Tim Hazledine: Business Advisory Council could prick 'lack of confidence' bubble

Prime Minister Jacinda Ardern. Photo / File

COMMENT: So the Prime Minister is setting up a blue-chip Business Advisory Council, to ensure that she is well informed about what 'business' wants her government to do.

Well, it is always good to be willing to listen, and perhaps this will turn out to be a cunning ploy to bring important business leaders on board with pricking the absurd, politically motivated bubble of supposed lack of confidence in our economy.

I just hope that the talking at the Council's meetings is not all in one direction. I hope that the Prime Minister will have a few home truths to lay on the corporate types.

You see, there is indeed a substantive 'business confidence' issue in New Zealand: it is about our, the people's, lack of confidence in them – specifically, in the big business corporate sector.

Overall, the corporate sector in New Zealand has been a conspicuous poor performer over the past thirty years.

In contrast, we've got, by international standards, excellent political governance and provision of public services, including education and healthcare. Not perfect, but pretty good. Our small businesses, including farmers, are often brilliant. Our workers are excellent – something that is proven over and over when a New Zealand professional or tradesperson goes to Australia, or Canada, or Britain, and immediately scores a job at a wage 20-30 per cent higher than NZ employers can offer.

We've handed over to business just about the most corporate-friendly legal and regulatory environment in the developed world, and they've done nothing with it.

When NZ Treasury dug into the reasons for the huge productivity gap with Australia that opened up (and remains) in the decade following the Rogernomics 'reforms' they found a single culprit: lack of investment by the corporate sector.

Of course, there are impressive performers: Air New Zealand (after being nationalised), Fisher & Paykel Healthcare, Mainfreight, and some others. There are also the depressing failures: Fletcher Building most recently, and our largest company, Fonterra, which has abjectly failed to deliver on the promises on the basis of which it was granted near-monopoly status twenty years ago.

But overall, and as evidenced by our pathetic little stock market, and failure to raise real incomes, the corporate sector really does deserve a good talking to by the PM.

She should not fail to note the single dimension on which corporate performance has been stand-out: rewarding its top managers.

CEO remuneration in New Zealand – controlling for firm size – has more than doubled in the past two decades, sheltering bloated superstructures of high-paid executives.

This is along with an explosion of personal wealth: we now have people getting onto the Rich List on the strength of ownership of a single franchised grocery store.

What does that tell us about the state of competition in this country?

The new Business Advisory Council should be asked about this, and other matters, such as what to do about the billions of relatively easily-earned profits remitted every year to the Australian owners of our banks and insurance companies.

- Tim Hazledine is a professor of economics at the University of Auckland Business School.