Business confidence up but concerns remain
Waikato businesses are significantly more optimistic about the regional economy than they were six months ago, but still harbour doubts about the country’s economic performance as a whole.
That’s the general finding of regional economic development agency Te Waka’s second Waikato Business Sentiment Survey – its first was in August 2020.
The survey, conducted in partnership with local authorities, chambers of commerce, regional tourism operators, business associations and other economic development organisations, collected 565 responses from business owners and managers between mid-February and midMarch – so predates the trans-Tasman bubble announcement.
Te Waka chair Hamish Bell said respondents showed a marked increase in net confidence in the economy for the six months ahead for their own business (34 per cent), their sector (from negative 10 per cent to 11 per cent in the positive) and the region (from negative 14 per cent to 11 per cent positive).
Confidence in New Zealand’s economy was up, increasing from negative 31 per cent to negative 3 per cent, but still in the red overall.
The survey, like the ANZ National Business Confidence Survey, calculates net confidence by subtracting the percentage of those who believe the economy will improve from those who feel the economy will deteriorate.
Thirty-three per cent of respondents reported increased sales for the full 2020 calendar year compared to 2019, and 45 per cent were forecasting increased sales ahead, particularly in health services, manufacturing and construction.
Bell said stronger sales had contributed to a more robust outlook for manufacturing, construction and retail, however supply chain issues, increasing prices, and skills shortages – notably in management and specialised technical skills – were impacting on construction, manufacturing, primary industries and transport.
‘‘The Covid-19 border restrictions appear to have highlighted underinvestment in people and skills.
‘‘Not only demand for skills but inability to meet that demand is a disturbing trend.’’
Waikato Regional Council principal economist Blair Keenan said for all the concerns about border closures on the ability to access suitable labour, 48 per cent of respondents identified the shortage of skilled New Zealand residents as a problem, compared to just four per cent who thought it was a problem of a lack of skilled immigrants.
‘‘A better understanding of precisely what kind of skills we’re lacking is an important piece of information that needs to be explored,’’ said Keenan.
Bell said while it was encouraging to see investment in business, financial, personnel and continuity planning, about a quarter to a half of businesses with 11 or more employees did not have planning tools in place, nor did 45 to 72 per cent of businesses of up to 10 employees.
Yet the emergence of supply-side issues, said Keenan, had ‘‘the potential to derail the recovery, for example through higher inflation and a subsequent policy response from the Reserve Bank.’’
The survey affirmed that hospitality and tourism were still bearing the brunt of
‘‘The Covid-19 border restrictions appear to have highlighted underinvestment in people and skills’’
Te Waka chair Hamish Bell, pictured
Covid-19, with 74 per cent having recorded reduced sales; 17 per cent noting a 50 per cent or more reduction.
Two-thirds of respondents in these sectors expected business to worsen in the coming months.
While many were now looking forward to the arrival of Australian tourists, Keenan said the benefits of the bubble for the Waikato region may not be all positive.
‘‘Setting aside public health issues, domestic tourism is important to the sector in Waikato, and the re-introduction of international options may effectively increase competition for the domestic market.
‘‘Overall, the Waikato economy has weathered the Covid-19 recession better than we might have feared a year ago when the prospect of mass unemployment and deflation seemed a real threat.’’
However, he cautioned that while it was encouraging that Waikato businesses were optimistic about the region’s economic outlook, the recovery remained both patchy and fragile.
Bell agreed:
‘‘It’s encouraging that the survey and personal engagement with industry indicate broad optimism . . . but we need to remain cautious about the concept of ‘the calm before a storm’.
‘‘We can’t afford to become complacent.’’