Economy Hub: Andrew Bayly – ‘Delta virus has changed the game altogether’
“The Delta virus has changed the game altogether,” says National party shadow treasurer Andrew Bayly. “And remember we’re only up to D in the Greek alphabet.”
Bayly, quietly spoken and not prone to inflammatory, headline-grabbing, declarations, has this week been pushing the Government to consider an additional rental support package for businesses to get them through lockdown.
“One of the most worrying things to me is that we are now of the view that we need to expect more lockdowns. And we’re probably going to be longer in those lockdowns because of the nature of the virus,” he says.
“If that prognosis is right, then I think we cannot assume that landlords will continue to front up the cash and we can’t assume that banks, even though they’ve been very supportive, will also continue to take a robust view on their problem clients.”
Unlike some on the right of the political spectrum, he’s largely okay with the borrowing the Government has done to get us through the pandemic.
But he is worried about how it is being deployed and what the long-term plan is to pay it down.
“If we go back to March last year our debt was a relatively modest $60 billion,” he says.
In response to the pandemic that has now risen to close to $120 billion.
“And most of that I’m pretty comfortable with,” Bayly says.
“Except where in the Covid fund – $62 billion set aside for Covid – $12 billion has been put into a whole host of projects that have had nothing to do with Covid.
“I think that’s wrong. I would have kept that $12 billion to do rent support packages for businesses.”
Bayly says he’d stop the non-Covid programmes and keep more money to deal with the prospect of Covid disruption going on well into next year.
“We’re under $120 billion today, under current Treasury projections we still add another $60 billion of debt topping out about $184 billion of debt in about three years.”
“That is a worrying thing for me. Because at the moment we have a very good trading environment, we’ve got a very good terms of trade, one of the best we’ve had for a long long time. We should be creaming it.”
There are no guarantees the strong environment will last, he says.
In fact ominous signs are of the horizon.
China’s political shift in the past couple of months has rattled markets and threatens to slow their economy, he says.
“In China we’ve got President Xi who has been pursuing a policy that is referred to as ‘Common Prosperity’,” he says. “Basically it’s a redistribution of wealth.”
Billionaires have been targeted and several high-profile market listings have been deferred.
Prices for many hard commodity prices like iron ore and copper have plunged.
“Those are the two largest Australian exports to China and that will have some effect on the Australian economy, ” Bayly says.
“From an NZ Inc perspective those are our two largest trading partners.”
The other big global issues were the squeeze going on labour movement and the supply chain for goods.
“I think we should expect we’re going to have supply chain disruption until the end of 2022,” he says.
“A 40ft container was roughly US$1500 – now it’s $10,000 to $12,000. There’s a huge additional cost on our exports. Those are the big international issues that will be affecting out economy.”
Inflation is already an issue and is likely to get worse, he says.
“If we get back in 2023 the first thing I’m going to do is work out how to deal with that debt. And I’ve got three options.”
The first one is I can tax people more. And I’m not that keen on taxing people more.
“The second thing is I can cut the budget. I will cut elements of it, but I won’t be cutting nurses’ and doctors’ and teachers’ salaries.”
Budget cuts wouldn’t make much of a dent anyway, he says.
“Even if I take $3 billion out of the Budget for 10 years that’s $30 billion. I’ve actually got a $100 billion hole I’ve got to fill.”
The only real way to get out of the debt position New Zealand will find itself in “is to grow the economy like billy-o”.
That option is of course the preferred option for most politicians.
Finance Minister Grant Robertson also sees economic transformation and productivity gains as the preferred path out of debt.
But Bayly argues that the way Labour is treating business doesn’t match the rhetoric.
He wants worker shortages addressed urgently – and that means a focus on immigration.
He is worried that New Zealand has trashed its reputation as a desirable destination for skilled immigrants.
“What we should be doing – first principle in business – is support what you’ve got. So all those immigrants who are here and have been locked in this country for 500 days, we should deal with them,” he says.
“If they don’t have immigration status, if they’ve been here and done nothing wrong, we should recognise them.
“The second thing is, we’ve got to make sure that, in terms of trying to attract new people, it is much quicker to get through.”
That means a focus on boosting MIQ spaces and speeding up processing of immigration applications, he says.
Longer-term though we have a much bigger issue: “If you go on a website and people say they want to emigrate to New Zealand there will be a host of people saying for ‘God’s sake don’t come to this country’.
“That now leads to a major issue about where we are going to go in the next 2-5 years.”
Needless to say, Bayly’s not onboard with Labour’s planned immigration reset.
“That doesn’t mean we go back to 70,000 [net migration] I don’t think anyone wants to go back to that level.
“But we will need to have an element of immigrants that bring high quality skills. That’s important.”
Bayly also believes business has been over-burdened with costs in the past few years.
“All the changes that Labour has put in place – minimum wages, additional holidays, all the sickness pay – we estimate that’s an additional $2.8 billion extra costs lumped on small businesses.”
He argues National would progress these things in a more measured and managed way.
Then, more needs to be done to encourage business to invest.
“Because not only do we need to be more productive as an economy, we need to create new jobs.”
Last election Bayly ran with a policy that would have allowed businesses to write off the cost of up to $150,000 per piece of equipment.
“I’d really like to look to that for the next election and increase that threshold quite significantly,” he says.
“I want to see businesses investing in the latest plant and equipment and becoming much more productive,” he says.
“That doesn’t mean working much longer hours.It means better jobs and a much more productive economy.”
TOMORROW: Liam Dann talks to Finance Minister Grant Robertson
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