Photographer: Brendon O'Hagan/Bloomberg

New Zealand Election Spooked Businesses, Confidence Survey Shows

New Zealand business confidence plunged to a two-year low in the run-up to a cliffhanger general election, led by fears of a downturn among manufacturers.

A confidence index compiled prior to the Sept. 23 ballot sank to zero from 18.3 in August, ANZ Bank New Zealand said Tuesday. More than a quarter of manufacturing companies surveyed said they expected business conditions to deteriorate over the next year, up from just 2 percent in the previous poll. The sector was the most likely to reduce hiring, and more than a quarter of respondents expected lower earnings.

The ruling National Party got 46 percent of the vote in Saturday’s election, while the opposition bloc comprising the Labour Party and the Greens got 41.7 percent. Both sides are now courting the New Zealand First Party in the hope of winning its support to form a coalition government, with negotiations expected to take three weeks.

Regardless of who prevails, there could be uncertainty for several months as a new government is formed and its policy positions are clarified, said ANZ New Zealand Chief Economist Cameron Bagrie. “That can be unsettling. The last thing the New Zealand economy needs is a long, drawn-out process mired in policy uncertainty.”

The New Zealand dollar fell after the confidence index was published, dropping to 72.44 U.S. cents at 2:53 p.m. in Wellington from 72.78 cents earlier.

Across the economy, executives were less optimistic about the prospects for their own businesses, although at a net positive 29.6 percent the measure continues to point to steady economic growth, ANZ said.

Bagrie said businesses likely got spooked by Labour’s policies on tax, trade and industrial relations in the final weeks of the election campaign, but he doubts a permanent slump in sentiment is in play.

“Most of the indicators are off their highs but they are still high,” Bagrie said. “There doesn’t look like there’s a whole lot of hand wringing out there at the moment, but I emphasize ‘at the moment’.”

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