New Zealand Firms Fear Economic Future

17 January 2008

WELLINGTON, NZ: Kiwi businesses are struggling for reasons to be cheerful, according to forecaster, the New Zealand Institute of Economic Research. Latest survey findings show that 26% of firms believe their prospects will deteriorate over the next six months.

The results are in marked contrast to business in neighbouring Australia where the latest International Business Report from accountants Grant Thornton ranks optimism seventh among 32 countries. At a three-year high of 77%, this is a reading well above the global average of 56% - and 15% up on 2007.

NZIER ceo Brent Layton believes Kiwi pessimism is fuelled by evidence of inflationary pressures, the likelihood of further Reserve Bank interest rate hikes and the credit crunch that has left the US teetering on the brink of recession.

However, there is a chink of light in the survey which shows 6% per cent of firms reporting an increase in their own activity on a seasonally adjusted basis, against 2% last quarter.

Manufacturers were generally more positive, but 35% expected the outlook to deteriorate, against 22% in Oz who expect an improvement.

NZ manufacturers have been less optimistic than their Australian counterparts for the past six years but this is the biggest differential since 1990.

Among construction firms, a net 40% expect output to rise, while merchants are also reasonably positive, with 7% looking forward to a rise in new orders and 11% an improvement in local sales.

Data sourced from Sydney Morning Herald; additional content by WARC staff