GONE BUT THE ECONOMY’S TROUBLES HAVEN’T
Despite the shock departure of the PM, the business sector is more focused on challenges than individuals, writes Kevin Norquay. Attention now turns to the relationship with her successor, Chris Hipkins.
Additional reporting by Gerhard Uys. What do you think? Email email@example.com
Stuff NZ Newspapers
Jacinda Ardern is going, going, almost gone, but don’t expect that shock to have any impact on the economy – not with inflation, supply chain woes, the cost of living, low productivity and stifled immigration all bedded in. So say economists, academics, business leaders and trade specialists asked by the Sunday StarTimes to reflect on the bombshell announcement on Thursday by a prime minister who was a highprofile leader, at home and overseas. Care needed to be taken when looking at how much weight to put on the Government’s influence over the economy, let alone the effect of a solitary MP, including incoming prime minister Chris Hipkins, independent economist Cameron Bagrie said. ‘‘The government of the day is more than one individual . . . the prime minister is a pretty important individual, of course, but when all is said and done, with anyone else we’d still be in the same places,’’ Bagrie said. ‘‘It is very clear, cracks have been across the New Zealand economy, with what I have been calling sugar candy economics, and that’s exacerbated division and created problems such as inflation. ‘‘Now we need substance. The problem we have is trying to chart a path to substance and deliverables, to get on top and make a real difference, but the approach from the existing Government is quite piecemeal. ‘‘We need to be boosting supply a lot more aggressively, through a lot more proactive policies, and then the other side of the political fence has not put an awful lot of alternatives on the table.’’ He expected a lift in business confidence, as the prospect of a blue-hued election win in October soared, but warned business confidence had consistently tended to be weaker under Labour-led Governments. ‘‘Business confidence does not tend to be well correlated with GDP growth. So I tend to ignore it somewhat, it’s got partial information, but it’s not the most reliable indicator that you’d be looking at out there. ‘‘Ultimately, the indicators that matter for where the economy is directed, is what firms actually think about prospects for their own, as opposed to the typical business environment.’’ Politically agnostic indicators showed there were ‘‘good patches’’ across the economy, ‘‘but we’re on a slippery slope and there’s going to be a pretty big economic cost in restraining inflation’’. Politically, election years have tended toward ‘‘don’t rock the boat’’, so the Ardern departure simply meant that would likely remain the case. BusinessNZ chief executive Kirk Hope said a lot of current business concerns related to specific government policies, and problematic policy areas were not essentially ‘‘Ardern-driven’’. A 2022 BusinessNZ survey of business opinion showed the main concerns were over skills shortages (immigration policy), inflation and cost increases (fiscal and monetary policy), he said. As well, there was ‘‘general uncertainty’’ as a result of significant policy change being developed and implemented in several policy areas, including employment relations. ‘‘The prime minister’s resignation could at best open a window for a reset in some policies, for example it could give Labour a chance to review currently poor policy, such as Fair Pay Agreements. ‘‘At the very least, the PM’s resignation will allow for some new conversations to be had about specific business concerns.’’ Businesses would be looking closely for any ministerial reshuffles, he said. Tourism and agriculture leaders said they wanted Hipkins to make immigration a priority. Chief executive of Tourism Industry Aotearoa, Rebecca Ingram, said workforce recovery was important for the tourism industry as it struggled with labour shortages. Tourism statistics released in the past week showed November 2022 overseas visitor arrivals were 62% of what they were before Covid, she said. The industry needed dynamic immigration settings, especially as New Zealand would co-host the 2023 Fifa Women’s World Cup with Australia this year, Ingram said. Chairman for Beef and Lamb, Andrew Morrison, said better immigration policies were crucial to the primary industry, which faced an ongoing worker shortage. Hipkins would have experience with immigration because of his involvement with the country’s Covid response, Morrison said, and should know how to effectively open the country’s borders. Morrison said the sector would have to wait and see whether Hipkins continued the same approach to initiatives such as He Waka Eke Noa, the agriculture sector’s answer to carbon taxes on farms. The Hipkins administration, Morrison added, should take a step back and review the sheer amount of new regulations being imposed on farmers. Trans-Tasman Business Circle chief executive Sharron Lloyd expressed admiration for the job Ardern did as leader, taking the country through significant global and local challenges. ‘‘She leaned into the challenges that any government would have had to balance between the economy and health and leaves the job with a foundation for the next leader to meet the challenges ahead,’’ Lloyd said. ‘‘Her resignation on Thursday was characteristically authentic and is understandable on a human level which I admire. ‘‘We have strong ambition and are performing well in tourism, food and fibre, in our tech – especially health tech – and I feel that the business community will have strong expectations of the next leader to be bold and decisive.’’ Government moves to help sustainability and climate change, and the encouragement of skilled migration, are high on the Circle’s priority list. ‘‘There needs to be a focus on the priorities for New Zealand and ensuring clear communication and transparency with the business community alongside serving our communities,’’ Lloyd said. This year was significant, with the 40th anniversary of Closer Economic Relations (CER) with Australia (and 80 years of diplomatic relations). ‘‘The relationship between our two countries is strong, secure and evenly balanced across many sectors, with the relationship being enhanced under PM Ardern. It is in New Zealand’s interests to continue to find ways of working better, and closely with Australia.’’ Internationally, there would be some impact on New Zealand and yet it too was unlikely to be significant, former trade negotiator and diplomat Charles Finny said, noting the markets had not responded negatively to the news. ‘‘Yes, the prime minister has certainly increased focus on New Zealand and been seen as a very good leader in times of crisis. She gets lots of exposure on UK-US television which is very good for Brand New Zealand,’’ Finny said. ‘‘But I’m not sure that her departure is going to be a real body blow for the economy. If the prime minister and Grant Robertson had gone together overnight, that would have had a noticeable impact. People have confidence in Grant’s ability to manage the economy.’’ Ardern had overseen ‘‘some really great achievements’’ in the trade area. She helped save the CPTPP (Comprehensive and Progressive Agreement for Trans-Pacific Partnership) when then-United States President Donald Trump ripped it up. ‘‘It’s going to be a very successful agreement,’’ Finny said. ‘‘She has helped land the free-trade agreement with the UK, which is a fantastic agreement if it gets ratified, and she’s also delivered us a deal with the EU – not as good as the UK, but it’s still a good achievement. ‘‘So she’s done a number of really good things, but I can’t see why a new prime minister . . . couldn’t do the same things.’’ Arden quit at a point where the economy faced some serious challenges, he said. ‘‘We have got a very high cost structure, being made higher with government expenditure, higher wages, all of which are good things if it is backed up with productivity, and it hasn’t been, so our competitiveness is very much being challenged by the combination of domestic factors we face. ‘‘That’s going to be a real challenge that [Chris Hipkins] is going to have to address and I’m not sure that Ardern would have been any better at addressing them.’’ University of Auckland marketing associate professor Bodo Lang said Ardern stepping aside was likely to erode the visibility of New Zealand overseas, and outside sympathy toward this country. ‘‘Jacinda Ardern has raised New Zealand’s profile, and imbued that profile with qualities that are resonating with many world leaders and consumers around the world . . . qualities such as empathy, kindness, authentic leadership, and progressive thought,’’ Lang said. ‘‘This effect won’t abate immediately but, depending on what qualities [Chris Hipkins] brings to the job, New Zealand may suffer from a drop in awareness and liking overseas.’’ Her departure had the potential to negatively affect the popularity of products overseas, and the enthusiasm of tourists and overseas students for visiting Aotearoa. ‘‘We know from advertising research that brand awareness and brand liking are key drivers of purchase,’’ he said. ‘‘Jacinda Ardern has undoubtedly positively impacted both of these drivers.’’ Otago University international macroeconomics and trade specialist Dr Murat U¨ ngo¨ r could not see a change of prime minister making a massive difference, given the economic problems New Zealand faced. ‘‘Business confidence is already at a low level, and Jacinda Ardern’s presence or absence in the political scene does not change this fact,’’ he said. An overwhelming majority of businesses (73%) expected general economic conditions to deteriorate over the coming months; a record low in the NZIER survey’s history. Businesses were becoming more cautious, planning to decrease staff and trim down their investment plans. The construction industry had the gloomiest outlook, affected by supply chain disruptions, with around 90% of building materials and products imported. As well, petrol prices affect delivery costs, and supply chain disruptions cause delays and price increases in construction. ‘‘The resignation of Jacinda Ardern may be seen by some domestic and foreign investors as increasing the chances of a National Party victory in the upcoming general election. If this is the case, investors will focus on how Christopher Luxon will present their economic policy plan,’’ U¨ ngo¨ r said. ‘‘Luxon has been arguing that the country is heading in the wrong direction . . . he should put forward a clear and convincing plan to investors, outlining how their economic policy will reduce economic uncertainty and increase business and consumer confidence.’’ Food prices had risen by 11.3% in December 2022, compared to December 2021, the largest annual increase in 32 years. There are egg shortages, CO2 shortages, and damage caused by an ex-tropical cyclone in parts of the North Island. ‘‘Low-income households are disproportionately affected by inflation, as they are more sensitive to rising food, energy, and rental prices. The economic burden of the cost-of-living crisis continues to weigh heavily on the less welloff segment of society,’’ he said. ‘‘Whether or not Jacinda Ardern is the prime minister, the economic landscape remains challenging.’’ Bagrie fears election-year caution had arrived at a time when all-out economic attack is required. ‘‘Unfortunately what we need at the moment is double-barrelled attacks on containing inflation. We literally need to be attacking inflation from the bottom up. ‘‘The CO2 shortage crisis is a consequence of people forgetting about this basic thing called risk management, and that could be a real major problem over the coming three months. ‘‘We need to see a lot of changes across New Zealand. On the other side of the political fence there ain’t too much on the table, we’re sort of in no-man’s land. ‘‘We need a real strong prescriptive policy platform that’s going to help the Reserve Bank contain inflation, and it’s all about boosting supply. ‘‘New Zealand is very divided, and a divided society is economically unhealthy. That makes it really hard to get things done. And yet, somehow we’ve got to bring New Zealand back together. ‘‘That’s going to be the challenge of the new prime minister. And it’ll be the challenge for whatever government we get in 2023.’’