Mood of the Boardroom: No cause to spend winter drowning in discontent

Liam Dann

As the All Whites arrived home, several players expressed great disappointment at having failed to qualify for the second round. But they, along with the rest of us, were quick to note that if we step back in time and look at what our expectations were a year or so ago, then these results look fantastic.

That's not a bad way of looking at the current economic malaise either. Here we are in another tough winter with spending still tight and costs rising.

But step back to where we were two years ago as the world headed in to the biggest financial meltdown since 1929. Just like the All Whites, New Zealand has fared better than anyone dared to expect at that time.

Even by comparison with last year, when we were still in the grip of recession and the spectre of a global pandemic added an edge to the gloom, things aren't looking too bad.

There is clearly room for cautious optimism and that flows through the views expressed by CEO's in this year's Mood of the Boardroom survey.

Expectations around revenue growth, capital spending and employment all indicate that business leaders are feeling upbeat about the road ahead. In each of these categories about half of respondents were feeling positive.

The rest were largely uncertain with a smaller group still feeling negative about the outlook. That not everyone is feeling optimistic yet is hardly surprising, given the lumpy nature of this recovery.

But the results suggest that we are steadily moving from "wait and see mode" to a genuine recovery mode.

On the other side of the ledger the concerns of business leaders are now of a less pressing nature.

Access to capital - through both equity and debt markets - appears lower down the list than it was immediately after the global financial crisis.

Other worries such as labour productivity, the rising costs of energy, fuel and the impact of the ETS have leapt towards the top of the pile.

These results also suggest we may be entering a new phase in the economic cycle.

Like the All Whites, having put in a better than expected performance doesn't mean we can sit back and relax. Thoughts must quickly turn to the future and how best to leverage the position we now find ourselves in.

As John Key quipped recently, we're a dead cert to rise up the OECD league table this year - that's because last time it was published we were sitting right behind Greece.

Key knows better than most that we shouldn't be laughing too long or hard about that. While our public debt levels remain benign, our private debt to GDP ratio is much more worrying.

A splutter from the China any time in the next couple of years could easily set the wider Asian economy back on its heels. That would provide a much stiffer test of New Zealand's economic health than we are getting from the current European meltdown.

But the point here is that we are currently doing better than many of our global peers. Even if the strength of our economic position is just a quirk of geography, we'd be fools not to see it as an opportunity and put policies in place to press home the advantage.

In the US, the Government continues to prop up the economy with stimulatory policies. In Britain and many European nations, governments are starting to bite the bullet and slash spending.

The gulf in policy - highlighted at last week's G20 summit - has been described as a great economic experiment.

In New Zealand we have a small window for trying something different. Though there is still great pressure on spending, this year's Budget has also provided scope for the Government to change the tax regime in a direction it believes should increase productivity. Bill English and John Key have told us there isn't room for radical steps. But they have showed us that they have a plan.

This year's Mood of the Boardroom survey shows a high level of support for the changes that have been made to the tax system. Certainly there is a view that there is more work to be done if we are to improve our economic performance.

But there seems to be growing confidence that this Government has a platform in place which can be built on. It is certainly not a platform on which we can afford to rest.