New Zealand business confidence dipped this month, while remaining at an elevated level, as firms started to face slightly tighter credit conditions in an environment where low interest rates have made money cheap for an extended period.

A net 24.5 per cent of firms were optimistic about the general economic outlook, down from 27.9 per cent in September, while a net 38.4 per cent see their own activity expanding, down from 42.4 per cent, the ANZ Business Outlook shows. A net 18.9 per cent of firms found it tougher to access credit, up from 9.7 per cent in September, with agriculture and construction finding it the hardest.

"A tightening in credit may dampen activity in the near term, but it's arguably in New Zealand's medium-term economic interests," ANZ Bank New Zealand chief economist Cameron Bagrie said in a note. "New Zealand is notorious for bingeing at the top of the cycle (rapidly accumulating leverage, pushing valuations to extremes, blowing out the currency account deficit), which ultimately requires a visit from the Grim Reaper as excesses are purged."

New Zealand's economy has been beating expectations as strong tourism and record migration underpin consumer spending, while a housing shortage and the Canterbury rebuild has supported building activity. Capacity constraints in the building sector have been pushing up construction costs, sinking several property developments in Auckland, and has prompted banks to be more circumspect in their lending to Auckland apartment projects.


The ANZ survey shows the construction sector is in good heart, with a net 37.5 per cent of firms expecting commercial work to expand and 44.4 per cent seeing more residential building.

Hiring intentions came back, with a net 20.7 per cent expecting to take on more staff compared to 25.3 per cent in September, while investment intentions slipped 1 point to 18.9 per cent.

A net 30.3 per cent of firms expect to be more profitable in the coming year, down from 34.4 per cent a month earlier, and a net 17.6 per cent want to raise prices, up from 16.8 per cent in September. Inflation expectations were unchanged at 1.44 per cent.