Prime Minister Jacinda Ardern is wasting little time defending her Government’s approach to sluggish business confidence, imploring businesses to look at the “real economic indicators.”
Her comments come after Treasury warned of “mixed messages” in the economy that could impact the Government’s books.
“Although we think growth held up in the June quarter, weaker confidence, in conjunction with other data, highlights the risk that growth over the coming fiscal year may be weaker-than-forecast in the Budget,” the Treasury said in a release on Monday.
The Reserve Bank is expected to take a similar stance on Thursday and revise down its economic growth projections.
Speaking at her first Post-Cabinet press conference after six-weeks’ maternity leave, Ardern had a message for businesses.
“The message I want to send to the business community today is that if we want to boost the environment they operate in, it means we have to keep moving, it means we have to make changes.”
She says modernising the economy comes with change, and with change comes uncertainty.
Ardern spoke at length about the “real economic indicators” which she says are much more important than businesses' perceptions of the economy.
“We also have strong forecast growth, some of the lowest unemployment in the OECD, we’re running a surplus and New Zealanders, as of July 1, will have more money in their back pocket as a result of the Families Package.
“I’m interested in the reality of what our economy is doing and how it is performing.”
Asked if the Government had made any mistakes that could have led to lower business confidence she deflected, saying instead that this is a trend often seen when Labour Governments come into power.
But she would like to see firms' optimism come back up.
“Real indicators are what matter to me, but I do take it as a matter of pride I want perception to follow suit.”
PM is in denial, Opposition says
Opposition Leader Simon Bridges tells Interest.co.nz the Prime Minister “is in denial over business confidence and its wider impact on the economy.”
He says Ardern blaming the drop in confidence on businesses historic aversion to a Labour Government is now getting off-base.
“She could have said that for the first two or three months – we’re now 10 months in. There is something more real here and it is based on policy.”
He is calling for the Government to do an “about-face” on its industrial action policies; he says this “could turn the tide” on business confidence.
Meanwhile, Ardern says the Government has no plans to break its budget responsibility rules in response to the prospect of slowing economic growth.
“The rules stay,” she says.
“The business community would say their confidence in us is our ability to deliver a strong economic agenda and that means running a surplus and keeping debt in check.
“That’s equally important.”
54 Comments
Not particularly excited by the fanfare around the PM and her holier-than-thou attitude, but have to hand it to her for pushing the economy into a restructure.
It won’t be an easy task breaking free from migration and speculation fueled growth impetus and move to a more sustainable mainstay, but the government seems to be taking this challenge head on.
Advisor - I won't debate the "migration and speculation" argument about how growth was supposedly maintained, but I'm failing to see any sign of anything from this Govt, other than platitudes, as to how they're going to create an environment to stimulate growth which is their number one responsibility in Govt. I'd much prefer a policy of "migration and speculation" that actually does something, rather than superficial wuffle, and policies that so far seemed designed to knee cap business and do exactly the opposite
I'd much prefer a policy of "migration and speculation"
Says it all really, I would take wuffle and nothing over the mess we have ended up in, where generations of kiwis are going to feel the pain from 9 years of abysmal failure. Unaffordable housing, larger classrooms, longer waiting times in hospitals, poor infrastructure changes, change of kiwi values with mass immigration, homelessness up the wazoo, high indebtedness.
In fact, we didn't end up in a mess, we ended up having an economy that is growing at 3+% and surpluses coming out of these losers' ears,
even the PM admitted that in the video above ....
As to all other things you mentioned, we are yet to see or learn about any positive step taken by this Lot to rectify any of that ( let alone the myths) ... For one, KB will now be in tatters after deep construction failures which left the ministers clueless, and huge upcoming price corrections resulting from regulating the above ...
the PM brags about surpluses she inherited and claims to be working on sustaining them albeit in her own way ( by pushing for change which could mean anything but),
however, no one will dare touching the golden geese ( immigration and houses) as they have no viable alternative for that with Business parked on the other side of the road !
Love to see a Plan, Road Map, or a Program instead of BS and meaningless promises, for a change!!
Take the blinkers off. That 3% growth was principally derived from low value immigration and a credit bubble. What economy wouldn’t be flattered by an increase in household debt from about 100% to 170% household income? That’s not wealth, that’s just a big IOU. That increase in household has been the principal driver of that growth. It has also produced a real estate bubble, as that’s where most of that new money has been tipped. We are now the world leaders for housing unaffordability. We are also uniquely exposed to any economic shock coming our way. I don’t understand how people like you who fancy themselves as “sensible” and “serious” think this is anything other than a mess. If you ran a business which based its “growth” on this degree of debt and leverage it would likely blow up within a decade. It’s a mess. No sensible person looking back over the last 10 years would view this as a sensible place to be
@ Boatman ..
I remember ringing up some 'news talk' station, probably just before Helen Clark's government lost to National. I said something like, "we need money to invest in the economy, to establish new, modern, tech and science based businesses. Let's rip out the gold, silver, oil, gas, etc. Let's cut down the pine trees and replant as we go. DOC can't even manage the land they've got! It's clear we NEED the Seed Money!"
Callers to 'talk back news' that night liked the idea, and so it was. National ended up winning and got a free pass for their oil, gas and gold exploration licensing. But did they use that privilege (a free pass) and money generated to invest in the knowledge economy? - not even close!
Did National take the opportunity to train young people up in the trades after the Christchurch Earthquakes? - Not even close!
Something to think about.
BLAH BLAH BLAH , this is sticking out like dogs balls as a ruse .
These idiots had their chance and the fluffed it when the banned oil and gas exploration .
Now they have hatched a plan on the fly, and its lip service and we can see right through the ruse
The golden goose has been shot , cooked and eaten by these fools , and its irreplaceable .
For a party that tried to challenge the idea of strong fundamentals by highlighting the cherry-picked statistics (e.g. not including GDP per capita growth), they sure do like defending them anyways. Likewise the same could be said towards their attitude towards surpluses.
As per usual, the status quo more or less wins again. Nothing in that was much more convincing than what the previous government had often said, the only difference is that there is a markedly lower baseline business confidence.
You have to be a freaking genius to make a policy change that positively improves an economy. Almost always any radical change will come with more downside than up, as there are 20-30 similar govts worldwide that have been experimenting for decades on trying to make things better, and the successful experiments get copied. No one in parliament (on either side of the house) has the intellect or foresight or guts to be able to institute positive radical change. So sticking to the knitting and trying not to actively make things worse (status quo) is generally the best we can hope for.
Unfortunately the coalition is suffering from overconfidence in their abilities combined with belief in ideas that have failed again and again and again (increased union powers, bigger govt, welfare expansion, tax and spend, min wage hikes...). Our economy is taking a hit as a result, but hopefully the fall won't be too far or hard.
So Coalition: please don't just do something (as has been typical of your first 9 months), sit there and think about it A LOT first.
They aren't about to either Sit nor Think, sorry. They are a twitchy, fearless, driven lot. They fully realise the fragility of the coalitions they are shackled into, fully realise they may only get a term or two before the rest of the wheels fall off, and so are determined to Leave Their Mark. So no Sitting...
And as to Thinking, their lack of business and wider commercial experience, evident from the start, fairly much sums up their intellectual horsepower. But as they are intent on feeding copious billions down the maw of a voracious Public Service, they will not face much in the way of dissent or challenge from within the ranks. It'll be Yes Minister and make hay while the OPM holds out, all the way down the line.
The rest of us are just collateral damage in the Grand Schemes.....
Global headwinds plus Govt policy changes. Anyone using min wage staff and locked into fixed customer contracts is now stuffed. Smart staff still buggering off to Aussie at the drop of a hat for cheaper housing, especially with oveseas cash still hiding assets. Lets do this...
Hurry up and reset asset prices. Banks and specuvestor will yell but everyone else will let out a sigh of relief.
She doesn't get ..does she? ... same useless lyrics with same tunes ... she is really out of her depth !! still delivering that morphine dose and insulting our intelligence. ... Alas, this bunch is a hopeless case, fasten your belts NZ, we are for a bumpy ride!
There were good reasons in the past for business sentiments to decline whenever a new Labour Gov took office , Nothing has changed to make us believe otherwise ... same Brand, same eccentric ideology, same language and attitude, same dreamers and activists running the country, surely leading to the same stupid results at the end.
She still likes to imitate aunt Helen, push back, stubborn, and comfort business with small ambiguous deliverables and pies in the sky ... " With change come uncertainty" ..." We have to keep moving, we have to make changes " Pitty, ....hardly the soothing answer business was waiting for ...watch for next month's survey ...!
Its funny that she now acknowledges that surplus and growth came from selling houses to " speculators" and immigration , now she is taking credit for sustaining it by selling us intangible nonsense like productivity and environment ( while keeping the status quo of course as she has No alternatives in sight) ...as if dishing out tons of money will sustain growth and make business happy !...
Well, we shall see how that plays out.
Labour is banking on the bribes they will be spreading around ( under all sorts of pretenses) to buy votes in 2020 - that is the only thing they are counting on, so is NZF .... however, there will be a price to be paid for arrogance and failure!
National can actually go on holiday for 18 months and let these noobs inflict the damage upon themselves without any interruption ... most NZers will beg them to come back and clean the mess.
Stocktake at the End of 2019 will show the undeniable state of incompetence and the damage these noobs have caused ... and what they have led the country into.... by 2020, heads will be ripe enough to roll.
Not sure who they survey when assessing business confidence - everyone I know operating for the last 20 years across a wide range of industries say they are flat out in 2018 and never been busier - most of them Nat supporters who have got over the fact Labour are in power and several say they have orders booked through to next year when in previous years they only have orders to last the next quarter. I think the real data over the next 12 months will reflect a far more positive picture than the business confidence surveys illustrate.
They could always define once and for all which Lucky Business categories are gonna get the ol' Con Devitt/BollerMakers Industrial Relations - er - Makeover.
Then those Chosen Ones can go sulk in a corner, and those Blessedly Exempted can go shake their pom-poms in public......
Certainty, y'see...
And while they are at it, how's about announcing that there will no No Mo' Oil/Gas whole-industry-black-holing. Mining is headed that way for all Conservation land if the sage Ms Sage has her wicked way with 'em. Check out Tony Kokshoorn on the effect on Westland - I think 'Rancid' sums up his attitude to That. Plus, the current (sorry) push to EV's could use the lithium supplies sitting on this land - a leetle Cognitive Dissonance there. Mind you, a good chunk of the world's lithium comes outta WA: the Greenbushes tenement and Mt Cattlin, coupla hundred clicks west of Esperance). So this is the sort of action possible here, to keep them electrons pulsing through the million EV's we are gonna need to Change the Weather in 2100.
So a commitment to an Uncertainty Freeze until it can be skated past the public in 2020, would work, if not Wonders, then at least to stave off some of the darker thoughts of the business community. Could even be a few Votes in it, without the need to purchase 'em from the Public Purse.....
When are they gonna do something about immigration? I am sick of the low quality immigrants flooding our country and overloading our infrastructure. Last straw for me today was walking past two Indian Uber drivers going for a pee into someone's hedge in Meadowbank this afternoon. Disgusting.
USA gets Satya Narayana Nadella (CEO Microsoft), the UK has 12 Indian businessmen each worth over $2 billion and NZ has Uber drivers. Is there no way NZ can get the best from whereever rather than the pleasant young immigrant who served my coffee today. Some malign policy to attack Kiwi workers at the bottom of the wage ladder but protect the wealthy unadventureous Kiwi businessmen who finance our political parties. Maybe it is only the desperate who can endure our INZ bureaucracy; talent goes elsewhere.
Work and PR visas in NZ, unlike in the US, are not aligned with skill shortages (mainly STEM). You get a 21 month OPT work visa plus a shot at the H1B and green card in the US with an advanced STEM degree followed by a well-paying job.
Migrants in NZ require only a median-salaried job to qualify for residence ($49k isn’t remotely enough to survive in Auckland). Any field, any qualification.
We go for quantity over quality to boost aggregate demand and return on capital in our economy, leading to unsustainable growth but “higher” business confidence.
1 method of raising business confidence is to drop corporate taxes ( you would also need to drop personal income tax or lots of money will simply shift from personal income to corporate income ). Alternatively abolishing unions or the minimum wage will likely work as well.
The Plan, such as it is, is Government Cheese.
Give a man a free house and he'll bust out the windows
Put his family on food stamps, now he's a big spender
no food on the table and the bills ain't paid
'Cause he spent it on cigarettes and P.G.A.
They'll turn us all into beggars 'cause they're easier to please
They're feeding our people that Government Cheese......
(The Rainmakers).
Ardern shuts down oil and gas because CO2. The only country to reduce CO2 emissions did so with natural gas. She then wonders why business, on the bleeding edge, has lost confidence.
“Overall U.S. carbon emissions are at their lowest levels since 1992 and have declined 13 percent since 2005. The EIA has credited two-thirds of the energy-related carbon reductions achieved since 2005 to natural gas, which has prevented over two billion metric tons of carbon dioxide from being emitted during that time.
Perhaps even more remarkable than the fact that per capita carbon emissions are down nearly 21 percent since 2007 is the fact per capita gross domestic product (GDP) has increased more than 4.5 percent during that time, while real GDP has increased 38 percent over the past 10 years.”
Does this study take into account the manufacturing done for the US in China and other Asian countries?
Over the period in discussion, American companies offshored most of their energy-intensive manufacturing and polluting industrial activities to Asia. So a portion of the rising levels of emissions in China can be attributed to the US. Have these "outsourced/exported" emissions been taken into account by this study? I guess not.
do you have proof for any of that? From 2005 to 2017 figures I can find suggest net trade with China went from about 220billion imports to about 400billion imports. That's extra 180billion is less than 1% of US GDP. Pretty unlikely that it represents activities of sufficient magnitude to account for the reduction in fossil fuel use.
Now instead of measuring in $.. measure in tons. Low monetary value (but high energy/pollution) crap being imported, but lots of it. And also a matter of where monetary value is recognized. What does apple declare the iphones value at for importation compared to what they are valued at the retail level?
Advisor - the complete opposite happened. Offshoring of US pollution and CO2 is a greenie myth. “ Between 1990 and 2008, US manufacturing output grew by one-third. Yet air pollution from US factories fell by about two-thirds.
...In a recent NBER working paper, Georgetown economist Arik Levinson estimated that more than 90 percent of the drop in US factory pollution since 1990 was due to companies adopting cleaner production techniques — things like switching fuels, becoming more efficient, recycling, or adopting pollution-capture technology.
And what he found was that the decline in pollution wasn't driven by offshoring. US factories were genuinely finding ways to cut emissions. In fact, the industries that saw the biggest drops in pollution intensity actually grew as a share of output.“
https://www.vox.com/platform/amp/2015/2/8/7999417/US-factory-pollution-…
Seemed to work well for John “smile n wave” key, maybe she’s onto something. I suspect she has set a goal of transforming the economy as much as the last national govt did, mind you that’s not a very high bar. And the debt well has been well and truly tapped out by national, so she can’t rely on that anymore
Sheesh. Plenty more debt where that came from. No need to put it on the balance sheet either. We can hide it in loads of crafty places, like Auckland City, or Transpower or Solid Energy. Oh, oops, sorry National used that one up, didn't they? Never mind, just give the bank a call and we'll fix it.
Bobster, between December 1999 and November 2008, total mortgage debt increased from $61,358m to $160,357. That is an increase of almost $100,000m and a growth of 161% in mortgage lending. Under national from 2008 to October 2017, mortgage has increased to $241,520m. An increase of $81,000m and a growth of 50%. So why you only blame National for something that Labour is guilty of too.
Another observation.
Taking your numbers, then between December 1999 and October 2017, total mortgage debt increased from $61,358m to $241,520mn. The level of mortgage debt at October 2017 was 3.9x the level of Dec 1999.
The median house price in NZ between December 1999 was $169,500 and in October 2017 was $530,000. The median house price level in New Zealand at October 2017 was 3.12x that of the level at Dec 1999.
The median house price in Auckland between December 1999 was $235,000 and in October 2017 was $848,149. The median house price level in Auckland at October 2017 was 3.61x that of the level at Dec 1999.
https://www.interest.co.nz/charts/real-estate/median-price-reinz
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