Business confidence finally saw a lift in December, after tanking towards the end of last year on political uncertainty when the new Labour-led government took office.
A net 24.1 per cent of firms surveyed in the ANZ business outlook survey for December expect general business conditions to deteriorate in the coming 12 months, versus 37.1 per cent in November. Agriculture remained the most downbeat sector, followed by manufacturing.
"While business confidence lifted meaningfully, it remains in the red... However, it is very encouraging to see a lift in all key activity metrics," said ANZ Bank New Zealand chief economist Sharon Zollner.
Firms' views of their own activity, which is more strongly correlated with actual economic performance, rose six points to a net 13.6 per cent predicting increased activity, versus 7.6 per cent in November.
Business confidence has plunged since the Labour-led government was formed in October last year and implemented a series of policies that have impacted business.
These include lifting the minimum wage, changing immigration settings, implementing fuel taxes and proposing changes to the current employment law.
However, recent positive data, including stronger-than-expected economic growth and evidence the government remains committed to fiscal discipline may have helped the mood.
Expected profitability and employment, investment and export intentions rose, and perceived availability of credit jumped sharply, ANZ said. A net 3.6 per cent of firms are expecting to lift investment versus a net 4.1 per cent expecting to reduce it in November.
Employment intentions rose to 7.4 per cent from 2.2 per cent a month earlier. Profit expectations were still in negative territory with a net 6.2 per cent expecting profits to decline.
However, that was better than the net 13.5 per cent that expected a fall in November.
A net 19 per cent of businesses expect it to be tougher to get credit, versus a net 31 per cent last month. While still negative, it indicates that expectations of credit conditions are the least tight since October 2016, said Zollner.
"There is a degree of wariness, but the sky hasn't fallen," she said. "All up, it feels like an economy that isn't particularly in need of either more or less monetary stimulus at present, which is consistent with our view of an on-hold official cash rate," she said.
Looking ahead, she said a key element that could change the picture is the international environment. "While China's demand for our commodities remains seemingly insatiable for now, it is prone to cycles just like anything else."