The Prime Minister is not expecting business confidence numbers due out this week to show a significant bounce, saying it’s more of a “slow burn.”
On Wednesday, ANZ will release its monthly measure of firm’s optimism which has been at decade-low levels since Coalition talks were underway last year.
In October, 39% of respondents said they were pessimistic about the year ahead – the lowest level since early 2009. That was a decline of 29 points on the month prior.
The story was not much better in November when the Coalition Government was announced, with 38% of businesses saying they were pessimistic about the year ahead.
There was no survey done in December, so Wednesday’s numbers will be the first indication if business jitters have turned.
At her weekly Post-Cabinet press conference on Monday, Prime Minister Jacinda Ardern said she does not have high expectations to see immediate jumps in the data.
“These things sometimes are a bit of a slow burn. I don’t have high expectations for us to see immediate jumps – that’s something this government will be working diligently on over time, regardless of what the numbers say.”
She says for her, it’s about making sure businesses are feeling reassured about the Government’s future agenda and its planned involvement with businesses.
“We want to work collaboratively on some of the issues that we’re looking at going forward; there are real opportunities within our housing areas, within the areas around environmental sustainability, regional growth.”
Early indications suggest business pessimism is subsiding, with an ASB research note forecasting “some recovery” in the numbers.
It says the November figures were likely just “knee-jerk” reaction to political uncertainty.
ANZ cannot comment on its expectations, but in a note say although confidence remains negative across all five sub-sectors, firms’ views on their own activity did bounce modestly, with a net 16% upbeat on their own prospects (up from +7%). That does, however, remain below prior levels of the historical average (+28%).
“The question ahead of the February figures is therefore whether or not the factors that appear to have weighed on sentiment (political uncertainty and soft housing market activity) have continued to do so.”
Elephant in the room
Ardern addressed the low business confidence numbers when talking to business people in Auckland earlier this month, calling them the “elephant in the room.”
“There is some hope - particularly in the fact that confidence, as it relates to businesses’ individual activities, is still high. And given that’s the marker that bears the most correlation to GDP growth, then I think we have some cause to feel at least comfortable with those numbers,” she says, adding that “we’re probably okay.”
She says previous Labour Government, such as the Clark-led Government of 1999-2008, also struggled with low business confidence numbers, despite having a good record of economic growth.
Strategic Risk Analysis Limited managing director Rodney Dickens has slammed these surveys for having a political bias and being out of whack with reality.