KEY POINTS:
More jobs are likely to be lost as businesses battle the global financial crisis.
That is indicated in yesterday's Institute of Economic Research's survey of business opinion, which shows employment intentions at their weakest level since 1991.
The quarterly survey - the longest-running and most comprehensive of its
kind - was comprehensively dire.
To add to the gloomy economic outlook, credit rating agency Standard & Poor's warned the Government of a possible downgrade in the country's rating, which would push up interest rates again.
The combined news pushed the New Zealand dollar down last night to a one-month low of US56.13c.
The business survey showed the proportion of firms recording a contraction in their activity in the last three months of last year, and those expecting a further decline over the next three months, were both the weakest since 1970.
The same weakness is evident in what companies say about the labour market.
They are finding it easier to get skilled and unskilled labour than at any time since 1991. That suggested the strong wage increases of recent years were at an end, ANZ National Bank economist Philip Borkin said.
In September a net 7 per cent of firms said they expected to reduce staff numbers in the coming three months.
In the event a net 21 per cent did, and in the latest survey a net 32 per cent - the highest number since 1991 - say they expect to cut staff.
In the upper North Island the figure is higher still, a net 36 per cent.
Employment intentions are weakest among retailers - a net 43 per cent expect to cut staff numbers - but manufacturing (a net 39 per cent) and building (a net 36 per cent) are not much better.
ASB economist Jane Turner said the figures showed how quickly and sharply the labour market had turned around.
"We have gone from extreme labour shortages into a situation of a large amount of slack in the labour market," she said.
After four years below 4 per cent, the unemployment rate rose to 4.2 per cent in the September quarter last year. Some economists predict it will rise to around 7 per cent.
Bank of New Zealand economist Craig Ebert said the survey put paid to any thoughts that with interest rate cuts, tax cuts and tumbling petrol prices the worst of the recession might be over.
"It's looking very, very ugly out there."
Financial markets are expecting the Reserve Bank to cut the official cash rate from 5 per cent to 4 per cent, or at least 4.25 per cent, at the next review on January 29.
They expect it to have dropped to 3.25 per cent by the time it is done easing, 5 percentage points below its level in the middle of last year.
But such action, and further stimulus from the Government, was more akin to nursing care than a cure for what ails us, Mr Ebert said.
"Much as booms feed on themselves, so do downturns."
There was only so much officials could do to manage the behaviour of millions of people.
Employers and Manufacturers' Association chief executive Alisdair Thompson said
briefing meetings held with association members in November showed employers initially taking a wait-and-see approach to staff cuts.
But "in the space of a couple of weeks" as the briefing round finished, employers were beginning to think about immediate lay-offs.
"There's a world-wide fall-off in the demand for goods and services."
Auckland Chamber of Commerce chief executive Michael Barnett yesterday predicted a two-tiered series of redundancies.
In the first, employers would lay off extra staff accrued over a decade of prosperity.
The second would come as the recession bit and businesses concentrated on their "core business".
The Government received a fresh reminder of the limits of its room to manoeuvre yesterday.
The Standard & Poor's agency warned of a downgrade in the country's credit rating unless the Budget laid out a credible plant to stabilise the Government's accounts in the medium term and the country's burgeoning balance of payments deficit improved.
A rating downgrade would push up interest costs across the board.
- ADDITIONAL REPORTING: David Eames
