The most troubling signal from the comprehensively grim business sentiment surveys released this week is the lurch lower in investment intentions.
Both the ANZ Bank's monthly survey and the New Zealand Institute of Economic Research's quarterly one make it clear that neither the official cash rate cuts, nor the exhortations to invest, from the Reserve Bank have moved the dial on that crucial score. Not yet anyway.
On the contrary, the ANZ survey found a net 9 per cent of respondent firms expect to reduce investment, down from a net 4 per cent negative in the August survey.
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And NZIER's quarterly survey of business opinion (QSBO) found that a net 3 per cent of firms expect to invest less in plant and machinery over the next 12 months than they did in the past 12, not to mention a net 16 per cent investing less in buildings. Both of those indicators had been at least slightly positive (a net 4 per cent) in the previous survey.
These discouraging forward indicators come from a starting point where business investment has already just about stalled.
The national accounts for the June quarter show business investment just 0.25 per cent higher than it was in the June quarter last year.
For the whole year ended June, it was 0.7 per cent higher than the year before, compared with an average growth of 5.4 per cent a year in the preceding five years.
This matters because business investment is crucial to lifting productivity, and with it the economy's potential growth rate and people's incomes.
Labour productivity, or output per hour worked, in New Zealand is frankly lousy. It runs around 40 per cent below the average for countries in the richer half of the OECD, which includes all the ones we like to compare ourselves with.
The Productivity Commission informs us that of the OECD's 36 members, the only two which have both lower levels of productivity and even weaker productivity growth than us are Greece and Mexico.
While there are multiple factors driving that, a central part of any plausible explanation of our dismal productivity numbers is capital shallowness — too little capital invested per worker.
The latest data from Statistics NZ, for the year to March 2018, reported labour productivity growth of just 0.3 per cent, with exactly no contribution from capital deepening (an increase in the capital-to-labour ratio).
Proportion of companies planning to:
• Boost investment:
• Stay the same:
Source: ANZ Business Outlook for September
SO WHAT IS BEHIND FIRMS' GROWING RELUCTANCE TO INVEST?
We can only speculate. The surveys do not solicit comment from their respondents.
But the QSBO does ask firms what single factor is most limiting their ability to increase turnover.
The cost of finance barely registers: just 4 per cent cited it as the main constraint.
Sales is always the main factor and it has climbed as a concern in the last couple of surveys after a long declining trend since the recession ended.
The QSBO found manufacturers, builders, retailers and the service sector all reported a weakening in demand. That limited their ability to pass on higher costs, compressing margins, so that a net 30 per cent of firms reported declining profitability over the past three months, extending a deteriorating trend for that indicator.
The ANZ survey found a net 25 per cent of businesses expect profitability to worsen, the lowest reading since the depths of the last recession. It reflects a wide gap between the number reporting higher costs (a net 47 per cent) and those expecting to raise their own prices (a net 18 per cent).
The financial markets have looked at this evidence of flagging demand and concluded that the Reserve Bank will respond by cutting the official cash rate to the limited extent it still can.
They are probably right, even if it is liable to be, as the cliche has it, pushing on a piece of string.
But it would be to take too insular and myopic a view of the problem.
We cannot discount the possibility that one of the factors weighing on business confidence is what is happening the other 99.8 per cent of the world.
It is not a cheerful picture. The level of bad temper between the United States and China is starting to looking less like a dispute over trade rules and intellectual property and more and more like the beginnings of a new and protracted cold war.
How deep the differences between the Chinese model and that of the West are is evident in the desperation of Hong Kong protesters as they confront a future in which their city is digested by an authoritarian one-party state which brooks no opposition or dissent.
Should that spread to Taiwan and trigger a declaration of independence, the geopolitical consequences could be grave.
In the meantime the ebb tide running on globalisation is already disrupting supply chains and hobbling manufacturing around the world.
Including New Zealand: the QSBO found a net 27 per cent of manufacturers experienced a decline in output over the past three months, when the long-run average is a net 10 per cent reporting increased output.
The news flow out of the Gulf suggest the risk of an old-fashioned oil shock is pretty elevated too.
Meanwhile, warning signs of yet another source of a supply-side pressure were to be seen in last Friday's climate marches.
The size of the turnout served notice to politicians and businesspeople alike that the days of lethargy and lip service on climate change are numbered.
How evident this is to New Zealand First and the National Party remains to be seen.
Addressing climate change is not going to be costless and that includes the sector responsible for half the country's emissions.
So it is no surprise that the ANZ survey found the agriculture sector particularly pessimistic in terms of overall confidence, investment intentions, costs and ease of credit. That is despite favourable export prices and a lower exchange rate.
The prospect of an end to an entirely free ride on greenhouse gas emissions, and to an untrammelled right to turn rivers into sewers, combined with being on the sharp end of any contraction of credit as the Reserve Bank compels banks to seismically strengthen their balance sheets, is leaving many farmers feeling unappreciated and ganged up on.
But history tells us that when farmers stop spending, the effects are felt first in the country towns and then, with a lag, in the main centres too.