Business leaders pessimistic about the Budget
A balanced Budget, mandatory Kiwisaver contributions, and an overhaul of the tax system are the key items on Kiwi businesses’ wish list heading into this year’s Budget.
Accounting and business advisory firm Staples Rodway has released its inaugural Business Confidence Survey of almost 500 business leaders, which featured respondents from a range of sectors across New Zealand.
“The survey found more than half of respondents believe this week’s Budget will have a negative impact on the economy and that the government’s performance around the economy to date has been poor,” said Staples Rodway Business Advisory Services Director, Kaison Chang.
More than half of respondents (55 per cent) across New Zealand’s business community believed New Zealand’s economy would decline over the next year. Almost half (48 per cent) rated the government very poorly on its economic management so far, with fewer than a third (32 per cent) thinking it had done well or very well.
“The biggest priority was balancing the books, with more than 88 per cent agreeing that it was very important or somewhat important for the government to avoid taking on further debt to stimulate the economy. This indicates that if the Budget cannot reassure businesses that the government won’t be adding to Crown debt, business confidence will fall further.”
The top-ranked items on business leaders’ shopping list for this year’s Budget are a simplified tax system with less red tape, chosen as the number one thing the government could do to create a better business environment. This was followed by a wish for greater investment in infrastructure such as ports, road and rail, and a reduction in the personal tax rate.
“It’s interesting how strong the sentiment is towards a change in our tax laws,” said Mr Chang.
“While we always have room for improvement, in comparison with many of our closest trading partners we have one of the more simple and robust business environments in the world. This comes as no surprise though, as it reflects the sentiment that we saw at the SME Leap Summit earlier this year, where small and medium businesses told us that they were looking for an easier way to do business. While a simpler business environment is also important to businesses with turnover above five million, they placed greater importance on improving infrastructure.”
Sharp divisions arose between Auckland and the rest of the country on restricting foreign investment. Over 44 per cent of Aucklanders felt the government should do more to encourage foreign investment, while only 26 per cent of people outside Auckland believed the same. Encouraging immigration and reducing barriers to foreign investment were not a priority for respondents, with only four per cent seeing these as the top priority.
There were also stark differences between New Zealand and Australia when the results were compared with Staples Rodway’s Baker Tilly associate across the ditch, Pitcher Partners. While only 32 per cent of New Zealanders felt our government was managing the economy well, 55 per cent of Australians felt the same about theirs. And while 55 per cent of Kiwi business leaders believed economic growth would decrease following the Budget, only six per cent of Australians had a negative outlook.
When asked about superannuation, more than 80 per cent of respondents agreed that Kiwisaver contributions should be compulsory for all Kiwis. Nearly 70 per cent disagreed with means testing for superannuitants. There was less consensus on raising the age of superannuation, with 59 per cent believing it should rise from age 65 and almost a quarter (24 per cent) strongly opposed.
Despite the pessimism, dairy and housing prices were expected to remain stable and exports were expected to increase. It’s also notable that while many believed they or their businesses would be negatively affected by the forthcoming Budget, just 10 per cent of respondents felt the impact would be very significant.
“Business leaders saw housing and poverty as issues which need to be addressed in the Budget. This was stronger in Auckland where businesses are struggling to attract good employees because of the cost of living. There seems to be an increased understanding that social issues ultimately impact on the productivity of businesses,” said Mr Chang.
“Given that the government has assured voters it intends to take a sensible approach to spending, even those businesses with somewhat negative views may find the post-Budget environment rosier than expected, provided the government keeps its assurances.”
Aggregated Survey Responses –
Staples Rodway Business Confidence Survey 2018
How is the government performing when it comes to managing the broader New Zealand economy?
|Very Well/Well||Poorly/Very Poorly||Not sure|
Thinking specifically about this year’s upcoming Budget, do you think it will have a positive or negative impact on:
|Very Positive||Positive||Neither positive nor negative||Negative||Very negative||Not sure|
|a. You personally||1.88%||7.95%||30.33%||47.49%||9.83%||2.51%|
|b. Your business||1.50%||10.30%||26.61%||45.06%||10.30%||6.22%|
|c. The New Zealand economy||2.10%||13.24%||16.18%||51.89%||13.45%||3.15%|
Do you expect this year’s Budget to be better or worse than last year’s Budget for:
|Much better||A little better||About the same||A little worse||A lot worse||Not sure|
|a. You personally||2.52%||6.71%||20.96%||40.88%||27.46%||1.47%|
|b. Your business||2.15%||8.58%||22.75%||36.70%||25.32%||4.51%|
|c. The New Zealand economy||3.18%||10.38%||13.35%||38.35%||32.42%||2.33%|
How important is it for the government to balance the Budget?
|Very important||Somewhat important||Not so important||Not at all important||Not sure|
Here are some things that other businesses have said government could do to create a better environment for business growth.
Please rank the following issues in order of how much of a difference they’d make to your business (1=most importance)
|a. Simplify the tax system and cut red tape for business||30.54%||14.23%||12.97%||11.30%||9.83%||9.41%||6.28%||5.44%|
|b. Reduce company tax rates||13.18%||19.04%||12.76%||10.04%||10.25%||9.83%||14.85%||10.04%|
|c. Reduce personal tax rates||15.90%||14.64%||15.90%||7.74%||10.04%||13.60%||10.67%||11.51%|
|e. Invest in research and development systems||5.44%||12.97%||14.64%||19.04%||19.46%||13.60%||8.58%||6.28%|
|f. Invest in infrastructure (i.e. rail, ports, roads etc)||19.87%||15.90%||16.53%||16.11%||14.02%||8.58%||5.02%||3.97%|
|g. Encourage the immigration of highly skilled workers||4.18%||7.95%||10.25%||11.30%||13.39%||17.99%||19.46%||15.48%|
|h. Invest in science, technology, and math education||6.69%||10.25%||12.13%||14.85%||11.30%||15.27%||20.92%||8.58%|
|i. Reduce barriers to international investment||4.18%||5.02%||4.81%||9.62%||11.72%||11.72%||14.23%||38.70%|
Some people have advocated for greater foreign investment and trade, while others think that there is already too much foreign influence in New Zealand business. One way governments try to balance the level of foreign investment with support for local business is through tax law. Which of the following statements do you think is a better description of New Zealand's tax laws for international companies?
|a. International tax laws are too restrictive; instead, the government should do more to encourage foreign investment in New Zealand.||31.97%|
|b. International tax laws should be stricter as international companies are disproportionately advantaged compared to New Zealand's businesses.||68.03%|
We’d also like to ask specifically about superannuation. What is your level of support for the following statements?
|Strongly agree||Somewhat agree||Somewhat disagree||Strongly disagree||Not sure|
|Superannuation should be means tested||7.17%||21.73%||21.31%||48.31%||1.48%|
|The age for superannuation should increase||21.99%||37.21%||15.64%||23.68%||1.48%|
|KiwiSaver contributions should be compulsory||49.05%||30.95%||9.26%||9.05%||1.68%|
What do you expect the following economic indicators to do over the next year?
|Increase a lot (5)||Increase a little (4)||Stay about the same (3)||Decrease a little (2)||Decrease a lot (1)||Not sure||Sentiment (3=neutral)|
|a. New Zealand economic growth forecasts||1.69%||16.46%||25.74%||41.56%||13.29%||1.27%||2.48|
|b. Consumer confidence||1.27%||12.29%||23.31%||45.55%||17.16%||0.42%||2.34|
|c. Business confidence||1.69%||9.09%||14.38%||46.51%||27.48%||0.85%||2.08|
|d. International investments||1.05%||8.02%||28.48%||34.60%||24.47%||3.38%||2.16|
|f. Dairy prices||1.48%||22.57%||49.58%||19.20%||2.32%||4.85%||2.87|
|g. Job security||0.85%||14.80%||38.48%||34.25%||10.99%||0.63%||2.58|
|h. House prices||5.91%||29.75%||34.39%||24.89%||4.01%||1.05%||3.05|
Key findings: Staples Rodway’s survey vs Baker Tilly associate in Australia, Pitcher Partners
|Managing the economy well or very well||32%||55%|
|Economic growth decrease||55%||6%|
About Staples Rodway
Staples Rodway is a New Zealand-wide network of accountancy and business advisory firms providing practical, responsive, and business-focussed services to a broad range of clients from start-ups to significant businesses across all industry types.