This low exchange rate provides very useful insulation from the downturn in the world economy, by propping up returns to New Zealand exporters (and indeed returns to those competing with imports) despite weaker prices abroad.
There has been a sharp decline in net confidence in the business sector in recent months, as measured by both the National Bank Business Outlook survey and by the quarterly survey undertaken by the Institute of Economic Research (figure 7). And businesses have become less confident not only about the economy in general, but also about the outlook for their own businesses.