Pessimism about the economy has persisted since the change in government.
Business leaders are less optimistic than they were a year ago. A total of 62 per cent of business leaders responding to the Mood of the Boardroom survey say they are less optimistic about the general business situation in their industry.
Just 15 per cent feel more optimistic, 23 per cent say they feel the same level of optimism as last year.
The figures were worse when respondents were asked their perspective on the New Zealand economy.
A full 83 per cent say they are less optimistic than they were one year ago. Only 4 per cent say they are more optimistic, 13 per cent say they feel the same as last year.
This poor outlook aligns with other surveys of business confidence, which have shown consistent pessimism about the economy since the change in government to the Labour-led Coalition in 2017.
The most recent ANZ Business Outlook found 52 per cent of businesses surveyed expected economic conditions to deteriorate.
Respondents were also asked how concerned they are about the impact of various domestic factors for business confidence, rated on a scale where 1 = no concern and 10 = extremely concerned.
The top domestic factors influencing business confidence in the NZ economy are congestion in Auckland (7.60/10) and infrastructure constraints (7.39/10).
The announcement last week that the Auckland light rail project will be delayed until at least 2021 exemplifies the lack of action that CEOs expressed frustration on. The infrastructure issue is considered in more detail on D21.
Other major domestic factors impacting business confidence according to CEOs include the availability of skills and labour (6.99/10) and general uncertainty around the impact and direction of current or proposed Government policies (6.87/10).
Foodstuffs North Island chief Chris Quin says: "Talent and Skills shortage and lack of clarity and progress on vocational training, along with an unclear future of vocational training and immigration settings are really harming the possibility of a successful transition to the future of work for NZ.
Aligned Government spending that is much more effective in growing productivity is critical."
Despite the pessimism from business, the International Monetary Fund released its annual review of NZ's economy in the last week.
It suggests New Zealand's economic growth is "still solid". It says despite the loss of momentum in economic activity and a cooling in housing markets, output has remained close to potential. It also praised the falling unemployment rate and the government's Wellbeing Budget — saying it struck the right balance between fiscal prudence and tackling priorities like mental health, child poverty and Māori and Pasifika aspirations.
Some economists say that business confidence surveys tend to be biased against Labour-led Governments, and have little correlation to actual economic growth. In line with this, Skycity chair Rob Campbell suggested one factor impacting business confidence is "business organisations talking down confidence".
Cathy Quinn, Independent director
I am optimistic about the general business situation for most of the businesses I am involved with as we have high quality CEOs with good business plans even if there are a variety of challenges.
The New Zealand economy seems tougher than 12 months ago and there is less confidence generally which makes consumers more cautious.
Trump, Boris, Brexit, the US-China trade war all make the global economy seem more uncertain and certainly unpredictable.
As NZ is tied to the global economy, we have to take account of that uncertainty.
All businesses are dealing with rising costs: wages, electricity and compliance costs including through preparing for changes in regulation. At the same time there is business uncertainty caused by global issues and local issues including where the RBNZ will land on the capital require-ments for our banks (and what it will mean for accessing debt — the consensus by business people is that it will be harder which will be negative to the economy).
While most business people are supportive of NZ facing the challenge of climate change there is concern about requiring some businesses to reduce emissions before there are technological mechanism to achieve a reduction in emissions.
Similarly, it makes no economic sense to impose increased costs on NZ businesses in this context and to give imports a free pass.
Nine players in the banking industry took part in the survey — including the top five banks: (ANZ, Westpac, ASB, BNZ and Kiwibank).
Of those in the banking industry, 56 per cent say they expect to authorise more capital expenditure in the next year compared to last year, 33 per cent expect it to remain the same, and only one respondent expects it to decline. On IT spend, 67 per cent expect it to increase in the next year, 22 per cent expect it to remain the same.
One third of banking leaders who responded expect staff number to decline over the next year, 44 per cent expect them to remain the same, and 22 per cent expect to see an increase.
In terms of revenue, one third expect to see growth over the next year, 44 per cent expect revenue to remain the same, and 22 per cent expect a fall in revenue. When considering profit, 11 per cent expect to see it increase, 44 percent say it will stay the same, and 33 per cent expect it to decline.
Two-thirds are less confident about the economy over the next year. The remaining third say it will stay about the same. In terms of the banking industry, 89 per cent are less optimistic, the rest expect it to be the same as last year.
Dame Paula Rebstock, chair ACC
As a large insurer with a substantial diversified investment fund, we are concerned about the low-interest rate environment and investment returns, particularly given the revaluation changes impacting our liabilities. Uncertainty about the economic outlook is a major factor influencing business sector decision-making. While the Reserve Bank's recent policy easing was meant to provide pre-emptive support, it signalled serious concern and has added to economic uncertainty. The adverse effect will likely outweigh any stimulus from marginally lower interest rates. The capital requirements review has amplified uncertainty, with it yet unclear how this might impact particular sectors of the real economy.
It is unclear what the end game is regarding the monetary easing cycle. Cyclical responses are being used to respond to structural problems that have been with us for a decade. There is limited further room for monetary policy response.
There were seven responses from the agricultural industry, ranging from meat producers to suppliers.
The majority (43 per cent) say they expect to authorise less capital expenditure over the next year compared to last. The remainder (29 per cent) are split between spending the same and spending more.
The industry is split on IT spend, with 43 per cent saying they expect to spend more in the coming year, and 43 per cent saying they expect to spend less. Just 14 per cent expect to hire more staff over the next year compared to last, 43 per cent say they expect to hire less.
No respondent in the sector expects less revenue growth over the next year compared to last — 57 per cent say they expect it to remain the same, and 43 per cent say they expect more. As for profit growth, almost half (43 per cent) say they expect to see more profit growth over the next year compared to last, 29 per cent expect it to remain the same, 29 per cent say they think it will decrease.
Every respondent in the agricultural industry says they are less optimistic about the economy compared to this time last year. They are slightly more positive about their own industry — 29 per cent are optimistic, 14 per cent are neutral. The remainder (57 per cent) are less optimistic.
Cameron Bagrie, managing director Bagrie Economics
We reside in a world (including NZ) where politics is becoming more and more of a shambles. Central banks can "fix" normal economic problems. The political overlay on economic challenges mean the next few years are likely to be tough. For the past thirty years central banks have been the big stabilisers.
Any problem has been attacked through lower interest rates. They are almost out of ammunition.
Government policy is going to become more critical and important going forward. Both as a stabiliser, but also influencing medium-term prospects and setting an environment where society and business can prosper together.
Seven dairy companies took part in the survey, ranging from the top end of town to nimbler but still significant players.
Of these, 57 per cent expect more capital expenditure in the following year compared to last year, 29 per cent expect less. In terms of IT, 71 per cent expect to spend more, 29 per cent say the same as last year.
Over half (57 per cent) of respondents expect staff numbers to increase, 29 per cent expect them to stay the same, and 14 per cent expect a fall in staff numbers over the coming year.
When asked whether they expect revenue growth over the next 12 months, 86 per cent say they expect more, 14 per cent say they expect the same. None of the dairy participants say they expect revenue to decrease. On profit growth, 57 per cent say they expect a growth in profit over the next 12 months, 14 per cent expect profit to remain the same, and 29 per cent expect a fall in profit.
On the NZ economy compared to one year ago, 71 per cent say they are less optimistic, 29 per cent say they are the same as last year.
No respondent said they were more optimistic.
For the dairy industry, 71 per cent are also less optimistic compared to this time last year, 15 per cent have the same level of optimism as last year.
Almost 14 per cent say they are more optimistic for the year ahead for the dairy industry.
Roger Partridge, chairman and co-founder of The New Zealand Initiative
The biggest immediate threat to the global economy is the trade war between the US and China. I expect it will be resolved within the next 12 months as it is in the interests of both countries to do so.
For this reason, I am slightly less pessimistic about the global economy than I am about the domestic economy. The New Zealand economy is facing a series of series threats.
Taking a helicopter view, our two largest industries — dairy and tourism — are vulnerable to climate change policy and perceptions.
At the same time, successive governments have failed to implement policies to resolve our ailing productivity growth challenge. Many factors have been blamed for our poor productivity performance, including our small size and geographical isolation.
There is little we can do about either of these. But that makes it all the more important that we focus on things we can solve — like the skills and educational attainment of our workforce (current and future), the quality of our infrastructure, housing affordability (especially in our fastest growing cities) and resource management restrictions. On all four we are performing poorly. And there is little cause for optimism that the necessary systemic reforms will be made. And in the last few years a new threat has emerged in the form of more activist, and less competent, government agencies developing or contributing to policy that is poorly thought through yet capable of compromising the entire economy.
The Reserve Bank's ill-conceived proposals to double banks' capital is but one example.
The dumbing down of New Zealand's education system is the biggest threat to the future prosperity and wellbeing of New Zealanders.
A highly-educated workforce is critical to a highly productive workforce. Yet our school students continue to slide down the international league tables (and, importantly, underperform compared with earlier generations of New Zealand school students). There are encouraging signs (such as the proposed NCEA reforms) however, other initiatives (like the Tomorrow's Schools recommendations) will do nothing to address the more fundamental problems besetting an education system that is failing to equip many school-leavers with the levels of literacy, numeracy and knowledge and skills needed for today's jobs, let alone those of the future workplace.
Confidence in the general business situation in their own sector compared to last year:
57% Less optimistic
14% The same
29% More optimistic
89% Less optimistic
11% The same
0% More optimistic
60% Less optimistic
20% The same
20% More optimistic
71% Less optimistic
15% The same
14% More optimistic
80% Less optimistic
20% The same
0% More optimistic
54% Less optimistic
31% The same
15% More optimistic