Finance news

New Zealand business confidence fell to a 17-year low in March, led by retailers and home builders, who expect economic growth will slow this year.

A net 6.4 percent of companies surveyed expect their sales will decline over the next year, the lowest reading since 1991, according to a report released by ANZ National Bank Ltd. in Wellington today. The net figure subtracts the number of pessimists from optimists.

Record-high interest rates and a global credit crisis have made companies more reluctant to hire and invest, adding to signs growth in the $104 billion economy will slow this year to about half the 3.1 percent pace in 2007. Weaker domestic demand may give Reserve Bank Governor Alan Bollard scope to cut the benchmark interest rate from a record 8.25 percent.

“Growth looks to have stalled, but is more likely to be negative in the March quarter,'' said Cameron Bagrie, chief economist at ANZ National in Wellington. “Inflation pressure will eventually recede in a weak growth environment. Interest rates do not need to remain at elevated levels when inflation is receding.''

New Zealand's dollar fell to 79.33 U.S. cents at 5:15 p.m. from 79.57 cents immediately before the report.

Asked about the general economy, a net 58 percent of the 467 companies surveyed said it will worsen over the next year paydayloans. That compares with 44 percent in February.

Workers, Investment

A net 8 percent of firms expect to fire workers over the next year and just 1.3 percent plan to invest more in plant and machinery, according to the survey.

About 45 percent of companies say their profits will fall while 38 percent plan to raise prices in the next three months to recover costs.

The construction industry is the most pessimistic, ANZ National said. Residential investment intentions are the lowest in the 20-year history of the survey.

A second report today showed building approvals fell 6.5 percent in February, the fourth decline in six months, as rising home-loan interest rates and falling prices cool the property market.

Bollard last week said interest rates will need to stay at high levels for some time to combat inflation. Eight of 15 economists surveyed by Bloomberg News last month expect the central bank will keep rates unchanged until next year.

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