Businesses Will Go To The Wall

The EMA is warning that businesses will close their doors or significantly downsize existing workforces if recent predictions around future unemployment levels are realised.

The warning comes as recent commentary from the Government, bank economists and the Reserve Bank all highlight unemployment levels at greater than five per cent as the economic squeeze goes on to rein in demand and combat inflation.

"The only way that the unemployment number starts with a five, given the current workforce and immigration constraints, is if businesses either shut their doors or reduce staff numbers," says EMA Head of Strategy and Advocacy, Alan McDonald.

"That’s terrible for business owners and their staff."

McDonald says feedback from the EMA’s recent round of Member Briefings highlighted critical staff and skill shortages; immigration constraints; strong demand for higher wages and salaries; and ongoing rising costs imposed on businesses - from supply chain problems and changing government legislation - as major issues for employers.

"Many businesses have little left in the tank after more than two years battling through COVID and many of our members are at a low ebb. The frightening retail crime wave is another low point for small businesses," he says.

"If the message from our central bank is to ask consumers not to spend and tell workers not to ask for bigger pay increases, then we are bereft of ideas for fixing our economy."

Mr McDonald says the business community was willing to help overcome some of these major issues and work with Government and others to rebuild confidence.

"Business shares Government’s goal around a more skilled, productive and higher paid workforce. Increased productivity leads to higher wages and that means encouraging investment in new technology, machinery and people.

"Bring in more rapid depreciation on new investment. Encourage and recognise that two-thirds of training happens in the workplace - not schools and universities - and fund it, and free up the immigration pipeline to encourage and more rapidly introduce the skills we need that will unlock more higher paid jobs around that particular role in a workplace."

He says there is little point channelling new or retraining workers into a field if there aren’t enough skilled people to train them. When those new people do come into the workplace, we need the education sector to deliver work-ready young people to the workforce. They can only do that by understanding the needs of and working with employers.

"Artificially raising wages through Fair Pay Agreements or large jumps in the minimum wage does not increase overall wages, and simply increasing wages does not automatically lead to increased productivity. They just increase business costs that are then passed on, adding to inflation," he says.

"Where there are identified sectors where low wages and conditions are an issue, work with business and the Unions to fix those sectors. Beef up the workplace inspectorate to reduce exploitation of vulnerable migrants and other workers.

"The new Spatial Planning Act, if implemented well, could unblock some of the road to faster infrastructure builds. But there’s little point in freeing up planning if we remain locked into a cycle of new business cases, project re-evaluation and interminable consultation. We need our new schools, hospitals, networks and communities this decade, not next and we need to be more open about how we fund and build that infrastructure so we do get the most value from what will be a very large spend."

Mr McDonald also says inflation was the new COVID that needed a joint effort to beat back.

"Perhaps we could look at reconvening the Business Advisory Council to work with Government to help overcome the issues faced with this new national economic challenge."

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