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Auckland Business Confidence Loses Ground

26 June 2002

Business confidence in New Zealand's economic prospects has noticeably slipped compared to three months ago.

Those expecting the economy to deteriorate during the next six months has nearly doubled since March, even though more than 60% of Auckland businesses continue to believe that their own business situation will improve over the same time frame.

As well, businesses report increasing difficulty in finding both skilled and unskilled staff, and there is a wide expectation that interest rates will continue to rise in the next 12 months.

These are among the main findings of a regular survey of Chamber of Commerce members on how they view business prospects in the period ahead.

The survey was conducted by internet over the last two weeks. Of 800 responses analysed, 38% indicated that they employ 5 or less people, and 43% employ between 6 and 50 in their business.

The overall level of optimism about business prospects over the next six months has dropped by 5% to 35% on the findings of the previous survey in March when 40% said that they believed the business situation would improve over the next six months.

Similarly, those expecting the general business situation to remain the same over the next six months has dropped by 5%, from 51% in March to 46% in the latest survey.

However, the most significant reversal is seen in the nearly doubling of numbers of those predicting the business situation to worsen over the next six months. Fifteen percent (15%) believe that the business environment will get worse, compared to just 8% in the March survey.

At the same time, there continues to be a dominant view that despite predictions of a deteriorating general business situation, individual businesses will survive in good shape. Sixtyone percent (61%) of Auckland businesses believe that their own business situation will improve over the next six months, while just 35% are optimistic about the general business situation improving over the same period.

In response to the same questions in the March survey, 64% of respondents expected that their own business' situation would improve over the next six months, while 40% were optimistic about the general business situation improving over the same period.

On interest rate trends over the next 12 months, 80% of respondents believe they will rise compared to 60% in the March survey and 23% in November last year. Just 11% of those surveyed predict interest rates will remain the same over the next 12 months, compared to 31% in both the March and November survey. Just 2% believe interest rates will decrease compared to 5% in the March survey and 43% last November.

Among other findings a clear trend emerges of increasing difficulty in locating both skilled and unskilled staff:

- Thirtyseven (37%) of respondents indicate that finding skilled staff is harder today than three months ago, just 7% say it is easier, and 35% the same. In contrast, in the two previous surveys in March and November, 36% and 33% of respondents indicated that they were finding it harder to locate skilled staff, compared to 9% (March) and 10% (November) finding it easier.

- In terms of recruiting unskilled staff, 11% say it is harder than three months ago, 39% say it is the same and 7% easier. In the March and November surveys, 9% and 7% of respondents respectively said it was harder to recruit unskilled staff, while 8% (March) and 12% (November) said it was easier.

In terms of an industry breakdown, the difficulty of finding skilled staff in the trades and manufacturing areas has noticeably increased:

- In trades, 63% of respondents say it is harder to find skilled staff, compared to 50% in March.
- In manufacturing, 47% are finding it harder to recruit skilled staff compared to 43% in March.
- In contrast, tourism & hospitality at 37% compared to 50% in March and service businesses, 36% against 44% (March), are finding it easier to recruit skilled staff.

Thirtyone percent (31%) of respondents indicated that demand was the single factor most limiting their ability to expand, while the next highest constraint was finance at 21% followed by capacity at 16% and labour 11%.

Within greater Auckland, optimism about both the general business situation and individual business prospects over the next months is highest in Auckland and North Shore cities. In terms of the general business situation, 38% of Auckland and North Shore respondents believe the business situation will improve in the next six months. The next highest is Waitakere at 29% with Manukau tailing the field at 24%.

In terms of individual businesses, 67% of North Shore respondents are optimistic about their business prospects over the next six months, compared to 60% in Auckland, 59% in Waitakere and 54% Manukau.

Chamber of Commerce Chief Executive Michael Barnett said that the overall results confirm that the business cycle has peaked and is on a downslide.

Despite obvious concerns about interest rates and a raft of comments about a tightening international and domestic market, it is very apparent that Auckland businesses believe they are strong enough to respond positively to the changing situation.

"In one sense the Government can take a comforting message from the survey - more than 60% of businesses continue to believe their own business prospects will improve over the six next months, even though only 35% believe the general business situation will improve."

On the other hand, if the role of government is to set a positive environment for business to operate in, then clearly the next Government has a lot of work ahead.

The range of comments offered on what single factor was most limiting their ability to expand highlighted the survey findings on difficulties of recruiting industry skilled staff, sourcing affordable capital and finding it easy to address regulatory and compliance issues. This was balanced by comments expressing determination to do better by running a tighter operation and using existing resources more smartly.

"Overall, this survey reinforces the impression of a robust Auckland business community that is determined to cut its cloth to meet the environment as best it can, but clearly under performing through difficulties solving capital, skills and regulatory concerns."


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