|Business Confidence Falls
Business confidence has dropped sharply
across New Zealand, with a growing number of businesses feeling pessimistic in
the face of rising labour costs and slow progress on housing and infrastructure
projects. According to the ANZ Business Outlook Survey, 27 percent of 354 firms
surveyed expect general business conditions to deteriorate over the coming 12
months, an increase from 23 percent the month before. The situation is
especially pronounced in Auckland, with the Auckland Chamber of Commerce
recently saying business confidence in the city was in "free fall".
While New Zealand's headline economic
indicators have supported the idea of robust economic growth recently,
companies are known to get more pessimistic about the economy when a Labour
administration is in place. According to ANZ Bank New Zealand chief economist
Sharon Zollner, "The survey made for fairly uninspiring reading this
month, with all aggregate activity indicators flat to falling... The economy
still has good tailwinds in the form of fiscal stimulus and the record-high
terms of trade, but may be tiring nonetheless."
You may be surprised by such pessimism,
with strong net migration continuing to fuel residential investment in housing
and the Organisation for Economic Cooperative and Development even coming out
in anticipation of solid growth. However, while migration numbers are helping
to bolster consumer spending and the expanding workforce is mostly being
absorbed by business, the Labour Coalition government has not done much over
recent months to gain the confidence of the business community.
The ANZ Business Outlook Survey highlighted
these growing problems, with New Zealand businesses uncertain about potential
changes to the employment market, taxation policies, and immigration policies
just to name a few. Other factors influencing the pessimistic outlook included
weak wages growth, flat consumer prices, poor per capita economic growth,
housing market uncertainty, and a lack of infrastructure spending to meet the
needs of the growing population.
Companies are also increasingly concerned
about earnings, with 8.5 percent of respondents expecting profits to fall in
the coming year, compared to just 0.9 percent in April. Just 3.2 percent of
businesses are intending to increase investment over the next year, down from
7.2 percent the month before.
Unsurprisingly, this means that hiring
intentions also declined, with 6.9 percent of respondents planning to take on
new staff compared to 8.9 percent in April. Agriculture was the most
pessimistic sector in the ANZ survey, followed by manufacturing and retail.
According to Auckland Chamber of Commerce
boss Michael Barnett, New Zealand's biggest city is in a particularly bad
place. The chamber recently surveyed 800 businesses, with a massive 44 percent
expecting the economy to deteriorate over the rest of the year and just 15
percent feeling optimistic.
Growing uncertainty over the Government's
economic direction was the main reason behind the slump in business confidence,
with survey respondents also concerned about the skills shortage, fuel tax, and
increasing cost of labour.
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