Bullish economic optimism among South Island businesses could soon be tempered, with nearly 50% of businesses citing the availability of skilled workers as a concern, according to the Grant Thornton International Business Report (IBR).

This compares with 28% for the North Island.

Simon Carey, partner at Grant Thornton New Zealand, said the fact that 23% of South Island businesses indicated that the skill shortage was a major constraint, compared with only 5% for the North Island, indicted the potential severity of the problem.

“The biggest concern is that this skill shortage is only likely to get worse in 2014,” said Carey.

“With construction in Auckland and Christchurch expected to accelerate next year, alongside other favourable trading conditions, some economists are predicting the economy to grow by 4% in 2014.

“Couple this with the fact that the Australian economy is starting to pick up again, and we can see even more pressure mounting on our skill shortage.

“The good news is that 74% of South Island firms and 69% of North Island firms are optimistic about the country’s economic outlook over the next 12 months, with 23% (SI) and 15% (NI) being very optimistic,” he said.

These optimism figures are supported throughout the survey with South Island firms expecting to generate a greater increase in selling prices than North Island companies (48% to 37%), employ more staff (42% to 32%), invest in plant and machinery (55% to 51%) and pay higher wages, with 85% of South Island businesses looking to increase salaries in line with or above inflation compared with 82% for the North Island.

“The massive rebuild of Christchurch will only really kick off next year. Couple this with an anticipated dairy boom in the South Island, underpinned by giant irrigation projects such as Central Plains Water in Canterbury and the proposed Hunter Downs in South Canterbury, and it’s likely optimism will remain strong for several years.

“But the lack of skilled workers will be a handbrake, both for the South and North Island.

“With the momentum of the economy picking up, the escalating demand for skills will put pressure on wages, pricing, and, ultimately, inflation,” he said.

Further enquiries, please contact:

Simon Carey           
Grant Thornton Partner, Privately Held Business
T +64 3 964 6812
M +64 (0)21 665 708
E simon.carey@nz.gt.com