Labour and materials shortages will see Kiwi businesses 'lost to Australia', economist says

A survey of 240 businesses in October shows frustrations over supply chain issues, labour shortages and rising prices.
A survey of 240 businesses in October shows frustrations over supply chain issues, labour shortages and rising prices. Photo credit: Supplied/GettyImages.

New Zealand businesses are experiencing frustration over labour and materials shortages, which one economist says is likely to cause some to move across the ditch.

Results from an October business survey of 240 employers and employees released by former BNZ chief economist Tony Alexander on Monday shows businesses are "severely strained" by supply chain issues, labour shortages and rising costs.

Commenting on businesses' responses across the board, Alexander said their concerns were focused around three things: Government regulations, lack of Government consultation when they make changes - and the lack of a plan for how the economy will reopen.

Meanwhile, with quarantine-free travel from the South Island to Australia resuming from Wednesday, the Australian economy is opening up.

"Businesses are extremely frustrated... businesses with top people [who] can relocate are going to start going to Australia," Alexander said.

The results showed Auckland's prolonged lockdown, Wednesday marking the ninth week of alert level 4 and level 3 restrictions for the super city, extended a further two weeks, combined with split alert levels for the rest of the country, is having a bigger impact on business activity than previous lockdowns. The  2020 nationwide lockdown lasted seven weeks, from March 25 to May 13.  

The survey, which captures comments from businesses operating across 31 categories, shows staff shortages in accounting, construction, horticulture, hospitality, IT, insurance, recruitment and shipping.

Businesses involved in construction reported price-rises in raw materials, supply chain issues and compliance backlogs as concerns. 

In the commercial sector, "overcommitted suppliers and subs" resulted in "big delays, poor productivity and cost overruns". Another reported "massive shortages in materials", from timber and steel, to more simple items, such as silicone and gib.

Dairy farming was reported as positive and profitable, with record milk prices, although regulation and rapid cost increases were cited as concerns.

With the hospitality and events industry, which one business described as "decimated", there were concerns over when businesses could open again, lack of confidence and a change in consumption of products and services.

Businesses involved in residential property reported supply and demand issues, buyer FOMO and low listing numbers. 

The business survey results follow a larger-than-expected 4.9 percent annual jump in the Consumer Price Index in September - the biggest annual jump in over a decade.   

Businesses are facing extreme cost pressures now, Alexander said, showing there's a lot more inflation still to come through.

And as businesses put up prices, supply chain issues ultimately affect consumers, as it's harder to shop elsewhere.  

"Normally we'd go online and look for an alternative... but the alternative is going to take six months to reach us," Alexander added.

Those price increases will be reflected in higher wages - and survey results show plenty of evidence of salaries going up.

"Salaries offered as increases, people demanding higher wages and salaries... there is a paid response happening out there," Alexander said.

The current bargaining position for staff is the strongest in New Zealand in over four decades, Alexander said. 

Those who couldn't get a decent wage increase this year, next year or the year after may be wise to consider changing jobs.

"At 4.9 percent [inflation], if you haven't had your wages go up by 4.9 percent, you're getting poorer."

Further detail, including comments from businesses across each category, can be found in the Tony Alexander business survey, available here.

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