BNZ Confidence Survey

BNZ Confidence Survey

OPTIMISM UNCHANGED – HOUSING BUOYANT

Last month our survey of Weekly Overview readers was undertaken just after the Reserve Bank had increased its official cash rate to 7.5%. We found a small increase in net pessimism about the economy over the next 12 months. There has essentially been no change in confidence levels over the past month with our survey undertaken over the past week revealing that a net 10% of respondents expect the economy to deteriorate over the coming year compared with 11% in the March survey. As the graph below shows this is a very good response compared with other outcomes since the survey started in 2005.

-80.0 -70.0 -60.0 -50.0 -40.0 -30.0 -20.0 -10.0 0.0 10.0 Feb- 17 Mch3 Mch17Mch31 Apr- 14 Apr- 28 May-12May-26Jul-07Aug-04Sep-08Oct-06Nov-10Dec-08Feb-02Mar-01Apr-06May-04Jun- 01 Jul-06Aug-10Sep- 07 Oct-12Nov-02Dec-07Feb-01Mar-08Apr- 04

BNZ CONFIDENCE SURVEY

Net % expecting the economy to be better in the next 12 months 2005 2006 2007 Perhaps it is notable that in spite of the recent sharp jump in the Kiwi dollar attitudes have not deteriorated.

This backs up our view that insulation against the high currency is being provided by high export commodity prices, the Kiwi dollar not really changing against the Australian currency from near 88 cents therefore not freshly impacting on manufacturers, and the tourism sector being insulated by firm growth overseas. Having said that some groups are struggling like horticulture and forestry and companies competing against imports.

But with attitudes remaining acceptable and yesterday's Quarterly Survey of Business Opinion revealing a rise in inflationary pressures and reduced capacity availability we are likely to see interest rates go up again in a couple of weeks time. Coupled with the Kiwi dollar going higher it will be interesting to see how these developments affect the business and household sectors in coming weeks. Interesting points which we have picked up from the industry comments include the following.

• Information technology remains very positive with ongoing staff shortages and long order books.

• Dairy sector attitudes have improved markedly. • Residential real estate remains over-whelmingly positive. • Horticulture looks very poor. • The skill shortage remains as bad as ever with increasing evidence of a wages response. • Things look firm in tourism. • No firm trend evident in retailing. 11 April 2007

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