Adjusting for seasonal influences, business confidence got ``thumped'', falling from 16 to -8. A 24-point movement was not trivial, he said.
Releasing the October ANZ Business Outlook, Mr Bagrie said other survey indicators held up and still provided growth signals, although a tempered mood was apparent.
``There are some real economic reasons for that, on top of political uncertainty.
``Prospects for the economy look more delicately placed.''
Most survey responses were received in the first half of the month, before the final government make-up was decided. The survey primarily covered the uncertainty about the outcome and not the outcome itself.
The latter would be next month's story, he said.
A net 22% of businesses expected better times ahead for their own business, down eight points on September.
A net 12% of firms were expecting to lift investment, down from 13 and profit expectations fell markedly from 18 to 12.
Export intentions eased from 25 to 20 but it was too early to see any benefits of the lower dollar, Mr Bagrie said.
Residential construction intentions bounced back from 18 to 31, continuing recent volatility. Commercial intentions rose from 18 to 43.
Pricing intentions were largely unchanged at 20 and inflation expectations eased slight from 2% to 1.9.
A net 31% of businesses expected it to get tougher to get credit.
The ANZ composite growth indicator was still flagging the potential for solid growth of about 4%, largely because a softening in business indicators was being offset by higher consumer confidence.
The ANZ aggregated both into the one measure.
Focusing on the change in the composite measure showed it had softened from 4.9% to 3.9% in the past three months, a material shift warranting further monitoring, Mr Bagrie said.
``With the economy now deep into the business cycle, it's harder to make strong gains, particularly with an engineered slowdown occurring in the housing market and resource constraints apparent.''
Some of the softening in key indicators was to be expected. Encouragingly, firms still had solid appetites to hire and invest, he said.
Old economic drivers of migration, construction and housing, were being replaced by new ones such as fiscal policy and commodity prices.
Transitions could be wobbly and created uncertainty. That uncertainty was being exacerbated by changes in government policy and economic direction.
``What the `social justice' version of capitalism or `wellbeing' means for longer-term growth prospects remains an important talking point, and not only in New Zealand.''
The last thing the economy needed was a repeat of the 2000 winter of discontent, although the finger could be also pointed at the Reserve Bank for lifting interest rates 2% in six months, Mr Bagrie said.
Change could be unsettling but change also offered opportunities.
In Australia, growing political uncertainty might have dented Australians' views of the economy, although overall consumer confidence remained steady.
The latest ANZ-Roy Morgan Consumer Confidence Index rose just 0.1% to 113.4 in the week ending October 29, with the indicator relating to current finances increasing 5.3%.
The measure of views about economic conditions for the next 12 months fell 4.5%.
ANZ head of Australian economics David Plank said political uncertainty might have hurt consumers' confidence in the economy.
``Rising political uncertainty may explain the rise in pessimism about the economic outlook, though consumers don't seem to see this uncertainty impacting their finances directly,'' he said.
It had been a tumultuous week for the Federal Government after the High Court disqualified Deputy Prime Minister Barnaby Joyce and cabinet minister Fiona Nash over their dual citizenship. Mr Joyce was facing a by-election in his seat of New England.
Mr Plank said he expected a small rise in the September retail sales figures, to be released later this week, reflecting slow wages growth, a sluggish property market and pressure on household budgets due to soaring energy prices.
