Capacity impacting plunging business confidence

July 9, 2019

Former Reserve Bank Governor Alan Bollard and economist Cameron Bagrie talk with Jack Tame about New Zealand’s economy on July 8, 2019.

"Business confidence, throw it in the bin," says economist Cameron Bagrie as confidence continues to drop. 

The latest NZIER Quarterly Survey of Business Opinion found business confidence fell to the lowest level since March 2009, however, "we might have slower growth, but the bills are being paid a little bit quicker", Mr Bagrie said on TVNZ1's Q+A.

He said firms were cautious about its own employment and investment. "We'd like to be going a little bit faster if we can, but there’s a lot of caution and weariness out there at the moment, but we ignore business confidence."

Former Reserve Bank Governor Alan Bollard he was not "too pessimistic" about the business confidence levels, however it could influence investment decisions. 

"A long time ago, I used to produce those Quarterly Survey of Business Opinion data. The numbers aren’t that important.

"I’d say it’s roughly equivalent to maybe 0.5 per cent off growth over the next year or so, which is pretty much what the forecasters have been saying.

"It’s there in housing, it’s there in other investment and I think manufacturing as well, from the look of it, and in the banking sector too."

Dr Bollard said there were other influences why business would be cautious currently. 

"We're watching Donald Trump and his US trade policies and the China response, and we've seen what now is a trade war morphing into a tech war, and we don’t want to see it going into a financial war."

Mr Bagrie said the bigger picture needed to be looked at. 

"We've got a slowdown here at the moment, but I would not call it a downturn or a recession around the corner.

"One of the big reasons the economy has slowed up is because of capacity. The unemployment rates in the low fours. You talk to any firm out there across New Zealand at the moment – what’s their biggest economic problem? It's finding skilled staff.

"Now, that’s a problem, but it’s a good problem to have as opposed to worrying about your next sales invoice."

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