Now it’s a downturn

Auckland

You can run but you can’t hide. The government bangs on about how business hates Labour governments, and that is the only reason why business confidence is plummeting. It has nothing to do with their handling of the economy, though – of course not. Business hates Labour – pure and simple.

But now even Grant Robertson is admitting that we are facing an economic downturn, although he insists it is not a major one.

Stuff?reports: Quote:

The ANZ business outlook for July showed a net 45 per cent of businesses were pessimistic about the general outlook for the economy, the most downbeat reading in the monthly survey since May 2008, when New Zealand was in recession and the global financial crisis was building.?End quote.

Well, this does reinforce the claim that business hates Labour governments, as National took office in September 2008. So maybe Grant Roberston is right after all? end quote.

Wrong. Quote:

ANZ chief economist Sharon Zollner said the survey “paints an unhappy picture” and it was difficult to take a glass half full approach to it.

Business confidence has been generally sliding since shortly before the 2017 general election, with economists blaming a range of issues, from global trade tensions to uncertainty about the policy direction of the new Government. End quote.

Thing is that the global situation isn’t doing us any real harm at the moment. Yes, there are trade wars and Brexit on the horizon, but as yet, we are not seriously affected by either. The world is still buying our milk, our meat, our wine, our logs. So, it is not the global situation. Not yet. Quote:

Finance Minister Grant Robertson said the latest figures were not a surprise given the recent trend and concerns about the global economy.

“We continue to believe that the?fundamentals of the economy are sound. We’ve still got relatively low unemployment, we’ve got a surplus, debt tracking down,” Robertson said.

“So we’ll continue to work with the business community on issues that are concerning them, but New Zealand remains a good place to do business.” End quote.

I love the way he says he will ‘continue to work with the business community on issues that are concerning them’. One of the biggest issues concerning them is the pending labour reforms, but the government makes it clear that they are going ahead with the reforms, come hell or high water. Quote:

National leader Simon Bridges however blamed the fall squarely on the Government.

“The fact that these numbers are at their worst levels in 10 years show just how worried businesses are and the Government must take responsibility as there is no other driver of this change,” Bridges said, blaming labour law reform, uncertainty around immigration settings, restrictions on overseas investment and changes to the oil and gas sector. End quote.

Totally agree. It is true that business often fears Labour governments, but this drop in business confidence, when there is no external reason for it, is very worrying. But, when a government decides to destroy a profitable business sector without consultation or warning, simply for a feel-good factor, other business sectors will wonder if they will be next. Perception is everything. Quote:

The recent plunge in business confidence has had little impact on the real economy so far, there is a risk that pessimism may see companies cut back on new investment or hiring, which could cause a downturn, even though consumer confidence remains solid. End quote.

Little impact? Ebert Construction went into receivership today, apparently owing tens of millions, and working on 15 major construction projects around the country. I have commercial construction clients who complain that they have been struggling with late payments for most of this year. The impact is there. And, for those of us who have seen these cycles before, it is always the construction industry that goes first. Quote:

Zollner said the disconnect between retailers and their customers could come from concerns about high household debt, a shift to online shopping and higher anticipated costs, including from hikes in the minimum wage.

“The New Zealand economy is delicately placed. Fiscal stimulus and the high terms of trade will provide impetus to growth, and the external environment remains favourable. But with businesses in a funk, it’s fair to say that the road ahead is looking less assured, and risks of a stall have increased.”

Westpac senior economist Michael Gordon said despite the political slant of confidence surveys, the change in mood?”has been consistent with a broader range of indicators, which show that the New Zealand economy lost some momentum over the first half of this year”.

“However, the ongoing slide in business confidence does raise some concerns about the underlying strength of private sector activity.” End quote.

They promised us dark clouds on the horizon on Selection night. What we didn’t realise was that it would be the government itself that created them.

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