1 Nov 2008

Businesses fear worse times to come

9:23 am on 1 November 2008

Many New Zealand businesses are warning of their bleakest year yet in terms of plans to hire staff.

The National Bank's business confidence figures for October have shown a plunge in confidence, with the largest one-month fall since the survey began in 1988.

The figures show pessimists outnumber optimists, with a net 42% of firms expecting economic conditions to deteriorate in the coming year.

Expectations businesses will hire more staff also fell to a historical low, with a net 21% expecting they will have fewer staff in a year's time.

Shamubeel Eaqub, from the investment bank Goldman Sachs JBWere, says businesses may have overstated their fears, because the survey was carried out during a period of extreme economic uncertainty.

"We are now at the peak period of output weakness and job losses," he said.

"The recession is making itself felt in the labour market and we would expect the next few months to be fairly painful in terms of job creation. That is the reality of economnic recession."

The National Bank's chief economist, Cameron Bagrie, says the results are a direct fallout from extraordinary activity in the global financial sector.

Mr Bagrie says businesses may find it difficult to keep perspective until the financial turmoil has fully played out.

Flexible labour market 'key to recovery'

Business New Zealand says keeping the labour market as flexible as possible could help the country get through the global financial crisis.

Chief executive Phil O'Reilly told Morning Report on Friday that a flexible labour market is a key aspect to recovery.

He says those with low skills and no skills should be looked after and that business will pull the economy out of trouble.

Meanwhile, apprentices are being laid off as business confidence plummets.

The Apprenticeship Training Trust helps school leavers into jobs such as plumbing, gas-fitting and drain-laying. Its general manager, John Berridge, says it is becoming more difficult to find host employers.

Mr Berridge says he knows some firms which are down to a four-day week, while others are laying off qualified staff and apprentices.

He says he is writing to offer employers the chance to share an apprentice with another firm if work is too scarce to keep someone on fulltime.

The manager of Hutt Gas and Plumbing, Colleen Upton, says despite more difficult times, all the firms she knows are trying to keep their trainee staff.

Ms Upton says shedding apprentices in tough times undermines the long-term future of a business.

Banking sector waits for guarantees

The banking sector is waiting to hear whether it will receive government guarantees on wholesale funding.

Since the Australian government announced a wholesale guarantee for its banks in September, trading banks in New Zealand have argued they will be shunned by foreign creditors if this country does not follow suit.

Massey University banking lecturer David Tripe says extending the guarantee will only encourage riskier lending and leave the Government with a potential $310 billion liability.

Mr Tripe believes pressure should be put on the Australian government to allow banks there to lend more to their New Zealand subsidiaries.