Wellington Employers' Chamber of Commerce President John Milford's speech to Wellington Business Forum
Wellington Employers’ Chamber of Commerce President, John Milford
Speech to Wellington Business Forum
18 March 2014
“Where we are at and where we could be”
Good afternoon everyone,
First I’d like to acknowledge a few people:
• Her Worship, Wellington City Council Mayor, Celia Wade-Brown
• Greater Wellington Regional Chair, Fran Wilde,
• Wellington City Councillors, Deputy Mayor Justin Lester and Councillors Foster, Marsh, Peck, Richie and Young
• Wellington City Council Chief Executive Officer, Dr Kevin Lavery
• Fellow Chamber of Commerce board members and members
• Chamber Chief Executive Raewyn Bleakley
• and finally to acknowledge all of you here today – who have committed your energy to this afternoon
I’m very pleased to be here.
The Chamber has been the voice of business in Wellington since 1856. We advocate for policies that reflect the interest of Wellington’s business community, and develop Wellington’s economy and region.
Having the voice of the business community here today is particularly important for Council to hear, given that Wellington businesses pay nearly half of the Wellington City Council’s total rate-take.
It’s imperative that we, as the business community, have a significant role and stake in the operation, structure and performance of Wellington - given our contribution. It’s also imperative because the Councils’ actions have a very real impact on the business environment.
So thank you again for being here.
Wellington’s success sits squarely with us all here today.
I want to take the opportunity to thank Council for today’s forum and acknowledge their work to date.
Working with business and the wider community is essential to achieving the city’s potential.
We’ve seen the Draft Annual Plan come out quickly, following last year’s council elections. This is a positive for Wellington, giving us a head start, and an early picture of proposed projects.
I also want to acknowledge the vision and challenge that has been set out through the priority growth agenda and the Council’s ‘8 big ideas’.
We’re eager to get into the detail of the eight proposals – and look at them with a strategic and regional lens.
Today I want to focus on where we are at and where we could be.
While I don’t think we should reflect on the following statement too much, I believe it is it worth remembering where we were just under a year ago - receiving a death sentence for the city.
Speaking to an Auckland business audience, on the 7th of May 2013, Prime Minister John Key said:
"the reality is even Wellington is dying and we don't know how to turn it around…. All you have there is government, Victoria University and Weta Workshop."
It’s fair to say we’ve all analysed the Prime Minister’s comment itself to death – given the passionate debate that followed.
I believe the comment was over played, but deep down, I think we all acknowledge there rings some truth.
It’s certainly not our fate – not yet.
Without a crystal ball to gaze in, what I do know is this: if we don’t start joining up the dots we won’t catch up, we won’t overtake, and we will continue to fall behind.
I’ll go into the depths of the data shortly, but this is how I read it: as a city we did well prior to the recession, then we did okay, then it hit us.
On the whole the Chamber is confident about Wellington’s future - if we grasp the opportunities ahead. The Chambers’ members share this positive outlook on the city too.
The Chamber’s business confidence survey show in December 2013 showed a net 40% of people expect the Wellington economy to improve over the next 12 months. This is much higher than our previous results, in August and May, which showed just 27.6% and 18.4% net.
The Chamber believes that our city has all the right ingredients to encourage an environment for innovation, growth, and success. And I certainly believe that our prospects and fortunes can only be further enriched by ensuring that we have the right people, at the right time, working together.
Which is why we’re all here today.
While there is there optimism, there is also a need for realism.
The Chamber has concerns about how Wellington is going. And we know the city is concerned.
The responses to our business confidence survey show people believe a lot less in Wellington’s outlook than the national outlook.
We have to address the current widely-held perceptions and the reality. We must and can do better.
You can cut and slice numbers in whichever way you want, but today I want to try and put the whole picture to you. If we can be honest about where we are coming from, we can be clear in where we are going.
Growth in our gross domestic product (GDP) is a good starting point to take a health check of the city.
It also shows how mixed the picture can be. I’ve looked at both the Wellington region and Wellington City information.
On the positive: average growth over the last five and ten years in Wellington City is positive, particularly compared with the national average. This is mostly due to the growth years 2007 to 2010.
On the negative: Of the last 12 years, half of these have been lower than the national average. Looking more recently, over the last two years, Wellington City sits at 1.9% compared with the national average of 2.5%. This ranks Wellington at 36 of 66 territorial authorities.
And: In 2013 we have gone up. Wellington City’s GDP growth of 2.6% ranks us at number 17 among the 66 territorial authorities in New Zealand and on par with the National average.
However, the latest numbers from Grow Wellington, which are more recent, gives us a different picture for the Wellington region. The regional growth figure, to the end of September 2013, has us at just 1.3% growth compared with national growth in GDP of 2.6%
The next indicator to consider is our unemployment rate.
From 2008 to 2012 both the region’s and the city’s annualised unemployment rate has been slightly lower compared to the national average.
However the most recently available unemployment data for the City is comparably high at 7.5%, compared with New Zealand rate of 6.8%.
The latest quarterly data from Stats NZ, as at December 2013, shows that the regional unemployment rate is 6%, the same as the national unemployment rate.
Again, it’s a mixed result.
The number of Businesses in the city is important to measure our performance.
Since 2009 business unit growth has fallen below 2%, mirroring the lower growth nationwide. The most recent data, at March 2013, shows the city business unit growth is negative 0.2% compared with New Zealand’s negative 0.1%.
You expect to see risks, venture and entrepreneurial activity slow during economic downturn – but for a city of start-ups this is a sobering reality.
Online purchasing issues aside, the retail climate in the Wellington region continues to be challenging. We have seen a prolonged period of stagnation.
This is important because retail is a barometer of how we’re feeling. It shows how confident consumers are, by how much they are spending, which generates business activity and growth – the whole works.
Like other economic indicators, retail sales in the Wellington region started to contract towards the end of 2011, while around the rest of the country saw improving sales.
Recent December quarter figures suggest the pace is picking up. However, closer analysis shows that the growth is focused on a limited range of sectors, supermarkets, food, recreational goods and hardware. Retail growth needs to be broad-based.
You just have to walk along the Golden Mile to see the growing empty shop fronts. I’m told that retail vacancies on the Golden Mile are sitting around 10% - having climbed over 2.5% since 2011.
So what does this all mean?
Firstly, I think its worth noting that Wellingtonians are some of the most educated, most connected, most informed in the country.
I think that’s reflected in the February ANZ Consumer Confidence Survey, where Wellington consumer’s price increase expectations were the highest with regard to inflation and house prices.
Our expectations are correct. We’re informed and connected which means we’re pragmatic, but if left unchecked, we can quickly turn into pessimists.
Wellington has faced a number of challenges during the last few years. Last year the two earthquakes shook confidence about coming into the city.
I believe the overall picture tells a story of a late Wellington slump, perhaps a self-fulfilling prophecy, with subdued consumer confidence, a depressed housing market and a perceived contraction in the government sector.
As I’ve said recently the council needs to quote: “think wisely, plan boldly and act swiftly.”
And we’re today here to help steer in the right direction, and make that happen.
Looking ahead to what we can do, the Chamber has some ‘bottom lines’ for future projects and proposals.
Wellington City and Region must continue to operate within financial prudence, as our economic recovery begins to take shape.
With continued uncertainty about future liabilities such as: earthquake strengthening of Council buildings, like the town hall costing $43 to $60 million, legal action from leaky homes, and as the region awaits the outcome from the Local Government Commission’s reorganisation proposal it is important expenditure within the Council’s operations is well considered.
This is not to say we are against future investment or consideration of future project expenditure.
But we should be well informed and thoroughly convinced about adding to the city’s debt – with a plan on how we pay for it.
For all project proposals, the Chamber would need to see the following:
1. An investment strategy with a robust business case, including a convincing cost benefit analysis and return on investment, with funding in collaboration with commercial partners.
2. A repayment strategy with a solid commitment to service and pay down the debt quickly.
Regardless of the overall balance sheet or the Council’s Standard and Poor’s credit rating, servicing our debt and paying it down needs to be made a number one priority.
Given the upcoming amalgamation possibilities, we must be clear on how the project will benefit the entire region.
I don’t want us to waste the next 12 months sitting around waiting for the draft proposal, final proposal, referendum and finally the outcome.
The Chamber favours a re-organisation proposal to amalgamate the current Wellington Regional Council areas of: Wellington, Porirua, Hutt City, Upper Hutt, ambivalent on Wairarapa councils, and we support the adoption of a local boards model.
We want what’s best for the region, and there’s no doubt amalgamation is necessary if the region is to progress.
The whole idea of amalgamation is to gain efficiencies and cost savings for ratepayers by reducing duplication across the region. It’s about being strategic about the region’s assets, rather than competing with each other’s councils.
You may have seen the Chambers’ comments in the DomPost today. We are worried that Hutt City will support the Petone Stadium proposal.
In our view it’s irresponsible for Councillors to commit the region to a bill of $25-$48 million, with ongoing costs of at least $350,000 a year, this close to a decision on amalgamation.
It would be more sensible to delay a decision until the Local Government Commission has made its determination on council amalgamation.
In all of our decisions here today we must consider the bigger picture – the regional picture – before committing to big ticket items that may not end up being the city’s responsibility alone.
The responsibility to turn our performance around doesn’t rest with the Council alone. It’s down to all of us to be involved to get this city and region moving forward.
However it’s about ensuring Council does the very best with what they do control, the city’s finances.
Council needs to ensure that the city has what it needs, to generate business activity, to make our city regionally, nationally and internationally attractive and vibrant.
It’s about making sure Council is absolutely focused on growth – its business and investment that are going to get the city humming. This shouldn’t be just about growing the rate base – it’s about being a competitive city again.
We also challenge the city council to show leadership on amalgamation. Just look at Sir Bob Harvey – he was absolutely against the regional amalgamation and is now the strongest advocate.
He said the difference for Auckland – besides the central government mandate – was strong determined leadership. Auckland is now a region totally transforming itself.
We believe there are real wins to be made for the region, localised through the local board model, but strong governance at the regional level.
There is much work to be done. Today we hope to set out ways of achieving further growth.