Hungry businesses will be looking for more than belt-tightening in Budget

Businesses like right-leaning governments. It’s no surprise that approval for the Government’s economic management has shot up since before the last election, when leaders’ approval ratings had plummeted almost to single figures in our Baker Tilly Staples Rodway polling.

Time to read: 5 mins

Yet there are also signs that many businesses have since packed up their party hats. While 57 per cent of businesses surveyed in our pre-Budget poll this month felt the Government was managing the economy well, a sizeable third (33 per cent) disagreed.

Until now, our leaders’ campaign against wasteful spending has been popular as a sign of fiscal prudence. However, responses from the business community show a clear sense that they’re now looking for a little more rocket fuel, a little less gruel from the upcoming Budget, avoiding waste but not sacrificing the meat and potatoes core services. These are the things the Government will need to put on the table to keep businesses happy.

Businesses want… a wellbeing Budget?

This isn’t exactly a throwback to Budgets past, but a reflection of businesses’ top spending priority – healthcare and medical research. The percentage of businesses who ranked healthcare as number one on their spending wish list has gone up since our pre-Election poll in 2023, and it was first on the list back then as well. Two-thirds (65 per cent) of all businesses ranked health among their top three priorities – showing any further cuts will not be well regarded.

It’s also notable that the majority of businesses don’t expect the upcoming zero Budget will have a positive effect on New Zealanders’ wellbeing, given the number of additional cuts and budget freezes signalled across the board. This poses a challenge the Government needs to address. While businesses want prudent spending, they also want a bit of positivity after some tough economic times – and if there are no new big ideas or projects announced to spark enthusiasm and bring in the promised foreign investment, our leaders risk further disengaging the business sector they champion.

We don’t need a lolly scramble, but a few more welcome mints for overseas investors would certainly be well-regarded. The message we’re receiving from business leaders is that we’re yet to reap the rewards of existing policies. If we can send a message that New Zealand is open for business, willing to partner with innovators, and back strong ideas, rather than that we’re closing shop, that’s not only good for businesses but for our national wellbeing as well. 

It’s about infrastructure, mate

Certainly the old line, “It’s the economy, stupid” hasn’t lost its relevance, but there should also be a catchphrase about infrastructure. Transport, utilities and other core infrastructure run a close second to health on businesses’ wish list this Budget, and all New Zealanders will be closely watching announcements on whether their favourite projects will be continued, postponed or scrapped under the austerity plan.

Although inflation and cost of living are the top concerns of business leaders, their infrastructure response shows they also want to keep things moving, whether that be to create jobs in the hard-hit construction sector, inspire foreign investment (as above) or bring water, electricity and transport costs down to enable their own investment. More fast-track projects, work to cut red tape (with industry consultation) and movement on Resource Management Act reform to help get things done would be an easy way for the Government to keep businesses on board.

Additionally, while on the surface it makes sense to rein in spend while times are tough, both new infrastructure investment and a commitment to ongoing maintenance will be required to avoid costs going even higher in the future, or being passed on to local authorities. Across the country, the rates bill has already jumped more than 10 per cent for the third year in a row, and no one wants to see that increase further. A stitch in time saves nine, as the proverb goes. Spreading the costs of infrastructure now, through central government investment and partnerships with businesses, will help prevent blowouts (and blackouts) later.

How do we pay for this? More fiscal innovation

That leaves the age-old question: If we want more investment in big-ticket infrastructure and health services, how do we pay for it?

Of note, businesses were keen to defer spending on defence, ranking it last out of 11 options on their list of Budget priorities, but that opinion would undoubtedly change should conflict break out in our region, and would add to the longer-term financial deficit.

We need to see bolder tax measures and alternative methods of raising money. More than three-quarters (76 per cent) of all business leaders in our research wanted a company tax rate reduction to make New Zealand more attractive to global companies and enable local businesses to invest in technologies and resourcing to help them scale.

While this will further decrease government tax revenues in the short term, it could set us up for a stronger, more competitive economy in future.

Meanwhile, opposition to a capital gains tax to raise revenues has declined, with far fewer in the “strongly oppose” camp than just two years ago. There seems to be a growing acknowledgement that you can’t have your cake and eat it. Businesses also overwhelmingly approved of taxing charities’ non-charitable activities, even though this has now been postponed.

Rather than deferring big ideas, we need to see every new fiscal approach on the table to make this a Budget for the long-term, not just for the current environment. Whether that’s a CGT or other changes to our tax settings, enterprise leaders want to demonstrate to the world that our country is still hungry for business. They’ll be hoping for more from this Budget than just a smaller menu.

DISCLAIMER No liability is assumed by Baker Tilly Staples Rodway for any losses suffered by any person relying directly or indirectly upon any article within this website. It is recommended that you consult your advisor before acting on this information.

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