Business confidence is high, but the Reserve Bank needs to counter growing inflation pressures, ANZ says.
ANZ chief economist Sharon Zollner. Photo: RNZ / DOM THOMAS
An ANZ monthly survey showed business confidence was higher than it had been in four years. The own activity measure rose five points to a net 31.6 percent.
The headline reading dropped marginally into pessimism, with 1 percent expecting the broader economy to weaken over the coming year.
ANZ chief economist Sharon Zollner said rising costs and finding skilled labour were the biggest problems for businesses.
"The New Zealand economy is stretched and firms are clearly facing enormous cost pressures," Zollner said.
"The risks around upcoming CPI (consumer price index) out turns are all to the upside, and the RBNZ needs to get a wriggle on regarding raising the official cash rate," she said.
About 86 percent of those surveyed expected to have to pay more for goods and services, while 63 percent expected to put up their prices.
Firms expected better profits, to invest and export more, and employment intentions remained strong.
Inflation expectations rose to 2.4 percent, which was well above the Reserve Bank's 2 percent target.
ANZ has forecast the Reserve Bank will raise the official cash rate in February next year, but odds are rising that rates will be increased this year.
"With firms keen to invest and employ, and both cost-push and demand-pull factors suggesting strong inflation ahead, it's past time to unwind the emergency OCR stimulus," Zollner said.
Latest financial market expectations put a 50-50 chance of a rate rise in November, with a near certainty of a rise in February.