Editorial: Business still foggy on the way ahead

If the oracles are right, we are in the last quarter of this long recession. The Treasury and other forecasters have been predicting growth to return some time after September. They have also been expecting unemployment to rise and continue to worsen when the economy is making a slow recovery. Unemployment usually lags behind changes in activity because firms are reluctant to lay off loyal staff and slow to take on new obligations.

The first part of the prediction appears to be true. Yesterday, we reported that the number on the dole had risen to 50,855 last month, more than 20,000 above the number at the end of last year and three times the figure of a year ago. These numbers need to be kept in perspective. The latest figure is barely half the numbers on the dole after previous downturns. But nor is it a full measure of those in need of work at present.

It excludes those who do not qualify for the dole, usually because their husband or wife is still earning a good income, and those who prefer not to register for the benefit. The Auckland Chamber of Commerce is setting up an independent register next week for redundant corporate professionals who need to tap a wider business network.

When the chamber advertised for vacancies a fortnight ago, it says, it got 76 responses, confirming there are always openings in a recession even if it becomes more difficult to find them. Unemployment will continue to rise in the initial phase of recovery if economies have been changed by the recession. Fewer jobs might be found in sectors such as finance and property dealing, more in primary processing, tourism and technology.

Every year, the Herald conducts a detailed survey of company chief executives, assessing their outlook for their business, their views on the national economy and its needs, and much else. The "Mood of the Boardroom" published today is interesting in several respects.

While more than half the 92 respondents said they had reduced staff this year and 26 expected to make reductions over the next year, a greater number expect to authorise more IT expenditure in the coming year. Some of this might displace jobs but experience suggests it will create many more. The productivity boost from the great technological change that arrived in the early 1990s may not be finished yet.

On balance, the surveyed business leaders are less optimistic now than a year ago on the prospects for their industry, the New Zealand economy and the global economy. Among their highest worries are access to capital and debt finance, though only nine had suffered a loss of credit lines since September. Only 10 felt they had applications for debt finance unreasonably rejected and only four admitted to a failure to obtain an injection of equity.

They also register strong concerns about uncompetitive personal tax rates, Government regulation, low labour productivity, the current account deficit and, most of all, the dollar's exchange rate. John Key's Government gets a pass mark for economic leadership from 63 of them, though they were not impressed with his "Job Summit" and most think he should be doing more to reduce spending and improve the Budget deficit.

But when invited to nominate Government savings, social outlays seem sacrosanct to most of the business leaders. And they are no braver when invited to change the tax mix. Most want reductions in personal and corporate rates but not a compensating increase in GST or a comprehensive capital gains tax.

We may be on the cusp of a slow recovery but business seems not to see a clear way ahead. Winter unemployment will cloud confidence for a while yet.