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Business confidence has collapsed in recent months, suggesting a sizeable loss of momentum. At the same time, the sharemarket has reached record highs.
Craigs Investment Partners head of wealth research Mark Lister said if business conditions were so bad, it made no sense for a key barometer of prosperity - the sharemarket - to be headed in the other direction.
``They both can't be right, can they?''
The ANZ Business Outlook showed sentiment falling to near the lowest level since March 2009, the depth of the global financial crisis.
Business confidence had been in negative territory for nine consecutive months, the longest stretch in more than a decade.
Mr Lister said it was difficult to argue it was simply a knee-jerk reaction to a new regime, although some politicians would naively continue to try.
``The caution looks here to stay and I'll be surprised if it isn't a precursor to slower economic activity.''
Uncertainty about key areas of Government policy was clearly a major factor, although there was an element of natural slow-down reflected in the business confidence survey results.
Auckland house prices were no longer rising, migration was the lowest in more than two years and construction was in the doldrums, he said.
In June, the local sharemarket posted its best monthly gain in two years, capping off a quarter in which the NZX50 index rose 7.5%. This month, it has pushed on to further record highs.
The sharemarket should be one of the best economic indicators around and yet its performance was at odds with what the business community was saying, Mr Lister said.
It was not all bad. Unemployment was at a 10-year low, government debt was at modest levels and the export sector was in ``excellent shape''.
Prospects for exporters had improved further in recent months as the currency had fallen sharply against all major trading partners.
All of those were positive factors for listed companies, many of which had substantial international operations.
``Unlike years gone by, it's easy to find quality businesses on our sharemarket where more than half of revenue comes from outside New Zealand.
``These companies will be less concerned about slowing domestic growth. In fact, if it leads to a lower New Zealand dollar, some will welcome it.''
Another reason for the strength of the market was the ongoing attraction of high dividend-paying shares, he said.
The higher proportion of utilities, infrastructure and property companies meant the average dividend yield was about 5% a year higher, in many cases.
Softer growth meant the Reserve Bank was much less likely to raise the official cash rate anytime soon, Mr Lister said.
The central bank had raised the prospect of cutting the OCR, which was not as outlandish as it seemed when the bad crop of trade tensions and other risks were considered.
A more subdued outlook seemed to have delivered the exporters and the high yield-dominated market two things improving their prospects - a weaker currency and a lower probability of interest rate rises.
While things were buoyant for now, the true test could come during the corporate reporting season in August, he said.
Then, it would be found if lower business confidence was a reflection of the real risk to share prices - falling profits.