Opinion: Covid-19 provides impetus for fundamental change (NZ Herald)
Opinion: Covid-19 provides impetus for fundamental change (NZ Herald)
It has been three years since Prime Minister Jacinda Ardern called climate change “my generation’s nuclear-free moment”.
While the previous Government was unable to declare a climate emergency in the last term — believed to be because Labour’s coalition partner New Zealand First blocked it — she has now made it a priority with a declaration of a climate emergency.
Since Covid swept the world, it has done a lot to emphasise the social and economic inequalities that exist globally. The harsh reality of the lockdown exposed that, even in New Zealand, women and low wage workers were most impacted by job losses and reduced work hours.
Similarly, the relationship between climate change and inequality will see those who are disadvantaged suffer disproportionately from the adverse effects of global warming. The need for action to achieve New Zealand’s vision of a thriving, climate-resilient, low emissions future is widely understood.
The same areas that New Zealand used to successfully respond to the Covid-19 outbreak are needed to address global warming: listening to scientists, public policy and international co-operation.
When US President-elect Joe Biden spoke with Ardern for the first time since the US election last month, he spoke positively about her handling of the pandemic and said he looks forward to working closely with her on common challenges, including tackling climate change. Biden has named ex-US Secretary of State John Kerry — one of the leading architects of the Paris climate agreement — as his climate envoy.
“America will soon have a government that treats the climate crisis as the urgent national security threat it is,” said Kerry.
This break from the Trump administration’s climate policy will put our Government to the test, and necessitate that our ambition reflects our action.
Speaking recently at the Institute of Financial Professionals in New Zealand (Infinz) conference, Climate Change Commission chair Dr Rod Carr said the commission’s current programme of work is to produce the first emissions budget out to 2035 — and to the extent that we are not on track to achieve our domestic targets and global obligations, advise on a reduction plan that will reduce those emissions having regard to a wide range of impacts.
“It is important to understand that climate action is now mainstream conversation, and understand what is to be done, by who, and by when,” he said.
New Zealand emits about 80 million tonnes of carbon dioxide-equivalent greenhouse gases every year, and under the international accounting rules sequesters about 10 million tonnes, largely through forestry. Nearly half of those emissions come from agriculture.
The challenge for New Zealand, says Carr, will be that although our form of pastoral agriculture may be one of the most efficient ways of producing meat and milk protein in pastoral agriculture, there may now and in the future be ways of producing meat and milk proteins with an even smaller greenhouse gas footprint.
Of the remainder of our greenhouse gas emissions, transport makes up about 40 per cent. It is a growing contributor, with household transport emissions increasing by 15 per cent between 2011 and 2017.
Carr says this will be one of the major challenges that will go to the heart of both the allocation of capital by private vehicle owners, fleet operators and government infrastructure providers.
“Converting ground transportation to low or no emissions is a 100 plus billion-dollar investment challenge over the next 30 years,” he says. “Known technologies exist. They largely require electrification, and that electrification needs to be provided from renewable energy sources, unless it is to continue to contribute to greenhouse gas emissions.”
Navigating our economic recovery from Covid-19, while finding solutions for our climate change challenges will require a substantial and coordinated response. This will mean making sure capital is deployed to support the new age, new technologies, and new and necessary ways in which we conduct business.
Covid-19 exposed major weaknesses in our society. But it has also given us the impetus to make fundamental changes that will address inequality and fuel an economic recovery that is long-lasting and sustainable. Without a handbrake on the Government — and with a renewed impetus from international leadership to deliver — now is the time to make sure New Zealand isn’t left behind.
Infrastructure: Bridging the troubled water gap (NZ Herald)
Infrastructure: Bridging the troubled water gap (NZ Herald)
Water is New Zealand’s most valuable asset and the biggest infrastructure challenge of the next decade.
That is the view of Fletcher Construction chief executive Peter Reidy, who says New Zealand’s water infrastructure is well overdue for investment as pipes reach the end of their useful lives.
Reidy says that more than a third of wastewater treatment plants will require re-consenting within the next decade, and almost a quarter are operating on expired consents. Conservative estimates are that the cost of upgrades and renewals will be measured in billions of dollars.
“The public’s environmental expectations are also increasing and the consequences of climate change, including more frequent and more intense droughts, require urgent attention,” he says.
Over the past three years, central and local government have been considering how to address the challenges facing delivery of three waters services (drinking water, wastewater, stormwater) to communities. The review followed the 2016 Havelock North campylobacter contamination crisis that exposed systemic issues in the regulation and provision of three waters.
The result has been the establishment of Taumata Arowai as a Crown water regulatory body to administer and enforce a drinking water regulatory framework, with additional oversight on improving the environmental performance of wastewater and stormwater networks.
In July this year, as part of the Covid-19 stimulus, the Government announced $761 million in funding to maintain and improve three waters infrastructure and to support the reform of local government water services delivery arrangements.
At the funding announcement, Local Government Minister Nanaia Mahuta said there are “massive looming costs across the three waters networks” and the current delivery arrangement, particularly for smaller rural and provincial councils, are not well-placed to meet them.
Although councils currently own and manage most water services, the investment from Government was made contingent on local councils opting in to the government’s wider reform programme.
Fletcher Construction supports the Government’s plans to reform the way we manage water.
“At the end of the day it is all about customers — improving environmental standards, value for money and productivity for customers,” says Reidy. “Having water utilities at scale will also allow for greater investment in digital solutions to water.”
Fletcher Construction has brought together two of its businesses — Fletcher Construction Infrastructure and Brian Perry Civil — to support the establishment of capital construction plus operations and maintenance for water assets to help local government meet their challenges.
In September, Fletcher Construction along with Fulton Hogan signed a $2.4 billion contract with Auckland Council-owned Watercare Services for the delivery of water and wastewater infrastructure for Auckland over the next 10 years.
Watercare said the long-term, collaborative partnership is a first for New Zealand. The planned programme of work — rather than discrete projects — is expected to help drive greater cost-efficiency and innovation. A key goal is Watercare’s aim to reduce carbon in infrastructure by 40 per cent by 2024, to reduce the cost of its infrastructure programme by 20 per cent by 2024 and to “improve the health, safety and wellbeing of all people involved in delivering our infrastructure by 20 per cent year-on-year.”
Reidy says the 10-year partnership with Watercare was secured under a new enterprise model which has audacious cost and sustainability goals. “This is a transformational model of partnership built around carbon reduction, safety improvements and cost savings that challenged our team to collaborate across their specialty areas,” he says. “Watercare has changed the way it partners and that has stimulated Fletcher Construction to respond in a way that puts safety, sustainability and innovation at the core of our model.”
Reidy says it is that kind of model that could work across the country.
“With Wellington Water we are also offering more than just a straight subcontractor model. And that’s because real progress can be made when deliverers are embedded within planning and project teams.”
Reidy says the Government has started this conversation, but we all need to collaborate together to find the solutions. “That’s critical for our cities, our waterways and our people,” he says.
Sustainability is a necessity now
The Covid-19 crisis has not sated the appetite for investing
When the Covid-19 pandemic struck, some suggested that investing sustainably is something best-suited to a bull market — a “luxury good” or “nice-to-have” — but among the first areas to be cut back when times are tough and the economy is receding.
Internationally, it seems that investors have not just stuck with sustainable investing, but have embraced it. Instead of a luxury good, sustainability is seen as a necessity and an idea whose time has come.
The new reality the world is facing has forced investors to consider risk differently, and has highlighted the interconnectedness between social, environmental and economic challenges.
JP Morgan ESG & Sustainability heads Jean-Xavier Hecker and Hugo Dubourg say: “Over the long run, Covid-19 could prove to be a major turning point for ESG investing, or strategies that consider a company’s environmental, social and governance performance alongside traditional financial metrics.”
Indeed, a survey run by JP Morgan asked 50 global institutions (representing US$12.9 trillion in assets under management) how they expect Covid-19 to impact the future of ESG investing. It showed some 71 per cent think it is “rather likely”, “likely”, or “very likely” that a low probability-high impact risk like Covid-19 would increase awareness and actions globally to tackle high impact-high probability risks such as those related to climate change and biodiversity losses.
More immediately, the pandemic has seen investors turn to sustainable and responsible investments as a form of safe haven. This is because companies with strong records on employee relations, environmental sustainability and corporate governance tend to do well over the long-term.
Closer to home, the Aotearoa Circle’s Roadmap for Action identified some of the domestic social inequalities that have been highlighted by the Covid-19 crisis, including:
· Those on lower wages, and females, have been more impacted by job losses and have less certainty about when their jobs may return.
· Those on lower wages have less capacity to absorb financial shocks, meaning their wellbeing has been more impacted by Covid-19.
· Those without digital access or capability have been further excluded from accessing essential health and other services.
· Those with essential jobs are the people we rely upon during a pandemic. Yet they receive little compensation above the minimum wage. This has led to the stark realisation that we need to value these people differently and need to re-think our ideas of value.
The Aotearoa Circle says the rapid behavioural change in response to the pandemic has shown how innovative and adaptive we can be.
It suggests that governments stepping in to become some of the largest consumers via various stimulus programs presents a crucial opportunity to serve two purposes: economic recovery and a climate change crisis recovery.
The Roadmap for Action says: “Our recovery needs to look to reduce the social and environmental imbalances that disrupt our society, and make our economy more resilient for the next generation.
“If the huge stimulus does not simultaneously contribute towards a more resilient, sustainable economy, or worse, sets us back in our response to those issues, there are real risks we leave ourselves further exposed, and we are putting ourselves at a higher risk of funding shortages to achieve such a transformation in future.”
Co-chair of the Sustainable Finance Forum and New Zealand Super Fund CEO Matt Whineray says while the pandemic and the consequential economic destruction looms large, the existential crisis that is climate change is not going away — and will continue to worsen.
“Responding to the pandemic in a way which exacerbates the climate crisis, would be a global policy failure,” he says.
While New Zealand may have lagged behind some of the large international markets, investment in areas that reduce global carbon emissions and address essential social services is rapidly growing.
For example, New Zealand’s sustainable bond issuance is becoming a relatively significant asset class of its own. ANZ/ Bloomberg’s analysis of sustainable bonds in New Zealand by year shows a dramatic rise in issuance from $106m in 2017 to $2.125b in 2020. Over the past three years, some $2.7b in wellbeing bonds have been issued by government housing provider Kāinga Ora to fund sustainable and affordable social housing.
There is also a growing expectation from New Zealanders that their KiwiSaver providers focus on responsible and ethical investment opportunities that deliver positive outcomes aligned with their values.
Further compounding this demand is the rapid growth in millennial investors. This will become even more significant as the largest ever intergenerational transfer of wealth occurs in the near future, putting some US$30 trillion under the control of millennials in the US alone.
A 2019 Morgan Stanley report says 95 per cent of millennials are interested in sustainable investing (compared to 85 per cent of the general population). The report also showed that 85 per cent of millennials believe it is possible for their investment decisions to influence the amount of climate change caused by human activities and 89 per cent say their investment decisions can create economic growth that lifts people out of poverty.
As the government and large corporates in New Zealand ramp up the delivery on their productivity, social and environmental aspirations, the call from investors for increased sustainable investment opportunities will be answered.
Investors will likely embrace the opportunity to provide some of the significant capital flow that will be needed to help ensure New Zealand’s economic recovery is long-lasting and sustainable.
Mood of the boardroom: How business leaders view Jacinda Ardern (NZ Herald)
Mood of the boardroom: How business leaders view Jacinda Ardern (NZ Herald)
Prime Minister Jacinda Ardern is admired by chief executives for her leadership during a challenging term in government, writes Tim McCready
Jacinda Ardern’s leadership has been tested over the past three years: the Christchurch terror attack, Whakaari/White Island disaster and pandemic are front of mind for respondents to the Herald’s 2020 Mood of the Boardroom Election survey.
They rate her leadership at 3.88/5 on a scale where 1= not impressive and 5=very impressive.
A property CEO says what Ardern has coped with in her three years at the helm is nothing short of unbelievable: “It’s hard to think of anyone who could have handled these challenges with the same deft touch as she has demonstrated.”
“Would I rank her as highly without those extraordinary events? Possibly not — but that’s hypothetical and irrelevant. Does she have some huge challenges in front of her as far as the ‘new normal’ is concerned? Goodness yes. Does that change how much credit she must be accorded for her performance to date? Not in my view.”
“It is hard to imagine a more difficult term for a first-term Government that has been out of power for three terms,” says Deloitte CEO Thomas Pippos. “The Prime Minister’s leadership in some of the key challenges the country has faced has been without a doubt very positive.”
CEOs rate Ardern’s integrity (3.57/5) and courage (3.67/5) among her top capabilities, along with her ability to adeptly communicate and demonstrate empathy. They say these are attributes that can be leveraged internationally to help New Zealand in its recovery following Covid-19.
“She has led the country through some of our most challenging moments in recent history, and her empathetic style has clearly resonated both locally and globally,” says Spark CEO Jolie Hodson.
The PM’s ability to form a coalition is also rated highly by CEOs among Ardern’s capabilities (3.51/5), having successfully negotiated her way into power following the 2017 election. Alongside this is her rating for political management (3.33/5) — demonstrated by her ability to lead a stable Government over three years — which many previously considered unachievable with Winston Peters’ involvement.
But executives say Ardern has been let down by her MPs and Labour’s inability to deliver on 2017 election promises including KiwiBuild and Auckland’s light rail.
“An outstanding leader on all fronts, sometimes let down by members of her team,” says the NZIBF’s Stephen Jacobi.
A healthcare boss says she is great at leadership in a crisis, but “lacks plans for a future pathway forward and has no credibility on implementation of any policy”.
This worries CEOs, as they say the “hard stuff” for New Zealand is only starting now and her ability in this is yet to be proven.
Ardern’s lowest scoring capabilities from CEOs are for her vision and strategy for New Zealand (2.56/5) and economic management (2.17/5).
Beca Group CEO Greg Lowe says when coming into power, the Prime Minister promised to govern for all New Zealanders. “While she has handled some situations very well, we are still lacking a long-term plan for New Zealand that we can all get behind and make progress on.”
Key Performance Indicators
The highest scoring KPI for the Prime Minister from CEOs is her management for the response to the Christchurch terrorist attack (4.50/5).
Says director Anne Walsh: “The Christchurch Call showed international leadership in bringing change globally as to how multinational digital companies operate differently in the spread of terrorism and misinformation”.
The handling of the two other major crises over the past year also rate among Ardern’s top KPIs: Whakaari / White Island (3.94/5) and the Covid-19 crisis (3.90/5).
“No one would wish them on any PM. Jacinda has demonstrated genuine compassion towards her constituents,” says Precinct Properties chair Craig Stobo. “She is an outstanding politician who may be able to govern New Zealand without a coalition partner.”
The Government’s Covid response is a key part of Labour’s election campaign, with Ardern pointing out that relative to other countries, New Zealand is more open. She says our recovery is on track to be better than Australia’s with lower debt and unemployment levels and fewer deaths.
Ardern’s charismatic performance has received admiration on the international stage this year, with stark contrasts made between her Covid-19 response to the likes of US President Donald Trump and UK Prime Minister Boris Johnson.
Her ability to leverage her brand for New Zealand’s international advantage has again rated highly with CEOs scoring this 4.23/5. Says Erica Crawford, “She is one of New Zealand’s best assets on the global scene, she needs to cheerlead New Zealand.”
Another high-scoring KPI for Ardern is her political performance (3.84/5).
It will be disappointing to Ardern that child poverty reduction, a portfolio for which she is responsible for and has expressed a strong desire to address, was her second lowest KPI, receiving a score of 2.10/5.
But one of the most troubling KPIs for executives is Ardern’s ability to build confidence within the business community — for that they rate her 2.13/5. They say that Ardern’s repeated calls for kindness and empathy in politics alone do not make a great leader: “you need a workable plan and know-how to deliver it with and through others”. A director says “she does not inspire confidence that she understands business — but she does need business to succeed to generate jobs and pay taxes.”
They say her success as leader is driven mostly by the figurehead aspects of the role. But notes a professional director: “the hallmark of great leadership is having a superb team around you — and apart from Robertson — she just does not have that”.
“Labour has a very superficial engagement with the business community,” says a multinational boss. “They do the bare minimum and have no ministers outside of Grant Robertson who really understand business at all.”
Mood of the boardroom: CEOs compare finance rivals Grant Robertson and Paul Goldsmith (NZ Herald)
Grant Robertson: Capable, calm, credible
Chief executives send a clear message to Minister of Finance Grant Robertson: You’ve done well, but the real test is yet to come. It is testament to his performance in the wake of Covid-19 that, asked whether Robertson has been a credible Minister of Finance, an overwhelming majority of CEO respondents to the Herald’s 2020 survey — some 91 per cent, said Yes. Just 5 per cent said No; 4 per cent were unsure.
This rating is up considerably from last year. Robertson’s rating in the 2019 Mood of the Boardroom survey had 54 per cent of respondents say Yes to that same credibility question and 29 per cent unsure.
He is the highest-scoring minister, receiving a rating from respondents of 4.18/5 for ministerial performance. To put this score into perspective, this is the highest rating a Minister has received in the Mood of the Boardroom Survey since then-Finance Minister Bill English in 2016, where he received a rating in John Key’s Cabinet of 4.51/5.
On his performance as finance minister, the word “capable” was frequently used. Fletcher Construction CEO Peter Reidy says he is “capable, calm and credible”.
NZ International Business Forum executive director Stephen Jacobi describes Robertson as “a source of strength and stability for the Prime Minister and the Government”. Says a transport executive: “thank goodness he is influential in cabinet”.
Beca CEO Greg Lowe says that Robertson has a good grip on the economy, its drivers and what makes it succeed. “He is a hardworking and capable minister,” he says. “Engagement with business is good but we could improve the teamwork between government and business.”
It was this influence that saw him fulfil Labour’s 2017 campaign promise to reduce net core crown debt to below 20 per cent of GDP in 2018.
“Robertson has done a superb job for three years,” says a government relations firm boss. “Where are the loony lefties now who cried out for him to spend spend spend when New Zealand had a sizeable surplus? He stared them down — thank God!”
Since the early days of the Covid-19 crisis, Robertson has proven his mettle in the eyes of New Zealand’s business elite. He has grown into this role and was superb throughout Covid — “whether we agree with his policies or not”, says a real estate boss.
He rolled out the wage subsidy just days after the Government’s response to the pandemic was put in place. The subsidy was initially for 12 weeks over the lockdown period, then extended a further eight weeks for businesses still experiencing a significant hit to revenue. A third extension was announced when Covid re-emerged in August.
The Government also introduced a temporary 12-week income relief payment for those who had lost jobs, low interest and interest-free loans for businesses, and changes to the tax system to encourage investment.
Many top business leaders responding to the 2020 Mood of the Boardroom survey say their companies accessed the wage subsidy — 41 per cent received the first iteration, 16 per cent received the second. “This was an excellent initiative. Quick and sharp response,” says a healthcare chief.
Some see it differently. A banking chair says “as Minister of Finance, he has held the line in a number of areas, but has allowed Government spending to run riot over the pandemic”.
Independent director Cathy Quinn says the wage subsidy was “an important step to keep people in work and the economy going.”
But she says we now need business to adapt to the tough new environment as the Government can’t afford to subsidise indefinitely.
An executive in the transportation sector says “the real test will be if he gets back and whether he can drive quality spending as opposed to a lolly-scramble”.
Mainfreight CEO Don Braid says Robertson has performed well under the conditions — but notes “the real challenge now lies ahead”.
That challenge is New Zealand’s economic recovery, and the hefty Government debt. According to the Budget, Government debt will peak at 2024 when it hits $219 billion (just under 60 per cent of GDP).
Robertson insists New Zealand will pay down its increased debt over time, through growing the economy. He has ruled out cutting significant public services and income support.
“When I look back to the late 80s and early 90s I saw a different kind of approach to recovery from a downturn, one that was more of an austerity-based one — it was young people who bore a lot of the brunt of that. I am determined we won’t allow that to happen.”
The Government’s approach was to invest in young people now through training and job support.
Chair of Precinct Properties, Craig Stobo, says Robertson has been “unruffled and steady,” adding “the spectre of the 80s economic reforms informs his policy preference”.
It is unsurprising most CEOs focused on Robertson’s performance in relation to the Government’s Covid-19 economic response. However, there is underlying disappointment that he has — so far — lacked long-term vision, and hasn’t used his position to deliver on the transformational change Labour campaigned on in 2017. A real estate boss says: “he lacks depth and strategic focus — it is all about the now.” Adds an executive recruiter: “I have severe concerns over his lack of focus and long-term thinking.”
The chief executive of an investment firm says: “He did a sound job in his first two-and-a-half years but he had the opportunity to create a massive lasting legacy and transformational change with the big spend up and appears to have wasted the opportunity on instead spreading money in every direction.”
Paul Goldsmith: Needs confidence, clarity
New Zealand’s top chief executives want Paul Goldsmith to find confidence and clarity.
National’s finance spokesperson has yet to make a major impact with many top business leaders, perhaps because he has been overshadowed during National’s leadership turmoil.
“Paul, like many in the opposition have been starved of oxygen in terms of public voice or debate,” says Deloitte CEO Thomas Pippos. Precinct Properties chair Craig Stobo has a similar view: “He has emerging credibility but low share of voice.” The 2020 Herald Mood of the Boardroom survey asked executives whether Goldsmith presented as a credible future minister of finance. Fifty-three per cent of respondents said Yes; 22 per cent said No.
The remainder — a significant 25 per cent — say they are still unsure, with many noting Goldsmith has lacked visibility at a time where strong opposition is needed.
“He’s been meek,” says an executive in the wine industry.
“He should have had a field day with this Government,” says an investment banker. “But he has been very quiet in Opposition.” Another high-profile banker says: “I haven’t seen enough to suggest he is a credible future minister of finance, but give him the benefit of the doubt.”
“Based on what little I have seen, he seems to be okay — but I am not ready to say ‘yes, he’s a credible future minister of finance’,” adds a recruiter.
This morning, Goldsmith will debate with Finance Minister Grant Robertson at the launch of the Mood of the Boardroom Election Survey. Several of New Zealand’s top bosses note that compared to Robertson — who received a positive response from 91 per cent of CEOs — Goldsmith lacks credibility.
Grant Samuel managing director Michael Lorimer says Goldsmith does not have a good grasp of the issues: “This was evidenced at last year’s breakfast debate and he has not improved since,” he says. “He needs to put up ideas — not just point out the faults in the Government,” says a healthcare boss. “While I don’t like Labour’s policies, I think Grant Robertson is a far better and more credible Minister of Finance.”
“He’s not as strong as Grant, but he has made some excellent suggestions and would be tested if he became minister, which would give him the chance to raise his credibility.” says an executive in the real estate sector.
But Goldsmith should take heart. The Opposition finance spokesperson is typically challenged when compared to an incumbent who has become established in the role.
Robertson also faced a hurdle connecting with the business community prior to taking the helm.
In the 2016 Mood of the Boardroom survey — when Robertson was up against Bill English — one banker suggested Labour should replace him with “someone who understands the portfolio, like David Parker”. In the eyes of CEOs, Robertson is now their top performer.
Goldsmith took on the finance portfolio in June last year and was elevated to third in the party’s parliamentary rankings under Simon Bridges’ leadership.
He won praise as Opposition finance spokesperson in the early days of the Covid-19 pandemic.
Goldsmith commended the Government for the wage subsidy package and its Covid leave support. But he also called for more targeted and specific support for business with more rigorous measures around it if a wage extension was introduced — something that is now being debated as it comes to light that some large, profitable companies likely took advantage of the subsidy.
The tone he used to deliver his criticism of the detail in the Government’s economic response was in stark contrast to then-leader Simon Bridges, which drew strong condemnation and ultimately led to his demotion.
“Paul has continued to work hard and push on detail,” says a transportation boss.
Goldsmith retained the finance portfolio under Todd Muller’s brief stint as leader but dropped in ranking to number five — bouncing back to number three when Judith Collins assumed the leadership.
Despite his backing in the role by three leaders, CEOs say Goldsmith is still yet to prove he’s got the chops to run the government books. But they also acknowledge he is in an unenviable position, following in the footsteps of some high-performing predecessors — former National Party finance minister Bill English consistently rated top of cabinet during his tenure as finance minister.
“I compare him to Bill English — a hard act to follow,” says a CEO in the agricultural sector.
“I like Paul — and he is smart,” says a top lawyer. “But scratch beneath the surface and he can’t answer follow up questions.”
Another major concern raised by CEOs is Goldsmith’s lack of ability when it comes to communicating and connecting with the business community and the broader public.
“He is not really a retail politician, but he is extremely bright and is a very fast learner,” says a professional director.
“He is not yet credible, but he has the brain, if not the communication skills — he’s very dry,” says a lobbyist. A CEO in the transportation industry says he lacks mana and presence — “too much IQ and not enough EQ!”. Another CEO shares a similar view: “He’s dry, but capable.”
The head of an investment firm sends the following advice to Goldsmith: “He needs to command the key points and deliver them with more confidence and clarity.”
A real estate boss gives a backhanded compliment — referring to Goldsmith’s extracurricular interests: “He’s an excellent art historian.”
Mood of the boardroom: Wage subsidy a jobsaver for many (NZ Herald)
Some sectors have even taken on staff writes Tim McCready
Business leaders say the wage subsidy the Government implemented to support firms that had taken a revenue hit from Covid-19, was an important step to keep people in work and the economy going.
The Mood of the Boardroom 2020 survey revealed 41 per cent of respondents accessed the first round of the subsidy, and 15 per cent — the second round.
The subsidy was received across myriad industries, and those that took it up say it was a quick and sharp response that bolstered confidence and saved jobs. “I think this saved many jobs,” says a healthcare boss. “We did not make people redundant because of this, and they remain employed post the subsidy ending.”
“It was a significant help during times of extreme uncertainty to support staff and give them surety of employment,” says Fulton Hogan CEO Cos Bruyn.
There have been reports of some companies rorting the system and claiming wage subsidies they may not have been entitled to but some survey respondents say although they may have been eligible for the support, their businesses chose not to take it up.
LIC chief executive Wayne McNee says given how the business performed for the full year, the firm chose not to use it. A tech CEO says, “we felt it was a badge of honour not to need or use the wage subsidy in the first or second round”.
Chief executive Don Braid says Mainfreight applied and received $10.6m — qualifying under the rules. “But we returned the full amount when we recognised we were better off than others and could see improvement occurring.”
One CEO says their company accessed the first round, but repaid it in full as soon as it was clear the impact of Covid was less than projected. “It was hugely helpful in giving us the confidence to maintain full employment and remuneration at a time when some competitors were cutting one or both.”
But business leaders caution: “We need business to adapt to the tough new environment and the Government — and indeed New Zealand — can’t afford to keep subsidising business indefinitely.”
Business resizing — not just down
The buffer provided from the subsidy has no doubt saved jobs. Exactly half of the survey respondents say they haven’t had to downsize staff during the pandemic.
But even so there have been a significant number of casualties from the crisis — some 17 per cent say they have had to downsize by more than 10 per cent. Although some note the full impact of job losses will be revealed once the ventilator of the wage subsidy wears off.
The most dramatic reduction in staff numbers has been in the tourism industry.
But 8 per cent of respondents say they have upsized due to the impact of the pandemic. These are from a range of sectors, including food and agribusiness, banking, investment, professional services and IT firms. There have been several reasons for the staffing increase.
“We are taking the approach of investing through this crisis,” says ASB CEO Vittoria Shortt. “This means providing permanent roles for contractors and recruiting more people into our business.”
Chapman Tripp chief executive partner Nick Wells says there have been fewer departures from the firm: “Few want to leave for overseas, so we have grown slightly compared to what we would typically expect.”
A professional director says one of her companies initially pushed pause on recruitment — “however it very quickly became apparent that the needs of our customers required us to accelerate progress in order to continue to help with their evolving needs.”
CEO Chris Quin says Foodstuffs North Island upsized 6 per cent at peak due to panic-buying and growth in online.
Mixed impact on production levels
CEOs were asked how Covid will impact production levels within their businesses. The result is mixed over the coming two quarters, with a few (4 per cent) expecting a significant decline of more than 80 per cent, but others expecting no impact or even growth in production levels.
A law firm head: “We saw a decline over the past three months that averaged out at 20 per cent. A trend in the right direction is now evident — but still down year-on-year.”
Most in primary industry and food and beverage say they don’t expect to see a significant impact in the coming months. “Demand persists for premium infant formula in the China market,” says director Ruth Richardson. “Demand signals remain very positive,” says an agribusiness boss. “But we do have a lingering concern — perhaps through our approach of being constructively paranoid — that the music will stop and there won’t be enough chairs.”
As has been the case for many aspects of Covid-19, CEOs say in many cases production levels will depend entirely on the pandemic — and therefore the future remains uncertain.
“It depends totally on expectations of further Covid incursions, shutdowns and the opening of borders to both shows, sports teams, artists and tourists,” says non-executive director Joanna Perry.
From a food and beverage boss: “This is a hard question to answer looking forward as it all depends on the Government’s ability deliver on its elimination strategy.”
Production is clearly not just a domestic issue. A slowdown in world trade growth (which CEOs score among their highest international risks at 7.64/10 on a scale where 1= no concern and 10=very concerned) contributes to general uncertainty and nervousness in the business community in terms of future production levels.
MinterEllisonRuddWatts’ Lloyd Kavanagh: “We need to plan for each of the scenarios, and be agile in adapting depending on what unfolds. We can’t project one outcome when there are so many variables.”
Covid changes
The disruption in the way businesses operate as a result of Covid-19 has been a catalyst for businesses to adopt new technologies more quickly than they expected and accelerate their use of existing technologies. McKinsey estimates this rapid migration to digital technologies has seen us vault five years forward in consumer and business digital adoption in a matter of around eight weeks.
The Mood of the Boardroom survey asked CEOs how the Covid-19 crisis has changed the way in which their business is conducted.
On a scale of 1 to 5, where 1= strongly disagree and 5=strongly agree, the top-rated changes to businesses are: increased use of online meetings (4.63/5), increased use of technology (4.45/5), more flexible working (4.36/5), accelerated growth of e-commerce (4.33/5) and reduced international business travel (4.31/5).
Beca’s CEO Greg Lowe said he was surprised during the initial lockdown at the effectiveness of working from home both for Beca and for its clients.
“The increased use of virtual meeting technology has not only increased the skill levels of all of us, we have realised that we can be more productive from remote locations and carry out more of our business activity remotely than we thought.”
Beca managed to maintain its delivery to its clients with thousands of people working from home — but that this is not a sustainable business model in the long term.
“Building relationships, developing people, creating more effective teams, increasing productivity all needs some form of person to person engagement. While undoubtedly we will see more flexible working (for many reasons) and less travel, I do not believe that large numbers of people want to work permanently from home.”
The adoption of flexible working saw one energy CEO reduce their organisation’s footprint and rethink the use of office space. But an investment fund boss reckons the importance on office space from more people working from home is overrated — “but this will be impacted by economic factors”.
Precinct Properties chair Craig Stobo says “the Covid wave has accelerated the digital wave”. Another executive in the tech sector says New Zealand should “use this to become a digital nation!”
A property CEO says Covid has given their organisation a greater appreciation of the critical importance of business continuity planning. “It is no longer a ‘nice to have when we get to it’ item on the board agenda.”
An increased focus on staff wellbeing and social purpose was also mentioned from executives spanning various industries as a major change from Covid.
“We have had a complete rethink on the role of HR and how teams work — including salary and incentive structures,” said one CEO in the utilities sector.
Mood of the boardroom: Resurgence pops plans for transtasman bubble (NZ Herald)
Support for transtasman travel but only when safe, reports Tim McCready
The transtasman bubble proposal should be progressed once the Covid-19 flareup in Australia is under control. That is the message from New Zealand’s top CEOs in the Herald’s Mood of the Boardroom survey.
The result was overwhelming — 94 per cent of respondents are in favour, 5 per cent are unsure. Just 1 per cent of respondents say we shouldn’t continue to progress the initiative.
CEOs placed myriad caveats — “only when safe”, “define ‘under control’”, “risk must be minimal before relaxing”.
“It’s something we should keep a watching brief on,” says a tech entrepreneur. “Nothing in Australia gives me confidence in their capabilities to contain.”
Deloitte CEO Thomas Pippos asks: “The question is what does under control mean? At one stage Victoria was considered under control.”
“The latest outbreaks seem to show this is less likely and riskier than first envisaged,” says Chapman Tripp chief executive partner Nick Wells.
Some CEOs say we shouldn’t be progressing until there is no community transmission on both sides of the Tasman.
“We need zero community transmission in each country and rapid tracing technology that crosses borders to even be considered,” says a dairy industry boss. “Rapid testing may have a role to play when and if it becomes available.”
But others are amenable to travel with cases present in the community — so long as steps are taken to ensure the risk remains low.
“Progress on pandemic management and the use of technology can both be used to provide a quarantine-free system for travel with selected countries,” says Beca CEO Greg Lowe. “We just need to get on with solving the technical challenges so we can implement when the health settings are right. No one wants to be unsafe, but we do need to have a plan.”
Australian Prime Minister Scott Morrison has said Australia is working on a “hotspot” model that would not necessarily require zero transmission. He said this could also extend to Covid-free parts of New Zealand.
Morrison said all states and territories except for Western Australia had agreed to an update of the roadmap to recovery, with the goal to reopen their borders by Christmas. It will focus on testing regimes, data sharing and interstate borders — rather than issues like hospitality venue capacity.
Jacinda Ardern has said that — so far — Australia’s hotspot model will not be reciprocated holus-bolus. “Ultimately, for the hotspot arrangement, it doesn’t change the work that we’re doing on the bubble which is focused on putting New Zealand and Australia in the position to have quarantine-free on both sides of the Tasman. Right now though, neither country is in a position to offer that in its entirety because it’s just not safe. “If a New Zealander chooses to go to Australia because there is no quarantine, they will know that they’ll be covering the cost of their quarantine on return to New Zealand.”
Back in May when a travel bubble with Australia looked promising, the Trans-Tasman Safe Border Group was established, co-ordinated by the Australia New Zealand Leadership Forum.
The group — made up of 11 government agencies, six airports, two airlines, health experts and airline, airport and border agency representatives from both Australia and New Zealand — submitted a blueprint for transtasman travel to both governments with the objective of removing the need for quarantine.
Auckland Airport CEO Adrian Littlewood was part of the effort, and said at the time “New Zealand and Australia have a great opportunity to really set some potential standards for travel restarting around the world.”
Its original aim was to have the bubble operational and flying by the July school holidays.
Prior to the Covid crisis, New Zealand was the most popular outbound travel destination for Australians, with 1.5 million visitors arriving from Australia in 2019, accounting for 40 per cent of all foreign visitors to New Zealand. Australia was the most popular outbound travel destination for Kiwis. New Zealand is Australia’s second largest source market for visitors, with 1.4 million visitors in 2019, accounting for 15 per cent of total visitors to Australia.
Unsurprisingly, a travel industry CEO is supportive: “It absolutely should be progressed — our economies and social structures are too intertwined.”
Chairman of the New Zealand Initiative Roger Partridge says the open border will be significant: “We all have an interest in Australia succeeding and expanding our ‘domestic’ marketplace for tourism by an extra 20 million people.”
Precinct Properties chair Craig Stobo reckons the industry should be innovative in its thinking. “We had 1.5 million Aussies come last year … tourism will have to go for a high-margin value proposition — not a low value volume growth strategy as we have done in the past,” he says.
Most CEOs agree quarantine-free travel across the Tasman is unlikely to happen soon.
“With the rate of community transmission and the time it will take to get this under control, we should not expect or depend on this opening up in the next three months,” says marketing boss Anne Walsh.
Mood of the boardroom: The show must go on — online (NZ Herald)
In any normal time, the political leaders would have been put through their paces and challenged by business chiefs on their election policies.
The 2020 election is like no other.
The Covid-19 restrictions in Auckland saw BusinessNZ move the conference online.
Instead of a pumping crowd, there was a sea of empty chairs. Mask-wearing journalists and a guy who sanitised the lectern in between four political leaders: James Shaw (Green Party), David Seymour (Act), Judith Collins (National) and Jacinda Ardern (Labour).
Winston Peters (NZ First) appeared through video-link and BusinessNZ’s members watched online.
Tim McCready summarises the show.
Jacinda Ardern
Labour Leader Jacinda Ardern was positive. She highlighted everything her Coalition government had done to support business through Covid, and reiterated “the best economic response is a strong health response.”
“Ours is a response I will defend as being among the very best in the world, because not acknowledging that would be a disservice to five million new Zealanders who made it happen,” she said.
2020 has not been easy: “For business it has been hard and disruptive — a pandemic sweeps away business as usual. It is incredibly hard for business to plan in a global pandemic.”
But she said there was a limited window of opportunity to leverage our reputation as a “clean, green, and safe nation”.
“We will launch an investment attraction strategy… and compete to win the global companies we want to invest in New Zealand and locate part of their business here.”
Ardern said New Zealand could use its standing to attract more investment like Microsoft’s plant establish its first data centre in New Zealand.
“We have a plan and we are rolling out that plan … “Supporting our people, our businesses, and our international reputation”.
Judith Collins
National leader Judith Collins spent a significant time pointing out the flaws in the current government — beginning with its response to Covid.
The prospect of yoyo-ing in and out of lockdown is a significant impediment to business, and she criticised what she called the “mind-blowing stupidness” that saw the Government allow corner dairies to open during lockdown period but not the butchers and greengrocers next door to them.
“Let’s put essential industries aside. We should be looking at what’s a safe industry.”
She was also vehement in her denunciation of Labour’s failure to fulfil its promises.
“We would not promise to build 100,000 houses in ten years. We would not promise light rail up Dominion Road and then not do it. We would not cancel or delay 15 roads. We will deliver on what we promise,” she said.
Collins spoke of her vision for New Zealand in the wake of Covid-19.
“It’s an opportunity for New Zealand which we can either ignore and worry about everything that might go wrong, or we can seize the opportunities.
“It is a time for vision. That vision does not mean going back to the past.”
Winston Peters
New Zealand First Leader Winston Peters joined via video link from his hotel room, while on his bus tour of the South Island. He started by criticising the Labour-led Government asking “what are we doing in lockdown in the South Island when [the re-emergence of Covid-19] is an Auckland issue?”
He said New Zealand is entering a completely new era — “we are not going to revert back to how things were just a few months ago”.
The Greens also came in for criticisim. “If you are sceptical that ‘woke’ is a problem, let me say: ‘Green school’.” Labour’s proposed Matariki holiday was also slammed, along with its proposal to increase the top personal income tax rate to 39 per cent — “taxing people will not regain our prosperity.”
As for New Zealand First, Peters said it is standing on several platforms, “one is the experience we bring to office and the moderating presence we have in Government. And if you doubt that, just two words: capital gains tax.”
He wrapped up saying he cannot believe the level of carelessness about the election: “Don’t stuff the country. That’s what the election is about. Don’t stuff the country. You’ve got two votes — buy some insurance.”
James Shaw
The Greens don’t always get an easy run with business. But many have an affinity with Greens co-leader James Shaw who was in his element at the BusinessNZ election conference.
He laid out three areas he thinks the NZ economy can expand on, which don’t require the physical movement of people.
Shaw pointed to NZ’s growth in weightless exports over the last couple of decades — particularly in the ICT sector.
He wants to establish a digital export office at NZTE to give the sector focus and significantly boost exports.
Sustainable agriculture was another opportunity with “value over volume” sitting nicely alongside environmental sustainability. “We need to move more towards supporting farmers and growers to enable them to take advantage of that and support them through the transition,” he said, adding that he’d love to finally be rid of the false narrative of town versus country.
But if he had to pick a winner for New Zealand, Shaw said it would be the development of electric transport. He said NZ has an advantage here — including using technologies developed for the America’s Cup: “We have a niche industry that is starting to emerge here that I think we could encourage and grow — that will ultimately lead to significant exports as the whole planet addresses the need to decarbonise.”
David Seymour
Act leader David Seymour opened up by likening the Government’s borrowing to “fiscal child abuse,” due to the amount of debt that future generations will have to deal with.
He told the BusinessNZ audience that New Zealand needs to stop comparing itself to Victoria and Sweden, and instead seek to do better. “Why are we not Taiwan?,” he asked. Seymour suggested we’d have a better outcome if we relied on both the public and private sector in our Covid-19 response, and not just the Ministry of Health.
In terms of encouraging future growth to aid our recovery, Seymour said we need to allow businesses to grow without restriction.
He said the current regulatory environment is unattractive to value-added tech — citing genetic engineering as an example — and thinks we could make good progress in this area if not for the “medieval superstitious genetic engineering rules”. It was a similar situation for fintech: “we might be able to get Kiwis back if our regulations weren’t so hostile.”
Foreign investment restrictions should also go: “We desperately need capital to raise productivity, we need to strengthen relationships and investment connections with democratic OECD countries.”
“There is no better vote you can give to raise the standard of debate in parliament and ensure we come out stronger as winners.”