Business confidence hits new low
New Zealand economy delicately balanced
Business confidence continues to slide according to the latest ANZ Business Outlook Survey.
Business confidence, and firms’ views of their own activity, continued to fall in July, reaching the lowest levels since May 2008 and May 2009 respectively, ANZ chief economist Sharon Zollner said.
This was increasing the risk of the economy stalling, she said.
Business confidence dropped to a net 45 per cent of respondents reporting they expect general business conditions to deteriorate in the year ahead, down 5 points.
Firms’ perceptions of their own prospects are a better gauge of economic outcomes, but the news wasn’t upbeat here either, Zollner said. It dropped 5 points to a net 4 per cent expecting an improvement. This is the lowest since May 2009.
“This economy feels increasingly late in the cycle. Fiscal stimulus and the still strong terms of trade will support growth. However, sustained low business confidence increases the risk that firms will delay investment and hiring decisions, in what could become something of a selffulfilling prophecy.”
Business confidence has become a flashpoint for the Coalition Government. It traditionally falls in response to the election of Labour govern- ments. Business groups are unhappy about the reform of labour laws and what they describe as policy uncertainty in areas like immigration.
At the National Party Conference last weekend, former Prime Minister John Key warned that New Zealand faces an economic downturn — which could be exacerbated by low business confidence.
Most economists see New Zealand’s GDP growth slowing through this year but picking up again next year as government spending policies start to stimulate the economy.
“The New Zealand economy is delicately placed,” Zollner said.
“Fiscal stimulus and the high terms of trade will provide impetus to growth, and the external environment remains favourable. But with businesses in a funk, it’s fair to say that the road ahead is looking less assured, and risks of a stall have increased.”
With businesses in a funk, it’s fair to say that the road ahead is looking less assured. Sharon Zollner