BNZ's latest survey shows a big rebound in confidence for New Zealand's businesses

The confidence of Kiwi businesses has surged back in April after taking a hit due to drought worries in the previous month, according to the latest monthly BNZ confidence survey.

BNZ chief economist Tony Alexander describes the latest survey findings - the fifth-strongest in the eight years the survey has been running - as "a good result with no mention of the drought this time around!"

Among the 203 businesses responding to the survey, some 56.7% expected the economy to be better in a year's time, 32% the same and just 11.3% worse. This gave a net 45.3% expecting the economy to be better, up sharply from just 25% in March when drought worries were surfacing strongly.

Although the latest result was the fifth-highest on record, Alexander said the rapid turnaround from the previous month's performance meant "we do not read particularly much into that statement".

Alexander said the latest survey found that conditions are seen to be quite good in various sectors "including most significantly accountancy".

"I say most significantly because weakness in this sector and the legal profession was evident in comments in our survey before the data actually showed the economy to be in recession in 2008. So we look to these two professional sectors to see if anything interesting may be happening.

"There is only one response from the legal sector this month so we must exercise caution. But the overall positive nature of comments from accountants this month does suggest that the upturn in the economy is gathering solidity," Alexander said.

Construction activity was continuing to pick up, with some comments from survey respondents indicating that the upturn has yet to lead to any broad inflationary pressures.

Residential real estate activity was "as busy as ever" with no indication that the listings shortage was ending.

"Investor demand for rental properties is strong and perhaps the buying of properties, which are then immediately put up for rent, accounts for weakness in rents noted here and in other forums," Alexander said.

The forestry sector was strong, while all nine responses related to tourism were firm, "which is extremely interesting in the context of the high New Zealand dollar and retailing weakness".

"Are people switching toward more services consumption?"

Areas of weakness in the survey included marine construction and retailing "with our survey consistently showing that the strength we have seen recently in retailing data is not being observed by the bulk of our responding retailers", Alexander said.

He said is a key thing that he had been pointing out to audiences in New Zealand for the past three years and more recently the people he had been meeting with in Europe was that in NZ there was no sense that something was drastically wrong with our economy and that we needed to do something about it.

"For those with the IQ to consider more than the newspaper headlines there may be a sense of pride that the reforms, which economies overseas are struggling with, were painfully undertaken in New Zealand a generation ago," Alexander said.

"For those aware of the rise in China there may be strong comfort taken in the high demand the Chinese have for our safe, quality food products and how we will never be able to satisfy the quantity of purchases that they want.

"So just like the shortage of properties pushing prices up to new equilibriums in Auckland and Christchurch, so too do we see good support for (some) of our export prices. Personally I would be looking for some improvement in sheepmeat prices soon given the near doubling of the value of NZ meat exports to China in the past year and forecasts of a tripling just ahead.

"Others may note that it is a complete no-brainer that the reconstruction of Christchurch (now estimated to be a NZ$40 billion rather than NZ$30 billion job) will boost our economy and soak up many under-employed people. At the same time the reconstruction will prompt many young people to acquire a trade and save others from wasting three or four years at university building up debt for a degree they may well not need.

"Taken in conjunction with a philosophy generally accepted by the populace that people need to stand on their own two feet rather than always looking to politicians to subsidise them (southern Europeans), and with the ultimate safety valve of moving to Australia, we feel generally happy about the situation," Alexander said.