Negativity over economy hard to dispel, despite Government urging

Friday, 29 August 2025

Auckland Business Chamber chief executive Simon Bridges says confidence among its members collapsed in the past three months.

Surveys released today suggest both consumers and businesspeople remain downbeat, despite the Government urging a more optimistic outlook.

Auckland Business Chamber chief executive Simon Bridges said confidence among its members had “collapsed in the past quarter”, with nearly two-thirds now pessimistic about the economy.

Meanwhile, ANZ reported consumers’ confidence in the economic outlook slipped slightly in August to its lowest level in 10 months.

Kiwibank said its business banking managers were so far seeing little impact from Investment Boost, the Government’s flagship Budget policy to improve economic growth.

ANZ chief economist Sharon Zollner said consumers’ perception of their current personal financial situation fell to a net negative 24% in August, its lowest level since October 2023.

“A net 12% think it’s a bad time to buy a major household item, down 4% and not a good sign for retailers,” she said.

Bridges said what had changed most in its survey was the domestic picture.

“Concerns about global risks have fallen away, while local pressures — costs, cash flow, weak consumer demand, and now nearly half saying energy is simply unaffordable — are biting harder than ever.”

Earlier this month, Finance Minister Nicola Willis criticised people in what she described as the “commentariat” engaging in what she described as “glass half empty economics”.

She later cautioned it was not the time for “merchants of misery” to talk down the economy.

Most economists do still expect lower interest rates to help turn the ship and there were some silver linings in the latest survey data.

Bridges noted more businesses now expected the economy to improve and nearly half were forecasting revenue growth over the next 12 months, even if that resilience was “fragile”.

Comments from TVNZ chief executive Jodi O’Donnell this morning supported the contention that sentiment might be better elsewhere, particularly in the South Island.

Zollner also noted consumers polled by the bank in the wake of the Reserve Bank’s dovish monetary policy statement on August 20 were more upbeat than those it polled earlier in the month, while saying it would be brave to call that “anything more than weekly volatility”.

The Reserve Bank has cut the official cash rate to 3%, the lowest in three years, offering relief for homeowners like Auckland buyer Angela Fahy. Economists predict two more cuts this year as the economy shows signs of stalling.

ASB said perceptions were now leaning firmly towards it being a good time to buy a house, with the proportion of people supporting that view at its highest level since 2011.

Kiwibank’s assessment that Investment Boost might just be providing “a cherry on top for well-placed businesses” may make the least appealing reading for the Government.

Investment Boost was designed to encourage businesses to bring forwarded investments at an expected cost of $6.6 billion to the Government’s coffers in foregone tax revenues over the next four years, by accelerating the pace at which they can claim tax deductions.

Kiwibank said it surveyed its business bankers to gauge what they were hearing from businesses.

Only a third reported an uptake of the initiative among clients and, even then, that was limited, it said.

“Most of the activity came from businesses either catching up on deferred ‘capex’ from the past couple of years, or those whose investment plans were already under way prior to the scheme’s announcement.

“It’s a boost for those already investing … a cherry on top. But the accelerated depreciation is not yet enticing firms off the sidelines.”

Will Warren, one of Kiwibank’s managers in Manawatū, said there were unanticipated accounting software updates required to accommodate the tax change and forecast its impact wouldn’t be felt for about a year.

“So whilst it reads well, the real-world impact is somewhat muted,” he said.

The corollary to that is a lower-than-expected take-up would mean less cost to the Crown in terms of foregone tax revenue.

Willis noted last week that declining levels of business investment would not necessarily mean the policy wasn’t having a positive impact.

“With the knock to confidence in the second quarter, we can expect that there have been lower rates of investment. So everything we can do as a government to encourage investment should be happening,” she said.

“And the Investment Boost tax policy says to businesses, ‘go out and invest’.”