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‘Jacindamania’ over as NZ business confidence sinks to 10-year low

Prime Minister Jacinda Ardern's coalition has vowed to make the economy 'work for all New Zealanders'
  • Reuters (New Zealand Reseller News)
  • 01 August, 2018 05:00
Prime Minister Jacinda Ardern

Prime Minister Jacinda Ardern

New Zealand's business pessimism deepened to a decade-low in July, an ANZ Bank survey has showed. extending a trend evident since the centre-left Labour-led government took the helm in October.

The survey showed a net 44.9 per cent of respondents expected the economy to deteriorate in the year ahead from 39 per cent in the previous month.

Prime Minister Jacinda Ardern's coalition has vowed to make the economy 'work for all New Zealanders' and curb rising inequality.

But firms' have responded negatively to many of its policies, notably a 5 percent increase in the hourly minimum wage to NZ$16.50 in April, and further plans to lift it to NZ$20 by 2021.

Ardern is due to return from six-weeks maternity leave on Thursday.

Pessimism reigned across the board in ANZ's survey, but the most gloomy sector was retail, where sentiment dropped 11 percentage points to -28 per cent.

"It's difficult to take a glass-half-full view of this month's survey results," said Sharon Zollner, chief economist at ANZ Bank.

"Sustained low business confidence increases the risk that firms will delay investment and hiring decisions, in what could become something of a self-fulfilling prophecy."

The net percentage of firms that expected their own activity to improve fell to a nine-year low of 3.8 per cent from 9.4 per cent the previous month.

New Zealand's gross domestic product (GDP), the envy of the developed world in recent years, has slipped since late last year.

The economy notched growth of 0.5 per cent in the first three months of the year, compared to an average of 0.9 percent since 2014.

New Zealand's Treasury forecasts the economy will average about three per cent annual growth for the next few years, expanding as much as 3.8 per cent in the year ending June 2019, but most economists now forecast growth to be below three per cent in 2018.

The New Zealand dollar slipped from $0.6830 to $0.6818 in the wake of the release.

(Reporting by Charlotte Greenfield; Editing by Simon Cameron-Moore)