NZ businesses 'hold their nerve'

By Phil Boeyen, ShareChat Business News Editor

Friday 29th June 2001

Business confidence has stabilised according to the National Bank's latest survey.

The survey for June shows headline confidence has a net 3% or respondents expecting general business conditions to improve over the coming year, down from 4% last month.

Most other survey indicators, such as own activity, labour market, profit, investment and pricing intentions, were little changes from a month ago.

National Bank chief economist, Brendan O'Donovan, says that with a very shaky world economy potentially about to get some respite, New Zealand businesses have held their nerve.

While the latest results are "nothing to phone home about", Mr Donovan says at least the slide in confidence has been arrested.

Once again the international environment has been picked as the most crucial element in the country's near-term outlook.

"Global economic developments have generally been worse than expected, making for a deeper trough in activity. The slide in the global economy is as rapid and widespread as seen for a long time," says Mr Donovan.

"But with US tax rebates to come into effect by the end of July and the big interest rate cuts that the US Fed has already delivered, it is hoped that the US consumer will fill the hole left by retrenchment of business investment."

Although Europe is feeling the pinch from slower world trade and economic activity is falling in Japan, Mr Donovan says the Australian economy is recovering from last year's post Olympic and GST hangover and is likely to be back on a steady, if unspectacular, growth path.

In the latest survey, 25% of business respondents expect improvement in economic conditions while 22% expect deterioration.

Finance Minister Michael Cullen says figures from the survey showing net 32% of respondents expect activity in their own businesses to expand over the next 12 months is encouraging.

"Most commentators regard the own activity measure as more accurate than the survey on general business conditions, although this has also stabilised and remains in positive territory."

Dr Cullen says he is particularly heartened by the continuing bullishness around exports: 43.9% of those surveyed expected real exports to increase, 50% thought they would continue at current levels, and only 6.1% thought they would drop.

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