NZ Companies Must Act Now to Retain Talent

New Zealand Companies Must Act Now to Retain Talent

New Zealand companies need to start today thinking about how to retain key talent to prevent an exodus of our best and brightest to the thriving Australian economy said leading financial commentator, Bernard Hickey.

Hickey told a briefing attended by accountancy and finance professionals hosted by specialist recruitment firm Robert Half, International that New Zealand’s rapidly aging population will lead to higher public indebtedness to fund pensions and free healthcare for the baby boomers, who will soon hit retirement age. Sales and income taxes in New Zealand will have to rise to fund rising budget deficits. Meanwhile Australia, which is benefitting from Chinese demand for commodities, will continue to lure our skilled young people with higher wages.

“The challenge for New Zealand businesses will be how to retain talent in an indebted future where labour markets are mobile, taxes are high and spending growth is weak,” Hickey, founder and editor of interest.co.nz, told the Robert Half business briefing in Auckland. “The risk is that we have a hollowed out economy full of retirees, farmers, beneficiaries and children.”

Megan Alexander, New Zealand general manager of Robert Half International, New Zealand, agrees that New Zealand businesses will need to do more to retain key talent as the domestic economy returns to growth.

“For the past two years, good talent has remained in stable jobs with companies that are known to them,” said Alexander. “That’s leaving employers frustrated because, contrary to what most people think, there aren’t many great candidates on the market right now. But we expect that to change as growing economy lures people out of safe positions to search for companies where they’ve got real prospects for advancement and professional development.”

Alexander said that companies should proactively look at re-introducing bonuses that are linked to personal and company performance.

“Smart companies need to be thinking now about setting realistic key performance indicators, which are linked to financial incentives like discretionary bonuses. Growth, however tentative, is returning to the economy and employees, having sat tight for two years, expect more from their organisations. Companies need to start planning for how they’re going to re-invest in their people, and in training and development.”

Turning to New Zealand’s debt position, Hickey said that Kiwi households have stopped accumulating debt and started saving in response to the worldwide economic recession, but need to do more in the coming years to reduce debt.

Households need to reduce their debt levels by some NZ$45 billion, or the equivalent of 25% of gross domestic product, over the next seven years, said Hickey. Failure to do so, at a time when interest rates are rising, may result in a return to recession, or worse – a Greece-style debt crisis.

“The reduction of debt is an enormous force which cannot be ignored, but the reality is that this process of deleveraging has only just begun. With interest rates rising again, households are stressed and indebted, and will struggle to start spending again.”

For mortgage holders, central bank requirements which force banks to source 65% of their funding from secure, long-term sources, such as term deposits, mean that floating mortgage rates will be cheaper for borrowers than fixed rates, reversing a long-term trend

ENDS