CEOs in fear of free-trade shutout

A scenario of Australia bagging a free-trade agreement with the United States and New Zealand being sidelined is ranked by chief executives as the biggest potential knock to business confidence.

Their concerns should give food for thought to Prime Minister Helen Clark and Government officials who have advised that such a scenario would be a temporary "setback" to the economy.

The risk of global deflation is also high in the minds of CEOs and company chairmen who responded to the Herald's survey this week. There are strong concerns about the decline in US business investment.

Consumers are still spending, but personal debt is rising. CEOs fear that if the Federal Reserve cannot work its magic, a global deflation scenario may emerge.

Despite the Bali bombing and threats against Australia, top business players rate the impact of a US retaliation in Iraq as significantly more negative than the threat of further terrorism in the region.

"I think it is going to be really damaging to the world economy, bugger it," said the EMA's Alasdair Thompson.

Riposted a tourism chief: "Frankly we should relax and get on with life. War on Iraq will have an impact on our business ... but focus on this front will undoubtedly hold businesses back."

The Herald asked CEOs to rank which of seven issues had the most significant negative effect on business confidence today (see table). Insurance costs and the continuing effects from US accounting failures were of concern, but it is the proliferation of the Treaty of Waitangi into more areas of business that really riles.

"We have to be concerned about whether some of the actions being taken in the name of the treaty are not a form of greenmail or corruption," says Air New Zealand's Ralph Norris. "There are obvious injustices that need to be recognised, but the real issue is that we don't get into a situation where it seems the norm to obstruct activities just to get some form of rent."

The Government cannot do much to shield New Zealand from international risk. But Clark emphasised this week that it will step up focus on its own push for a US trade agreement and try to persuade Congress that the integration of the transtasman economies makes the move essential.

Risks nominated by the CEOs included the economic performance of our largest export and investment market, Australia.

Says JB Were's Clark Perkins: "A slowing domestic economy, further impacted by a major drought may be more significant than the relatively benign commentary we are reading from Australian economists."

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