2014

New Zealand’s business optimism levels continue to soar, bucking a global dampening in confidence and placing us fifth amongst 45 countries surveyed in Grant Thornton’s International Business Report (IBR) released today.

Confidence levels have lifted dramatically in the last quarter in New Zealand from 64% to 74%, against a global figure which has dropped from 32% to 27% in the same period.

This places New Zealand behind United Arab Emirates (90%), Philippines (90%), Peru (84%) and Indonesia (78%).

Paul Kane, Partner, Privately Held Business at Grant Thornton New Zealand, said that for the first time in many years New Zealand was favoured by a growing local economy and renewed international interest following the Global Financial Crisis.

“Much has already been noted in relation to the Christchurch rebuild, Auckland housing construction and booming dairy prices, but the sleeping giant of Asia is now starting to have a major influence on the New Zealand economy.

“Of great interest in the survey was the fact the Philippines (population 99 million) was ranked first equal in business confidence and Indonesia (237 million) was ranked fourth. Both have emerging middle classes, and in the case of Indonesia, are our second closest major trading partner after Australia.

“The survey was undertaken in the midst of the devastating Philippines cyclone but it would seem this had no discernible impact on their confidence. This is likely due to the fact that most of the interviews took place in Manila where the cyclone’s effect was negligible.

“When you add the combined populations of India and China (2.5 billion) with the other growing economies of Korea, Taiwan, Malaysia, Thailand, Vietnam and Cambodia then the potential is unlimited.

“And we are already starting to see the first major glimpses of these influences. The appetite for our agricultural products appears to have no bounds, the demand for our educational facilities is growing with students also once again returning to Christchurch and tourism numbers, especially from China, growing exponentially.

“The other good news for the New Zealand economy is that Australian confidence almost doubled to 42% (from 23%),” he said.

Optimism is also reflected in profitability expectations with 68% of New Zealand businesses expecting an increase in profit in 2014, once again ranking us fifth in the world behind India, Peru, Taiwan and Indonesia.

“The good news for employees is that 86% of New Zealand businesses intend  giving a pay rise in 2014, ranking us seventh in the world in this area,” he said.

Other key findings of the report included:

Global business optimism has declined back to 27%. Why?

Optimism in the world's two largest economies, the US and China, slowed sharply with the United States dropping from 52% to 36% following the government shutdown and Chinese optimism dropped from 31% to 22% Brazil also dropped sharply from 31% to 10%, a new record low. Russian optimism declined from 19% to just 1%, a record low since 2009.

Where is the positive news coming from?

Optimism in Japan ticked back up into positive territory (6% from -9%). Indian confidence improved from 57% to 69%; UK business confidence remains high at 71% (although down from 76% in Q3) and in the eurozone, Germany remains confident at 51%, but pessimism in France increased, dropping back to -38% from -17% as the economy contracted in Q3.

What is stopping businesses from growing?

Economic uncertainty remains the single greatest challenge for business leaders globally at 42%, unchanged from Q3 with business leaders in southern Europe still most concerned (59%) – led by Greece (86%). Thailand (84%), which is being gripped by riots, is also suffering, as is Argentina and India (both 78%) which are facing significant political challenges.

Rising energy costs is the second greatest constraint at 35% with Japan (79%), still dealing with the fallout from Fukushima, struggling most, followed by Thailand (76%), India (69%), Greece (64%) and the Baltics (57%).

Regulations/red tape has fallen from 36% to 34%; 2013 average (35%) same as 2012.

Further enquiries, please contact:

Paul Kane
Grant Thornton Partner, Privately Held Business
T +64 (0) 21 277 8835
E paul.kane@nz.gt.com