Mood of the Boardroom: CEOs urge Govt to pivot for economic growth

Reminder, this is a Premium article and requires a subscription to read.
Christopher Luxon’s Coalition Government has completed “The Great Unwind”. It’s now time to pivot hard and focus on bold moves necessary to spur economic growth. That’s the prevailing sentiment in the 2024 Mood of the Boardroom CEOs survey which attracted 103 respondents.

“Christopher Luxon has outperformed in terms of what’s
been delivered so far vis-a-vis expectations generally held,” said Forsyth Barr managing director Neil Paviour-Smith.

The NZ Herald survey disclosed business leaders want the Government to move on from blamestorming its Labour predecessors for the economic environment it inherited.
Read more from the Herald’s 2024 Mood of the Boardroom series
Many of Labour’s initiatives have been unwound and it’s now time to focus positively on the road ahead, not keep looking through the rearview mirror.
“Fiscal restraint is right for the times but where good investment stacks up we should get on with it,” said an industry association chief. “Labour did spend way too much and profligately so, but New Zealand doesn’t have a significant public debt issue relative to other nations; we have productivity and growth ones that require sensible investment. Finally, let’s see more policy boldness.
“It doesn’t need to be full Rogernomics or Ruth Richardson style, but more than English or Robertson incrementalism is required given New Zealand’s serious problems.”
Despite lingering recessionary effects, CEOs are predominantly optimistic, rating their confidence in the economy at 3.23/5.
This is the highest score for optimism in the New Zealand economy since 2016 when the previous National-led Government was in power under the prime ministership of Sir Bill English (3.6/5).
There is broad consensus that the fall in interest rates should lead to a more favourable domestic business environment with many wanting the Reserve Bank to get on with it.
Business leaders caution that the journey to full recovery is far from over. But they would like to see a more upbeat presentation from leading Cabinet Ministers which capitalised on their own optimism.
Mainfreight managing director Don Braid acknowledges smaller businesses are still doing it tough.
But his own sales calls in New Zealand in recent weeks indicated the initial small adjustment that the Reserve Bank made to interest rates had “lifted the mood of the marketplace.
“People are feeling more positive about it. It might mean we’ve reached the bottom of that cycle and we actually can see our way forward.
“So there’s definitely more positivity than what there was, you know, in the previous six months.”
Throughout the survey leading CEOs — and some chairs — have put forward their ideas to address some major issues facing the nation.
The survey demonstrates that the ground is shifting in several key areas, among them capital gains taxes.
It might be anathema to the Beehive, but the sentiment in this year’s survey demonstrates that CEOs are at least prepared to have an open conversation about broadening the tax base.
As a departing salvo, Treasury Secretary Caralee McLiesh warned that structural changes are required to address the Crown structural deficit such as a capital gains tax and a more efficient superannuation scheme.
Some 77% of respondents to the NZ Herald survey agreed; 13% didn’t.
More than half of the 41 respondents who put forward their own suggestions as to what should be considered to plug the structural deficit mentioned a capital gains tax.
Other suggestions included making KiwiSaver fully compulsory and putting it at the same rate as that of Australia.
“Capital gains tax, Public Private Partnerships, lessons from Australian Super and its success wouldn’t go amiss,” said Braid.
From Beca executive chair David Carter: “Our ageing population plus settings which incentivise investment in unproductive assets seem unlikely to be able to deliver the tax revenues required for our nation’s future needs.”
A finance chief observed New Zealand is an international outlier not having a capital gains tax or some form of wealth tax. “So, we shouldn’t be surprised that we have rising levels of social disparity, particularly after a long period of asset price inflation.
“If we want to have a strong sustainable public health and public education system, we can’t just keep taxing people’s work and lifting GST.”
Institute of Directors CEO Kirsten Patterson spoke for many when she said “We need to be able to have courageous conversations and debate ideas about unpopular realities”.
But there are sceptics.
“Economically, a capital gains tax makes sense. Politically, probably no,” said Enviro NZ’s Chris Aughton.
From Deloitte chair Thomas Pippos whose own article appears later in this report, “The capital gains matter is a red herring with the bigger issue being Treasury doesn’t appear to have had the visibility it should have during this last period — put another way, it’s unclear what the legacy of this last period is.”

Reminder, this is a Premium article and requires a subscription to read.