3 Oct 2017

Business confidence slipped pre-election

6:08 pm on 3 October 2017

Business confidence took a tumble in the run up to the election as firms found orders slowing and pulled back on hiring and spending.

23062016 Photo: RNZ / Rebekah Parsons-King. Busy streets in Wellington.

Photo: RNZ / Rebekah Parsons-King

The Institute of Economic Research (NZIER) latest survey of business opinion fell to a seasonally adjusted net 7 percent from 17 percent in the June quarter.

The closely-followed survey mirrored others which showed political uncertainty making consumers and companies more cautious about spending and investing.

"We have tended to see a decline in business confidence and with the uncertainty over the makeup of the new government we tend to see businesses and people holding off committing to major spending plans," NZIER senior economist Christina Leung said.

She said the fall before this election had been lower than the average decline before elections over the past 20 years.

Sentiment was the weakest in the building and service sectors, which were also affected by the slowing housing market.

NZIER senior economist Christina Leung.

NZIER senior economist Christina Leung. Photo: SUPPLIED / NZIER

Ms Leung said it is likely that sentiment would rebound after a government was formed, although the make up of that government could weigh on sentiment.

She said looking beyond the short term, sentiment appeared relatively upbeat, although the shortage of staff, particularly in the building industry was acute.

Businesses were set to resume investing, hiring staff and expected new orders, profits and exports to grow.

The economy was likely to grow at just below 3 percent a year over the medium term, but inflation was subdued with business often absorbing higher prices rather than pass them on to consumers, she said.

"Overall, there remains little urgency for the Reserve Bank to begin lifting interest rates. We expect the Reserve Bank will leave the official cash rate on hold until at least late 2018," Ms Leung said.

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