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Home / Business / Economy

<i>Liam Dann:</i> We will need plenty of bottle

Liam Dann
By Liam Dann
Business Editor at Large·NZ Herald·
13 Jul, 2009 04:00 PM5 mins to read

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Liam Dann
Opinion by Liam Dann
Liam Dann, Business Editor at Large for New Zealand’s Herald, works as a writer, columnist, radio commentator and as a presenter and producer of videos and podcasts.
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The business of doing business is seldom easy. But it has seldom been more difficult than in this grim winter of recession and swine flu.

Even the All Blacks are struggling to maintain productivity and are having to work with diminished resources. There certainly doesn't seem to be much to
cheer about. These are dark days.

But maybe - hopefully - these are the darkest of this economic downturn. Whether there is cause for optimism yet is the topic that consumes business pages. Green shoots seem to spring up, then wither daily. In truth the pattern is not yet clear.

Business people, by their very nature, are seldom pessimists but the conditions of the last year have required even the most positive to take a cold hard look at the challenges in front of them. The Mood of Boardroom survey has thrown up a wide mix of views on whether things are getting better or worse.

Given the conditions out there it would be surprising if the boardroom mood was not a little subdued.

How positive we should be about the timing of the recovery is not only a topic of great debate in newsrooms but in boardrooms, shop floors, pubs and even homes. Predicting the future has never been more popular or more difficult.

At its most simplistic it has been reduced to a Sesame Street game of picking your favourite letter of the alphabet.

In the real world the odds of the recovery charting to the shape of a V or a W seem pretty unlikely. What we have seen in the past year is a massive contraction in consumer demand across the world as credit has dried up.

Markets are still trying to find an equilibrium with the new level of demand. So we see them overshoot and undershoot and generally bounce around all over the show as people try to estimate where the real bottom is. Eventually, demand will stabilise and things will become easier to read.

At that point we'll know where we are and a sustained recovery can begin.

Until then we have to deal with wild fluctuations in share prices, commodity prices, currency and almost anything else that can be traded. That's no fun for anyone making a business plan, particularly anyone who has the steely eye of the bankers watching over their shoulder.

In these kind of conditions a bias towards pessimism is often safest. But there are risks in becoming overly negative. Opportunity abounds in a recession. It is cheaper to do things for a start. The big question remains when to start doing things again. Timing as always is everything.

One solution is to look to our political leaders for some clues. They have the public purse strings and with them comes a considerable influence over the confidence of the nation.

But to the casual observer there sometimes seems to be a mixed message coming from the top.

The optimism versus pessimism battle is being reflected at the highest level by the "good cop, bad cop" double act being run by Prime Minster John Key and Finance Minister Bill English.

Key continues to take an upbeat populist tone - presumably aware of his role as a leader and a cheerleader for the nation as whole.

Meanwhile English has been happy to play the tough guy - upfront and realistic about the grim situation facing the New Zealand economy.

This was illustrated last month when he presented to the Finance and Expenditure Select Committee. He highlighted the breakdown between tradeable and non-tradeable GDP.

That showed that when it comes to the portion of the economy which actually brings in the money we've actually been in recession since 2004.

It was a stark reminder of the problems New Zealand has when it comes to real wealth creation. In terms of making a statement which was in line with the views of the wider business community, English couldn't have been more on song.

But his success in illustrating the Government's understanding of the problems only heightens the sense of expectation about what this National plans to do to boost productivity and return us to a growth path.

One gets the sense that this year's Mood of Boardroom survey is heavy with the weight of expectation.

After nine years business has a Government which it it perceives as being on its side.

Responses to survey questions about the need to cut expenditure, address the current account, release capital from state owned enterprise and to build infrastructure all show a desire from business for this government to be bolder and move faster on the reforms it is making.

No doubt English can and will mount a strong argument on the basis that the Government has in done a lot in a short space of time.

And, though he might not say it, this Government also has to tread carefully through a mainstream political culture which is still greatly influenced by nine years of Labour.

The public remains hyper-sensitive to policy that bears a resemblance to the reforms of Roger Douglas and Ruth Richardson.

But as Key and English set their course for reforming the economy this tension with business - over the pace of change - is sure to linger. It may yet become one of the defining themes of their tenure.

Discover more

Opinion

Is the government doing enough to stimulate the economy?

26 Nov 02:56 AM
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