Although this was up 2% on last year, the CPA Australia study shows the average across other countries was 62.5%.
Growth is being hindered by low technology adoption, a high-age demographic profile, and lack of innovation, leading to a widening gap with regional peers.
Only 5% of businesses had plans for a new product or service this year, compared to 29% percent across the region and only 7% were planning to hire, compared to 36% across the other countries.
Of the more than 300 New Zealand small businesses surveyed, 68% of those were aged over 50.
Businesses whose owners were under 40 were much more likely to be reporting growth. CPA’s regional head Rick Jones says those respondents are more likely to adopt new technologies.
Lifting small business technology adoption should be a central priority. Our data consistently shows that businesses which invest effectively in technology grow faster, hire more people and are more likely to innovate.
He says countries like Singapore have demonstrated what targeted digital support programmes can achieve - there are proven approaches in our region that could work here."
The recent fuel price increases because of the US Israel war with Iran were another hurdle and were escalating the problem.
Households under pressure
It is not only businesses facing an increasing obstacle. ASB recently said households will face a $55 a week increase in the cost of living on top of their mortgage, utilities and everyday bills.
Auckland based accountant Luke Kemeys says households will in fact need more as the $55 a week is after tax money. It equates to $2,860 a year.
For those earning in the 30% or 33% tax bracket having an extra $2,860 means they will need to earn $4,000 before tax. “That’s just to keep pace with the cost increases the ASB is expecting.”
He says a lot of households aren’t increasing their income by $4,000 this year and if they can’t they slowly fall behind – fewer savings, more pressure on cashflow and more reliance on debt.
Also creeping inflation is a silent pay cut.
Bigger rate cuts
Economic forecaster Infometrics is predicting higher fuel prices will drive inflation up to 4.8% a year in the current quarter – an immediate outcome of Iran War that the RBNZ can do little about.
It expects the Reserve Bank to lift the official cash rate three times this year starting in July, with the OCR reaching 4% by mid-2027 and as high as 4.5% in the first half of 2028. Increases starting in May cannot be ruled out.
“Inflation expectations are more elevated than they were at any time during the 2010s, and the 2021-23 experience of less pricing discipline is still fresh in business-people’s minds,” Gareth Kiernan Infometrics chief forecaster says.
“We’re also conscious that, after three years of weak demand conditions, firms have limited scope to absorb current cost increases.
“In general, we expect firms to try and raise prices despite the risk of losing customers, because the alternative of holding prices will makes firms unprofitable and effectively guarantee their own demise.”
But even with an assumption that fuel prices moderate in the second half of the year, Infometrics is still forecasting inflation to be at 3.9% a year in March next year and 3% a year by December 2027, with second-round effects from the fuel price spike rippling across the economy for several quarters.
