Business confidence at two-year low
Business confidence has plunged to the lowest level in two years, as the economy braced for political uncertainty.
The monthly ANZ business outlook survey saw the net number of businesses that were confident about the overall economy over the coming 12 months dropped to zero in September, from a net 18.3 per cent positive in August.
It was the third month in a row that general confidence dropped, and marked the weakest score in the survey since September 2015.
The survey was taken in early September, before the election took place.
The score means as many businesses believe the economy will deteriorate in the coming year as believe it will improve.
When the survey was released the New Zealand dollar dropped slightly, below US72.5 cents.
The kiwi has been easing lower since currency markets opened on Monday in the wake of the election, amid uncertainty about the formation of a new government.
Respondents to the survey took a more confident view of how their own businesses would perform, with a net 29.6 per cent positive. However, this also showed a drop of more than 8 percentage points.
ANZ chief economist Cameron Bagrie warned on Sunday that some of the main drivers in the economy were coming off the boil.
‘‘We’re past peak construction, we’re at peak migrant and we’re probably at peak tourist,’’ Bagrie said.
But yesterday Bagrie pointed to new drivers emerging, which should mean growth would remain ‘‘respectable’’.
‘‘New economic drivers are appearing in the form of high commodity prices, rising household incomes and expansionary fiscal policy. It’s nothing to fret about.
‘‘Night follows day just as day follows night; the business cycle evolves and goes through different stages,’’ he said.
Uncertainty in the wake of the election was likely to rise, he said.
‘‘Policy uncertainty will rise over the coming months as political horse trading takes place. That can be unsettling. The last thing the New Zealand economy needs is a long, drawnout process mired in policy uncertainty,’’ Bagrie said, warning of lessons from when Labour took office in 2000 and confidence plunged.
‘‘Change [that was not sold or communicated well] was a key factor driving business confidence into a funk in 2000, and the economy stalled.’’
On a seasonally adjusted basis, net confidence fell from a net 29 per cent to a net 14 per cent positive. Investment intentions, employment intentions and profit expectations all fell.
Westpac economist Shyamal Maharaj said the survey was ‘‘consistent with other recent signs that the economy is cooling a little’’.
Both residential and commercial construction intentions fell in the survey, with firms reporting difficulties finding skilled work and accessing credit, which Maharaj said showed the industry was facing headwinds.