Cost of confidence slump

December 1, 2017

Business confidence has fallen to the lowest level in more than eight years:

The ANZ business outlook survey found a net 39 per cent are pessimistic about the economy over the coming year, a 29 point fall since October.

The latest survey is the first of its kind to be taken since the new Labour-led Government was formed.

Headline business confidence was negative across all the five sub-sectors covered, with agriculture the most pessimistic.

All the anti-farmer rhetoric in the lead up to the election gives those in agriculture and related industries good cause for concern and dry weather throughout much of the country isn’t helping.

Dairy, sheep meat and beef prices are all reasonably good but there is a lot of uncertainty about what the government might or might not do.

“Uncertainty around changing Government policy, a softer housing market, and difficulty getting credit are likely culprits,” ANZ chief economist Sharon Zollner said.

“The economy is at a delicate juncture as migration, construction and housing run out of steam as growth drivers. Commodity prices are strong and a fiscal boost will come through in time, but at such times of transition, sentiment is more vulnerable.”

Zollner said while it was the first survey of its type that ANZ had conducted since Jacinda Ardern became prime minister, “it would be too simplistic to ascribe the full move to the change of government”.

“There is a lot else going on. The softening in house price inflation is one obvious factor that shouldn’t be overlooked (particularly its importance for the retail sector), as is the reported difficulty of getting credit.”

So-called “own activity expectations” – what individual owners expect of their businesses remained positive overall, but fell sharply, down 15 points to a net 7 per cent positive. This was also the weakest measure since 2009.

The survey found a net 41 per cent of businesses expected it will become more difficult to obtain credit, the highest since the question was introduced to the survey in 2009.

ASB senior economist Jane Turner said the fall in headline confidence was hardly a surprised, and was typically biased when Labour has been in Government.

“However, the fall in own activity is concerning and if sustained will suggest material downside risk to the economic outlook,” Turner said. . . 

Just as one political poll shouldn’t be taken too seriously, one business survey shouldn’t be cause for panic.

But lack of confidence can become self-fulfilling and the cost of that is an economic slow down.

Businesses need confidence to invest, to take the risk to grow, to employ more staff. Without confidence they hold back on new or bigger investments, they’re much less likely to take risks, less likely to invest more, and less likely to take on more staff.

Governing parties are back pedalling on several of their pre-election policies but until it’s clear what they’re saying and whether that’s what they’ll do, businesses are going to be wary.


Brighter future no mirage

October 19, 2013

While attention has been on political sideshows there’s been several positive stories about the economy this week.

Consumer confidence is growing adding to signs economy is picking up pace:

New Zealand consumer confidence rose this month, adding to signs the economy is growing at a faster clip, with the strongest recording for kiwis feeling better off than a year ago since January 2008.

The ANZ-Roy Morgan consumer confidence index rose 3 points to 122.3 from 119 in September. The current conditions index rose 4 points to 120 and the future conditions index gained 3 points to 124.

“Consumer sentiment remains elevated and consistent with perky spending trends,” ANZ New Zealand chief economist Cameron Bagrie said in his report. . . .

Employment has been lagging behind growth but it is beginning to pick up too.

The ANZ Index shows job advertisements increased last month:

The ANZ jobs index released on Thursday shows total job advertising rose 1.1% in September, with the number of jobs advertised just over 4% higher than a year ago.

ANZ Senior Economist Sharon Zollner says newspaper ads rose 4.2% after a sharp fall in August.

Ms Zollner says Internet ads rose 0.5% which is the fourth consecutive monthly increase. . . .

She says it’s normal for the labour market to lag behind the general economy but the jobs recovery had been sluggish.

“We’re optimistic that in the second half of this year things are going to pick up.” . . .

And beneficiaries are seeking out emerging jobs:

More than 700 beneficiaries have sought out and landed jobs despite having no requirement to work since the new Work Bonus became available.

“We introduced a work bonus as an incentive to help people move off a benefit and onto a wage,” says Social Development Minister Paula Bennett.

The government is making a difference through a modernised welfare system by setting expectations, incentives and support to work.

Operational since July 15, the latest welfare reforms include the new Work Bonus, which allows the benefit to be phased out incrementally so people keep a proportion of it as they transition to a wage.

“Even just six weeks into the policy, 706 people had gone off benefit into work and were getting the Work Bonus,” says Mrs Bennett.

“The majority were sole parents, but more than 80 were people choosing to go off the Supported Living Payment (previously Invalid’s Benefit) into work.”

Work opportunities are emerging nationwide and beneficiaries will continue to snap up these jobs with employers choosing to recruit via Work and Income.

Home Support North is looking for around 70 part time support workers in Kerikeri and Whangarei. A new Supervalue supermarket opening in Avondale, Auckland provided work for five beneficiaries and likewise a FreshChoice supermarket will create 30 new jobs in West Auckland’s Ranui when it opens.

Z petrol stations regularly use Work and Income for recruitment. Seventeen beneficiaries gained jobs in Auckland Z stations in May and June alone.

“Three of those seventeen had done the Limited Service Volunteer (LSV) scheme. The Opposition writes this course off, but it motivates people to work,” says Mrs Bennett.

Another ten LSV graduates of the Hobsonville course have been interviewed for more positions at Z stations.

A number of new and expanding businesses are opening sites or starting up in areas that will benefit from the new jobs emerging including:

  • Progressive enterprises re-opening a refurbished Wellington supermarket
  • Sea Dragon Marine Oils doubling staff levels and opening a new factory in Richmond
  • New Subway sandwich store in Nelson
  • Drivers and labourers needed by Smart Environment Limited for recycling and rubbish disposal in Westport
  • Rydges Latimer Square Christchurch hotel now open and taking staff

Jobs are becoming available around the country and Work and Income are making every effort to match them with motivated beneficiaries.

“The new, modernised welfare system is providing real incentives and support to move into work and people are taking up the opportunities as they arise.”

There’s been a dramatic drop in the number of beneficiaries in the last year:

The number of people on benefits in New Zealand has fallen consistently for three quarters says Social Development Minister Paula Bennett.

Today’s data release shows benefits fell to 304,394 in the September quarter.

“A year ago there were almost 321,000 New Zealanders on benefits; that fell by 16,548 since September 2012, and by 5,388 in just the last quarter.”

The number of people on Sole Parent Support fell by more than 3,000 in the last quarter and there are at least 2,000 fewer people on Jobseeker Support.

Since the Sole Parent Support benefit was introduced in July 15, more than 3,200 sole parents have cancelled it for work, others have left for different reasons and another 5,000 came onto this benefit in the same period.

Mrs Bennett says the new, transparent, approach to the welfare system reveals sole parents spend 15.8 years on average on welfare and the total lifetime liability for sole parents is $21 billion, or $234,000 per person.

“This is why we’ve prioritised this group for assistance, particularly teen parents who are most at risk of getting trapped on welfare,” says Mrs Bennett.

“Teen parents on benefit are required to be in education so they can be better prepared for work, as well as undertaking parenting and budgeting programmes, all of which helps them to become independent.”

Since July, more than 10,000 Jobseeker benefits have been cancelled because people found work and on average, around 1,500 benefits are cancelled every week, because people go off benefit, into work. . . .

South Island firms are showing meteoric growth:

South Island listed companies have posted a meteoric 22.7% growth in the latest quarter according to the Deloitte South Island Index released today.  This is the largest quarterly growth percentage since the inception of the Index.

The 23rd edition of the Deloitte South Island Index, for the quarter to 30 September 2013, saw the index rocket upwards by $1.6 billion (22.7%) in market capitalisation, continuing the trend of the previous four quarters. The latest quarter’s results see the Index up $3.02 billion (53.6%) during the year to 30 September 2013 with total market capitalisation now standing at $8.66 billion, yet another new high since its inception in 2007.

The South Island Index’ 22.7% growth led the way against benchmark indices during the September quarter. Over the same period, the ASX All Ords achieved respectable growth of 9.3% while the NZX 50 Index and Dow Jones achieved more modest to low growth of 6.7% and 1.5% respectively. 

Paul Munro, a corporate finance partner in Deloitte’s Christchurch office, says the performance of the Index over the last quarter has been nothing less than remarkable. . .

The full Deloitte South Island Index report is here.

We still have a long way to go but all of these are encouraging signs that the  economy is on track back to surplus and that the brighter future National promised is no mirage.

Prime Minister John Key says:

I’m proud of the progress we’re making to build a stronger economy. Economic growth means more jobs and opportunities, better schools and hospitals, and a brighter future for families.
From John Key : NZ is growing faster than most economies, meaning more jobs, more opportunities & a brighter future for Kiwi families.


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