Beehive Uncertainty and Posturing Big Factors in Business Confidence Drop

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The NZIER Survey,

National's comment, 

and different views by ANZ and Kiwibank economists. 

See also NZ Herald's Mood of the Boardroom survey

and Government's R&D Business Tax incentive

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The latest  quarterly NZ Institute of Economic Research (NZIER) business survey confirms earlier polls by other pollsters that business confidence -- in the general economy and in the firm's own expected activity-- has declined.  Just over ¼ of businesses expect worse conditions, the worst since 2009. and only 1% reported higher demand.

"We found Government policy, labour costs, consumer confidence, availability of labour and operating margins were the key considerations for businesses when it came to an assessment of general economic conditions."

Manufacturers, concerned with weaker demand and rising costs. were the most pessimistic. Larger firms were more influenced by uncertain Government policy; retailers and builders by possible labour shortages, costs and consumer confidence. However, architects  expect a pick-up residential and commercial construction over the coming year.

NZIER commented that responses on general economic conditions are usually worse than the firms' own activity, and that in 50 years of polling the difference between these two measures tends to be larger under a Labour Government.

National’s Finance spokesperson...
Amy Adams, , said " The Government can’t continue to cling to policies that are harming the economy while trying to ignore the growing body of negative indicators  ... the survey points to GDP growth of just 2 per cent in the year to September 30, well below the levels touted by the Finance Minister.

“Instead of taking credit for the strong foundations built up by National, the Government should stop experimenting with the economy and cease being the biggest source of uncertainty for business. It is arrogance to ignore the impact of bad policies."

ANZ senior economist Liz Kendall said Tuesday’s data from NZIER are consistent with a softening in GDP growth, which casts considerable doubt on the Reserve Bank's expectation in its August Monetary Policy Statement that annual GDP growth will accelerate from here.

Kiwibank chief economist Jarrod Kerr said the uncertainty generated out of the Beehive had persisted over the year.

"Firms’ concerns have yet to translate into materially weaker activity, however," he said. (i.e, difference bewtween the general economy and in the firm's own expected activity.)

"We believe there may be an element of protest, anti-reform, voting taking place, especially in regard to labour market reform, tenancy reform and taxation reform (capital gains). 

"There’s a lot for businesses and landlords (often one and the same) to get their heads around.

"It’s uncertainty that kills confidence. And it’s uncertainty that kills growth. 

"So far we assume a large amount of posturing, and (hopefully) a limited amount of pass-through.

"But the risks are clearly down, not up. Today’s survey is exactly what keeps the RBNZ awake at night, and justifies the central bank’s dovish tilt." 

-- ACW