There is a lot of talk in the media about what the next 12 months is likely to bring. Following the Covid fallout and recent severe weather events, we are also heading towards an election. In a nutshell, this is what we are hearing in the media.
- Recession is looming, with inflation close to a 32 year high at 7.2 percent annual rate.
- Living costs are expected to continue increasing this year, and income growth is not likely to keep pace with this, despite another year of strong wage growth.
- Throughout 2023 New Zealand households will be spending more on their mortgage, and therefore not be able to spend as much in the economy.
- The devastating impacts of recent weather events have resulted in widespread economic disruptions throughout the upper and central North Island, and they have had a particularly large impact on sectors like horticulture.
- There are signs that the labour market has started to turn in recent months, with the number of job advertisements trending down since mid-2022. As domestic demand weakens over the next few years, we expect to see a related downturn in jobs growth, along with a rise in the unemployment rate to 5.2% by 2025.
- Businesses across the economy have seen their margins squeezed, with operating costs rising by an average of 8% over the past year. At the same time, many businesses are reporting a drop in forward orders.
Luckily it is not all gloom and doom. There is also some positive news.
- The continuing tourism recovery means that we are back to about two-thirds of pre-pandemic visitor numbers to New Zealand, and there’s still some scope for other markets to recover, which would help our tourism and entertainment businesses.
- Recovery of international economies may also have a positive impact on NZ organisations that export goods. After peaking in early 2022, New Zealand’s commodity prices are ascending again.
What we are hearing in the media is also being reflected in conversations we are having with organisations that we work with.
These are the key themes that we are seeing.
- Organisational restructure is on the rise again, some due to changing landscapes rather than for economic reasons, e.g., the NZ Public Sector. Others are doing so due to financial pressures, organisations futureproofing themselves or refining their offering.
- Scrutiny of expenditure to ensure that every dollar spent offers value in return. We are delighted to see that investment in people is still seen to be valuable by many, as it is times like this that the perceived “nice to have” people areas of business get the biggest budget cuts.
- There is increased awareness of the importance of humanising the workplace. For some organisations we work with, this is new territory. Many have been results-focused, often at the expense of people. They are seeing the benefits of defining a team’s emotional culture and agreeing a set of behaviours around these to drive performance.
- Our team has used the Emotional Culture Deck toolkit extensively post Cyclone Gabrielle. Two of our team are based in impacted areas and wanted to do something to help their communities. This proved to be an invaluable tool to start discussions about how people were feeling, taking conversations beyond “How are you doing?”
Despite the challenging time, we are seeing some real positives. We know that investing in people, and ensuring they feel valued, encourages them to be their personal best, but also being realistic about where caution and restraint is needed. This stands an organisation in better stead once they get through to the other (and hopefully brighter) side, post-recession, that we’ve seen in these cycles before.
It is refreshing to talk to leaders who really think strategically, mapping out their journey and building resilience into their organisations by investing in the right areas. After all, businesses don’t exist without people.