NZ businesses want to start employing people again

Monday 31st May 2010

New Zealand businesses are still upbeat about the economy over the coming year, and are getting ready to start hiring, with employment intentions at an eight-year high.

Overall confidence levels, as measured by the National Bank Business Outlook, held steady this month, with a net 48% of companies surveyed expecting business conditions to improve over the next 12 months.

This is down from a net 50% last month.

That comes amid a 2.5 percentage point increase to a net 16% of firms saying they intend to hire, the highest level since April 2002, and a 3.4 percentage point rise to a net 14% of companies saying they intend to boost investment.

"Nothing seems to be denting the air of optimism towards prospects for the New Zealand economy," said the bank's report.

Profit expectations are “at a healthy level, which if translated into actual profits, should see firms act on their investment and hiring intentions.”

New Zealand’s economy climbed out of its worst recession in 18 years in the middle of last year, with surging dairy prices and solid demand for raw materials underpinning central bank Governor Alan Bollard’s desired export-led recovery.

Last month, the country posted its first annual trade surplus in eight years, according to government data.

Businesses have pared back their expectations on unemployment, with a net 11% picking the jobless rate to rise in the next year, and increased hiring intentions flagging a potential 4% labour market growth.

Companies remained optimistic about their own activity, with a net 45% of respondents picking better times ahead for their own business.

A net 28% of firms intend to lift their prices in the coming year, up from a net 26% last month, with inflation expectations creeping up to 2.69% from 2.67% in April.

The Reserve Bank will review the official cash rate next week, and investors are split as to whether Bollard will begin hiking rates in June, July, or possibly later.

The market is betting the central bank governor will increase the official cash rate 160 basis points in the coming year, according to the overnight interest swap curve.

Still, the bank’s economists warn the survey won’t have captured the government’s Budget, which is expected to introduce one-off inflationary pressures when GST rises in October, nor will it have covered much of the collapse in equity markets following the concerns about Europe’s sovereign debt crisis.

“Next month’s survey reading promises to provide some real insights into businesses’ thinking about the array of contrasting forces at play,” the bank’s economists wrote.

Businesswire.co.nz

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