Does anybody else out there wonder why drooping business confidence matters? Okay, business is important but it represents just one part of the economy.
In many ways what followed the latest business confidence survey was a plea to a Government with more than just business on its mind, saying, ‘we’re here’ – if only just. After all The Auckland Chamber of Commerce had declared that confidence in Auckland was in ‘free fall’ – adding a hitherto unknown dimension to gravitational forces.
The New Zealand Herald contributed to to the building panic, reporting that New Zealand had tumbled down the OECD business confidence rankings to the second lowest among countries in the developed world. Two years ago New Zealand was the third highest in the OECD, but now everyone except South Korea is above New Zealand’. (South Korea is an emerging powerhouse and as an aside, National was in Government that year.)
So naturally this survey provided meat and drink to Amy Adams, National’s new finance spokesperson.
“… it is a shocking revelation that New Zealand – typically a haven of political and economic stability – has the second lowest level of business confidence in the OECD,” Adams said. …”a damning reflection of the current Labour Government’s economic management”.
So there. But can something as ephemeral as a sentiment like confidence be measured accurately? In some cases yes – perhaps if you’re Venezuelan and suffering a 90% drop in the value of your currency. What the survey does highlight is not so much a lack of business confidence, as an excess of business timidity.
Yet, backed by unquestioning media, business self-interest generated a crisis of sorts bringing the government to its table even though the respective agendas are very different.
A look at the history of the ANZ Surveys from 1970 to 2018 reveals a striking coincidence:
‘Business Confidence in New Zealand averaged 5.69% from 1970 until 2018, reaching an all-time high of 80.90% in February of 1994 and a record low of -76.40% in December of 1974.’
The dates are informative. In 1974, the Labour Government was in power; twenty years later National ruled, privatising what it could and, in the process, coming top of the Confidence Survey class…
So what then do the ‘Dries’ of Treasury make of the present confidence or lack of it. In its May 2018 update, Treasury found that the country’s prospects look pretty good.
GDP growth has slowed over the past year from 4.0% to 2.9% in the year to December 2017 and is expected to remain around these rates over the first half of 2018’, it says.
‘Thereafter the demand outlook is broadly positive with activity underpinned by low-interest rates, migration-led population growth, rising government spending and robust international growth’.
‘Annual average growth is forecast to pick up from 2.8% in the June quarter 2018 to a peak of 3.6% in the December 2019 quarter, as private consumption growth remains solid, increased government spending bolsters the economy, and both residential and business investment pick up. Growth is expected to slow to 2.5% by June 2022 as net migration inflows ease, and interest rates rise.
What’s happening across the ditch is also informative. Australia’s GDP growth is 1% per quarter. Ours is 0.5%. Their unemployment rate is 5.3%. Ours, 4.5%. Their Government Debt to GDP is 41.9% ours is 22.2%.
In other words most sectors are quite healthy, even as this Government repairs something truly shocking – a damaging legacy of neglect from the previous Government.
But back to surveys. How about something different, something like a National Social Satisfaction Survey which takes the pulse of our society – including checking the health of business.