Some convergence in business confidence

While business confidence in New Zealand seems to be recovering from the slump after 2017’s election, it has weakened in Australia. (See Chart.) That deterioration can partly be explained by softer conditions elsewhere. But the largest drop in sentiment has been observed among domestically oriented sectors. That suggests that the housing downturn is starting to influence the wider economy and supports our view that GDP growth in Australia will slow to 2.0% this year. Meanwhile, we still expect slower migration and weaker business investment to weigh on activity in New Zealand and expect GDP growth to slow to 2.2% in 2019.