Firms eye tech to cut labour costs
Businesses are looking to invest more in plants and machinery and less in buildings, a sign of a move to strip out labour costs, a major business survey suggests.
The quarterly survey of business opinion, covering the first three months of 2018, continued to show gloomy business sentiment.
A net 9 per cent of businesses expect general economic conditions to deteriorate over the coming 12 months, a marginal improvement on the December survey. A negative net score means pessimists outnumber optimists overall.
Christina Leung, principal economist at the Institute of Economic Research (NZIER), said the survey showed negative business sentiment, which is not unusual when a Labour Government takes power, but trading activity remained solid.
A net 15 per cent of businesses reported a rise in their own activity in the three months to March 31, while a net 16 per cent expected their own trading to improve in the coming three months.
But the survey also showed a change in investment intentions, which suggested that while businesses are broadly expecting to continue to expand, there may be a slowdown in employment growth.
A net 17 per cent of businesses expressed plans to invest in plant and machinery, which can be a measure of labour cost savings.
Leung said NZIER, which has undertaken the QSBO since 1961, said investment intentions were being seen as an indication to cut labour costs.
‘‘Given the fact that with labour shortages still acute and labour costs looking to be rising, businesses are thinking about investing in labour-saving technology.’’
The number of businesses expecting to take on more staff still outnumbered those looking to make cuts, but the gap narrowed, to the lowest level since 2013.
‘‘This easing in hiring intentions does suggest a moderation in employment growth over the coming year,’’ Leung said.