By ELLEN READ
Another bumper three months for small businesses means the sector has now out-performed the wider economy for two years straight.
Small business economic activity grew 2.4 per cent in the March quarter, bringing the figure for the year to March 31 to 4.7 per cent, faster than the economy
as a whole at 3.6 per cent.
The National Bank says small business growth remains underpinned by a strong construction sector and the spillover effects into retail and related services.
But economist Lauren Rosborough warned that heavy reliance on the construction sector would leave small businesses vulnerable next year, when construction is expected to slow as housing demand moderates.
The demand for construction is seen to be waning and retail demand easing as net migration falls and interest rates rise.
However, Rosborough said that over recent quarters manufacturing activity (where small businesses service the rural community) had strengthened, so growth was unlikely to suffer markedly.
Lack of skilled employees remained the greatest concern for small businesses in the three months to June 30 - worrying over 20 per cent of those surveyed.
This is consistent with the biggest problem cited by all firms and is not surprising given unemployment is at 16-year lows and a high labour market participation rate, the bank says.
With such a tight labour market, some businesses are having to pay higher wages to attract and retain staff - anecdotal evidence is confirmed by statistics showing real wages paid to staff of small and medium firms have been rising over the past two years.
In March, annual nominal wage growth for small firms exceeded inflation by around 2 per cent.
Regulation remains a worry for small businesses, but fell slightly over the quarter to 17 from 19 per cent - down from its peak of 26 per cent in September 2003.
Inflation, interest rates and supply shortages were bottom of the list of concerns.
