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Regulatory risk (delayed?)

Regulatory risk (delayed?). Red Meat Sector conference Colin James 8 July 2013. Timescale of comments. Out to 2018 Goes through two elections here — change of govt 2017 if not before Sees through unwinding of QE, China adjustment Two big FTAs? Or neither?

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Regulatory risk (delayed?)

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  1. Regulatory risk (delayed?) Red Meat Sector conference Colin James 8 July 2013 www.TheHugoGroup.com

  2. Timescale of comments • Out to 2018 • Goes through two elections here — change of govt 2017 if not before • Sees through unwinding of QE, China adjustment • Two big FTAs? Or neither? • Climate change issues higher profile • Maybe: US-China trade/security crunch; MidEast mess www.TheHugoGroup.com

  3. Context • Firm domestic growth through next 18 months, slower thereafter • Depends on global conditions — expect bumps • Outlook good for high-end food • 210m more households by 2025 on $US20,000 a year; Chinese households on $US16,000-34,000 go from 14m to 168m by 2020; 3bn more in “middle class” ($US10-100 a day) spending 2030 • But those straight-line projections; diversion risks (China, water, food, geo-security) www.TheHugoGroup.com

  4. Domestic policy/political overview • GDP growth dominates till next election • National 55:45 to win third term — NZ First may hold balance • If National wins 2014, policy continuity (modified a bit by deals with small parties) • If Labour+Greens win 2014, major policy reversals on RMA, local govt, labour • Labour+Greens odds-on in 2017 if don’t win 2014 • If Labour+Greens win 2014, 50:50 National 2017 www.TheHugoGroup.com

  5. A triangle at the top Key English Joyce www.TheHugoGroup.com

  6. A triangle at the top Key English Joyce www.TheHugoGroup.com

  7. A triangle at the top Key English Joyce www.TheHugoGroup.com

  8. A triangle at the top Key English Joyce www.TheHugoGroup.com

  9. A triangle at the top Key English Joyce The strongest line What happens if this line frays? www.TheHugoGroup.com

  10. A triangle at the top Key English Joyce The strongest line What happens if this line frays? Second tier of other sector-leading ministers — corresponding to departmental sectors www.TheHugoGroup.com

  11. Till 2014 election: GDP growth is king • Fiscal consolidation to reduce state crowdout • Balance, then debt reduction below 20% GDP • Improved asset management • Asset selldowns for investment funds • PPPs (but warily) • “Better public services”:efficiency, effectiveness • 2014 budget won’t be a vote-buyer but some doles • Tax policy mainly tidy-ups www.TheHugoGroup.com

  12. Till 2014 election: GDP growth is king • More mining, more irrigation • Research geared more to food/agriculture • Deregulation of labour market • Big RMA changes: economy trumps environment • Local councils required to get in line • Exceptions: re-regulation in finance and to deal with political embarrassments (quake rules, mine safety, very low wages — maybe more • Has the economy rebalanced? Lab+Greens say no www.TheHugoGroup.com

  13. Till 2014 election: other policy • FTAs: TPP, RCEP and whoever else will play; not much trans-Tasman • Climate change: all sectors firm target for 2020 but ministers wary about effect on GDP growth • Education: more emphasis on technology, professionalisation of teachers • Health: increasing output; spending constraints • Welfare: get them into jobs (actuarial/investment) • Foreign policy: independent but friendlier to US • A four-year fixed term? www.TheHugoGroup.com

  14. The 2014 election • Alternative govt has taken shape: Lab+Greens (+maybe others); voters have choice (unlike 2011) • Polls give Nat big lead over Lab but little or nothing above Lab+Greens • Household finances/confidence key factor: so far, so good but watch the global economy • Leadership: Key popular but now some doubts; Mar-April dip might be repeatable • Norman looks too much like opposition leader for Labour comfort; might stop Nat—>Lab transfers www.TheHugoGroup.com

  15. Polls still good for National but Lab+Green close www.TheHugoGroup.com

  16. Hypothetical 2014 election outcome — NOT forecast • Nat has real prospect of 44% • ACT may get 1 seat (but needs new candidate) • Maori party 0-3 seats, let’s guess 2 • Conservatives get 2011 2.7% (=3 seats if in Parlt) • Lab should get 35 at least (electorate score 2011) • Greens likely to be lower — but at least 8% • Mana 1 seat • NZ First 60:40 to clear 5% • Peter Dunne out www.TheHugoGroup.com

  17. Hypothetical election outcome—NOT a forecast • National 44.2% • ACT 1.0% • Maori party 1.4% • Conservatives 2.7% • TOTAL NATIONAL 49.3% • NZ First 5.5% • Labour 35.0% • Greens 8.0% • LABOUR+GREENS 43.0% • [Mana 1.0%] www.TheHugoGroup.com

  18. Hypothetical result 1: Peters over 5%, Craig out • National 44.2% 55 seats • ACT 1.0% 1 seat • Maori party 1.4% 2 seats • Conservatives 2.7% 0 seat • TOTAL NATIONAL SIDE 58 seats • NZ First 5.5% 7 seats • Labour 35.0% 44 seats • Greens 8.0% 10 seats • LABOUR+GREENS 54 seats • [Mana 1.0% 1 seat] www.TheHugoGroup.com

  19. Hypothetical result 2: Peters over 5%, Craig a seat • National 44.2% 54 seats • ACT 1.0% 1 seat • Maori party 1.4% 2 seats • Conservatives 2.7% 3 seats • TOTAL NATIONAL SIDE 60 seats • NZ First 5.5% 7 seats • Labour 35.0% 42 seats • Greens 8.0% 10 seats • LABOUR+GREENS 52 seats • [Mana 1.0% 1 seat] www.TheHugoGroup.com

  20. Hypothetical result 3: Peters under 5%, Craig a seat • National 44.2% 57 seats • ACT 1.0% 1 seat • Maori party 1.4% 2 seats • Conservatives 2.7% 3 seats • TOTAL NATIONAL SIDE 63 seats • NZ First 4.5% 0 seats • Labour 35.0% 46 seats • Greens 8.0% 10 seats • LABOUR+GREENS 56 seats • [Mana 1.0% 1 seat] www.TheHugoGroup.com

  21. Hypothetical result 4: Peters under 5%, Craig out • National 44.2% 59 seats • ACT 1.0% 1 seat • Maori party 1.4% 2 seats • Conservatives 2.7% 0 seat • TOTAL NATIONAL SIDE 62 seats • NZ First 4.5% 0 seats • Labour 35.0% 46 seats • Greens 8.0% 11 seats • LABOUR+GREENS 57 seats • [Mana 1.0% 1 seat] www.TheHugoGroup.com

  22. Repeat — hypothetical NOT A FORECAST • Take Nat down 1% and it gets more marginal • Likewise if ACT cannot get a credible candidate • If Dunne in, may add a seat (but very big “if”) • If Nat up 1%, chances improve • If Lab 38%+Green 8%, Nat in trouble • If Peters has balance of power, unclear if he goes with Nat (is ex-Nat but angry at Key’s 2008 attacks) or Lab+Greens (doesn’t gell with Greens) www.TheHugoGroup.com

  23. Outcome 2014 • Election likely 29 Nov; Key may announce date early Feb • 55:45 National third term • But support mix may make it difficult to manage so might not see out full term: NZ First hard to accommodate, Maori party needing more distance • Key goes by end-2016 (if a loss he goes quickly) www.TheHugoGroup.com

  24. If Nat-led govt post-2014 • Policy continuity but qualified by: —need to attend to voter preferences —need to attend to small parties —if Key retirement: Joyce, Collins, Adams? —possible economic/other upsets so hasty fixes —possible deregulatory over-reach • Higher cabinet rank: Adams, Kaye, Bridges; ministry posts: Goldsmith, Lotu-Iiga, Ross (Lee?) • Leadership convulsions in Labour www.TheHugoGroup.com

  25. If Lab+Green-led govt post-2014 • Significant regulatory risk for business • Would reverse/repeal several 2008-14 policies —RMA, local govt, house consents, workplace law, protest, Sky City; plus tougher on climate change • “Seesaw factor”in policy: the bigger the 2008-14 “see”, the bigger the post-2014 “saw” • More active economic policy: monetary, capital gains tax, compulsory KiwiSaver, govt agency to buy electricity, research tax credits, high-end manufacturing, venture capital, apprenticeships www.TheHugoGroup.com

  26. If Lab+Green-led govt post-2014 • Balance budget (but some slippage?) • Social policy focused on “child first” • “Living wage” ($18.30 now) for state employees and contractors/suppliers • Greens push on social, environmental policy; oppose mining (but Lab mostly prevails), oppose FTAs (but Lab gets Nat support) • NZ First push on immigration • Would it last more than one term? www.TheHugoGroup.com

  27. 2017 election and beyond • If Nat third term 2014, 75:25 Lab+Green-led win in following election • IN SHORT: a Lab+Green govt sometime in the next five years • So regulatory risk is real but may be delayed • If Lab+Green win 2014, 50:50 Nat back 2017 www.TheHugoGroup.com

  28. Lab+Green govt post-2017 • Generally similar to post-2014, except that Y-gen MPs more significant, baby-boomers/X-gen less influential —so Robertson, Ardern, Clark, Hipkins up • Who would be leader/deputy after Shearer dropped 2015? • May not reverse as much policy as would have if elected 2014: the longer between the “see” and the “saw” (of policy seesaw) the better the chance of a smaller (or no) “saw” www.TheHugoGroup.com

  29. Get ready for change • If not 2014, then 2017 • Post-1984 orthodoxies not secure • Regulatory risk significant www.TheHugoGroup.com

  30. www.TheHugoGroup.com

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