Directors see NZ economy on the up

Confidence in the economy has nearly doubled among Kiwi directors over the past year to reach a historic high, the 2024 Director Sentiment Survey reveals. 

The survey found 52.2% of respondents expect the economy to improve over the next 12 months, up from 28.3% in 2023. 

Produced by the Institute of Directors (IoD) in association with ASB, the survey takes the pulse of New Zealand’s governance community to identify governance issues and challenges.

“Last year’s economic pessimism has been replaced by the highest level of national economic optimism since the survey began in 2014, despite soft trading conditions, high unemployment and relatively high interest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.

This lift in confidence moved sentiment on the economy much closer to sentiment for directors’ own organisations, at 52.2% and 58% respectively (28.3% and 47% in 2023). In the past, directors have tended to have a much more pessimistic outlook for the national economy – which they cannot control – when compared with the prospects for their own organisations, where they can influence strategy and performance.

The change of government is likely to have influenced business confidence, but directors remain cautious. 

“Political/policy uncertainty was the second most commonly cited risk facing organisations (14.5%), just two percentage points behind the leading risk, low consumer demand (14.7%),” Beatson said.

ASB Chief Economist Nick Tuffley says that, while the economy remained under pressure over the past year, with GDP down 0.5% in the year to June 2024, directors are seeing light at the end of the tunnel.

“The economic slowdown of the past couple of years was extended due to the Reserve Bank holding interest rates high to combat inflation,” Tuffley said. 

“With inflationary pressures easing when this survey was conducted in August/September, there was an expectation that the Bank would allow interest rates to fall. We have seen that easing begin with the cut to the official cash rate (OCR) from 5.25% to 4.75% in October, and the market is predicting further cuts. As interest rates continue to fall, directors seem to be anticipating an economic rebound.”

At a national level, directors identified cost of living/inflation as the main risk to the economy (41.6%). This also topped the list in 2023 (44.5%). For 2024, the next greatest risks were seen as challenges to the global economy (33.2%) and New Zealand’s low productivity (32.3%).

When it came to their own organisations, directors perceived cost of living/inflation to be the third highest risk (10.6%), behind low demand and political/policy uncertainty. Last year’s leading organisational risk, labour capacity and capability, fell to fourth and 10.1%, down from 20.6% in 2023.

“This is likely to be due to a combination of increased immigration and higher unemployment. Staff are easier to attract and retain in the current environment,” Tuffley said.

Looking ahead, technology and innovation was the go-to topic when directors were asked about the focus areas for their boards in 2025. However, AI/digital acceleration only ranked sixth (25.2%, little changed from 24.5% in 2023) among their current top strategic issues.

“Short-term financial pressure is providing an impetus for discussions about technology and innovation,” says Beatson, “but directors continue to see both opportunities and risks associated with technology, particularly AI.” 

Strategy and growth was the second-most-mentioned focus area for 2025, with directors seeking business growth, market development and market positioning in the improving economy. However, when asked about current strategic issues, balancing short-term viability with longer-term concerns took top spot (57%). 

“This suggests that, despite the increased optimism, directors are paying close attention to market conditions and not getting ahead of themselves at this stage – which may explain why cost management and efficiency was third most-mentioned future focus,” said ASB’s Tuffley.

From a good-governance perspective, there were concerning shifts in the percentage of boards conducting formal evaluations (46.9%, down from 50.2% in 2023), Beatson said.

“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 (48.7%, up from 47.4% in 2023). Formal evaluations are useful to understand both the effectiveness of the current board, and where there are skills or experience gaps that need to be addressed.”

There was also a drop in the percentage of directors who felt their boards supported their governance development with just 47.9% saying there was a culture of continuous learning for directors (down from 49.1% in 2023).

“High-performing boards need diverse talent if they are to lead through uncertainty in fast-changing times,” said Beatson.

“They need to understand what they are doing well, as a collective, and where they could do better. Sometimes, the composition of the board may need change to improve decision making on behalf of an organisation, but directors should always commit to a culture of lifelong learning.

“This is further problematic due to the fact that, at the IoD Leadership Conference in June, 70% of directors felt there was someone on their board who should step down. This survey reveals that not only are fewer formal evaluations taking place – and less emphasis being put on ongoing development – but only 27.2% of boards have a process for addressing an underperforming or problematic board member.”

You can read the full 2024 Director Sentiment Survey below.

View report

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The Director Sentiment Survey is brought to you by the Institute of Directors and ASB.