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18 Dec 2023

New Zealand's Economy Expected to 'Bounce Back' Post-election: But Big Businesses Remain Struggling

Experts forecast that New Zealand's economy might see a post-election uplift, but it might mean little for big businesses struggling with cost-of-living effects. 

New Zealand is a nation affected by cost of living pressures this year, with many households cutting their spending on groceries and retail. This knock-on effect impacts many businesses as significant drops in retail spending have been recorded.   

However, labour pressure costs are expected to ease in the upcoming year. Additionally, the recent ANZ Business Outlook index shows improved business confidence overall. However, these indicators bring little immediate benefit to big businesses. 

"Business confidence hasn't flowed through to the real economy yet."

Big businesses are still reporting a slow performance, and there has yet to be a tangible result of the economic uplift. According to Frances Sweetman, a portfolio manager at Milford Asset Management, big companies are still recovering from interest rate rises. Speaking to AM, Sweetman said. 

"We've had people like Fletcher Building continue to be more cautious around their house sales; they're now expecting them 25 per cent lower than last year," 

"We've seen Freightways say they're seeing packages of kind of 5 per cent. The Port of Tauranga, who do loads of imports, saying they are seeing total volumes of 9 per cent - so what you're getting from big businesses instead is this ongoing slowing … and that pickup in business confidence hasn't flowed through to the real economy yet, so it's just not happening." 

Claiming that big businesses are facing a difficult point in the economy, Sweetman cannot confirm when these companies will see a positive change. 

"One of my grandma's favourite phrases was don't try and pick up pennies in front of a bulldozer, and the bulldozer that we're trying to deal with is those rising interest rates and people's mortgages. Still, a lot of people haven't rolled over onto those seven percents that we're seeing now - that hurts, and that will continue to weigh," she said.  

"But we're in this weird place where if it doesn't, then we'll just see more rate rises because we still need the economy to slow. It's almost like good news is bad news." 

Migration and tourism could provide a boost

There might be a piece of positive news for big businesses, as increased migrations and a big tourism forecast this summer could potentially be significant in turning things around for these companies. New Zealand's annual migration levels have surpassed its pre-pandemic levels in April, a testament that the nation remains an attractive employment destination. 

"All signs are that migration is going to continue to boom, and it's a great one that you pick up on because that will really help the economy, bringing in more demand and also helping to ease those labour constraints. So that's one thing that could change the story a little bit is that migration and also, a really good tourism summer would also really help," Sweetman said.  

Additionally, businesses in the essential services sector, like electricity and telecommunications, are seeing "great" results. Sweetman claims big businesses could expect their revenue to moderate next year after a short summer hiatus. However, this depends on various economic factors and "moving parts."  

"I think maybe we'll have a bit of a summer hiatus, but I think next year we'll continue to see things moderate…. I think that the hiatus over summer is real, and then the bit that's really weighing on the economy, in addition to the interest rate rises, is the global economy." 

Reverencing other factors that affect the economic implications for big businesses, Sweetman says. 

"We've seen dairy prices come off, and that's another big factor; if the global economy turns around, maybe those oil prices come back down, that would also be helpful. So there's a lot of different moving parts - but at the moment, the real game in town is those interest rates and inflation."  

What it means for businesses

With increased economic uncertainties, businesses are under more pressure than ever to minimise risk and ensure their projects are safeguarded from cost-of-living pressures. While the market remains uncertain for the year ahead, businesses should take steps to manage their asset and be prepared for any scenario. 

Bonded NZ helps business owners remain efficient in economic uncertainties through comprehensive and tailored business insurance. Whether it's public liability or professional indemnity insurance, our cost-effective options help them secure their business at every angle. 

For more information about our services, contact our team today.