Business confidence ‘threatening’ growth, ANZ says

New Zealand’s business confidence has fallen to its lowest levels in more than 10 years, according to the latest ANZ Business Outlook Survey.

Overall confidence fell two points in September with 54% of respondents reporting that they expect general business conditions to deteriorate in the year ahead, the lowest since April 2008.

Commercial construction intentions fell 9 points to -13; residential construction intentions fell 15 points to -19. Both remain negative.

Firms’ expectations for their own activity over the year ahead fell 1 point to -2, the fourth fall in a row, and the lowest since April 2009.

Employment intentions rose 1 point with 8% of firms intending to reduce employment. Investment intentions fell 5 points to -9.

Profit expectations fell 5 points with 25% of respondents expecting profitability to decline, the lowest since April 2009.

Commercial construction intentions fell 9 points to -13; residential construction intentions fell 15 points to -19. Both remain negative.

Export intentions rose 3 points to a net 2% of firms expecting exports to lift.

ANZ chief economist Sharon Zollner says inflation weakness is now emerging despite the large cut to the official cash rate in August.

“Declining inflation expectations were cited as a reason for the large OCR cut last month.

“The combination of high cost pressures but limited pricing power is showing up in expected profitability and weak investment intentions.

“The Reserve Bank will be disappointed that its unexpectedly large 50bp cut in the official cash rate last month does not appear to have had much impact on business’ sentiment or investment and employment intentions.

“The backbone of the New Zealand economy is still in place – commodity prices are still decent; population growth is positive; monetary conditions have eased.

“But the prolonged lack of confidence is starting to feed its way through the economy and is threatening the tight labour market,” Zollner says.

NZ economy ‘resilient’

The New Zealand economy has proved resilient through a period of weakening global growth and heightened global uncertainty according to the Reserve Bank’s recent annual report.

“Our economic and policy environment is constantly changing, and we’re evolving with it to ensure we’re ready to meet the needs of New Zealanders now and in the future,” Reserve Bank governor Adrian Orr says.

“Throughout the year our priorities focused on setting the foundations for significant change and setting us up for growth and innovation.

“One of our highlights has been the new framework for the way we run our monetary policy functions that took effect on 1 April 2019.

“Working alongside the Treasury, we designed, implemented and embedded the new framework aimed at producing better monetary policy outcomes for New Zealand,” Orr says.