshoring and dependency on foreign providers (with many associated risks of both cost and missed opportunity).”
Just 15 per cent advocated against alternating tax settings.
Sam Stubbs, founder and CEO of Simplicity, notes that the crux of the matter lies in policy alignment rather than simply adjusting tax settings and deductibility.
Furthermore, a finance executive says the necessary incentives for promoting automation already exist within the current framework.
This perspective is backed up by a professional director, who says that businesses should already be actively pursuing automation, with current economic factors like inflation serving as additional driving forces.
https://www.timmccready.nz/wp-content/uploads/2023/09/Automation-finds-favour.jpg726331tim.mccreadyhttps://www.timmccready.nz/wp-content/uploads/2020/03/TimMcCready_banner.pngtim.mccready2023-09-29 16:54:582023-09-30 17:10:19Mood of the Boardroom: Automation finds favour (NZ Herald)
Wayne Brown is, by far, the best candidate to become Auckland’s next mayor in the eyes of business.
When asked in the Herald’s Mood of the Boardroom survey which of the top polling candidates of New Zealand’s commercial city has the best attributes to become an effective Mayor of Auckland, 51 per cent plumped for businessman Brown.
“I have been on a board chaired by Wayne Brown,” says one professional director. “He is the kind of no-nonsense person who would cut through many of Auckland’s problems assuming he has at least some support around the council table.”
Brown is regarded as a disruptive player who will get things done.
He is a former mayor of the Far North District Council, serving two terms before being tossed out at the 2013 local elections.
He has chaired Auckland DHB and led a suite of other large organisations with a turnover of more than $1 billion, been a director or chair of various Crown-owned companies and recently led the North Island Supply Chain review for the Labour-NZ First Coalition Government, which recommended shifting Auckland’s port to Northland. A top chairperson suggests he is a “cantankerous man” and will bully his way to ensure things get done — noting that “three years will be enough!”
Efeso Collins, who was elected to Auckland Council at the 2016 local elections, trailed far behind in second place on the survey, receiving the nod from 16 per cent of respondents.
Collins promotes himself as an inclusive candidate, who worked in youth development and community liaison roles before entering politics.
“Collins’ main qualifications for the role are that he is not Wayne Brown, and he knows how council works with all its frustrations,” says a boss in the real estate sector. “Why anyone wants this job is a mystery to me — the mayor is set up to fail with one vote and a host of people whose main position on any proposal is ‘no’.”
Viv Beck, who just last week pulled out of the race so as not to split the centre-right vote (although her name remains on voting papers), received endorsement from just 12 per cent of respondents. She had stood aside from her role as CEO of Heart of the City, but failed to make cut-through and became mired in campaign financing issues.
“Viv has imploded — although I thought she was pretty capable,” says another respondent.
Just two people thought Craig Lord was best placed to become Auckland’s mayor, while 19 per cent say don’t know or prefer someone else.
“None of these excite me, we need new leadership with a vision for the future,” says Harcourts managing director Bryan Thomson.
“What a tragic set of choices,” was the response from an investment firm partner, summarising the mood of many of those who commented.
What do CEOs think of the flagship policies?
Ports of Auckland proposal not achievable
Brown says he will demand Ports of Auckland pay the city $400 million a year in ground rent to force it to start freeing up land for more valuable uses than freight and car imports.
But half of the survey respondents — 52 per cent — say that this will not be achievable. “It is a simplistic soundbite that doesn’t address the multitude of interrelated issues,” says Deloitte chair Thomas Pippos.
“It is 100 per cent Council-owned,” says a top boss in the travel sector. “If he sends it bankrupt the Council will end up recycling the $400m back to the port company.”
Accordant chair Simon Bennett says: “Show me a business that is struggling to remain viable that is able to find $400 million spare.”
But 21 per cent think the proposal is a step in the right direction. Others were unsure. From one entrepreneur: “About time. Ports of Auckland has blatantly disregarded public voice when extending footprint. Their control needs to be curbed.”
Low support for free public transport
Collins’ flagship free public transport policy has been estimated by Auckland Transport to cost about $130m initially, rising to $500m by 2030.
Just 23 per cent of business leaders agree with this flagship policy, with those in favour hoping it may solve wider challenges across the city.
A property boss says that fares-free public transport will “give us a fighting chance of making inroads on our terrible traffic and climate failure.”
Another chief executive reckons: “On balance when considering traffic congestion, climate issues, and cost of living pressures in Auckland it becomes a credible alternative.”
A high-profile chairperson suggests the cost will be minimal when you factor in how much fares are subsidised already — “and getting people out of cars is the only way to reduce congestion, as you will never be able to build roads fast enough.”
Some 58 per cent are against the policy, with several respondents suggesting it is the frequency and accessibility of services that prevent people from using public transport, rather than the cost.
“This would involve substantial loss of revenue but would probably not result in substantially increased use of public transport,” says one chairperson. Another asks: “Why subsidise everybody, including tourists?”
Though Beck is no longer in the race, her plan to scrap the Government’s $14.6 billion light rail project and replace it with practical, cheaper and quicker solutions across the city including better bus services drew favour from respondents, with 42 per cent of respondents agreeing with the proposal.
“Long term, Auckland is going to require light rail, but the current plan is not the right one,” says a professional services chief executive.
But 27 per cent disagreed with Beck, with some noting that bus capacity has been reached.
“That is why light rail is being proposed — Symonds St is done,” notes an investor.
https://www.timmccready.nz/wp-content/uploads/2022/09/Mayoral-Mood-of-the-Boardroom-Tim-McCready.jpg813733tim.mccreadyhttps://www.timmccready.nz/wp-content/uploads/2020/03/TimMcCready_banner.pngtim.mccready2022-09-23 17:05:012022-09-24 17:22:47Mood of the Boardroom: Business leaders weigh in on Auckland mayoral candidates (NZ Herald)
A shortage of workers has become a global phenomenon, with the pandemic severely disrupting the labour market. Employers are finding it increasingly difficult to find staff as employees seek out higher wages, remote and flexible work options, and more satisfying employment opportunities that better align with their values.
Further compounding this has been New Zealand’s border closure, which restricted the flow of migrant workers for the past three years. With the border now reopened, skilled workers and pent-up demand from younger people that delayed their OE are considering a shift overseas.
The labour shortage has become a significant economic issue for New Zealand, and a contributor to the ongoing inflationary environment. Though a rising cost of labour may mean employees receive higher wages as employers attempt to attract and retain staff, the cost tends to be passed on in price increases.
When asked in the Herald’s Mood of the Boardroom survey to what degree employee churn is being experienced in their business, just 3 per cent of business leaders say not at all, and 35 per cent say churn is at a manageable level.
“Less than expected,” says Deloitte chair Thomas Pippos. Adds the CEO of a property management firm: “The rate of churn is probably no higher than it has been in the past.”
But a sizeable 56 per cent say churn is increasing, and 6 per cent consider it to be “off the scale”.
A CEO in the design sector says “the industry simply poaches and incentivises with $40,000 salary increases and we have had to do the same, which is unsustainable.”
A tech company chair says while churn has always been high in the IT industry, it is notably higher now: “And some of the salary packages being offered — like double their current salary — make it almost impossible to avoid.”
Some business leaders experiencing significant staff churn are from the real estate industry. But with house prices falling, sales sluggish and housing stock increasing, one industry leader says: “Staff are leaving because they are simply not making an income from real estate.”
Increased investment in staff development
In an effort to retain staff and make up the shortfall in accessible skilled talent, businesses are placing an increased emphasis on investing in employees.
A massive 73 per cent of respondents say their investment in training and skill development over the past two years has increased.
“Lifelong learning and development is key to a sustainable future,” responds Beca executive chair David Carter. “Our Intermediate Development Academy is our latest initiative to be launched.”
Just 4 per cent say training and skills development has decreased, though the reason for this was mostly put down to financial constraints and “expense management due to the pandemic”, or lockdowns significantly limiting the ability of businesses to run programmes to the same extent.
“Our ability to do this was limited in 2020/21, but has increased in 2022 which has balanced it out,” says the head of a professional organisation.
The remaining 23 per cent say training and skill development levels have remained the same.
Immigration delays causing a major challenge
The current immigration restrictions and its management by Immigration New Zealand is another area seen as prohibitive by CEOs.
When asked how challenging this has been on a scale of 1-5 where 1=very difficult and 5= very easy, they give a combined score of 1.85/5.
This response comes from across the board in terms of sectors. “The agricultural workforce is well under strength in key areas,” writes one CEO. “It took two years to get nurses approved, it is crazy,” says another. From a construction CEO: “Our sector needs skilled workers and ultimately the market needs immigration.”
A university boss writes: “Our chief challenge is around international students — who often become others’ workers. There is a potentially dangerous bottleneck we face.”
The need to address workforce gaps at pace, after such a prolonged period with the border closed, has heaped pressure on to Immigration New Zealand’s visa processing capacity. Last month, Immigration New Zealand stood up a Reconnecting New Zealand Incident Management team, with the authority to make decisions and improve the processing of applications. Business leaders are concerned about these delays impacting their ability to source talent, but also the toll it places on staff who already reside here.
“We have worked through the process with a handful of our team who were here when Covid first hit and have almost made it through the process,” writes a CEO in the property industry.
“It has been laborious more than anything else, but I really feel for our people who are in the middle of it. Until the lengthy process is done, they can’t settle in and make themselves at home — and the mental strain of that is real.”
Boost to working holiday scheme doesn’t go far enough
To address the significant and ongoing labour gap, the Government recently doubled the Working Holiday Scheme cap for 2022/23, which will see a further 12,000 working holidaymakers able to enter New Zealand and is extending visas for holidaymakers.
Immigration Minister Michael Wood said the changes would provide immediate relief to those businesses hardest hit by the global worker shortage.
“We have listened to the concerns of these sectors and worked with them to take practicable steps to unlock additional labour,” he said.
But when business leaders were asked whether the change will help, it was met with a muted response. Of those surveyed, just 27 per cent say it will address labour shortages in their sector.
A substantial 45 per cent say it will not help, and 14 per cent are unsure. The remainder says this question wasn’t applicable to the sector they operate in. Many of those that did respond positively left a caveat — while it may help, it won’t be enough to make up the significant number of works that are required.
“It will help, but not at the previous levels nor at the levels required,” says Accordant Group chairman Simon Bennett.
Deloitte’s Thomas Pippos suggests: “Government needs to better allow the market to operate efficiently and only intervene when there is a (looming) market failure.”
Some, including the CEO of an architecture firm, says New Zealand’s relative lateness in opening up to the rest of the world has come too late — “even giving access now, we have missed vital timelines.”
“It remains to be seen if New Zealand’s overall proposition will compete with other countries,” says Foodstuffs North Island CEO Chris Quin.
Adds an environmental services boss: “Why would they come? Australia is more welcoming.”
Growth in automation investment
When asked whether they are investing in automation as a result of tight labour conditions, 68 per cent of respondents say they are. A further 27 per cent say they are not investing in automation, and 5 per cent are unsure.
The head of a large tech firm says the convergence of new technologies — including the Internet of Things, AI and 5G — is creating compelling new use cases for businesses of all sizes to automate parts of their operations, improve efficiency, and enhance the quality of decision-making.
“This is also supporting improved environmental performance through sustainability solutions,” they say. “Now is the time to invest behind these opportunities and encourage more rapid adoption.”
Business leaders are quick to point out that the heightened focus on automation is not necessarily down to the tight labour conditions, but instead is a long-term response to other factors.
“Not because of labour, but to increase efficiencies,” says Mainfreight CEO Don Braid.
A similar response from a tech boss, who has introduced automation into the business “more because we need to do formally manual tasks more efficiently in order to remain competitive in the market”.
From Tower Insurance CEO Blair Turnbull: “We have been investing in automation for a while now and this investment is increasing with the aim of delivering a better customer experience and efficiencies. It is not related to current labour conditions.”
Change the tax settings
A follow-on question asked whether Government should change the tax settings to accelerate investment in automation to lift productivity.
Two-thirds of respondents agree that this would be a good idea.
“This may be a good tool, but we need a suite of changes to raise productivity,” says Accordant’s Simon Bennett.
Just 15 per cent think there should be no change in tax settings, while the remaining 19 per cent are unsure. “I don’t believe in ‘targeted’ tax relief,” says the CEO of a large manufacturer.
A boss in the IT sector thinks that “accelerated depreciation isn’t needed to speed up investment in this area”.
We’re extremely concerned about not having enough workers to cover the 2023 harvest. That’s despite doing everything we can to attract New Zealanders, providing competitive remuneration, flexibility, training, and career progression.
Low unemployment and the lack of people coming to New Zealand on Working Holiday Visas is exacerbating the issue. RSE workers are a valued part of our business and we would like to see their numbers increase.
The current rules restrict the tasks they are allowed to do and we would really like to see this broadened. Pressures on labour supply are far-reaching, from production through to our hospitality customers. This situation has been building for three years and the impact on our teams is compounding.
We realise this may be a long-term strategy but the need is now.
— Kevin Mapson
Pernod Ricard Winemakers NZ
‘Some of the salary packages being offered — like double their current salary — make it almost impossible to avoid churn’
— IT company chair
https://www.timmccready.nz/wp-content/uploads/2022/09/Employment-Mood-of-the-Boardroom-Tim-McCready.jpg1085735tim.mccreadyhttps://www.timmccready.nz/wp-content/uploads/2020/03/TimMcCready_banner.pngtim.mccready2022-09-23 17:04:592022-09-24 17:22:47Mood of the Boardroom: Too many situations vacant (NZ Herald)
When asked in the Herald’s Mood of the Boardroom survey about the Government buying back Kiwibank to keep it fully locally owned, only 22 per cent of CEOs agree that it was the right thing to do.
“Yes, I support the move,” says the head of a corporate advisory firm. “Although a state-owned enterprise/partial float scenario would have been good for capital markets and improved the bank’s ability to access capital for growth.”
While the head of a professional services firm disagreed with the premise of the question, noting that reporting has been misleading: “They have not bought it back – it was owned by the Crown, and is still owned by the Crown!”
Last month, the Government announced that it would acquire 100 per cent of Kiwibank’s parent company Kiwi Group Holdings (KGH) for $2.1 billion from state-owned shareholders, subject to regulatory approvals from the Reserve Bank.
KGH is 53 per cent owned by New Zealand Post, 25 per cent by the New Zealand Superannuation Fund, and 22 per cent by the Accident Compensation Corporation.
Finance Minister Grant Robertson said that an ongoing shareholding in Kiwibank did not fit NZ Post’s and ACC’s long-term strategic and investment plans.
NZ Super Fund had been interested in purchasing a majority shareholding in KGH, but it withdrew its interest as it did not align with the Government’s commitment to public and New Zealand ownership.
At the time of the announcement, Kiwibank chief executive Steve Jurkovich said the acquisition would enable Kiwibank to continue to deliver on its growth ambitions and have even more impact for its people, customers, and Aotearoa.
“We look forward to working constructively with the Government under our new ownership structure to deliver on our purpose: Kiwi making Kiwi better off,” he said.
When announcing the acquisition, Robertson stressed that the Government is fully committed to supporting the bank to be a genuine competitor in the banking industry, “ensuring the bank has access to capital to continue to grow on a commercially sustainable basis and offer a viable and competitive alternative for New Zealanders”.
But almost two-thirds of survey respondents – some 63 per cent – say they disagree with the move, with the remaining 15 per cent unsure.
Despite Robertson’s reassurance, many are wary that Kiwibank will struggle to get the capital it needs to be successful.
“Look at its cost-to-income ratio, it is a very poor investment that will require much more taxpayer support,” says a banking boss. “The Government won’t have the appetite to invest the capital needed to transform Kiwibank so that it can compete with the Aussie banks.”
From a tech chair: “The mixed ownership model has worked so well. Floating 49 per cent of Kiwibank and applying the discipline of the investment community while giving the bank increased capital would have been awesome.”
“The Government is paranoid about foreign ownership… or thinks that the public is,” says a chair in the banking sector.
https://www.timmccready.nz/wp-content/uploads/2022/09/Kiwibank-Supermarkets-Mood-of-the-Boardroom-Tim-McCready.jpg529739tim.mccreadyhttps://www.timmccready.nz/wp-content/uploads/2020/03/TimMcCready_banner.pngtim.mccready2022-09-23 17:04:572022-09-26 13:37:23Mood of the Boardroom: View on government moves in banking and supermarkets (NZ Herald)
National party leader Christopher Luxon, a former chief executive of Air NZ and of Unilever Canada, brings a business focus to politics. MPs are measured by KPIs and New Zealand business leaders say his focuson discipline is an important skill set for the current environment.
In the 2022 Mood of the Boardroom CEOs survey, respondents were asked to rate Luxon’s performance as Opposition leader, by holding the Government to account on critical national issues, on a scale where 1= not impressive and 5= very impressive.
He received a score of 3.24/5; 6 per cent of respondents gave Luxon a “very impressive” score. The majority (70 per cent) rated him at 3 or 4/5.
Luxon took over as leader of National after just a year in Parliament when Judith Collins was toppled amid poor polling and a chaotic move to demote political rival Simon Bridges. In last year’s survey, her rating was a mere 2.06/5.
Luxon’s rise coincides with a time when the gloss is coming off the Labour Government.
Recent opinion polls show National and Labour neck and neck. The latest Taxpayers’ Union-Curia poll, released last week, had National and Act able to form a government.
National was up 3 points on last month’s poll to 37 per cent and Act up 1 point to 12 per cent.
When becoming leader, Luxon promised a new era for the National party. “We are the reset,” he promised. “Much has been made of my relative newness to Parliament, but to be honest I see it as an advantage.
“I bring a fresh set of eyes, and what I see is that this place and this country needs a real shake-up.”
Many survey respondents agree Luxon has provided the reset the party desperately needed after being plagued by bad polling and internal ructions since the pandemic.
Already some 55 per cent of survey respondents believe he is starting to carve out a strong brand for National.
“He has ensured that voters see National as a credible option,” says RedShield CEO Fabian Partigliani.
“There seems to be unity in the party after a long period and his policies reflect a more mature business-like outlook which will be good to stimulate the economy,” says Cordis managing director Franz Mascarenhas.
Deloitte chair Thomas Pippos adds: “In a relatively short period of time he has sought to unify the caucus, build a following and positively differentiate themselves from the Government.
“The fact that he is not a career politician is a real positive.”
“Holding his party together for 10 months is impressive in itself,” says Precinct Property chair Craig Stobo.
“It could easily be forgotten where National was before he took the reins — it was an absolute shambles,” said a media boss.
But others noted while Luxon has made a substantial improvement, it is off a low base and is “best described as a work in progress”.
An independent director notes it will be important that the party moves forward in a progressive way to reflect the expectations of a majority of New Zealanders as the population demographics change.
“At times, the National party looks like it is seeking to appeal to the ageing conservative population and not Gen-Y and Z that are now exerting their dominance,” they say.
“Those generations are passionate about ending racism, purposeful living and solving climate challenges and the National party need to adjust itself to reflect a modern and progressive community.”
The head of a top investment firm advises: “He needs to shake the Christian-right reputation.”
“I desperately want to see some evidence that National is developing policies as well as slogans and soundbites,” a property boss says.
“Being the Opposition should be about holding to account and offering an alternative. It’s not just about opposing everything,” says another CEO.
Bagrie Economics’ Cameron Bagrie observes that National has improved off a low base at a time the Government has walked into some economic reality.
“Economically, New Zealand is devoid of real leadership across the entire political spectrum.
“It is a global problem where populism is driving policy. We do not have real bench strength across the entire political spectrum — we have some talent, but not the bench strength.”
CEOs are quick to point out that Luxon’s greenness in politics has sometimes held the party back from where they think it should be.
A CEO in the energy sector suggests he “hasn’t had any wins and is still an amateur politician”, while an environmental services CEO harks back to National’s heyday.
“He is not John Key.”
Plenty of room for new policies from National, say CEOs
When asked what policies National should consider in order to provide a clear choice at the next election, many CEOs suggest National sticks to the core issues that elections are often won or lost on — law and order, education, and health: “Sort out ram raids,” says one. “Get the health system caught up on postponed surgery due to Covid,” from another.
There was a strong call for more focus on education, with several noting it is “the key to prosperity”.
The New Zealand Initiative chair Roger Partridge, wants to see New Zealand “return our state schooling system to a standard where it is the envy of the world,”; and “Go hard on education — education today defines the economy in 20 years,” says Cameron Bagrie. “We are in serious trouble based on education achievement today.”
While many CEOs want to see tax reform, tax cuts, and an end to the bright-line test, others would prefer to see the National focus more on social and environmental investment.
“Forget the tax cuts — give New Zealand an economic plan that has merit,” says Bagrie.
The head of a telecoms firm says the party should balance its reputation for prudent economic management with a clear plan for how Aotearoa’s growth and economic progress will be shared, “and how we will improve social and environmental outcomes for the next generation”.
A media boss suggests National closely re-examine the ideas former PM Jim Bolger floated about reimagining capitalism, and “Bill English’s social investment ideas should be pursued and embedded in policy.”
Reduce the regulatory burden
Business leaders say it is imperative the increasing regulatory burden is wound back, and the rhetoric that “government knows best” dropped. “We need a moratorium on excessive regulation,” says a banking executive.
Partridge advises National look to “cease costly and ineffective climate change regulations and subsidies operating outside the emissions trading scheme (ETS) and redirect revenues from ETS to lower-income households to assist them to meet the costs of climate policies.”
“Reduce the regulatory burden on business through a combination of RMA reform, liberalising overseas investment, and undoing labour market reforms — fair pay agreements and social unemployment insurance.” Dial-up immigration.
With myriad sectors and businesses facing unprecedented skills and worker shortages, they also want to see National “focus on immigration”.
One CEO wants to see National revise immigration settings in a way that is “directed squarely at pressure points in the economy — health, construction, services”.
Another calls for roadblocks to be freed up to “allow more labour to enter New Zealand in a frictionless way and the country to be more attractive”.
https://www.timmccready.nz/wp-content/uploads/2022/09/Luxon-Mood-of-the-Boardroom-Tim-McCready.jpg813733tim.mccreadyhttps://www.timmccready.nz/wp-content/uploads/2020/03/TimMcCready_banner.pngtim.mccready2022-09-23 17:04:562022-09-24 17:22:48Mood of the Boardroom: Christopher Luxon breathes new life into the party (NZ Herald)
Getting the Government’s books back into the black should be a higher priority, according to a clear majority of chief executives.
When asked about the Government’s plan to return to surplus and stabilise and reduce net core Crown debt, 58 per cent say this should be a higher priority for the Government.
Just over one third, 37 per cent, say the priority on returning to surplus and reducing net core Crown debt is about right. A further 5 per cent think it should be a lesser priority.
Many respondents to the Mood of the Boardroom survey expressed dismay at the current level of spending and want to see a more prudent approach.
“This should be done by stopping bad policy, silly centralisations that deliver no gains and wasteful spending,” said a top infrastructure boss.
Others concur: “Mainly through controlled and targeted spending, and living within our means,” said a utilities boss.
“Should be largely derived by reducing Government spending,” added a CEO in logistics.
“The issue is less about the need to reduce core Crown debt than to reduce fiscal stimulus, to take pressure off monetary policy,” said a banking chair.
There is a cohort of business leaders who are less concerned with the amount being spent, but rather over what it is being spent on.
“The TVNZ/RNZ merger seems a complete indulgence in the current environment,” said one CEO.
“No one can seem to articulate the problem they are trying to fix.”
Notes Precinct Property chair Craig Stobo: “We know that the problem lies with ministerial acuity and leadership when the Office of the Auditor-General criticises the methodology of tourism support during Covid, and the accountability of the proposed Three Waters reforms, and when Treasury advice on the $350 cost of living spray is ignored”.
Concern over the efficacy of spend CEOs also have heightened concerns about the efficacy of Government spending.
A significant 85 per cent of respondents say they are more concerned now than they have been previously in this regard.
“Government seems to be spending an astronomical amount of money to deliver an appallingly low level of outcome,” said a top logistics CEO.
From a design firm boss: “Huge amount of cash, huge amount of no KPIs.”
Mainfreight group managing director Don Braid: “The tax dollars being collected are being wasted on the funding of the bureaucracy and the consultants”.
Some 14 per cent of respondents say they have a similar level of concern over the efficacy of Government spending as they have had in the past. Just 1 per cent say their level of concern is reduced compared to previously.
Finance Minister Grant Robertson has said that from a fiscal perspective, the Covid emergency is now over.
“At a broad level, my focus will continue to be on making sure New Zealand maintains responsible debt levels, and ensuring our path back to surplus.”
Robertson has made it clear that upcoming “tough choices” will not include austerity cuts to spending.
But there is concern that the extent to which spending is reined in will be limited, given the imminent general election next year.
“I believe the fiscal policy will be expansionary in 2023… which will be a headwind for monetary policy,” says Stobo.
https://www.timmccready.nz/wp-content/uploads/2022/09/Surplus-Mood-of-the-Boardroom-Tim-McCready.jpg315598tim.mccreadyhttps://www.timmccready.nz/wp-content/uploads/2020/03/TimMcCready_banner.pngtim.mccready2022-09-23 17:04:542022-09-26 13:38:33Mood of the Boardroom: What about that surplus, Grant? (NZ Herald)
CEOs are impressed with the Act Party, in particular with Act leader David Seymour and his ability to tackle topics that other parties deflect away from.
Seymour received the highest score from CEOs among minorpolitical party leaders in the Herald’s Mood of the Boardroom survey, scoring 4.08 on a scale where 1 equals not impressive and 5 equals very impressive.
When asked if Act provides a more credible opposition to the Government than other parties, 46 per cent responded yes.
A further 44 per cent said no, and 10 per cent were unsure.
“David Seymour is an exemplary Opposition politician,” says one economist. “He combines political convictions with an understanding of policy development, and compared to Christopher Luxon — and despite Luxon’s business pedigree — Seymour is the far more experienced political leader.”
Seymour leads a 10-strong team in Parliament noted for its discipline and cohesiveness.
At their annual conference in July, he released a “laundry list of reversals” that the party would strive to achieve in the first 100 days of a new Government which included Act.
“We won’t allow National to lazily roll over Labour’s policies like it has in Governments gone by,” he said.
An architecture boss suggests National’s silence has been deafening, whereas Seymour “says what is being spoken at the dinner table.” A real estate CEO concurs: “Act is leaving National in the dust in terms of providing genuine Opposition with alternatives.”
“Seymour in particular seems to be fast off the mark in getting press statements out — and those are typically well-argued,” says a banking leader. “He handles press briefings with particular skill. He is effective in the House and has policies with which I am in agreement.”
A utilities CEO says Act would be excellent in concert with National, and “is a rational party that believes in the enlightenment, rather than one-eyed ideology”.
Among the proposed reversals:
• Repeal Three Waters, returning ownership to councils
• Repeal the Māori Health Authority
• Reserve Bank Act changes: Giving the Reserve Bank two targets (price stability and employment) with one tool (the Official Cash Rate) was illogical.
• Scrap the 39c tax rate and simplify to a two-rate tax system
• Stop the Public Interest Journalism Fund. “At $55 million over two years it’s not large enough to help or hinder the media as much as many suspects. However, it is pernicious enough to destroy faith and trust in our institutions,” he said.
• Repeal the Zero Carbon Act and associated ute tax and the “Tesla subsidies”. Overturn the ban on oil and gas exploration
• Get rid of so-called Fair Pay Agreements
• Get rid of hate speech laws (if introduced before the election)
• Mortgage interest deductibility, the bright-line test, and Residential Tenancies Act changes would go
• Act would bring back 90-day trials, three strikes and charter schools.
But some CEOs note Act is too reliant on its leader, lacks depth, and is very issue-specific.
Says a partner at an investment firm: “Act is a great ginger group, but not credible in the sense of ever being in charge.”
“They are still a bit fundamentalist and strange,” writes an environmental services provider boss.
HOW THE MINOR PARTY LEADERS RATED
Act’s David Seymour is the stand-out minor party leader, according to the 2022 Herald CEOs survey.
Some 39 per cent of survey respondents marked his political performance as a minor party leader as “very impressive” at 5/5, on a scale where 1 equals “not impressive” and 5 equals “very impressive”. A further 41 per cent gave him a 4/5 rating.
“David Seymour is the only party political leader with a policy compass,” said Precinct Properties chair Craig Stobo, a comment echoed by an oil and gas chief executive who said: “Act has the only voice of challenge.”
The Act leader has continued to poll well for a minor party leader, hitting 6.6 per cent in the recent Taxpayers’ Union-Curia poll.
Greens co-leader James Shaw continues to impress business leaders who ranked him first this year in their ratings of Cabinet Ministers (and Ministers outside Cabinet) on ministerial performances over the past year.
Some 12 per cent rated his performance as a minor party leader as “very impressive”, trumping the 1 per cent who rated Greens co-leader Marama Davidson as “very impressive”.
“James Shaw is a rationalist; unfortunately he has lost the backing of his party who are anything but” (oil and gas CEO, in reference to how Shaw was booted from the co-leaders job in July, after at least a quarter of delegates at the party’s annual general meeting voted to reopen the position for nominations.
Shaw was later returned.
Davidson does not have the same cut-through with the business sector.
The Māori Party co-leaders, who debuted for the first time in last year’s CEOs survey, have held their ground with the business sector.
Debbie Ngarewa-Packer and Rawiri Waititi became MPs at the 2020 election — three years after the party was last represented in Parliament. They have been a been a vocal and forceful presence in Parliament.
“Apart from James Shaw, we have not had much visibility of the others,” noted a director.
– Additional reporting: Fran O’Sullivan
https://www.timmccready.nz/wp-content/uploads/2022/09/Act-Mood-of-the-Boardroom-Tim-McCready.jpg671291tim.mccreadyhttps://www.timmccready.nz/wp-content/uploads/2020/03/TimMcCready_banner.pngtim.mccready2022-09-23 17:04:522022-09-24 17:22:48Mood of the Boardroom: Act passes the credibility test (NZ Herald)
The way that debate has played out is reflective of something that I am increasingly concerned about in New Zealand: a developing division in the political discourse that is artificially divided in a waysimilar to what we have seen play out recently overseas.
Top law firm boss Hayden Wilson says that co-governance, in a legal sense, is not a new concept, and while it is sensible to discuss appropriate governance models for the public sector, he is concerned about the way it is being latched on to as a rhetorical tool in political debate.
Ongoing water and health reforms have seen co-governance make headlines recently.
Local Government Minister Nanaia Mahuta says that co-governance is about the Crown meeting treaty obligations and maintaining relationships between councils and mana whenua.
But National Party leader Christopher Luxon believes New Zealanders don’t have a good idea of what it means, and suggests the Government needs to set out clear guidelines on what is and what is not included for constitutional issues such as co-governance.
Wilson, who chairs Dentons Kensington Swan and is a member of Dentons’ global board of directors, says New Zealand’s government exists as a result of a treaty partnership, and governance models that seek to reflect that relationship with Māori and provide for a more inclusive decision-making, can only be a good thing.
“Co-governance is a product of New Zealand’s unique place in the world and our unique arrangements,” he says, noting it offers a real opportunity for something that is different, more effective, and truly New Zealand.
“It may be an attractive political football… but the way that debate has played out is reflective of something that I am increasingly concerned about in New Zealand: a developing division in the political discourse that is artificially divided in a way similar to what we have seen play out recently overseas.”
We’re about where we should be in the political cycle
Recent political polls have shown Labour and National roughly equal. When asked about polling in terms of the current electoral cycle, Wilson thinks it is “about where it should be. If things weren’t at a reasonably even balance now, you would be wondering what was going wrong, really.”
He says, to some extent, our perception of party polling has been shifted by the 2020 election, where for the first time since MMP was introduced in 1996 a party won enough seats to govern alone, with Labour receiving 50 per cent of the party vote.
“We do need to put that down to being a Covid election,” he says.
“It was a kind of ‘wartime’ election, and I think everyone who observes politics knew that it was going to come with challenges having that level of mandate, along with a larger caucus.”
Wilson recognises the past three years have felt long and stressful, particularly for those with responsibilities to keep businesses functioning and people employed. He says we are at a real crunch time — the global economy is impacting New Zealand’s economy, and along with inflation and the fall in house prices, is making people nervous and will likely set the scene for next year’s election.
“Government needs to be seen to be delivering on some of those big ideas and converting them into something that feels like a difference for an electorate that is quite grouchy.”
Wilson says it will be essential for Government to make itself look fresh again because there is an extent to which the public gets tired of seeing the same people over and over again.
“We have had five years now of a Government that has been quite tightly controlled by a small group of Ministers who have a lot of responsibility, who I am sure are just as tired as the rest of us.
“There is only so much you can send Chris Hipkins and Megan Woods in to fix. How does the Government put a fresh bench forward to make the case they should have another three years?”
https://www.timmccready.nz/wp-content/uploads/2022/09/Hayden-Wilson-Mood-of-the-Boardroom-Tim-McCready.jpg341733tim.mccreadyhttps://www.timmccready.nz/wp-content/uploads/2020/03/TimMcCready_banner.pngtim.mccready2022-09-23 17:04:502022-09-24 17:22:49Mood of the Boardroom: Co-governance shouldn’t be a political football (NZ Herald)
Respondents to the 2022 Herald’s CEO survey rated their optimism in the New Zealand economy at an average 1.86/5 — a fall from last year’s score of 2.70/5. This is on a scale where 1equals much less optimistic, and 5 equals much more optimistic.
Though this is a significant drop in confidence, it is not as low as the record depths seen in the 2020 survey (1.36/5).
“My overall sense is that we are drifting as a country and not really moving forward, accepting it is worse elsewhere,” suggests Deloitte chair Thomas Pippos.
Roger Partridge, chair of the think tank The New Zealand Initiative, recognises threats to the economy abound at home and abroad. “Rising inflation, rising borrowing costs, skills shortages, transport bottlenecks and an increasing regulatory burden (especially labour market regulation) are all creating headwinds for business domestically,” he says.
“Internationally, the story is similar, and in some cases worse. Business is in for a buffeting.”
While the border is now fully open, CEOs consider New Zealand’s relative lateness in reconnecting and “moving on” from Covid has contributed to the confidence knock.
Harcourt’s managing director Bryan Thomson says though there are serious concerns worldwide, such as in Ukraine, “the rest of the world seems more advanced regarding Covid recovery.”
One real estate CEO says “New Zealand not opening our borders until just recently has had more effect than many predicted.”
“Despite the removal of divisive masks, mandates, vaccine passes and the overreaching Covid protection framework, New Zealanders remain unconnected,” explains Precinct Properties chair Craig Stobo. “Our cities are bereft of people.”
Some suggest New Zealand is not as prepared as the rest of the world to deal with current challenges and those on the horizon.
“There is a growing concern of looming recessionary times and that businesses offshore are starting to plan and prepare for this,” says MinterEllisonRuddWatts (MERW) chair Sarah Sinclair. “This puts greater pressure on the government programme in New Zealand to deliver.”
From Z Energy boss Mike Bennetts: “We have failed to progressively reduce or lessen the Covid-related economic stimulation and now face more severe interventions.”
Despite the pessimism, some respondents are optimistic.
“It is hard not to be optimistic about the NZ economy when you look at the years of Covid and the good export results we achieved,” says Auckland Business Chamber director Michael Barnett.
“We only need to focus on what we have done well and build on that in a world that has a demand for the quality products and services that New Zealand is associated with.”
Industry confidence mixed
As is typical in this survey, executives rated optimism in their own industry higher than in New Zealand or the global economy, with a weighted average of 2.70/5 (2021= 3.20/5).
But delving deeper, optimism varies wildly depending on the sector.
Business leaders among the most optimistic include those working in education (3.5/5), telecommunications (3.1/5), and agribusiness (2.8/5). “The primary sector and tourism position us to outperform global economic growth,” says independent director Jonathan Mason.
A tertiary education CEO says: “The opening of the borders is key for us, but is complicated by a buoyant labour market and high inflation which is not an optimal setting for an institution like ours.”
An energy director notes “in spite of the offshore oil and gas ban, the New Zealand energy/ electricity market is proving to be resilient and effective.”
At the other end of the scale, the least optimistic industries include entertainment and leisure (1.3/5), food and beverage (2.0/5) and retail (2.0/5).
A wine industry leader: “We will be relying on growth in export markets as opposed to domestic growth.”
The top domestic issues of concern are linked to the ongoing shortage of workers, with the pandemic severely disrupting the labour market.
CEOs are particularly concerned about skills and labour shortages, which scored 9.00/10 on a scale where 1= no concern and 10= extremely concerned. This was also the top-rated concern last year when it received an even higher score of 9.18/10. Closely tied to the worker shortage and skills gap is immigration. Current restrictions surrounding immigration saw this rated at 8.52/10.
But for the first time in two years, anxiety associated with Covid has fallen to the bottom of the domestic concern table. Concerns about further waves of Covid received a score of just 4.79/10. This compares to 8.38/10 in last year’s survey.
Kirsten Patterson, chief executive of the Institute of Directors, is optimistic about the Covid recovery, but less optimistic about inflationary pressures. “Overall that results in optimism levels for 2023 balancing out to the same or similar levels as 2022 — still some uncertain times ahead.”
Inflation and cost of living pressures are also a major headache, scored at 8.30/10.
“Inflation is hugely challenging, and we’re concerned about how this is flowing through to the cost of living for Kiwis,” says Tower Insurance CEO Blair Turnbull.
“We have a number of initiatives underway aimed at tackling inflation and we’re doing everything we can to stay competitive and keep costs down… but it is really tough right now and ultimately people are going to see it reflected in what they’re paying.”
Rounding out the top five domestic concerns are those related to the Government: the level and quality of government spending (8.51/10) and policy uncertainty (8.25/10).
“Government needs to control its spending, free up labour supply, stop imposing unnecessary costs on business, and fix the infrastructure to assist in improving productivity,” says a financial services CEO.
“Businesses can work through economic cycles, but they need to have confidence in the settings.”
MERW’s Sinclair notes “there is growing concern around the risk of change and the ‘NZ Inc’ risk this may create in relation to our attractiveness to much-needed offshore resources (expertise, capital and people).”
Infrastructure constraints, rated at 7.46/10, are also a major issue.
Beca executive chair David Carter suggests many of the substantive challenges New Zealand face, including around infrastructure, require investing now for the future.
“Consistency of long-term policy settings and pan-party agreement on key infrastructure spends is critical to providing confidence to commit.”
Other notable concerns include wage increases (7.57/10), labour productivity (7.43/10) and supply chain issues (7.36/10).
Survey respondents were asked to put forward other pressing concerns on domestic issues outside those polled. A senior professional director expressed deep concern over the nursing shortage: “This is causing a crisis — particularly in aged care, despite the Government maintaining a public position that all is fine.
“This is despite care facilities for the elderly being forced to reduce capacity and send residents to either the DHB (who has no capacity) or home to families who are ill-equipped to cope. The seriousness of the situation has not yet had a quality national conversation.”
Despite the significant concerns conveyed in the Mood of the Boardroom survey, Health NZ chair Rob Campbell suggests business might be over-egging the negativity in terms of optimism.
“I think that business response to media and interest group concerns of many topics exceeds their real-world concerns.”
Strahan Wallis – CEO Clemenger Group
“We are cautious about prospects for 2023 but also know that research shows the smartest organisations increase marketing spend in the hard times, during recessions or downturns.
Media spending has been up across most categories over the last 24 months as organisations get more out of their advertising assets. There is a pent-up need now for smart companies to create new brand campaigns that will ensure customer loyalty and a quick exit from any economic headwinds over the coming 18-24 months.
Chris Quin, CEO Foodstuffs North Island
We’ve gone straight from fighting Covid to fighting inflation. What worked through Covid was keeping things simple and focused on what really mattered: keeping our team and customers safe and keeping food on the shelf.
I’m optimistic that we’re doing the right things now to fight inflation for our customers: buying well, running as efficiently as possible, and keeping costs down. And the numbers show we are doing that.
What I’m less optimistic about this year is the widening gap between government and business when it comes to collaborating to identify the right problem and fix it. There’s growing concern that the Government is trying to do too much. Right now, for businesses like ours, that means adding uncertainty, cost and complexity.
Like we did through Covid, the Government and businesses are now fighting a common enemy of inflation.
With the cost of living, we need to maintain focus on what will actually fix that and deliver on it.
The next 12 months are going to be tough on New Zealanders, it’s a time when Government and business should be working closer together — not drifting further apart.
https://www.timmccready.nz/wp-content/uploads/2022/09/Confidence-Mood-of-the-Boardroom-Tim-McCready.jpg1091745tim.mccreadyhttps://www.timmccready.nz/wp-content/uploads/2020/03/TimMcCready_banner.pngtim.mccready2022-09-23 17:04:422022-09-24 17:22:49Mood of the Boardroom: Business confidence tumbles (NZ Herald)
CEOs are split on whether increased co-governance between Government and Māori is “right for the times” or “anti-democratic”.
The vexed issue of “co-governance” frequently dominates headlines with supporters saying it is a crucial step inthe Crown meeting its obligations under Te Tiriti.
But others say the extent of “co-governance” is already divisive and anti-democratic.
CEOs and directors responding to the Herald’s Mood of the Boardroom survey were asked specifically if they believed increased co-governance between Government and Māori was “right for the times”, “anti-democratic” or whether they were “unsure.
Some 37 per cent of survey respondents said that increased co-governance was “right for the times”, although many include caveats in their support.
“Co-governance seems a sensible solution for resolving claims in relation to taonga/property — especially where only a 21st-century solution is possible,” says The New Zealand Initiative chair Roger Partridge.
“However, co-governance of the national provision of services is not consistent with the principles of our liberal democracy.”
The head of an investment company says “there has been a ‘whites only’ policy to date, and that needs to change”.
A chair says they agree with co-governance in principle, but it does not need to be in every domain. “Māori values, and in fact most things Māori are undergoing a renaissance,” they say. “Our Māori history is common to all New Zealanders.”
But a further 41 per cent of respondents believe increased co-governance is “anti-democratic”.
“I will not support two votes for one ethnicity in any election process,” says Precinct Property chair Craig Stobo.
The head of a design firm says co-governance is “totally against all democratic principles — a reversal to dark days.”
An investment banker shares a similar sentiment. “It is not only anti-democratic, it is unnecessary and an inefficient way to address the inequities trying to be addressed.”
“Having dedicated Māori seats on local councils makes sense,” says a top chair. “But in governance, where Māori have an equal say on important matters, is a step too far for me.”
“Have a referendum and let’s see what Kiwis want,” says the head of an energy company.
What are the politicians talking about here?
Prime Minister Jacinda Ardern maintains her Government has been clear about where it would implement co-governance, such as the establishment of Te Aka Whai Ora (the Māori Health Authority) to improve indigenous health by working in partnership with the new centralised health agency Te Whatu Ora Health New Zealand.
“Health outcomes for Māori are worse in this country, Māori die younger in this country,” Ardern has said.
“I think we all acknowledge that the way we’ve been operating in our health system hasn’t been serving Māori well.”
But the extent of co-governance overlaid on the Government’s Three Waters plan to amalgamate local water assets into four big new regional authorities has proved divisive.
The new entities will be represented by regional representative groups comprising 50 per cent local council members and 50 per cent from iwi. Mana whenua will have oversight over the boards charged with operational management, but no operational authority.
This has already set the scene for co-governance to be a major election issue in 2022 with Act and New Zealand First highly critical of initiatives taken by a majority Labour Government which were not put up as policy at the 2020 election.
Act Party leader David Seymour said a referendum on co-governance would be a bottom line if forming a Government with National.
He said the Treaty of Waitangi was not a partnership and co-governance arrangements should not be viewed as a necessary extension of that and have warned co-governance will end liberal democracy in New Zealand.
However, National leader Christopher Luxon had ruled out a referendum for now: “We’re not in any place to have a referendum right now because the bottom line is we’re not clear what we’re talking about with respect to co-governance.”
CEOs also want more balance
Some 22 per cent of survey respondents say they are unsure about increased co-governance.
“We need a much greater level of the national conversation,” says a professional director.
“The controversy is coming via the uninformed and is not being countered by an intelligent conversation.”
“I want Māori inclusion but with democratic principles,” says Vector chair Jonathan Mason.
From a utilities boss: “Māori should definitely have a voice in governance its more about balance.”
Others are concerned the subject has become a political dog whistle.
“We need to ensure that the debate around it is measured and informed,” says a property CEO.
“I am anxious about the way conspiracy theorists are harnessing genuine confusion and concern around what the term really means and turning it to their own ends.
“I don’t think this is going anywhere good, and I think it is incumbent on the leaders of all of the sane political parties to ensure the rhetoric around this issue is measured and grounded in fact.”
Under National-led governments, co-governance arrangements were made with iwi over Te Urewera national park, the Waikato and Waipā rivers, and the Whanganui river.
Former National Cabinet minister Christopher Finlayson has been vocal that the present Government is losing valuable purchases on public tolerance for Māori advancement.
“I subscribe to Chris Finlayson’s world view on this issue,” says a property CEO.
“And also note that this has been happening in lots of spaces for quite some time — it’s not, in fact, new.”
https://www.timmccready.nz/wp-content/uploads/2022/09/Cogovernance-Mood-of-the-Boardroom-Tim-McCready.jpg760740tim.mccreadyhttps://www.timmccready.nz/wp-content/uploads/2020/03/TimMcCready_banner.pngtim.mccready2022-09-23 17:04:362022-09-24 17:22:49Mood of the Boardroom: Increased co-governance divides chief executives (NZ Herald)