1 Jul 2014

Business confidence drops

8:22 am on 1 July 2014

Business confidence has dropped after months of overconfidence.

The latest ANZ Bank survey has found a net 43 percent of companies are optimistic about the economy, down 11 points from last month and 28 points down from the peak.

However, confidence is still 33 points higher than the survey's long-run average of 10 points.

ANZ Bank chief economist Cameron Bagrie said there were plenty of reasons why confidence had declined, including rising interest rates, the high New Zealand dollar and lower dairy and forestry export prices.

"You go out there and we've still got a record amount of construction-related activity. Auckland-Christchurch still surging ahead. Of course, the migration numbers are still looking very buoyant across the general economy," Mr Bagrie said.

"Business confidence, consumer confidence down but still reasonably elevated.

"Employment labour market still picking up there behind the scenes.

"So yes, you could take a little bit of a glass half empty view of where New Zealand stands but you can't just point ... at all those negative factors, because under the bonnet there's still a reasonable economic story across New Zealand."

The Reserve Bank wanted to engineer a slowdown and while that did not mean it was causing a meltdown, it did want the economy to grow more in line with New Zealand's natural speed limit.

"That is, the speed at which we can grow without generating inflation," Mr Bagrie said.

"This economy simply cannot grow at 5-6 percent. If we can get this economy down around the 3 percent mark, that'll be a reasonable outcome."