Companies cannot find enough staff

New Zealand employers are finding recruiting staff is harder than it has been at any time in more than 30 years, a survey shows.

A quarter of 1400 firms surveyed by the New Zealand Institute of Economic Research said labour was the single factor most limiting their ability to boost turnover. This was up from 22 per cent in September, and is the highest it has been since mid-1974 and reflects the 3.8 per cent unemployment rate - an 18-year low.

NZIER says pressure on resources - plant, equipment and labour - remains at record levels with labour shortages a key constraint on economic growth. However, the strong dollar is keeping imports cheap and inflationary pressures, although widespread, are lower than they were in September.
All this has economists predicting the Reserve Bank will leave the Official Cash Rate unchanged at 6.5 per cent on January 27.

NZIER said its quarterly survey suggests robust economic growth continued into the fourth quarter. The economy grew 4.6 per cent in the year to September 2004. 

The building construction sector is feeling the labour pinch the most, with 71 per cent of firms surveyed saying labour was the factor most limiting their ability to lift turnover.

In contrast to labour, concerns over sales and orders are at their lowest level since 1974 with 43 per cent of companies rating this the major factor limiting their ability to raise turnover.

Of the companies surveyed, 61 per cent said it was hard to find skilled workers and 40 per cent said it was difficult to find unskilled labour. That is up from 54 per cent and 34 per cent respectively from September.

"The survey is confirmation the economy is still operating very close to full capacity," said Westpac chief economist Brendon O'Donovan. "The machines are being run pretty much on full tilt and you can't find employees."

Capacity utilisation, measuring how much plant, equipment and labour is being utilised, remained steady at 93 per cent. This is the highest level it has been at since the survey began in 1961.

NZIER predicts average wage growth of 3.7 per cent this year and 4.2 per cent in 2006. It said 11 per cent of companies intended to increase plant and machinery investment, up from 5 per cent in September.

Meanwhile, 28 per cent of firms plan to raise prices in the next three months, down from 34 per cent in the previous survey.

Ulf Schoefisch, chief economist at Deutsche Bank, said the strong dollar is keeping a lid on inflation because cheap imports mean good deals for shoppers. If the dollar fell to about US60c there would be pressure on inflation, Schoefisch said. The dollar was buying US69c yesterday.