August 23, 2018
Where’s the business backbone?
Where's the business backbone?
It beggars belief that business confidence is down, and to me this reflects major problems based on capacity and capability of our business leaders.
As US President Donald Trump might tweet to our business leaders in regard to their plummeting confidence: "They are low energy, light weight, low intelligence."
Let's have a look at the major advantages that businesses have in New Zealand that are above and beyond all business folk in other competing jurisdictions.
We have one of the friendliest systems in the world to start up businesses. We have over 30 years of supply side economics, where the major settings have not changed, and this certainty has allowed all good businessmen to make good medium- and long-term investment decisions.
Since the 1990s, we have had the most consistent low interest rates for borrowing known in the modern history of the New Zealand economy. The cost of borrowing has never been lower. Add to that low interest on cash and deposits and you must redeploy your investments.
In the first budget of the new coalition Government, massive stimulation packages have been announced with the $5.5 billion Families Package targeted at low-income New Zealanders. This money will not be spent on shares or property or flash overseas holidays. The money will be spent immediately and on the basic necessities that rich folk take for granted.
That money will be spent immediately into the community and economy on the day it is received.
The Government has also announced tens of billions of dollars on infrastructure spend over the next 10 years. Align that with local authorities spending billions up and down the country and you have significant economic stimulation provided care of the New Zealand Taxpayer and the New Zealand Ratepayer. Remember 72 per cent of New Zealand's GDP (Gross Domestic Product) is domestic. We can only earn 28 per cent offshore.
As President Trump might tweet "Let's have a look at whether business has a backbone." Let's have a look at our captains of industry and their performance in an industry which has everything to gain and nothing to lose – that is the construction industry.
Massive immigration and significant under-investment in housing led to a lack of supply and a demand fuelled by immigrants arriving, who have the ability to out-purchase New Zealanders in our low-income, low-wage society.
In my view, any developer in the construction industry that did not make double-digit returns from 2005-2015 must be a business disgrace.
With quotes like: "The procurers think, go cheap, if there are problems sue the designer or sue the constructor but at least we got a bargain. It's completely wrong thinking and we'll continue to have problems so long as we take that route."
"They get caught with fixed price contracting, which is often standard business practices, but then they get delays in getting the work started or consented, then prices increase during that period beyond their control … so when they've got a fixed price contract, potentially with liquidator damages at the other end, and they're stretched, they get caught."
"With the demise of three of our larger construction companies in the last few months, I don't think it's doing too well. We're getting slower and more expensive."
And: "Some companies are over trading and are becoming victims of their own success."
These comments are made by high powered chief executives or directors of boards. If this is the standard of leadership being exhibited in the New Zealand business community, then I think that community has problems.
No New Zealand government, given we make up 0.2 per cent of the world's global trade, can contend with our major trading partners entering into trade wars or in capacity and capability headwinds in their own economies.
We will all be affected, regardless of the colour of the government, by factors that are outside the control of that government and of our business community.
You get a clear impression that business leaders are all members of one party. Why? Because the problems raised by them all occurred under the previous administration.
No one has mentioned the poor labourer, the poor tradesman or all those providing supplies to them. When the big boys go under, they never lose their houses, cars, businesses or marriages. They just pass on their losses to the little guy.
Given the demise of three of New Zealand's biggest construction companies over the past 12 months, you have to question the abysmal leadership of that industry, which may explain the Trump-like description of "low energy, light weight, low intelligence."
The old No 8 wire mentality, the old make it work with what you have got because you have to make it work, the old adage of look in the mirror for solutions, rather than blaming your missus or the kids or the government, has to be challenged.
The beauty about businessmen apparently not understanding how good business opportunities are in this country, makes way for a new breed of leadership.
We will see a new generation rise that will have the backbone and fortitude to deliver a business community that is not lecherous for itself, but is attuned by its heart and soul for its family, community and country.
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