INSIGHTS

NZ BUSINESSES TO KEEP CALM AND CARRY ON

Mark Lister, 24 October 2017

With the negotiations over, we’ve finally got a government and its time to get back to business.

I doubt the election caused many local companies to pause for thought anyway. Most will have had more important things to worry about, like their latest product innovation, getting a new customer over the line, or finalising a contract with a supplier.

We did see a fall in business confidence during the campaign period, but that’ll be short-lived and we’ll see sentiment bounce back over the next few months.

I’m not worried about the new leadership. They’re talking a fairly sensible game so far, and a few fresh ideas won’t go astray.

The coalition partners already seem to have moderated some of each other’s more drastic policies anyway. There’s no chance of a water or capital gains tax while Peters has any say, and Labour won’t tolerate dramatic changes to the Reserve Bank Act.

A clampdown on migration remains an important issue for business, but if they take a pragmatic approach they can probably achieve their goals without destabilising the sectors that have genuine skill shortages.

Besides, migration is starting to taper off naturally anyway. It’s been falling for the past three months and the latest monthly numbers were the lowest in more than two years.

Housing is the other area firmly in the firing line, but other than a few self-serving grumbles from the real estate industry, I think the rest of us are all on board with sorting that out.

The local sharemarket took the news in stride, briefly opening on the back foot but within a matter of hours finishing at a new record high.

The industry is full of smart people and the market represents their collective view on the future. Outside a handful of stocks that stand to lose if house prices are reigned in, that view was quite simple – nothing to see here, move along folks.

As for the decidedly downbeat comments we heard from Mr Peters about the state of the economy, I’m not sure we all need share his pessimism.

Sure, things are coming off the boil. House prices are likely to go sideways rather than up, and consumer spending will decline as a result. Migration has peaked and will fall from here, while there is the usual lengthy list of global worries.

However, we’ve got an unemployment rate below five per cent and an agricultural sector that’s in its best shape in years. Government debt is very low by world standards, so the new leadership has options should a fiscal boost be required. Interest rates might drift higher due to offshore factors, but they’ll still be modest compared to history.

The NZ dollar is at the lowest levels in more than a year, despite remaining above long-term averages. It’s arguably now in the sweet spot where export industries get a healthy boost, but our global spending power as a nation is still reasonable.

If Peters is right, there may well be storm clouds on the horizon, although I’d argue we’ve got a better chance of weathering them than he gives us credit for.

This article was originally published in the New Zealand Herald under the title “Mark Lister: Companies have more to worry about than government” on Monday 23 October 2017.