Business confidence needs signals from Govt

17 January 2006

Business confidence needs signals from Govt

Low business confidence could be improved by some strong signals from Government, says Business NZ Chief Executive Phil O'Reilly.

"Not all factors are Government-related," Mr O'Reilly said. "For example, much of the pressure from the exchange rate is outside its control. But if the Government were to signal its intention to reduce spending in non-essential or low quality expenditure areas, that would reduce the inflationary pressures that are helping to keep the dollar high. This would help reassure manufacturing firms whose export capabilities are currently threatened by the high New Zealand dollar. It would also help stave off the possibility of a further increase in the official cash rate later this month.

"We would also urge Cabinet and the Minister of Revenue Peter Dunne to consider bringing forward plans for business tax relief, as another important signal to the business community. Our members are concerned that these do not have a timeframe attached to them yet and so are unlikely to happen soon - but the need for a lower company tax rate is pressing.

"This historic low level of business confidence can be turned around. Some meaningful indications by Government could give immediate heart to business.

"The Government's focus on productivity improvement is positive, but this is a medium and long term issue - business needs clear signals about immediate problems right now."

ENDS

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