The Worst Has Passed – Business Confidence Lifts

24 March 2006

Media Release

The Worst Has Passed – Business Confidence Lifts

The decline in business confidence that began a year ago has begun its turn, according to a survey of over a thousand business respondents undertaken electronically by the Auckland Chamber of Commerce earlier this week.

Key messages from the survey that asked businesses to look ahead at conditions for the next six months show less pessimism about times ahead, and a sharp turnaround in favour of a view that interest rates will start coming down in the period ahead.

Commenting, Chamber Chief Executive Michael Barnett notes that the fall in confidence that began in the Chamber’s March survey last year has stopped, with fewer businesses predicting a worsening environment for doing business and proportionately more believing their own prospects will improve.

“This is not the bad news many might have expected in the face of all the negative talk at the moment. It seems that the fear of the unknown that dominated the talk from the Government and Reserve Bank through last year about forcing up interest rates has been ‘worked through’ and businesses are taking their own decisions to bounce back.”

The big message now is how Government and business can take advantage of the more favourable exchange rate that has burst onto the scene,” said Mr Barnett. “Clearly, a window of opportunity is opening up for exporters and we should take full advantage while it lasts.”

At the end of the day, the strong survival instinct of many businesses is apparent. “The survey findings show that 49% of businesses are picking the business environment to get worse in the next six months, but this compares with 59% who held this view at the previous survey last December.”

Main survey findings were:

On Confidence

- 49% of firms believe conditions for business will get worse over the next six months, compared with 59% in the previous December survey and 55% in September. However, only 8% believe conditions will improve, compared with 7% in the December survey.
- 40% of firms believe conditions for their own individual business will improve over the next six months, compared to 35% in the December survey. In contrast, 21% believe their situation will get worse, compared to 25% and 23% in the previous two surveys.

On Skills

- 37% of firms believe it will continue to be harder to employ the right people with the right skills, compared to 54% a year ago.

On Interest Rates

- 33% of respondents now believe interest rates will rise, compared with 85% in the previous survey in December and 67% in September.
- 24% of respondents believe interest rates will decrease in the next 12 months, compared to just 3% who held this view last December, and 5% in September.

Mr Barnett noted a similar survey undertaken by the Wellington Chamber of Commerce this week revealed a similar result.

“This is a ‘here and now’ survey of what business believes. We shouldn’t hide from the fact that many businesses in the past few months have been intimidated by the negative messages from the Reserve Bank and others. However the result is nonetheless reassuring that businesses are not going to fold up their tents based on rhetoric,” said Mr Barnett. “There is cause for some optimism.”

ENDS

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