Who knows best: businesses or economists?

Economists were surprised yesterday when the Reserve Bank changed tack and put the prospect of an official cash rate cut on the table. But some in the business community, namely Air New Zealand, were already on the same page.

The Reserve Bank emphasized that low interest rates are needed to counter a weaker global growth outlook and reduced domestic momentum.

Similar logic was employed by Air New Zealand today to justify key business decisions. The airline has deferred fleet expansion plans to better match demand against a weaker passenger volume growth outlook.

It sometimes pays to read closely the actions of big, influential businesses, rather than simply following the commentary of mainstream economists. A lot of the data that economists have to work with is a stale snapshot of a ship that has already sailed.

The business community is at the coalface of what is happening in a day-to-day setting. For that reason, surveys of business sentiment and trading conditions are a key part of anyone’s economics toolkit. Some of these surveys contain industry-specific detail, while there are even local authorities and economic development agencies who have invested in such business snapshots of their own local area.