Rising prices have become the second biggest issue for Wellington and central New Zealand businesses behind ongoing staff shortages.
The latest Central New Zealand Business Confidence Survey has revealed net confidence in the national economy has plummeted by 57 per cent compared with March last year.
Four out of five respondents said it was harder to find skilled staff compared to this time last year. Three quarters of employers were concerned about staff workloads.
The survey was conducted over a two-week period before the Government announced the country was moving to the less restrictive orange traffic light pandemic response setting from 11.59pm last night.
Yesterday the Reserve Bank also signalled it is prepared to move faster to head off inflation. It lifted the official cash rate by 50 basis points to 1.5 per cent, saying its path of least regrets was to "increase the OCR by more now, rather than later".
Business Central chief executive Simon Arcus said businesses were experiencing the long-term consequences of the supply chain crisis and a lack of skilled staff.
"Prices are going up across the board, and businesses are having to pass on the costs to keep their doors open.
"There just aren't enough people in the country to fill the jobs available. It's hurting our productivity and driving up costs. When half our businesses don't have the staff to meet customer demand, that's going to push up the cost of living for everyone."
The orange traffic light setting means no indoor or outdoor capacity limits and seated rules removed. The seven-day isolation requirement for positive cases remained.
Masks are still required at some gatherings and events, close-proximity businesses such as hairdressers and retail stores.
Arcus said the move to the orange setting was a step in the right direction.
"What we're hearing is Wellington businesses are feeling good about this decision and they're feeling good about the pace of the decision. The Government has acted decisively and they've made the call on the day. It bodes well for a good Easter."
He said there were small green shoots of optimism in that respect.
However, Arcus said the issue of business confidence being at -43 per cent was an issue that ran deeper than the traffic light settings.
"We have seen a plummet in confidence. It's very low even by historic standards and one of the other things we've seen that's really interesting is inflation has shot up as a major concern for any business we surveyed."
Inflation was a "wicked" issue that could not be solved overnight, Arcus said.
"I think what we're going to see is businesses grappling with the cost of doing business and how to pass those cost on at times to consumers. That's a real challenge in an environment where people are feeling stressed and very overwhelmed post-covid."