PrimeCut: Less haste, more consultation in policy change

Kirk Hope, Business NZ
Kirk Hope, Business NZ, speaking at RMSC 2019. Photo: B+LNZ Ltd.

Juggling political demands from the tripartite Coalition Government and hasty policy change is leading to a messy road ahead for red meat businesses, the Red Meat Sector Conference heard earlier this month.

The coalition between the Labour Party, the Green Party and New Zealand First is forging ahead at all speed with its transformational plans for the country – though not always in concert and often with little consultation with the red meat sector.

The sector accepts the biggest challenge “of our generation” is that posed by climate change. Speaking at the Red Meat Sector Conference earlier this month, Meat Industry Association chairman John Loughlin noted the sector is up for “playing our part in a sensible response to climate change” and pointed to the Primary Sector Climate Change Commitment as evidence.  However, the tough target of 24-47 percent methane emissions reduction by 2050 set in the Green Party-led Zero Carbon Bill currently before Parliament has “all the hallmarks of a messy political compromise,” he said.

The biggest risk for business, said Business NZ’s Kirk Hope, is that New Zealand “gets ahead of other countries,” putting our own companies at a disadvantage in the global marketplace.

Pledging reform of the Resource Management Act, the finalisation of free trade agreements such as CPTPP, tax credits for research and development and improvements to scientific funding to help find technological solutions to agricultural emissions are all examples of positive policy change by this government.

However, Hope outlined eight changes in policy that will impact on red meat sector businesses, from large to small, and including processors, exporters, farmers, marketers, and all service companies. Some of these changes have been made very quickly with little or no consultation, he noted.

Forestry needs to complement farming

Forestry incentives, designed to speed up the planting of one billion trees by 2028 to provide jobs and sequester carbon, are already converting sheep and beef land to forestry and have made it easier for overseas investors to buy land for forestry, rather than farming.

“I would like to see a policy landscape where forestry complements farming not replaces it and where farmers have the ability to offset their own emissions by planting their own trees themselves,” said Hope.

Overseas investment changes knocking confidence

Other changes to overseas investment rules are also worrying Business NZ. The first phase last year focused on restricting house purchases by overseas buyers. The second phase this year is screening of overseas investment in New Zealand-based companies bringing more uncertainty for investors, who were already worrying about the direction before the last election. More recently, Findex’ head of agribusiness Hayden Dillon has noted the changes have already had an impact on the value and demand of land, by limiting the flow of capital into the market, halting farm-sales downstream and knocking confidence.

Capital adequacy “not a good outcome”

Similarly, the Reserve Bank’s proposal for new capital adequacy requirements for New Zealand’s trading banks, which mean the big four will need to hold around $20 billion more capital here, will see some banks reposition mortgages and loans and sell assets. This will result in higher borrowing costs and slower growth, said Hope: “Not a particularly good outcome for New Zealand.”

Councils’ scope needs to be narrowed

Broadening local government’s purpose and function into social, economic, environmental, cultural and well-being areas, does not enable Councils to focus on local infrastructure and essential services, Hope argued. Businesses pay the lion’s share of the rates, with farming operations, for example, paying over $26,000 a year on average. However, Hope pointed to a recent survey, where 75 percent of them considered they do not get value for money from their local council. Business NZ is calling for Councils’ role to be refocused much more narrowly onto infrastructure and for rates to be commensurate with the services actually delivered.

Skilled workers are needed by the sector

At a time when the sector is crying out for skilled workers to carry out value-added activities in processing and specialised activities, such as halal processing, and for beef and dairy workers, work visa processing bottlenecks and the review of vocational training (RoVE), including on the job training, are not helping. Understandably, the sector is very keen to avoid the loss of any training and recruits.

ERA changes concerning

Other Employment Relations Act (ERA) changes have also caused concern for Business NZ and the red meat sector’s employers because of the impact on business and productivity. The Labour Party was looking to eliminate 90-day trial periods, open up workplaces to union representatives, lock businesses into collective bargaining agreements and also into multiple employer collective agreements (MECA).

One of the examples where New Zealand First has played a role in bringing Labour back into the middle ground, Hope said, was on 90-day trial periods – which had proved effective for employers in finding staff – which have been retained for companies with under 20 employees. It was argued unfettered access for union representatives to workplaces could have caused health and safety, privacy and stock safety issues and the representatives now need to obtain consent before entry. Businesses are now compelled into using a collective agreement, and must also be part of a MECA, but NZ First’s intervention means they do not need to conclude it if their objection is on reasonable grounds.

Fair-pay agreements should be voluntary

Hope was part of a cross-industry working group, chaired by Jim Bolger, reviewing fair-pay agreements, that reported to Cabinet last December. Their conclusion was that fair-pay agreements should be voluntary, not mandatory. Cabinet has yet to make a decision.

“The time-frame tells you it’s way more complicated than people thought and there hadn’t been a whole lot of policy work done on it,” he commented.

The working group was felt it would be inflexible for business, said Hope, and would “not be great for competitiveness.” It was also believed its similarity to the 1970s and 1980s system, would see a return to strike action at secondary bargaining level, which is not desirable.

Business NZ is not keen on lumping businesses together into big collectives – unless they want to be, taking away the right of businesses to control their own workplace, increasing taxes on businesses and farms, increasing borrowing costs and arbitrary changes and incentives for investment into different sectors of the economy, said Hope.

“At the same time, we are keen on policies that keep taxes affordable, keep borrowing costs under control, retain the ability of businesses to hire as they see fit, deliver appropriate services, grow skills and respect the right of different sectors to develop in ways they see fit.”

With an election looming next year, it will pay for the $9.8 billion sector, that employs 80,000 – many of them in the regions – and its policy-makers in all parties to get much closer together to understand what the sector needs. The presence of at least two National MPs at the conference showed that point is understood by the blue side of the house.

As Loughlin succinctly put it: “Knee-capping the primary sector will ultimately knee-cap our national ability to provide well-being to our citizens.”

Government needs to take the red meat sector alongside it as it reshapes the economy for the future. The order of the day should be less haste, more speed … and more consultation.

This is the editorial from MeatExportNZ’s August PrimeCut newsletter. If you would like to subscribe for future issues, fill in your details in the newsletter box on the front page, or in the pop up. 

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