Photo: 123RF
Smiles have replaced frowns in the country's boardrooms on expectations of economic recovery, according to a new survey.
The Institute of Directors (IoD) annual Sentiment Survey showed optimism has replaced pessimism with those expecting better times rising to a record 52 percent from 28 percent last year.
It was matched by directors' expectations for their own organisations, which rose to 58 percent optimism from 47 percent.
"Last year's economic pessimism has been replaced by the highest level of national economic optimism since the survey began in 2014, despite soft trading conditions, high unemployment and relatively high interest rates," said Guy Beatson, general manager of the IoD's Governance Leadership Centre.
"The change of government is likely to have influenced business confidence, but directors remain cautious," Beatson said.
The biggest concern for most directors was low consumer demand, closely followed by political and policy uncertainty.
The most optimistic were private companies of all sizes which rated above 50 percent confidence, while all other types of organisations sat in the mid- to high-40 percent range. Only Maori organisations were less confident than last year.
Falling rates, rising confidence
The survey was done in conjunction with the ASB Bank and its chief economist Nick Tuffley said the Reserve Bank's move to cut the official cash rate as inflation slowed was the mood changer.
"As interest rates continue to fall, directors seem to be anticipating an economic rebound."
However, the cost of living/inflation was judged as the main risk to the economy, followed the state of the global economy, and New Zealand's low productivity.
For their own organisations, directors' biggest concern was low demand, with political/policy uncertainty ranked second, and last year's big worry - labour shortages - falling to fourth.
For the future it was getting to grips with technology and innovation, business growth, and market development and positioning, along with balancing short term viability against longer term issues.
"This suggests that, despite the increased optimism, directors are paying close attention to market conditions and not getting ahead of themselves at this stage," Tuffley said.
Boardroom health
However, Beatson said not all was well in how boards ran themselves, with "concerning" shifts in the number of boards looking at their performance and makeup.
Fewer than half of boards were doing formal evaluations, a drop on the previous survey, with rising doubts about whether they had the right skills, were developing board members, and had suitable ways of improving or removing underperforming directors.
"While it is nice to see a buoyant mood in boardrooms, this is an unwelcome fall as, again this year, fewer than half of directors considered that their boards had the right skills and experience to meet increasing risk and complexity," Beatson said.
"High-performing boards need diverse talent if they are to lead through uncertainty in fast-changing times."
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