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Friday, 30 August, 2002, 07:21 GMT 08:21 UK
NZ executives feel stock market chill
New Zealand sheep shearing championships
Farmers face tough challenges
Falls in share prices have hit confidence among New Zealand executives, with farmers at their most pessimistic since 1990, a survey has shown.

Of 1,200 businesses questioned, 43% expected conditions to worsen over the next year, compared with 12% forecasting an improvement, a survey by National Bank revealed.

"The deterioration in business confidence occurred in every sector of the economy," the bank's chief economist, John McDermott, added.

The agricultural sector, which has suffered drought and a slump in dairy prices, recorded its "lowest level of confidence in 12 years", he said, blaming the slide in overall business optimism on recent falls in share prices.

"Continued international equity market uncertainty is weighing heavily on confidence both at home and abroad," Mr McDermott said.

Growth fears

The data represented the fifth successive monthly slide in optimism, and compared with July data showing 37% of business chiefs pessimistic over prospects.

Friday's figures raised fears that New Zealand's economy, which expanded by more than 3% over the first seven months of the year, was poised for a period of lower growth.

Mr McDermott said the economy was at a turning point, with slowing growth in car registrations and car sales, and weakness in retail sales, visitor arrivals and job advertisements.

"Unless business confidence improves in the next few months, chances are that we'll see a slowdown in the domestic economy," he said.

But, with interest rates now back at 5.75%, their level before last year's 11 September attacks which sent shockwaves throughout the global economy, Mr McDermott said New Zealand's central bank had scope to revive growth.

"Should economic conditions weaken, expect lower interest rates from the Reserve Bank and a weaker currency to act as shock absorbers," he said.

Help from Oz

Friday's data was "disappointing but not surprising" given international economic conditions, New Zealand Finance Minister Michael Cullen said.

But Australia's continued strong growth should provide New Zealand with "a buffer against adverse events further afield".

Australia takes almost one fifth of New Zealand exports.

See also:

29 Aug 02 | Country profiles
27 Jul 02 | Asia-Pacific
03 Jul 02 | Business
02 May 02 | Business
08 Jan 02 | Business
24 Aug 01 | Business
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