Friday, 26 May 2017

Spreading It Around


Budgets are not what they use to be and the Budget 2017 is no exception. Much of what Finance Minister, Hon Stephen Joyce, announced in the budget yesterday had been clearly signaled in pre-budget announcements. The increase in social investment, more money for the film industry, more spending on housing, millions to be spent on infrastructure (including Kaikoura), irrigation, schools, money dedicated to conservation and more funds for vulnerable children had all been announced prior to the budget and were simply reinforced in the context of the budget messaging. The new announcements also came as no surprise.

Increases in Working for Families and generally looking after families with lower incomes were clearly signaled before the election. The changes in tax thresholds which also impact on lower income earners were strongly hinted at prior to the budget announcements. The combination of the Working for Families increases and the changes in tax thresholds will cost the Government around $2 billion per year. That is additional money that will be circulating in our communities and that should be good for everyone.

This budget was all about spreading available funds around and pleasing as many people as possible in an election year budget. Minister Joyce is fortunate as he had the ability to do that with the economy in good shape, the Government projecting significant surpluses and the prognosis for our economy being quite bright. That is also the case here in Canterbury as a microcosm of New Zealand’s economy. We can expect things to stay, from a domestic perspective, strong and stable and there is every indication that we can enjoy continuing relatively strong economic growth.

We are a lucky province in what, in the international environment today, can be described as a lucky country.

However, you make your luck. The New Zealand economy is in good shape because of consistent economic policies, but also because of the determination of the business community to diversify, to add value, to innovate and to concentrate on export and tourism growth. With GDP growth expected to be over 3% for the next five years the Governments’ of the future have the ability to flex spending. We can all recall prior budgets where it was all about conserving cash and reducing expenditure. It appears that the Government’s target of reducing debt to 20% of GDP by 2020 is achievable. It also appears that the country is well positioned for unexpected economic downturns. So, all in all a positive unsurprising budget, taking into account current economic conditions and prospects.

However, New Zealand is not without its challenges. There is no doubt that our interest rate levels will have to trend up at some stage in the future and many of us are carrying high levels of debt, particularly with respect to our investment in housing stock. That poses a high risk to certain sectors of our economy. We constantly hear of short fallings in infrastructure, roading, rail, tourism amenities and rural broadband. In a rapidly growing environment those infrastructural shortcomings will be exacerbated. There will need to be a quantum shift in investment in diverse infrastructure in the future. We also face the risk of international volatility and uncertainty. We know that the world economies are doing OK, but we also know that there is a real risk of unexpected economic upheaval, and we live constantly with international uncertainty. This is exacerbated by the increasing tendency for other countries to adopt isolationist policies which will disadvantage New Zealand in an international forum.


So Budget 2017 has delivered some benefits to most of us. It has partially addressed the need to look after those with lower incomes across our economy and it has every indication of a relatively well performing economy across most sectors. We can be comfortable with that, but certainly not complacent. 

Monday, 15 May 2017

Making Democracy Work

Every year the Christchurch City Council (CCC) invites submissions on its Draft Annual Plan or Long Term Planning processes. The Canterbury Employers’ Chamber of Commerce (the Chamber) comprising almost 3,000 companies, the majority of whom are domiciled in the CCC catchment, has always submitted to the Council in an endeavor to fairly represent the interests of the business community.

While the consultation process is appropriate, it often goes under the horizon and participation from most sectors of the community is very limited. We think it is important that our voice is heard and listened to. We work very closely with the CCC on different fronts on a myriad of issues. Fundamentally we have the same objectives which is to ensure that our city and its surrounds have an offering which is conducive to people living and working here. From the Chamber perspective, we also fully understand the interdependence between sustainable, profitable business and community wellbeing. You simply cannot have one without the other. Accordingly, we submit constructively and are appreciative of the open and transparent platform upon which the Council generally operates and its demonstrable accountability to the community.

There are always areas we will disagree on, usually with respect to different ways of achieving the ultimate objective. For example in this year’s submission we have emphasised our desire for the Council to minimise rate increases and borrowings and continue to assess the merits of realising capital through sales of assets that are not core to its operations. We respect the right of the Council to borrow more and increase rates rather than accrue cash from other sources, but we question the merits of that in the context of a sound financial policy.

We have also commented this year on the need for the CCC to be more aggressive in realising the reality of Christchurch for its citizens. We have noted that the Council has proposed a $152 million reduction in spending on its capital works programme which may ease the burden short term but has a critical impact on existing and future capability and capacity. We question the merits of that.

We also noted that in the exceptional circumstances of the recreation of our city it is important that the Crown and the Council are seen to be working constructively and jointly together and we are pleased to see positive progress in this area. It is still however, a work in progress and there is still much to be done.

Of fundamental importance is the need for more clarity on the strategic direction of our city. In other words, what does all the work that is going on in various sectors of the city (whether it be sub-terrain infrastructure, roading, developing the public realm, or Council owned land and buildings) look like?  What is the end game, what does the “big picture” look like and how will all the work going on result in positive and optimal outcomes for all of us? We believe that there would be much more tolerance in the community of the disruption that is occurring across the city as the new city takes shape, if people had a clearer picture of how things will look and function when the job is done.

Finally, we also think it is legitimate for the Council to address shortcomings in current plans through pausing and reflecting on progress to date and different ways of doing things in the future. We do not believe that this city should be bound by existing plans and strategies just because they are there. We are all in this together, it is important that we all have our say, and it is important that as a result of democratic input we get the right result.


Tuesday, 2 May 2017

Keep an Eye on the Prize

At a recent Business Leaders Forum hosted by the Chamber, there was discussion concentrating on where our city is at, where we are going and what are our challenges? 

Depending on where you are and what stage you are at, those challenges manifest themselves in different ways. We do know however, there are still a sizable proportion of our population that are not in a good space from a housing and social perspective which all of us have a responsibility to address. We know there are a small number of people still struggling with their insurance companies and people who are “repairing the repairs” which is causing frustration. There are areas in our central city that are causing angst, particularly derelict sites, issues around how accessible our city is currently, and how accessible it will be in the future. Of course, there is the gnarly issue of the Cathedral, which particularly from an external perspective, tends to drag the city down. 

These frustrations need to be addressed and addressed quickly. There is always going to be pain as you build a new city after the most expensive natural disaster in our lifetime - there is inevitably a cost associated with that. As we progress the construction of our new city it is important that we recognise why we are going through some pain. It is also important that we move on from Christchurch being dominated and defined by being an “earthquake city” into the new Christchurch with its existing and new offerings presenting a compelling opportunity for anyone who wishes to participate. 

It is clear that 2017 is a tipping point when what the centre of Christchurch is going to look like is more clearly understood and when we move through to 75% of the construction phase of the rebuild being completed by the end of this calendar year. It is therefore timely to consider what are the unique points of difference that our city has and will have which will make it a city of choice, the most liveable city in New Zealand. From this perspective, it is important that we do not lose sight of what was in place prior to 2010: 

This city has a good health system, which is internationally recognised; 
Its education system and the quality of the offerings are unique in New Zealand; 

  • We have good infrastructure, which is being replaced as is necessary and it underpinned by an airport operating 24/7 and a port that is expanding; 
  • We are geographically well positioned and proximate to some of the most beautiful scenery in the world; 
  • We have a balanced economy which has seen us through difficult times and will continue to see us thrive and prosper into the future; and 
  • We are a city that is small enough to be easily accessible and big enough to have all of the offerings afforded by larger cities. 

The Business Leaders Forum determined that we should move from being “stuck in earthquake related issues” and we should celebrate the progress we are making. We need to put positive messages out to our employees and we need to move away from our city being defined by the earthquakes. We need to reinforce what makes us different and attractive from any other city in New Zealand or beyond. Those differences are generally positive and underpin opportunity. 

Our city of the future will be defined by the experiences of its residences and its visitors. Members of the Business Leaders Forum all affirmed that they were in Christchurch because it is the best place to live and bring up their families. It is important to share this message with and beyond our city.  

Canterbury Build Magazine Editorial: Mongolia – Much to be Learned

Recently I travelled to Mongolia, to the capital city Ulaanbaatar, to address a seminar on private strategies for disaster resilience mitigation of small to medium enterprises in Mongolia. This seminar was sponsored by the United Nations Office for Disaster Relief Reduction and the International Labour Organisation, with the support of MONEF – Mongolia’s Employers’ Federation.

These agencies were well aware of what had happened in Christchurch and how important the lessons we learnt in Christchurch were from a perspective of optimising business survival. It was a real privilege to be able to appear before a group of interested Mongolian businesses and tell them some of the stories that might have application to the Mongolian community in the event of a calamity.

Mongolia is vulnerable to multiple hazards including storms, floods, blizzards, heavy snow falls, wild fire and droughts. Between 1990 and 2016 Mongolia was hit by 21 disasters that resulted in economic damages totalling almost US $2 billion effecting 4.2 million people.

As the 18th largest country in the world by area with a relatively small population of 3 million people, Mongolia is positioning itself for its future in the context of increased risks from natural disasters. The meeting identified the needs and challenges that SMEs experience before, during and after disasters and from my presentation the learnings that came out of the Christchurch earthquake experience.

The attendees came away with an improved understanding of SME disaster risk protection and increased awareness of the potential opportunities for collaboration to improve disaster mitigation and a better understanding of the practical risk management tools tailored specifically for the business community.

We should never under estimate how important the lessons we have learned in Christchurch are and how relatively well our business community has done in the context of unprecedented natural calamity. There is much to be learned and much to be gained through sharing.

I was grateful to be sponsored to Mongolia which is a fascinating country full of opportunity and challenge. We have played a small part in making them better prepared for the inevitability of significant further natural disasters.


Friday, 31 March 2017

The Challenging Changes to Work

The technological changes we are seeing in the world today are unprecedented. Never has technology been more powerful, more available or cheaper than it is today and we are just at the beginning. The projected growth of technology in the next two years is purported to be as much as we have seen in the whole of history. This will have a greater impact on the way we live and work than any of us can imagine.

Concurrent with this is an ongoing concern about the impact of continuing skills shortages on business which CEOs in New Zealand and globally see as a major concern. Both issues mean it is vitally important to reassess the way we educate and the content of our education. It is critical that as we build an increasingly complex economy in our city and our region we have students at all levels being prepared in an optimal way to participate in and across that economy.

The expectations of education outcomes are changing markedly. Employers are looking for young New Zealanders to be able to relate well to others, to be motivated and reliable, to be resilient and enterprising, literate and numerate and to be informed decision makers while being critical and creative thinkers. These attributes are going to be increasingly important as we consider the dynamic future that awaits young people.

Education, particularly at a secondary school level, is not just about allowing young people to make immediate choices that confront them at the end of school but is about ensuring young people are equipped to consider their career paths throughout life. Their career paths will markedly be influenced by changes in the workplace driven by technology. It is legitimate to ask whether our education system will have the ability to keep pace with the changes confronting us.

There are already robots that are perfectly capable of doing background legal research for complex court cases. There are robots that are much more accurate in their pathological diagnosis than human beings. We are seeing the beginnings right here in this city of autonomous electric vehicles, with one being trialled at Christchurch International Airport. Some are predicting that a simple cellphone will be as powerful as the human brain within eight years.

The collection, interpretation and use of data is increasing exponentially to the extent that already some of us are becoming concerned about who is collecting it and what they are using it for.

I can recall in the 1970’s when computer technology was just starting to ramp up that some of us thought the requirement for employees would materially drop over time as computers took over. That did not happen, but slowly and surely, workplace dynamics changed. There are many things that cellphones and computers are doing now that use to be done manually usitlising large numbers of people.

Opportunities for work will continue. However, the work will be different. Employees will have strong literacy language and numeracy skills and increasingly need skills of communication and corporation, computation, computer mastery, creativity, and critical thinking. Tomorrow’s employees will need to be able to think across traditional disciplines make connections and solve problems. Already division of labour is increasingly in teams rather than in hierarchy of command. The old model of educated managers supervising the less educated workforce has gone. So as we face our future we need to be putting much more emphasis on educating our young people in new ways to embrace what is ahead of us. That is a significant challenge for us all. 

Tuesday, 21 March 2017

Keeping Our Heads Above Water

New Zealand is a country blessed with copious quantities of fresh water. Recently some parts of our country have had a lot more than they want, some a lot less. It is an extraordinarily precious resource that must be cared for and used more wisely than it is being used at present.

Historically water usage in Canterbury, and in wider New Zealand, has been very opportunist. We have taken water from wherever we can get it and have used it for whatever we wanted to use it for. We have not had sufficient regard for the way it has been extracted, the way we have treated it and the way we have returned it to the environment. That is all changing. In my opinion 2017 will be the year that the real issues about the sensible utilisation of water right across our communities will begin to be understood and accepted.

In Canterbury almost all the available fresh water passes through or under the Canterbury Plains and out to sea. However, because of the way we have extracted water we have put pressure on very vulnerable areas in our environment, both through creating water shortages and through contaminating water systems in a way that is not sustainable. We need to work out ways to maximise the economic benefit of fresh water utilisation while concurrently protecting and continuously improving water quality and availability.

To drive this change we will inevitably need to harness existing and new technologies which are becoming cheaper, more powerful, more available and more applicable every day. Those technologies will be driven by far better data collection and analysis to ensure we make the right decisions. We will need to ensure that we get communities buying into the need for a different approach to water management. This will reduce waste and inefficiency, allow flexibility and support the development of infrastructure to ensure reliability of storage and water supply. We will also need to demonstrate leadership with respect to how we make better decisions with regards to water utilisation and how we facilitate investment and longer term planning to ensure that we use available water equitably and wisely.

The harvesting and controlled distribution of large volumes of water along the east side of the main divide will be critical in this regard. There have already been good examples of water schemes that harvest and farm water. The Opuha Scheme in South Canterbury is one, and more recently the Central Plains Water Scheme in North Canterbury which not only takes excessive run of river water when it can but also uses Lake Coleridge as a water sink to ensure reliability of supply. These schemes can guarantee water supply when it is needed and also support and encourage the amelioration of environment damage that has been done in the past.

The Canterbury Water Management Strategy (CWMS) has been a good model to manage water allocation and utilisation to date but it is just at its beginning. The important thing about the CWMS model is that it relies on input from right across various participants in our community, all of whom have different requirements for the protection and/or utilisation of water. It relies heavily on reaching a consensus with regards to how water is allocated. That inevitably involves compromise, an appreciation to think strategically and agree on what is the best outcome for the wider community.


Our future is not about putting unreasonable restrictions on water utilisation. It is much more about sourcing water from where we can and utilising it in a way that does not involve environmental degradation. That is possible with use of good technology, sensible water management structures, strategic thinking and good leadership. We can do that in Canterbury and we can lead the way for others to follow.   

Tuesday, 14 March 2017

Sharing Lessons of Disaster Recovery

Late last year I was invited to attend an ASEAN conference in Manila to present to all ten ASEAN countries lessons learned from the Christchurch earthquake from a business perspective.

ASEAN countries are prone to disasters of many types, including significant seismic activity, typhoons, hurricanes and floods. Their preoccupation with recovery is very much related to how individuals are protected in a post-disaster environment. My presentation in Manila was about how we protected the corporate infrastructure of Christchurch post-earthquake through various interventions with remarkable success.

The rationale for this intervention from a social protection perspective (looking after the people) is that by protecting the fabric of the companies you protect employment and therefore ensure optimal outcomes for people in a post-disaster environment.

This was a foreign concept for almost all the attendees at the ASEAN seminar in Manila. They were intrigued to hear how the Government supported a wage subsidy post-earthquake which meant that companies could maintain and protect employment relationships even though their businesses were seriously compromised.  I told them that our Government invested in excess of $250 million into Christchurch companies by way of a wage subsidy that was a lifeline for thousands of earthquake impacted companies. I also advised them of the behavior of our banks in affording extra facilities to affected companies and our insurance companies who in many instances provided part payment of insurance settlements to ensure continuing cashflow and the IRD who delayed payments on GST or provisional tax to ensure companies cashflows were optimised. The big lesson was that it was all about maintaining cashflow in companies and protecting employment relationships.

I was involved in some serious questioning with respect to the affordability of such interventions. I was told that it was all very well for a wealthy first world country to provide financial support for its businesses but how could poorer economies afford to do this? My response was to advise them that this was not a cost to Government but rather an investment. The millions invested in protecting corporate structures in Canterbury will have been repaid many times over through continuing PAYE payments, GST payments as well as corporate tax payments. Of course, the Government had far fewer people to pay the unemployment benefit to because people stayed in work.

My message to these communities was that this was a good way of protecting economic activity and social outcomes post-disaster and should be seriously considered as a proven disaster recovery mechanism.

The normal churn rate for businesses in Christchurch (in other words those businesses that go out of business every year for one reason or another) is around 11.4%. Since the earthquake, it has been around 11.6%. A remarkable statistic when you consider that up to 30% of our companies were predicted to collapse post-earthquake. Work done by the IRD demonstrates that GST payments, PAYE payments and corporate tax payments have continued to grow from immediately post-earthquake until today. Which is another good sign of corporate health and payback to the public purse.

Recently I was approached by the International Labour Organisation to present to another seminar in Mongolia on exactly the same topic. What we did in Christchurch has increasing interest in the Asia Pacific region. We should not underestimate the positive commercial outcomes that occurred in Christchurch post-earthquake and the lessons the world can learn from that. It is a great credit to all institutions involved, including our Government, who saw the merits of protecting cashflows in a post disaster environment as a means to optimise long term positive economic outcomes. It has worked in Christchurch and it can work elsewhere.