By BRIAN FALLOW
WELLINGTON - Business confidence has plunged further, to the lowest levels since the aftermath of the 1987 sharemarket crash.
In the National Bank's monthly survey of mainly small and medium-sized firms, 63 per cent expect general business conditions to be worse in 12 months while only 8 per cent expect them to be better.
Ominously, firms are not only feeling gloomier about the general environment but about their own outlook - more so than they were even during the recession of 1991.
Investment intentions are the weakest they have been since 1988. Hiring intentions are down. The only line pointing up is pricing intentions.
National Bank chief economist Brendan O'Donovan said the survey conveyed two clear messages: to the Reserve Bank not to raise interest rates any further, and to the Government to listen to business more.
It follows news earlier this week that household consumption did not grow at all in the first three months of the year, and that consumer confidence has suffered its sharpest drop ever.
Consumers had been hit by higher interest rates, dearer petrol and tobacco tax increases, Mr O'Donovan said, while wages and employment had been growing only moderately and there was no buoyancy in the housing market to make people feel wealthier.
There simply was no excess demand in the economy that the Reserve Bank needed to rein in through raising interest rates further, he said.
But the money markets are still betting that the Reserve Bank will raise rates a quarter of a per cent in August and another quarter of a per cent before the end of the year.
Apart from the mounting evidence that the non-export sectors of the economy are slowing, the other main factor weighing on business confidence is labour law reform.
The Government has said it will amend the Employment Relations Bill, now before a select committee, to address some of the concerns business has raised, but it is likely to be a couple of weeks before it is clear what those changes are.
The Auckland Regional Chamber of Commerce chief executive, Michael Barnett, believes there will be positive changes on:
* Enabling the status quo to remain in independent contractor arrangements, when that is what both parties want;
* Disclosure of financial information during bargaining; and
* Unions' right to recruit and employers' right to communicate with staff directly during bargaining.
"The business community, I suggest, has to accept in good faith the concessions that will be made and move on," Mr Barnett said.
The bank survey provides evidence that the Government's "charm offensive" is having some effect.
The 75 per cent of responses which came in before June 8, when the Government began to flourish its olive branch to business, were more negative (by a net 16 per cent) than the last 25 per cent.
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