NZ Businesses See Better Prices Than Most

News Release
14 January 2009

NZ Businesses See Better Prices Than Most In Global Survey, But Lower Profitability

New Zealand businesses, on balance, expect better selling prices and better exports in 2009 but lower profitability, according to the latest Grant Thornton International Business Report survey.

On selling prices and exports their expectations are above the global average mark and on profitability they are below the international average figure.

However, accounting and business advisory firm Grant Thornton point out that the global figures for this year mask wide variations among different economies, and, not surprisingly, a downturn of 50 percentage points from last year’s global average for turnover expectations. New Zealand is among those countries predicting a drop in turnover (minus 12%).

Equally expectedly, the survey shows overall optimism among businesses around the world has slumped by 56 percentage points in the past 12 months and pushed the Grant Thornton international optimism / pessimism barometer to a record negative balance of minus16%, compared with plus 40% this time last year. New Zealand had a percentage balance of minus 15%, just below the global average - the percentage balance is the difference between the percentage of respondents who were optimistic and those who were pessimistic.

The Grant Thornton International Business report surveyed senior executives in more than 7,200 privately-held businesses across 36 economies, including New Zealand..

“In New Zealand, it is a case of the good news and the bad news,” said Grant Thornton New Zealand spokesman Peter Sherwin.

“While there are variations in the New Zealand findings, that is also the case globally and it appears to be indicative of the widespread fluctuation in opinions and fortunes around the world. It is difficult not to conclude that businesses in many economies have yet to feel the full force of the global downturn, and some may be in for a delayed shock.

“What is not so encouraging is that, while the Australian businesses surveyed on balance thought there would be no movement in profitability, there was a negative view of minus 30% in New Zealand. So, while they expect selling prices to be up, they see turnover as being down and they are also building in cost increases – hence the outlook for lower profitability.

“Turnover is driven by both domestic sales and exports and is impacted by consumer demand and investment levels at home and abroad.”

Australian businesses were still positive on turnover, selling prices and exports, contributing to their neutral view on profitability.

The average price increase expected among Australian businesses was 3.5%, while in New Zealand it was 1.3%.

While New Zealand was generally pessimistic on turnover, some economies continued to have high expectations, among them Vietnam, India, Botswana, South Africa and Armenia. Those who feared the worst were Hong Kong, Taiwan, Japan and Spain.

Mr Sherwin said that another finding of interest was that New Zealand businesses overall expected investment in plant and machinery, but did not foresee investment in new buildings.

In the overall optimism / pessimism stakes, India, Botswana and Brazil headed the optimists, while Japan and Spain were the most pessimistic.

New Zealand came in 17th of the 36 economies surveyed, with the top 12 countries in the list in positive territory and the remainder showing negative percentages. Australia was at number 10.

In the North Island, on balance the outlook was less in negative territory (minus 13%) than in the South Island (minus 20%).

In the North Island, a fall in consumer demand was rated a bigger concern than in the South. But the tables were turned when it came to shortage of business credit, with the South Island more concerned than the North in this respect.

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