KEY POINTS:
Wage hikes and labour shortages worry small and medium businesses the most, despite general optimism about the economy.
The New Zealand Herald Mood of the Boardroom survey, in association with Business New Zealand, reveals the tight labour market is inhibiting growth and putting companies under pressure to lift pay rates to nearer Australian levels.
Business owners said they struggled to find staff to fill many jobs and had to call on family members to "fill the gaps'' or scale back their operations.
Bruce Gore, managing director of South Pacific Rewinders in Otahuhu, Auckland, said the inability to attract skilled workers made him want to give up the business.
"Things are not good. There is no enthusiasm in the business to step up and make it grow,'' he said. "Your option is to close it down and walk away.
"There is a diabolical skill shortage. I advertised for somebody two months ago and got two replies - one from somebody who had worked for me before and one from somebody who didn't have a work permit.''
Gore said the situation was not helped by what he described as poor polytechnic training for young people. "The apprenticeship system [polytechnic training] is abysmal. It is going to come back to haunt the country.''
His industry, like many others, had an ageing workforce, he said. Fifteen years ago, he employed 22 staff compared with eight today.
"Most of the people we employ are in their late 40s to my age [60]. Young people don't get steered into trades.''
Skills shortages were endemic throughout the trade, he said. "I know that for hydro-generation repairs and power station repairs, they have to pull in people from all over the world to get the repairs done.
"People in New Zealand are underpaid and we have a government that says people are not saving but I say, how can they save? They are not earning enough to save.''
Forbes Worn, managing director of Dorothy Home Cookery in East Tamaki, Auckland, said skill shortages were a major difficulty for the baking business.
"We will have one or two general bakers and will have to pick up school leavers but in the past five years we have not kept one of them.
Worn said some job applicants wanted to be paid under the counter or expected the company to sponsor them for residency.
The job market was so tight that it was no longer appropriate to talk about a simple skills shortage, said Employers and Manufacturers Association (Northern) chief executive Alasdair Thompson. "What started as a shortage of skills has become a shortage of labour,'' he said, blaming emigration. "We are losing middle-class New Zealanders. These are the people who have got the get-up-and-go and want to get ahead.''
He said the problems facing small and medium businesses could not be solved by drawing more people into the workforce. "We have the highest engagement in the workforce in the western world. More New Zealanders want to work or are working than in any other country.''
The answer, he said, was to create an environment that was attractive to business and encouraged New Zealanders to stay at home.
Thompson conceded New Zealand workers were underpaid compared with Australians but said pay increases had to be supported by a rise in productivity.
Business Roundtable executive director Roger Kerr was happy about the tight labour market. "The objective should be a fully employed market, where labour is scarce and where employers will have to pay more for labour,'' he said.
But he also warned that pay rises could not come without productivity increases, and predicted the wages gap between Australia and New Zealand - already about 25 per cent - would widen.
"New Zealand is a much better economy than it was 15 to 20 years ago. But the big question is: are we doing as well as we could?'' he asked. "New Zealand was performing as well as Australia in the early 1990s but now we are falling away.''
Business New Zealand chief executive Phil O'Reilly said there was a risk of wage demands imposing an undue burden on small and medium companies.
"Wage deals done by the larger companies which do have union pressure will trickle down to them.
"I am not hearing from small business yet about cost increases of wages but things like cost increases of the extra week's holiday and KiwiSaver are legislative wage increases with no productivity benefits at all.''
Not all small and medium businesses are struggling to find staff. Auckland-based clothing supplier Ambler & Co, known for its Summit brand, said it had not been affected by skill shortages.
"I don't think this is going to be the case for us,'' managing director David Ambler told the Herald. "We have a very contented workforce.''
And Mike Hollier, co-founder of Auckland-based Vital Food Processors, said his industry's major problem was raising capital. "We are a research and development business and we don't have any issues in terms of skills shortages. Our issues are around raising capital.''
He said the company, whose products included dietary supplements made from kiwifruit, had to undertake extensive research and clinical trials to expand its markets. To fund this Vital Food Processors last year sold a majority stake to BioPacific Ventures, a $100 million Australasian venture capital fund, with kiwifruit supplier Seeka Kiwifruit Industries as a co-investor.
The deal provided the necessary financial backing to complete research and expand international marketing but Hollier said the New Zealand capital market's lack of sophistication gave the company little choice but to go with BioPacific Ventures.
"We trawled around the New Zealand market for a year before we locked on BioPacific Ventures and we are very happy to have them.''
Had tax laws been different, Hollier said, shareholders would have been able to personally claim accumulated tax losses because of the company's loss-attributing qualifying company status. But a change in shareholders meant those losses could not be passed on.
The absence of a vibrant domestic capital market meant New Zealand technology companies either failed to meet their potential or ended up being overseas owned, he said.
"It would be nice to see some better opportunity [for capital raising]. The loss of DFC New Zealand [the former state-owned development bank placed under statutory management in 1989] was a blow.''
