ASB alters forecast as confidence rises

ASB has axed its forecast for an interest rate cut in February after an ANZ survey showed a big rebound in business confidence.

ANZ said a net 26 per cent of businesses were expecting general business conditions to deteriorate in the year ahead, which was a big decrease from the net 42 per cent expecting worse conditions the previous month. Firms’ expectations of their own fortunes rose 17 percentage points to a net positive 13 percentage points.

Chief economist Sharon Zollner said the improvement was ‘‘broad and consistent’’ and suggested lower interest rates and the more favourable exchange rate were working their way through the economy.

‘‘The remarkable resilience of New Zealand’s commodity prices is providing an invaluable buffer to the world’s woes,’’ she said.

ASB responded to the survey findings by cancelling its forecast for a 25 basis-point interest rate cut in February, though it is predicting the official cash rate will drop one notch to 0.75 per cent in May. ‘‘Business confidence still remains at low levels and consistent with sub-trend

Commodity prices are helping New Zealand ride out economic doldrums, says ANZ.

economic growth,’’ senior economist Jane Turner said.

‘‘We look to future surveys to confirm an upward trend rather than just a stabilisation in confidence going forward,’’ she said.

BNZ research head Stephen Toplis said it had expected business confidence to improve but not as big a bounce.

Toplis said the survey reinforced its view that the official cash rate was on hold for the foreseeable future.

‘‘While the Reserve Bank might well see this as evidence of monetary policy working, many others might argue the bank’s recent pause in its policy plunge – since its August shock ease of 50bps – has calmed nerves out there in the business sector,’’ Toplis said.