Risk to NZ economy 'remains considerable'

Credit agency Dun & Bradstreet is playing down suggestions a global economic recovery could be starting, and says the risk to this country's economy remains considerable.

In its quarterly Global Economic & Risk Outlook Report, Dun & Bradstreet said governments and central banks had not yet succeeded in breaking the adverse feedback loop between the financial system and the real economy.

The report noted cautious optimism that the pace of global economic deceleration was weakening.

It also noted that countries with robust fiscal stimulus packages, or exporting minerals to China would be in a stronger position to weather the global economic storm.

But the report warned against interpreting recent events as the start of a recovery.

Instead it suggested a recent capital market upturn was likely to be a market correction, rather than indicating improved fundamentals capable of pulling the global economy out of recession.

The short term economic risk outlook for New Zealand was negative, although Dun & Bradstreet New Zealand general manager John Scott said there were some signs of promise.

Dun & Bradstreet believed the risk of a more severe recession in New Zealand should be mitigated by a combination of fiscal and monetary stimulus measures in this country and overseas.

The report comes out just before Statistics New Zealand data on Friday is expected to confirm this country's economy shrunk for five consecutive quarters to the end of March.

But there are increasing reasons to hope the worst of the decline may be over.

In its latest report, recruitment agency Hudson said hiring expectations among New Zealand employers had risen for the first time in two years.

A net 0.5 per cent of employers intended to increase permanent staff levels between July and September, Hudson said.

There was a shift away from employers reducing headcount towards holding current staff levels.

Employers intending to reduce permanent staff levels fell to 15.3 per cent from 23.7 per cent the previous quarter, while those looking to increase headcount rose to 15.9 per cent from 12.4 per cent.

A global survey by Mercer found Australian and New Zealand companies were containing employment costs, but had paused in making deep workforce or pay cuts for the rest of 2009.

Almost half of all Australian and New Zealand respondents planned to hire key talent while at the same time reducing their overall workforce, Mercer said.

While 57 per cent of Australian and NZ respondents planned to make further workforce cuts in 2009, only 1.2 per cent would make cuts of 10 per cent or more.

In the next six months 46.5 per cent planned to freeze salaries at 2008 levels, but 53.4 per cent would make 2009 pay increases as planned although 62.5 per cent said 2009 bonus payments would be reduced.

- NZPA