NZ Comes Down with Heavy Thump in Optimism Survey

New Zealand Comes Down with a Heavy Thump in International Business Optimism Survey

The first results from the 2006 Grant Thornton International Business Owners Survey (IBOS) conducted in 30 countries around the world show a dramatic collapse in optimism among medium-sized businesses in New Zealand.

New Zealand companies have sunk well below the global average on the balance of optimism versus pessimism, to record the lowest level for three years in terms of their confidence for the outlook of the country's economy over the coming 12 months.

And, although Australia has been on a gradual slide on the same measure, New Zealand is now some distance below Australia.

The figures in the survey are the percentage balance between optimistic and pessimistic responses.

In New Zealand the optimism / pessimism differential was 23% in the latest survey, tumbling dramatically from 64% the year before.

In comparison, India's figure was 93%, Ireland's was 84% and South Africa's 80%, while Australia's was 64%. The global average was 39%.

India topped the confidence charts in most sectors of the survey, which showed very mixed results around the world compared with other recent years. Close behind in various sectors was China and the results showed a shift in optimism to countries like India and China from former powerhouses such as the United States, United Kingdom and other European countries.

Grant Thornton New Zealand chairman Peter Sherwin commented: "These are obviously very exciting times for countries such as India and China, but in New Zealand we have this major re-adjustment from fairly high optimism, reflecting a downhill run in both business and consumer confidence.

"The difference in a year is huge and is probably a result of continuing stories about a pending economic slump and a considerable amount of uncertainty that had its genesis in the general election campaign. Australia has had similar cautions about its growth prospects, but their business confidence is obviously more resilient and less fickle.

"It is also interesting to contrast New Zealand with Ireland. The Irish economy has flourished in recent years with plenty of encouragement for strong investment, as well as a good degree of domestic stability."

Mr Sherwin pointed out that while New Zealand businesses' optimism went up with respect to expectation of better selling prices, and maintained a similar level to the previous two years for higher turnover, it slid in regards to increased employment and profitability.

"This very much indicates that they believe it is tougher to maintain margins and therefore this leaves less scope for employing new staff. This is not a good sign for us as a country and economy, unless there are productivity gains to offset these factors."

Survey expectations by subject included:

Employment

Top country: India, 69%; Australia 36%; New Zealand 27%; global average 36%.

Profitability

Top country: India 78%; Australia 43%; New Zealand 37%; global average 47%.

Turnover

Top country: China 89%; Australia 63%; New Zealand 61%; global average 62%.

Selling prices

Top country: Russia 61%; New Zealand 51%; Australia 34%; global average 29%.

Balance of optimism v pessimism

ENDS

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