Domestic influences key to economic recovery

  • 22/01/2013

A new year appears to have triggered a spirit of optimism towards the global economy.

But what about here? Are New Zealand businesses also in a positive mood about what 2013 has in store for them?

Business New Zealand chief executive Phil O'Reilly says the outlook is better than it was for 2012, but "that's not saying much".

"Last year was a bit of a shocker," he says.

"Things aren't as bad as they were, but the big watchword is still uncertainty, frankly, for the year ahead."

Mr O'Reilly points to a lack of confidence overseas, despite improvements in China and the US, as impacting on the local market.

"No matter what you can do in New Zealand, the world market is still pretty subdued. United Kingdom growth is barely above zero, eurozone growth barely above zero, the US a slightly better story, China – surprising, on the upside, Australia not so flash."

Domestic influences on the whole look more positive, thanks to the growing impact of the Christchurch rebuild, but there are concerns around export businesses because of the high dollar and international uncertainty.

"Some always go to the wall of course, that's the nature of business and that's the nature of a market economy," says Mr O'Reilly. "What we're seeing is some businesses are really being impacted by the high dollar… you've really got to feel for them… there's not much they can do about it, but that's not true of most businesses. Most businesses will be some importing and some importing, and some of course are just importing and for them, it's good times."

He says the high dollar is forcing businesses to become more "sophisticated" and focus on margins, but it's a "deadweight" on the export sector.

Improved confidence however will help small-to-medium businesses pick up new staff.

"For them, hiring a staff member will be one of the most expensive and risky decisions that they take. A staff member is a high-cost thing… that's an expensive call. Confidence will get them to do that."

Mr O'Reilly is confident as the economy improves, hiring will pick up.

"But we can't just sort of hope – we've got to do a lot more in our education system to make sure that kids coming out of school are fit to do some work – more maths and science skills, more technical skills – otherwise it's entirely possible that you have growth going on in the economy but you've still got relatively high unemployment."

If he could do one thing to improve the economy, Mr O'Reilly says innovation is the key.

"I'd make sure businesses build that capacity to be initiative because if they do so, they'll pick up market share – hopefully – and they'll be able to retain that market share because there will be some grunt behind the margins they'll be able to charge in the marketplace."

3 News

source: newshub archive

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