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Scoop IV: Business NZ's Phil O'Reilly

Scoop Interview: Phil O'Reilly On the Business Of Business NZ

Business NZ Chief Executive Phil O'Reilly chillin' in the Wellington boardroom of Business NZ

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Earlier this week Scoop went to get the good oil on the relationship between the Labour government and Business, the stoush between Progressive Enterprises and the National Distribution Union, and employment relations in NZ from the Chief Executive of NZ's largest business lobby group – Phil O'Reilly of Business NZ.

SCOOP: Phil, what sector groups do you primarily represent?

PHIL O'REILLY: Business NZ's the biggest advocacy group in NZ, so although we have major historical strength in the manufacturing sector and in the employing sector, increasingly we also represent the services sector as well. So, if you put us all together, we represent over 70,000 businesses. Easily the biggest business representation in the country across all sectors.

SCOOP: Just for those who don't know, what is the difference between say a lobby group like the Business Roundtable and Business NZ?

PHIL O'REILLY: We're both lobby groups. The Business Roundtable has membership of the top 40 companies in NZ or 40 big companies in NZ. BusinessNZ comes out of the old Employers Federation and the Manufacturers Federation. So, our membership basis is very significantly different and covers everybody from the fish and chip shop in Dunedin right through to Fonterra. So although we do similar things in the sense that we advocate on behalf of business, what you'll see is that we take a slightly different view of things just because of our membership.

As well as that, Business NZ is the social partner of the government with regard to the International Labor Organisation conventions and we're also the key business interlocutor at the OECD. So we have some sort of semi-official positions, if you like, in the NZ political scene as well.

SCOOP: Would it be fair to say you maybe get on with the government more than a lot of groups, like say the Business Roundtable? There seems to be a bit of tension there between them and Dr. Cullen.

PHIL O'REILLY: I think the difference between the BRT and us is that we tend to run a lobby which is much more day-to-day. So the Business Roundtable does a lot of research and makes announcements about that and goes and lobbies on those things. The nature of our lobby, the nature of our representation is very much day-to-day.

In the average week, I'll be talking to anywhere between three and eight Cabinet ministers and 20 officials, and a lot of that's very day-to-day stuff. I've just come from a meeting with ACC on how we might restructure ACC levies and do a whole bunch of work in that area. None of that is particularly controversial. It's just the machinery of how business might deal with government.

We do have disagreements with the government and we have very loud agreements with the government, too. It's just that a lot of the work we do is day-to-day, down-to-earth, and that affects the relationship that we have with government. That means it's very easy to talk with them about all sorts of things.

SCOOP: Okay. Is Business NZ an ideologically driven organisation?

PHIL O'REILLY: No. We try and say what's best for business. Now, if you look at any business organisation anywhere in the world, business organisations will always say--just about all that I've ever seen, anyway--that it's important that government is smaller rather than bigger; that private enterprise is a good thing; that competition's a good thing; that free trade and open markets are a good thing; that an over-regulated approach is a bad thing; and so on.

The sorts of things that Business NZ says are no different to what many business organisations say. We just advocate for business, and that's essentially what we're trying to achieve.

SCOOP: I'll read you out a statement.

"Reducing personal tax rates would provide incentives for individuals and families to get ahead by working hard, knowing they will keep more of their earnings. This is preferable to turning a large segment of the population into beneficiaries."

That was from a Business NZ press release. Is that ideologically driven: "...turning a large segment of the population into beneficiaries"? Presumably, you're talking about Working for Families there?

PHIL O'REILLY: Well, you could define it as ideological if you like. That worries me about the political debate in NZ, that as soon as you say something like that, you're accused of being an ideologue. The fact of the matter is that we think you're going to do better as an economy if you can make sure that people have money in their hands. The fact of the matter is, in our view, that government bureaucracy will tend to be wasteful. Whenever you get into broad-scale income shifting, then that's likely to be inefficient and likely to send wrong signals.

The fact of the matter is that 200 people sitting on the Terrace, fundamentally--no matter how intelligent they are--are unlikely to make the right decisions for each and every family in NZ. So we take the view that that's where you start from.

But it's important to know also that we're not against welfare. Businesses are not opposed - to the best of my knowledge, anyway - to some sensible social welfare system, so it's not... I think the ideology would be if you said, "We shouldn't have welfare at all." That's not what we say. We want it to be efficient, and we don't want it to get in the way of enterprise.

SCOOP: Watching TVNZ's Agenda program, though, you'll often see certain - say, more National and ACT leaning people will say that 'Working for Families' is turning people into beneficiaries, and then on the opposite side you'll have, say, Labour and the Greens saying it's tax relief. I mean, is there any other statement you can give for 'Working for Families' that falls in between the two?

PHIL O'REILLY: We think it's inefficient, but we think it's inefficient because it has some extremely high thresholds. So the rate of tax that comes onto you as soon as you get a job is very, very significant. In many circumstances it actually discourages people from going to get a job and getting back into enterprise.

But I think it's important not to have these debates, at least visibly, or not to be accused on either side of ideology. We could just as easily accuse the side, the government that thinks that whatever the question is, the answer is welfare. Well, that's equally potentially ideological. I don't necessarily take that view. I think what we've got to do is work out what's the best thing for New Zealand.

And what we'll be saying - what we DO say - is that 'Working for Families' has some significant problems, because we think it discourages people back into work because of those highly regressive tax rates that move into you--and that is playing out in a few workplaces right now. But at the same time, I don't think we're against welfare per se. So, it's important to work out what's the most efficient welfare system we can have that encourages people when they're out of work to get into work, and looks after those who simply can't look after themselves. And I don't think any New Zealander would disagree with that proposition.

SCOOP: What about small business? Isn't 'Working for Families' good for your local dairy owner? People with more money in their hands, spending it?

PHIL O'REILLY: Fundamentally I think what's good for dairy owners and small businesses is lots and lots of people in productive employment. At the end of the day, what you want is people who are in control of their own lives and their own destinies, who are able to make expenditure decisions for themselves. So I think if you walked into - there's not many of these areas in NZ these days, but if you walked into an area of high unemployment - and there are still some - you won't find businesses liking that at all, even though everybody's on welfare.

Businesses won't like that. Businesses that do well - small and medium - are businesses that have high employment areas, because then you've got people getting into economic activity, earning more, getting skills, earning much more than they could ever do under Working for Families.

SCOOP:I understood that generally you actually have to be employed to get Working for Families. That's what the Child Poverty Action Group's so annoyed about.

PHIL O'REILLY:The point I'm making is that where you've got high areas of welfare, you've got low levels of business, business satisfaction, I can assure you. So we would say it's much better to have people truly in control of what they're doing. So the point I'm making is, if I'm getting that through the welfare system AND I'm getting discouraged from doing other economic activity because of those highly regressive tax rates that come onto me when I get back into work, I'm less likely to work harder and less likely to do that Saturday overtime. I'm less likely to think about that new skill I might get to get some more money. That's the problem. I'm trying to link business confidence and business success with people being in productive work that's valuable work.

SCOOP:Are the unemployed a sector group that BusinessNZ cares about, then?

PHIL O'REILLY:My word! Because they're potential employees, and at a 3.6 percent or whatever it is - it's that number at the moment; I just haven't seen the latest number - it's that kind of unemployment rate we want, and we absolutely need as many NZers in a job as we can. So we don't think just about the unemployed, either.

We think about those who otherwise might not be easy to employ--workers with a disability, mature-age workers with few skills, and so on. It's very important that we engage with the government and business to try and make sure we give as many of them productive work, because NZ will be poorer without it.

SCOOP: Do you think that Wayne Mapp's bill would have been of benefit to unskilled workers? "Gang members just out of prison," I guess, was Roger Kerr's statement.

PHIL O'REILLY: Sure. We think it would have been, and that certainly isn't ideological in saying that, because just about every OECD country has some sort of probation period. So, in fact, those who argued against it, I suspect were taking the more ideological approach. The fact of the matter is that while employers are fearful or scared of or concerned about employment laws that impact them from Day One, they're much less likely to take on an at-risk employee. Much better to try to get them across the line of trying someone out.

And I think many of the arguments made against the probation bill were pretty wrong-headed. I don't think employers were about to start firing people at 89 days. It's just very, very wasteful to do that. No right-minded employer would be doing that, and if they are, they deserve to get whacked for it. I think the debate around that was pretty wrong-headed and I think it's an idea whose time will come. It's a big issue for business, particularly small business. I don't think it's an issue that will go away.

SCOOP: I was at a select committee hearing where National MP Paula Bennett pointed out that there really was no information that people were taking personal grievances in the first 90 days. So wasn't the bill fixing a problem that didn't really exist?

PHIL O'REILLY: We don't know it exists. That's the very point. Employers are scared of these things. They're fearful of the concerns. One of the points I've made to the minister is Why don't we have a look-see just how big that issue is? It's an attitudinal issue really. That's why attitude surveys are taken.

Because it's attitude that often determines action. So if employers are fearful or are concerned about the possibilities of these kinds of things occurring to them, then they're likely to take a decision whether or not those things are absolutely provable in statistics. So, this is an attitudinal issue and it's about getting employers to take a chance on somebody, to give somebody an opportunity, that otherwise might not have had one.

I think that the lack of statistics around it is not necessarily the main point. The main point is employers' attitudes, and those attitudes are real. And, by the way, some of them are fair. We all know of the horror stories that we've got around employees... you know, some extraordinary dismissal scenarios where employees have come back to work or have got big payouts.

And we're also well aware of something that's going to be very hard to research, and that is the ambulance-chasing lawyers and advocates for workers, who will say to an employer, "Listen, this will all go away if you just pay me some money." Now, that's going to be very, very hard to research, but we know it's going on. Employers tell us it's going on. And that's what leads to that fear of hiring employees who otherwise might be good employees for them.

SCOOP: Did you see any other problems with the bill, though? Because United Future's Gordon Copeland - I also chatted to him - he's not really business-unfriendly, but he had a problem with the fact that you could have had a great employment record, you might have three or four jobs and that legislation such as the 90-day probation period may actually put people off moving around the economy.

PHIL O'REILLY: As I understand the bill, the bill was a voluntary measure. In other words, an employer and an employee could have agreed not to have a probation period. I think any bill that requires you to have a probation period would be as silly as a bill which requires you not to have one, as the current law is.

The overcoming of those kinds of issues is really about making sure that those things can be bargained or negotiated at the time of the commencement of employment between employers and employees, and that overcomes the issue of the highly skilled employee, who'll be employed by anybody, any way. There's absolutely no problem, no risk there at all. You could easily just agree that you won't have a probation period. That would overcome those issues, I think.

SCOOP: According to your briefing to the government, it is important to attract the right sort of immigrant. Do you see being able to fired more easily as assisting this goal?

PHIL O'REILLY: The point about immigration is a much wider one, and I don't think--

SCOOP: Skilled immigrants looking for a job.

PHIL O'REILLY: Sure. I don't think immigrants are either going to come to NZ or not on the basis of a probation period. As I've said, every other OECD country bar almost none, to the best of my knowledge, has some form of probation period. Whatsmore, you find that the employment conditions of NZ companies are very good in terms of their conditions, and so on, compared to many other countries around the world. So I don't think a probation period is in any way going to impact an immigrant's choice, most immigrants' choices, about whether they come to NZ.

The fact of the matter is that NZ is in competition with the rest of the world for skilled migrants, and really what we're saying to government about these things is that government needs to have a migration policy that recognises that migration--particularly of skilled migrants with English language skills--is not some sort of rationing exercise any more. It's actually about competing to get the best in the world. And I'm very pleased that David Cunliffe seems to be picking up on that point. It certainly seems to be driving some of the policy work in Immigration. Fantastic! Good for him!

SCOOP: According to a recent World Bank survey, NZ was a very easy place in the developed world to hire and fire employees. Would you like to see us be the No. 1?

PHIL O'REILLY:Those particular surveys are useful for what they are, and it's fantastic that the survey says that. Those World Economic Forum or World Bank-type surveys usually what they survey is very, very basic information. Like, how easy is it to start a company?

How easy is it to get legal redress? And those sorts of very, very basic things about any economy. And I'm delighted to say that over probably 20 years now, successive governments have made sure that NZ is the easiest place in the world to do those kinds of things. And that is absolutely fantastic. We should celebrate that and congratulate successive governments, as we do.

The problems that we face don't tend to be there, though. They tend to be at the more complex level of business, which are some of those very significant competitive issues. Regulatory matters. RMA issues. And so on. Where business finds it quite hard to invest with certainty. So it's not at those basic levels that we have the problem. And the same issue in the employment area. The simplicity of the law around dismissals is not necessarily the issue. The issue is the complexity of the mediation process and the fact that we have ambulance-chasing lawyers, and the fact that employers are uncertain about those things, and the fact that all of those remedies apply from Day One, Hour One, Minute One.

So, we're not suggesting that the entire employment law surrounding dismissals is wrong. What we are saying is that there's a very significant impact that it has on what is in fact a very vulnerable part of the workforce, and we want to make sure that those people have the best opportunity to get a job.

SCOOP:Phil, you've lived in Australia, and I see from another press release that you're pleased Australia's employment relation scene is being liberalised. Do you think the Aussies are at last recognising the benefits of NZ labour reforms in the 1990s?

PHIL O'REILLY:The Australian labour system is - certainly was -extraordinarily complex. It was, and in fact remains, a labour law system based on grafting of changed laws onto changed laws onto changed laws. And you had a complex interface between federal law and state law in areas such as accident compensation. So you've got a very, very complex labour system operating in Australia, and it was a system that - when I was there - was certainly creaking. It was aged, it was difficult, it was hard. It certainly wasn't impacting Australia's competitiveness.

Now, what they've done is they've at least gone some way, they're attempting to modernise that, to make it more enterprise-focused, to make it more bargaining-focused than structural-focused. That's good. I don't know whether it will play out well or not, but the fact that Australia is thinking about trying to make their employment laws more competitive and use them as a competitive tool is something I think we ignore at our peril.

The Australians are trying to liberalise labour laws at the same time that we have been de-liberalising them over the last couple of years. Now. I'm not necessarily - in saying that - arguing that we either do what Australia does OR that we return to the Employment Contracts Act. Time moves on. We're different from Australia. We actually already have a fundamentally simpler law than Australia has, even now. And at the same time, we've moved on from 1991 and 1998 and all that. Times have moved on.

So I think we can have a debate about the proper way of liberalising our labour laws, but what worries me is that Australia is moving down a liberalisation track, they already have a huge amount of competitive advantage over us, and at the same time we're moving back towards re-regulation. It's the velocity and the direction of that change that's a concerning thing.

SCOOP:I noticed Aussie workers earn a lot more than New Zealanders - well, up until now they do. You don't think that the liberalisation of the labour laws might see it evening up again?

PHIL O'REILLY:No. The opposite's true, I think. The reason Australian workers earn more than NZ workers is that the Australian economy has enjoyed high productivity over the past 10 years or so, and that means that workers tend to be... work tends to be more efficiently done. It tends to be done with a higher capital input and therefore workers tend to get paid more.

I don't see that that fundamental will change for the worse in Australia's case. Indeed, I suspect that the liberalising of labour laws in Australia will mean that the situation gets worse against us. In other words, the Australian economy's productivity lifts as a result of these changes and we will face an even more competitive Australia, as a matter of fact. I actually think that these changes to the laws in Australia are likely to lead to a worse problem for us, not a smaller one. Hence the need to be much more urgently focused on not just labour laws in NZ, but a whole range of things.

As you know, we're working cooperatively with the government on the productivity agenda. We're working with them cooperatively on issues like immigration. There's a bunch of things that we need to do. As I say, we're also working cooperatively with them on a tax review. So, there's a bunch of things we need to do. This is getting a hundred things right. Labour law is one of them, but it's a very important one.

SCOOP: It's interesting you say you work cooperatively with the government. Some people would say that the Labour Party has bent over backwards to help the business community. In the circumstances, do you think they get a bit of hostility from the business community still?

PHIL O'REILLY: I don't know who you're talking to that's said the Labour Party's bent over backwards for business.

SCOOP:An anonymous source! [laughter]

PHIL O'REILLY: Good for them.

SCOOP: They may be close to the Beehive…

PHIL O'REILLY: That's right! This government's like any government, and that's an important thing to note. This government's done a few things right and a few things wrong. I think the nature of the debate is potentially unhelpful. So I think the possibilities are for a much more wide-ranging and engaging conversation with business than they have today. Now, undoubtedly part of that will be down to some business people being suspicious of the government. I'm not going to try and say that all business people are fantastically pro-government; of course some of them aren't.

SCOOP: Can I qualify that? For a Labour government, they've bent over backwards to help business.

PHIL O'REILLY: They're a third-term government now. They've had different configurations - MMP does that to you - but they're a third-term government, and certainly what I notice about dealing with them is that... what I do think is good faith from their part is that they search very well for things that they think will work.

Certainly, I don't get any thought that their relationships with the business community are cynical, for example - that they don't care, they're just doing this to look nice, and so on. I think they are genuinely attempting to engage, but I think they do that from the perspective of their own ideology, from the perspective of the Labour Party. That's fair enough! Of course they would. The Nats or ACT or the Greens would do the same. And, by the way, I don't think any of those people are cynical about dealing with business, either. Whenever I talk to politicians generally I think they try to engage, fundamentally, sensibly with business about what might work.

I think the issue is, though, that we're not seeing a real agenda, or a real verb, or a real spirit around that engagement with business that we could see. And certainly from my perspective, what I'm attempting to do is make sure the doors remain open and we have an ideas-focused discussion and a solutions-focused discussion as opposed to a blame-focused discussion. I think that's very, very important on both sides. So that's essentially what we're attempting to achieve with them.

SCOOP: At the moment, there's a big industrial stoush, you've been quoted a couple of times. It began between the Distribution Union and Progressive Enterprises. You claimed in a recent news reports that the NDU is acting from an ideological stance in this dispute. Do you think it's possible the company is also taking an ideological stance with the lockout?

PHIL O'REILLY: It's possible. I'm not close to the Progressive dispute in the sense that I'm not day-to-day close to it. Obviously, we've been in contact with the company. They're running the dispute along. We don't believe in the idea of Big Capital vs Big Labour any more, like the old days of the Employers Federation, so you won't see us getting actively involved in the dispute. We don't think it's appropriate to do that, and I think the CTU would probably agree with that, too.

What I said last Saturday, I think is an important point. And that is, I think it's very important that the parties attempt to settle this dispute on the basis of the needs of the enterprises concerned. It would be a worry if ideology gets in the way of that. I think the danger is that you've got the NDU in this case talking about the need for a single contract. Now, is that really the case? Or is that an ideological issue?

I don't take it much further than that. I think it's a worry if it does turn into an ideological issue. And I think on behalf of the workers and the employer in that case, all of us would be hoping for a quick solution to that dispute based on the practicality and the needs of that enterprise. Fundamentally, the best industrial bargaining is that kind of industrial bargaining.

SCOOP: I was reading that great tip sheet Molesworth & Featherston - a little plug for my favourite tip sheet - and that posed a couple of questions. One was, do you think other employers in NZ want Progressive Enterprises to stir up industrial militancy when there's skill shortages and low unemployment?

PHIL O'REILLY: I don't think that most employers have a view on it. At the end of the day, what we've had in NZ for quite some time now is enterprise bargaining, largely, except for a couple of circumstances where you've got multi-employer collectives - the plastics industry being one. Certainly most employers in that particular industry are enterprise-based, so my sense is that there's no - and I'm certainly not aware of any - great employer push or otherwise for industrial militancy.

These things tend to play out on an enterprise basis. If an employer and a group of workers and a union have a big problem together, that will play out to the best of my knowledge and understanding at an enterprise level and tends to remain there. I'm not aware that there's any great push for employer militancy or otherwise. And what I can tell you is that I'm certainly not attempting either way to engender that amongst employers.

SCOOP: Okay. Two quick questions. I was looking at your briefing to the incoming government. You point out you'd like to research alternatives to a minimum wage. What exactly is that about? Is that getting rid of the minimum wage?

PHIL O'REILLY:What we think is, the debate around the minimum wage is in many ways an unhelpful debate. The OECD will tell you that minimum wages and youth minimum wages in particular are a useful way - or at least a helpful way - to get youth into their first job. They will tell you that, and the research is there and available for us. So that's helpful to know. Now, we seem to be having a very, very political debate about the youth rate in particular.

What we're interested in is asking ourselves, What else could we do? Do we have to have a one-size-fits-all youth rate? Do we have to have a one-size-fits-all minimum rate? If we do, how does that play out? Should it apply to different people in different ways? Should it apply to supervisory staff differently to other staff, for example? A whole bunch of other things. So we have an open mind about discussing that. We really wanted to engage the government in a debate about that, and show a willingness to do so. And we have. And the government continues to discuss it with us.

I don't think there's any urgent decision going to be made on the youth minimum wage. I don't think it's going to happen any time in the next few weeks, so it's a useful open debate. And what we're really trying to say to government -it's kind of indicative of a bunch of other things that need to be said in the debate, I think - that is, the idea that says what currently is, is wrong and therefore needs to be taken away, is probably not a helpful debate. The better debate is to say, If you've got a problem with what's there now, what is that problem? And how might we go about solving that while keeping some of the benefits of what is there right now? And the youth rate's an example of that.

The OECD will tell you that having a youth minimum wage is a useful way to get young people into a job. We don't want to destroy that, because we've got a 12 percent unemployment rate amongst our youth--which is a very bad thing. At the same time, if there are concerns being raised about that, well OK, let's have a look at those concerns and see if we can do something about assuaging those while retaining the essence of the good things about those kinds of regulatory interventions.

SCOOP:You're not worried about getting flack from John Key? He was on radio pumping up the minimum wage a couple of weeks ago.

PHIL O'REILLY: Yeah, I saw that. I wasn't sure what the context was of him making those statements. We obviously made our comment to government long before John made his comments publicly. But it demonstrates that the minimum wage is an issue that generates intense political debate, isn't it? Even the Nats are saying - some of the Nats are saying - there's an issue there, and you'll find that some will say...

SCOOP: Well, Wayne Mapp wants to get rid of it and John Key, obviously, is a big fan, so that party is a broad church.

PHIL O'REILLY: Exactly! There's a lot of conversation about it. And I think the job of business in that debate is to take a view that says, "Here's why we think it works and here's some evidence about why it works for us in New Zealand. If you've got some issues with it, let's work out how we might go about solving those issues while retaining some of the best features of it." Now, that's a rich conversation, it's a complex conversation, and it's not a sound-bite conversation. And that's really what we were signaling to government when we made those statements just after the election.

SCOOP: Right last question, yet again from your briefing to the government. Petrol tax. You'd like all the petrol tax spent on roading. If that were to happen, what do you think would happen to the public transport in New Zealand?

PHIL O'REILLY: The petrol tax being spent on road is simply what the petrol tax should be spent on. The petrol tax is a tax that I pay at the petrol bowser in the expectation that it will be spent, that I am paying for my share of the roads. It should be spent on that. If public transport is important - and it clearly is - then the government should think about alternative ways of funding that.

But bear in mind that statement was also made at a time when there was a lot of debate about infrastructure spending. And what we're looking at is not only whether the petrol tax money is spent on roads, but also what is the government's total investment in infrastructure, and that includes public transport infrastructure.

And of course we've had some positive statements about that, particularly in the Auckland region in the last few months, so that's helpful. But I think the point here is, not whether public transport's important, but about whether that particular source of funding for public transport should be used or some other source of funding. Because we don't think it should be the petrol tax.

SCOOP: Thank you very much.

PHIL O'REILLY: Pleasure.

ENDS

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