New Zealand business confidence dropped sharply in November with uncertainty around changing government policy, a softer housing market, and difficulty getting credit seen as likely causes. The kiwi fell about a quarter of a US cent.

A net 39 per cent of businesses were pessimistic about the year ahead, the lowest level since early 2009, and a decline of 29 points from the previous month, according to the ANZ Business Outlook.

A net 6.5 per cent of companies see their own activity expanding, compared to a net 22 per cent a month earlier. The kiwi dropped to 68.50 US cents from 68.80 cents immediately before the release.

The survey showed a net 12.5 per cent of firms expect profit to fall in the year ahead, turning around from 11.7 per cent expecting profit growth in October, while employment intentions dropped to a net negative 3 per cent from 14 per cent positive the prior month.


"This month's survey responses were received after the final government make-up was decided," said ANZ Bank New Zealand chief economist Sharon Zollner.

"However, it would be too simplistic to ascribe the full move to the change of government. There is a lot else going on.

"The softening in house price inflation is one obvious factor that shouldn't be overlooked, as is the reported difficulty of getting credit," Zollner said, noting that a net 41 per cent of businesses expect it to be tougher to get credit, up from 31 per cent. This is the highest since the question was first asked in mid-2009.

"The economy is at a delicate juncture as migration, construction and housing run out of steam as growth drivers," Zollner said.

"Commodity prices are strong (notwithstanding that recent dairy auctions have been softer) and a fiscal boost will come through in time, but at such times of transition, sentiment is more vulnerable and a hiatus adds to the prospect of growth wobbles. It is crucial the policy landscape is clarified as soon as possible to provide firms and consumers the certainty they need to make optimal economic decisions."

Pricing intentions rose to a net 31 per cent from a net 20 per cent, and inflation expectations for the coming year rose to 2.3 per cent from 1.9 per cent.

Construction expectations fell considerably, with a net 17 per cent of respondents expecting more residential construction in the year ahead, from a net 31 per cent in October, while a net zero per cent were optimistic about the commercial construction sector's outlook, compared to 42.8 per cent a month earlier. Zollner said both series have been volatile of late.

Across the five sub-sectors, agriculture was the least positive, though all were firmly negative about general business conditions.


Interest rates were expected to rise by a net 59 per cent of respondents, from net 41 per cent in October.