Jarrod Kerr, Chief Economist, Kiwibank. Photo / Supplied
For the number of people it has, Auckland is the worst example in New Zealand of under-investment, a leading banker believes.
Jarrod Kerr, Kiwibank Chief Economist, says while the city is "incredibly well-placed competitively" it does have issues and believes it needs more "think-big type projects" and more businesses coming in to solve its problems.
"When we built the harbour bridge (the Auckland Harbour Bridge, opened in 1959) it was too small and we had to add clip-ons 10 years later.
"That was in the 1970s and we've got no alternative to it 40 or 50 years on; we've under-invested all that time and the fact it can take 40 minutes to an hour to drive 15-20km is unacceptable."
Kerr says Auckland – and New Zealand – will do very well in the long term and "if I was running a small business today I would be looking to expand; we need to get them (small businesses) firing again."
Kerr made the comments after, as he described it, putting himself in the shoes of a plumber running a small business in Auckland and looking at how that person could manage in a world of interest rate cuts, labour shortages, red tape, US-China trade wars and weak business confidence.
"If I believed in myself and my company I would take a five-year view," he says. "If you look at New Zealand and what we've got here, it's one of the most attractive countries on the planet. We have strong population growth, we attract a lot of migrants and other good people, so our growth is going to be reasonably strong over a long timeframe."
Kerr sees the upside for small to medium enterprises (SMEs) in low interest rate environments: "We really need them to step up and look to the future, look to expand, look to adapt and look to boost productivity; the starting point is to get interest rates so low that it looks attractive for businesses to do that."
This is particularly important for SMEs. "Larger companies have access to capital and loans, but they're not the backbone of countries like Australia and New Zealand.
"That's small to medium companies – there's a lot more of them, they're the ones that pop up and solve a lot of problems quite quickly" Kerr says. "We need to get them firing again."
Kerr thinks interest rates will stay low for 5-10 years and says next year's election is unlikely to affect them because the Reserve Bank is independent.
"We would love to see the Government loosening the purse-strings and taking the lead in infrastructure investment in this country after decades of under-investment.
"If you get a Government that comes in and says, 'right, we're going to solve a lot of the infrastructure-deficit problems that we have,' the Reserve Bank will put that into their forecasts and would lead to better growth and inflation outcomes."
Far-fetched as it may sound, Kerr say US-China ructions may affect our Auckland plumber both "directly through the cost of pipes, for example, and indirectly through a significant slowdown in global growth, which could lead to a significant slowdown in our exports and economy."
Kerr says New Zealand is a small, open economy heavily influenced by offshore factors such as trade wars and protectionism: "This adds to the uncertainty – particularly in the construction sector – and businesses are worried. And fair enough."
But Kerr is optimistic. "We hope those fears will dissipate and SMEs will look to the future and go, 'You know what? New Zealand's not going to fall off the map. We will bounce back in a few years' time, and I really need to invest today to make sure I have enough equipment and vehicles and bits and pieces to grow my business over the next five years'."
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This content was originally published on NZ Herald and has been republished with permission.