Rob Campbell: Don't fall for the gloom, business is doing fine

SkyCity chair Rob Campbell called on executives not to buy into the notion that business confidence was falling in New Zealand. Photo/File.

COMMENT:

We read in the media these days about low and falling business confidence. This is a view which I do not share.

I have a wide range of business interests from tourism to commercial property development to casinos. If the economy was in real trouble or investment and business operation was becoming more difficult you would think I might notice it. I don't.

Business is seldom easy. It's not meant to be. In business we are always assessing risk, anticipating change and reacting as skilfully as we can.

One of the less attractive aspects of business activity is that while we espouse competition and market forces as a mantra, in our hearts we wish there was less competition or none. Often, just like unionists, businesses seek to combine together for greater strength.

This is why I am sceptical when people purport to talk on behalf of industry interests or gather to lobby governments on that basis. I just can't shake the thought that someone is trying to leverage an advantage against the rest of us.

There is no need or value in me naming names. You will recognise the practice when you see it. It's endemic in our economic and political systems.

Is business really going through a bad run at present in New Zealand? Our economic and political system in fact rates highly for integrity, innovation, legal structures. Though you might not think so if you were an Auckland motorway commuter or a tourist looking for a toilet our physical infrastructure is relatively strong. Our social systems are relatively cohesive and our environment and climate relatively benign. We have good resources and energy. Tax rates are relatively low. Education levels are relatively strong. You might almost think it was a good place to do business.

This is not to say that everything is perfect. We have many social and environmental issues which need urgent focus and attention. But the main point is that we face a generally supportive and benign environment.

The media have an inclination to look for negatives and to extrapolate those they find into crises. This is not just about business, but it does impact confidence.

There is almost a glee with which the media pronounce that this or that survey has shown an adverse outcome in terms of business confidence.

I have looked at the various reasons which have been given for these survey outcomes. Broadly they may be grouped as a reaction to Government moves on industrial relations, tax or levy impositions, and climate change-motivated initiatives.

On climate change issues, I think there can be little surprise that a coalition with the current composition has made some moves in this area. That is simply an outcome of the electoral process and the moves to date have been neither more radical nor do they impose higher costs on society than anyone might expect. For my part, I think that a positive business investment response to the climate and environmental challenges we have is exciting and will be a mark of this generation shifting from the complacent and careless response of my own generation.

In respect to taxes and levies, there are few people who like more of these rather than less. But the business and higher earner tax burden in this country is not high and there are no imminent proposals that either should be so. We do need, and I am confident we will get some tax changes which are necessary to improve capital allocation. Most business will gain from such a change. We should see the current tax review as an opportunity to remove inappropriate incentives. This could be one of the better areas of reform if we can all stay focused on what is fair and what best serves to lift productivity.

The final area driving negative survey outcomes is that of industrial relations reform. There is a concern within many businesses that we will begin to experience labour cost increases and that view is well founded.

We are currently seeing and I hope we will continue to see shifts in the lowest rates of pay across the economy. Social policies will also play a role but pay rates which cannot sustain acceptable standards of living are socially demeaning and destructive. There is no free lunch and achieving a change at the bottom level will have costs in absolute terms for the owners of business currently paying such rates. The change will also reduce demand for some jobs but undertaken within a context which is structured and staged properly will be less damaging than the alternative of not acting. We are better to do this together than not do it and take the social costs and disruption which are the alternative.

Second, we are now at a point where the ineffective delivery to date of equal pay between men and women and pay equity as between gender uneven occupations is going to be consigned to the dustbin of history. This will involve additional costs for many businesses and will also lead to some reallocations between occupations over time. Again, this is a process most effectively carried out, because it simply should be carried out. To not embrace this process is to condemn business to ongoing uncertainty on a far greater scale.

Third, there is a general shift evident towards enhancing the role of unions and collective activity in general. I was a union advocate for many years and still regret how little we were able to do about issues like low pay and equal pay at that time.

It's not surprising that we are now reviewing where we sit. I am pleased that Jim Bolger is leading this review and encouraged by the kaupapa he outlined to a recent directors meeting which was "think about this in terms of the kind of society you want to live in". If we do that honestly and openly we can get great outcomes.

But everything isn't rosy. There are good reasons for business to be thinking hard about our future.

Technology is the obvious one. But I'm not so concerned about the pace or even scale of change. The biggest danger I see is the concentration of economic and social power in a small group of very large and pervasive networks. We could all, in the extreme, become modern commodity supplying peasants for these mammoths. This challenge can't be met by our small nation. We can only meet it by being an open, intelligent, commercial and co-operative participant in the global process.

Environmental issues are similar. I have argued there's much we can and should do about this in a manner consistent with business success. But global issues are just that.

Trade is vital to our present and future. We do not need to be a victim of either trade deals or trade wars. Business in New Zealand can and does contribute to global trade policy by what I have described as an open, intelligent, commercial and co-operative participant.

The worst thing that we can do as the business sector is to be drawn into the negativity of lobby groups or media outlets. This is a great place to open and operate a business. Negativity is for those who stand on the sidelines watching and commentating.

Directors have a big responsibility in this. We do, or should, set the directions for our business. We must do so in a manner which is not trying to force the hands of the economic and social clock backwards. Rather our role is to anticipate change, to foster the positive aspects of change, and to make sure that the actions of our business are sustainable and value generating not simply extractive or exploitative.

The last area I want to address is the challenge we face to the authenticity of business on society. This "social licence", as it is sometimes called, does not occur as a right. It's earned. And recently, this licence has been challenged not so much by anything which governments or wider society has done but more because of failings within business itself. When business is conducted with excessive greed or insensitivity it can readily lose its legitimacy in society. When this happens, it can severely wound the goose which we want to be laying golden eggs.

I, for one, am determined and confident that this will not happen on our watch.

This is an abridged version of a speech presented by SkyCity chair Rob Campbell at the Palmerston North Business Breakfast this morning.