NZ Sinks Down the Global Business Optimism League

News Release
14 January 2008

New Zealand Sinks Down the Global Business Optimism League

New Zealand has fared badly in comparison with Australia in an international survey of businesses’ outlook for the economy this year.

Optimism among New Zealand businesses measured in the Grant Thornton International Business Report survey has sunk to a balance of + 30%. The figure is underneath the global average of + 42% and well below Australia’s + 77%.

The gap between the two countries has widened considerably. This time last year, Australia’s optimism level on the economy was + 62% and New Zealand’s was + 42%.

“This difference in optimism between the two countries is disturbing,” said Grant Thornton New Zealand spokesman Peter Sherwin today. “Coming on the back of statistics showing more New Zealanders going to Australia to live and work in what is perceived to be a better economy, it is a worrying commentary on the economic state of New Zealand.

“We are seeing a drain of New Zealand individuals and businesses to our big neighbour and we really cannot afford such a lack of optimism here.

“At the moment we’re up against a cooling economy, but one that still has the Reserve Bank worried about inflation and indicating that it won’t lower the official interest rate in the near future. And that will have had a bearing on businesses’ outlook.

“Just as we are falling towards the tail of the OECD average incomes chart, we are also slipping down the optimism ladder.”

New Zealand businesses’ optimism expectations fell particularly in the categories of employment, profitability and investment in new buildings. There were lesser falls in expectations on turnover, selling prices, and investment in plant and machinery.

“If there is one bright spot, it is that there is an increase in optimism on the outlook for exports,” said Peter Sherwin. “Given the difficulties some companies have had with the higher Kiwi exchange rate, a tight labour market and rising costs, this particular improvement in outlook is most likely a reflection of the current dairy products export bonanza.”

New Zealand is 23rd overall on optimism versus pessimism measures out of the 34 countries ranked in the Grant Thornton survey.

Australia is level seventh with China, on 77%. At the top of the league are India and the Philippines, both at 95%, with Vietnam on 87%, Singapore on 84%, Hong Kong on 82% and Poland on 78%.

Global business optimism has dropped only slightly overall, despite extensive coverage of the financial ripples spreading from the United States sub-prime mortgage crisis and resultant credit crunch.

The optimism of India and the Philippines can be attributed to the robust economic growth of recent years and expectations that the momentum can be sustained during 2008. In contrast, the outlook in Japan, which had been trending upwards, slumped again in the latest survey and the country stayed in the league cellar.

ENDS

About the IBR
The International Business Report surveyed more than 7,500 owners of medium sized businesses in 34 countries. In New Zealand, Consumer Link surveyed 150 businesses. For the purposes of the IBR survey, a medium-sized business in New Zealand was seen as employing between 10 and 149 people. The research was conducted by Experian Business Strategies Limited and Harris Interactive. All figures were correct at time of going to press. To find out more about IBR and to obtain details of IBR reports and results please visit www.internationalbusinessreport.com.

About Grant Thornton International
Grant Thornton International is one of the world's leading organisations of independently owned and managed accounting and consulting firms providing assurance, tax and specialist business advice to privately held businesses and public interest entities. The strength of each local firm is reflected in the quality of the international organisation. All Grant Thornton International member firms share a commitment to providing the same high quality service to their clients wherever they choose to do business.

About Grant Thornton in New Zealand
In New Zealand, Grant Thornton has independent firms in Auckland, Christchurch, Dunedin and Wellington. From market-leading services for the owners of private businesses, to audit, to insolvency and capital markets services for corporations, and to innovative taxation and wealth management services for individuals, Grant Thornton in New Zealand helps business owners achieve success and realise their ambitions.

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