'Lack of direction threat to optimism'

A lack of direction from the Government is a key threat to a seven-year peak in business optimism, Grant Thornton partner Peter Sherwin says.

International research by accountancy firm Grant Thornton showed New Zealand businesses had a net 66 per cent positive outlook for 2010, the most bullish they have been since 2003.

That compared with a negative 15 per cent sentiment at the same time last year.

The results placed New Zealand seventh of 36 surveyed countries, four spots behind Australia and just ahead of Hong Kong.

Mr Sherwin said the rise in optimism showed some acceptance by business owners that the end of the recession was real.

"This is the first real step."

Expansion of investment, mergers and acquisitions and employment should follow, he said.

However, certain challenges ahead could undermine the optimism and one was the absence of a clear direction from the Government.

Mr Sherwin said the lack of attention to the findings of Don Brash's 2025 task force report about catching up with Australia was disappointing.

Aspects of the report were "too Right wing" but there were "pearls" in the findings that needed to be picked up, particularly on setting goals.

"If we don't actually set a target, we won't get anywhere. We'll just loll along."

Support from business owners for the new National Government at the last election was based on a lot of "ideas and talk" that had not come to fruition.

"It's not as if they are not doing anything but there does not seem to be any concept of what we are trying to achieve."

Australia was New Zealand's biggest trading partner and was always going to play a big role in boosting domestic confidence, but more could be done to ensure New Zealand stayed as close as possible to the country dubbed "the lucky country", Mr Sherwin said.

Businesses were going to face other everyday challenges that would test their mettle throughout the year, namely cashflow, rising interest rates and difficult export choices.

Exporters needed to pick their markets in 2010, he said, pointing to the relatively lower positive sentiment in traditional markets such as the United States and Britain.

Japan, one of New Zealand's longest serving traditional export markets, was at the bottom of the survey with a net 72 per cent negative sentiment.

"Japan will end up languishing for another few years until they work out how they can recover their economy. To be at the bottom of the heap is extraordinary," Mr Sherwin said.

The economies leading global business sentiment, such as Chile, India and Hong Kong, held more potential and businesses had to weigh that up to make the most of the recovery.

"Some countries are going to continue to be in recession for the next year."

The spectrum of business costs hitting businesses early in 2010, mainly tax payments in the first quarter, would test some firms' cashflow and banks were still tight on their conditions, Mr Sherwin said.

Once the Christmas and Boxing Day retail surge tapered off, some businesses would be left trying to ascertain whether they had made money or not. "The retail industry will be in the doldrums for some time and there will be some more casualties there."

Interest rates would rise this year and that could cause difficulty for some firms.

- © Fairfax NZ News