Growth in business investment in New Zealand has been sluggish in recent times and private job advertisements have flattened off, according to a recent report from Westpac.
Westpac’s weekly report shows that although business confidence has grown weaker since the change of government in 2017, it has only now shown signs of manifesting in business decisions.
“Even though firms are citing capacity constraints and difficulty in finding workers, growth in business investment has been sluggish and private sector job advertisements have flattened off,” Westpac said.
The banking and research company said the recent deterioration relates to dissatisfaction with government policies that have added to business costs, such as minimum wage increases, changes to employment law, and increased regulatory requirements.
With technology changes and international competition putting more power in the hands of consumers, and demand not expanding quickly enough for firms to be able to justify price rises, Westpac said this has resulted in firms seeing a squeeze on their profitability and are scaling back their expansion plans accordingly.
These factors have led to the NZ economy remaining subdued in the early part of this year after losing some momentum in the second half of last year, Westpac said.
The company said in its latest quarterly Economic Overview Highlights, some change is on the way.
“Lower interest rates will help to boost the housing market and spur consumer demand,” Westpac said. “Combined with the already-planned fiscal stimulus, we expect this to lift growth above 3 per cent again in 2020.”
New Zealand’s GDP growth has slowed from a peak of 4 per cent in 2016 to around 2.5 per cent today.
Initially, the slowdown was led by consumers reacting to a cooling housing market. House price inflation peaked at 15 per cent in 2016, but has since slowed to around 2 per cent nationwide, largely due to a flattening off in prices in Auckland and Canterbury.
According to Westpac, the factors that have weighed on growth recently are likely to stick around for a while yet.
“Nevertheless, we think that the mix of government policy will support a lift in growth over the next couple of years.”