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Confidence rises over threats

Friday 1st November 2002

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Three major threats hang over a recovery in business confidence, the latest National Bank Outlook survey shows.

They are slower exports due to the faltering recovery of New Zealand's trading partners; the "darker global scene" of volatile markets, fraud and accounting scandals, war threats and terrorism dampening investment intentions; and the continuing decline in world commodity prices.

Meanwhile, the number of pessimists has shrunk in the past month. A net 12% of businesses in October expected business conditions to deteriorate over the coming year, down from a net 21% in the previous month.

Economist Cameron Bagrie said businesses' expectations for their own performance remained unchanged at net positive 23%, closing the gap with headline confidence.

"At current levels, firms' own activity expectations are consistent with a solid, but not stellar, economy and an easing of the frenetic pace seen in the first half of the year," he said.

He said New Zealand was insulated through its buoyant domestic economy, which was the fastest growing in the OECD at 1.7% in the June quarter.

Profits, employment and investment intentions were below their long-run trend. But a recovery in dairy prices had seen a lift in dairy farmers' confidence. the survey found. The bank said interest rates would stay on current levels for the remainder of the year.

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