Sharon Zollner: ANZ Chief Economist on construction leading the return of optimism to the business sector

Optimism is rising among businesses - largely driven by construction. 

ANZ's October business outlook has business confidence up five points on 66, in a 10-year high. 

Meanwhile, the proportion of businesses feeling they're faring well, has climbed to -11 in the highest point since March. 

Chief economist Sharon Zollner says it boils down to interest rates. 

She says fewer construction firms say they're not busy than a year ago - and she explained conditions are tough, but things are starting to look up a little.

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Episode Transcript

Speaker 1 (00:01):
Ever do for ze Ellen well business optimism, how good
is this keeps growing? It's up five points in October
alone to sixty six points. Businesses are still rating their
own activity much lower though, at negative eleven, but that's
still at the highest level since March. Sharon z Ona
is A and z's chief economist and with.

Speaker 2 (00:16):
Us, Hey, Sharon, good evening. What do you put this
optimism down to? Is this basically the rate cuts?

Speaker 3 (00:22):
I'd say so, I mean, when it boils down to it,
the slow down scene caused by higher interest rates. So
why wouldn't lower interest rates be the solution. There hasn't
been a lot else going on. There's obviously some fiscal
cutting that's hurting Wellington and the export markets in China
maybe an't so great at the moment, but but overall
the slowdown has really been a result of interest rates.

(00:42):
So in that context, perhaps not surprising to see a
fairly enthusiastic response to rates now coming down.

Speaker 2 (00:48):
What are you seeing in the construction sector.

Speaker 3 (00:51):
Well, that's a really interesting one because the construction sector
is by far the most sensitive to interest rates, and
it's just generally on a bigger rollercoaster than the rest
of the economy. It was booming the most in twenty
twenty one, but it's actually been the weakest since early
twenty twenty three in terms of what they are reporting
for experienced activity as opposed to their expectations. But they've

(01:12):
also had the biggest lift in that. So this isn't
just the hope and optimism looking forward that fewer construction
terms are now reporting that they're less busy than a
year ago. They're still the majority, so you know, it's
still pretty tough times, absolutely, but things are just perhaps
starting to look up a little.

Speaker 2 (01:29):
What are you expecting in the unemployment numbers next week?

Speaker 3 (01:33):
We're picking four point nine. There, reserve banks at five.
I've seen an estimate of five point one out there,
so we're all there or thereabouts. The number can surprise
us because it's impacted not only by how many people
are employed, but also by how many people are looking
for work, and that can actually jump around quite a bit,
so the details will matter, but we're all focusing at

(01:55):
number around five.

Speaker 2 (01:56):
Right, four point nine from you guys on the path
to what, we're.

Speaker 3 (02:01):
Picking around five and a half. That seems to be
the general expectation. There are some people picking that could
go as high as six. Hopefully not, but you know,
in the early nineteen nineties it went well into double digits.
But there in our survey too, there was some good news,
employment intentions lifting strongly, and actually firms reported past employment

(02:23):
also lifting. Again, still negative, but it does suggest that
perhaps the margin some ferns are choosing to keep their
staff in anticipation of better time.

Speaker 2 (02:33):
Love them.

Speaker 1 (02:33):
Yeah, that's great, hey, Sharon, thank you very much, appreciate it.
Sharon's on ass chief economist. For more from Heather Duplessy
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