No sign of stimulus as economic conditions slump further
The Business New Zealand Economic Conditions Index has dropped to its second lowest level since the index began in 2000, defying efforts at stimulus.
The index dropped to -11, down nine points on the September quarter and down 16 points on a year ago.
Three of the four sub-indexes are heading downward, the exception being monetary policy, which has benefited from a drop in interest rates and the withering of inflationary pressures.
This sub-index held steady from the previous quarter at two, five points up on a year ago, thanks largely to the “inflation genie” now being “firmly in the bottle”, allowing Reserve Bank Governor Alan Bollard to take the axe to the official cash rate.
But the other categories make grim reading.
Economic growth and performance indicators are down two points to minus four, and down 11 on a year ago.
Of particular concern is the current account deficit, expected to worsen as falling prices hurt our exporters, and high overseas debt, which makes New Zealand vulnerable to a rating downgrade from Standard & Poor's.
Labour market indicators are down four to minus four, a 10-point drop from a year ago, with wage pressures easing as unemployment rises.
This is having a flow-on effect on the business/consumer confidence sub-index, which is down three points from the last quarter to minus five.
The decline is expected to continue despite tax cuts, lower interest rates and a more competitive New Zealand dollar.
This is largely blamed on the “deteriorating” labour market, which is expected to hit sectors such as retail, tourism and hospitality.
Household debt levels, which have seen a small decline after years of whopping increases, point to further drops in consumer activity, which could mean an even bigger drop in business confidence next time the index is released.
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Comments and questions15
Sorry, but the Government is not handling this situation.
“The decline is expected to continue despite tax cuts…” We would be better off with the Labour government. Key’s cabinet is not doing enough to improve current situation. There is no time for on job training for the Nats. We need better results. If you cannot do better – resign!
Really? Resign? You must be joking, you want to put Cullen back in charge after he paid $500 million too much for Toll just a few months back. The financial crisis is out of our control as a small state, and if anything we need more people with finacial experience and understanding, not high school teachers leading this country
John Key and his cabinet are trying to clean up the disaster left to them by the Nanny State regime.
Don't know why anyone thinks that a Labour government could do better, they created a lot of this mess with their wasting money on stupid things like NZ Rail.
I can only assume that journalist Niko, and bloggers Robyn and Dave, are paid up members of the Labour Party.
any intelligent thinking person would realise that the stimulus packages which National have released over the last four weeks or so are going ot take many months (years) to revers the mismangement of the last nine years when we were subjected to the Çullen Downhill'policies.
Perhaps at teh next election people will appreciate the financial dangers of the Vote buying bribes of teh Clark years, and ensure that any form of Socialist governemnt is never let anywhere near the Treasury benchs.
Bob, you may rest assured that I am not a member of any party. The stimulus referred to is the slashing of the OCR from 8.25% to 3.5%, not any actions taken by political parties.
..isn't there a financial catastrophe unleashing itself somewhere in the northern hemisphere that might be influencing these issues? NBR readers expect way better than this lightweight effort.
NIko, you should know that the OCR does not directly put money into Joe Publics pocket; it is basically an interbank lending rate. Joe Public still has to pay intersst which reflects teh true borrowing cost to the banks. At the moment we have to wait for the National Party actions to filter down through the economic system, it takes time.
YOur article very much reinforces my feeling that muchnof NZ's past AND present domestic economic misunderstanding is due to poorly written 'negative sensationalist' articles.
Lets have some factually accurate articles, which are not trying to tell people what they should be believing. The PC thought'' days of Comrade Helen telling people what they should think are over, hopefully never to return.
Nats in power = economy in shambles, yet again. They just have bad luck , I suppose?
To Chris Rennie's comment, I didn't include the "context" of what is going on overseas because I assume most NBR readers are at least vaguely aware of a few minor hiccups in the world financial system. I then made a leap of faith that they don't need this small issue to be spelled out in every single news story in order to put two and two together as to why export values are collapsing and the cork has popped off the unemployment bottle.
"defying efforts at stimulus". Other Western countries are into stimulus - what is NZ's comparative performance with them?
"Other categories make grim reading". If we were Romania (or even Germany?) they'd probably be very pleasant and re-assuring reading. Again no context or comparison with how, say, our principal trading partners.
The overall context that's also lacking in this article is an underlying recognition that perhaps the NZ Govt doesn't have to be furiously pulling the stimulus levers because we have no registered banks in trouble and our economic management has been first-class over 20 years. Also, is the economic stimulus so far applied intended to have an instant, medium or long-term effect?
One of the biggest problems we have I believe is the negative media exaggerating and distorting the truth. Let's start highlilighting the good things which are happening. Doesn't sell newspapers though as we have been conditioned to clamour for bad news. I feel great today. I have a job. I can still buy food as almost all New Zealanders can. The sun is shining. The autumn colours are about to happen. I do not watch TV news but listen to light jazz instead. Things are great. Cheer up ! ! !
"I have a job. I can still buy food" - but for how long? This is what I would like to know before buying my ticket to Australia.
Kiwi's need to stay in NZ, sure Australia is better but how about some national pride. Stay and work to improve NZ, its an easy option to move to OZ but dont when you get here start telling us how good it is in NZ. I have never believed any Kiwi when they do -given all of them that I have met have deserted their homeland.
They just create debt for the tax payer. They are just a "feel good" factor. Key seems to understand this by making the stimulus relatively small but playing the PR game for the financially naive.