Business confidence has slumped to its lowest level in nearly two years as firms became more pessimistic in anticipation of Omicron and surging cost pressures.
Photo: 123RF
ANZ's monthly survey showed those thinking the broader economy will deteriorate this year fell from a net 23 percent in December to 52 percent, the lowest since April 2020.
The more closely followed measure of firms' view of their own prospects fell to an 18-month low of 2 percent pessimism from 12 percent optimism in the previous survey.
"The survey makes grim reading, certainly. But this isn't March 2020 and we do have an idea of the storm that we are heading into ...The disruption will be intense, but relatively short-lived," ANZ chief economist Sharon Zollner said.
The retail sector had the biggest slide in sentiment, while firms generally cut their expectations of profits, exports, employment, and investment.
Respondents were overwhelmingly expecting higher prices, nearly three out every four surveyed expected to raise their own prices, and a similar level were finding it difficult to get finance.
ANZ chief economist Sharon Zollner Photo: RNZ / DOM THOMAS
Zollner said firms and households would remain under pressure once Omicron peaked.
"But both before and after this outbreak, firms face skyrocketing costs, extreme labour shortages, and shipping disruptions that continue to worsen.
"On the demand side, households are facing higher interest rates, falling house prices, and a vicious increase in the cost of living.
"All up, 2022 is shaping up to be a challenging year economically, and getting on top of super-charged inflation without an outright recession is looking increasingly difficult," Zollner said.
She said inflation might hit as high as 8 percent a year, well above the Reserve Bank's estimates, which left it with no alternative but to keep raising the official cash rate.
"And now global geopolitical developments threaten yet more imported inflation via energy markets. Buckle up."