Business Environment Profiles - New Zealand
Published: 15 June 2023
Business confidence index
62 Index
-0.4 %
This report analyses trends in the business confidence index. The data for this report is sourced from ANZ's monthly Business Outlook Survey. Business confidence is calculated as the net balance of responses to a survey of about 1,500 businesses which asks respondents to rate the expected future state of their business and the overall economy. When the index is at 100, the number of optimistic and pessimistic responses are equal. The index is positive when more businesses are optimistic and negative when more are pessimistic. The report uses the average of monthly index values over each financial year and is measured in index points.
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IBISWorld forecasts the business confidence index to increase by 12.9 index points in 2023-24, to average 62.1 index points. Inflation has started to trend downward in the current year, supporting an anticipated improvement in the business confidence index. Nonetheless, inflation will remain high throughout the year, weighing on business confidence levels. Additionally, the Reserve Bank of New Zealand (Te Putea Matua) is likely to continue raising the cash rate over the year to tackle inflationary pressures. This trend is further anticipated to place downward pressure on business confidence. As a result, the index is anticipated to remain negative in the current year.
New Zealand's early success in containing the virus' spread contributed to a steady recovery in business confidence following the initial national lockdown and COVID-19-induced recession. Business confidence remained mostly positive over the first half of the 2021 calendar year. However, further outbreaks and subsequent lockdowns contributed to confidence levels dropping into negative territory.
The business confidence index has remained negative over the past five years. Prior to the five-year period, business confidence was mostly positive due to strong trade activity, robust tourism volumes, lower interest rates and a thriving construction sector. However, confidence took a steep dive over the two years through 2019-20. Several factors ultimately contributed to confidence falling into negative territory. Concerns surrounding global economic prospects gave many businesses cause for low confidence. The COVID-19 pandemic continued the trend of negative business confidence. However, improved conditions on the other side of the pandemic, like the reopening of New Zealand's borders, have generated some optimistic respite. Overall, IBISWorld forecasts the business confidence index to remain negative and decrease at an average annual rate of 0.2 index points over the five years through 2023-24.
IBISWorld forecasts the business confidence index to average 74.9 index points in 2024-25, repres...
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