Tuesday, May 28, 2019

Mike Hosking: Government has brought rock star economy to a grinding halt

It's not the news the Government wants in budget week. The Warehouse is laying off up to 150 people, and there are potentially more to come as they restructure their operations looking for efficiencies.

Vodafone has been in the news for the same thing. Air New Zealand has announced a profit guidance reduction, and a pay freeze at the top. They won't be the only ones.

This is an economy slowing, and one suspects faster than the leaders in Wellington are prepared to admit. They are currently pedalling the line that international headwinds are the cause, which is only partially true.

Their polices aren't helping. The minimum wage rise, the tenancy amendments, the fair pay legislation, the industrial action we are seeing, the Kiwibuild fiasco, the petrol tax, the CGT attempt have all added to an economic state that is increasingly fragile.

The clues were there last week as Grant Robertson was scrambling around looking for a billion in low priority spending. Further clues were issued Thursday with the adjustment to a debt range, as opposed to a 20 percent target.

Now, in the mix will be individual circumstances. The Warehouse has had a rough old ride over the years, Air New Zealand has been bailed out, and it's been the toast of the town. All companies have specific circumstances unique to themselves and/or their industry.

But the critical role governments play is in setting the business agenda: whether it is through tax, economic performance, or, most importantly, confidence.

Confidence in this government since its formation has been an issue, and it remains an issue to this day.

Mix that now with the cold, hard, reality that money is short, the promises are big, and growth is slowing, and what we need to buckle up for is more news like that of The Warehouse.

Perhaps one of the biggest ironies in the middle of all this are the unions, who yet again fail to see the folly of their approach to business. Having promoted an increase in the cost of doing business, whether it be through minimum wage rises, the promotion of the living wage, or support for major industrial reform whereby they get an increased say in the workplace, they then become outraged when people lose their jobs.

They can't have it both ways. The more you pay people, the fewer people you can afford to pay. Unless of course you sell more, and you only sell more if people feel good about buying. If only they could, or would, join those dots.

The same applies to the government. Promise all you want, but you simply have to have an economic base to pay for it. And it's becoming increasingly clear they don't.

The trouble with the sort of spending they're into, is it has no return. It's a never-ending demand for social issues they hold dear. Like the 13,000 more people on the Jobseeker Benefit who won't work, and they won't ask questions as to why not. Like social housing whereby you can once again stay for life because they don't ask you to move on.

Big layoffs have not been a part of the political discourse for years because we have had a rock-star economy. In 18 short months, this lot have managed to bring the golden days to a grinding halt.

Mike Hosking is a political broadcaster on Newstalk ZB, who has hosted his number one breakfast show since 2008 - see HERE.


Anonymous said...

"They can't have it both ways. The more you pay people, the fewer people you can afford to pay. Unless of course you sell more, and you only sell more if people feel good about buying. If only they could, or would, join those dots."

I am right-wing on many issues, but I don't like the way people on the economic right portrays wages as a zero-sum game. In my view, one fundamental problem with New Zealand's economy is its chronic unproductive nature, which I think is perpetuated by labour being too cheap, ultimately meaning that it is very hard to find jobs giving a decent standard of living. New Zealand is still focused on low-value-added industries like dairy, forestry etc. What about the possibility that minimum wage rises will push companies to move up the value chain and use more efficient working practices? With New Zealand's economy being one of the freest in the world and having endured Rogernomics and Ruthanasia, it is clear that the old Tea Partyist attitude of "A bit more deregulation here, a bit more tax cutting there" is not the answer by itself.

Anonymous said...

If "money is short" the Govt could take a leaf out of Key's book & borrow $80 Billion & sell off the remaining shares in the Electricity Cos. Oh & don't run a flag referendum. Also, how come companies are screaming out for workers?

Mervyn said...

We never had a rock star economy. It was all action without production. The reason we have child poverty and a housing crisis is we have not produced additional wealth to cover our needs let alone our demands. This has been going on for years under both governments. The problem we face is the present government intends to make things worse by reducing the real wealth producing part of the economy and spending more on welfare.
As for the writers theory that the economy can be fixed by raising wages and salaries forcing companies to invest in technology to raise labour productivity there is the problem of how to fund it. We do not have a large risk capital market .Sole proprietors of established business's find it impossible to sell their interests to NZers.