- Jane Turner, senior ASB economist
New Zealand business confidence declined to the lowest level in three years in the second quarter as the economic outlook lost lustre. A net 5% of firms in the NZIER's quarterly survey of business opinion anticipated general business conditions to improve, down from 23% three months earlier and marking the lowest level since June 2012. A net 2% of respondents appeared to be pessimistic about their expected profitability in the coming quarter, down from an optimistic reading of 12% in the previous three-month period. Meanwhile, inflation pressures remained weak, with only a net 1% of firms able to lift prices over the past quarter, the lowest level since 2009. A net 25% of financial services firms predict domestic interest rates to drop over the next 12 months, an increase from the net 4% in the previous quarter.
Fitch Ratings confirmed New Zealand's long-term foreign and local currency ratings at 'AA' and 'AA+' respectively, saying the outlook remained positive. The country's status as a high-grade sovereign credit is backed up by a credible and flexible economic policy framework, supportive business environment and high standards of governance. The rating agency expects the New Zealand economy to expand 2.8% in 2015 as lower agricultural production due to drought, and weaker demand following a fall in dairy prices, has slowed New Zealand's economic momentum.
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