Coalition keeps coming up with more bills for listed firms to pay

Friday 30th November 2001

Concerns mounting over the government's plans for the Health and Safety in Employment Amendment Bill have implications for the New Zealand sharemarket.

Listed companies will be just as vulnerable to the punitive intent of the proposed bill as will be unlisted ones.

Labour market policy inevitably has implications for sharemarket performance and investor decisionmaking.

Problems created by the bill will be cumulative on others stemming from government policies that have been undermining the ability of NZSE listings to deliver adequate rates of return to investors.

Examples of other such influences would be the ERA, renationalisation of ACC, paid parental leave, higher taxation, the Cullen superannuation fund, continued failure to get to grips with compliance cost issues such as RMA reform, and deterioration of transtasman relations with Australia.

One way or another, the government keeps coming up with ways to hand listed businesses more bills to pay.

All these various state-initiated measures have actual or potential impact on a listed company's bottom line and its ability to pay dividends, service debt, and take risks on expansion of markets and undertaking of research and development.

In turn, investors and retirement savers have these problems passed on to them as price signals in their sharemarket holdings expressed in terms of capital gains or losses and dividend payout variations.

It cannot be imagined that NZSE listings have been made more attractive for investment as a consequence of these government initiatives.

It is hard to know whether the right hand knows what the left is doing in the government so far as effects of policy on listed companies go.

One interpretation would be that there has been a stampede of wish-listing as Labour and Alliance figures, for so long exiled from the Treasury benches, rush to ram their pet projects through without investigating the aggregate results.

Alternatively, there might indeed be a big, co-ordinated picture in place, as Steve Maharey implied when he wrote (NBR, November 9) that Labour represented "modern social democracy" and the "Third Way."

If Labour is trying to become the architect of a lasting social democratic state in New Zealand then perhaps there is method in the madness.

It has been said that few members of the Labour/
Alliance coalition have experience of running a business.

By extension, it is probably true that the great majority of these people do not understand the sharemarket, investment, and relationships between financial markets and the wider economy.

Some at least could even be ideologically hostile to the sharemarket. Yet New Zealand needs to have a healthy, vibrant sharemarket for raising business capital if this country is to enjoy the prosperous future the government keeps promising ad nauseum.

Problems the coalition is creating for listed companies have ramifications at various levels. For investors and those who seek to raise company capital, it becomes less likely that they will meet up and together create new sources of wealth.

For retirement savers, chances are diminished that they will hit their target nest egg sum, at least not from investing in New Zealand.

For the Stock Exchange, beset with woes over how it will move forward and stay internationally relevant as a capital market, the worsening legislative climate for listed companies will undermine its efforts.

In terms of building small listed companies into big ones, increased cost burdens imposed legislatively will be regressive on the smaller firms, retarding their growth and development to the advantage of the larger corporates better-placed to absorb such impositions.

In having an inherent bias that - ironically under socialist administration - favours big business, government policies will work to the detriment of expanded competition and innovation within the economy.

All up, the government is not just anti-business, it is anti-sharemarket.

The odd victory in rolling back some of the worst of its proposed excesses during the current parliamentary term will be no substitute for comprehensive reform and repeal of the entire legislative mess that has been dropped on listed companies, investors, retirement savers, the Stock Exchange and the economy.

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