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New Zealand’s Business Confidence Bounces Back

July 10, 2020 By Mircea Vasiu

One of the countries with great success in containing the coronavirus spread is New Zealand.

The island nation benefited from natural borders and low population density and used the two to its advantage. Coupled with strong leadership and a high level of trust in its capabilities, New Zealand showed the world one way to tackle the virus.

Sure, conditions are not the same in other parts of the world. However, if some success is noticeable, it represents an encouraging sign of how to deal with this virus.

In terms of economics, New Zealand is poised to bounce back strongly. The ANZ Business Confidence survey released this week considers hundreds of businesses nationwide and refers to a twelve-month horizon. All forward-looking activity indicators monitored by the survey lifted from June levels – even the jobs picture improved.

What Businesses in New Zealand Expect Over the Next Twelve Months Horizon?

To begin with, only 4.5% of firms expect to reduce investment, albeit 26% of businesses expect lower profits in the year ahead. Moreover, only 15% of businesses expect to cut jobs in the year ahead, a sharp improvement when compared with the previous survey where over 35% expected to do so.

To continue, cost and pricing inflation are pushing up, although inflation expectations dropped slightly when compared with the previous survey. All in all, a good and optimistic report, highlighting the privileged economic position of New Zealand. How come?

First, the activity is largely back to normal, as indicators from traffic and spending data reveal. While tourism is nowhere near the pre-COVID-19 levels, the other economic sectors recovered impressively.

Second, this is an economy mainly driven by exports. Traders and investors are well-aware of the importance of dairy goods for the New Zealand economy (e.g., New Zealand is a major exporter of powder milk to China). Also, in a country that counts more sheep than the number of people, meat exports to the Middle-East account for much of the internal GDP.

The two main economic sectors saw only a soft decline, making it easier for the country to cope with the mild-recession.

While the global economic outlook is dire, New Zealand managed to come out fine so far. It remains to be seen how long the pandemic will last and how it will affect the other parts of the world. Because on its own, an economy as the one in New Zealand today is too dependent on what happens in other parts of the world.