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New Zealand Small Businesses Optimistic About Growth Despite Pessimistic Economic Outlook
New Zealand's small businesses are displaying remarkable levels of confidence in their own growth prospects, even as they remain generally sceptical about the wider economic trajectory, according to the 2022-2023 Asia-Pacific Small Business Survey conducted by CPA Australia.
"Small businesses are expecting sunshine despite the gloom," remarked Rick Jones, the Country Head of CPA Australia New Zealand. He noted that the positive result is unexpected considering the relative pessimism surrounding the New Zealand economy.
The survey revealed that just 40 percent of New Zealand businesses have high hopes that the national economy will grow, this number reflecting one of the most pessimistic outlooks in the region. However, the same survey showed that two-thirds of small businesses anticipate their own business to flourish, representing an increase from 60 percent in 2021.
"It's a surprising but positive result given small businesses' relative pessimism about the New Zealand economy."
The survey found that over 43 percent of businesses anticipated economic shrinkage this year. This is, remarkably, an even bleaker outlook compared to sentiment measured at the height of the Covid-19 pandemic when only 38 percent expected a contraction.
Jones acknowledged that the survey results themselves might be more positive than the current sentiment actually suggests due to the timing.
"We've experienced natural disasters, persistently high inflation, a worse-than-expected GDP result for the final quarter of 2022, and further interest rate rises," he explained.
These factors may have dampened business owners' confidence in their own performance while contributing to their pessimism regarding the national economy.
The rising costs of doing business presented as a constant theme and reflects a significant concern, with 37 percent of businesses expressing worry—a notable increase from 29 percent in 2021. Jones warned that these rising costs are expected to pose ongoing challenges throughout 2023.
A reduced investment in digital technologies by New Zealand businesses can also be seen in the results, which could be being influenced by escalating expenses associated with digital payment platforms. Previously, the percentage of businesses generating over 10 percent of their revenues through online sales dropped to 36 percent from 40 percent in 2021, marking the lowest result among the 11 economies surveyed.
New Zealand small businesses also exhibited the lowest adoption rates for using social media for business purposes - with only 34 percent utilizing it. They were also the least likely to offer their customers accessible digital payment options such as PayPal or Google Pay, coming in at 42 percent.
Furthermore, New Zealand ranked second to last in terms of utilizing IT consultants and specialists, with only 17 percent interested in contracting their services.
Jones proposed that the lack of digital uptake could be attributed to the modest short-term returns on technology investments.
"Only 37 percent of New Zealand's small businesses reported their investment in technology last year improved their profitability,” Jones noted, this stat marking NZ as the third worst result among all the surveyed markets.
In addition, the survey revealed that 42 percent of businesses devoted minimal resources to address environmental, sustainable, and governance (ESG) matters, placing New Zealand near the bottom of the regional rankings. Jones emphasized that ESG is an increasingly important measure of business performance, urging companies to invest more to keep pace with the rest of the region.
Despite an increase in the number of businesses reporting difficulty accessing finance in the previous year, New Zealand small businesses ranked second to last in seeking external finance. Of the businesses in need of funding, 54 percent encountered challenges, compared to just 18 percent in 2021.
Jones anticipated that accessing finance would remain arduous in the current year, with 50 percent of businesses expecting a tough experience, well above the survey average of 27 percent. He suggested that the government should assess whether the requirements of the Credit Contracts and Consumer Finance Act unintentionally hinder businesses seeking financial assistance as this concern has been raised by members.
"Members are telling us that small businesses are having to jump through more hoops due to the requirements of the Credit Contracts and Consumer Finance Act, rather than seeing any tightening of credit availability from banks.”