September 20, 2023
Business leaders have offered a sobering assessment of the ongoing challenges facing New Zealand, raising running cost concerns and questioning economic policy in the lead up to the general election.
This is an industry battered and bruised following three years of attempting to overcome obstacles ranging from COVID-19 and persistent inflation to an ongoing talent shortage and a cost-of-living crisis.
As a result, exhausted C-level executives are heading into the general election on 14 October armed with a strong sense of despondence and pessimism.
“The business community’s take on the situation is somewhat sobering,” observed Mike Horne, CEO of New Zealand at Deloitte.
According to new research – Deloitte and Chapman Tripp Election Survey conducted by BusinessNZ – 93% of Kiwi company leaders believe changes made by the Labour Government during the past three years have increased the cost of doing business.
Within this context, 85% of organisations believe the incumbent government does not have a plan for improved economic performance.
“The mood of business is sombre as respondents look to a post-election government to start actioning change,” Horne added.
Each election year, the survey sources business sentiment on current political issues and poses the same questions to New Zealand’s main political parties, allowing comparisons to be made between the public and private sector.
This year, 880 businesses and seven political parties – Labour, National, ACT, Green, Te Pāti Māori, New Zealand First and The Opportunities Party (TOP) – were surveyed.
“The majority of New Zealand businesses have expressed concerns over the lack of a coordinated government plan to raise New Zealand’s economic performance,” Horne explained. “This uncertainty around the future of the economy is amplified by a perceived increase in the cost of doing business over the last three years – attributed to changes made by the government.
On this specific issue, political parties were asked the related question: do you have any plans to reduce the costs of doing business?
Responses were armed with promises for reducing specific costs and differed significantly between parties, while ACT and National also proposed initiatives for reducing the regulatory burden overall.
According to Kirk Hope, CEO of BusinessNZ, the overwhelming view from organisations that the compliance and operational costs on business had increased should make all politicians pause for thought.
“New Zealand’s economic growth depends solely on business success, yet increased costs placed on businesses have hampered their ability to succeed,” he added. “There is a clear need for the new Government of New Zealand to take action on the cost burden on business.”
Clear business position on tax
Findings also highlighted a high degree of business interest in tax policy issues and clear views about proposed tax changes.
Executives were reluctant to endorse proposals for changing business-related tax policy either through introducing a capital gains tax (61% against), wealth tax (67% against) or windfall tax (70% against).
Many were also against changing GST (75% against) or corporate tax (60% against) as part of a policy prescription to manage ongoing financial issues facing the nation.
The compliance cost of business tax was also a significant concern for many, with 64% of company leaders saying their tax compliance costs had increased over the last three years.
According to findings, businesses have demonstrated a “high level of understanding” of taxation options and trade-offs, sending a “clear message” to political parties seeking to raise taxes to address current fiscal challenges.
“Businesses are expressing a desire for stability on tax that likely reflects an interest in enhanced clarity and deliberateness of spend,” advised Horne, rather than increasing the amount available to spend through significant tax change.
When asked about proposed policies for infrastructure, resource management and investment – all areas which can affect business growth prospects – company leaders expressed further doubts.
The vast majority (74%) believe the government did not have the balance of infrastructure spending right on this particular issue during the past three years.
In order of importance, businesses ranked the need for investment in:
In an environment shrouded by varying issues and threats, Horne said local businesses are also worried about the state of the country’s overall finances.
“This speaks volumes about the ability for our private sector to operate with confidence and provide the economic underpinning that is critical for wider societal prosperity,” he added. “The only constant we can rely on as we look to the future is change, and to contend with it, we need to make some deliberate choices with our constrained resources, capability and capacity.”
Despite the challenges, Horne stressed that the onus is also on the business community to work alongside those in the government to facilitate and support the change that is needed.
“It can be acknowledged that it is much easier to navigate these shifts in a strong economy – something the post-election government will need to address first,” he added.
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