Nimbleness the key
It’s been interesting to come back to New Zealand after some years living and working in Australia. For someone focused on the business environment, it’s fascinating to compare attitudes to business, indicators of growth and trans-Tasman trends.
I’m struck by how closely our two countries are intertwined, and by the strong bonds between us. I can report a genuine affection on the part of Australians towards New Zealanders, regardless of our sporting or other rivalries. Just as well, since there are lots of us over there. There’s a thriving Kiwi mafia in just about every large Australian company and every Aussie seems to have at least one or two Kiwi mates.
It’s not surprising that so many New Zealanders are living in Australia, given the larger number and greater range of jobs, and also given the wages gap. The latest OECD figures show the average Australian weekly wage before tax is bigger than New Zealand’s, byNZ$286. That’s quite a gap.
That gap is a direct consequence of the growth patterns of our two countries – the average growth rate in Australia from 1993-2003 has been 3.5%; ours has been 3.1%. Higher growth over time leads to differences in scale – Australia’s GDP is more than six times bigger than New Zealand’s. The New Zealand economy is now only 65% the size of the economy of Sydney.
This scale creates a gravitational pull, not only on individuals, but companies too. Over the last five years we’ve seen Lion Nathan, St Luke’s Group, Feltex, Carter Holt Harvey enterprises, Heinz Wattie, Baycorp and several others take their head office across the Tasman.
It’s a trend that won’t be easily reversed, given technology and the nature of corporate ownership in New Zealand. It won’t be a major problem as long as we grow our small Kiwi businesses into large ones to take the place of those that go – but turning small New Zealand businesses into big ones is something we struggle with.
Of course, the benefit of having a big neighbour is having a big market to sell goods and services to. Australia, our largest market, takes 21% of our total exports, worth over $6 billion a year.
The downside is that our neighbour has many companies competing against New Zealand companies in other markets. In many ways they’re in a better position, being somewhat closer to trading partners than us, having a baseline wealth from mineral resources and, significantly, they’re about to enjoy the benefits of a free trade agreement with the US.
So competing against Australia is about to get harder, but it doesn’t mean we can’t do it successfully. We mostly need to be more nimble than Australia. There’s no good reason why we can’t – we aren’t burdened with federalism; we are smaller and our business leaders and senior managers are generally less specialised, which could cause issues of course, but also tends to mean quicker, less siloed decision making. The gap between boards, shareholders and managers will often be narrower in New Zealand companies, which should lead to an easier road to effective governance, reporting and support for business decisions.
But there are some roadblocks in the way of nimbleness. Employment law is a key one. Here in New Zealand we have a law that says there’s a permanent imbalance of power between employers and employees and that the aim of employment law should be to correct the balance (it does actually say this). This is simply not a credible claim. Many employers are trying to be ‘employers of choice’ and are investing a lot in pursuit of that aim.
New Zealand is experiencing great growth at the moment and some might say the Employment Relations Act is one of the reasons why. In fact, we’re getting growth despite our labour laws. When the cycle turns, as it must, we will find that it is laws like this that will stop us being nimble to access new markets and new investment.
Meanwhile, Australia looks set to give business, and particularly small business, the capacity to be more nimble as a result of a raft of labour law changes in the next year or two. This is a warning to us – we should be pursuing policies that will enable us to be more, not less nimble, than Australia. Phil O’Reilly is Chief Executive, BusinessNZ.