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Sharon Zollner, ANZ Chief economist explains why business confidence has tanked so badly.
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Business confidence has jumped off a cliff in the latest ANZ Business Outlook survey.
This is for March, takes into account some of the war. Have a look at the numbers.
Official confidence score has nearly halved down from 26 points. Down, I should say 26 points.
So it's dropped from 59 down to 33. 85% of businesses reckon costs will go up over the next three
months. That's up six points on the last month. And as a result, 60% of businesses are expecting
to increase their prices. Prices you and I both pay. That's up seven points. Meanwhile,
the number of firms reporting stronger activity compared to a year ago has actually fallen
to just 18% that's down five. Sharon Solner, ANZ Chief Economist with us this morning. Sharon,
good morning. Good morning. Do you expect that number, those numbers will get worse in the coming
months too? Well, you don't have to not coming months probably this month because actually,
if we split the sample into what happened in the early part of the month, which was literally
surveyed hours after the Iran invasion habit or attack happened. And what became in the last week
actually, it fell a lot further. So business confidence is down more like 80 points.
If you take that late month sample, which is basically a complete consensus shift from
business conditions are going to get better to business conditions are going to get worse.
And honestly, it's hard to disagree with. Isn't it given what has been going on?
And actually that big shift was across all the activity indicators were a lot lower,
late in the month, all the inflation indicators were a lot higher. So definitely we're on a
trajectory downwards at the moment. Sharon, same thing is happening with consumer
confidence, which we're spoken about. How do you explain in the US? I was just reading overnight
that they did a consumer sentiment survey there and consumer confidence there was actually up.
How are they so resilient? Yes, well, they have oil, of course, for that help.
I think probably a better comparison would be with Australia. And actually, if you look at their
consumer confidence numbers, they report them weekly. They've had a similar precipitous fall
to what we have had in our consumer confidence. But in terms of the business survey,
I mean, it was pretty clear that everyone's going to be very, very worried. So no surprise in
the forward looking indicators. But what business is no best is actually how the last month has gone,
and that's actually the series that has the best correlation to actual outcomes. And the news
there wasn't great either. While the fall in the month average measure was only five points,
as you indicated, late in the month had actually averaged zero. So down more like 23 or so points.
So particularly for retail. So it does seem that that rise in petrol prices and that fall in
confidence is already translating into that sector in particular. Does this change your thinking on
where we might be heading growth wise inflation wise? You know, it's a bit like throwing a dart
in a dartboard at making predictions at the moment because no one knows how long this shock will
last or how long our high oil prices will go. But for the record, if we sort of assume that this
is the worst of it, and oil prices decline from here, which admittedly is looking more heroic
in terms of assumptions by the day. But based on that, we've knocked 0.7% of our GDP growth. So
it's growing around 2% instead of around 3%. So still going forward, but definitely dampening the
recovery somewhat. What do we learn from this? What happens after this? Do we get, do we need to,
well, obviously, we need more storage? Everyone's going to be wanting more storage. But, you know,
where we, where we source our oil from, our partners, etc. We'll be changing a whole bunch of
stuff after this, like we did after COVID. Will it reall get, reorder region things?
Yeah, I think resilience and supply chains was definitely a thing during COVID, and it's becoming
a theme again. We, we are always going to be dependent on important fossil fuels. We had a little
tiny bit, but not really enough. So, and what we've seen actually is, you know, in the US,
their petrol prices have gone through the roof as well, even though they produce oil. It's a
little bit like how our butter prices went up when the global prices got up. It's a very
much a globally traded good. So, even if you are self-sufficient, you still get the price
shop. But what New Zealand firms have got hanging over them is this fear that we might actually
just run out. And then we're in a completely different world. And I think, you know, if we get,
if we didn't have that dark cloud over us, I don't think the, well, that's all theoretical. But
I suspect the hit to confidence wouldn't have been as great. That's a pretty existential fear
for businesses at the moment.
The SME Stream



