Power shift Deloitte BusinessNZ Election Survey

Our perspective August 2017 It is a time for the political parties to listen closely to the views of their constituents and make their case for governing Deloitte BusinessNZ Election Survey

Election 2017 in perspective

Consistent with past surveys, the 2017 While political outcomes are generally What’s changed? Deloitte BusinessNZ Election Survey binary – someone wins or loses – what Given what has been happening around highlights the likely approaches that the is often overlooked is how close the the world, it is perhaps unsurprising different political parties would take in electoral outcomes actually are, the that the BusinessNZ members surveyed relation to policy issues for business if level of voter turnout and the resulting are open to change in certain areas – elected, overlaid by what the business mandate a government has to lead. particularly if it leads to greater social community would like to see from any This was particularly pronounced in the cohesion here. future government. 2016 US Presidential election which had a participation rate of eligible voters When asked what the indicators of In an election year, voters are asked in estimated to be in the mid-50s, with the higher economic performance are, 69% a broad sense to take stock of how the popular vote supporting the President of respondents said “socio-economic country is doing. And it is a time for the being in the 20s, on a percentage basis. wellbeing”, second only behind “GDP political parties, whether in power or in growth”. This is an increase of 11%, and opposition, to listen closely to the views Internationally therefore the political a jump from fourth to second (out of six of their constituents and make their case pendulum has generally swung from indicators) since the 2011 election survey. for governing. At its heart, this process “status quo” to “change”, with a large requires both politicians and voters to number of eligible voters sometimes While the proportion of business evaluate what’s changed and what’s not participating. This global theme of respondents against raising the highest stayed the same since the last election, change can be seen as a response to the marginal personal tax rate remains steady and set their course or make their perceived growth in inequality coupled with in 2017 at 76% (compared to 74% in 2014), decisions accordingly. a growing populist approach to politics. the numbers supporting an increase in the Enough voters are increasingly feeling rate rose from 18% to 35% if the additional A global climate of change disenfranchised, left behind or just looking revenue raised were earmarked to fund The backdrop for the upcoming election for something new, to form a new majority social investment. is unquestionably different to what it was (sometimes by the slimmest of margins) in 2014. that is voting for “something else”, even And more (44%) respondents are now when it’s not clear what that “something supportive of the living wage than are The last year has seen an avalanche of else” really is other than it’s not what is against (43%). This is a change from 2014 surprising political change in some of our already there. when the largest number of respondents closest and long-standing allies and trading (48%) didn’t support a living wage. partners. The UK Brexit referendum last So how will this global political climate June saw a slim majority vote to leave the affect us in ? When asked As for the political parties in 2017, there EU. The 2016 Australian federal election if the economic and social conditions is plenty of change happening in terms in July was so closely contested that the that have led to Brexit, Trump and the of party leadership and makeup, and to outcome was unclear, with fears of a hung rise of populism in Europe are becoming a lesser extent policy. National has a new parliament, for a week after polls closed. an increasing issue in New Zealand, Leader and Deputy Leader in 2017 after the Donald Trump rode a wave of populism to 53% of business respondents to the surprise announcement in December last surprise all the pundits and become the Deloitte BusinessNZ Election Survey year that saw Prime Minister Key step down. 45th President of the United States. And said “yes”, 21% thought “no” and a in the UK, Theresa May’s call for a snap quarter of the respondents were on election backfired, albeit her Conservative the fence. This despite the fact that Party still edged out Labour in the closest New Zealand’s economy is a positive result in over 40 years. outlier in terms of global performance. 1 Deloitte BusinessNZ Election Survey

And their election year Budget saw a The majority of respondents (55% this Perception vs policy continued shift toward the centre with year and in 2014) continue to think the tax Controlling perception and appealing to policies focused on social cohesion through system should be reasonably flat with few voter emotion are equally (if not more in an increase in funding for social investment exemptions or tax breaks and 59% (63% 2017) as important as substantive policy and increases to Working for Families. in 2014) are against the introduction of a discussion in a hard fought election capital gains tax. campaign. In the heat of the battle it’s easy At the time we described Budget 2017 to lose sight of the fact that, from a policy as providing a cash dividend to middle Fifty-eight percent responded that more perspective, one can expect only a small and lower income New Zealand with the resource should be put to providing degree of change from any outcome under remainder offered a “social cohesion “better connections between science and our MMP system backed by a neutral dividend” – the ability to continue to benefit business” in an effort to lift R&D (this was public service; recognising that from a from the current economic settings. also 58% in 2014 and 57% in 2011). fiscal perspective the overall decisions of the differing political parties can have Not to be outdone, and in many respects Half of all business respondents remain materially different outcomes over time. as a reaction to lacklustre polling, the unsure of whether or not the Government’s The former point is illustrated by the Labour Party has elevated current infrastructure spending plans will relatively small number of specific policy to Leader with less than two months to deliver the best economic outcomes (52% changes proposed by political parties in the general election. Normally this would in 2014). And business supports private responding to the survey, recognising also be considered to be electoral suicide, but investment in infrastructure, with 64% that the voting public’s appetite for policy so far it has paid dividends, causing an (62% in 2014) saying they think public debate is limited. immediate and material rise for Labour private partnerships provide shorter in the polls. The Green Party has seen timeframes and value for money in The 2017 Deloitte BusinessNZ Election resign as Co-Leader amidst infrastructure projects. Survey is useful in highlighting the likely controversy. And recently NZ First shook policy approaches the different parties things up with the addition of Shane Jones Finally, businesses overwhelmingly would take on a case by case basis, as their candidate for Whangerei. (77% in 2017 and 79% in 2014) continue whether populous or principled, the extent to believe that the Government should to which they would intervene or moderate One cannot escape a creeping sense of have an overarching regional economic natural market forces, and the levers that topsy-turvy from these changes – that the development strategy to balance economic they would pull that affect business. relative stability that has characterised activity as far as possible throughout New Zealand’s politics in recent years New Zealand. We will leave the personality politics, the could – exacerbated by our MMP playing on emotions and the attempts to environment – be subject to change. For In these areas where business opinion control public perception in the capable some it’s just because they feel that it’s has remained steady since previous hands of the politicians with the survey time for something different, which is elections, one has to ask if this is because simply a marker of business sentiment. human nature following a settled period. the perception is that there hasn’t been much change in recent years or it’s just the What’s stayed the same? predicable business response. Perhaps in 2017 what’s more interesting is what hasn’t changed. In either case, the Opposition parties have an opportunity to shift the dial in The majority of business respondents some of these categories to draw on a (60%) to the survey think that the consistent sentiment. This is certainly Government has a coordinated plan of the case with infrastructure, where all action focused on raising New Zealand’s parties are suggesting increased spending Thomas Pippos economic performance. This compares to over a variety of projects, and regional Chief Executive 63% in 2014. development where the Māori Party, for example, have a strong focus.

2 Deloitte BusinessNZ Election Survey

Business is open to policy change, especially when it supports greater social cohesion

es re te econoic n socil conitions tt ve le to Breit ru n te rise o te rit nsure in Euroe ecoin n incresin issue in Ne Zeln No

What’s changed

Socioeconoic ellein Do you suort te concet es s n inictor o ier o te livin e No econoic erornce s een steily risin since

What hasn’t changed

e ority o usinesses Suort or uttin ore resource into tout tt te overnent roviin etter connections eteen coorinte ln o ction science n usiness to lit D ocuse on risin Ne Zelns stye rouly te se econoic erornce

3 Deloitte BusinessNZ Election Survey

Infrastructure

Opportunity for political parties to make their mark

Infrastructure has become a key election Auckland’s transport issues dominate the With an increase in infrastructure spend issue. According to the 2017 Deloitte agenda of the major political parties on across the board supported by most BusinessNZ Election Survey, parties infrastructure. Many of their proposals for political parties, it’s unsurprising that all from across the are Auckland are identified in the Auckland parties acknowledge the need to consider committing to increased infrastructure Transport Alignment Project (ATAP) innovative funding options, including spending. Their policy statements cover a report released last September. National private investment where appropriate, range of transport and other infrastructure has announced a transport package for to help meet the cost of their proposals. assets to support housing, resilience and Auckland including major projects across In this instance politicians are aligned economic development. rail, road and bus services. Labour’s with business respondents to the survey, headline is a light rail network between with a majority (64%) indicating the use And business agrees that infrastructure the CBD and airport (light rail in Auckland of private-public partnerships will deliver spending is needed with 25% of business is also backed by the Greens and United infrastructure that is better value for respondents to the survey identifying Future), funded through a regional fuel tax. money and within shorter timeframes. roading infrastructure as the “most important government-related issue.” This Outside of Auckland, both the Māori Party While the best ways to fund infrastructure is the fifth highest ranking issue identified and NZ First are mooting the revival of development is an important conversation, by respondents out of fourteen. regional rail infrastructure to support supply side action is also needed. We regional economic development. And can’t simply build our way out of the Despite ranking infrastructure as a National and Labour have plans for problems that are in bold relief in Auckland. priority, business is decidedly cool on transport infrastructure improvements in And in terms of Auckland’s transport the current Government’s infrastructure Wellington and Christchurch. infrastructure, transport pricing (a key plans. While they identify transport recommendation of the final ATAP report) infrastructure (roads, rail and ports) and Both major parties point to the importance is a promising way forward since it deals telecommunications/broadband as the of building transport infrastructure in with congestion and infrastructure capacity types of infrastructure with the most step with the development of housing and utilisation. potential to support growth, 31% of infrastructure – again a nod to Auckland’s respondents don’t think government’s continued growth. This is best illustrated Finally, there is an element of future current plan will deliver the best economic by the announcement of the Housing proofing that needs to come with any outcomes for the country and 50% are Infrastructure Fund earlier this year infrastructure development, underpinned unsure. Respondents were also negative and the re-purposing of Crown Fibre by corresponding digital infrastructure. Not on whether or not the current and planned Holdings under the new name of Crown only will this use technology to improve level of infrastructure spending is sufficient Infrastructure Partners. its own operations, but it will connect to relieve the economic constraints from people with business, government and increased growth. Sixty percent say “no” In addition, there is consensus among the the infrastructure in question. How and 29% report being “unsure.” political parties on the need for commercial to best embrace collaboration and users of water to be subject to greater technology change in transport and other This leaves ample opportunity for all economic pricing and discipline, reflecting infrastructure development will be critical political parties to make their mark on the various considerations such as efficiency, for the next government. infrastructure issue. benefits gained, environmental impact and market-based pricing. Most parties are open to new ways of funding and charging for new water infrastructure. National and The Opportunities Party highlight the role of local government in decision making, and the Green Party highlight the importance of strengthening the RMA to protect ground water resources and deal Tim Arbuckle with climate change issues. Partner 4 Deloitte BusinessNZ Election Survey

Business is unsure of current infrastructure development plans

lese rn ec o te olloin tyes o Ne Zelns inrstructures in ters o ic s te ost otentil to contriute to Ne Zelns usiness rot

ere s te iest otentil n s te lest otentil

nergy electricity gas

Water

Telecommunicationsbroadband

Transport roads rail ports

ill te overnents current s te current n lnne inrstructure senin lns level o inrstructure senin eliver te est econoic by the Government sufficient outcoes or Ne Zeln to relieve te econoic constrints tt ve eere ro increse rot

es No nsure PLA

5 Deloitte BusinessNZ Election Survey

Tax

Major parties play it safe

In prior elections, the major political parties But business did have a strong response The Opportunities Party in particular might have drawn clear boundaries on tax to increasing the top personal tax rate find these results of interest. As one of the policy. But the results of the 2017 Deloitte with 76% opposed. This puts them at odds only parties with a detailed tax policy, TOP BusinessNZ Election Survey suggest that with the Green Party campaign promise to is proposing to tax non-financial assets and may not be the case this year. increase the rate to 40% for those earning the introduction of an unconditional basic over $150,000 per year. income over time – a radical change, but The Labour Party seems to be downplaying not totally out of step given some of the tax as a key election issue in 2017, after A similar result plays out in relation to a sentiment showing through in business previously advocating for a capital gains capital gains tax (CGT). Again, the Green responses to the election survey. tax and an increase in the top personal Party is in favour (excluding the family tax rate. This time around, instead of home), but the majority of business (59%) The National Party will be content, as with proposing substantive tax reforms, they are opposed. With the Labour Party not the prior election, to sit outside the tax have promised to establish a tax working providing a pre-election position, this could debate as much as possible – at this stage group after the election to explore creating give rise to some interesting questions on positioning themselves as the party that “a better tax system” – with the recently the campaign trail. will cut tax rates over time - but leaving the announced water tax the only exception to specifics on how far and when for later. this so far. The thought of a CGT is certainly not subject to the same level of opposition as it The National Party is also saying once was. In fact, when asked this question comparatively little on tax, instead pointing with the caveat that there would be a to changes aimed at families announced in corresponding decrease in personal tax this year’s Budget. rates, those opposed to a CGT decreased from 59% to 46%. So there is a greater The reluctance to take a strong stance is acceptance of CGT by business if it is perhaps not surprising when the results from part of a tax base broadening package the business survey are evaluated – as the that allows other tax rates to be reduced. Alex Mitchell preference for change is not always clear. But no is articulating the Partner introduction of a CGT in this light. The company tax rate is a good example. The only political party currently Movement on a CGT isn’t the only example advocating a rate reduction is ACT. But of business showing some policy flexibility. business appears split on the issue; 48% While there is clear opposition to an support a decrease in the rate to 20%, increase in the top personal tax rate, 35% but 39% are opposed and 13% unsure. said that they would be more likely to Without a clear call from business to support an increase if it were used to fund reduce the rate, the major parties are social investment – a sign that a material likely to focus their efforts elsewhere. proportion of respondents are thinking about social cohesion as an important issue in 2017.

6 Deloitte BusinessNZ Election Survey

Business preference for tax change is not always clear

oul you suort es incresin te iest No ersonl rinl t nsure rte ro

oul you e ore liely Social to suort n increse in investment te iest ersonl rinl t rte i te itionl t revenue rise ere use to un Transport infrastructure

Other

Do you suort te oul you e ore liely to suort citl introuction o ins t i tere s corresonin citl ins t reuction in ersonl t rtes over tie s citl ins t revenues increse suc tt totl overnent t revenues rein neutrl

es No nsure

T

7 Deloitte BusinessNZ Election Survey

Business overwhelmingly support the need for an overarching regional Regional economic economic development strategy development Do you elieve tt te es The “within New Zealand” story overnent soul ve No n overrcin eionl nsure Econoic Develoent A large part of what’s behind the populist Fifty percent of all respondents (52% We might look at prosperity and economic Strtey to lnce econoic political movements abroad is that an in 2014) said they were unsure that growth through a range of lenses. For ctivity s r s ossile increasing number of citizens are feeling government’s infrastructure spending example: trouout NZ “left behind” and “left out.” Exactly what plans will deliver the best economic •• An industry lens – what are the current this means is not always clear but it is outcomes. And only a third of respondents industries driving our economy, what wrapped up in population shifts from rural thought Immigration New Zealand has the might future ones look like based on communities and regional towns to larger balance right in allowing skilled people into global trends and our comparative cities, leaving behind what economist the country, again relatively unchanged advantages, and how we might plan for Shamubeel Eaqub termed “zombie towns” from the 2014 survey results. this “within New Zealand?” here in New Zealand. t soul overnent o to So it stands to reason that political parties • An infrastructure lens – how could we EE NSES • suort sustinle usiness The majority of respondents to the 2017 that can tap into the emotion around be more coordinated across the country rctice in Ne Zeln Deloitte BusinessNZ Election Survey come the changes being faced by regional to consider where the next dollar of from small businesses and the largest New Zealand can achieve success. They infrastructure spend should be invested? group are from the agriculture, forestry can either play to people’s base-level fear •• A people lens – what can we do now to and fishing industries. Collectively they of change (as per recent experience in ensure we are ready to take advantage of rovie incentives or clener are a good representation of regional other countries), or they can take the more opportunities, and conversely, as existing production and resource efficiency New Zealand. difficult positive route and articulate an industries are disrupted how can we alternative vision for the country – what it ensure that our workforce is well placed Buil stroner lins eteen Ne Zeln When asked if they believe government might look like in a decade. to adapt? reionl econoies services n roucts should have an overarching regional economic development strategy to balance Instead, notable in the political party New Zealand is already seen as an attractive economic activity as far as possible responses to the survey is the absence of Ene it usiness on o to place to invest and do business. But we throughout New Zealand, a decisive 77% distinct policy positions. Exceptions include trnsition to lo cron econoy have an opportunity to aim for more and said “yes.” This was similar to 2014 when the Māori Party whose Māori Economic to be smarter about how we lift regional 79% agreed on the importance of having Development Strategy understandably prosperity alongside, and in step with, an overarching strategy. has a strong regional emphasis, NZ economic growth in our urban centres. First looking to increase investment to But the fact that such a clear majority revive regional rail infrastructure, and of respondents feel this way, and that it Labour’s plan for a $200 million Regional hasn’t changed since 2014, is indicative Development Fund. Does irtion NZ ve te that government still has a way to go es te lnce is rit lnce rit in lloin sille in articulating a vision for regional At Deloitte, we believe that it is just No tey let too ny eole in eole into Ne Zeln New Zealand. Looking at some of the as important to articulate a “within No tey ont let enou eole in other results from the survey further New Zealand story” as it is to have an nsure supports this. outward focused “New Zealand story.” It is not enough to develop regional economic Linda Meade When asked what government should do development plans in silos, rather they Partner to support sustainable business practice, need to exist within an overarching the second most popular issue chosen by framework. And for our big urban centres respondents (49%) was to “build stronger there could be a similar “within cities” story links between regional economies, services and strategy developed. and products. This sentiment remained steady from the 2014 survey.

8 Deloitte BusinessNZ Election Survey

Business overwhelmingly support the need for an overarching regional economic development strategy

Do you elieve tt te es overnent soul ve No n overrcin eionl nsure Econoic Develoent Strtey to lnce econoic ctivity s r s ossile trouout NZ

t soul overnent o to EE NSES suort sustinle usiness rctice in Ne Zeln

rovie incentives or clener production and resource efficiency

Buil stroner lins eteen Ne Zeln reionl econoies services n roucts

Ene it usiness on o to trnsition to lo cron econoy

Does irtion NZ ve te es te lnce is rit lnce rit in lloin sille No tey let too ny eole in eole into Ne Zeln No tey ont let enou eole in nsure

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