China-US trade war bad news for NZ's agriculture sector

Business confidence has improved, following a strong quarter of economic growth - but still, most bosses expect conditions to deteriorate in the year ahead.

A week ago Statistics NZ said gross domestic product (GDP) increased 1 percent in three months, the fastest growth in two years. The spike in growth followed a rapid fall in business confidence, as measured by ANZ's monthly survey.

"There has been a lot of policy change over the last year, and the change of Government was relatively sudden and then some of those policy changes were quite intense," Business NZ chief executive Kirk Hope told The AM Show on Thursday.

"If you think about the oil and gas decision, that has quite long-lasting implications. Some of those things have created that air of uncertainty."

In August a net 50 percent of businesses told ANZ they expected the economy to worsen in the year ahead - that's improved to 38 percent.

"You'd expect that when you've had a quarter of 1 percent GDP growth," said Mr Hope.

But he says the improvement in confidence is obscuring dark clouds on the horizon, with investment intentions turning from a net 1 percent to -5 percent. ANZ said it is rare for investment intentions to turn negative, meaning more businesses are planning to reduce investment than increase it.

"One of the weaker parts of that confidence survey were businesses' investment intentions - so that uncertainty is still playing into that into that investment intentions space," said Mr Hope. "That's really concerning."

A lack of investment would hurt future growth and job numbers. Correspondingly, employment intentions fell from a net 2 percent to -6, with no sectors registering a net positive.

Mr Hope says the biggest impacts are coming from overseas, with the US declaring trade wars against rival global behemoths like China and putting up barriers to free trade.

"Those have the ability to have a real impact, a really direct impact on New Zealand exporters and the prices that we can get for our goods and services overseas.  Those things are concerning, and usually what happens when protectionism starts to play out is it will hurt agriculture.

"Given agricultural production is such a big part of our economy, that's really concerning."

The survey backs up Mr Hope's fears, with agricultural firms registering a net -62.9 percent confidence, easily the lowest of any sector.