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Auckland Business Confidence Nose Dives

18 March 2004

Media Release

Auckland Business Confidence Nose Dives

Auckland businesses are predicting a sharp down turn in both the economy and their own prospects over the next six months.

Eightyfive per cent (85%) of Auckland businesses surveyed late last week expect the economy to deteriorate or remain the same during the next six months.

This outcome compares sharply to the 72% of businesses surveyed last December who expected the economy to improve or remain the same during the next six months.

Reinforcing the reversal from high levels of optimism into a mood of pessimism in the last four months, 36% of respondents believe the general business situation will get worse over the next six months, compared to just 19% in December’s survey.

Just 14% of respondents believe the business environment will improve in the next six months, compared to 30% four months ago.

Also reinforcing the increased pessimism around Auckland is a finding that 57% of respondents believe that their own business' situation will deteriorate or stay the same in the next six months, compared to 44% in December.

Difficulties in recruiting skilled staff continue to show up, and there are signs that recruiting unskilled staff is also getting harder.

Seventythree per cent (73%) of respondents expect interest rates to rise over the next 12 months, compared to 21% a year ago and just 9% in the June 2003 survey.

These are 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. Of about 500 responses analysed, 95% indicated that they employ 100 or less people.

In a similar survey of 500 businesses undertaken by the Chamber in Canterbury there was a marked downward shift in general business confidence.

When asked to indicate whether respondents expected the general business situation in NZ to improve, remain the same or deteriorate during the coming six months 13% predicted an improvement (19% in Nov/Dec 2003) 53% predicted the situation would remain the same (62% in Nov/Dec 2003) and 32% expected a deterioration of the general business situation (18% in Nov/Dec 2003).

Commenting, Chamber of Commerce Chief Executive Michael Barnett said it is very obvious that there is increased uncertainty emerging, reflected by high expectations of rising interest rates, staff recruitment and retention difficulties of one kind or another, and a tough regulatory and compliance environment.

“This is a ‘here-and-now’ survey of what about 500 Auckland businesses said in the last few days,” said Mr Barnett.

When the survey findings are lined up against the comments provided by respondents, it is very apparent that New Zealand’s regulatory environment is proving to be a major hurdle for businesses with growth aspirations.

The comments about compliance ranged from difficulties with council red tape over renovating premises, to restraints on aquaculture, to changes in government policy involving the disabled.

Other concerns mentioned included the impact of worsening difficulties traveling around the region and influence of recent immigrants, both of which were changing the pattern of the retail market in the city centre and suburbs.

Clearly, the survey findings are not good news for those looking for evidence that government policies are succeeding to build a growth-led economy, even if somewhat predictable, said Mr Barnett.

“What this survey reflects is the business case for politicians to commit to a visionary business-led growth action plan to date neither the government nor Opposition have put such a package on the table,” said Mr Barnett.

In other findings:

As in previous surveys, numerous respondents cited difficulties finding experienced skilled staff with the correct attitude. While 42% of businesses say that it harder to find skilled staff compared to 44% last December, as in previous surveys more than 75% overall are reporting that sourcing suitable staff is the same or more difficult while only a small number – 5% - say it is getting easier to locate suitable staff.

On interest rate trends over the next 12 months, 73% of respondents believe they will rise compared to 21% a year ago. Just 21% of those surveyed predict interest rates will remain the same over the next 12 months, compared to 45% a year ago and 19% last December. Two per cent (2%) now believe interest rates will decrease compared to 29% a year ago and just 1% in the December survey.

Both finance and demand continue to be the most limiting factors to businesses expanding their activity. Thirtythree percent (33%) of respondents indicated that demand was the single factor most limiting their ability to expand, up from 28% in the December survey. The next most limiting factors to business expansion were finance and labour, both 17%, followed by capacity (16%).

However, 92% of small-medium enterprises (SMEs), employing 20 or less staff cited finance as the single factor most limiting their ability to expand, followed by demand (74%).


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