Prime Minister's business confidence push back: 'I'm interested in the reality'
Monday, 6 August 2018
Jacinda Ardern says she will push back against surveys about weak business confidence, with a focus on measures showing the economy is healthy.
On Monday afternoon Treasury issued a warning that a combination of a cooling housing market and falling business confidence meant its forecasts for Crown revenue were at risk.
'Although we think growth held up in the June quarter, weaker confidence, in conjunction with other data, highlight the risk that growth over the coming fiscal year may be weaker-than-forecast in the Budget,' Treasury said in a statement.
Grant Robertson's first Budget saw Treasury forecasts that the economy would continue to grow at around 3 per cent in each of the next few years, giving scope for the Government to increase spending as debt as a share of the economy fell.
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At the time the forecasts were branded as highly optimistic by economists, who warned that a fall in business investment could see growth - and therefore Government revenue - miss the target.
In July, an ANZ survey on business confidence showed the lowest reading since the global financial crisis.
But Ardern said she would focus on measures showing the economy was still performing well.
'We have a survey that's telling us some of the business perceptions that exist, but alongside that we also have strong forecast growth', low unemployment, a Government surplus and a spending boost from July 1 from the families package, Ardern said.
'I'm interested in the reality of what our economy is doing and how it is performing.'
'What is of course always going to be more important is what's happening in real terms. I will push back and come back to the fact that when you look at New Zealand's position relative to some of our counterparts, we are performing well.'
Asked if she believed that the Government had made mistakes which contributed to lower business confidence, Ardern pointed to political bias in the confidence surveys. Independent economists have acknowledged a disconnect between business confidence and economic growth under past Labour Governments.
'When I look back at how business confidence has tracked in the past, there is a correlation between Labour Government and what happens with business confidence, that sits in direct contract to how our economy has performed under a Labour Government.
'These real markers are what matters to me, but I do take it as a matter of pride that I want perceptions to follow suit,' Ardern said.
Whatever the impact on Crown revenue, Ardern said there would be no diversion from the self-imposed Budget responsibility rules, which require the Government to cut net debt to 20 per cent of gross domestic product.
'The rules stay,' Ardern said.
National leader Simon Bridges said Ardern 'is in denial' about the direct impact between her Government's decisions and plummeting business confidence.
'Businesses are genuinely concerned about their own futures and those of the wider economy and it's the result of anti-growth policies like raising taxes, restricting foreign Bridges said.
'The Government should recognise the impact its bad decisions are having and take action to ease the concerns and give Kiwi businesses the confidence to invest to grow and hire more New Zealanders. If the Government doesn't the concern will continue to grow and New Zealanders will miss out.'
Treasury said that while there had been positive recent news for the economy, such as a 7.5 per cent increase in new dwelling consents in the June quarter, up from 6.2 per cent in the March quarter, the risks appeared to be for lower growth.
'Risks to our growth forecasts are rising as the housing market cools, business confidence weakens, and international trade tensions rise,' the statement said.
In the months since the Budget, the Government's revenue take has been stronger than expected, however Treasury warned the issues may reverse due to timing of tax receipts.