Optimism among New Zealand’s business leaders is at its highest level since 2016, according to the 2024 New Zealand Herald ‘Mood of the Boardroom’ survey. Despite ongoing economic challenges, including slow growth and lingering effects of the pandemic, the business community is showing renewed confidence in the country’s economic prospects, as well as in Prime Minister Christopher Luxon’s leadership.
The survey results, published this morning by the NZ Herald, highlight key areas of focus for New Zealand’s CEOs. Here are the key takeaways.
Business Optimism Hits Highest Level Since 2016
A standout finding from the survey is that optimism among business leaders regarding the New Zealand economy is at its highest since 2016, reaching a score of 3.23 out of 5. This is a significant improvement from last year’s score of 1.82 and a clear positive shift in sentiment, largely driven by a more favourable economic environment. The surge in optimism is comparable to the levels seen under the National-led government of Sir Bill English in 2016, when optimism peaked at 3.6 out of 5.
Key drivers of this newfound confidence include falling interest rates, to which there is a broad consensus that this “will lead to a more favourable domestic business environment with many wanting the Reserve Bank to get on with it,” the Herald reported. The Reserve Bank’s recent moves to ease monetary policy were also welcomed, with many leaders believing that the worst of the economic downturn may now be behind them.
The Mood of the Boardroom Survey echoes the sentiment of 2Degrees’ ‘Shaping Business Study’ published in June, which found that 53% of business leaders expect revenue growth in the next year, up from 50% last year. Still, CEOs are cautious, with many expressing concern about sustaining this optimism in the face of global instability and domestic regulatory issues. Kirsten Patterson, CEO of the Institute of Directors, summarised the mood: “There are some green shoots showing, but I am not sure the national and global economic environment is right to nurture those properly yet.”
Christopher Luxon: Strong Marks for Delivery, Calls for Bold Action
The survey also assessed Prime Minister Christopher Luxon’s performance after nearly a year in office. Business leaders gave Luxon an average rating of 3.73 out of 5, reflecting general satisfaction with his leadership, particularly in managing his Cabinet and maintaining a focus on delivery. Luxon’s highest score, 4.3 out of 5, was in the area of keeping ministers on track with their key performance indicators (KPIs). Many respondents appreciated his corporate-style governance, where ministers are held accountable for achieving specific targets every 100 days.
Luxon’s background as CEO of Air New Zealand seems to have resonated well with the business community. CEOs like Craig Stobo, director of NZ Windfarms, lauded his “tight delivery programmes” and his focus on economic growth and addressing the cost of living.
However, there are calls for Luxon’s government to shift from “blamestorming” the policies of previous administrations to laying out a more ambitious economic agenda. Many leaders expressed impatience with what they see as a continued focus on blaming Labour for the economic challenges inherited by the current government. An industry association chief remarked, “Fiscal restraint is right for the times, but where good investment stacks up, we should get on with it.”
Economic Priorities: CEOs Call for Bold Growth Strategies
One of the strongest messages from this year’s survey is the call for more decisive action on economic growth. 35% of business leaders identified economic growth as their top priority for the government, with many urging more proactive measures in areas like taxation, innovation, and regulation. While fiscal discipline is appreciated, there is a growing consensus that bold, long-term strategies are needed to address structural challenges in the economy, including productivity and growth.
A common theme in the responses was the need for more ambitious policies, particularly around technology and innovation. Nicola Willis, the Finance Minister, has earned confidence from 78% of survey respondents for her handling of economic matters. However, there is still a sense that more is needed to foster sustainable growth.
Some CEOs pointed to the importance of engaging more closely with the business community to develop and execute these growth strategies. Foodstuffs North Island CEO Chris Quin noted, “It would be good to hear more from the government about their economic growth story. New Zealand doesn’t feel like an easy place to do business right now.”
Geopolitical Risks a Key Concern
Global instability remains a significant concern for New Zealand businesses. From the Russia-Ukraine war to rising tensions in the South China Sea, geopolitical risks are increasingly shaping business strategies. 72% of New Zealand’s top executives confirmed that their businesses regularly assess vulnerabilities related to international risks, a significant jump from previous years. Notably, 27% of respondents acknowledged that they have yet to fully integrate geopolitical risk assessments into their strategic planning, while 1% were unsure.
Business leaders, particularly those with international exposure, are adopting more rigorous approaches to risk management. Air New Zealand Chair Dame Therese Walsh emphasised the need to stay attuned to global trends. At the same time, Morrison CEO Paul Newfield noted that geopolitical risks are now a regular part of his company’s strategic discussions.
Supply chain disruptions, often exacerbated by geopolitical tensions, have been a key challenge. Many respondents highlighted the need for businesses to diversify their sourcing strategies and remain agile in the face of potential disruptions.
Finance Minister Nicola Willis: A Steady Hand, but More Ambition Needed
Nicola Willis’ tenure as Finance Minister has been marked by cautious optimism from the business community. Her fiscal prudence and commitment to reducing government spending have been widely praised, but many CEOs are now looking for a clearer, more ambitious vision for the future. While 56% of CEOs expect increased profits in the coming year, there is still hesitation to invest heavily in capital expenditure or IT, with 33% and 40%, respectively, planning to increase investments in these areas.
Willis’ social investment approach, which aims to address long-term societal challenges like poverty and inequality, has also been well-received. However, there are concerns that the government’s economic strategy lacks detail. As one CEO put it, “The five pillars are good, but where is the meat on the bone?”
The Key Takeaway?
The 2024 *Mood of the Boardroom* survey paints a picture of cautious optimism. While business leaders are more confident about the economy’s trajectory than they have been in years, they are also acutely aware of the challenges that lie ahead. From geopolitical risks to the need for bold economic reforms, the business community is calling on the government to take decisive action to maintain momentum.
The message is clear: while there is much to be optimistic about, particularly with lower interest rates and a recovering global economy, New Zealand’s leaders must now focus on fostering sustainable growth and addressing long-term challenges.