21 Mar 2023

New Zealand businesses pessimistic about economy prospects - CPA Australia survey

3:32 pm on 21 March 2023

Businesses are much more confident about their own economic growth than the wider economy's prospects.

CPA Australia's 2022-2023 Asia-Pacific Small Business Survey found just 40 percent of New Zealand businesses expected the national economy to grow, which was one of the most pessimistic outlooks in the region.

"Small businesses are expecting sunshine despite the gloom," CPA Australia New Zealand country head Rick Jones said, adding that two-thirds expected their business to grow - up from 60 percent in 2021.

"It's a surprising but positive result given small businesses' relative pessimism about the New Zealand economy."

Just over 43 percent of businesses expected the economy to shrink this year, which was a gloomier outlook for New Zealand than during the height of the Covid-19 pandemic, when 38 percent expected the economy to shrink.

Jones said the survey results were perhaps more positive than current sentiment would suggest.

"We've had natural disasters, persistently high inflation, a worse-than-expected GDP result for the final quarter of 2022 and further interest rate rises," he said.

"That may have taken some of the gloss off business owners' confidence in the performance of their own businesses and contributed to pessimism about the New Zealand economy."

He said rising costs were a concern for 37 percent of business compared with 29 percent in 2021.

"We expect rising costs to continue to challenge businesses in 2023."

Rising costs were probably a reason why New Zealand businesses were investing less in digital technologies.

The percentage of businesses reporting more than 10 percent of their revenues came from online sales shrank to 36 percent last year from 40 percent in 2021, which was the lowest result among the 11 economies surveyed.

New Zealand small businesses were the least likely to use social media for business purposes at 34 percent, and were also least likely to offer digital payment options such as PayPal or Google Pay at 42 percent.

They were also second least likely to use IT consultants and specialists at 17 percent.

"One possible explanation for the lack of digital take-up is the poor short-term returns businesses achieve on technology investment," Jones said.

"Only 37 percent of New Zealand's small businesses reported their investment in technology last year improved their profitability. This was the third worst result of all the markets surveyed."

In addition, 42 percent spent little time or money to address environmental, sustainable and governance (ESG) matters, which put it near the bottom of the region's rankings.

Jones said ESG was an increasingly important measure of businesses' performance and they needed to invest more to keep up with the rest of the region.

He said small businesses were also second least likely to seek access to external finance, despite an increase in the number reporting difficulty accessing finance last year.

Of those businesses that required funding, 54 percent said they found the experience difficult, compared to 18 percent in 2021.

Jones said accessing finance was expected to continue to be difficult this year, with 50 percent forecasting the experience to be tough, which was well above the survey average of 27 percent.

"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.

"The government should review whether the Act is having unintended consequences for business seeking to access finance."

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