What does the new Cabinet mean for business?

Yesterday afternoon Prime Minister Jacinda Ardern announced the members of her new Cabinet. The mainstream media will discuss the ins and outs and the winners and losers in the new Cabinet, our focus remains on the impact of the announcement on our clients and New Zealand businesses.

Two things stand out.

This is a majority Labour Government. Two Ministers outside Government does not a coalition make. This is without doubt the first majority MMP Government and the Prime Minister is running it as such.

The focus is on delivery. Across the Cabinet we see trusted hands with key portfolios and the brief to deliver. In the wake of the “Year of Delivery” and its associated challenges the PM and her advisors are leaving nothing to chance.

From a business perspective the implication is clear, this Government is determined to “get cracking” on many fronts and is not going to waste any time making a start.

An even stronger “Tight Five” inner circle

The Prime Ministers’ announcement led with two overarching priorities – to drive the economic recovery from COVID-19 and to continue the health response to keep New Zealanders safe from the virus. In addition to this, the new Cabinet further strengthens the inner circle as, in the manner of Lord of the Rings, the “one team to rule them all”. This one team will lead the direction and make the key decisions of this Government.

Previously the Prime Minister had Grant Robertson, Chris Hipkins, Megan Woods and David Parker holding between them the key portfolios of Finance, Health, Education, Housing, Energy, Environment & Trade. That group now includes the Deputy Prime Minister role, Infrastructure, COVID-19 Response, Public Service, and Revenue.  Phil Twyford who was in the group with Transport (and Housing before it moved to Minister Woods) has gone and Andrew Little effectively joins the new “Tight Five” with the Health portfolio. Trade which was with the old “Tight Five” has moved to Damien O’Connor. The Prime Minister is playing to the strengths of her rejigged inner circle.

With no New Zealand First sitting at the Cabinet table and the core portfolios held by these five people, there can be no excuses for failing to deliver in three years’ time and equally little doubt of the direction of travel.

In the workplace, increases to sick leave and minimum wage happen

Our analysis that there will be significant change in the workplace remains unchanged, though it might be slowed with the appointment of a first-time, untested Minister, Michael Wood.

Michael Wood, MP for Mt Roskill and the Labour’s Senior Whip in the last Government, will be determined to prove himself and make progress in the portfolio. He is a former Union official, as was Minister Little.  Whether it progresses as fast as it would have under the auspices of Andrew Little will be determined by how quickly Michael Wood gets up to speed and adapts to the role. That he is also Deputy Leader of the House, supporting Chris Hipkins, is a good indication of where he will be turning for guidance. He has good connections with the inner circle.

On a policy front, we expect the minimum wage increase, sick leave changes, Fair Pay Agreements and the proposed public holiday for Matariki starting in 2022 to be implemented.

The border trilogy

Labour made three campaign promises:

  1. Review immigration criteria to enable a broader range of workers to enter New Zealand
  2. Enable a 10 percent quota for critical workers as we further develop the allocation system for managed isolation places
  3. New Investment Attraction Strategy to encourage targeted and high-value international investment into New Zealand

With Chris Hipkins becoming Minister for COVID-19 Response, as the PM said, “holding the keys to the border”, working alongside Kris Faafoi, who remains Minister for Immigration, there is a known and stable team to drive these policies forward.

The combination of COVID-19 Response and the Education portfolios under Chris Hipkins is interesting. The universities are under all sorts of financial stress due to the closed borders and lack of overseas students. Could we see Hipkins take the opportunity and initiate university reform like he is doing with vocational training? Only time will tell. There is no doubt that the universities and the border are something of an intractable problem. That Chris Hipkins is the Minister with this problem on his plate, maybe a problem for the universities.

Skills and training roll on

Chris Hipkins got his wish and retained the Education portfolio. There is no doubt then that the Government will continue to target funding of vocational training and apprenticeships, and that Reform of Vocational Education (RoVE) will move to completion.  As noted in our previous analysis, look for the Workforce Development Committees to be quickly established.

Infrastructure, Infrastructure, Infrastructure

Consistent with the theme of a stronger inner circle, the PM’s announcement gave the Infrastructure portfolio to Grant Robertson. It was previously held by Shane Jones.

With fellow member of the inner circle David Parker responsible for the reform of the Resource Management Act and an Associate Finance Minister, working with Grant Robertson, the expectation is for significant progress on the $42 billion of infrastructure investment. We have little doubt there will be a shovel coming to a road, pipe, cycleway, tunnel, railway line near you.

Reduced waste and plastics

We expect David Parker and new Associate Environment Minister, Kiri Allan, MP for East Coast and previously Junior Whip, to work together and deliver on the drive to reduce waste and single-use plastics. The product life cycle approach to waste puts much more onus on the manufacturer, less on the consumer.

Like Michael Wood, Kiri Allan has proved herself to be a good member of the Parliamentary team and has been rewarded accordingly. She will also be keen to prove her ability to make things happen and deliver on the headline commitments to:

  • Phase out single-use and hard to recycle plastics by 2025
  • Create a $50m Plastics Innovation Fund to develop alternatives
  • Standardise kerbside recycling

And just like Michael Wood, Kiri Allan has been given a member of the inner circle as a guide and mentor.

Groceries and building supplies under the microscope

The grocery and building sectors will be quick to make introductions with one new Minister and a Minister needing to reclaim some standing – Poto Williams in Building and Construction, and David Clark in Commerce and Consumer Affairs.

Both sectors have upcoming market reviews. Poto Williams, the member for Christchurch East, and previous Minister for the Community and Voluntary Sector, has the brief to ensure New Zealanders are paying a fair price for building supplies as the economy recovers from Covid-19. David Clark is to answer the same question for groceries.

From the perspective of the building sector, not being allocated a more senior minister once again sends that message that it is the poor cousin to infrastructure. Three more years.

Primary industry

Damien O’Connor retained Agriculture and gained Trade and Export Growth. Alongside Stuart Nash, who became Minister for Economic and Regional Development, and Minister for Forestry alongside Small Business and Tourism, all farm roads lead to these two Ministers.

It falls to these two Ministers to balance the needs of rural towns, and the wellbeing of the farming community while also adjusting to the climate change initiatives under Minister Shaw (outside of Cabinet). This will be especially pertinent with all those rural, farming electorate seats that turned red.

On the high seas, David Parker’s extensive collection of portfolios includes Minister for Oceans and Fisheries. We see this as being important signal to the sector. Parker’s ability to get Federated Farmers to agree to water standards through compromise and co-operation applied to fisheries could well result in progress with amongst other things, monitoring and cameras on trawlers.  Change is certain.

Digital economy prioritised

With a newly created portfolio, Minister for the Digital Economy and Communications, we expect policy in this space, including the much-touted digital service tax and consumer data rights, to be progressed.

The question is whether David Clark can progress this alongside the other priorities in his portfolios including market reviews, Insurance Act reform, leftover legislation for the financial sector, and open banking? He has a heavy workload, but maybe his Treasury background will stand him in better stead than when he held the Health portfolio.

What happens next?

Later this week the PM will make a speech setting out her Government’s priorities. After that look out for the first Parliamentary Order Paper. The Order Paper is where we will see exactly what the Government determines to be a priority and which pieces of legislation they want progressed in the seven weeks before Christmas.

Then look out for the announcement of Select Committee membership. The ability to pass legislation with such a large majority is the key impact of the Ardern government mandate.  The role of Select Committees remains important even if few, if any, will have an Opposition majority or role as chair as in the last term. Opposition Shadow spokespeople may articulate a different point of view if they are briefed. Ensuring a rigorous debate on policy issues could well be a challenge with the Government holding an absolute majority.