Rebuild boosts business confidence
South Island businesses are increasingly bullish, outshining their northern counterparts, according to a Grant Thornton IBR survey.
Simon Carey, a Christchurch partner of Grant Thornton New Zealand Ltd, said that over the next year, 73.2 per cent of South Island businesses expected an increase in revenue or turnover.
This was ahead of the 65.4 per cent in the North Island who expected an increase.
Overall 65 per cent of southern businesses were very or slightly optimistic compared with 57.2 per cent in the North Island, Carey said.
The Christchurch rebuild from the 2010 and 2011 earthquakes was a major factor in the growing confidence, he said.
"Last year (2012) I think it's fair to say that many businesses have been watching from the sidelines as they wait for the city's blueprint to be finalised and the way cleared for rebuild activity.
''We're now almost at that stage and businesses are optimistic about what lies ahead," Carey said.
"Clearly there will be benefits across the country and in the past year we have already seen some businesses opening an office in Christchurch or expanding their operations, poised for the economic spin-offs which are set to accrue."
The Grant Thornton survey falls in line with recent ASB surveys of activity in Canterbury as shown by a ''Cantometer'', a reference tool to get a taste of activity and the rebuild in Canterbury.
The Cantometer, developed by the bank, shows the region's aggregate activity levels have now lifted above pre-earthquake levels during the last two survey periods with the construction sector dragging up the total index.
The surveys have been released in November and December 2012.
Grant Thornton's Carey said that while the Christchurch rebuild would have a significant positive impact on the South Island economy for many years to come, the importance of the agricultural sector could not be under-estimated.
Commodity prices remained strong and dairy numbers were growing. Water schemes would help the expansion.
''With large irrigation schemes such as Central Plains Water about to kick off, the importance of agriculture in the South Island will continue to grow. Minister Gerry Brownlee is quoted as saying that for every $1 billion invested in irrigation it will return $1b year-on-year. Over $1b is earmarked for investment in irrigation in Canterbury alone over the next few years."
Carey said that both South Island and North Island businesses expect profitability to increase - 64.9 per cent and 67.30 per cent respectively while 26.8 per cent and 24 per cent think it will remain steady.
"That confidence is reflected in the intention of 66 per cent of South Island firms (and 51 per cent of North Island firms) to increase investment in plant and machinery, while 47.4 per cent (North Island 34.6 per cent) are planning to increase the number of employees."
Helping the employment situation in the South Island, 44.3 per cent of businesses increased the number of people they employed during 2012 (against 27.9 per cent in the North Island) while 26.8 per cent of southerners (North Island 21.2 per cent) were tipping an increase in salaries by more than inflation.
In the South 50.5 per cent (North Island 48.1 per cent) expected salaries to stay in line with inflation.
Carey said it was encouraging to note that almost half the businesses surveyed, 48.5 per cent, did not expect the cost of finance to pose any constraint to expansion and another 19.60 per cent saw it as a minor impediment.
"It's certainly good news to find that seventy six per cent expect little or no constraint around long term finance while slightly more than half those surveyed, 55.6 per cent, see little or no impediment around shortage of orders and reduced demand."