On The Nation: Business Panel

On The Nation: Business Panel
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Business groups won’t be feeling too impatient about getting a government, according to Kim Campbell from the Northern Employers and Manufacturers Association, Abbie Reynolds from the Sustainable Business Council and Bill Rosenberg from the CTU. Campbell and Rosenberg say it could become a concern if negotiations dragged on until Christmas.

Campbell says Winston Peters will have to soften his stance on immigration in coalition negotiations.

Both the EMA and the Sustainable Business Council support national groups outside of government having responsibility for long-term issues such as infrastructure and climate change.Rosenberg says he’d be concerned if such groups were used to increase the use of Public Private Partnerships.
Lisa Owen: Winston Peters has begun negotiations with both Labour and National about forming the next government, but we’ll have to wait a few more days at the very least to know which way they’ll go. The only thing we do know is that his party, New Zealand First, will be involved in some form. So what will that mean for the economy? Well, joining me now are Kim Campbell from the Northern Employers and Manufacturers Association, Abbie Reynolds from the Sustainable Business Council, and Bill Rosenberg from the Council of Trade Unions. Good morning to you all. Abbie Reynolds, if I can come to you first. Everyone seems to agree that strong, stable government is important, but is it also important to get a government in place in a timely fashion?
Abbie Reynolds: Look, I think when I’m thinking about what my members are saying to me about what their priorities are, they’re really focused on things which are very long-term. So I think this interregnum is, you know, inconvenient, but mostly where they are is we need these long-term strategies around the things that matter to us – climate change and making sure no New Zealander is left behind.
So they’re happy to wait.
Reynolds: Well, I don’t know that they’re happy to wait. They’re getting on with things, but the stuff we’re thinking about is really long-term, so what we want is really well thought through policy. Yes, there’s a sense of urgency, but hurrying these conversations isn’t something that we can do.
Kim Campbell, how long before business gets a bit spooked?
Kim Campbell: Well, you’ve got to look at the planning arises, as Abbie says. If somebody’s planning a large investment over a long period, a couple of months is neither here nor there. In the short-term, some people are holding on maybe buying a house or car or going on holiday, and that’s always going to happen. But look at overseas. United States, we have an approximation of a presidency; the country just does very well. Some countries, it takes months. Germany, I know, is going to take four or five months, and the country goes on fine. I think we’ve got to remind ourselves that we’ve got such strong institutions here. The things that go on in New Zealand keep going on. So I’m quite happy for them to take their time and get it right. But if it was Christmas, I think we’d be worried.
Bill Rosenberg, how long before you’d get worried?
Bill Rosenberg: If it took six months, people might start getting worried. But I think I agree with what Kim and Abbie have said – that, actually, there are urgent things to get on with, but as much as we need to have a government that’s equipped to take those long-term views, that we rush the whole business. If anything urgent comes up in the interregnum, then the caretaker government can get together with the opposition and say, ‘Look, hey, we actually have to make these decisions. Let’s do it.’ But really the things that are urgent are the things that the outgoing government has left behind, and it’s been working on the principal ‘don’t do today what you can put off until tomorrow.’ And we have all these hugs issues that the next government will have to face – housing and health funding, social welfare and so on.
OK. Well, let’s look at some possibilities here, because the one thing that we do know, the one thing that is certain, is that Winston Peters and New Zealand First are going to be involved in this new government. So what is the best thing, Kim, that that party and he could do for the economy?
Campbell: Well, the best thing they can do is find places to compromise, because if a business looks at all the parties, if we could cherry-pick, they’ve all got some policies we like, and both parties, both Winston and National’s, have to curb their most extreme instincts or they’re just not going to find a common ground. Winston tends to be rather more interventionist. He has a very conservative social agenda. And so the combination is what counts.
Do you see a policy–? You say they’ve all got policies that you can identify that you’d liked. So if you looked at Winston Peters’ arsenal, can you pick one from there that you think would be a good one?
Campbell: He believes in manufacturing, which we obviously believe in, and he’s got some ideas there that work. We disagree with the way he wants to go at immigration. But his regional ideas – we’ve got lots of businesses in the regions that are struggling; I think it’s a good idea. Taking care of places where– Forestry’s another one. I think we’ve left that neglected for too long. So there are lots of places where there’s points of contact.
OK. Bill, what do you think could be one of the most significant things that New Zealand First could do for the economy?
Rosenberg: Well, I think New Zealand First does have a relatively long-term view of changing the direction of the economy, which is positive and important, and it also has some quite positive policies in there of wages, pushing up the minimum wage and dealing with the problem of a lot of people of casual employment. So there are some things there that are obviously quite close to what both Labour and the Greens are talking about. And I think, actually, after nine years of a government that has been very focused on business and on reducing government spending, we actually need to move much more to looking after the direct needs of people in New Zealand. And Kim’s talked about that, about the need for people, and businesses are starting to recognise that. You have an economy where a whole lot of people are missing out, where we’re neglecting the environment, then, actually, the economy won’t function well. But, more importantly, the reason for an economy, which is for people to raise their welfare, their wellbeing, is getting lost, and I think that needs to be the change in focus.
OK, you mentioned wages — I want to talk about that in a minute — but I want to give Abbie a change to identify what she thinks could be the thing that Winston Peters and New Zealand First brings to the economy.
Reynolds: Oh, look, it might be a bit of a fantasy, but what we would really love him to be able to do is to take that really long-term perspective and build some really cross-party coalition— long-term coalition around what the climate change plan is — how they’re going to work with business to figure out what our pathway is to being a net-zero economy and how quickly we can do that. And, I think echoing what these guys have both said about what are we going to do around making sure that no Kiwis get left behind — that’s really important to our membership.
OK, well, let’s talk about wages, then, because that is one thing that you’ve raised, Bill. Winston Peters does want to raise the minimum wage to $20 from $15.75. How realistic is that, Kim?
Campbell: Why don’t we make it 30? I mean, it’s pick a number. You need to match the growth in wages with other things in the economy.
So you think that’s unrealistic?
Campbell: I think $20 is fine, provided we can raise— you know, people that lose their jobs — think about this. And you’ve also got to think about if you put everybody up 25%, what happens to the people who are already on $20 an hour, and the ratcheting effect that is going to have.
So, you actually think people would lose their jobs from that, because there is conflicting evidence about whether raising wages causes job losses.
Campbell: Well, it depends on where and who— it depends where you are in the economy, what you’re doing. There’s no law that says you can’t pay people more money, and we’ve been quite vocal about this, saying, ‘Look, the minimum is the absolute rock-bottom.’
But this would be a law telling you, ‘You have to pay people $20.’
Campbell: Our instincts are ‘let the market decide that.’ So we’re not disagreeing on the what, we’re disagreeing on the how.
OK, so, Bill, what do you think? $20 an hour is his ambition. Do you think that that is realistic, or will it cost us jobs?
Rosenberg: I think it’s ambitious, but it’s also realistic. The international evidence on rises in the minimum wage areconverging into the very clear view that it causes minimal employment effects.
Campbell: Yes, but we’re the highest in the world here.
Rosenberg: And we’ve had some of the lowest unemployment in the world with some of those high minimum wages, so it’s case in point. But I think also the other way to look at rises in wages is that it actually provides an incentive to employers to raise productivity, and one of the big problems that New Zealand has is very poor productivity —absolute productivity and very poor rises in productivity, and some stimulus from sensible wage rises, I think, would really help with that. One of the problems with the minimum wage is that it only affects the people right at the bottom, and I conducted a study of this just recently — there’s kind of a hollowing out in the middle there. The next 50% are not getting anything like those wage rises, nothing like what the top 10% are getting. So we actually need to do more than simply raise the minimum wage.
Spread it through. Your members, Abbie, one of the things that they have identified as one of their biggest concerns isthat people are being left behind. Wages are one of things that you could do to make sure that doesn’t happen, but the other thing is that Winston Peters says he would lower the company tax rate to enable this to happen. Is that a realistic trade off? Could you do it without that?
Reynolds: Look, I think my members will all be in different places on this. What I can say, though, is that a lot of them have taken steps to raise their minimum wage to about $18.50, because they think that’s the wage that allows the people who work for them to live with dignity, so there is a real drive from leading businesses to say ‘What is it we need to be paying people so they can live well?’ So, I think leading businesses are really clear that they need to look after their people well, so how we transition to what the right minimum wage is will be a really important part of the conversation.
Well, Kim, he is saying lower the tax rate to about 25c. That would, some people say, carve out $1 billion of revenue. Can we afford that?
Campbell: Well, you may find—
Because that’s infrastructure, health, education, isn’t it?
Campbell: Well, the counter facts are maybe that actually, at that lower tax rate, it’ll attract greater investment and the tax tape will stay the same or actually go up.
So, you’d like to see that?
Campbell: Because remember, we’re competing. Always think about competition.
Yes.
Campbell: Who else? What are the tax rates elsewhere in the world? And they are round about that level, so I would argue — stay competitive. Just the same with the wages. The fact is, people aren’t paying enough, find their organisations hollowed out, people leave and get better jobs. And also to Bill’s point, in a way, by raising the wages, you may get greater productivity because people will automate. The sums become better to buy a robot and have people working for you, so the question then arises — what is the economy going to do to respond to this in terms of either looking after the people that aren’t working because of robots or other things that we’re doing that give them work to do. And it’s a real issue that we need to deal with as a community. But the fact is, as the wages go up, it becomes much more attractive to put in automated equipment.
All right. Bill, a recent economic forecast from ANZ and Cameron Bagrie said that we've reached peak tourism, peak immigration, peak construction. Do you think we're there yet and we're about to head down the other side?
Rosenberg: Well, people have speculated about peak immigration for several years now. Treasury forecasts always say it's going to fall. It hasn't. So that's speculation. I would hate to see it being peak construction, because there's so much more to do there. And peak immigration? Again, I think this is speculation. We do have significant environmental problems that have to be solved if we continue to increase tourism at the pace we're currently doing it. But if I can just come back to what Kim was saying, the threat of automation, I think, is a very rare one. And even in the United States, full automation is very rare. What may occur is we may get firms buying better machines, get better processes, involving workers more in decision making, so we actually get better processes there. What we need to have accompanying that is much better support from the government to help people through those changes, and we need to have government that actually supports the development of new, high-value industry, taking advantage of opportunities like climate change to actually change the direction of the economy to high value.
What about immigration in all of this? Because some industries are crying out for more people —physical people on the ground. So Winston Peters — we all know very clearly what his position is on immigration, so what would you message from the people you represent be to Winston Peters about that? He'd like to knock it back to around 10,000 people a year.
Reynolds: Look, I don't think my members are going to have a particularly aligned point of view on immigration. I think a lot of them are probably employing people from overseas. But, equally, what this record low unemployment is meaning for my members is that we're all having to think about the talent pools that we're not currently recruiting inside New Zealand. So we've got work we're doing around how our members can target the most excluded and disadvantaged young people. So there are these really interesting tensions which are starting to emerge. I think the interesting thing about automation is we're in this great acceleration; part of our challenge as a nation is that there is no more business as usual, and we're not really thinking about how fast these changes are going to happen for us, how we get legal and regulatory resilience for the change that's coming. I mean, I'm thinking about climate change; we're also thinking about automation. How quickly is that stuff going to turn up for us, and how do we get ready for it? And that's going to require a really long-term strategic point of view.
Kim, what would your message be to Winston Peters and the parties that need his support? What's your message around immigration to him?
Campbell: I'm going to say to him, look, Winston doesn't want to be the man that took the bottles away from the party. And the fact is, this party is going to come to a very sharp, grinding halt if he does 10,000 people. I think everyone agrees with some kind of calibration—
So do you think whoever goes into government with him should not bend on this?
Campbell: What they should do is say, 'Winston, we hear what you say, but let's have a look at the harsh reality on the ground.' Because in this election there's been more smoke and mirrors than anything about immigration. Look at the numbers. We've got 30,000 Kiwis coming home, and they're bringing their brides from wherever they've been, or husbands. So it's in the numbers and the detail. What is important is that we get the key people we need to recalibrate our economy, to do all the things to remain competitive. And whatever the number is, it lands where it is. So one of the reasons why we've done so well is we've had a very flexible workforce, we've had great relationships with the workforce across the country, for the most part. We've now got an immigration system that works and responds, and I believe that will continue. And I think Winston understands that. So I think you're going to find some common ground. Cos nobody—
You think he's going to weaken his position on that?
Campbell: I think he'll adapt it to make sense, so the economy can grow.
We're running out of time, but I quickly want to address this, because the EMA would like a national infrastructure group that sits outside of government to stop political horse-trading and to come up with some more kind of long-term plans, and that kind of aligns with your thinking around climate change. Do you all think that is realistic — that people will put aside their political leanings and work together in a group like that?
Campbell: Absolutely. Why? Because these investments, all of us are making them. And they are very large, big-ticket items. They affect us all. And once you've decided you're going to do it — and I think everyone agrees we need to invest in infrastructure — for the environment, for tourism, for everything — and so the only way to do that is by procuring it in a professional way and having a system that actually responds in a way that isn't wasteful.
But, Abbie, doesn't that mean people give away their point of difference — they sacrifice their point of difference? The Greens, for example, because that's their political position.
Reynolds: Look, I think — and my members are very clear with me — that what they're looking for from this government is cross-party working on climate change, and a really key part of how we're going to deliver a low-emissions economy is how we do infrastructure. So it's really clear in our members' minds that actually that's what we need. And if we don't go there, what's the future of our nation going to look like?
Bill, do you think it's realistic?
Rosenberg: It might be for certain parts of infrastructure. I would hate to see it if it's simply another way to bring in more and more PPPs and privatisation of that infrastructure. But I think it is true that a lot of what we call infrastructure is actually quite political, in the sense that you have to make priority decisions. One part of infrastructure is rebuilding some of our hospitals. That's a decision that was one of the points of difference in the election. And I think those issues have to be debated. Whether or not we put money into roads or into better public transport — all those kinds of things, they are inherently political, in the sense that, as a society, we have to make priority decisions on them.
OK. We're almost out of time. Just a quick answer from you all — will we have a government by the 12th of October. Kim?
Campbell: Probably.
Abbie?
Reynolds: Probably.
Bill?
Rosenberg: I doubt it.

Transcript provided by Able. www.able.co.nz

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