Economic growth in New Zealand continues to perform well by most measures, although businesses across the country are worried about a slowdown in economic performance as a result of inflation. A sense of optimism among business leaders is notably lacking at present, in the wake of Prime Minister Ardern’s declared focus on social welfare rather than economic growth.
“Despite a historically high terms of trade and rising exports, Finance Minister Grant Robertson has repeatedly tried to blame the domestic slowdown on global conditions,” National’s Finance spokesman Paul Goldsmith said, reflecting rising concerns among businesses.
Such sentiments may be expected from the opposition party. Yet recent research suggests they are shared by many in the private sector. A business confidence survey from the New Zealand Institute of Economic Research found that 31% of business owners expect that the next month will be worse in financial terms. Indeed, the country’s recent economic expansion and its positive short-term business outlook tell one story, but the IMF agrees that risks are also increasing as the uncertain international economic situation continues to develop.
“If you look around the world, New Zealand’s not doing too badly. But our confidence numbers – all those kind of leading indicators – have been weak since 2016. That’s when things kind of started to topple over,” economist Shamubeel Eaqub recently said on The AM Show.
Eaqub then added: “This is a very long cycle – we’re in our 10th year of expansion now. We’ve been growing for a long time. But it’s been a weird cycle – it’s been long, it’s been slow, it’s been very disparate across industries and regions. It hasn’t felt like a normal cycle for most people.”
Meanwhile, issues related to the planned Google tax continue to spring up. As many are aware, New Zealand plans to impose a tax on tech companies and online platforms like Facebook, Amazon, Apple and Google. Yet determining a fair way to tax these American companies, while maintaining profitability and overall consumer benefit, may be more difficult than previously imagined.
Over the past few years, OECD countries have been trying to solve this problem by proposing a distinct set of international tax rules. Chief executive of Business NZ Kirk Hope has suggested that New Zealand should not and does not have to pass its own internet tax regulations, but instead should follow the same rules as OECD countries.
Moreover, many believe that if New Zealand brings in its own internet tax rules, such an initiative would end up having negative effect on the economy for many reasons – including the risk of sparking a trade reprisal from the US.
Kirk Hope believes that if New Zealand follows the rules created by the OECD, and makes these tax rules work for everyone, the tech-related tax issues could be resolved with minimal friction. Such an outcome would lessen the risk of a wider economic slowdown, and pave the way forward for New Zealand to integrate itself smoothly into the digital age as it matures and solidifies.