Column: Is the mood turning?
Wednesday, November 8th 2000, 5:41PM
by Rob Hosking
There may be a little bounce-back in the business confidence over the next month as the government reaps the benefits from its two business and ministers pow-wows of the past couple of weeks. The let's make up and be friendly, meet and greet between senior ministers and selected business types was probably of limited direct economic benefit, but it lances what had become something of a political boil.
From the viewpoint of the Labour-Alliance administration, the main idea seems mostly to neutralise the howls of outrage which greeted the government's every move earlier in the year.
Prime Minister Helen Clark showed yet another Muldoonist touch in marginalising some of the sector groups the Business Roundtable and the Employers Federation in particular as extremist.
In his heyday the late Sir Robert was notorious for his attacks on the union movement, but he was always careful to distinguish the "extremists" and the "stirrers" from the "ordinary decent New Zealander" who as often as not was a union member. Clark has carefully done the same business critics are wreckers, verging on the unpatriotic, and quite unlike the rest of the ordinary decent business-person.
It is handy, even in this day and age, for a left leaning government to have some grizzles from the business community. It is probably one of the factors which has kept the Alliance rank and file in line over the past eight months as it has seen the once ferocious Jim Anderton turn into a bit of a pussycat.
But the government wants those grizzles to be confined to a low rumbling background noise. When the discontent reaches the level it did this year, ordinary voters get a bit nervous. Moreover, that sort of mood does affect the real economy, with investment decisions deferred and workers not hired.
The mood may shift for the next survey. The e-commerce summit last week which was open to all comers, and which had almost as many Cabinet ministers in attendance as the hand-picked soiree the previous week was remarkable in its upbeat mood. Partly this was the response of an IT industry which, international in outlook and fed on US-generated talked about the new economy, has long felt that governments of whatever stripe do not take it seriously enough.
Nicely timed for the end of the conference was Ericsson's announcement of a large investment in the Wellington region.
Then came the job figures, which definitely caused a burst of concentrated head-scratching. They were unexpectedly good unemployment is at a 12 year low, and the number in jobs grew by 1.2% for the quarter. However this burst of good news reflected employment and investment decisions taken earlier in the year, before the business mood got low down and dirty. Moreover, the fact that the figures showed more than 8000 new jobs in education the equivalent of two universities- suggests those statistics may be a little on the wobbly side.
Next week's Quarterly Employment Survey is expected to show more robust numbers.
However that should be followed by a slowdown. Partly this is driven by the generally bad mood, which last week's rosy glow is unlikely to wholly dissipate. Partly also there will be the flow on of price rises from imported inflation caused by petrol price hikes and the low currency. Adding fuel to that particular fire will be wage demands. One Auckland based IT firm had to come up with a 20% wage rise over the past month to hang on to its workers. OK, that¹s not a typical example. But the Deutsche Bank economists last week estimated that wage inflation will run at around 4.5% over the coming year.
Does that mean Reserve Bank governor Don Brash was on the money when he warned MPs about the dangers of stagflation a couple of months back?
Well no not yet anyway. The economy is still growing above 4% for the year to date, although the trend is heading down. But the pressures from wages and prices are not going to be contained much longer which is going to make Dr Brash¹s job that much more difficult over the next year or so.
Rob Hosking is a Wellington-based freelance writer specialising in political, economic and IT related issues.
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