KEY POINTS:
There are plenty of reasons to see the glass as half empty - a lack of savings, the shrinking sharemarket, overburdened infrastructure, corporate taxes and the current account deficit, to name just a few.
But today business editor Christopher Niesche finds 10 reasons business should see the glass as half full or even overflowing.
NZX takes flight
At the beginning of the year, most commentators expected the sharemarket to rise just 5 to 10 per cent at best, but the NZSX-50 has defied all predictions to gain 20 per cent this year and climb above 4000 for the first time ever this week. After three years of good growth, the market is more than double where it started in 2003.
But there is a caveat: Much of the rise in share prices this year has been because of takeover activity rather than earnings growth.
"The actual earnings growth has been very modest this year and still looks pretty modest over next year," said First NZ Capital economist Jason Wong.
Indeed, the market's overall price-to-earnings ratio has risen from 15 times earnings to 16.5 times - meaning that shares are more expensive relative to their future profits than they were a year ago.
The Teflon economy
Economists have been forecasting a sharp downturn for a couple of years, but the economy has defied the pundits and kept growing, showing surprising resilience.
John McDermott, associate professor at Victoria University's School of Economics and Finance, puts the sturdier economy down to all the individual business people who have ignored talk of gloom and doom.
"There's a sort of underlying confidence; the business people are just getting on with it and there's millions of actions and decisions that are defying the forecasts," he said. "It's the market economy at work; it's an aggregate of lots of people doing stuff."
McDermott says the economy doesn't have to go through the boom and bust cycles it went through in the past.
"If we can still achieve 2 per cent growth at the trough of the cycle, that's great news. It means firms don't have to lay people off."
Creators, not destroyers
Most major companies in New Zealand today are earning a good return on their invested capital, instead of eating into it as they did in the past.
"The companies that dominate the top 10 index today create value, which is in stark contrast to the companies that dominated the index in the 1990s," said James Miller, head of equities at ABN Amro.
"The quality of companies has improved and that quality improvement is something we should be optimistic about."
Miller nominates Fisher & Paykel Healthcare, Auckland Airport, SkyCity and Telecom as companies that create value for shareholders.
This is in stark contrast to companies that dominated the sharemarket in the past and destroyed shareholder value - Brierley Investments, Fletcher Challenge and Carter Holt Harvey.
Compulsory savings
New Zealanders can only look with envy at the vast amounts of money that pour into Australian investment markets every year as a result of compulsory savings and the benefits that flow to Australia's economy and infrastructure.
AMP forecasts funds under management in Australia will grow from A$528 billion in 2004 to A$1.9 trillion in 2015. By contrast, New Zealand has just $31 billion under management, says the Reserve Bank, which is why so many local businesses have been lost to Australian investors this year.
But David Skilling of the New Zealand Institute, which has driven the savings debate, says there's a growing consensus that compulsory saving is what we need.
"Most people in business and capital markets are saying positive things about compulsory savings," he said. It was "looking reasonably likely" in a few years.
World getting smaller
Many of New Zealand's manufacturers are no longer very far from their foreign markets, or at least they're no further away than many of their competitors.
Take Pumpkin Patch. The childrenswear company manufactures in China and then exports to the US. But its major US competitors - Gap Kids, The Children's Place and Gymboree - also manufacture most of their stock in Asia and so face the same distance difficulties as Pumpkin Patch.
Pumpkin Patch chief executive Greg Muir quotes Microsoft's chief financial officer, Kiwi Chris Liddell: "A model for New Zealand's future is Pumpkin Patch - where it's designed in New Zealand, made in Asia and sold all around the world."
As Muir says, "It's a model that will have more and more currency as time goes on."
Clean, green image
The country's environment has long been seen as a tourism asset, but with business taking global warming and environmental concerns more seriously, it's even more of an advantage.
"One of the biggest industries for the next 30 years is renewable energy and green energy and things like smart metering," says New Zealand Exchange chief executive Mark Weldon. "We've found ourselves in a spot that a lot of other countries would envy right now. The question is: Are we going to make something of it?"
With about two-thirds of the country's power generated by hydro-electricity, New Zealand has one of the highest proportions of renewable energy generation in the world. This sort of capability and the expertise that goes with it will be increasingly sought after.
"It's going to get very, very big, so we should celebrate the fact that we've got a real opportunity there," says Weldon."If we can put two and two together we can end up with 14."
Better management
Corporate management has improved in the past 20 years, says Simon Botherway, head of Brook Asset Management and activist fund manager.
"The quality of boards and internationally competent management now are things to celebrate about New Zealand business," he says.
He puts the improvement down to a group of younger managers who cut their teeth in the post-1984 deregulated economy.
"Probably 10 years ago we still had a lot of company directors whose business experience had been in the the pre-1984 days, in the quite sheltered and protectionist-type markets," he says.
Botherway nominates business leaders such as Mainfreight's Don Braid, F&P Healthcare's Mike Daniel and F&P Appliances' John Bongard as managers "who've always been accustomed to working in a truly competitive environment".
"That's where they've learned their trade."
High kiwi, high interest rates
It may be cold comfort to businesses paying high interest rates and exporters fighting the currency, but they both provide insurance against a severe slowdown. If Alan Bollard needs to give the economy a boost, he has a long way to cut interest rates, in contrast to Japan a couple of years ago, where growth was stagnant with rates already at zero. Likewise, a slowdown will see the kiwi fall, giving a much-needed push to exporters.
Also, says ANZ chief economist Cameron Bagrie, the moving rates and currency are signs of "an economic framework which is working remarkably well".
Strong growth pushes interest rates and the currency up, slow growth does the opposite. "Such an economic framework is ironically going to smooth out some of the peaks and troughs in New Zealand's economic cycle," says Bagrie. Instead of lurching from 5 per cent growth to a 1 per cent contraction, the economy can trough at 1.5 per cent growth and peak at about 4 per cent.
The global outlook
The world economy - and so New Zealand's trading position - remains strong, despite the looming slowdown in the United States.
New Zealand's largest trading partner, Australia, grew by 2.4 per cent this year and will pick up to 2.8 per cent, according to Deutsche Bank estimates.
But more importantly Asia - which will take more of New Zealand's exports in the coming years - will keep growing. Excluding Japan, Asia had spectacular economic growth of 8.5 per cent this year and will grow at 7.6 per cent next year, Deutsche says.
"Notwithstanding the slowdown in parts of the US economy, we've had another year of strong economic growth," says Deutsche Bank chief economist Darren Gibbs. "We can be grateful that we've had no major escalation of geopolitical events to set the economy off course.
"The global environment is still one which is favourable to a small trading nation."
It's Christmas
Christmas Day is forecast to be fine and the pohutukawa are blooming.
