The Government says the decline in confidence reported in the latest Quarterly Survey of Business Opinion was to be expected given the continuing economic and political fallout from the terrorist attacks on the United States.
The New Zealand Institute of Economic Research today reported that a net 44 per cent of businesses in the September quarterly survey expect the general business situation to deteriorate over the next six months. This compares to a net 1 per cent of firms that expected an improvement in the June quarter survey.
Finance Minister Michael Cullen said New Zealand was not alone in facing a drop in business confidence.
"Australia has also tumbled into negative territory," he said. "The fall has been sharper here but, in both countries, has been driven primarily by the deterioration in world growth prospects."
He said New Zealand, as a trading nation, could not immunise itself against the effects of the global slowdown.
"But the competitive dollar, robust export commodity prices and the recent reductions in interest rates mean that the New Zealand economy in good shape to weather the turbulence."
Business confidence drop inevitable, says Cullen
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