So who will make the hay this summer?

New Zealand’s longest-serving economics think tank says the current labour shortage is the worst it has ever observed.

The New Zealand Institute of Economic Research began its surveys of business opinion in 1961, and its second quarterly survey for the year released yesterday said the scarcity of skilled and unskilled labour was at the most acute on record over the history of the survey, with firms finding it particularly difficult to hire skilled labour.

Yet paradoxically, the number of workers saying they are not getting enough hours of work each week is up 22 per cent on pre-covid figures.

However most are concentrated in retail. accommodation or food services — a product of the impact the closed border is having on tourism.

There are far fewer in critical areas of the economy like agriculture or IT.

But so far, the Government appears to be unmoved by the shortages, making only minor modifications to its border entry regulations.

Perhaps the oddest example of a shortage came from the Office of the Auditor General yesterday.

Parliament will have to pass the Annual Reporting and Audit Time Frames Extensions Legislation Bill to allow an extension of the June 30 audit date for Crown entities and annual reporting requirements of local authorities and council-controlled organisations.

The Auditor-General, John Ryan, said there was a shortage of auditors across New Zealand and Australia.

“Normally, the audit profession relies on bringing in auditors from overseas to manage the workload at this time of the year,” he said.

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“With border restrictions in place, there is a limited supply of auditors in both the public and private sectors.

“Compounding this, there are auditor retention challenges.

“A tight labour market for qualified finance staff means that auditors are actively sought for other positions.”

Meanwhile, the country’s restaurants yesterday turned their lights off for two minutes in a bid to try and attract the Government’s attention to their shortages of staff.

POLITIK has already reported on the crisis facing the meat industry with a shortage of Muslim butchers, which may lead to the meatworks chains having to slow down with a consequent loss of output for the country’s second-largest export industry.

In Southland, agricultural contractors are worried they will not be able to cut and bale enough winter feed to get farmers through the next winter.

Daryll Thompson told “The Muster” radio show yesterday that he was short of 15 machinery operators for the coming season.

He hoped to get three or four operators from the quota of 125 mobile machinery operators that the Government is allowing into the country.

“We had that wave of covid redundancies where we had baristas; we had airline pilots, we had people from all sorts of walks of life and people from the tourism industry, whatever, whose jobs had been affected,” he said.

”But they’ve been sucked up now, I guess.”

Thompson said he and other contractors were getting no replies to ads for staff.

“We do have another elephant in the room, and it’s bloody Australia,” he said.

“They’re actively recruiting over here because the bubble means that they can bring people in without quarantining.

“And so they are actively recruiting over here, which has affected us personally,” he said.

“Guys are going over there for big money.”

But when officials in Wellington stand back and look at the statistics, they see a different picture to Daryll.

The March quarter Household Labour Force survey showed that there were 170,000 workers who wanted to work more hours but couldn’t because there wasn’t sufficient work available.

That number was up 22 per cent on the pre- Covid March quarter last year, which suggests that there are massive inefficiencies in the way labour is employed in New Zealand.

The solution to that, increasing productivity by employing more machinery, appears to be increasingly looked at by New Zealand businesses.

The NZIER survey notes that a net 26 per cent of businesses reported increased demand in the June quarter.

“These results suggest the recovery in the New Zealand economy will remain robust over the coming year,” the Institute said.

Speaking in Parliament yesterday, Finance Minister Grant Robertson said that businesses did have concerns linked to the stronger than forecast economic activity.

“These include labour supply issues, global supply chain issues, and whether the stronger than expected economy might lead to earlier than expected interest rate rises,” he said.

“The Government is aware of these concerns; we are working with businesses on them,”

The Institute noted that business was compensating for the shortage of labour by looking to investment.

“A net 15 per cent of firms increased headcount in the June quarter, while a net 20 per cent of firms are looking to increase investment in plant and machinery over the coming year,” it said.

“This increased focus on investment in plant and machinery likely reflects the labour shortages that firms are facing, which is encouraging firms to consider the use of labour-saving technology. “

To an extent, both business and the Government appear to have been caught by surprise by the strength of the economy.

In April last year Treasury published scenarios for how Covid would be likely to impact the economy.

They forecast that unemployment could range from 13 to 30 per cent.

In fact, unemployment in the June quarter was 4.7 per cent.

In such an environment, something has to give, and the Bank economists yesterday were forecasting that inflation would rise and with that would come interest rate rises.

“Rising demand is occurring in a constrained business environment of rising costs, difficulty in finding staff and sourcing the materials,” said Kiwibank chief economist Jarrod Kerr.

“As a result, inflation is set to rise, and so are interest rates.”

ANZ economists Finn Robinson and Miles Workman said the NZIER report adds further evidence that the economy was in a very strong cyclical position.

“The economy has come roaring back to life since lockdown, and the strength of domestic demand has been enough to more than makeup for the absence of international tourism over the past year,” they said.

.”The labour market is giving off very strong signals, and we think it’s well on the way to maximum sustainable employment and, firms are finally starting to pass on higher costs to consumers (something that they struggled to do pre-COVID), which has helped see a recovery in profitability.

“These developments are important for the monetary policy outlook –it’s easy to look at supply disruptions and say that these are persistent, but not permanent sources of inflation pressure.

“But with the labour market tightening and firms starting to pass on cost increases to consumers (a significant behavioural change), that speaks to a more sustained source of underlying inflationary pressure that will require a tightening in monetary policy, and sooner rather than later.”

One Beehive source yesterday said that though there were obviously tensions within the economy, it was, as Bill English once said, “a nice problem to have.”

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