Behold, another Quarterly Survey of Business Delusion

The Kākā by Bernard Hickey

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Behold, another Quarterly Survey of Business Delusion

NZIER survey finds gap between business' awful experienced activity & still-hopeful expectations widens again to record-high -35%; Lack of demand fears at 11-year high; Architects' confidence slumps

Bernard Hickey

Jul 01, 2025

149

Transcript

Briefly in the news from Aotearoa’s political economy around housing, poverty and climate on Wednesday, July 2:

The NZIER’s QSBO survey published yesterday showed businesses remain stubbornly confident about the wider economy and their own businesses, despite their own ‘experienced activity’ in the June quarter being much, much worse than they had expected just three months ago. See more in The Lead below the paywall fold and in the podcast above.
That ‘delusion gap’ between expectations for the next quarter and what actually happened in the next quarter’s survey widened to its worst levels ever of minus 35% in the June quarter, just as concerns about a lack of consumer demand rose to an 11-year high and architects’ confidence about future construction work collapsed to record lows, particularly for Government infrastructure work. See more in Charts of the day below.
Foodbank managers report they’re struggling to cope with more demand as the winter sets in, just as they call again for certainty about Government funding, which was rolled over at the last minute for one year in May’s Budget. See more in Quote of the day below.
An Auckland supermarket offered to sell a 500g tub of semi-soft butter for $18.29 over the weekend. See more in Number of the day below.
Fresh research published by Michael Plank has found as many as 3,800 lives were saved in 2020 and 2021 because of Aotearoa’s Covid policies. See more below in Doc of the Day.
Today’s Must-Read is from Amy Williams for RNZ from the inquest into Cyclone Gabrielle, which heard testimony from Metservice yesterday that the Hawkes Bay Council opposed issuing Metservice’s preferred red weather warning before the cyclone hit. See more in Picks ‘n’ Mixes below.

There’s more detail and analysis for paying subscribers below the fold and in the podcast above. If we get over 100 likes I will open it up in full for public reading, listening and sharing.

Behold, another QSBD

The New Zealand Institute of Economic Research (NZIER) published its June quarter edition of its Quarterly Survey of Business Opinion (QSBO) yesterday. It matters because it’s the longest running survey and is closely watched by the Reserve Bank of New Zealand as a leading indicator of economic activity, often helping it decide whether to cut or raise rates.

But there’s increasingly a problem from the noise of the political views of business decision-makers overwhelming the signal from their reports of confidence about the economy and their own businesses. When a centre-right Government is in power, businesses are much more confident about the future of the economy broadly. Conversely, when Labour is in power, they are downbeat about the economy as a whole.

This has meant over time that financial markets and the Reserve Bank have learned to ignore the results from the survey’s questions about the ‘General Business Situation’ and instead look more closely at their views about ‘Domestic Trading Activity’, which is all about their own businesses’ activity. Respondents are asked whether their own businesses have experienced an improvement in the current quarter, and whether they expect an improvement in the next quarter. The answers to these questions have generated the ‘signal’ that has correlated with GDP over time, especially the answers about expectations for the next quarter.

Often, the answers for expectations for the next quarter match up with the experience during the next quarter’s survey, given, in theory, businesses are correct in forecasting their own experiences. But in the last six quarters, and for a period during 2009 at the beginning of the last National Government, even that signal is obscured by the noise about expectations with a centre-right management in charge of the economy.

The results from yesterday’s survey show the gap between expected experience next quarter and what actually eventuates has widened to its widest level on record. Every quarter since the election, businesses have forecast an improvement in their own businesses and then been disappointed with the actual outcome. This chart tells the story.

What delusion looks like in chart form

This chart also shows how expectations of ‘own activity’ were also higher than actual GDP growth when National was in power than when Labour was, and that’s happening again. The gap is particularly wide at the moment.

Further reading:

Charts of the day: Demand soft & architects quiet

Quote of the day: ‘Please build a fence’

“Foodbanks are not an appropriate response to food poverty. Poverty exists for one simple reason - people don't have enough money. There's a lot of things the government can do to change that. There's a desire in the food rescue and foodbank sector, to put ourselves out of a job, to not be needed. That would be nice.
“We're the ambulance at the bottom of the cliff, and it just seems that more people than ever are falling off the cliff. Sure would be nice if somebody built a fence.” Manukau Foodbank Manager Joel Williams via RNZ