New Zealand business optimism at new high

New Zealand business optimism at new high

New Zealand businesses are more optimistic than they have been in years, according to the annual economic outlook survey by business advisors Grant Thornton.

The International Business Report (IBR) found a huge jump in optimism from

-15% last year to 66% of New Zealand businesses who are optimistic about 2010 - the most bullish they have been since Grant Thornton began its annual survey of our privately held companies in 2003.

Peter Sherwin, a director of Grant Thornton New Zealand, said that this swing from pessimism to optimism was extremely encouraging.

“New Zealand businesses were among those with the most optimistic outlook in the world, ranking seventh. It was particularly interesting that Australia weighed in the third most confident at 79% which is not that far ahead of us – especially when you consider that there is debate about whether Australia has ever actually been in recession.”

The International Business Report (IBR), now in its 18th year, surveys more than 7400 privately held businesses across 36 economies. It found that international optimism had bounced back significantly and that several economies are more optimistic about their outlook than International Monetary Fund forecasts suggest.

“Most New Zealand businesses have become leaner and more cost effective during the recession, as they have had to scrutinise their operations. This has set them up well for the recovery.

“As the global economy emerges from recession, we are likely to see many businesses reaping the rewards of recession induced efficiencies to lead the way in the upturn.”

But Sherwin said that while Don Brash’s 2025 taskforce report was seen as too radical, the Government had yet to unveil a public strategy on its plans to take New Zealand from slow growth to robust growth.

“Leadership from the Government must be the focus for 2010 otherwise it is clear that Australia, dubbed ‘the lucky country,’ will continue to outstretch our growth in both GDP and wages.”

Sherwin said it was interesting to note that the North Island had a more confident outlook – 70% versus 57% in the South Island. There were subtle differences in each category, with southern businesses generally lagging their northern counterparts in optimism.

The survey also found that 66% of businesses in the North Island and 42.9% in the South Island expected increased revenues in 2010 (when respondents were asked to rank likely business trends next year.

“This could be evidence of the more conservative approach from our southern businesses.”

When asked where businesses had put increasing focus in preparation for the upturn, the most emphasis among New Zealand businesses was on skills of their current workforce, with new target markets and new products/services also in the spotlight. Low on the priority list was composition of supply chain and mergers and acquisitions.

“The research confirms what we had already suspected. In New Zealand privately held businesses haven’t preserved profit at the expense of their people. Half of the businesses surveyed had focused on up-skilling and maintaining and enhancing their current workforce in the recession. We’ve also seen a resurgence of tactical recruiting.”

Sherwin said New Zealand had benefited from the return of many highly talented business people to our shores and it was now easier to source talented workers.

“The challenge for us now is to make sure we keep those who have returned. Their international experience is invaluable and can help New Zealand firms to look at new ways of doing business.”

The international survey found that businesses in Chile, India, Australia, Vietnam and Brazil are the most optimistic in the world, all scoring over +70%. Close behind is the Philippines, New Zealand, South Africa, mainland China, Singapore, Canada and Hong Kong (which showed the biggest swing of sentiment from 2009) at +60% or higher (see figure 1).

At the other end of the scale, many Eurozone countries remain pessimistic about the future; Italy, Denmark, Finland and France all scored -10% or lower with Greece (-23%) and Ireland (-42%) even more gloomy. Spain (-56%) and Japan (-72%) kept their places as the most pessimistic economies in the world, although even here the figures were slightly up on last year.

When compared to the IMF's GDP figures for 2009, economies that avoided recession (for example, Australia, mainland China, India and Vietnam) or suffered a relatively minor recession (such as Brazil, Hong Kong, Canada and New Zealand) all feature, not surprisingly, at the top of the league table.

Against the IMF’s GDP forecasts for 2010, however, an interesting picture emerges, with businesses in places as geographically diverse as Australia, New Zealand, Canada, Malaysia and Germany recording disproportionately higher optimism than might be expected.

Peter Sherwin: “Privately held businesses contribute 81% of global GDP, and the global and New Zealand business community should be encouraged by the results of this survey.

“Many people blamed globalisation for the speed of the downturn but we are now seeing that globalisation may also help us accelerate out of recession. This survey suggests that businesses in the giant emerging markets of mainland China, India and Brazil are confident that they can help to pull the rest of the world back into growth and businesses in many other economies are equally optimistic (in some cases more optimistic than they have been for years) that they have not only survived this recession but are well placed to help drive the upturn, and see their business grow as a result. European governments, in particular, will hope such optimism is well founded.”

ENDS