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4/7/2018 — General
NZIER and the seeds of business pessimism
By Simon Hartley

Otago, Taranaki and Blenheim were singled out as “particularly downbeat” in the latest New Zealand Institute of Economic Research (NZIER) quarterly survey, which overall has struck a seven year low.

NZIER principal economist Christina Leung said the decline in confidence, for the past quarter to June, was across all the regions, but singled also out Otago for its pessimism.

As with national sentiment, Otago businesses are finding rising costs one of the more difficult issues at hand, plus labour shortages and proposed Government changes to employment contracts and bargaining.

Otago Chamber of Commerce chief executive Dougal McGowan said the continued decrease of recent months in business confidence must now be taken as a real concern for central government.

“Locally we're still seeing increased pessimism among members businesses,” McGowan said. Their two major issues continue to be a shortage in labour and rising costs associated with conducting their own business.

“People are now seeing possible inflationary pressures with the costs of borrowing money potential on the rise - 94 % are now saying it will either rise or stay the same,” he said.

Otago Southland Employers Association chief executive Virginia Nicholls said businesses were concerned with increasing costs, including the lift in the minimum wage. In Central Otago it had become more difficult to get visas for immigrants to work here.

“It's taking longer to get visas processed, which is frustrating, particularly for the hospitality and construction sectors,” Mrs Nicholls said.

She said there was a “perfect storm” underway in the retail sector, which is facing more competition from online shopping, as well as the minimum wage increase.

“There are significant concerns around the changes to employment relations, including the employment relations bill,” she said.

Employers with 20 employees or more were losing the right to include trial periods in employment agreements, she said. Also, businesses were being forced to settle collective agreements even if they don't or can't agree, they were not allowed a choice to opt out of a multi-employer collective agreement, and allowing union reps access to workplaces without any permission.

The number of taskforces and working groups being set up to examine a wide range of issues was concerning businesses, who question if this will increase business competitiveness.

McGowan said on the positive side, exports were strong and terms of trade were still very strong, as was population growth, the latter much needed to meet labour demand.

“And with the recent drop in the dollar, all are helping,” he said.

However, increased costs are seen as a major issue for many businesses, with labour and transport costs rising alongside petrol, plus wage increases were now in effect.

“Labour shortages are still limiting productivity in many areas,” he said.

McGowan said locally, predicted wage rises were at levels higher than inflation, with nearly 50% of business saying they are now looking at wage increases above 3% around Otago.

Possible changes to the employment law were also creating uncertainty and worry for many employers, McGowan added.

*Simon Hartley is senior business reporter and assistant chief reporter for the Otago Daily Times.

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