SMEs seek tax relief, wary of tight budget
Small businesses across New Zealand are approaching the May 22 government budget with cautious optimism but clear calls for action, according to the latest Prospa SME Sentiment Tracker.
Many are hoping for tax reform and reduced regulatory burden in what they see as a critical moment for business confidence and growth.
Confidence in government support divided
Prospa’s survey revealed that 49% of small businesses lack confidence that the budget will deliver meaningful support, while only 26% agreed that current government actions have been beneficial to SMEs.
“The upcoming budget is clearly important to small business owners and what we’re hearing from them is a desire for practical changes that would make a difference to their day-to-day operations,” said Adrienne Begbie (pictured), managing director of Prospa NZ, which recently revealed top SME lending trends across NZ regions and sectors.
Tax and red tape top the wishlist
When asked what changes would have the biggest impact, SMEs overwhelmingly called for tax reform (39%) and the removal of bureaucratic red tape (25%).
Government taxes were cited as the biggest business cost (22%), followed by staffing and recruitment (15%) and inventory or materials (12%).
“SMEs are the backbone of our economy, and merit targeted support to continue thriving. By removing unnecessary barriers, SMEs can unlock growth and reinvest in their people and products,” Begbie said.
Business health holding up despite cashflow strain
Despite the economic climate, 57% of small businesses rate their business health as “good” or “very good.” However, 59% have three months or less in reserves, and 22% have less than a month’s buffer—highlighting how fragile their financial positions can be.
Challenges include reduced consumer spending, talent shortages, and fierce competition driven by e-commerce and large players. Marketing spend has risen from 5% to 9%, while fuel costs eased from 10% to 5%.
Despite uncertainty rising, overall sentiment remains relatively steady:
- 43% expect next year’s profits to remain stable
- 35% expect a profit increase
- 37% are unsure about market conditions, up from 29%
“The reality is that SMEs are doing a great job controlling what they can. Their internal confidence is strong, but like many Kiwis, they’re keeping a close eye on broader economic signals,” Begbie said.
SMEs open to funding as outlook shifts
In response, 30% of SME owners plan to seek external funding in the next 12 months. Over half (55%) say they trust non-bank lenders like Prospa to deliver tailored finance solutions.
“Small businesses are becoming increasingly savvy about their options. With the right funding, many are ready to take the next step in their growth journey,” Begbie said. “It’s encouraging to see this shift as it shows confidence and capability is still very much alive in the SME community.”
ASB: Budget 2025 to focus on restraint, not relief
ASB chief economist Nick Tuffley expects budget 2025 to prioritise fiscal restraint and long-term consolidation, limiting scope for sweeping SME-friendly changes like tax cuts—at least in the short term.
“Much of the focus on budget 2025 will be on spending restraint as a means to consolidate the fiscal position,” Tuffley said in ASB’s latest Economic Note.
He noted that trimming operational spending allowances by $1.1 billion and freezing public sector expansion are likely to have a contractionary impact on the economy.
“The primary obstacle to the recovery of house prices remains high inventory levels,” Tuffley said, warning that public finances remain vulnerable post-COVID and are not yet in a position to offer substantial stimulus.
Tax cuts—particularly for businesses—may re-enter the conversation in budget 2026, once debt is stabilised and fiscal buffers rebuilt.
