While recent research both in New Zealand and globally points to rising business optimism, Grant Thornton New Zealand partner, Greg Thompson, looks at the strength of this confidence and wonders if in fact it is not just another “false dawn.”
According to the latest research from the Grant Thornton International Business Report (IBR), a quarterly survey of 3,000 businesses in 40 countries.
“During the first quarter business confidence in New Zealand rose from 36% to 45% compared with the last quarter of 2011 while overseas the lift was even stronger with business optimism in the G7 countries rising by 28 percentage points from -12% in Q4-2011 to 16% in Q1-2012.
“The increase in optimism in the United States – where optimism increased by 45 percentage points, from just 1% in Q4-2011 to 46% in Q1-2012 – is a major factor. Meanwhile, businesses in Japan (-53%) and Europe (-4%) remain pessimistic, but both have seen improvements over the last quarter.
“However, looking back at results over the past 12 months tells a more sobering story. New Zealand’s optimism figures are almost identical to this time last year, 45% compared with 44%, yet is the country better off than this time last year?
“When you look at Government and the fiscal drag of the Christchurch rebuild, you would have to say no. The much promised stimulus coming from that rebuild seems to move further away with each day. What was hoped to start in earnest in the last quarter of 2011 is now being pushed out as far as the third quarter of 2013 by some observers.
“And while experts, including most recently the International Monetary Fund, are saying that the New Zealand dollar is overvalued up to 20%, it has remained at these levels for such a long time that some are wondering if it will ever retreat to more export-friendly levels,” he said.
Thompson said that he did not want to sound overly pessimistic, more realistic when considering the macro economic factors that influence the New Zealand economy rather than the emotional triggers that affect confidence.
“While Europe and its debt problems will be on-going for some time, the economic recovery in the United States, borne out by brighter GDP and employment data, seems to have really gained momentum in the last quarter.
“There is also good news in the New Zealand figures. Access to, and the cost of, finance appears much less of a problem that it did three months ago with the cost of finance less of a concern (-12%), a shortage of capital (-2%) and a shortage of long-term finance (-12%) all showing positive signs.
“Battling with red tape remains a problem with an increase of 4% in the number of businesses citing it as an inhibiting factor.
“The other good news is on the wages front with 22% of employers expecting to give a pay rise above inflation, 51% in line with inflation and 24% no pay rise at all. The other good news is that no employer is contemplating reducing wages.
“Business behaviours currently do not reflect the likelihood of a positive improvement in the outlook for the New Zealand economy, but at least with a confidence that things will improve, business is poised to take advantage of any opportunities which may come their way,” Greg Thompson said.
Greg Thompson
Partner, Tax
Grant Thornton New Zealand Ltd
T +64 (0)4 495 3775
M +64 (0)21 281 7332
E greg.thompson@nz.gt.com