NZIER principal economist Christina Leung said the recent decline in confidence was across all the regions, but also singled out Otago for its pessimism.
As with national sentiment, Otago businesses are finding rising costs one of the more difficult issues at hand, along with labour shortages and the Government's proposed changes to employment contracts and bargaining.
Otago Chamber of Commerce chief executive Dougal McGowan said the continued decrease in business confidence of recent months must now be a real concern for central government.
''Locally, we're still seeing increased pessimism among members' businesses,'' Mr McGowan said.
Their two major issues continue to be a shortage in labour and rising costs associated with conducting their own business.
''People are now seeing possible inflationary pressures with the costs of borrowing money potentially on the rise ... 94% are now saying it will either rise or stay the same,'' he said.
Otago Southland Employers Association chief executive Virginia Nicholls said businesses were concerned with increasing costs, including the lift in the minimum wage.
In Central Otago it had become more difficult to get visas for immigrants to work.
''It's taking longer to get visas processed, which is frustrating, particularly for the hospitality and construction sectors,'' Mrs Nicholls said.
She said there was a ''perfect storm'' under way in the retail sector, which is facing more competition from online shopping, as well as the minimum wage increase.
''There are significant concerns around the changes to employment relations, including the employment relations [amendment] Bill,'' she said.
Employers with 20 employees or more were losing the right to include trial periods in employment agreements, she said.
Also, businesses were being forced to settle collective agreements even if they do not or cannot agree with them, were not allowed a choice to opt out of a multi-employer collective agreement, and must allow union reps access to workplaces without any permission, she said.
The number of task forces and working groups being set up to examine a wide range of issues was concerning businesses, who question if they will increase business competitiveness.
Mr McGowan said, on the positive side, exports and terms of trade were still strong, as was population growth, the latter much needed to meet labour demand.
''And with the recent drop in the dollar, all are helping,'' he said.
However, increased costs are seen as a major issue for many businesses, as labour and transport costs rise, plus wage increases now in effect.
''Labour shortages are still limiting productivity in many areas,'' he said.
He said locally, predicted wage rises were at levels higher than inflation, with nearly half of businesses saying they are now looking at meeting wage increases above 3% around Otago.
