Politics

Ardern addresses ‘the elephant in the room’

In a pre-Budget speech Jacinda Ardern took her critics head on, telling the crowd of business leaders that flagging business confidence didn’t match reality, Thomas Coughlan reports.

Businesses should feel better about the economy and align their perceptions with the positive reality says Prime Minister Jacinda Ardern.

Delivering the now traditional pre-Budget speech to the Business New Zealand audience, Ardern said business confidence was “the elephant in the room”.

Business confidence has been low since the Government took office. One of the leading business confidence surveys conducted by NZIER found businesses had turned pessimistic about economic outlook for the first time in two years after Labour assumed office.

On Monday ANZ’s monthly business confidence survey reported pessimism grew in April. 23 percent of businesses were pessimistic about the economy, up from 20 percent in March.

Ardern said businesses should look at other metrics of confidence in the economy, which have been positive.

“The IMF, following its annual visit this month, said New Zealand has a favourable outlook with strong annual economic activity expected and our fiscal, monetary and prudential policy settings are appropriate,” Ardern said. She also noted the ratings agencies had given positive reviews of the Government’s performance and of New Zealand's growth prospects.

The IMF’s report even defended the Government’s budget responsibility rules, which have come under criticism from economists and commentators here. Shamubeel Eaqub captured the mood of many other economists when he called them “a fiscal straitjacket”.

Ardern and Finance Minister Grant Robertson have talked-up the importance of the rules even as they embarked on a campaign of subtle hints to voters the previous Government had left big deficits in infrastructure.

Ardern kept to this script on Wednesday.

“I can assure you Grant Robertson takes the Budget Responsibility Rules seriously,” she said, before rattling off a digested list of the rules.

This is not the first time Ardern addressed low business confidence.

She told a business event in February “the elephant in the room” was the Government’s poor polling with businesses.

“They feel akin almost to being in high school and suddenly discovering the notes that people are passing around the classroom about you,” she said of the business surveys.

Ardern also alluded to the fact most businesses surveyed are positive about outlook for their own firms, whilst being pessimistic about the economy on the whole. The most recent NZIER confidence survey found a net 15 percent of firms reported a lift in demand in their own businesses in the March 2018 quarter and 16 percent expect increased demand over the next quarter.

“Surveys show that businesses are actually feeling pretty good about their own activity,” Ardern said.

“I look forward to hearing the same level of confidence expressed about the economy as a whole.”

Budget guessing game

The purpose of pre-Budget speeches is to tease out or signal announcements to come.

Ardern announced the creation of a Future of Work Forum, which will bring together Business NZ CEO Kirk Hope and CTU President Richard Wagstaff and the Government, represented by Robertson. She said the forum would plan for the future of work in a world where automation and climate change will force immense changes in the workforce.

“40 percent of today’s jobs will not exist in a few decades,” Ardern said.

Labour had talked up future-proofing the workforce while in opposition, but its changes to the minimum wage and the 90-day trial rule have been unpopular with businesses, particularly retail. Retail is the most pessimistic sector of the economy, according to NZIER’s business survey.

Bringing Business NZ into the forum could be a way of ensuring future workplace changes carry businesses along with them.

This Government is keen to avoid repeat of the last Labour Government’s 'winter of discontent', when the then-Prime Minister Helen Clark and her incoming ministers faced-off with business upon assuming office.

Now, businesses and trade unions will be able to work with Government as it creates workplace policy.

“We’re at the table, they’ll be able to feed directly into us as the ones who are creating policy,” Ardern said.

Pay equity on the way, but probably not yet

Pressure over pay parity for midwives was already brewing at the 2017 Women's Day event at Parliament. Photo by Lynn Grieveson

Ardern did let slip some details about the forthcoming Budget.

At the same time as the Business NZ lunch, midwives marched on Parliament demanding a pay equity agreement. When questioned about whether they would be rewarded, Ardern told reporters “I’ve heard them”.

She then hinted midwives might have some of their needs met in the Budget.

“I am acutely aware of the issues our midwives are facing and have heard for some time now the challenges that exist particularly around parity for midwives depending on where in the sector they are working it is something we are looking to confront and we’ll have more to say on that as we get to the Budget,” she said.

Ardern was quick to manage expectations, saying she couldn’t “do everything at once,” but added: “midwives are one of the many issues in the health sector that we have to address”.

Later, Health Minister David Clark repeated Ardern’s hint.

“This is a Government that is determined to deal with the situation we have inherited and in our first Budget take first steps towards addressing that historic underfunding,” Clark said.

There were no hints as to how far the Government might go to address the pay equity claims. The historic pay equity settlement for aged care workers, which came into effect last year covers 55,000 workers and cost $2 billion, a number so large it had a marked impact on the Labour Cost Index, which measures wage inflation.

According to the Royal College of Midwives there are just 3000 registered midwives in New Zealand, and the number practicing may be smaller.

New Zealand College of Midwives estimates the current average hourly wage for rural midwives is $7.23, and for urban midwives $12.80.

Nurses and other health workers have also demanded pay equity settlements.

This week, Robertson told journalists he believed it was possible to balance the priorities of healthy books and healthy New Zealanders, a message Ardern reiterated to the business community. Health workers will have to wait until May 17 to see whether they agree.