14 Jan 2014

Business confidence at 20-year high

10:21 pm on 14 January 2014

Business confidence is at its highest level in two decades and a lobby group predicts that will mean companies hiring and investing more in the coming year.

Phil O'Reilly.

Phil O'Reilly. Photo: SUPPLIED

The Institute of Economic Research's December quarterly survey found a net 52% of firms expected economic conditions to improve, compared with 33% picking better times ahead in the previous period. It is the highest level since mid-1994.

Business New Zealand chief executive Phil O'Reilly says that high confidence is the result of the growing economy, making companies more financially secure and that should boost expansion plans.

"What we've seen in the past is that some companies would be feeling good, some wouldn't be, some regions would be feeling good and some wouldn't be.

"One of the striking things about what's been going on in the last probably three to six months is that those dips in confidence have gone away to a large extent. There'll still be some companies that won't be feeling very good, but not many of them now."

Mr O'Reilly is confident firms are now resilient enough to cope with expected interest rate rises this year.

Survey findings

Trading activity, which the Institute of Economic Research says closely mirrors economic growth, suggests annual economic growth of 3.5% in the last three months of 2013.

Profitability has picked up, while hiring is at its highest level since late 2006 and firms intend to employ more people and invest more in plant and machinery.

A net 15% of firms reported increasing activity - the highest since the beginning of 2005.

The survey indicates that the recovery is broadening beyond earthquake-hit Christchurch to most regions, while activity also picked up across all sectors.

Price increases remain subdued, but companies intend to raise prices in coming quarters.

Constraints on firms being able to lift their production are most pronounced in Canterbury, but are starting to emerge in other regions.

The Reserve Bank is expected to start lifting interest rates in March from a current record low of 2.5%.