Tuesday, 15 Jun 2021

Budget 2021: Businesses’ wish list as outlook gets gloomier

Business wants to see the Budget focus on driving economic growth, addressing debt levels and maintaining border security, according to a new survey.

The poll, conducted by New Zealand accounting and business advisory network Baker Tilly Staples Rodway, is the last indication of business concerns ahead of Thursday’s Budget.

Businesses were more gloomy about the economy than they were last year despite a sooner than expected Covid rebound, the survey found.

Of the more than 470 businesses surveyed around the country, 71 per cent of respondents believed the Government was not doing enough to support a strong economic rebuild.

Some 68 per cent said the Government was performing poorly on managing the economy in general.

David Searle, national chair of Baker Tilly Staples Rodway, said uncertainty was likely the result of a slew of recent Government measures that affected the business operating environment.

Fair Pay Agreements, a third minimum wage hike in as many years, a sick pay increase and an extra public holiday from 2022, were weighing on employers’ minds, he said.

“Businesses are finding life tough with the fallout from Covid, including ongoing disruption to obtaining shipments of goods and materials and border closures significantly affecting the labour market. Continual changes that add to long-term costs are creating even more pressure.

“There needs to be greater understanding from policymakers that more support for businesses is more support for workers. Without strong businesses, it will be impossible for the Government to meet its commitment of lifting more New Zealanders out of poverty and into employment.”

Half of businesses polled believed it would be three to four years before New Zealand’s economy returned to pre-Covid levels, while 13 per cent thought it would take more than seven years.

The percentage of respondents that were in favour of reducing debt had fallen significantly compared with that of a similar pre-election poll in September.

Just 28 per cent of those surveyed said they were comfortable with our current debt levels (down from 40 per cent pre-election), while 60 per cent were in favour of a much more conservative approach, something Finance Minister Grant Robertson has indicated will be the case.

“What our poll shows is that while the Government built goodwill through its management of the pandemic and wage subsidies… its recent financial policies risk eroding this,” Searle said.

Businesses opposed the loosening of our border restrictions as the pandemic continues to grip parts of the world like India and Latin America, while making a resurgence in other countries.

Prior to the election, 64 per cent of businesses surveyed were in favour of opening our borders within the next year.

In the recent poll, only 48 per cent of businesses said they were in favour of loosening border restrictions within the next six months.

While the transtasman bubble with Australia has allowed some form of international tourism, 35 per cent of businesses said it wasn’t enough to help the New Zealand economy.

Among the positives, businesses overwhelmingly supported infrastructure investment, such as the $12 billion spend up announcement, while health and housing were also top priorities.

Businesses suggested more public-private partnerships to accelerate affordable housing developments (57 per cent), changes to rural/urban boundaries and planning rules to enable more development (41 per cent) and incentives to invest in shares or commercial property to take the heat out of the housing market (38 per cent).

“The recent measures targeting residential property investors, such as the removal of interest deductions for residential homeowners and the extension of the bright-line test to 10 years are concerning for investors and property developers who are concerned about unpredictable changes in regulation,” Searle said.

“These unflagged changes make investment decisions tougher, including decisions about constructing new housing to address the real issue, which is increasing the supply of new housing in the market.”

On taxes, more than 60 per cent of businesses polled supported National MP Simon Bridges’ Bill to link income tax brackets to wage inflation.

The Bill, which would address bracket creep, would prevent more New Zealanders on lower incomes having their top slice of income edge into a higher tax tier.

“Heading into the Budget, the Government can best keep up momentum by demonstrating it still supports strong employment, maintaining its previous commitment to infrastructure and rethinking its position on tax to increase fairness across the board,” Searle said.

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