The case for investment-led growth

Deloitte's perspective

By Louise Aitken, Partner, Deloitte and Rikki Stancich, Partner, Deloitte

The resounding message from this year's Election Survey is that growth and resilience are no longer viewed by the business community as separate agendas. Businesses are signalling that affordable energy, resilient infrastructure, and climate adaptation are now core economic priorities.

The impacts of climate-related costs are already showing up in balance sheets. More than half of the survey respondents (52%) say climate change is affecting their insurance costs, while 43.7% report impacts on input costs.

This clearly informs the position of 63.3% of respondents who believe that New Zealand needs to increase investment in climate adaptation and natural hazard resilience, with two-thirds (64.5%) of respondents identifying that central government should be the primary funder.

This then begs the question: where does the investment come from?

The survey repeatedly revealed resistance to using the tax system as a policy tool. Only 11.1% support increasing taxation to fund natural disaster investment. Almost six in ten respondents do not think the tax system should be used to deliver wider social outcomes. Wealth taxes, windfall taxes, and land taxes are all opposed by around two-thirds of respondents. Rather than leveraging fiscal policy, 55.9% favour reprioritising existing expenditure.

Energy security and affordability is top of mind for the majority of businesses. For the first time, businesses ranked energy ahead of transport as the infrastructure investment with the greatest potential to contribute to New Zealand's economic growth. Yet 80.4% of businesses are concerned about future energy costs, with electricity emerging as the dominant cost concern, affecting 70.6% of respondents, well ahead of diesel (51.3%) and petrol (39.1%).

There is consensus among businesses that government should play a key role in New Zealand’s energy future. More than 61% believe government is not doing enough to remove barriers to electricity supply needed to meet future demand.

However, this should not be interpreted as a call for more regulation. Regulatory compliance costs and regulatory complexity were cited as the two largest regulatory challenges, with 47% saying that regulatory changes in the last three years have increased the cost of doing business.

Instead, businesses are calling for long-term policy certainty. An overwhelming 94.7% of respondents support bipartisan 20 to 30-year approaches to infrastructure planning and funding. Businesses are signalling that critical investments in energy, transport, water, and resilience cannot be planned around three-year electoral cycles. While political parties themselves differ on the role of renewables, gas, storage, and market reform, there is broad political agreement that energy security should be a priority.

Businesses are not opposed to government intervention where markets alone cannot deliver strategic outcomes. Indeed, they are signalling a preference for government to explore novel approaches to financing infrastructure upgrade, with 78.6% calling for broader based mechanisms, such as congestion charging and user-pays models, to help fund infrastructure build.

Whether it is accelerating energy generation, improving resilience, strengthening supply chains, or supporting innovation, businesses appear more receptive to tax relief, co-investment, depreciation incentives, and targeted subsidies that encourage investment than to new taxes or regulatory mandates. The challenge for government is to create the right signals that attract private capital into nationally important outcomes.

Chapman Tripp's perspective

Bipartisan policy shifts

By Nicola Swan, Partner, Chapman Tripp

Two flagship shows of bipartisanship this term have demonstrated the art of the possible when parties reach across the political divide to address long-standing, systemic challenges.

A Modern Slavery Bill was introduced with co-sponsorship from National and Labour, and the select committee has now recommended the Bill be passed, which would bring New Zealand into alignment with regimes in Australia and the UK.

The National Infrastructure Plan also enjoyed broad support across Parliament. The Plan’s 16 recommendations set out a pathway to deliver New Zealand’s 30-year infrastructure needs. With nearly two-thirds of survey respondents believing that increased climate adaptation investment is needed, an enduring approach to resilient infrastructure will be a welcome development for many in the business community.

For the nearly half of businesses surveyed who indicated regulatory changes had increased operating costs, such a collaborative approach provides some comfort that policy in these key areas may endure across the election cycle.