An economic survey describes business confidence being in a "funk" after hitting a 10-year low, and an economist says there's good reason for Kiwis to be concerned.
The capitalist-driven model New Zealanders have grown used to for decades is changing. Former ANZ chief economist Cameron Bagrie says New Zealand is looking for a more "social-centred version of capitalism", and the Government is trying to identify what that looks like going forward.
But changing this model has consequences for business confidence, which is evident in the latest ANZ economic survey. However, Mr Bagrie says business confidence is a "useless indicator".
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"The correlation with GDP is 0.2 percent so we pretty well ignore that. We know there is a little bit of political bias in regard to the perception that it's a lot weaker under the red [Labour] than it is under the blue [National]," Mr Bagrie told The AM Show on Wednesday.
Looking at the broader survey, he said it's not so much a business confidence survey but a business outlook survey. ANZ asked firms about employment, investment, and firms' own activity expectations, and found that these areas are flat lining at around zero.
"That's a sign that the economy is dangerously close to what we call the 'stall speed'," said Mr Bagrie.
"Growth 12 months ago was about three-and-a-half percent. The latest figures show we're in the two-and-a-half to three percent zone. But at the moment I think we're dangerously close to one-and-a-half and we're decelerating as opposed to accelerating."
But Mr Bagrie doesn't believe the economy is too bad, and he foresees one percent growth over the next 12 months. However, he said there is reason for concern when the country is running on around one-and-a-half percent, which brings "some pretty big fiscal implications".
He said the spirit of the current Labour-led Government has been to take responsibility for the environment. But the Government has been criticised for ending oil and gas exploration, with National MP Judith Collins saying it's the "worst thing" the Government could have done.
"I don't think too many people would disagree with the spirit of what [the Government] is trying to do," said Mr Bagrie. But he said the issue is that high income industries such as oil and gas are being hit on the head - sectors for which New Zealand will get no more growth out of.
If the business outlook in New Zealand is grim, then businesses will lose confidence, put their cheque books away, and not hire new people, according to Mr Bagrie.
However, he said despite all the grim talk, there are positives to consider. The Government is spending "a hell of a lot of money over the next 12 months" and that's putting money into people's pockets. The agricultural sector is also bringing in big revenue.
"From a theoretical perspective, we should be able to transition the growth back and things should be picking up later this year to early 2019," said Mr Bagrie.
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