Confidence swells, but bank wary

21:21, Apr 20 2014

Consumer and business confidence is so high they suggest the economy could grow as much as 6 per cent - though shop spending is likely to be solid, rather than bumper.

But ANZ Bank says while its latest consumer confidence survey and business surveys flag an economy "ripping along", it does not think think it will boom to 6 per cent growth.

"We're positive but not that bullish," the bank said.

Its April survey showed consumers are "chipper" with its confidence index up 2 points to 134 despite rising interest rates.

The bank expected solid but not bumper spending trends, even though such high confidence levels would typically point to a speed up in spending.

But households had borrowed heavily and the household savings rate was poor. "That's not the stuff of which bonanzas are made," ANZ said.


As well, the Reserve Bank has started to push up interest rates to keep inflation in check. ANZ preferred an elongated expansion rather than a boom bust, and lifting interest rates early on would underpin and ensure expansion and sustainable spending trends.

The ANZ-Roy Morgan survey shows consumer confidence up from 132 to 134 points in April, undented by the Reserve Bank lifting official interest rates in March. The central bank is expected to lift rates again soon.

Interest rates might be moving up, but there were good reasons for that. "The economy is expanding rapidly, more jobs are being created, the housing market is still buoyant," ANZ said.

As well, the high New Zealand dollar is keeping import prices down for big-ticket items. And the prospects for wage rises were improving. "That's a chipper combination," ANZ said.

And interest rates so far have been small, though that may change once the Reserve Bank tugs on the lever a few more times, the ANZ said. The survey also showed more households felt better off than a year ago at a net 13 per cent positive compared with 8 per cent last month.

By region, confidence was unchanged in Wellington and Auckland in April, but up everywhere else.

Canterbury is the most optimistic it has been since 2007, before the global financial crisis hit and later the earthquakes which shook the region. Fairfax NZ

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