Many small firms are cutting costs, pausing hiring, and rethinking pricing
Small and medium-sized enterprises (SMEs) across New Zealand are tightening costs and adjusting strategies as they contend with sluggish consumer spending and economic uncertainty, according to new findings from the MYOB Business Monitor.
Of more than 500 business owners and decision-makers surveyed, just over a third (35%) said they had reduced operating expenses, while 33% had revised pricing strategies. A quarter had paused hiring, while nearly one in five had diversified their products or services.
“Local SMEs are doing what they can to give themselves a financial buffer by lowering costs to improve their position,” said MYOB chief customer officer Dean Chadwick (pictured).
Behind these moves is concern about the wider economy. Almost four in 10 (39%) of those surveyed expect conditions to deteriorate in the year ahead, while 36% anticipate improvement and 24% predict no change. That marks a sharp drop in confidence compared with earlier in 2025, when nearly half of SMEs had expected growth.
Inflation remains a dominant pressure, with 58% of respondents reporting they were “somewhat” or “extremely” concerned about its impact, and only 11% saying they were unconcerned.
“Following the ‘survive to 25’ narrative that surfaced last year and with the Reserve Bank making a few cuts to the Official Cash Rate, businesses and consumers alike were hopeful that 2025 might offer a reprieve. However, while winter is a notoriously challenging trading period for local enterprises, there’s been a gradual shift in mood and sentiment over the past several months around the local economy,” Chadwick said.
The survey found little evidence that lower interest rates have filtered through to consumer spending. Forty percent of SMEs said their customers were spending less, 28% noticed smaller transaction sizes, and 26% reported reduced purchase frequency. Although the Reserve Bank’s latest 0.25% cut brought the Official Cash Rate to 3.25%, SME respondents said a larger reduction – on average just over 1% – would be needed before they felt a benefit.
Despite the challenges, SMEs are still exploring ways to grow. Nearly a third (32%) see opportunities in expanding their local market presence, while others plan to adopt AI tools (25%), introduce new products or services (24%), or upskill staff (23%). Introducing new technologies was also cited by 21% of respondents.
“Despite being hindered by higher costs and economic uncertainty, business operators are assessing their options for the small wins and strategic changes that could deliver solid returns,” Chadwick said, adding that consumer support remains critical to sustaining the sector.
