Auckland Business Optimism "As Good as it Gets"?

- Interest rates expected to soon rise

- Finding Good Trained Staff "Getting Harder"

Auckland businesses are strongly optimistic about their own business prospects, even though most are expecting interest rates to rise in the next 12 months.

Sixty-four percent (64%) of Auckland businesses believe that their own business' situation will improve over the next six months, while just 40% are optimistic about the general business situation improving over the same period, and 60% are predicting interest rates to rise in the next 12 months.

At the same time, the overall level of optimism about business prospects over the next six months has increased by 7% to 40% on the findings of the previous survey in November when just 33% said that they believed the business situation would improve over the next six months. The 40% level of optimism is now 4% higher than the 36% recorded at a similar survey in August 2001 - a month before the September 11 events in the United States.

Also, just 8% believe that the business environment will get worse, compared to 20% in November and 16% in August, while those who believe the general business situation will stay the same remained relatively constant at 51% compared to 46% and 47% in November and August respectively.

On the other hand, this survey reveals a marked change of expectations about interest rate trends. Sixty (60%) believe interest rates will rise in the next 12 months, compared to 23% last November and 30% in August. Just 5% believed interest rates will decrease compared to 43% in November and 18% in August,

These are the main findings of a regular survey of Chamber of Commerce members in Greater Auckland on how they view business prospects in the period ahead.

The survey was conducted by internet over the last two weeks. Of 600 responses analysed, 36% indicated that they employ 5 or less people, and 45% employ between 6 and 50 in their business.

Except in the area of recruiting skilled staff, other findings remained consistent with the previous survey in November::

- While 36% of respondents indicated that finding skilled staff was harder today than three months ago, just 9% said it was easier and 35% said it was the same. The comparable responses in the previous survey in November were 33%, 10% and 39%.

- Thirty-seven percent (37%) of respondents indicated that demand was the single factor most limiting their ability to expand, while the next highest constraint was finance at 21% followed by capacity at 14% and labour 13%.

In terms of differences across the region:

- Optimism is highest in Manukau with 15% expecting the general business situation to improve over the next six months, with Auckland at 8% the next highest, followed by North Shore at 7% and Waitakere 5%.

- In contrast, 32% of respondents in Manukau expect the general business situation to worsen in the next six months, compared to 40% in Auckland and North Shore. Nearly half (47%) of those surveyed in Waitakere expect the general business situation to deteriorate during the next six months.

Commenting, Chamber of Commerce Chief Executive Michael Barnett said that despite the high level of expectation of individual businesses that their business situation would improve in the next six months, some obvious concerns are revealed about interest rates, recruitment of skills, difficulties sourcing capital and the time-cost involved in addressing compliance issues.

"While the government can clearly take a comforting message from the survey - optimism has increased on the previous two surveys, and those expecting conditions to deteriorate is at a record low 8% compared to 16% last August - on the other hand the survey reveals some warning signs.

"With 60% of respondents predicting interest rates to rise in the next 12 months, compared to 30% to the same question in August last year, the question has to be asked: 'Is this level of optimism as good as it gets?'"

"It is almost as if the market has a built-in expectation that when growth signs appear, Reserve Bank Governor Dr Don Brash will step in and snuff the optimism by lifting interest rates," said Mr Barnett.

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