Nigel Tutt Chief Executive of Priority One

As we kick off 2022, there will be a number of items on the minds of local businesses.

While the disruption that Omicron will inevitably cause is front of mind, businesses will also need to look past this to matters that will impact the economy in the longer term. Here are some things they need to watch out for:

Omicron will dominate the first half of this year. We know that the red traffic light setting will affect events and hospitality businesses through additional restrictions. This will perhaps knock off a couple of per cent of economic activity.

The larger effect of this variant will be for staffing, as we have seen in the Australian economy recently.

Because of the vast spread of the virus we can expect 10-25 per cent of staff off at any one time, either through sickness or needing to isolate. The effect will be disproportionate between sectors and absenteeism will cause the most disruption to businesses that need staff onsite – think distribution, grocery and manufacturing businesses.

This shortage of staff will make the supply chain shortages experienced over the last year even worse.

An equal worry is productivity for time-sensitive businesses, with kiwifruit in particular a concern for our region. This industry will have a labour shortage already due to our closed borders and strong domestic employment – the economic and community consequences of a shortage at harvest time in a couple of months will be significant.

The status of our border will be closely watched. With the current closure and limited MIQ availability, it is close to impossible for exporting businesses to get to market and visit customers and suppliers, which becomes very difficult to sustain in the longer term.

Businesses will also be keen for the border to reopen for labour availability – be it backpackers, RSE workers or skilled migrants.

Inflation is another topic of interest for 2022. It hasn't been top of mind for several years now, but will come back with a hiss and a roar this year. Supply chain shortages, material price increases, fuel prices and labour shortages will all contribute to rapidly rising prices this year.

If left unchecked it will cause major economic problems, so look for swift action. The antidote to high inflation is to increase interest rates, and the Reserve Bank of NZ has plenty of scope to do that. In turn, this will affect access to credit for businesses and consumers alike.

While there are certainly some challenges on the horizon, we can take some comfort in the resilience that our economy, particularly locally, has shown over the past couple of years. Our economy has generally performed above expectations and our fundamentals remain strong.