Key warned: Don't slip into cruise control

John Key's government is 'timid' according to one company chair. Photo / Dean Purcell

The New Zealand Herald's Mood of the Boardroom survey shows the Key Government has won wide support from leading NZ business leaders with 76 per cent saying it is "providing sufficient economic leadership for New Zealand."

That view is reinforced by the adjoining survey of Business New Zealand's membership which found 73 per cent of SME respondents agreed.

"Year on year we have a change of Government which is giving new energy and life to business despite extreme external conditions," said a share-broking firm boss. "This Government listens to business and is genuinely interested."

"John Key made a very good start and seems pretty sure-footed," said Telecom CEO Paul Reynolds. "The proof of the pudding will be in the delivery."

But chief executives warn Key against slipping into "cruise control mode".

The 92 chief executives who responded to the Herald survey have plenty to say about the Prime Minister's leadership - some of it not so flattering.

"Key has the political standing to take the country into his confidence and chart a sure-footed strategy to break out of our lacklustre and declining performance," said a company chair. "But the Government is too timid and needs to take a strong lead."

EMA (Northern) chief executive Alasdair Thompson believes the Government is not yet showing enough economic leadership. "They need to build a constituency for change and sell it". NZ Business Roundtable's Roger Kerr is also critical: "Actions are falling short of aspirations. They are not doing enough to explain challenges NZ is facing."

Others were more forgiving.

"They could do more to remind the public that under the Labour-led Government we were in recession well before the global financial meltdown so that the public will be more attuned to the need for some more conventional but painful financial correction measures," said a financial sector chief.

Key took power against the backdrop of a major international financial collapse, still having huge ramifications on our major trading partners. "We believed dairy would see us through," says South Pacific Pictures' John Barnett.

"Now the reality is evident to all."

After 18 months of domestic recession, New Zealanders are looking forward to the upturn. But, warns Ports of Tauranga CEO Mark Cairns, "I think we are yet to see the full effects of increasing unemployment on the economy."

He takes issue with those who criticise Key for the lack of outcomes from the February Jobs Summit. "Give Key a break": pointing critics to Treasury Secretary John Whitehead's Summit presentation which revealed how Government revenues had evaporated.

Others like Solid Energy's Don Elder are more optimistic. Elder accompanied Key to China on his first State Visit as Prime Minister. "The US and Europe are still in the doldrums," says Elder. "But we're now seeing demand [from China] pick up - which will spark confidence in investing."

The Government - particularly Finance Minister Bill English - wins brownie points for staving off a credit rating downgrade from Standard and Poor's. "They understand acutely the importance of managing for the balance sheet," said First NZ Capital's Scott St John.

But many believe English's first Budget should have set out a more robust deficit reduction path. This concern that the Government is "slipping into cruise control" mode is borne out by the fact that 63 per cent want the Government to take a "more aggressive approach to getting expenditure (and the Budget deficit) down quicker."

Thirty per cent of CEOs responding to the Herald survey rank the level and effectiveness of Government expenditure as the most important single Government-related issue. Other issues include: Infrastructure - ranked highest by 18 per cent; Auckland (16 per cent), regulation (14 per cent, tax rates (7 per cent), savings (5 per cent) and the ownership of major central Government assets (6 per cent).

And 95 per cent of chief executives target the bureaucracy as a sitting duck for a Government razor gang. Welfare is also in the firing line (40 per cent), Working for Families (32 per cent), Health (17 per cent) and NZ Super (18 per cent).

The Key Cabinet's hesitance to take tough decisions on spending issues plays into how some CEOs rate individual Ministers in the economic team. "English is held back by his conservatism, which apparently also applies to cutting Government expenditure," says the EMA's Thompson. "(Gerry) Brownlee likewise. (Simon) Power is good but is restricted by National's 'do nothing 'policy on state-owned enterprises. (Steven) Joyce is excellent. A great solution for Waterview." Joyce is clearly a rising star within the Key Government, ranking just below English in CEOs' eyes.

Nick Smith was criticised over the Resource Management Act reforms ("there was very limited thought on how they might work in practice, they went through a very poor select committee process and then have stalled as Smith tries to work out how fix all the stuff-ups he has made ... a classic case of more haste, less speed").

Chief executives were relieved there is now better "public alignment" between Key and English after their embarrassing differences over the $50 million national cycleway. But they want to see other Cabinet ministers take a higher profile.

"Apart from Bill English very little is resonated from the rest. John Key is highly influential, he needs to be careful he is not seen as being the entire party."

Chief executives feel there is now "better public alignment between English and Key" after the silly slips on the national cycleway. But there is still a perception that nothing happens without Key.

"The Prime Minister currently appears to be carrying too much of the load himself," cautions a tourism boss.

"There is a perception that if something is going to get done, and if the bureaucratic barriers are to be overcome it needs the PM's personal engagement."

* Is the gloss coming off?

"John Key's first budget squandered his political capital and represented a lost opportunity in economic terms. I get no sense of urgency or purpose from the Government. There is no policy programme to unambiguously address New Zealand's two big obstacles to lifting our game: to reduce the level of government claims on the economy, and to lift the level of productivity. I can understand their lack of confidence in the current bureaucracy but endless task forces make for an ad hoc approach," - Company chair

"John Key has displayed good leadership. But he needs a centrepiece for the strategy. He is too inclined to move quickly from one thing to the next, and not to cement gains. A rolling maul is an approach, not a strategy. The Jobs Summit had the potential to be a centrepiece, but he needs to articulate it as so, and make clear that a lot of stuff that is happening, such as the co-fund with tourism, is an outgrowth of that." - Finance sector boss