Unemployment down, Fonterra down, OCR flat

Despite negative business confidence there are some good economic signs, with unemployment down and the OCR being left low by the Reserve Bank with an indication it will stay low through next year and into 2020. This will keep interest rates low. However the news is not so good for Fonterra and their many shareholder farmers.

Employment rates at record high

Today’s record employment rate of 68.3 percent, matched by the lowest unemployment rate of 3.9 percent in over a decade means better lives for thousands of New Zealanders, Minister of Employment Willie Jackson says.

“There are now over 2.66 million New Zealanders in employment which means that 29,000 more people and families are engaged in earning since the last quarterly results were released”.

“The underutilisation result for this quarter has continued the recent downward trend and has fallen further to 11.3 percent. This is an indication that people who want to work, are able to work.

“The reduction in the unemployment rate for Māori to 8.5 percent (down from 9.9 percent) is a further example of our continued focus on improving outcomes for our people and while this is the lowest it has been in over a decade, the work doesn’t stop.

Today’s Household Labour Force Survey release shows a further reduction in the NEET rates for 15-24 year olds from 10.9 to 10.1 percent.  This is a down from the same time last year when our young people not earning or learning were at 11.3 percent.

Unemployment drop another sign of strong economic fundamentals

Today’s drop in the unemployment rate to its lowest level in over a decade is another real example of New Zealand’s strong economic fundamentals, Finance Minister Grant Robertson says.

The unemployment rate fell to 3.9% in the September 2018 quarter, the lowest since June 2008. At the same time, the employment rate rose to a record high of 68.3%.

So that is all good news.

Yesterday from the reserve Bank: Official Cash Rate unchanged at 1.75 percent

The Official Cash Rate (OCR) remains at 1.75 percent. We expect to keep the OCR at this level through 2019 and into 2020.

The pick-up in GDP growth in the June quarter was partly due to temporary factors, and business surveys continue to suggest growth will be soft in the near term. Employment is around its maximum sustainable level. However, core consumer price inflation remains below our 2 percent target mid-point, necessitating continued supportive monetary policy.

GDP growth is expected to pick up over 2019.

Downside risks to the growth outlook remain. Weak business sentiment could weigh on growth for longer. Trade tensions remain in some major economies, raising the risk that trade barriers increase and undermine global growth.

Upside risks to the inflation outlook also exist. Higher fuel prices are boosting near-term headline inflation.

So this is generally looking good, especially for those with mortgages and business loans. Not so good for those with interest earning investments.

While dairy farmers will like the low interest rates not all is well for them.

ODT: Fonterra told it must ‘do better’

Fonterra’s financial performance since its inception has been “unsatisfactory”, a report has found.

The report said the country’s largest dairy co-operative had failed to deliver meaningful returns over and above the cost of capital since inception.

Milk growth over the past 15 years had been an impediment but was now largely past. It had been critical that was addressed to ensure continued supply of milk and capital.

Mr Hurrell told around 300 farmer shareholders at the meeting the company had plans to turn around its financial performance and no longer aimed to produce as much milk as possible.

RNZ: Fonterra’s ‘sorry’ not enough for all shareholders

Fonterra managers met with 400 shareholders in Waikato today to apologise for their nine-figure loss. As Eric Frykberg reports, while many farmers backed the co-operative, others were fuming.

Global dairy prices have been trending down all year – see https://www.globaldairytrade.info/en/product-results/

Mixed confidence news – RNZ:  Consumer confidence drops to lowest level in three years

The ANZ-Roy Morgan consumer confidence index fell three points last month to below its historical average.

The future conditions index was down five points to the lowest level since 2015.

The chief economist at ANZ, Sharon Zollner, said the pessimism about the future has spread from being about the broader economy to individuals’ future financial position.

But consumers were still relatively confident about current conditions, with a net 11 percent feeling better off than they did a year ago.

Auckland Business Chamber – Encouraging signs for business confidence

Auckland’s SME (Small and Medium Enterprise) sector displayed a changing view of business confidence in Auckland Chamber’s latest quarterly survey.

“Confidence amongst Auckland business showed a 10% improvement on last quarter,” said Chamber CEO Michael Barnett.

The survey of more than 700 respondents recorded 48% of respondents expecting conditions to deteriorate over the next six months compared to 54% from the previous survey.

“This in part reflects the move from winter into summer and the start of the holiday season, but it is a positive,” said Barnett.

“Despite this, the survey reveals elements of uncertainty that SME’s are having within a changing business environment.”

So mixed signals there too.

Q+A: Grant Robertson on business confidence

Minister of Finance Grant Robertson was interviewed about business confidence.

“I don’t believe low business confidence is affecting economic growth. NZ will meet growth forecasts”.

Committed to current debt target, not expecting to go over it. Even if Govt did go into more debt, NZ would be in good shape.

Doesn’t agree with Shane Jones’ comments about Air NZ boss Christopher Luxon

Full interview:

 

Panel discussion:  Professor Jennifer Curtin, Shamubeel Eaqub and Fran O’Sullivan with our host Corin Dann

Hickey critical of Ardern’s economy confidence elephant

Bernard Hickey’s analysis of Jacinda Ardern’s long promised big business confidence speech is quite critical.

Newsroom Analysis: Side-stepping the elephant in the room

Jacinda Ardern called it the Government’s “elephant in the room” just before she went on maternity leave. Upon her return, she said would address it directly in a major speech aimed at turning it around.

Tuesday’s speech was supposed to deal with it head-on and convince business leaders that the Government understood the problem, had listened, and was changing its plans to help.

Instead, those business leaders got a pep talk and an explanation of an existing plan, which they already knew. The key problems remain of an infrastructure deficit caused by a population shock, uncertainty over migration settings, the minimum wage surge and the ban on new oil and gas.

Ardern’s announcement of a business advisory group and a limit to the number of fair pay agreements did little to address those concerns.

Ardern failed to distinguish between the wider business confidence figure, which is politically biased and economic irrelevant, and the own activity measures of confidence, which are also down sharply and much more closely aligned with GDP growth. The Government rightly dismissed the slump in headline business confidence as a politically-biased measure of business leaders’ disappointment at the change of Government.

But the slide in own activity confidence through the June quarter could not be as easily dismissed, and Ardern failed in the speech to acknowledge that.

Instead, she chose to frame the own activity fall as a judgment about certainty, rather than confidence.

She didn’t address the business community’s shock over the coalition’s immediate and irrevocable decision to lift the minimum wage by more than a third in three years and its shock over the ban on new oil and gas drilling permits offshore.

Again side-stepping responsibility, Ardern said the economy faced a number of challenges which were global in nature.

Hickey provides quotes from her speech to support his criticism.

He challenges her ‘transformation narrative’.

The changes to taxing capital and wealth are yet to be proposed or agreed to by voters. The modern transport infrastructure she referred is subject to the legislative timetables for the Urban Development Authority, infrastructure bonds and the infrastructure funding whims of the Auckland Council. Much of it remains uncertain and distant.

The addition of the vaguely phrased “contributing to supporting maximum sustainable employment” line in the Reserve Bank’s Policy Targets Agreement has changed nothing.

He says Ardern concluded that New Zealand had a positive future despite the ‘giant flashing sign with fireworks’ of low business confidence.

“We are promoting change because without change our businesses and our economy are at risk. But change does not need to breed uncertainty, not when instead it can breed opportunity,” she said.

“I have confidence that our relationship will thrive, that our agenda will successfully tackle the challenges we face, and that our shared achievements for the country will leave a lasting legacy future generations will thank us for.

“Now let’s get on with it.”

Her concluding comments showed she believed business leaders needed simply to listen more closely to the Government, get more involved and ‘buck their ideas up’ about the positives in the economy.

It was more of a pep talk than a new plan or an acknowledgement that business owners had legitimate concerns.

Ardern is growing a reputation for pep talks and platitudes. She sounded confident in giving her business confidence speech, but I think the people in business will be looking for more substance.

This was a well signalled opportunity for Ardern to win the confidence of business leaders, and business people in general.  She will need to do more, and better, to earn confidence in her and her Government’s ability to work well alongside the business community.

 

Ardern: “Working together to build a new economy”

The big news from Jacinda Ardern’s Westpac speech on business confidence this morning to is Ardern announces Prime Minister’s Business Advisory Council, but there are other things of interest in her speech.

Working together to build a new economy

In fact it wasn’t too long ago that I stood amongst you and spoke about our economic agenda.

I also spoke about the issue of business confidence. I called it the elephant in the room. Well I am here this morning to tell you that I have changed my mind.

Not on our economic agenda – I remain more convinced than ever that it is required, but on the issue of business confidence.

It is not the elephant in the room, it’s a flashing great neon sign with giant lights and fireworks going off behind it. We are all talking about it, and there is nothing wrong with that.

That is why this speech was the first thing I announced the day I returned to work.

Because we have an economic agenda which responds to so many of the issues that have been raised time and time again, and because if there are concerns, or issues, both within our control and outside of our control – then lets tackle them head on, and lets do that together.

The business confidence paradox

When you line up business confidence with key economic performance measures over the last two governments there appears to be an inverse relationship between business confidence and the actual performance of the economy.

For instance, average business confidence scores under the Clark/Cullen Government were much lower than the Key/English Government, despite Clark and Cullen delivering higher average growth, lower unemployment, lower debt, larger surpluses and stronger wage growth than their successors.

We appear to have inherited a similar conundrum, we’ve run a strong surplus, have the best net international investment position ever recorded, stable and low interest rates forecast for some time which ought to spur investment and the lowest unemployment rate in a decade.

That then begs the question, if it’s not the overall economic indicators that is driving these figures, then what is? I have discussed this question with both business leaders and representatives, colleagues and officials. The answers I have had back are almost as diverse as the groups I have asked.

Certainty

As I travel around the country, the issue of certainty is an underlying theme. Whether you are a social service, a health organisation, or a business, knowing what a new government has planned is critical to your eco system. I utterly understand that. In fact, I have considerable empathy for that desire too.

As a politician with quite a diverse government and the scrutiny of a three yearly very public performance appraisal, I will take certainty when I can get it.

From a business perspective, I understand the desire for certainty in order to make decisions big and small, ranging from the risk of taking on an extra hire through to multi-million dollar investment decisions, and you need to understand that the climate you operate in today will be broadly the same tomorrow.

But certainty shouldn’t be confused for stasis and complacency, which are the enemy of progress, and for that matter the enemy of innovation.

The reality is that our economy faces a number of challenges, global in their nature, that by working together we must confront to protect our long term prosperity.

Skills shortages, lack of investment in the productive economy, a shallow national pool of capital, an infrastructure deficit, low productivity, building sustainable business practices in the wake of environmental degradation, and the challenges of what can broadly be called the future of work.

The jarring way in which we came out from under the cloak of protectionism in the early 80s saw over a hundred thousand workers lose their jobs and the genesis of many of the social challenges we are now working to fix decades later. This must not be repeated.

And for that, we need a plan.

It is time to retool our economy to make it work within the limits of our environment, shape it to deliver on the hopes and aspirations of all our people, and for our economic purpose to be bigger than just profit.

From reform of the Reserve Bank where we are including maximum sustainable employment as an objective, to getting active in the housing market, building modern transport infrastructure and setting ambitious emission reduction targets – we are renovating the existing legislative and policy architecture to bring it up to the new code our economy needs.

Government decision making

We are an MMP government at its best and our structure ensures that on every decision a range of views are heard. The outcome reflects the breadth of input and leads to better decisions.

Hardly a model for fast and unexpected change – in fact all change is negotiated, but a model that I believe serves us well.

Business Partnership Agenda

Today we are launching a publication that outlines this agenda and brings together the strands of this Government’s economic strategy.

Our overall objective is to build a productive, sustainable and inclusive economy.

On each score we have some way to go. When it comes to productivity, the OECD has said we are “well below leading OECD countries, restraining living standards and well-being”.

We need to transition from growth dominated by population increase and housing speculation, to build an economy, that as I said, is genuinely productive, sustainable and inclusive.

That’s the why. Now what about the how. For that, I want to share with you the top lines of our economic strategy so everyone is clear about our key priorities that you can engage with us, but also so you can hold us to account against some key measurables.

First we want to grow and share more fairly New Zealand’s prosperity.

That means the gap between the highest and lowest income and wealth deciles reduces, real per capita income increases; the value and diversity of our exports grows and home ownership increases.

Second we want to support thriving and sustainable regions that benefit from an equitable share of sustainable economic growth. We want to see key regions show improvement in employment and income distribution figures and the number of businesses in key regions growing.

Third we want to deliver responsible governance with a broader measure of success. The Finance Minister is already working on the Government’s measures of success to ensure they better reflect New Zealanders’ lives.

Next year we will be the first country in the world to deliver a Wellbeing Budget. This process is underway and will see an overhaul of how the Budget is written and the objectives that it sets.

Finally this Government is committed to transitioning to a clean, green carbon neutral New Zealand. We plan to put New Zealand on a clear path to a net-zero emission future and a healthy environment.

My message to you all is this – now is the time to be involved and help shape this work for a better economy.

Industrial relations and immigration settings

In amongst this new agenda is also the work that we are undertaking on industrial relations and immigration settings – two areas that do come up from time to time.

I understand the tension that addressing these issues can bring. The reality of making payroll, investing back into the business for future growth and keeping the lights on.

The underlying fundamentals of our industrial laws are working well, but we do need to address some of the imbalances that have been generated over recent years.

A lot of waffle on this.

Then Ardern announces Prime Minister’s Business Advisory Council.

Conclusion

I am confident that by working together we can overcome the challenges facing our economy and society.

We will not be an idle Government, and I won’t be an idle Prime Minister.

We are promoting change because without change our businesses and our economy are at risk. But change does not need to breed uncertainty, not when instead it can breed opportunity.

I have confidence that our relationship will thrive, that our agenda will successfully tackle the challenges we face, and that our shared achievements for the country will leave a lasting legacy future generations will thank us for.

Now let’s get on with it.

Apart from announcing the Business Advisory Council there doesn’t seem to be much new here, it is largely a promotion of the Government agenda – she used the work agenda 12 times – and trying to promote confidence in the changes they want to make to “successfully tackle the challenges we face”.

I don’t know what business people will take from her speech. There doesn’t seem to be much in specifics.

Full speech notes at Scoop.

Bridges versus Ardern in Parliament

The return of Prime Minister Jacinda Ardern to Question Time in Parliament yesterday seemed to pass largely unnoticed as most attention was on the Brash speech ban at Massey.

Simon Bridges holding Ardern to account wasn’t very newsworthy anyway, but here it goes.

2. Hon SIMON BRIDGES (Leader of the Opposition) to the Prime Minister: Does she stand by all her Government’s policies and actions?

Rt Hon JACINDA ARDERN (Prime Minister): I’m nothing if not consistent: yes.

Hon Simon Bridges: Some things don’t change.

Mr SPEAKER: Order! I think that’s sort of now 2-1 in the out-of-order comments. We’ll just get back to the questions.

Hon Simon Bridges: When she dismissed business confidence yesterday as “perceptions” and said, “I’m interested in the reality of what our economy is doing and how it is performing.”, had she then seen yesterday’s report from Treasury that stated, “… weaker confidence, in conjunction with other data, highlight the risk that growth over the coming fiscal year may be weaker-than-forecast in the Budget …”?

Rt Hon JACINDA ARDERN: I would not characterise that as dismissal at all. I hear what business is saying in the same way I hear what nurses have said, what teachers have said, what anyone who works in the well-being space has said around the need to rebuild confidence in New Zealand’s social well-being outcomes as much as our economic outcomes. What I will say is that I also have to acknowledge the international environment, which is having an effect here in New Zealand, which is why we need to diversify our economy and make sure that we are not vulnerable, which is exactly the place that last Government left us in.

Mr SPEAKER: Before I call the member, I am going to ask David Bennett to go the rest of this question and the series of supplementaries and answers without interjecting.

Hon Simon Bridges: On the international environment, why is it, then, that New Zealand’s the only country to have gone from near the top of the OECD in business confidence to right near the bottom?

Rt Hon JACINDA ARDERN: We’re actually a fraction away from the long-term average, and I have to say, when you look at the OECD comparisons around our growth forecast, actually we stand up pretty well.

Hon Simon Bridges: Does she accept the weaker growth talked of now by Treasury is the reality, as is a decline in GDP per capita in just the last quarter?

Rt Hon JACINDA ARDERN: If we’re going to quote what Treasury have said, let’s share the entire picture. They’ve said that the housing market was cooling faster than expected. And actually, the housing market was overheated under that last Government, and we need to stand up and fully confront that and the harm that it was doing New Zealand’s people. Secondly, we need to acknowledge the international environment, which Treasury has, as well. And, at the same time, they’ve said that labour income—wages—are growing strongly, that employment growth is solid, and that we have issued things like more building consents. If you’re going to talk about the economy, let’s talk about all of the indicators, not just some of them.

Hon Simon Bridges: On her discussion, once again, of the international environment and Treasury’s view on it, does she not accept that they’ve said, “The international environment remains broadly stable.”—nothing’s changed?

Rt Hon JACINDA ARDERN: If the member is reading the voice of business—like, for instance, I would imagine he would look at the KPMG survey, which has highlighted that that is, in fact, having an impact. So if the member thinks the KPMG survey is babble, does he think that what John Key has said was babble as well? Because he’s raised it, too.

David Seymour: Does the Prime Minister stand by education Minister Chris Hipkins’ statement that the Tertiary Education Commission will have new powers under the Act to monitor the tertiary sector and hold providers to account for their use of public funding?

Rt Hon JACINDA ARDERN: If he’s asserting that the Minister of Education is saying that we should strive for high-quality tertiary education, then that is no bad thing.

David Seymour: Would it be a bad thing if a university failed to use its public funding in alignment with section 161 of the Education Act 1989 to uphold academic freedom, such as by refusing to allow speakers to speak on university campuses because of their political views?

Rt Hon JACINDA ARDERN: Ultimately, institutions have their own freedom on a day-to-day basis, but if he’s asking me for a personal opinion, the example I think that he is pointing to I would characterise as an overreaction on the part of the institution.

Hon Chris Hipkins: Does the Prime Minister think it is tenable for the Government to threaten to cut funding for universities when they make decisions that the Government disagrees with?

Rt Hon JACINDA ARDERN: Absolutely not. We continue to hold a personal view, and, as I say, there are a number of examples where politicians and ex-politicians have caused a stir on university campuses. I think the reaction we’ve seen has been an overreaction. Will we retaliate? Of course not.

Hon Dr David Clark: Ha, ha!

Hon Simon Bridges: Does she accept—

Mr SPEAKER: Order! Who made that noise?

Hon Dr David Clark: Mr Speaker, if you’re referring to the laugh—that was me.

Mr SPEAKER: Right, OK. Thank you.

Hon Simon Bridges: Does she accept the weaker growth foreshadowed by Treasury and the decline in GDP per capita in just the last quarter to be a reality?

Rt Hon JACINDA ARDERN: Of course Treasury has put out its forecasts, and I acknowledge that, yes, the housing market has cooled. International tensions have had an effect. But on the flip side, if I’m going to accept that, I’m also going to accept the wage growth, which is benefiting New Zealanders; high employment, which is also benefiting New Zealanders; and the fact that we have seen, for instance, a decrease in the number of young people in unemployment. I accept that we have challenges in front of us. That’s why we’re investing in boosting productivity, it’s why we’re investing in diversifying our trade, and it’s why we’re investing in R & D. I’m not shying away from those challenges.

Rt Hon Winston Peters: Regarding the international influence upon New Zealand’s economy, is the Prime Minister encouraged by all of a sudden the number of highly-placed European Union officials and representations with respect to a free-trade deal with the European Union?

Rt Hon JACINDA ARDERN: Absolutely. We have a visit today which only helps us further our relationships and New Zealand’s interests. I also applaud the work that the Minister for Trade and Export Growth is doing on our Trade for All, alongside negotiating the Pacific Agreement on Closer Economic Relations, the Regional Comprehensive Economic Partnership, and the EU free-trade agreement. We are moving at pace, because growing exports grows jobs.

Hon Simon Bridges: Does she accept a 60 percent decline in job growth since her Government came into office is a reality for the thousands of New Zealanders who didn’t get a job as a result?

Rt Hon JACINDA ARDERN: We have 94,000 more people employed at the end of June 2018 than there were in June 2017. Our unemployment rate has decreased. So the member is picking a figure and interpreting it in the way that he chooses, but I am proud of the fact that we are putting people into jobs.

Hon Simon Bridges: Does she accept a 4,000-person increase in unemployment in just three months to be a reality for those families?

Rt Hon JACINDA ARDERN: It’s down from 4.8 percent, I would first point out. The second point that I would make is that we have seen a rise in participation—more people moving into the job market. I would interpret that to be that they see hope that there are jobs and work available for them. The ANZ Job Ads indicates that that is indeed the case.

Hon Simon Bridges: Does she accept more industrial strikes in the last nine months than in the last nine years to be a reality for those businesses and workers?

Rt Hon JACINDA ARDERN: I just want to highlight today we’ve also concluded the nurses’ pay agreement, which is something that I would like to celebrate—and you’re welcome. We concluded that after inheriting it halfway through. We concluded it because we doubled the offer, we addressed the safety concerns, and, just as we have with teachers, we’ve already scrapped national standards. We’ve brought in more funding for teacher aides and for those with learning needs, and we have increased their operational funding. There is more to do, but we’ve done more in nine months than that Government did in nine years.

Hon Simon Bridges: Does she accept the collapse of multiple construction companies to be a reality for those businesses, their workers, and their customers?

Rt Hon JACINDA ARDERN: Look, absolutely we’ve acknowledged that’s happened. That’s why we sat down with the vertical construction industry yesterday. I acknowledge that it’s a very different case for residential and those working in infrastructure, because they are seeing a huge boost in investment out of this Government in those sectors. When it comes to vertical construction, 18 percent of the work for that industry comes from Government. Even though we represent only 18 percent, we are fronting up and saying that if we can play a leadership role to ensure that we do not have a further collapse in this sector, we will play it. That’s what this Government has done. We hadn’t gone far enough with the reforms of the last Government, and we are, again, happy to pick up the pieces.

Hon Simon Bridges: Does she think there will be real impacts for New Zealanders from us having the lowest business confidence since the global financial crisis, while in Australia it’s at a 30-year high?

Rt Hon JACINDA ARDERN: Australia’s at a 30-year high, and yet we’re outperforming them on things like the employment rate.

Hon Simon Bridges: No, we’re not—not on anything.

Rt Hon JACINDA ARDERN: On things like the employment rate, we absolutely are. We have the third-highest rate of employment in the OECD. We have steady economic growth and, according to the OECD, at 3 percent, the same as Australia going into 2019. Where we don’t sit on the same page as Australia is our low wages, and we’re doing something about that, too.

Hon Simon Bridges: Is the Prime Minister seriously denying that in Australia right now they are growing faster than us for the first time in several years, that their business confidence is at a 30-year high while ours is at a 10-year low, and that there are more New Zealanders leaving for Australia than there have been for some quite considerable time?

Rt Hon JACINDA ARDERN: What I am arguing is that if we’re going to look at the health of our economy, then we should look at a range of indicators. Employee confidence is up. Job ads are up. Consents are up. Unemployment—we have incredibly low unemployment in this country. We have 94,000 more people in work and—and—we have, on average, over $70 going into the back pockets of working New Zealanders and those in need, which, of course, is stimulating our economy. I’m proud of the changes we’re making. We need to modernise our economy and we are working hard on doing just that, as well.

Hon Simon Bridges: Does she accept any responsibility in terms of her Government’s policies such as industrial relations reform, shutting down the oil and gas sectors in terms of new exploration, higher taxes, and banning foreign investment, and the hurt they’re causing business confidence, and therefore the direct impact they’re having for families all around New Zealand?

Rt Hon JACINDA ARDERN: Look, as I’ve said, I absolutely acknowledge that businesses have shared with us via the confidence surveys that there are issues they wish us to work on. I’ve heard that. When you ask business what it is, they say to us it is the skills gap, so we’ve invested in training and educating our workforce, and business can access that just as much as anyone else. They’ve told us that it’s our productivity challenge. They’ve told us that it’s that we’re not investing in R & D. They’ve told us that we’ve underinvested in the regions, which is why we have the Provincial Growth Fund. They’ve told us it’s because we need to modernise our economy and because of the challenges of climate change, which is why we have the Green Investment Fund. I acknowledge that as with any Labour-led Government in the past, this coalition Government needs to challenge the perception that exists. I’m not shying away from that challenge, and that’s why I’m fronting it head-on.

Hon Simon Bridges: Isn’t the Prime Minister in complete denial about our economy’s reality and any number that any of us could pick in her Government policies’ impact, and doesn’t she need to start listening to businesses, small and large, around New Zealand and make some serious changes?

Rt Hon JACINDA ARDERN: As I’ve said, I’ve acknowledged every single economic indicator that tells us we have a lot to be proud of, and I also acknowledge 94,000 more New Zealanders in work—something to be proud of. If that member wants to go around dissing our economy and the potential that exists in this country, that, I have to say, is a damn shame.

Ardern needs to urgently address declining business confidence

Ex acting Prime Minister Winston Peters tried to make a joke out of concerns raised in Parliament about worsening trends in business confidence on Tuesday – see Bridges versus Peters – a surprise conclusion.

But this is something Jacinda Ardern will have to put some priority on addressing when she returns to Parliament next Monday. This was pre-empted in an interview given yesterday.

Stuff:  Jacinda Ardern faces mounting problem in business confidence on her return

When Ardern returns to Parliament on Monday she is set to walk into a building storm over plummeting business confidence that threatens to shake the economy in real terms.

In an interview with Stuff, ahead of her returnArdern gave assurances that her Government’s agenda did not come at the expense of economic growth.

“I absolutely believe that our agenda will grow the economy, will make sure businesses are in a position to grow and prosper, because I need that economic growth to be able to lift the wellbeing of all New Zealanders.

“These are not two separate agendas – they absolutely work hand-in-hand. I think New Zealanders absolutely see my emphasis on the wellbeing of New Zealanders. Now what I’m hoping they’ll also see is the agenda that’s always existed for us around growing the economy”.

That is just vague waffle. She will need to be far more decisive than that. Strong sounding comments ‘absolutely believe(which means little more than ‘I think’ or “I want to convey’) are already overused by Ardern and pretty much meaningless.

Apart from business confidence trending downwards to levels not seen since the Global Financial crisis economic signs are mixed.

Her comments come at the same time figures showed a slight rise in unemployment – the first since December 2016 – though unemployment remained low. Job creation had slowed, two major construction company had collapsed in recent weeks and more industrial action was in the offing.

But while economic growth had slowed, the overall picture remained positive. Migration was strong, the Government accounts were solid and spending was up. Despite farmers registering low levels of confidence, commodity prices were strong and the dollar was down, benefiting exporters.

Despite that, New Zealand had dropped from near the top of one OECD table on business confidence, to second from bottom, and that threatened to slow investment and growth.

Confidence may bounce back, but if it stays relatively low that will, in time, flow through to economic activity with lower employment and less investment in business development likely.

Ardern:

“What I intend to do is, within a month at least, bring together some of the work we’ve been doing in earnest around working together with the business community, to make sure that we are tackling some of the challenges that we’re facing collectively”.

“But what I’m really proud of is that we know and recognise some of the challenges that businesses are saying to us they have. Finding and attracting skilled labour, making sure that we grow our exports, diversifying our economy beyond housing and dairy – those are challenges we’re tackling head on.”

“We have incredibly low levels of unemployment relative to the OECD in particular. We have good solid growth forecast for the future. We have a surplus and, relative to other countries, our debt’s in pretty good shape too”.

“When you tackle challenges that creates a level of uncertainty. Because you’re creating change. We are modernising our economy, but we need to bring everyone with us.

“Within the month, I’m committed to bringing those strands together and doing a significant speech on the economy and we’re very much focused on addressing some of those concerns I’ve heard. But I feel absolutely confident we’re tackling this head on and we can bring business with us.”

Flowery and exaggerated language aside, that doesn’t say very much that is likely to turn confidence around. I think that people who make decisions in business would like to hear something far more substantive.

And beyond New Zealand there is a lot of international uncertainty as Donald Trump ramps up his trade war with China. That could be mostly bluster, but it could also get very messy, and New Zealand would not be immune from the effects.

Both the domestic and international economies pose major challenges for Ardern. A baby photo won’t cut it.

 

Winston’s winter of disarray

The country has survived six weeks of Winston Peters as acting Prime Minister, but it has left a number of issues in limbo, And it has not been without some controversies.

Peters isn’t wholly responsible for ongoing disarray in Government that he largely inherited from Jacinda Ardern, but he hasn’t helped it either.

Peters’ disdain for parliamentary processes was on show yesterday – see Bridges versus Peters – a surprise conclusion. One notable feature of the last few weeks has been deteriorating business confidence, and Peters tried to laugh it off.

Hamish Rutherford (Stuff):  Peters may have prolonged the uncertainty surrounding the Government

History is likely to remember the winter of 2018 fondly, whatever discontent is being shown by business now.

For Peters, the spell as acting prime minister appears to fulfil something of a career-long dream, and the NZ First leader appears to be winning plaudits for his performance. At the least, it seems it could have gone worse.

The end of his time in the chair appears designed to be dramatic. As he departs for an international trip as foreign minister – a relatively rare thing compared to the travel schedules of his predecessors – Ardern will resume duties at midnight tonight.

In reality though, there is less to his stepping down than meets the eye. With a new Government already struggling to explain to the business community what it is about, the past six weeks have simply prolonged the uncertainty.

Ardern is certainly returning to some significant challenges.

Peters hasn’t messed things up, but he has left a number of messy and unresolved issues that really need leadership – business confidence for one, also the cannabis issue, Kiwibuild and others.

But nor has this winter helped build familiarity in the new administration at a time when the economy is facing a tricky transition, with the boom in the construction sector behind us and the growth in tourism slowing.

In many ways, for business, uncertainty is worse than bad news, as there is almost nothing which can be done to adapt to it or plan for it.

Jacinda Ardern has made restoring business confidence one of the Government’s priorities.

Whether or not she can convince employers to share her vision, her return will at least give better direction on what it is her Government stands for.

We are yet to see what Ardern’s return will mean. So far her Government has suffered from a distinct lack of direction and leadership from when she took over last November.

She has had some time out from politics. perhaps that has given her an opportunity to look at the bigger Government picture and see how she needs to step up.

Bridges versus Peters – a surprise conclusion

Simon Bridges kicked off Question Time in Parliament today asking Winston Peters about the alarming turnaround in business confidence.

At a glance Bridges may have seemed to be wimping along getting savaged by Peters, but if you watch through this I think it becomes apparent that Bridges quietly making some serious points, while Peters noisily tried to make a joke of it all.

On that performance thank goodness Peters is soon to retire from his stint as acting Prime Minister, because today he made a disgrace of the responsibility.

There was a very serious twist at the end when Gerry Brownlee made a pointed non-point of order:

Hon Gerry Brownlee: I raise a point of order, Mr Speaker. If it’s parliamentary to refer to a member as being a joke, would it not equally be parliamentary to refer to a member as being drunk?

Question No. 1—Prime Minister

1. Hon SIMON BRIDGES (Leader of the Opposition) to the Prime Minister: Does he stand by all his Government’s policies and actions?

Rt Hon WINSTON PETERS (Acting Prime Minister): The answer to that question is “Most definitely”.

Hon Simon Bridges: Is he aware that New Zealand has fallen from the second-highest level of business confidence in all of the OECD in 2016 to having the second-lowest under his Government?

Rt Hon WINSTON PETERS: What I am aware of, and so are my colleagues, is that there are half a million enterprises in this country, and 490,000 were not asked their opinion; 1,000 were. That’s the quality of that survey.

Hon Simon Bridges: Has he seen the latest ANZ business confidence numbers, released today, which show that business confidence has declined by a further five points?

Rt Hon WINSTON PETERS: It is not surprising that the ANZ, despite having record profits at the moment, has a chairman who’s been talking down the economy nevertheless.

Hon Simon Bridges: Does he accept that at the moment we have the worst business confidence in our country since the global financial crisis a decade ago, and if so, what will he do to revise his Government’s disastrous policies?

Mr SPEAKER: Order! [Interruption] Order! Before the member answers, I am going—

Hon Simon Bridges: I’m allowed to have an “if so”.

Mr SPEAKER: Sorry, I will stand up to deal with it if the Leader of the Opposition is going to interject when I’m ruling. I’m going to let the question go, but warn the Leader of the Opposition. I think he knows exactly what for.

Rt Hon WINSTON PETERS: As they say in one of the home countries, those comments are balderdash. And more importantly, the IMF has refuted them in their very confident prediction as to where this Government is taking the growth of our economy.

Hon Simon Bridges: Isn’t the only credible explanation for the worst business confidence numbers since the global financial crisis directly the Government’s policies and actions?

Rt Hon WINSTON PETERS: As much as that member would like to predicate his future on turning down and arguing down the economy, that is most definitely not going to happen—either the economy going down or him having a future.

Hon Simon Bridges: Why, then, is it the case that business confidence in New Zealand is at a 10-year low and business confidence in Australia is at a 30-year high?

Rt Hon WINSTON PETERS: The record of these confidence surveys has this to reflect upon: when the economy was running at 3.2 percent over a period of nine years, the confidence indicators were all down from those elite business people, and when the economy was running under National, at an average of 1.9 percent over nine years, the confidence rate was up. In short, you’ve got 1,000 of half a million enterprises being surveyed, and that is not the kind of elitism we promote in this country.

Hon Simon Bridges: Is the best the Prime Minister can do to explain away the variety of business confidence surveys and give no real answers to this House or New Zealanders about what is happening at the moment in New Zealand?

Rt Hon WINSTON PETERS: I have to be frank to that member and say, no, I can do much better, but I don’t have to get out of first gear facing him.

Hon Simon Bridges: Is he aware that GDP growth per capita has fallen behind Australia for the first time in several years, and what are the Government’s policies and actions in relation to turning that around?

Rt Hon WINSTON PETERS: The Government has a tranche of explosive policies that we intend to put into place, or are already having in place, and we can see a rapid turn-around in our country’s economy because we’re based, in terms of this Government’s plan, on production and exports and real wealth, not mass immigration and consumption.

Hon Simon Bridges: Is he aware that net migration to Australia’s gone from net 32,000 leaving for Australia in 2008 to a net inflow to New Zealand in 2017, and if so, will he consider a failure if net migration to Australia does not continue in this positive direction under his Government’s watch?

Rt Hon WINSTON PETERS: Again, those stats are false. The net—[Interruption] Well, they can all laugh, and maybe fly a white flag later, but the reality is the net trend began in mid-2015 and that party over there is responsible for it. We’re going to turn it around.

Hon Simon Bridges: What is his Government doing to keep ambitious young New Zealanders in New Zealand given that yesterday in Australia a new job in the mining sector was advertised every six minutes, while here in New Zealand his Government has banned oil and gas exploration as well as mining on conservation land?

Rt Hon WINSTON PETERS: This Government has not banned oil and gas exploration, and whatever that industry called “moining” is—I’m having difficulty trying to understand it—we’ve not banned that either.

Hon Simon Bridges: Is the reality that when New Zealand has the worst business confidence—which has a flow-on effect to investment and jobs—in a decade since the global financial crisis, all he can do is come down to the House and make jokes about it?

Rt Hon WINSTON PETERS: Look, I can’t win the jokes stakes; I’m looking at one, in terms of his ambition. But I want to tell that member that they can be as mealy-mouthed and as doomsday as they like, but they are not going to succeed in getting up the polls or getting back at the next election. If they want to help, we’d be grateful for whatever help they might give, but given their last nine years of abysmal performance, I don’t think so.

Hon Gerry Brownlee: I raise a point of order, Mr Speaker. If it’s parliamentary to refer to a member as being a joke, would it not equally be parliamentary to refer to a member as being drunk?

Mr SPEAKER: My view is that one is a matter of fact and the other is a matter of opinion. If the member is seriously suggesting the latter in the House and he is inaccurate, he is making a gross breach of privilege.

Hon Gerry Brownlee: Speaking to the point of order—

Mr SPEAKER: No, there is no point of order. The member will resume his seat.

Hon Gerry Brownlee: Well, I’m entitled to an explanation, surely.

Mr SPEAKER: The member will resume his seat.

Business confidence heading downwards

Decreasing business confidence should be making Grant Robertson and the Government a bit uneasy.

Stuff: Latest plunge in confidence sends ‘strong warning signals’ and talk of interest rate cut

A sharp fall in business confidence in June has ignited debate that the Reserve Bank may look to cut the official cash rate to a fresh record low.

On Thursday the central bank will review the cash rate and is widely expected to leave the OCR unchanged at 1.75 per cent, where it has been since November 2016.

That should at least keep mortgage rates down.

Asked about their general outlook for the entire economy, a net 39 per cent said they expected conditions to deteriorate in the coming year, a fall of 12 points on May.

Survey participants were more upbeat about the likely activity in their own business, with a net 9 per cent optimistic, but this was a 5 point fall from May and remains well below the long term average.

Significant drops…

While the monthly figures fluctuate, business confidence has been falling since June 2017, ANZ senior economist Liz Kendall said.

…and part of a longer downward trend.

Toplis said the ANZ survey, coupled with other indicators, represented “very strong warning signals”, including concerns about regulatory changes and a sharp drop in hiring intentions..

“It doesn’t matter whether uncertainty about a new government is justified or not, what we do know is that uncertainty causes deferred investment and that means lower actual and potential economic growth,” Toplis said.

“If employment growth slumps, as intimated by this survey, then economic activity will be adversely affected too.”

So the Government will have to play things carefully – with pressure of public service secots going on strike for substantially more pay.

The survey said that finding skilled staff was the most common problem seen by businesses, followed by regulation. Raised as a problem by 17 per cent of businesses, it was the highest reading for this problem since this data started being collected in March 2012, ANZ said.

Regulation is often claimed to be a major factor in the housing shortages, but it is also an ongoing issue with employers.

Meanwhile: Step forward for Bill giving 10 days’ leave to domestic violence victims

A Bill that would give victims of domestic violence 10 days of paid leave has taken a step forward.

It will now only need to pass its third reading, likely at some point in July.

It’s passed with support from the Government parties, and objection from National and ACT. If it passes, the law will come into effect from April 1, 2018.

The Opposition say the Bill is bureaucratically-heavy and expensive for employers. Mark Mitchell proposed a change to the Bill that would replace domestic violence leave with a clause making it explicit domestic violence is a legitimate reason to take annual or sick leave instead.

So more regulation and administration.

And it also means that victims of domestic abuse will need to justify leave on that basis to their employer.