Paying for poor policies

Business confidence has dropped to the lowest point for 10 years:

In the August ANZ Business Outlook Survey headline business confidence dropped a further 5 points to a net 50% of respondents reporting they expect general business conditions to deteriorate in the year ahead.

However, firms’ perceptions of their own prospects are a much better gauge of actual economic outcomes. This series stabilised at a net 4% expecting an improvement, well below the long-term average of +27%. By industry, manufacturers’ expectations dropped 11 points to become the least positive about their own activity (-4%), while retail and services improved somewhat.

Turning to the survey detail:

* A net 5% of firms are expecting to reduce investment, down 6 points. It is rare for this series to be negative.

* Employment intentions fell 8 points to -6%. No sectors are positive.

These two points are most concerning. Businesses reducing investment and with negative employment intentions will have a direct and negative impact on the economy.

* Profit expectations were flat at -17%. Retail and manufacturing are the weakest sectors at -27% (up 1%pt) and -28% (down 12%pts) respectively.

* Firms’ pricing intentions fell 2 points to +27%. They are strongest for construction but also lifted for retail. Inflation expectations were flat at 2.2%.

 * Residential construction intentions eased 3 points to +13%, while encouragingly, commercial construction intentions bounced 13 points to -4%. . . 

The economy is delicately placed. But it seems increasingly inevitable that wariness amongst firms will have real impacts, in the near term at least, as investment and employment decisions are deferred. . .

The outlook isn’t all bad.

But firms have real concerns about industrial relations policy, minimum wage hikes and costs more generally – and particularly about their ability to pass on higher costs and maintain profitability. Troubles in the construction sector appear to be starting to cause stresses in related firms. And exporting firms will be keeping a nervous eye on signs that global growth has peaked. . .

The Taxpayers’ Union says the drop in confidence shows the urgent need for tax reform:

. . .Taxpayers’ Union Economist Joe Ascroft says, “Businesses need more than a working group. They need real changes in policy direction, including tax reform. Business breakfasts with CEOs and Cabinet Ministers simply won’t cut it for the average small business.”

“Company tax rate cuts – accompanied by full capital expensing – would put a rocket under business investment and put an end to the doldrums. If focused at measures to boost productivity, the evidence shows that tax relief would flow through to workers in the form of higher wages.” . .

Tax reform would help and not just for businesses.

The lower dollar helps export returns but increases the cost of imports, including fuel, the price of which is also being boosted by extra taxes:

The Government’s obsession with fuel taxes shows it doesn’t care about the cost of living for ordinary Kiwis, National’s Transport spokesperson Jami-Lee Ross says.

“Now is the time for solutions to the cost of living, not new taxes. National is taking the initiative with a bill lodged today to repeal regional fuel taxes within three months.

“Fuel prices are sitting at record levels across the country and are set to rise further because the Government is proposing three additional rounds of national fuel tax increases totalling an extra 12 cents a litre of fuel in new taxes.

“In addition, there is an 11.5 cents a litre regional fuel tax in place in Auckland that will be rolled to other regions in a few short years. It adds to this Government’s sorry record of driving up costs for households and businesses and choking economic growth. . .

 

But tax is only part of the problem. The Government has several other poor policies that we’re all paying for:

The message from economists is loud and clear: the Government’s bad economic policies mean New Zealanders will be thousands of dollars a year worse off, says National Party Leader Simon Bridges.

“In the last three months alone NZIER has revised down their GDP growth forecasts which means every man, woman and child will be $1600 a year worse off on average by 2022. That is $6400 for a family of four.

“NZIER are clear that the decline in the economic outlook isn’t just sentiment. Profitability has deteriorated and businesses’ own activity, a measure closely correlated with GDP growth, has weakened. There are real implications for businesses, workers and New Zealanders trying to get ahead.

“The reason GDP growth is now faltering is because this Government has imposed a wide range of policies that are bad for growth. They have imposed more taxes, shut off foreign investment, significantly increased labour and compliance costs, banned oil and gas exploration and wasted billions on low-quality spending.

“And what was the Prime Minister’s solution this morning: another working group. The Government needs to understand that lower growth has real consequences for New Zealand families. Working groups do not drive economic growth, good policies and hardworking New Zealanders do.

“So the goal is simple. We must grow the economy if we want New Zealanders to be better off. A growing economy means more jobs, higher incomes and more revenue to pay for the things we need.

“We need to be pro-growth as that is the only way we can improve our standard of living. National wants New Zealanders to keep more of what they earn. Higher taxes, more regulation, compliance costs and a rising cost of living do nothing to help families get ahead.

 

Added costs and uncertainty are a poisoning business confidence and this week’s announcement of a business council is no antidote.

One Response to Paying for poor policies

  1. adamsmith1922 says:

    Reblogged this on The Inquiring Mind.

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