Three Steps To Ward Off Economic Storm
Weekly Column by Dr Muriel Newman

Helen Clark's snap election gamble paid off. Ballot boxes closed before most voters had noticed that clouds of economic gloom are gathering over the horizon. If the election had been held in November, as scheduled, awareness of the downturn would have been unavoidable and the government would have borne the brunt of voter dissatisfaction.

When weather forecasters issue storm warnings, most families will check that they are well prepared: gear stowed safely away; windows tightly shut; candles and matches on hand; pantry stocked; and water jars filled. While these measures are sometimes not enough, they certainly assist in keeping people and property safe.

An approaching economic storm is surely no different. Any responsible government should ensure that the country is in a good position to withstand any downturn. In particular, that means addressing the needs of small business. Small business is the engine room of an economy: if small business is buzzing, the economy flourishes and families enjoy growing prosperity. But if small business is struggling, the economy turns down and families face hardship.

If the government took its responsibility in this area seriously, it would seek to ensure that laws and regulations that affect small business facilitate enterprise and productivity, rather than diminishing them. It would also address the widespread and growing concerns of the small business sector.

A recent Business Herald report found that over half of the 700 businesses surveyed have held off expanding because of concerns about the country's new labour laws. Many indicated they would hire more staff if employment laws were more flexible. Some 84 per cent said they would consider expanding staff numbers if there was a trial period, during which new staff could be laid off without the risk of a personal grievance claim, if things didn't work out.

This was consistent with a March National Bank survey of small to medium sized enterprises, which also found that dealing with New Zealand's employment laws was a major challenge inhibiting employment.

The reality is that many small businesses are afraid to employ people in case they get it wrong and end up facing a personal grievance claim. I understand that claims for $10,000 are not unusual. Facing such alarming prospects, many small businesses decide that their best option is to box on understaffed and underperforming.

According to an article in this week's New Zealand Herald, Peter Tritt, the Advisory Services Manager of the Northern Employers and Manufacturers Association, stated that the added risks involved in hiring have now lead many employers to think of new employees as a liability rather than an asset. He believes that being an employer has now become so complex that it is almost like having to 'adopt' someone.

This situation is bound to be exacerbated by the passing of the Government's new Health and Safety in Employment Bill. This OSH law would enable employers to be fined up to $500,000 if an employee suffers from stress. Given that stress is a normal part of everyday life, the new law looks set to become a minefield for employers.

When passed, the government's Minimum Wage Amendment Bill will increase the cost of on-the-job training for young workers. As a result, employers may be less likely to hire young, untrained staff.

The government is also threatening to change the law for employees who work on any of the 11 statutory holidays, to not only a day in lieu, but to time-and-a-half as well.

The Council of Trade Unions is lobbying hard for yet more changes. They want the government to lift the minimum adult wage to over $9 an hour. They also have plans for holiday entitlements to be increased from three weeks a year to four.

Highly regulated labour markets only increase the vulnerability of businesses to an economic downturn. It restricts their ability to respond quickly to changes, and in a country as small as New Zealand, this is dangerous.

With those gathering storm clouds on the horizon, the government should act as the family does and make preparations to reduce potential damage.

A great way to start would be to fast-track three things: implementing the 162 recommendations of the 2001 Ministerial Panel on Business Compliance Costs to reduce compliance costs on small business; enacting the recommendation of the McLeod tax review to reduce the company tax rate below that of Australia; and amending the Employment Relations Act to introduce a voluntary, grievance-free, 90-day trial period as proposed by the Employers and Manufacturers Association.

While much more obviously needs to be done, these three steps would be a start. They would also send small business a message that the government is concerned about their plight. To do nothing will signify that in spite of all the rhetoric, the government is fundamentally anti-business.

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Dr Muriel Newman, MP for ACT New Zealand, writes a weekly opinion piece on topical issues for a number of community newspapers. You are welcome to forward this column to anyone you think may be interested.

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