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Business confidence in the government’s financial management has plunged since 2020, but there is greater optimism about the economy compared with last year. Meanwhile, demand for health spending has risen to the top of businesses’ wish list, overtaking infrastructure even though the Covid pandemic is over.
As businesses traditionally align right of the political divide, it’s perhaps unsurprising that respondents believed the Labour government was performing poorly on managing New Zealand’s economy. What’s most striking is the depth of the swing since the 2020 election. Then, more than a third of businesses (34%) thought the government was managing the economy well. That’s now slipped to 14 per cent – with 85 per cent now feeling the government’s economic performance is poor.
With rising prices topping the list of respondents’ greatest concerns, this signals a strong desire for change at the election. A third of those polled rated the cost of living as their most pressing issue, with 27.5 per cent choosing the cost of doing business. Three quarters of the more than 700 businesses surveyed across New Zealand also believed a Labour win would spell worse business conditions, against just nine per cent for a National-led government.
“US President Bill Clinton called it right with his election slogan: ‘It’s the economy, stupid’. With mortgage rates and costs continuing to climb across the board, the question of who forms our next government will likely be decided by whichever party is seen to have the best chance of fixing inflation. We know there will always be a tendency for businesses to be pessimistic about a left-leaning government, but these numbers suggest a significant shift to the right even though they are actually feeling more positive about the future than last year,” says Baker Tilly Staples Rodway national chair David Searle.
The poll revealed that while more than half of businesses (57%) believe the economy will worsen over the next year, that’s an improvement from 65 per cent in 2022.
“In our conversations with business clients, there seems to be a feeling that we’ve seen the bottom – that interest rate hikes are levelling off, and that the severe labour shortages that have been hampering growth are also easing. This is borne out by the poll data, where businesses reporting acute labour shortages have dropped more than 17 per cent, even though hiring’s still a challenge for most. However, it may also be that given recent political polling, businesses are also anticipating a change of government, which has led to greater optimism,” says David.
There are other surprises. Despite the impact of this year’s weather events and the end of the Covid pandemic, businesses want the incoming government to spend more on healthcare first, with infrastructure falling to second spot. More than a quarter (28%) voted healthcare as the top priority for investment, with infrastructure at 25 per cent. With ram raids, theft and gun violence making headlines this year, it’s perhaps less surprising that crime reduction is in third place. Crime is also third on the list of respondents’ personal concerns.
The final item on businesses’ to-do list for the next government is stronger action on tax. Despite three quarters opposing a wealth tax, and opinion divided on a capital gains tax, nearly 85 per cent of respondents were in favour of a full review of the personal tax system to address bracket creep and lack of a tax-free minimum income.
David says recent changes to GST on fresh fruit and vegetables were unlikely to counter increasing worries about squeezed margins and rising mortgage costs, without addressing the fact that the 33 per cent income tax rate designed for the highest earners a decade ago is now capturing people across the board.
“Fixing this is even more urgent during a cost-of-living crisis. What businesses are telling us heading into this election is that piecemeal changes to our tax settings aren’t enough. Parties who can offer a bolder and more holistic approach to tax, even re-looking at a capital gains tax, are likely to receive strong support,” he said.
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