Sharon Zollner: ANZ Chief Economist on the house price forecast and business confidence

House prices are set to rise as businesses report less confidence  

With two further cuts expected to the OCR, ANZ is now expecting a 4.5% lift as opposed to 6%. 

Business confidence has also taken a tumble, with just 49% expecting improvements in the year ahead – down 9 points.  

ANZ Chief Economist Sharon Zollner told Mike Hosking the data was taken amid tariffs hitting the markets, impacting business confidence, investment, and employment.  

She says there may be a hint of a knee-jerk reaction that may not last, but only time will tell. 

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Episode Transcript

Speaker 1 (00:00):
Back to this business of our economy. Couple of key
measures here, housing and confidence both have taken a bit
of a hit in the latest day and Z data
as far as business confidence is concerned, down nine, as
we talked about with Andrew, So we're in contraction territory.
As Chief Economy Sharon Zolna is back with a Sharon
good morning to you.

Speaker 2 (00:16):
Good morning. Do you know person under also called Sharon Fruit?

Speaker 1 (00:20):
Didn't? I didn't know that. Where'd you get that from?

Speaker 2 (00:24):
Oh somewhere in my childhood.

Speaker 1 (00:25):
I'm not sure I would remember it, Yes, exactly. A
little bit of no little bit of noise around these
numbers or not you're confident with them.

Speaker 2 (00:33):
Well, we've got the normal sample size. It's always a
bit dodgyer when you start splitting into into smaller groups.
But so basically the story is that the business Confidence
survey it fell a lot in the early in the
later months sample compared to earlier in the month. And
in between, of course, we had all the tariff noise
in the market turmoil, so the business confidence, investment tensions,

(00:58):
employment intensions really across the all lower in the second
half of the month. So a very consistent message. So
I think.

Speaker 3 (01:05):
I think there definitely is more than just noise exactly,
which is why I asked, is there a hint, potentially
a panic in here that might rectify itself in a
later date if things don't turn out to be the
end of the world.

Speaker 2 (01:16):
Oh, panic will be too strong, but it is absolutely
possible there's a bit of a knee jerk reaction that
might not last. So that's the real question. I think,
will this actually affect decision making and will it just
affect it for a couple of weeks or will it
actually be something more lasting? So obviously, the only time
will answer that question.

Speaker 1 (01:34):
Indeed, all these companies that are about this global, all
these companies that are abandoning guidance now because they have
no idea what's going on? Does that make life more
difficult for us?

Speaker 2 (01:42):
All? Well, certainly does make it more difficult for them.
In New Zealand's case, I mean the actual direct tariff
on us ten twelve percent of very exports, really of
our goods exports. So it's not a game change of
for the economy, but for some individual companies of course
it's a very big wheel. But the main chain all
through which and Young could be effected the slower growth

(02:03):
and including in China of course, our biggest export partner,
impacting our commodity prices and export more generally, but also
that confidence channel that it could just be firms just
delay their investments and employment plans. So of course we
don't want to have to wait very long to get
another read on that confidence channel. But I'll be looking
at particularly will that impact last, but also will we

(02:26):
start to see in the impact on what firms are
saying they're experiencing as opposed to expecting, because that's where
the rubber really hits.

Speaker 3 (02:32):
The race exactly.

Speaker 1 (02:33):
What's your sense what are your spider senses telling you
on recession and all this talk about it, Well, I.

Speaker 2 (02:39):
Mean, the economy is recovering, absolutely, but we have revised
down our forecast partly because of this uncertainty thing. So
basically recovery is going to take a bit longer and
need a bit more of support from mountry policy. We've
put a couple of extra cuts, oh cr cuts in
our forecasts in our CEOs are going to two and
a half, but still recovering. Obviously, there is a scenario

(03:01):
where it turns more pair shape than that. With the
Reserve Bank here has pointed out that they're in a
very good position to cut rates quickly if they needed to,
and they are particularly compare to the Federal Reserve and
the US who's facing a very nasty trade off between
the inflationary impacts of the tariffs and the growth impacts
now here in New Zealand, of course we haven't put
new tariffs on, so it shouldn't be inslationary here. But

(03:23):
it was interesting in our consumer confidence survey we actually
saw consumers inflation expectations jumped half a percent, so it
was a bit of confusion out there, but businesses inflation
expectations were steady as a rock, so I think businesses
understand it.

Speaker 1 (03:37):
So that's interesting. So if you expect inflation to rise,
does it or if you just got it wrong, and
if it does, then this minimal to no growth. That's stagflation.
And is that real?

Speaker 2 (03:48):
Businesses inflation expectations generally matt and more than households because
they're the ones who set prices, I would say, how
sohold inflation expectations matter more if the economy is running hot,
because it would impact wage demands, for example, it would
make it easier else equal for firms to pass on
price and cost increases into their prices. But with the
economy still in a fairly subdued state, I wouldn't think

(04:08):
that those higher consumer inflation expectations will will make much
difference to anything, and they may not last.

Speaker 1 (04:15):
OK. Do you have a view on the Willis budget
in the sense that the seems to be some debate
among economists if she cuts radically in terms of government
expenditure that hurts an economy as opposed to priming the
pump when we need it most, Is that fair or not?

Speaker 2 (04:30):
Well? I think as she's playing long game, that a
longer game anyway, and that's you know, we are running
quite structural deficits that aren't sustainable and so we need
to do something about that. I mean, it will be
pro cyclical and so far as you know, flowing fiscal
spending while the economy is flowing. But we didn't have
to don't have a lot of choice because we had
expansionary fiscal policies in the economy was booming. So this

(04:53):
is the other side of that. You know, the fiscal
policy was unhelpful nuntal policy in that regard, and so
far was adding to demand. At time, and private demand
is already very strong. So now now the cost of that,
and one of the costs of that is that we
have to have title fiscal policy in the economy. All
of it could probably handle a bit more fiscal stimulus,

(05:14):
but you know, there we're an environment where I think
there's going to be more focus on fiscal balances, on deficits.
Our deficit, our fiscal debt is higher than it was.
It still looks pretty good in an international comparison, but
people are starting perhaps to look for alternatives to the
traditional place of parking your money in the US government debts.

(05:36):
So if we can show them responsible fiscal numbers, then
hopefully we can get the specty tiny fraction of that
global money that's maybe looking to diversify a bit more
than previously, and that would be a win for.

Speaker 1 (05:47):
Our tax pack, wouldn't it be known? It's nice to
talk to you appreciate the insiders all ways. Sharon's on
A and Z chief economists with us this morning.

Speaker 3 (05:53):
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