24 Nov 2023

What's worrying boardrooms as the new government takes over

6:23 am on 24 November 2023
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Inflation, the economic outlook and political uncertainty are souring the mood in company and organisation boardrooms, according to the Institute of Directors' annual sentiment survey.

The institute said the cost of living and inflation had replaced worries about finding staff as the top issue for members, with 44.5 percent of the more than 1110 respondents putting it as their main concern, just ahead of last year's top-rating labour concerns.

"We are seeing a combination of international and domestic inflation pressures that appear stubbornly resistant, despite the Reserve Bank [RBNZ] holding interest rates high," Institute chief executive Kirsten Patterson said.

"Many organisations will be feeling the hit from the higher interest rates, just like many households are, and this is likely underpinning directors' views on the economy."

Broad outlook still pessimistic

Directors remained pessimistic about the outlook for the broader economy, with close to 56 percent expecting a worsening of conditions over the coming year from a record 68 percent last year, while just over 28 percent picked an improvement.

As with most other business surveys, directors were more upbeat about their own organisation's outlook, with nearly half expecting an improvement and just over a quarter expecting a decline, although the net reading - the gap between the optimists and pessimists - was actually worse than the year before.

Previous surveys' concerns about the labour market, supply chain disruptions, and immigration faded on the back of improved transport links and the surge in migration.

Patterson said directors were still being challenged by heavy workloads arising from responsibilities for climate change, sustainability, and other regulatory demands, but seemed better prepared for cyber attacks, while the Mainzeal court decision affirming heavy penalties on the directors over its collapse had had something of a chilling and cautionary effect.

The survey was conducted in the run-up to the election, which likely accounted for political and policy uncertainty being rated as the third-most pressing issue for organisations.

"As we await news of the policy direction of the new government, that uncertainty will persist. It will be interesting to see how the incoming government can impact sentiment when the ongoing economic pressures look likely to remain with us for some time," Patterson said.