Business confidence and Christchurch

Written By: - Date published: 9:02 am, April 1st, 2011 - 6 comments
Categories: business, disaster - Tags: ,

I take polls with a healthy grain of salt. I take polls of “business confidence” with a whole salt shaker. None the less, this latest poll expresses concerns that seem to be well founded:

NZ business confidence plummets

New Zealand business confidence plummeted this month, and while the decline was worst in Canterbury, the latest survey shows gloom has set in nationwide following the devastating earthquake.

A net 8.7 per cent of businesses expect worse times ahead, according to the National Bank Business Outlook, a turnaround from last month’s survey where a net 34.5 per cent were upbeat about the next 12 months. That marks the second-largest monthly drop in the survey’s history.

A wave of gloom has seen profit expectations evapourate and firms expecting to shed jobs. The downbeat tone was led by the Canterbury region, where headline confidence tumbled 92 points and firms’ expectations of their own activity slumped to a negative 8 per cent from a net 47 per cent positive. The business survey follows the quarterly measure of consumer confidence, which tumbled into negative territory on the back of the quake.

“The implication is simple – this is far from a local issue,” said National Bank chief economist Cameron Bagrie. “It’s an economy-wide challenge. Facing exceptional times we should hardly be surprised to see exceptional movements in confidence.”

Christchurch is our second largest city. Many businesses have not yet reopened, and many never will. That affects trade, and supply & demand relationships all around the country. About a third of the Christchurch workforce are not currently working, and a huge number will lose their jobs permanently. That affects the customer base of businesses all around the country. These cold hard realities are starting to sink in. No wonder confidence is falling.

At this time in our history we need government leadership like we have never needed it before. But the signs aren’t good. Even usually friendly jounos are calling Brownlee’s Canterbury Earthquake Recovery Agency (CERA) a “catastrophe”. We’re 5 weeks out from the quake, but CERA still won’t even exist for weeks, and Mayor Bob Parker is conceding that “it would be next year before any significant construction could begin”. English and Key don’t seem to agree on how the recovery should be paid for. The emergency package that is supporting those out of work is being wound back (which is really going to help a city on the edge).

In the midst of all the Nats claim to be optimistic about growth. But these are the same Nats who promised us an “aggressive recovery” that would bring us “roaring out of recession”, and instead flatlined the economy and (with some help from the quake) drove us in to an all time record budget deficit. So when it comes to their judgement on the economy, I wouldn’t hold my breath.

6 comments on “Business confidence and Christchurch”

  1. vto 1

    Yes unfortunately a double triple whammy has thumped down upon us all. The economy was already in a parlous state imo only then to thumped by a couple of earthquakes.

    Getting anything done in the city simply takes an age, whether going somewhere, making a phone call, ordering something, etc. Just takes longer. As such there are simply far fewer transactions going on every day. The economy, being the sum of a million individual daily transactiona, has simply fallen.

    On top of that, everyone is counting the money available under their insurance and realising they will be coming up short in some way or another and as such are gluing the chequebook shut to cover themselves for that looming shortfall.

    What can the govt best do? Well there seems to be a sense that the same failings after the first quake are returning – namely slowness in decision making and getting rebuilds physically underway. Believe it or not some builders here are sitting at home today waiting for EQC / Fletchers / insurers to make a decision and write a cheque. Builders sitting around doing little. Govt could assist this particular area by getting involved in the insurance / EQC payout sector in order to move this along. Perhps by ensuring payouts are made first and any disputes put aside for later resolution, rather than wait for any dispute resolution first.

    But yes, aint much confidence in any other than the construction sector. But does not so much feel like your usual recessionary times, more like people accepting a new reality and just getting on with life. Old life no longer around for pretty much everybody. A strange camaraderie and egalitarianism.

    • Bored 1.1

      I like your idea of payouts now / disputes later. If the government by way of their current emergency powers etc were to decree and gaurantee something along those lines I suspect you could get every builder started tomorrow and soak up most of the unemployed as skilled / unskilled assistant labour. The obvious place to start would be non RMA type work, the smaller stuff whilst the big stuff gets done properly.

      Such a simple initiative would do wonders for confidence. I cant see what in effect is very different to this idea than the finance sector gaurantees post the crash.

  2. Afewknowthetruth 2

    Nymex Crude Future 107.40
    Dated Brent Spot 117.52

    The only thing that might save NZ from another round of fuel price rises is the rise in the kiwi dollar against the US dollar (That will make exporters grizzle, of course).

    The present oil-based economic system has no long term future. It’s simply a question of when the collapse is going to occur.

    In the meantime the circus clowns and saboteurs that make up the government will keep pretending that business as usual is possible (when it it patently obvious it isn’t) while they carry out whatever looting they can..

    • Bored 2.1

      How dare you tell the truth!!!!! Actually it is an illness to not recognise peak oil, it is called selective deafness.

  3. Swampy 3

    Bit inconvenient having an earthquake in election year isn’t it. That speaks volumes.

    Seriously the temporary homes will get going pretty soon. In the meantime all the infrastructure repair is keeping council workers and a lot of contractors busy.

  4. Swampy 4

    Aslo comparing us with the US state authority that was set up after Katrina is invalid. in NZ we do not have the system of political devolution to states. As such it was always going to be a government run thing here.

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