Commenting on the NZIER Quarterly Survey of Business Opinion, released yesterday, Mrs Nicholls said she had talked to those in Dunedin's construction industry who were excited by the new projects.
''They have to increase their staff numbers and it is a challenge for them after having to let staff go. There was a lull but the lull is over. There is a feeling this surge is a pretty big thing.''
The influential New Zealand Institute of Economic Research (NZIER) survey showed a further strengthening in business confidence in the three months ending September. A net 26% of firms expected improved economic conditions in coming months.
The improvement in confidence was broad-based across most regions, with optimists outnumbering pessimists in dairy-intensive regions such as Taranaki and Southland, NZIER senior economist Christina Leung said.
The recent increase in global dairy prices and subsequent upward revision by Fonterra to its dairy payout forecasts had reduced the risks to the dairy sector and boosted confidence.
''Nonetheless, confidence remains strongest in the tourism-intensive regions such as Auckland, Otago and the Bay of Plenty.''
Firms were also expecting a strong lift in demand in their own business with a net 32% expecting an improvement in own trading activity in the three months ending December, the highest level since mid-2014, she said.
The building sector was again the standout, with confidence in the sector boosted by a strong pipeline of residential and commercial construction work.
''Rapid population growth has boosted demand for housing and new office buildings and firms expect a further ramp-up in building activity over the next few years.''
However, skill shortages were becoming more acute, Ms Leung said.
A net 27% of firms wanted to increase staff numbers in the next quarter - the highest level for 43 years.
Firms reported increased difficulty in finding labour and that might have limited the extent to which firms could increase numbers in the past quarter.
The difficulty in finding labour was particularly acute for skilled labour, with shortages at levels not seen since December 2007, she said.
Mrs Nicholls said the southern region was dealing with a particular set of problems regarding skill shortages.
In Queenstown, the construction sector was desperate for skilled workers but a lack of accommodation was hampering the hiring of new staff.
Older workers were happy to travel from Kingston and Cromwell each day to work in Queenstown but younger people wanted the night life of Queenstown.
Young people were prepared to live in their cars because of a lack of accommodation.
The proposal to build a hostel for staff would help ease the pressure, she said.
The tourism sector was also facing difficulties in attracting and retaining staff because of the lack of accommodation. People could not afford to rent and some people would rather turn their houses into Airbnb than rent to workers.
A shortage of IT staff in Dunedin, Invercargill and Queenstown had meant bringing in people from overseas to work in the technology industry, Mrs Nicholls said.
The employers association had recently employed a new health and safety manager from Perth. His Australian parents-in-law had moved to Port Chalmers some years ago, seeking a different life. The new manager had decided to move to Dunedin with his family to join them.
Health and safety managers were highly sought-after because of New Zealand's legislation, she said.
Mrs Nicholls had been working with a Dunedin firm which supplied glass panels to the construction industry. The manager had ''desperately'' been trying to find staff locally but had been unsuccessful.
Because the firm was in Dunedin, and not Christchurch, immigration rules prevented bringing in skilled overseas workers for the job. That was despite the firm supplying Queenstown and Christchurch with the panels.
''This is not an isolated case.''
There was also a lot of seismic work happening - bringing buildings up to standard. Work in Oamaru had been delayed because of a backlog. The companies doing the work were busy, she said.
