Business confidence hit two year low in lead-up to Government announcement

Tuesday, 31 October 2017

Business confidence has plunged to a fresh two year low amid political uncertainty.

The ANZ business outlook survey for October showed a net 10 per cent of businesses are pessimistic about the year ahead, meaning more businesses expect general conditions to get worse in the coming year, than the number who expect to see an improvement.

However, the survey does not reflect the business community's view of the new Government, as most of the responses were collected while coalition negotiations were still ongoing, before the make-up of the new administration was known.

It is the lowest reading in the survey since September 2015 and marks a 10 point fall in a month. The September survey itself marked a sharp fall from August.

READ MORE: Business confidence plunges in lead-up to the election

'The finger can be pointed at political uncertainty,' ANZ chief economist Cameron Bagrie said.

'[T]his month's survey primarily covers the uncertainty around the outcome and not the outcome itself. The latter will be next month's story,' Bagrie.

ASB senior economist Jane Turner said the bank expected confidence would remain 'subdued' in the short term, reflecting uncertainty from a change in Government.

'The fall in businesses' own activity expectations is more modest than the fall in headline confidence, but points to below-trend growth nonetheless,' Turner said. 

A net 22 per cent of businesses expect better own company performance in the coming year, but this was an 8 point fall on September. 

Investment, employment, export and profit expectations all eased slightly. A net 31 per cent of businesses said it was more difficult to obtain credit.

Pessimists outnumbered optimists across all five sectors in the survey, with agriculture the most downbeat.

Bagrie said the change in Government, while unsettling, offered opportunities.

'Change in itself is not the key issue; how you market it, tell the story and take people along with you is the real challenge.'

BNZ senior economist Craig Ebert said it was not a surprise that confidence had eased given the uncertainty which followed the election however the drop between September and October 'was a bigger drop than we might have imagined'.