Media Statement Dec 12th
Business confidence freefall hits new record
low
(12 December 2005)
Confidence hit a new low in a survey of over a thousand business
respondents undertaken electronically by the Auckland Chamber of
Commerce between Monday and Wednesday this week.
Key messages from the survey that asked businesses to look ahead at
conditions for the next six months painted a joyless picture of
confidence continuing in freefall, and challenging times ahead
shaped by rising average costs and selling prices and declining
profits.
Commenting, Chamber Chief Executive Michael Barnett notes that the
fall in confidence began in the Chamber’s March survey and has
progressively worsened to now be lower than at any time since the
Labour-led Government first won office in 2000.
“The lack of a constructive response from Government is confusing
the market. On the one hand Government has started to accelerate
the upgrade of key infrastructure such as Auckland’s roading and
take initiatives to lift productivity.
Countering these initiatives, however, is the impact on businesses
of rising interest rates coupled with Government’s inability or
lack of will to action a constructive alternative to the blunt
instrument used by the Reserve Bank to threaten and intimidate
business that it will control the housing market if inflation is
not brought under control.
“The ballooning pessimism is clearly being fuelled by the Reserve
Bank’s simplistic messages to drive up interest rates and the lack
of response by Government to control its own spending or direct
local government to keep rate rises and other costs within
inflation.”
“We don’t see this kind of intimidation against business in the
Australian approach to manage economic policy, yet they continue to
maintain a business productivity level that is at least half a
percent better a year than here. The result is that business is
under pressure from all sides - from offshore through more
efficient competitors enjoying the benefit of a more sympathetic
business environment and foreign exchange pressure, and being
battered into submission at home by our own regulatory
agencies.”
“I simply repeat my message after the last survey three months ago.
The big issue is that New Zealand – Government & business
together - needs to respond aggressively to these worsening
conditions with a long-term strategy that will re-position our
economy internationally, and not just batten down the hatches
because the conditions have got tough.” “In plain language, we need
an action based response, not more paralysis by analysis,” he
said.
At the end of the day, the strong survival instinct of many
businesses is the only reason that the New Zealand economy
prevails. “The survey findings show that despite the 57% of
businesses picking the business environment to get worse in the
next six months, 36% still believe they can take advantage of this
environment to improve their own performance and prospects.”
Main survey findings were:
On Confidence
· 57% of firms believe conditions for business will get worse over
the next six months, compared with 55% in the previous September
survey and just 8% in March 2002. Only 8% believe conditions will
improve.
· 63% of firms believe conditions for their own individual business
will stay the same or get worse over the next six months, compared
to 36% who believe they will improve.
On Skills
· 42% of firms believe it will continue to be harder to employ the
right people with the right skills. The sectors most affected
include the trades, tourism & hospitality, manufacturing and
professional services. Frustrating business at present is the
compromise they are having to make when employing, including
finding staff who are passionate about what they do and the concern
that having to be in 10 places at once to compensate is, to quote
one respondent, resulting in the desire to stay in business being
hammered out of us.
On Interest Rates
· 85% of respondents now believe interest rates will rise, compared
with 67% in the previous survey in September, and which for many is
placing added pressure on a shrinking bottom line.
Other Issues
· Investment in buildings and machinery is continuing to
decline;
· The high dollar is becoming “too strong and too much to handle”
for many exporters;
· Competition from China’s “rock bottom” labour costs is resulting
in lost accounts and orders.
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