Andrew Dickens: Business confidence a self fulfilling prophecy

Author
Andrew Dickens,
Publish Date
Mon, 14 May 2018, 12:18PM
Businesses would be wise to wait until the budget is released on Thursday before worrying about the Government. (Photo / NZ Herald)

Andrew Dickens: Business confidence a self fulfilling prophecy

Author
Andrew Dickens,
Publish Date
Mon, 14 May 2018, 12:18PM

I think it’s a good time to talk about business confidence as we approach the budget this Thursday. Because everyone is talking about it.

The government is trying to convince everyone that they’re prudent guardians of the public purse, while the opposition is desperately trying to convince us that we’re going to hell in a handcart.

This is a difficult line for Simon Bridges to pursue.  On one hand he’s trying to tell the country that Labour has loads of cash because of his party’s fiscal management.  That the rock star economy is still singing a sweet tune. Yet on the  other hand he’s saying we’re on the verge of an apocalypse.

Meanwhile Grant Robertson, the invisible man of politics who seems to have been beavering away on his first budget, is telling everyone to brace themselves to be disappointed.  That there won’t be a budget blowout and that he’s going to be as miserly with the purse strings as Bill English.  That said, he’ll be putting some band aids over areas of the economy that National neglected.

Who’s right and who’s wrong.  We don’t really know right now.  It’s all just an opinion depending on where you stand.

What I know is that the figures coming out of the economy are still very positive.  But business is starting to hit the wall again.  As the economy grows so the capacity to meet demand needs to grow. But because of a business confidence feeling of dread, businesses are starting to close their wallets.  The Reserve bank is concerned.

The other day Adrian Orr asked the question. “"Given the capacity constraints that are coming through, why wouldn't business be investing? Given the level of interest rates, the state of balance sheets across the business sector, it is an opportune time, as it is for the Government."

The very reason Adrian Orr kept interest rates at their record lows is because our population is still growing, demand is still increasing and we need companies to keep investing in kit to keep the wheels on the bus

But they’re dithering because too many businesses have already decided we’re screwed.

There’s an old legend that business confidence always slumps under the first days of a Labour government and rises under a National government.  That has more to do with political loyalties than logic.

So the business sector needs to realise they are far more important and have far more influence than any government. That falling business confidence because of a feeling in your gut is a self-fulfilling prophecy

Let’s just wait a bit until this Thursday and the real intentions of the government become clear and until then don’t worry, make money.