Financial Commentary
Canterbury economic growth is on track
Fuelled mainly by the rebuilding in Canterbury economic growth is on track to accelerate to around 3% by early next year. Small and medium-size enterprises (SMEs) are central to longer-term growth prospects and on that front some work is needed.
Business and consumer confidence surveys have improved moderately in the last couple of months. This suggests that economic growth is in the process of improving from the modest 1.4% recorded in 2011.
Provided the international financial crisis muddles through and there are no more major quakes rebuilding in Canterbury will underwrite an improvement in economic growth to around 3%. In 2012 this will be supported by a national upturn in residential building driven by the moderate fall in mortgage interest rates since July 2011.
Things are just starting to pick up on the rebuilding front with Statistics New Zealand reporting 185 quake related
building consents in March. Many firms around the country will supply goods and services to the rebuilding which will filter the stimulus to other parts of the country.
Near-term economic growth prospects are improving, but looking further ahead what happens in the SME space is critical to economic growth prospects.
SMEs make up a major share of employment. Stats NZ’s 2011 business survey revealed that 47% of employees were employed in firms with less than 50 staff. Of even more relevance to economic growth prospects, based on US studies SMEs are responsible for the vast majority of new job creation.
Most new firms start small. And of concern, annual births of new firms have slowed from 63,122 in the 2007 survey to 42,370 in the 2011 survey. Stronger economic growth and hopefully improved access to finance will underwrite some recovery in the birth rate of new firms. But this is an area that gets too little press.
Fostering SMEs rather than strangling them in red tape should be one of the highest priorities of
the government. In this context I would like to congratulate Lock Finance for signing up as a National Patron of Business Mentors.
Rodney Dickens
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The chart shows the % of national employment by firm sizes, with firm sizes based on the number of employees. Source: Statistics New Zealand.