Things are volatile in the world at the moment, but the sky hasn’t fallen in just yet. The Brexit debacle rolls on and on; no one is winning and no one is allowed to go anywhere. Trade sanctions are having an effect, but not disastrously. In many ways, it is business as usual, although historically low interest rates would indicate otherwise.
So why exactly is the ANZ Bank telling us that business confidence in this country is at ‘dismal’ levels?
The September ANZ Business Outlook Survey saw headline confidence fall
2 points, with a net 54 per cent of respondents reporting that they expect general
business conditions to deteriorate in the year ahead – the lowest since April 2008.
Firms’ expectations for their own activity over the year ahead fell 1 point,
the fourth fall in a row, and the lowest read since April 2009.
Jacinda has tried to address this issue by smiling, using slogans and setting up a working group, but clearly it has not had the effect it was supposed to. Blindsiding the oil and gas industry, decimating the agricultural sector and promising labour reforms that the 1970s would be proud of might be a few factors causing this.
“The Reserve Bank will be disappointed that its unexpectedly large 50bp cut in the
Official Cash Rate last month does not appear to have had much impact on business’ sentiment or investment and employment intentions,” ANZ chief economist Sharon Zollner wrote.
Fundamentally the economy was still in good shape, she said.
“Commodity prices are still decent; population growth is positive; monetary conditions have eased. But the prolonged lack of confidence is starting to feed its way through the
economy and is threatening the tight labour market.”
I am not quite sure why Adrian Orr thought a 50 percentage point cut in interest rates that were already at historic lows would stimulate the economy. Everyone is used to cheap money by now. Interest rates lost their effectiveness as an economic stimulant some time ago.
“But, there is still no sector of the economy that reports on net that it is planning on hiring more staff – that hasn’t happened since 2009,” she said.
“And the services sector, which employs a hefty 74 per cent of people across the economy, is now also capitulating. This gradual but prolonged economic slowdown is at risk of ceasing to be about the data and starting to become about the people.”
A net 40 per cent of firms said they expect it to be tougher to get credit, up one per cent.
I am hearing this too. People are being advised to try to borrow money this side of Christmas because funds will be harder to come by next year. I assume this is because of the banks’ new capital requirements, also imposed by the Reserve Bank. If so, it seems the Reserve Bank is simply playing games; making money cheaper, but harder to get. That is really going to stimulate the economy next year.
Critics – including the Government- have accused business confidence surveys of being overly negative and politically biased.A Newspaper
This is the government’s Get-Out-of-Jail-Free card. If confidence is falling, it is nothing to do with them. It is simply because business hates Labour governments. That gives them carte blanche to do anything, knowing they can always put the blame somewhere else.
This is classic behaviour from this inept government, but someone needs to tell them that Helen Clark never had these problems, because she got alongside the business sector and worked with them.
Grant Robertson blames volatile world issues, and this may be a factor, but it does not tell the whole story. The fact that business confidence has been low ever since this government came into power probably tells us more. It may be true that business is wary of Labour governments, and the business sector often adopts a ‘wait and see’ approach with a new Labour administration. This time, there is not much to feel joyous about. Their flagship policy, Kiwibuild is a total failure. The Provincial Growth Fund is being used selectively to shore up political support. We have hundreds of working groups, many of which have produced reports that are then given to another working group. But when you ask the question of what exactly this government has actually done – for the business sector, or indeed for anyone else – the answer is… virtually nothing.
Except, of course, it has hiked fuel prices, raised the minimum wage by 27%, proposed significant labour reforms that favour unions, proposed water improvement programmes that will cost many farmers most of their profits and have started working on a Zero Carbon Bill that promises to knock the stuffing out of the agricultural sector at a time when things are already tough.
Yep. Nothing for the business sector to worry about there. Grant is right. Either it is the world situation to blame, or business just hates Labour governments. It can’t be anything else, can it?