Economist warns firms 'expecting to cut jobs' as confidence drops

An economist is warning firms in New Zealand are "expecting to cut jobs" as ANZ's latest business outlook report cautions of falling business confidence. 

ANZ senior economist Miles Workman said the bank's latest business outlook survey found that business confidence fell, with 44 percent of respondents saying they expected business conditions to worsen in the year ahead. 

"From our business outlook survey, what we've seen there is firms are beginning to report that they are expecting to cut jobs," Workman told Newshub. 

"If that is actually happening, then that implies household incomes are potentially falling and that could be weighing on sentiment."

Consumer confidence has also dropped, another recent ANZ survey has found. Just 21 percent of consumers surveyed said they expect to be better off financially this time next year. 

Workman explained how the survey was split into two components. The first part, asking consumers about their current conditions, "held up pretty well", he said. 

"It did fall slightly but we still have a decent portion of households out there who still think that now is a good time to buy a major household item."

It was the forward-looking component of the survey where Workman said things looked worrying. It found that forward-looking confidence dropped to its lowest level since September 2015. 

"That suggests households are getting a little bit weary and the risk of that is that it could translate to households restraining their spending a little bit if they are concerned about the future of their own incomes."

National's finance spokesperson Paul Goldsmith.
National's finance spokesperson Paul Goldsmith. Photo credit: File

National's finance spokesperson Paul Goldsmith said the Government "needs to take responsibility as it has continued to add costs to businesses, has created massive uncertainty and has demonstrated incompetence". 

In Parliament on Thursday, he asked the Finance Minister, Grant Robertson, whether he thought the title of ANZ's economic outlook report, "Grim", represented the outlook of the New Zealand economy. 

Robertson responded by pointing out the report's mention of a "global slowdown" which it said had been "having an effect on business confidence in New Zealand". 

Prime Minister Jacinda Ardern has also blamed the economic slowdown in New Zealand on global conditions, pointing to Brexit and the US-China trade war. 

Workman said it's a combination of global and domestic factors that are affecting business and consumer confidence in New Zealand. 

"We're a small, open economy, and we do rely on trade to support growth, but there are also domestic factors such as capacity constraints which are sort of limiting our ability to expand at the same rate that we have in the past."

The Finance Minister Grant Robertson.
The Finance Minister Grant Robertson. Photo credit: Getty

Pointing to a drop in confidence in the agriculture sector - which generates about $42 billion a year in exports - Workman said it could have something to do with the proposed environmental regulations

"Agricultural firms have been pessimistic for quite some time and part of it is the regulatory backdrop with environmental regulation - that's a cost to most exporters."

Despite that, Workman said New Zealand exporters have been "quite resilient against this global backdrop" - similar to a statement made by the Finance Minister in Parliament.

"I know those in the agricultural sector keep a very close eye on the global environment because they are primarily exporters and what they see there is uncertainty from Brexit and the US-China trade war."

The Finance Minister said "progressive farmers" are "very keen on supporting this Government". 

Newshub.

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