Global uncertainty weighs on business confidence

“The decline in headline business confidence to minus 16 per cent is a rational and entirely predictable response to the uncertain geopolitical environment,” Finance Minister Michael Cullen said today.

Dr Cullen was commenting on the latest National Bank Business Outlook.

“Higher oil prices, the risk of war in the Gulf and – for exporters – the rising dollar are all negatives and are weighing on people’s minds.

“So it is particularly encouraging that the important ‘own activity’ indicator is holding up so strongly with a net 27 per cent of respondents still expecting conditions in their own businesses to improve over the next 12 months.

“The message in these apparently contradictory results is that, while the New Zealand economy cannot insulate itself from global shocks, it does on this occasion have the benefit of some good shock absorbers.

“We are coming off a period of extremely high growth and have some discretion in both fiscal and monetary policy due to the government’s strong fiscal position and to New Zealand’s modestly high interest rates.

“These all help the economy’s ability to weather any externally generated downturn,” Dr Cullen said.

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