What does a Labour-led coalition mean for business?

Hayden Shearman shares some reflections on what the newly elected government means for business owners. 

Winston has finally decided on his teammates. Yay! His decision means the arrival of a left-leaning government for the first time in almost a decade. For many business owners who are new in the game, this presents a foreign political landscape in which to do business. So is this a “Yay!” for business?

Well, so far, Jacinda and her new team mates haven’t put a lot of detail to their pre-election promises, but, as a general rule, a left-of-centre government means more tax, increases in minimum wages, tighter restrictions around employment and other business practices, and a government playing a more heavy handed role in the mechanics of the economy. As such, it’s easy to understand why so many business owners vote right. So, today, as we celebrate the arrival Labour Weekend, it can seem like uncertain weather is on the horizon for the New Zealand business community.

However, before we go writing off the next three years, let’s analyse what has actually been promised.

Yesterday, Jacinda Ardern referenced her pre-election plan for Labour’s first 100 days in office, saying, “Labour will take urgent action in its first 100 days in office to expand support for families and students, make rental homes warm and dry, find solutions to the mental health crisis and accelerate efforts to clean up our waterways”. So, not a lot that’s going to have a major impact on business early on (aside from those businesses contributing to the country’s water quality issues).

Similarly, Winston Peters has noted that much of NZ First’s decision to run with Labour was around issues of affordable housing, immigration, equality, and stabilising the economy.

Analysts are saying that, from what we know, we might see:

• A drop in the New Zealand dollar (there was already a noticeably sharp dip at last night’s announcement)—encouraging news for exporters, not so great for importers.
• A crackdown on immigration quotas—which can obviously reduce the labour pool that businesses can pull from.
• Controls over direct foreign investment—which reduces the amount of money circulating around our economy but can mean a reduction in prices of assets (property being the key asset class on everyone’s mind this election).

An important objective in Labour’s pre-election 100-day plan is the following:

“Increase the minimum wage to $16.50/hour, to take effect April 1, 2018, and introduce new industrial relations legislation.”

While it’s not clear whether the Greens and NZ First will agree to this exact figure at this exact date, minimum wage increases and employment legislation changes have to be in the pipeline.

So, there you are. There are pros and cons awaiting business owners and our recommendation is to keep your ear to the ground for concrete announcements of changes that will affect your business and make some tweaks to your business in case they do go ahead. Of which, here are some quick tips:

• If you’re in hospitality and employ people at the lower end of the wage scale, now could be a good time to tweak those budgets to allow for small increases in wages;
• If you’re in property, there could be a few spanners in the works that introduce both new challenges and new opportunities—you might want to free up some time over the next 12 months to deal with unforeseen changes;
• If your business relies on oversees labour filling New Zealand’s skills shortage you’ll be wanting to get those job adverts online fast and recruit (note: Labour’s plans for making the first year of tertiary education free and improving the student allowance could well help to boost skill levels of Kiwis in a few years);
• If you’re in the export or import sectors, these are unstable times and I’m sure you’ve already got your finger well and truly on the pulse of exchange rates.

At Strategy Collective we have people ready to assist with your finance, strategy and HR challenges and opportunities. And of course, the best way to fend off the unknown is to build your customer base so getting in touch with our Brand and Marketing team isn’t a bad idea either! Give us a bell on 06 759 7044.

Have a restful Labour Weekend everyone!

Let’s do coffee …