New Zealand Business Confidence Plummets

By Ben Collins Features Dow Jones Newswires

New Zealand business confidence fell to its lowest level in eight years in October, in the first survey results after the formation of a new coalition government.

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Data from Australia and New Zealand Banking group released Thursday, show 39% of firms are pessimistic about the year ahead, the lowest level since early 2009 and a decline of 29 points from October, whose survey results were compiled before the Labour party formed a coalition government with the New Zealand First party, ending nearly a decade of rule by the centre-right National party.

"Uncertainty around changing government policy, a softer housing market, and difficulty getting credit are likely culprits," ANZ Chief Economist Sharon Zollner said in a statement accompanying the data.

"The economy is at a delicate juncture as migration, construction and housing run out of steam as growth drivers. Commodity prices are strong and a fiscal boost will come through in time, but at such times of transition, sentiment is more vulnerable," she said.

"This month's survey responses were received after the final government make-up was decided. However, it would be too simplistic to ascribe the full move to the change of Government," she said, with a softer housing market and tighter lending conditions also playing a role.

The Reserve Bank of New Zealand this week relaxed loan-to-value rules that cover the amount of loans banks can write to owner-occupiers with deposits worth less than 20% of a property's value, saying new policies from the government such as banning foreign buyers were likely to keep a lid on house prices.

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A frothy housing market is one of the biggest risks analysts have seen for the New Zealand economy. The RBNZ also eased the rules for how big of a deposit investors need, lowering it to 35% of the property's value from 40%.

The bank's activity outlook index fell to 6.5% in November, from 22.2% in October.

-Write to Ben Collins at ben.collins@wsj.com

(END) Dow Jones Newswires

November 29, 2017 19:45 ET (00:45 GMT)