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National leader Bill English on election night.
Although the National Party ended election night the largest party by a healthy margin, its margin wasn’t big enough (unlike 2008, 2011, and 2014) to make its return to the Treasury benches a foregone conclusion.
The final outcome is now subject to negotiations, with Labour and National courting NZ First to get them over the line.
On the face of it the election campaign had a chilling effect on farmer and business confidence as evidenced by two surveys released last week.
Rabobank’s September quarter Rural Confidence Survey saw a fall from June’s record highs. Net confidence in the agricultural economy for the upcoming year fell from +54 to +38, with potential government policy figuring as a significant concern. Rabobank noted the prominence during the election campaign of policies impacting on farming.
Looking at farmers’ own business performance over the coming year there was a much smaller drop in net confidence, from +47 to +44.
Sheep and beef farmers tended be less optimistic than dairy farmers for both the agricultural economy and their own business performance.
General business confidence also took a dive in September in ANZ’s monthly Business Outlook Survey. In September a net 0.0% of respondents expected general economic conditions to improve over the coming year, down 18 points on August. This means optimists and pessimists were evenly matched. For agricultural respondents the net figure was also 0.0%, down 23 points on August.
As with the Rabobank survey, own activity held up rather better. Overall, a net 29.6% expect their own activity to increase over the coming year, down 9 points on August. For agriculture, the figure was a net 40.0%, unchanged from August. These are still healthy figures and indicative of solid economic growth.
Clearly the election campaign spooked many in the business community. With the election over it will be important to get a government in place to provide certainty for business and for confidence to recover before weaker sentiment impacts on investment and employment. Hopefully this won’t take too long.
Change has also come to the Reserve Bank with governor Graham Wheeler stepping down and an acting governor (Grant Spencer) in place while a replacement is sought.
The first review of the official cash rate in the post-Wheeler era was held this week with no change at 1.75% and no change to the accompanying statement’s studiously neutral tone.
The statement concluded with the comment that “monetary policy will remain accommodative for a considerable period. Numerous uncertainties remain and policy may need to adjust accordingly”. No change there either.
The next OCR review (and monetary policy statement) will be on November 9.
Exported goods were up in August but there was still a big monthly trade deficit, according to Statistics NZ’s monthly merchandise trade statistics.
Goods exports were $3.7 billion in August 2017, up 9.0% on August 2016. Fruit (up 28.9%) and wine (up 10.4%) both posted healthy gains. Meat was up 1.5% but exports of milk powder, butter and cheese were down 2.6%. Wool was down 23.6%.
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