Coronavirus: Business confidence slightly up but economic situation still 'dire', bank says

Monday, 11 May 2020

WELLINGTON, NEW ZEALAND - MAY 31: ANZ Chief Economist Sharon Zollner said the economic impact of Covid-19 could be worse than the 2008 Global Financial Crisis.

Business confidence is up following unprecedented lows but predictions are the economic crisis facing the country caused by Covid-19 could be worse than the Global Financial Crisis, ANZ says.

ANZ released its preliminary business confidence on Monday showing a slight increase in business confidence, but levels still remain very low.

It said business confidence increased by 21 points to -46% in the survey, with a net 45 per cent of firms expected to cut jobs, and a net 38 per cent expected to reduce investment.

ANZ Chief Economist Sharon Zollner said even the best case scenario for the economy is 'still pretty grim'.

'If you put the virus to one side, we're looking at a horrendous hit to global growth. That's what we got in 2008 and it sent the economy into a tailspin,' she said.

'And this global shock is looking much, much bigger than that.'

While business confidence has bounced back 'a little', Zollner said activity indicators are still 'deeply negative'.

'I think there is a realisation it's going to be years for the world to work its way through this,' she said.

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She's anticipating a 'spectacular bounce' in the third quarter out of a 'very deep hole', but it won't bounce back to pre-Covid-19 levels.

'We'll bounce back about half-way out of the hole because we need to reshape the economy,' she said.

Zollner has been watching other countries to see how they've reacted to Covid-19, and the economic impact it's having.

She said New Zealand is in a good position for recovery compared to the likes of the United States, and South Korea and Germany where a second wave of Covid-19 has taken off

New Zealand's commodity prices have also been 'holding up' and some areas of industry are seeing growth, particularly horticulture, which is 'booming', she said.

Government relief packages, including the wage subsidy package, has helped business confidence, by ensuring the country 'wasn't in the worst case scenario the whole way along'.

With the budget released this week, a more 'targetted approach' is required to keep businesses afloat during this uncertain economic time, she said.

'On one hand, you intuitively want to support the sectors most affected,' she said.

'But on the other hand you want to help businesses that are going to be viable at the other end of this.'

ASB reacted to ANZ's survey saying the 'financial toll of the lockdown is devastating'.

ASB has also encouraged the government to continue to invest in businesses, many of whom won't be able to return 100 per cent to operational capacity.

ASB forecasts a 7 per cent decrease in the New Zealand economy, with a likely unemployment rate of 9.3 per cent.