Q+A's Debate On The Economy

Q+A’s debate on the economy has been transcribed below The full length video interviews and panel discussions from this morning’s Q+A can also be seen on tvnz.co.nz at, http://tvnz.co.nz/q-and-a-news

Q+A is repeated on TVNZ 7 at 9.10pm on Sunday nights and 10.10am and 2.10pm on Mondays.

DON BRAID, WAYNE BROWN & SHAMUBELL EAQUB discuss the NZ economy with PAUL HOLMES

PAUL Right, let's talk economy. The numbers are suddenly frightening. Unemployment at a 10 year high. Back in February business confidence was at a 10 year high, now it's low. There are 159,000 people without jobs, higher in the Pacific Island and Maori communities. Business confidence has fallen three months running. In Wellington City Centre 19 shops are empty. In the provinces dairy prices are dropping, all the while interest rates are inching up. It doesn’t sound like the recovery we were promised. With us we've got the Mainfreight Managing Director Don Braid, the Far North Mayor and businessman himself, Wayne Brown. In Wellington the economist from NZIER Shamubeel Eaqub.

Shamubeel why don’t you start us off. Give us the hard numbers. Spell it out for us, give us the hard talk on the state of the economy at the moment.

SHAMUBEEL EAQUB – NZIER Economist Well I guess the first point is we are recovering. We had this horrible recession in 2008, 2009, we had a lot of job losses, the housing market fell apart. Since then things have been coming off those lows. But what we've seen is kind of this massive slide and things have kind of stabilised, and we've still got a lot of unemployment, it's at about 7%. We still need to grow the housing market. We still need to see household spending. And what we're seeing at the moment is this lack of confidence. A lot of people are just sitting on their collective hands. And one of the big drivers of the recovery which was net migration, that seems to be fading as well. A lot of Kiwis are going to Australia, and we think that will accelerate further given the very strong economy in Australia. So the question is, what is going to drive this recovery?

PAUL Ah the big question. So let's start to discuss this. So he says we're recovering. Wayne Brown, you're a businessman, you have some business ventures, you're the Mayor of the Far North, you have huge unemployment. Are you seeing a recovery Mr Brown?

WAYNE BROWN – Far North Mayor I think this is kind of the new reality. The numbers are a bit ugly out there obviously. Unemployment's 12% there.

PAUL What amongst Maori?

WAYNE No, I think unemployment amongst young Maori's probably more like in the 20s, if not higher. Things have tanked a bit, but it's interesting because the export sector up there is still doing pretty well, but locally...

PAUL You were telling me about this before, you're trucking the logs out, you're exporting so much stuff from Northland, the people on the ground are flat broke.

WAYNE Flat broke but some of the numbers are really ugly and quite startling. Electricity use is down 23%, which is horrifying. Building starts, housing starts, and unfortunately I'm in that industry, is down 35%, commercial's down 58%.

PAUL Down 58% on commercial building starts?

WAYNE And yet we're exporting more out of the district than we've ever done before. I mean I was just talking to Don he's loading up flour trucks out of the North.

PAUL Well you're a good indicator of course because you're trucking the stuff. You know if someone's producing something you truck it to the shops, to the supermarkets, to the ports. What are you finding?

DON BRAID – Mainfreight Managing Director Well domestically volumes are up 10.8% just in this last quarter, but a lot of that's market share. So we've done pretty well. I guess when times get tough you see who's swimming naked when the tide's out. I don’t think we should also underestimate businesses who have learnt to do more with less. There is a recovery there, there's no doubt about that, but businesses that have survived will not be employing a lot of people to do the job that they’ve learnt to do without too many people.

PAUL But you're up in the billion dollar class you see. You're not one of the two or three hundred thousand small businesses who in the last what six, eight weeks, two months, three months, have lost one employee here, two there, and so forth. Plus three quarters of your business is overseas isn't it?

DON Yes 67%.

PAUL And you're carting things to supermarkets which are pretty well recession proof we know.

DON And we're carting a lot of building products, there's no doubt about that. But we've got 166 branches around the world, and in New Zealand here there's 34 of those, and they are small businesses in their own right. Sure you know we've got 1.2 billion of revenue, but we need bigger businesses in this country. You know we've got to grow bigger businesses, and we've got to learn how to grow a bigger business to be able to compete, and sometimes it just might be that those businesses need to learn to grow offshore, to help what we've got here in New Zealand.

PAUL We've gotta be able to get offshore though, I mean this is one of the problems isn't it Shamubeel?

SHAMUBEEL Oh look it's very difficult for small businesses to be out there accessing global markets. It's not easy to be an exporter. Most exporters will fail on their first attempt. But the other thing that Don was saying that was really interesting was, the difference between big businesses and small businesses. In very recent data what we've seen, is that small businesses have been doing it much tougher particularly over the last three or six months, whereas big business is still doing okay.

PAUL You see you used the expression early on Shamubeel that people are just sitting on their hands at the moment, that we're seeing a certain staticness in the economy, it's not because we're broke, it's because people are sitting on their hands. So I would suggest to you that people who are actually broke, there is nothing for them to sit on.

DON It's the darkest before the dawn, there's no doubt about that. Those that have got through these tough couple of years, it's a slow recovery. We've only got four million people, don’t expect it to turn around over night. You know the bigger countries have got a quicker recovery. With four million people we've gotta find our way, grind our way out of that, with good discipline, good business discipline to get us there.

WAYNE But we do have to initiate things ourselves, we can't just wait for someone else to have it. I mean at the Council despite the fact that there's gloom all round us, we have at least got three possible growth scenarios next year, which have come out of thought and drive from one or two people, probably those driven like myself who are in small business anyhow, but we have come up with the ideas and the government has put a little bit of money in to help, but we've got a mineral aerial survey which I think will lead to long term growth in the Far North, if I can get past the RMA and all the other issues. We've got the cycle way, which is a coast to coast one, it's been kicked off before the grand one for the whole country, and we are determined to make the absolute best we can out of the Rugby World Cup. We've got three teams next year, but it's not about next year, it's about legacy things for afterwards. But nevertheless you have to have those things plus really tight control of Council's finances, and we find that central government in our district are not quite behaving the same way. You know guys arriving from Whangarei to our drive to inspect the height of scaffolding on little construction projects out in the bush. Now we can't afford to have that level of bureaucracy.

PAUL You're very interesting on that because you were quoting some figures earlier from 04 to 2010.

DON 2004 to 2010 we grew jobs in the public administration and safety sector by 25,000, 20%. In the manufacturing and transport and warehousing sector we lost 20% in jobs. I mean you're not going to grow an economy by having more bureaucrats in this country. We've got to learn how to grow business and bigger businesses, and the government's gotta have some ambitious goals, put some lines in the sand. And frankly I don’t think it's about being like Australia either. We've gotta learn to be a New Zealand in the wide world of business. And it's not just about export Paul. You know this thing about New Zealand businesses moving offshore, or exporting, or thinking that their business is offshore. That’s just not about export, we've gotta encourage them to go offshore to exploit those larger markets.

PAUL Can government do anything? What can government do? Is it a time for us to forget the orthodoxy of the last 20 years and for government to get down and dirty and start picking some winners and doing some help? I mean my own anecdotal experience is the Auckland Food Show, four days of it, probably audience numbers up there, crowd numbers up, spending well down. Not one sign, and the most marvellous array of people producing all kinds of new food products, wines and so forth, cheeses, everything. New Zealanders doing it Don. New Zealanders doing it, learning how to put a label on a bottle, to design a label, get the pricing right, so forth, controlling your costs. Not one MP was there, did I see. Is it time for the government to start doing something real?

WAYNE Well I think they are busy but I'd like them to reassess where they are. I mean rural New Zealand produces 70% of the country's income, and yet we have had a big shift of government spend towards the 80% who live in the cities, and whilst it's good that they're doing things in Auckland, when they make a decision that we're gonna cancel subsidies to all rural seal extensions, which is what most of the people in the area want, that shuts down a whole lot of local employment. It's not just a rebalance, you know that’s where our Maoris work, they do roads, and his trucks thunder up and down them and ...

PAUL Yeah and make it worse.

WAYNE We're happy to have them there...

PAUL You want some infrastructure.

WAYNE What I'm saying is infrastructure is all being focused. You look at the roll out of fibre, and I know a bit about this cos I rolled out the Auckland fibre when I was Chair of Vector, but we're now looking to have a fibre roll out across the country starting from the cities and going out. It should go the other way. There's much more bang if you start north of Kaitaia where there's nothing. Those people will get a big lift, and drift towards the city where there is infrastructure already.

PAUL People at home are going to be interested in where we are actually now. I mean Shamubeel I don’t know who economists speak to and I don’t know who you speak to in Wellington. We see the Reserve Bank Governor, now we've got to start worrying about inflation. I've just read a piece in the New York Times by a fellow who says you know what the world policy makers ought to be worried about is deflation not inflation. It's all very well Shamubeel thinking two years out. But we phoned for preparation for this programme the head of a big department store, we said did you notice spending reduce in the last four or five weeks. He said to us quick as a flash, it happened seven weeks ago. Something is deeply deeply flat. Do you accept this?

SHAMUBEEL Oh look and this is one of the big points, is what we're seeing is this is not a strong recovery. Things are really going sideways. We've stabilised, we're seeing household...

PAUL Sorry, what is recovering actually? Did we establish this? What is recovering?

SHAMUBEEL Recovery is I spose moving forward.

PAUL I know what recovery is. What is recovering?

SHAMUBEEL What is recovering is exports. It's mostly dairy and logs. Outside of that there is not much happening in the New Zealand economy. We're not spending on retail goods, we're not investing in housing, we're not investing in commercial property.

PAUL What is recovering in Keri Keri Shamubeel. What is recovering in Hastings? What is recovering in Timaru? What is recovering in Oamaru? What is recovering right now in Marton? Do you know?

SHAMUBEEL And this is exactly the point that the Reserve Bank has gotten wrong. What we are saying is that there is an overall recovery in the economy, but it's very concentrated in very small parts of the economy. We haven't got a broad base recovery yet, the Reserve Bank should not be raising interest rates. We are not going to have a big inflation problem because there isn't enough demand, and what we should be doing is encouraging people to consume more and give them a little bit of time, a little bit of breathing space to recover from this massive shock that we've had in this global financial crisis.

PAUL And then of course we've got the GST rise coming up shortly.

SHAMUBEEL And personal taxcuts though?

PAUL And the personal taxcuts. It's all gonna be pretty neutral.

DON Importantly we've got business tax reducing, and for the first time we've got a government thinking about how it can help business, which is great, so we're at 28, you know frankly I think we've gotta get down to 20. We've got to encourage companies to come to New Zealand because of their ability to have less tax. Our companies have gotta have less tax to be able to reinvest in what they want to create.

PAUL Quick conclusion from you?

WAYNE I'm delighted as a rural small business person to get a voice because that’s where it's hard to monitor that section. If 5000 small businesses drop one person there's you're 66.8% and it's very hard for a central economist to see that, and so we need to be heard, and I think – I'm in with Don, and we're in for a long haul, based on export stuff, but I think the small towns need to have more visibility.

PAUL Very good Mr Brown, Wayne Brown, Mayor of the Far North, Don Braid Managing Director of Mainfreight, and Shamubeel Eaqub, NZIER economist.

ENDS

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