Despite austerity measures elsewhere, CEOs are backing a larger tech budget, reports Alexander Speirs

When an export dependent nation like New Zealand has nearly five times as many chief executives singling out technology as a bigger factor for business than shifts in the global economy -- it's time to pay attention.

A strong focus on technology has emerged as an overarching theme in this year's Mood of the Boardroom survey. Our chief executives are overwhelmingly reporting that advances in technology stand to make the biggest changes to business in the medium term.

When an export dependent nation like New Zealand has nearly five times as many chief executives singling out technology as a bigger factor for business than shifts in the global economy -- it's time to pay attention.

It seems the boardrooms of our largest companies already have, with 55 per cent of chief executives revealing that they expected to authorise a larger budget for IT in the coming year, and only 12 per cent anticipating a cut to their technology spend.


That's significant, because it comes at a time when businesses are less willing to spend on themselves.

Despite access to cheaper capital, as the Reserve Bank continues to slash the official cash rate, only 40 per cent of chief executives expected to authorise an increase to overall capital expenditure.

It's a material slide from the 53 per cent who expected to raise spending last year -- but there's been only a minor increase in those expecting to decrease expenditure. Instead, businesses appear to be content to employ a wait and see approach over the next 12 months.

With a noticeable slowdown apparent in the Australian economy, a number of chief executives reported austerity measures under way and conservative strategies being adopted in boardrooms across the Tasman.

"Many New Zealand corporate decisions are made in Australian boardrooms," explained John Barnett, chairman at South Pacific Pictures.

"As they retrench and adopt defensive strategies, the fallouts will be felt here."

Chief executives did however remain bullish about the prospects for their own businesses. Despite increasing evidence of caution being employed, 69 per cent reported they expected to grow profits over the next 12 months. That is only a minor decrease from the 74 per cent who said the same last year.

Supreme confidence in business conditions was, however, an over-riding theme in last year's Mood of the Boardroom survey and a number like that was expected.


CEO's were upbeat about the prospects for New Zealand, as commentators and politicians alike lauded the success of our rockstar economy. Fast forward 12 months and it's evident that the gloss is coming off.

Turbulent times in Europe and the softening of global commodities markets -- highlighted by the complete collapse of dairy prices -- have put a serious dent in confidence.

"We are seeing some of the effects of being an open economy, with a reliance on commodities and the discretionary tourism industry in an increasingly protectionist world," said one financial services head.

That sentiment has extended into the boardrooms of New Zealand's largest companies, with 67 per cent of chief executives indicating they see an economic slowdown looming.

"With the collapse of international dairy prices, the weakness in international oil (and other commodity) prices, problems in the Eurozone and tensions in both the South China Sea and eastern Europe, it's hard to be optimistic," said former Reserve Bank Governor and politician Don Brash, providing plenty of reason for caution when looking ahead.

"The rebuild in Christchurch, at least where residential is concerned, is likely to slow down over the next year," added Kevin Jaffe, chief executive at Simpson Grierson.

One CEO from the advertising sector said the behaviour of certain clients was a strong indicator of what was ahead.

"One of our clients is a large bank. They are already adjusting their behaviour as if a recession was already here.

"This almost certainly means the economy will soften."

Michael Barnett, chief executive of the Auckland Chamber of Commerce said, "while New Zealand firms should be optimistic they would be foolish not to expect a tougher environment in which to operate".

"Overall, the basis of the economy looks solid," said Greg Lowe, chief executive at Beca..

"Government spending has been reined in and there is a clear focus on achieving debt reduction. The impact of low dairy prices is unclear, but the longer this continues, the more we must factor in some negative impact."

Plummeting dairy prices in particular were on the minds of a number of our chief executives, but many were quick to call for a level-headed approach to the drop and what it meant for the economy as a whole.

"We can't escape that Fonterra and the dairy sector impact on us all. When the dairy sector is doing well, it has flow-on effects and the reverse must be true," explained Cathy Quinn, chairwoman at Minter Ellison Rudd Watts.

"The lower returns will not be likely to have an immediate impact on Auckland. It will if we talk ourselves into it. The fundamentals driving Auckland growth have not changed -- they remain the same," she said.

Bruce Hassall, chief executive at PwC said, "it is clear the New Zealand economy is facing some headwinds in the period ahead.

"Many parts of the economy are strong, resilience levels are robust, but our collective ability to talk ourselves into a slowdown is a real worry."

Like Hassall, a major transport chair pointed out that a hit to the public's confidence could be exponentially more damaging than the underlying cause for alarm.

"While we need to be cognisant of what's happening, negative sentiment is usually more damaging than actual outcomes," she said.

Mark Powell, chief executive at The Warehouse said though he was unsure whether there was a slowdown ahead, there was reason for optimism.

"There are tailwinds, we have low interest rates, a lower foreign exchange rate which is good for export.

"Net migration is positive and Government fiscal policy is sound."

The head of a major healthcare company said this was a ripe time for Government and business to work together. "Collaboration and private-public partnership has to be more commonplace rather than the exception and should be valued and encouraged," he said.

Thomas Pippos, chief executive at Deloitte said it was difficult to generalise about a national slowdown as "the New Zealand economy operates on multiple speeds.

"Clearly some sectors are faced with consider challenges over this next period, given current commodity prices," he said.

A major energy firm head said current issues were sector-specific. He reported that his own industry was dealing with a host of issues at present, saying "the energy generation and transmission spaces are lacking any opportunities".

Kim Campbell, chief executive at the Employers & Manufacturers Association, said though some sectors were fragile, others were performing well. He pointed to tourism, horticulture, construction and education as sectors exceeding expectations.

The head of a major trading firm said they were seeing companies that were investing in innovation succeeding irrespective of how the economy at large was trending.

"We are exposed to premium, high value, knowledge intensive businesses, and these are focusing on their niches all over the world.

"For these companies, I am optimistic," he said.