Need to prepare for economic growth

Next year looks like it will be a cracker for Kiwi companies but businesses need to prepare for changes brought by a stronger economy or risk being swamped, says business advisory firm Grant Thornton.

New Zealand has been inundated with positive economic data during the past few months, with expectations that things are only going to get better next year.

The ANZ business outlook survey, released earlier this month, showed a net 64 per cent of firms were optimistic about their prospects, the highest since February 1999.

But Grant Thornton New Zealand privately held business partner Paul Kane said closer analysis of the repercussions from such a bullish economy uncovers some serious warning signals.

Kiwi businesses needed to take action now if they did not want to get swamped by a rampant economy next year, he said.

New Zealand's terms of trade rose to their highest levels in 40 years in the September quarter.

"That is pretty heady stuff for business owners, but it does come with a few kickers," Kane said.

There would be pressure on interest rates, the dollar would probably continue its recent climb, inflation was a possibility and the stretched, skilled employment sector was going to be pulled tighter, he said.

Businesses needed to think about how and when to prepare for economic change.

It was about having the confidence to employ staff now, rather than wait until later next year when staff would be harder to find and wages had climbed, Kane said.

Statistics New Zealand said the unemployment rate for the September quarter was 6.2 per cent and Kane said economists were predicting the unemployment rate would continue to drop.

"Finding good people is going to get very hard," Kane said, especially in the construction, dairy and farming industries.

However, if businesses did take on extra staff now and they did not grow next year it could make "bad positions worse", Kane said.

Kane said businesses did not need to hire new staff to deal with growth.

Kiwi companies tended to throw more staff at a growth problem, rather than invest in research and development, new technology and advanced processes, he said.

Businesses also needed to think about the exchange rate and whether they had sufficient hedging in place and if they should secure advanced orders.

They did not need to fix orders in place now but should have a plan to minimise the impact if things changed, Kane said.

Fairfax Media