NZ economy - risky business

26 Jun 2018

The BusinessNZ Planning Forecast for the June 2018 quarter shows that though many key economic indicators remain on the positive side of the ledger, there are a number of risks that could undermine what is currently a generally healthy outlook.

BusinessNZ Chief Executive Kirk Hope says the economy is forecast to grow at around 3 percent out to June 2020, but there are risks to achieving this. Both domestic and international, these are combining to keep business confidence in the doldrums.

“Policy uncertainty and some ad hoc changes are likely to be driving this continuing nervousness,” Mr Hope says. “These include the political, rather than economic, rationale for effectively banning the issuance of future offshore oil and gas exploration licences.

“The jury is still out on whether the range of Taskforce and Working Groups set up will provide consistent policy outcomes that promote increased business competitiveness.

“And though the agricultural sector is enjoying higher lamb and dairy prices on the back of improved global demand, the outbreak of mycoplasma bovis will affect productivity.”

Internationally, growth forecasts remain solid. However higher inflationary pressures are resulting in rising interest rates, affecting the cost of capital. For equity markets, the potential for a significant market correction cannot be ruled out.

Concern remains over the potential escalation of international trade retaliation with more inward-looking international agendas, particularly triggered by moves from the US to increase tariffs on certain products, imposing trade barriers on international trade.

The BusinessNZ Economic Conditions Index sits at 9 for the June 2018 quarter, up 2 on the previous quarter and down 5 on a year ago. The Index tracks 33 economic indicators including GDP, export volumes, commodity prices, inflation, debt, and business and consumer confidence.

The BNZ - BusinessNZ Performance of Manufacturing Index (PMI) and its sister survey, the Performance of Services Index (PSI), both continue to show solid expansion.

The BusinessNZ Planning Forecast for the June 2018 quarter is on www.businessnz.org.nz