The spiking price of fuel, slow progress on housing and infrastructure and the threat of rising labour costs has sent business confidence in the country's biggest city into "free fall", says Auckland Chamber of Commerce boss Michael Barnett.

The chamber last week surveyed 800 businesses and found nearly half (44 per cent) believed the economy will deteriorate over the rest of this year.

Only 15 per cent thought the economy would improve during that time.

Compare that to June last year, when a third of businesses surveyed thought the economy would improve while only eight per cent believed things would get worse.

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The chamber said that skill shortages were getting more pronounced for small-and-medium businesses, which made up 97 per cent of the chamber's survey

But uncertainty over the direction the Government is taking the economy was the main reason behind the slump in business confidence, Barnett said.

Businesses, according to Barnett, were upset with the Government over what they perceived as slow progress on infrastructure and housing.

"There appears to be no speed of action and no decisions, just working groups," he said.

The 11.5c fuel tax - which Auckland Council last week approved - and increasing cost of labour was also biting.

The minimum wage rose 75c to $16.50 per hour on April 1 and the Government has said
it is committed to hiking it to $20 by 2021.

Michael Barnett, chief executive of the Auckland Chamber of Commerce. Photo / NZME.
Michael Barnett, chief executive of the Auckland Chamber of Commerce. Photo / NZME.

"The biggest threat to a small and medium business is the threat of a price of labour hike, a spike in the cost of labour. And they [businesses] are told the minimum wage is going up, they told the living wage is going to be in there by 2020 and they're told that if they don't think they can manage it they shouldn't be business," Barnett said.

Barnett said the Government had to get better at communicating because businesses also acknowledged there was going to be opportunities when topics like infrastructure and housing came up.

Other surveys have also found that business is getting more gloomy.

The ANZ Business Outlook Survey for May - released last week - found a net 27 per cent of firms were pessimistic about the year ahead, down four points on the prior month.

Firms' views of their own activity (which has a stronger correlation with GDP growth), also dipped from a net 18 per cent positive to just 14 per cent, the lowest reading since November.