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Overall activity in the region's services sector for May dropped to 46.5 points, Otago Southland Employers Association chief executive Virginia Nicholls said.
While it was encouraging to see the regional breakdown in categories had orders/new business in expansion, activity/sales levels and employment levels had declined, Ms Nicholls said.
Tourism had moved into a quieter period, which was to be expected at this time of year. That was a seasonal issue and something she did not believe was a concern.
But the slow processing times for visas by Immigration NZ was concerning businesses and the new employer accreditation was also taking significant time.
Polytechnics were concerned about the slow processing of student visas by Immigration NZ, which had meant some student visas had been approved after the courses had already started, she said.
There were continuing concerns about increasing compliance costs, including health and safety and the significant new employment law legislation.
Ninety-day trials were now restricted to businesses with fewer than 20 employees. Larger businesses would like to be allowed to use the 90-day trials, to enable them to test untried workers to gain employment, she said.
Nationally, activity in the services sector picked up after three consecutive monthly falls in expansion.
The PSI for May was 53.6, which was 1.6 points up from April. However, the May result was still below the long-term average of 54.4 for the survey.
A PSI reading above 50 indicated the service sector was generally expanding, below 50 that it was declining.
While the pick-up in activity was a positive step, further expansion in the coming months would depend on a few factors, BusinessNZ chief executive Kirk Hope said.
New orders/business (55.7) had remained around that level for the last three months, which was below the long-term average of 58.6.
Given that sub-feed index feeds through into activity/sales and employment, a lift in that space would need to take place to improve the overall result.