New Zealand businesses are slightly more optimistic about the year-ahead than counterparts in the country's major trading parties.
In the latest Grant Thornton quarterly international business report released yesterday, the survey noted a cautious increase in New Zealand business optimism for 2012, at a time when business confidence in Australia, United States and United Kingdom is in decline.
Grant Thornton New Zealand partner Peter Sherwin said while the wider New Zealand economy would benefit from buoyancy in the rural sector, he warned about a decline in spending on research and development - now standing at minus 4%.
He said following a bullish outlook early in 2011, New Zealand business confidence dipped during the last quarter, but had now taken an upturn with 36% of respondents more upbeat, compared with 32% in the previous quarter.
"This contrasts with New Zealand's major trading partners who are viewing the new year less favourably.
"Confidence among Australian businesses declined for the fourth consecutive quarter, now standing at 24%; the US at 1% and the UK at minus 35%," Mr Sherwin said in a statement yesterday.
The uncertainty surrounding the global economy in 2012 has been underlined by numerous reports, surveys and economic outlooks released by governments during the past fortnight.
Earlier this week Business and Economic Research Ltd highlighted New Zealand faced "muted growth" during the year ahead, while headlines from the United States include waning exports and a decline in business capital expenditure.
Europe remains at the forefront of most analysts' and economists' concerns, where recent forecasts have placed Europe with a 65% chance of hitting a "mild recession", or 35% chance of a "deep recession".
Mr Sherwin said in Australia the recession had been masked by the profitable mining sector but the wider business sector was now beginning to experience a lack of demand, coupled with signs that the property bubble was about to burst.
In New Zealand the rural sector had a far more widespread effect because there was " barely a city, town or province" which does not have some farming component.
"The benefit is that when the rural sector is doing well it feeds right throughout New Zealand," he said.
He noted some good news for employees in the report, with 79% of employers planning to provide workers with a pay rise during the year; with 62% offering salary increases at the inflation level and 17% said it would be more than the inflation level.
Mr Sherwin said higher dairy prices had also had a flow-on effect to trends predicted for 2012.
More than half of respondents, at 56%, were expecting increased revenues and 47% were planning to invest in plant and machinery.
However, Mr Sherwin was concerned at the dip in those businesses planning to invest in research and development (R&D).
"R&D traditionally takes a back seat when there is a constrained economic environment and profitability is hammered. But it's a worry.
"You can't reduce the investment in R&D for a sustained period without killing your business," he said.
If New Zealand is to go into a fully developed economy moving up the OECD scale, it had to do more than export primary produce.
"I think this anticipated decline in R&D investment is a real danger signal. It's a call to action and it needs leadership from the Government to help businesses be more open to R&D," Mr Sherwin said.
