NZ Business Owners Less Optimistic Than Aussies

Media Release Monday 24 November 2003

New Zealand business-owners are not nearly as confident about the economy as their Australian counterparts, according to the first findings of the annual International Business Owners Survey (IBOS) conducted by accountancy firm Grant Thornton.

This is the first time New Zealand business owners have been included in the survey and they ranked ninth in optimism among the 26 countries covered. They had an optimism-to-pessimism balance of 49 per cent* ? India topped the league with 83 per cent and Australia was close behind with 81 per cent, with the United States third on 75 per cent.

Overall internationally, the survey showed a significant swing to optimism compared with the previous year.

The Grant Thornton International Business Owners Survey was carried out among 6600 owners of medium-sized businesses between September 1 and October 31.

Ireland, with which New Zealand is often compared in business terms, was well down the list with 7 per cent. Five of the 26 countries ? the Philippines, Germany, Singapore, Poland and Japan - were in negative territory.

Singapore is the only country in the survey to become more pessimistic this year and, unlike Hong Kong, appears to have been unable to shake off the repercussions of SARS.

"It is pleasing to see New Zealand in the top 10 on the optimism-pessimism balance, but it is also a pity that the overall percentage score is not higher, particularly in relation to our nearest and biggest trading nation," said Grant Thornton New Zealand chairman Peter Sherwin.

"The good thing, however, is that we now have medium-sized New Zealand businesses benchmarked against many of their overseas counterparts. Small businesses are very important to the country because they make up the very large majority of businesses in New Zealand, but medium-sized enterprises fulfill a vital role because they are generally the ones that have the greatest potential to become significant export earners and economic activity creators.

"Being able to register their health through their outlook, and measure it against other nations' similar businesses, is a powerful new tool for economic analysts, forecasters and the businesses themselves," said Mr Sherwin.

New Zealand's business expectations were highest about turnover, with a 66 per cent balance of optimism on turnover. The least optimism was generated by expectations on exports (only 19 per cent), though the figure was better than that for Australia and the global average.

Balance of optimism figures, broken down by category (with Australian and global comparisons in brackets) are:

· Outlook for the country's economy: 49% (Australia 81%, global 39%).
· Turnover: 66% (Australia 69%, global 58%).
· Selling prices: 30% (Australia 41%, global 17%).
· Exports: 19% (Australia 12%, global 17%).
· Employment: 31% (Australia 41%, global 26%).
· Profitability: 55% (Australia 64%, global 42%).
· Investment in new buildings: 20% (Australia 28%, global 18%).
· Investment in plant and machinery: 48% (Australia 50%, global 34%).

Said Mr Sherwin: "Internationally the results paint a much better economic picture than this time last year with an optimism balance of +39% compared to +3% twelve months ago. The global economy appears to be firmly on a recovery path, led by a strong economy in the US. While Europe is also more positive, business owners remain more cautious and lag far behind the US.

"If you are doing business in Asia, the survey strikes a note of caution. It is critical to understand the differences between the individual countries; as always, the region cannot be treated as an homogenous bloc."

Asked about their expectations for their own companies, the international findings from business owners included:

· Prospects for employment have improved in most countries in line with the expected upswing in economic activity. Pakistan (+48%), US (+45%), Australia (+41%) and Turkey (+40%) have the strongest expectations for employment. Germany and Poland (both ?16%) are the most pessimistic.

· There is a wide expectation that profitability will rise. This is typical of this phase of the economic cycle. Japan is the major exception with expectation of profitability even more negative than last year with a balance of ?15% compared with 0%.

· The business owners who are most pessimistic about selling prices all come from Asia ? Japan (-50%), Singapore (-39%), Taiwan (-30%) and Hong Kong (-26%). Russia is the most optimistic with a balance of +59%. ends

* the figure is the percentage balance of the respondents who are optimistic and those who are pessimistic.

About Grant Thornton

Grant Thornton is one of the world's leading accounting and consulting groups, providing assurance, tax and specialist advice to independent businesses and their owners. The strength of each local firm is reflected in the quality of the organisation. Grant Thornton operates in 110 countries, bringing together 21,500 people in over 585 offices worldwide. All Grant Thornton firms share a commitment to providing the same high quality service to their clients wherever they choose to do business. Grant Thornton has offices in Auckland, Wellington, Christchurch, Dunedin and Whangarei.

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