NZ: More than political protest by firms? – BNZ

Craig Ebert, Senior Economist at BNZ, notes that ANZ business survey slumps majorly for NZ economy and the real question is the extent to which it simply reflects political protest about the new Labour-led government.

Key Quotes

“Today’s issue was the first to be canvassed entirely after the new government was announced (19 October). And the survey has a history of reacting very negatively to centre-left regimes, only for the economy to hold up, even look good.”

“On political considerations alone, we expected net confidence in today’s ANZ business survey to fall, but not quite as much as it did. It dropped to -39.3, from -10 in October. Activity expectations were also weaker than we figured on, coming in at +6.5, from +22.2. The falls are more noticeable when we seasonally adjust the series, and the levels lower than the headline outcomes portray.” 

“The role of some over-arching factor, such as politics, was consistent with the fact that the weakening, and outright weakness, was well spread across the ANZ survey, whichever way you sliced and diced it. Nothing else stood out as a heavily negative explanatory factor.”

“Politics noted, the extent of the drop in the ANZ survey, so soon, means we also need to wonder what might be bugging the business sector from a practical point of view too – whether by way of identifiable policy or anything else.”               

“In this vein, it seems fair to say that some of the new government’s policies will be a direct impost on private firms, especially those of small to medium size, and away from the major metropolis areas. The policy around the minimum wage is a good example of this. And we have certainly heard a great deal of concern about the ripple effects of this on business, amongst many others policy measures.”  

“To be clear, we are not about to slash our economic growth forecasts – or anything else for that matter – on the basis of today’s ANZ business survey. However, its latest readings definitely make us glad we have kept our GDP forecasts on the conservative side for the near term. As such, there seems further reason to question the strength of the Reserve Banks’ latest GDP forecasts, as well as Treasury’s (with an eye on its upcoming Economic and Fiscal Update).”