The document summarizes a report on the business outlook in New Zealand. It finds that while New Zealand's economy grew unexpectedly in Q1 2012, businesses are slightly less optimistic about the economy in Q2 than in Q1. Expectations for employment and revenue growth are marginally lower. However, the availability of skilled workers is seen as less of a constraint than in 2011. Overall the economy is forecast to grow around 2.4% in 2012 and 2.8% annually through 2016, supported by trading partners and reconstruction from earthquakes.

1. Focus on: New Zealand
International Business Report 2012 – Economy focus series
The economy The business perspective
New Zealand’s economy unexpectedly grew at the The Grant Thornton International Business Report
fastest pace in five years in the first quarter of 2012. (IBR) surveys more than 12,000 businesses in 40
Gross domestic product in the agriculture-driven economies around the world. This report focuses
economy jumped a seasonally adjusted 1.1% in the on businesses in New Zealand and their expectations
quarter from the previous three months. It is for the next 12 months, as illustrated in figure 1.
unlikely that the economy will be able to keep up The IBR survey tells us that businesses in
the brisk pace, given the uncertain global outlook New Zealand are slightly less optimistic about their
and Europe’s debt woes, as well as a build-up in economy Q2 compared with Q1. Expectations for
inventories and consumers still paying down debt. employment are marginally lower than 2011 levels
The key indicators1 are highlighted below: while the availability of a skilled workforce is
• economic output expanded 1.1% in the first slightly less of a constraint on business expansion
quarter of 2012 over the previous quarter than in 2011.
• the trade surplus narrowed in May, as imports
rose faster than exports, widening the annual
deficit. The monthly surplus was $301 million,
down from a revised $335 million in April. The
value of the nation’s biggest exports, dairy and
meat have declined in line with weaker global
prices for farm commodities
• exports fell to $4.42 billion in May from $4.62
billion in the same month last year, while
imports rose to $4.11 billion from $4.07 billion
• the unemployment rate rose to 6.7% in the first
quarter of 2012
• the inflation rate in New Zealand was recorded
at 1.6% in March of 2012; excise increases
(alcohol and tobacco) and rentals (Christchurch)
were the major upward influences.
1
source: International Monetary Fund, The Economist and Experian.

2. The outlook
Figure 1: Key indicators for businesses
With the government focused on the reconstruction
and aid effort following the earthquakes in 2010 and New Zealand compared with the APAC average 2010 2011 2012 2012
2011, the economy is forecast to expand by 2.4% in NZ NZ NZ APAC
2012. However, output is expected to pick up next Outlook for the economy over the next 12 months
Net optimism over pessimism +66% +42% +42% 5%
year supported by low interest rates, comparatively
strong growth in New Zealand’s main trading
Change in employment levels
partners Australia and China, and the rebuilding of Net hiring expectations +35% +33% +30% +29%
Christchurch city and the surrounding region.
Growth is forecast to average 2.8% per annum in Constraints on expansion
2012-16. Availability of a skilled workforce 27% 39% 36% 37%
New Zealand is relatively unexposed to the Regulations/red tape 33% 32% 26% 33%
slowdown in Europe but exports are unlikely to add Source: Grant Thornton IBR 2012
to growth in the short-term. After investment,
consumption will be the key driver of growth
although consumers are likely to remain focused on
saving and paying down debt. The government is
expected to continue its policy of fiscal prudence
given vulnerabilities associated with rapidly rising
public debt and high external debt.
Talk to us to find out how we can help you deal
with the challenges your business is facing today.
Tim Keenan
National Director, Privately Held Business
T +64 (0)21 670 323
E tim.keenan@nz.gt.com
W www.grantthornton.co.nz
2 Focus on New Zealand

3. International Business Report results
The results reveal that global business optimism has Figure 2: Outlook for the economy over the next 12 months: Q4-2010 to Q2-2012
risen marginally in Q2-2012 with net 23% of Net percentage businesses indicating optimism less those indicating pessimism
businesses optimistic2 for their economies over the 60
50
next 12 months. Businesses sentiment for the next
40
12 months in mainland China is positive with net 30
33% of businesses optimistic, up from net 23% in 20
the first quarter. 10
0
The sovereign debt crisis continues to weigh
-10
heavily on businesses confidence in Europe; -20
business optimism across the eurozone stands at net Q4-2010 Q1-2011 Q2-2011 Q3-2011 Q4-2011 Q1-2012 Q2-2012
New Zealand 35 44 52 32 36 45 42
-5%. However confidence in the BRIC3 economies
APAC 6 2 -9 -7 8 17 5
remains strongly positive at 41% and confidence in Global 23 34 31 3 0 19 23
the United States increased from 46% to 50%, the
Source: Grant Thornton IBR 2012
highest level recorded since 2005.
Optimism/pessimism
• business optimism fell slightly in the second
quarter, from net 45% to 42%
• business sentiment in the APAC region stands
at net 5%, down from 17% in Q1
• globally, optimism levels have risen to stand at
net 23%.
2
the balance is the proportion of companies reporting they are optimistic less
those reporting they are pessimistic.
3
the BRIC economies are Brazil, Russia, India and China
Focus on New Zealand 3

4. Employment Figure 3: Employment history: Q4-2010 to Q2-2012
• net 30% of New Zealand businesses expect Net percentage businesses
employment to grow in the year ahead, slightly 50
40
lower than expectations in Q1 but in-line with
30
expectations with the APAC region 20
• actual employment growth reported by New 10
Zealand businesses in Q1 (28%) was lower than 0
Q4-2010 Q1-2011 Q2-2011 Q3-2011 Q4-2011 Q1-2012 Q2-2012*
expected the previous quarter (35%). Expected NZ 16 15 42 46 26 35 30
Expected APAC 16 32 38 32 34 35 29
Actual NZ 0 2 20 0 0 28 –
Actual APAC 26 34 33 30 25 24 –
*Q2 2012 actual data will be documented in Q3 2012
Source: Grant Thornton IBR 2012
Revenue expectations
Figure 4: Revenue expectations: Q4-2010 to Q2-2012
• the proportion of businesses expecting to Net percentage businesses indicating an increase less those indicating a decrease
increase revenues over the next 12 months 70
60
slipped to net 62% in Q2-2012, down from
50
67% in Q1 40
• the APAC average climbed to 59% over the past 30
quarter, while the global average remained steady 20
10
at 52%.
0
Q4-2010 Q1-2011 Q2-2011 Q3-2011 Q4-2011 Q1-2012 Q2-2012
New Zealand 42 53 56 58 58 67 62
APAC 51 55 54 51 48 56 59
Global 46 55 55 45 43 52 52
Source: Grant Thornton IBR 2012
4 Focus on New Zealand

5. Profitability expectations Figure 5: Profitability expectations: Q4-2010 to Q2-2012
• the proportion of businesses expecting to see Net percentage businesses indicating an increase less those indicating a decrease
an increase in profits over the next 12 months 70
60
climbed to net 64% in Q2-2012, up from net
50
38% in Q2-2011 40
• globally, net 38% of businesses expect to see 30
profits rise, slightly below the APAC average 20
10
of 40%.
0
Q4-2010 Q1-2011 Q2-2011 Q3-2011 Q4-2011 Q1-2012 Q2-2012
New Zealand 28 41 38 56 52 59 64
APAC 37 45 34 32 34 37 40
Global 40 47 42 33 31 39 38
Source: Grant Thornton IBR 2012
Constraints
Figure 6: Constraints on expansion: Q2-2012
• a lack of skilled workers is cited as being the Average percentage of businesses rating constraint 4 or 5 on a scale of 1 to 5 where 1 is not a constraint
and 5 is a major constraint
greatest constraint on business expansion for
New Zealand businesses (36%), similar to the Availability of skilled workforce 36
37
APAC average (37%)
Regulations/red tape 26
• a shortage of orders/reduced demand is cited by 33
49% of APAC businesses, compared with just Shortage of working capital 26
27
22% of businesses in New Zealand.
Shortage of orders/reduced demand 22
49
Shortage of long term finance 14
23
ICT infrastructure 14
21
Transport infrastructure 10
19
Cost of finance 6
33
New Zealand APAC
Source: Grant Thornton IBR 2012
Focus on New Zealand 5

6. Accessing finance Figure 7: Accessing finance: Q2-2012
• the majority of businesses in New Zealand are Percentage of businesses
happy with the level of support provided by 100
90
lenders; 91% of class lenders as supportive or
80
very supportive towards their business, 70
compared with 81% of APAC businesses 60
• moving forward, 36% of New Zealand 50
40
businesses expect finance to become more
30
accessible, while 12% also expect it to become 20
less accessible. 10
0
91 81 2 2 36 20 12 23
Supportive Unsupportive More Less
Lender support Accessibility of finance – next 12 months
New Zealand APAC
Source: Grant Thornton IBR 2012
Public private partnerships
Figure 8: Are public private partnerships the future way to develop New Zealand and its
• the majority of businesses in New Zealand infrastructure? Q2 2012
Percentage of businesses
believe public private partnerships are the future
60
way to develop New Zealand and its 50
infrastructure (80%) 40
• two thirds of businesses agree that the 30
20
government should be privatising assets
10
but a third of businesses disagree with this. 0
54 26 16 4
Yes, definitely Yes, perhaps No Don’t know
Source: Grant Thornton IBR 2012
6 Focus on New Zealand

7. New Zealand office contact details
Auckland
L4, Grant Thornton House
152 Fanshawe Street
Auckland 1140
T +64 (0)9 308 2570
F +64 (0)9 309 4892
E info.auckland@nz.gt.com
Wellington
L13, AXA Centre
80 The Terrace
Wellington 6143
T +64 (0)4 474 8500
F +64 (0)4 474 8509
E info.wellington@nz.gt.com
Christchurch
L1, The Antarctic Attraction
38 Orchard Road
Christchurch Airport 8053
T +64 (0)3 379 9580
F +64 (0)3 366 3720
E info.christchurch@nz.gt.com
Focus on New Zealand 7

8. The Grant Thornton International Business Report (IBR) is a quarterly survey of 3,000 senior executives in businesses all
over the world. Launched in 1992 in nine European countries the report now surveys more than 12,000 business leaders in
40 economies on an annual basis providing insights on the economic and commercial issues affecting the global economy.
In New Zealand 200 businesses were surveyed over the past 12 months across all industry sectors. These businesses ranged
from small to medium in size with total employment between 10 to 149 employees. Q2-2012 data are drawn from interviews
conducted in May/June 2012.
To find out more about IBR and to obtain copies of reports and summaries please visit: www.internationalbusinessreport.com.
Participating economies
Argentina Malaysia
Armenia Mexico
Australia Netherlands
Belgium New Zealand
Botswana Peru
Brazil Philippines
Canada Poland
Chile Russia
Mainland China Singapore
Denmark South Africa
Finland Spain
France Sweden
Georgia Switzerland
Germany Taiwan
Greece Thailand
Hong Kong Turkey
India United Arab Emirates
Ireland United Kingdom
Italy United States
Japan Vietnam
Contacts
Global research
Grant Thornton International
Dominic King
T +44 (0)207 391 9537
E dominic.h.king@uk.gt.com
www.gti.org
www.internationalbusinessreport.com
© 2012 Grant Thornton International Ltd. All rights reserved.
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