It is no surprise that the economy entered a recession in the December quarter given the difficult economic environment facing many businesses says the Employers and Manufacturer’s Association (EMA).
EMA Head of Advocacy, Alan McDonald, says the economy is struggling because inflationary pressures, high interest rates and low consumer confidence are combining to hit many businesses hard.
"Not only are sales falling but business costs and bad debts are rising, and this is forcing many to look at where they can reduce their outgoings," says Mr McDonald.
"Unfortunately, this inevitably means looking at cutting staff numbers. As a result, we have seen a surge in requests from our members looking for support around redundancy and restructuring.
"Calls to our AdviceLine have increased by 70% year-on-year and our support team is receiving an average of thirty calls a week from businesses looking for help around restructuring and redundancy.
"Inevitably this will be reflected in the unemployment rate, which we expect to rise over the next year as businesses continue to respond to the economic slowdown.”
Mr McDonald says while all parts of the economy are being impacted by the slowing economy, the manufacturing sector has been hit particularly hard.
"The latest PMI numbers, which is a global measure of manufacturing activity released this month, showed that New Zealand’s manufacturing sector entered its twelfth straight month of contraction. This is the longest period of contraction since the Global Financial Crisis in 2008/09," says Mr McDonald.
"Manufacturing is still incredibly important to the economy, responsible for 10% of GDP, 60% of exports and employing 12% of our workforce. It is no surprise, therefore, that when our manufacturers are struggling so does our economy."
He says the priority must be on supporting an economic recovery and reducing inflation.
"There are some positive signs and business has welcomed several steps the new government has already taken but the focus needs to remain on rebuilding the economy and business confidence.
"That means continuing steps to encourage investment, cut red tape and reduce costs. A healthier economy supports increased investment in our social services."
