New Zealand Business Confidence Plummets

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.

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.

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"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.

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)