NZ entrepreneurs more upbeat as rock star economy continues to rock, while global counterparts stay cautious

Dairy industry holds key to NZ economy
Kiwi businesses are certainly more upbeat as the local economic engine ‘roars’ on despite rough patches in the global economy

Kiwi entrepreneurs are certainly a little more upbeat in how they view the economic and business landscape compared to their global counterparts.

This is despite the fact that profitability and revenue challenges remain a present danger with a four percent rise (to 58 percent) in those who reported profit declines over the last six months.

A lower percentage of businesses (79 percent against 81 percent ) reported revenue rises in the last six months, according to a survey just released by the latest Global Entrepreneur Indicator (GEI). Globally, only 66 percent of businesses reported higher business revenues.

The GEI, which covers a six month period ended February 28, 2015, is released by Entrepreneurs’ Organisation (EO) – a global organisation with over 10,000 members across 46 countries globally. 

Communications chair of the Auckland Entrepreneurs’ Organisation (the local chapter of the EO) James McGlinn says the survey results show the increasing optimism of Kiwi entrepreneurs.  

Entrepreneurs dream big, employment strong

There is also certainly no let-up in the entrepreneurial dream in New Zealand, with 94 percent of entrepreneurs in Auckland saying they are inclined to start a new business.

Local companies are also hiring more. About 75 percent of Kiwi companies are increasing full-time employees compared to just 56 percent globally.

Forty-seven percent have increased access to capital and close to 60 percent generated an increase in net profit. Businesses are also anticipating better access to capital, with 50 percent expecting better capital access in the next six months.

“When we released our last GEI in September 2014, our members were predicting full-time employment to grow by two-thirds so it’s fantastic to see it jump by 15 percent further than that,” McGlinn says.

Entrepreneurs around the world and their business outlook

NZ economy powers on

In September 2014, 62 percent of those surveyed believed NZ’s economic environment would improve in the coming six months; that’s now increased to more than 80 percent compare to their global peers’ (44.7 percent) less upbeat mood. Over the next six months, 91 percent of businesses in Auckland expect a net profit.

“With the NZ economy going from strength to strength, Kiwi businesses are clearly feeling more confident which is reflected in our members’ optimistic outlook for NZ’s economy over the next six months,” McGlinn says.

Net profits increased for 60 percent of companies around the world (58.8 percent for NZ) while 16 percent also experienced a decrease in profits compared to NZ’s 14 percent.

Local business sentiment is consistent with what economists are reporting.

Outlook

The NZ Institute of Economic Research (NZIER), in its March survey, notes that the domestic economy is relatively calm against existing global uncertainties.

GDP is expected to grow around three percent in 2015, it predicts. However, exports will be dampened by weaker Chinese and Australian demand – two of our largest buyers, the NZIER says.

Hong Kong and Shanghai Bank, which designated New Zealand its rock star economy status in 2014, also remains upbeat about 2015’s prospects, pegging GDP to come in at three percent. The bank cites two main factors for its optimism: the reconstruction of Canterbury and a net migration inflow.

There are however some risks to the economy, including the prospects of higher interest rates and a dip in dairy prices weighing on rural income. Interest rates have remained low, it says, due to spare capacity in the economy, the strong labour supply as a result of net migration, and the strong local currency. Watch video here