The Business Herald’s markets and banking reporter.

Many Auckland firms expect boost

Revenue rise seen as likely among small and medium-sized firms but many holding off taking on new staff.

Confidence in Auckland is improving. Photo / Brett Phibbs
Confidence in Auckland is improving. Photo / Brett Phibbs

Almost half of Auckland's small and medium-sized firms expect a lift in sales in the coming year, research suggests, but an economist says rising confidence among the city's businesses is failing to translate into a lift in the number of companies taking on new staff.

According to a MYOB Business Monitor survey, which canvassed 1000 firms, 45 per cent of Auckland SMEs are expecting revenue to rise this year.

That's ahead of Wellington, where only 31 per cent of the businesses surveyed are expecting a lift in sales, but behind Christchurch where the post-earthquake rebuild is boosting confidence and 57 per cent of companies are expecting revenue to go up.

Auckland firms, however, lagged behind those in the other two cities in terms of actual sales increases in 2012, with 32 per cent reporting a lift in revenue, compared with 33 per cent in the capital and 45 per cent in Christchurch.

James Scollay, of accounting software provider MYOB, said Auckland firms viewed 2013 as a key year for their return to growth.

"Such a positive outlook from New Zealand's biggest city - a key driver of the national economy - shows signs we're shaking off the lasting effects of the recession and returning to a period of growth and confidence," Scollay said.

But Auckland Council economist Geoff Cooper said increased confidence among businesses was failing to boost the job market in the city.

That was the result of a number of factors including low interest rates, which made capital investment seem more attractive than taking on new staff, and there not having been the kind of sustained economic growth businesses required to account for increased labour costs, he said.

"Over the past four years employment growth's really struggled to keep up with population growth [in Auckland]."

While there had been a big reduction in Auckland's unemployment rate between the third and fourth quarters of last year, Cooper said that was mostly the result of seasonal factors and people dropping out of the labour force.

"It didn't actually represent a great deal of new employment growth, which is what everybody's after."

But Cooper said the proportion of Auckland firms expecting increased sales this year was a positive sign.

"High confidence goes along with economic growth ... so in that respect it's a very positive sign for Auckland and largely in line with some of the initial figures that we're seeing in terms of that [confidence] translating into economic growth."

With 37 per cent of gross domestic product produced in Auckland, Cooper said the city's success was important for the country.

"For New Zealand to succeed Auckland's got to do its fair share."

Close to a third of Auckland businesses expected the economic environment to improve in the next 12 months, while 34 per cent of firms in the city had observed more work in the pipeline for the coming three months - one percentage point higher than the country average and only one percentage point behind Christchurch, according to the survey.

"This increase in workload is spread across many key sectors within Auckland, with a number of bellwether industries showing real improvements in the amount of work they have booked to the end of the financial year," said Scollay.

Attracting new customers was seen as the biggest challenge.

- NZ Herald

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