I went to a really interesting talk by Tony Alexander (BNZ Chief Economist) and his key message was that there is going to be good growth and a positive outlook for Canterbury over the next 4 years.

Although annual growth for Tourism in New Zealand increased by 45% (instead of 4% in previous years) Canterbury has missed out on a lot of the 14.5 Billion that was put into the economy, due to the earthquakes and now as the city is rebuilt and we get more infrastructure it's our opportunity for Canterbury to catch up.

Tony's view is that housing prices in Christchurch will continue to increase, similar to Nelson and it's all to do with supply and demand. Young Professionals with families are more likely to come to Christchurch from Wellington and Auckland as we are the only other city that offers a great lifestyle and cheaper living costs while still maintaining a spot on the professional ladder.

It seems that the rest of the country is experiencing what Canterbury's businesses has had over the last 6 years which is:

  1. Not enough skilled staff means demand is exceeding supply. we are short of skilled staff by net 44% (used to be 19%) and short of unskilled staff by net 29% (used to be 4%)
  2. Low loyalty from employees, the younger generation are trying numerous positions and are not just moving for money but also lifestyle choices, flexibility, type of work which is helping keep wages low.
  3. Customer loyalty is becoming a thing of the past as there is so much easy access to shop around so business owners can't put prices up.
  4. Machinery, tooling and productivity efficiencies are better/cheaper ways of producing and this has been a big factor in the region.
  5. Adopting quickly to change is paramount, this is a part of Canterbury culture now. Even when machinery is purchased, majority know that this machine is likely to be redundant in 5 years or has adaptability capacity.

These factors would normally lead to increased wages and inflation, but it's not and it's got the economists beat. The big message was past cyclical patterns no longer exist, we are living in a new age where things such as interest rate fluctuations cannot be predicted.

My understanding of what Tony Alexander's message about the future of business was that once the minimum wage increases to $20 by 2021 and if a business has inefficient productivity, many are likely to go out of business. This will be good for all the businesses left as they will be able to put their prices up. The businesses still running would have concentrated on:

  1. Working collaboratively with suppliers. (also suffering from understaffing)
  2. Rather than growing in quantity of customers, they have looked after their good customers. (getting rid of the ones that drag them down and are difficult).
  3. Looking after key team members.
  4. Working on internal efficiencies.
  5. Getting a business model that changes quickly.
  6. Having capital to invest in machinery & efficiencies so human labour is not so reliant on.
  7. Having a team that's multi-skilled and adaptable.
  8. Looked at how the business can be environmentally smart and are moving towards the "less is more" philosophy from packaging, electricity, fuels, biodegradables, leaving a smaller footprint wherever possible.

Our outlook nationally is good, key areas include:

  • Increase in tourism.
  • Increased in investment in tourism.
  • Increase in Construction
  • Rise in population (net above 68,000 last year)
  • Increase in healthcare spending.
  • Increase in world growth

BUT capacity will hinder, stop trying to grow (his words not mine), drop bad customers and work collaboratively with better clients.

It was a great talk and I have many other statistics and information so if you would like to talk about this subject more please feel free to contact me.

Next week we will be talking about the Budget and how it affects you.

Warmest Regards,
Louise Neville
Director, Chartered Accountant