Business NZ expects economy will come under increasing pressure

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BusinessNZ expects the New Zealand economy will come under increasing pressure over the next couple of years, resulting in miniscule growth and a downturn in the business outlook.

The latest BusinessNZ Planning Forecast highlighted an economy overburdened with rising debt, persistently high inflation, weak agricultural commodity prices, excessive restrictions on foreign investment and too much regulation that was adding to the cost of doing business.

BusinessNZ director of advocacy Catherine Beard said businesses would like to see more political consensus and bipartisan agreement on issues that affect long-term investment decisions.

She said business confidence was improving, but there was still a long way to go, with many fed up by short-term political thinking and flip-flops on critical issues, such as immigration and climate change.

“Political parties are always going to have their differences but around a few key things that really matter to have a long term vision on. That is more of what we would like to see,” Beard said.

“We’re coming back from historically low levels of business confidence, with some of the worst we’ve seen in the past 10 years,” she said.

“Investors remain cautious – with factors like decreased demand, the upcoming election and the impact any change in policy will have on business being front of mind.

“Likewise, consumers are feeling the squeeze of prolonged high inflation, increased mortgage repayments, rising costs at the supermarket and at the pump. Spending is going to remain tight as people curb any extra spending on top of the basics.”

Her comments were reflected in the organisation’s planning forecast.

“The results of a recent Deloitte and Chapman Tripp Election Survey conducted by BusinessNZ, show 93 percent of respondents believing changes made by the current government had increased their cost of doing business,” the planning report said.

“The other main concern – of a staggering 85 percent of those responding – was their belief that the current government does not have a plan for raising New Zealand’s economic performance.”

Among the other concerns was that immigration had been too slow to recover, with net migration rising to a record net 96,200 in the year to July.

“This is very much too little too late as many of our competitors have stolen a march on us with more inviting regimes in respect to inward flows of both capital and labour.”

The report also highlighted concerns about restrictive regulations.

“It is unfortunate most political parties still promote restrictions on foreign investment in one form or another when NZ needs a much more open policy to attract the foreign capital required to meet the requirements of current and future generations,” it said.

The report was critical about the quantity and quality of regulation, which needed to be a focus for local and central governments.

“Legislative changes, either proposed, recently enacted or in the pipeline have the potential to reduce business flexibility and competitiveness, add to the costs and risks of doing business, and flow ultimately on to consumers,” it said.

“Moreover, there is concern with the ad hoc approach and ongoing meddling in some areas.”

The areas of concerns included such things as climate change policy, which created uncertainty for many businesses, including iwi-owned forestry assets.

“Many are bothered by the potential for government to ride rough-shod over existing private property rights.

“It is a fundamental pillar of a market economy that property rights should be clear, unambiguous and able to be upheld in a court of law.”

Cover the costs of an ageing population was another concerned raised in the paper.

BusinessNZ’s report also supported reform of the Reserve Bank Act, with the potentially conflicting objectives of maintaining price stability and maximum sustainable employment,” it said, particularly if a National-led party won the upcoming general election.

The (central) bank’s tendency to dabble in other activities, such as climate change and housing, is also likely to be peeled back giving it a steely focus on inflation,” it said.

“Time will tell whether these, and other possible changes will be made to the Reserve Bank’s operational policy.”

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