Election jitters in New Zealand boardrooms and a hard-hitting Australian budget have seen the gap in business confidence levels between the two countries narrow sharply over the last three months.
New Zealand business confidence for the next 12 months has dropped 18%, from 88% in first quarter of this year to 70%, while Australia’s has rebounded from 36% to 50%, according to the Grant Thornton International Business Report (IBR) which surveyed businesses in 34 economies. New Zealand confidence levels have been higher than Australia since 2011.
Mark Hucklesby, Partner and National Technical Director, Audit, for Grant Thornton New Zealand said the shadow of the elections is definitely starting to fall on New Zealand businesses.
“I have been in several boardrooms over the last few weeks where the impact of the elections has been discussed. It’s clear that the offshore customers of many New Zealand businesses are seeking views on the likely outcome of our pending election.
“One thing that these offshore customers want is stability. Even though the National Party has a strong majority, the quirks of MMP leave overseas business leaders with a sense of unease which in turn dents confidence among New Zealand business.
“This survey was conducted before the Reserve Bank’s latest interest rate rise and I suspect this move has probably further eroded confidence levels given its impact on exchange rates,” he said.
Hucklesby said that despite the drop in confidence levels, New Zealand is still ranked sixth in the world, one place lower than last quarter. India (86%), Ireland (84%), United Kingdom (80%), Germany (79%) and the United States (74%) are ahead of us.
“This is still a very good ranking. If you look at the rise in confidence throughout the rest of the world, especially in Australia where business confidence has climbed to its highest level since 2010,then there is no reason to think that the New Zealand economy will not continue to perform strongly.
“The influence of Australia on New Zealand cannot be underestimated. They are still our second biggest trading partner after China and a buoyant economy in Australia is beneficial to New Zealand. Australia’s strong business performance through the Global Financial Crisis and the fact they did not slip into recession was a real positive for this country.
“I firmly believe that the ruthless budget delivered mid-May in Australia helped their business confidence level. They knew that something drastic had to be done and the budget delivered some tough measures. Also, one should not forget that while their budget figures aren’t great, their economy is still ticking over strongly. Good growth figures coming out of India and China have also helped Australia,” he said.
