Why is a middle-aged man like an economic downturn? His hairline is in recession, his stomach is suffering from inflation and the combination is increasing his risk of depression.

Sorry, awful I know. It was the best the internet could deliver at short notice.
I'm just trying to lighten the mood. Business needs cheering up, apparently.

NZIER's Quarterly Survey of Business Opinion (QSBO) last week showed firms still down in the dumps after last year's election.

The QSBO revealed businesses to be marginally more upbeat about the economic outlook - although still more pessimistic than six months ago.


Meanwhile, expectations for its own business outlook worsened.

What's going on? Is the Government really that bad?

The answer is almost certainly no. It just hasn't done enough yet for judgment to be passed from anything other than an ideological point of view.

Employment law changes and minimum wage hikes? Sure, not popular but no surprises there. The employment law changes were less radical than expected - retaining the 90-day trial laws for businesses with fewer than 20 employees.

Meanwhile, New Zealand has signed up to the CTPP trade deal.

Slashing immigration seems to have been kicked for touch.

The Government is sticking to its guns on its fiscal responsibility pledge - downplaying chances of a lolly scramble in next month's Budget.

We know that historically ideological opposition to left-leaning policies accounts for some of the shift in business confidence but there are other, more acute factors at play.

According to NZIER principal economist Christina Leung, the QSBO – which dates back to 1968 – shows an average dip of 18 points every time Labour wins an election, versus a four-point bump when National triumphs.

But if you take closer look at the issues troubling business there is a deeper more persistent problem - one not unique to New Zealand.

Firms report the squeeze is on their profit margins.

They face cost pressures due to labour shortages, rising wage bills and fixed costs like rent and rates.

These are what ANZ economist Miles Workman described as "late cycle head winds" in his analysis of the QSBO.

It's tough out there for small businesses and it's fair to say minimum wages rises and fuel taxes are badly timed for many.

Normally this would all flow through into broader inflation as business passes on price rises.

But in 2018 retailers in particular say they can't do that.

There are big deflationary forces, in the form of the internet and globalisation, that have conditioned consumers to expect ever cheaper goods.

That sense of feeling trapped, as profit margins close in, seems a genuine reason for business to feel glum.

Unfortunately there is no quick fix.

We need to boost productivity in this country to raise profits and wages in a sustainable way.

A report last month by the New Zealand Productivity Commission makes the point the growth of labour productivity and wages has slowed.

"Between 1996 and 2000 the average amount produced from one hour of work in the private sector (labour productivity) grew by 2.62 per cent a year and real wages grew by 2.17 per cent," report author Paul Conway noted.

From 2008-16 the rates were just 1.15 per cent and 0.86 per cent a year respectively.

The good news for business - although perhaps not widely recognised - is that finance minister Grant Robertson lives and breathes this stuff.

Robertson loves talking about productivity issues almost as much as he loves rugby and Flying Nun bands.

In other words, although he is a lefty prepared to back minimum wage hikes for reasons of social justice, he gets that New Zealand can't just legislate its way to higher living standards.

"Boosting productivity across the economy will be one of the key drivers to improving New Zealanders' living standards and wellbeing. The Government will put this at the heart of what we do," Robertson said in a February speech on the future of work.

He pointed out our low labour productivity growth over the years has seen our level of GDP per hour worked fall to about 20 per cent below the OECD average.

Expect to see Labour take a more hands-on approach to addressing productivity issues around skills and research and development.

National under John Key and Bill English believed business did best when government stayed out of the way.

It aimed to provide a low-cost platform for firms to get on with making money, assuming they would grow and re-invest and greater productivity would follow.

The problem is it didn't really happen.

That's not all National's fault. That economic approach was very much of its time. It provided stability and topline growth through the tough years after the GFC and Christchurch Earthquakes.

Globally productivity growth also stagnated in these years.

Regardless, New Zealand needs a circuit breaker. Robertson believes this Government can provide that.

But even if successful, it will take time.

Meanwhile business may have to live with slower growth in the short term and policy changes that it doesn't love.

The Government will have its to work cut out to cheer them up.