Strong GDP growth in the past two quarters has put New Zealand near the top of the OECD pack for annual economic growth, but the good data has been tempered by concerns about growing inequality as house prices continue to soar. Global worries also continue to undercut the optimism as nervous sharemarket investors brace for a lift in United States interest rates. It's an economic outlook broadly reflected in the results of the Mood of the Boardroom survey. On the local front there is some serious optimism breaking out and that can't be a bad thing. Last year's gloomier Mood of the Boardroom outlook results came as we were bracing ourselves for a dairy downturn. There was some real concern about how the fragile economy would cope. But with a bit of a nudge from record immigration levels, we've managed to keep growing through the worst of it. Second quarter GDP growth took our annual rate to 3.6 per cent -- ahead of Australia, United States, the UK and Germany. The top-line figure is good news. It creates an environment in which business can grow. Business leaders are certainly feeling more optimistic about their own prospects and the local economy than a year ago. But on the global economy they were less upbeat, with a sizeable number feeling less optimistic than last year. After the market turmoil in January, the Brexit meltdown in June and now growing fears around the US Federal Reserve's next move to raise rates, it is hardly surprising the scepticism about the global recovery remains. The spectre of a Chinese economic slowdown also looms large. Throw in the Donald Trump factor and there are no shortage of issues to be concerned about. But it would be foolish to ignore the relatively benign local economic environment. It might not be so flash on a per capita basis but it is vastly preferable to the opposite scenario of a contracting economy and shrinking population. Coping with growth constraints -- one of the biggest issues for business leaders in this survey -- and even adapting to technological disruption are real problems, but who'd swap them for the shrinking revenue and cost cutting of a serious recession. It has been eight years since New Zealand has been there.
It is important to recognise relative good times and use them to make the structural change and long term plans necessary to ensure we're in shape for the next cycle.We entered recession in early 2008 after a severe drought and were out before the end of the year -- just as the rest of the world slumped into the global financial crisis. That's not to say the past eight years have been plain sailing -- but it is important to recognise relative good times and use them to make the structural change and long-term plans necessary to ensure we're in shape for the next cycle. Some of that enthusiasm for structural change is evident in survey responses. With regards to monetary policy, a sizeable proportion of CEOs felt the Reserve Bank's policy targets should be renegotiated to deal with the unusual low inflation conditions. Inflation has now been outside the official target band of 1 to 3 per cent since the third quarter of 2014. Some economists have suggested we should relax about that target and that chasing it is keeping rates unrealistically low -- further inflating the housing market.
An overwhelming majority agree the Government's current economic management is good.There is also a sizeable number of CEOs who feel the Government need to take a more targeted approach to issues like immigration and infrastructure. But it was worth noting the Bill English still gets plenty of support for his economic management and tight fiscal approach to balancing the books. Calls for English to take a more fiscally stimulatory approach to ease pressure on monetary policy still get a resounding "no" from the majority of respondents. In the end, despite increased concern about social issues such as housing, the Government can still feel comfortable about its support base among senior business leadership. An overwhelming majority agree the Government's current economic management is good. Judged on the economic environment in which most companies are doing their business this year, it is not hard to see why. • Liam Dann is NZME's business editor-at-large.