29 Jun 2012

Confidence slump puts rate rise 'some way away'

7:28 am on 29 June 2012

An economists says another fall in business confidence this month increases the chances that interest rates will stay on hold for longer.

National Bank's closely-watched monthly survey of business sentiment found confidence halved in June.

Only a net 13% of respondents expect business conditions to improve over the next year, compared to a net 27% in May.

All subgroups in the National Bank survey experienced declines, with firms expecting to earn less, hire fewer staff, invest and export less in June, compared to May

National Bank chief economist Cameron Bagrie says confidence has been falling since March.

"The (Christchurch) rebuild is just around the corner - so I think there is a lot of hope there within the construction sector," he says.

But Mr Bagrie noted that sector was coming off a low base, and builders might say things would get better because they couldn't see how cashflows could get any worse.

And in the agriculture sector, farmers were expected to be a little more conservative in how they managed their cashflows over the next six months.

Goldman Sachs' economist Philip Borkin says the continued decline in business confidence means there is no pressure on the Reserve Bank to raise interest rates any time soon.

"There's certainly no pressure on them to tighten monetary policy, and we think the next (interest rate) move, while it will be up, barring a big global meltdown is still some way away yet."