Business concerns on wellbeing agenda lead to mixed messages
Business concerns about wellbeing agenda lead to mixed messages
• 63 per cent of business leaders think the government is managing the economy poorly (from 48 per cent last year)
• Almost three-quarters of business leaders (72 per cent) agree wellbeing should be measured alongside economic progress
• Nearly two-thirds (63 per cent) predict tax increases in the next 12 months, despite the abandonment of a capital gains tax
AUCKLAND, 27 May, 2019 – Business negativity about both New Zealand’s economic outlook and the government’s management of our economy has grown since last year, amid concerns that the government may not deliver real improvements in wellbeing. On the other hand, the government’s announced infrastructure investments align well with businesses’ top priorities.
Accounting and business advisory firm Baker Tilly Staples Rodway has released its 2019 Business Confidence Survey of more than 500 business leaders, with respondents from a range of sectors across New Zealand. The survey asked participants to rate how well the government is managing the economy and predict the performance of a range of economic factors.
Economic and business performance
Negative opinions about the state of New Zealand’s economic wellbeing have become further entrenched. In 2018, 48 per cent of business leaders thought the government was performing poorly at managing the economy. This has risen to 63 per cent in the current survey. Only 13 per cent of business leaders believe the economy will grow at the same rate as in the previous year, down from 18 per cent in 2018.
On the other hand, in 2018, the majority of businesspeople (68 per cent) believed they personally would be worse off under the new Labour Government’s Budget than they were the previous year, but this has shrunk considerably to 48 per cent in 2019. The same applies to respondents’ business and economic outlook. While 55 per cent of all business leaders believe the impact of the “Wellbeing” Budget on the economy will be worse than last year’s, this is down from 71 per cent in 2018.
“Overall, business owners are more optimistic about their own business than about the economy. This mixed message seems more a reaction to the government’s policies impacting businesses generally, rather than discomfort over where dairy prices or exports are going, for example,” said Kaison Chang, Business Advisory Services Director at Baker Tilly Staples Rodway.
Less than 28 per cent of respondents think earnings from exports or dairy will decline in the next year.
“The survey was conducted after the capital gains tax was ruled out, so this result can probably be explained by that element of fear being taken away, rather than greater positivity,” said Chang.
Asked whether respondents’ own businesses performed better in the last year, most said they had either stayed the same (43 per cent) or improved (27 per cent). However, more than half (51 per cent) believe the new Budget will negatively impact their businesses.
Job security is also expected to worsen by more than half (51 per cent) of respondents. Notably, 16 per cent of employers expect employee numbers at their businesses to decline in the next 12 months, compared with only 11 per cent of employees.
Businesses are supportive of environmental and wellbeing factors being included in national performance measures. Almost three-quarters (72 per cent) of respondents agree that wellbeing factors such as mental health and community engagement should be measured, and 70 per cent support including environmental factors such as air and water quality.
Business representatives were asked whether they believed national wellbeing would improve as a result of the Budget. Expectations are low.
The majority of respondents are sceptical we’ll see any improvement. Only slightly more than a quarter are forecasting any positive results, with more than a third of respondents believing things will stay the same. Another third think wellbeing will actually decline.
“With the capital gains tax gone and wholesale income tax changes also off the table, businesses fear they are the only remaining source of funding for any wellbeing schemes,” said Chang.
“While business leaders support the concept of wellbeing, they’re worried about who will be paying, especially as we’ve already seen a rise to the minimum wage and extra compliance measures impacting businesses. Further business costs will ultimately slow the economy and the sentiment seems to reflect this.”
There is greater optimism that the housing market has levelled off. While 36 per cent of survey respondents last year thought house prices would rise, the figure has dropped to 29 per cent this year – and 36 per cent now believe house prices will fall in the next 12 months, compared to 29 per cent in 2018. Aucklanders in particular are expecting a house price drop.
With tax also grabbing headlines this year, the survey asked whether businesses expect to see any change to their taxes in the next 12 months. Nearly two-thirds (63 per cent) predict increases, a third (33 per cent) no change, and just four per cent predict a reduction. By contrast, more than half of business leaders (53 per cent) support a new tax band for very high income earners. A fifth of business leaders (21 per cent) support higher taxes for those earning more than $150,000, and a third (32 per cent) are comfortable with a new threshold at $200,000.
How businesses and the government align
What businesses want most now is more government investment in infrastructure like roads, rail and IT infrastructure. Greater investment in research and development has also climbed the list, from fifth to third. A simplified tax system, which was the most wished-for Budget item in 2018, has dropped to second place.
“What this shows is that the government is actually more aligned with the top business priorities. Businesses can be encouraged by the government’s signalled investment in infrastructure and innovation, from rail improvements and renewable energies to considering the Tax Working Group’s proposed new regime to encourage further investment,” Chang said.
“The government is also showing positive signs of wanting to work more closely with businesses through the introduction of the Business Advisory Council and Small Business Council. Although business leaders will be watching carefully to see how this Budget addresses physical barriers to growth such as transport issues or lack of access to new technologies, there are encouraging signs that outcomes may be more positive than they think.”