Survey shows firms under pressure while central bank eases
Businesses across New Zealand remain downbeat about the state of the economy, according to the latest MintHC Business Insights with Tony Alexander.
“The three top ranking areas of concern for Kiwi businesses are the two areas which usually rank highly, customer demand and the state of the economy, plus this time around politics,” independent economist Alexander (pictured) said.
He noted that concerns about the state of the economy have yet to decline, while customer demand worries “rose early in 2024 and have yet to decline.” This month also saw a sharp rise in concerns about politics, as businesses voiced frustration with the policy environment.
The survey comes just as the Reserve Bank cut the official cash rate by 25 basis points to 3%, with a divided vote highlighting concern about slowing economic momentum. Markets now expect further easing to take the OCR to 2.5% by year-end, a move that may provide relief for borrowers but also reflects the fragile state of the recovery.
By contrast, very few respondents said they were worried about the New Zealand dollar being too high, although more businesses noted the currency was too low.
Profitability worries rise
While some issues such as tariffs and supply chain functioning have eased, profitability is emerging as a growing pain point.
“The net proportion of businesses expressing concern about the availability of finance has crept up over the past two months. But these rises pale into insignificance beside the sharp increase in worries about profitability,” Alexander said.
Other measures also show mild upward trends in input cost worries, though concerns about cash flows remain steady.
Where businesses are spending
Despite the weaker sentiment, many firms are still investing to retain customers and grow market share.
“The top areas of spending intentions are retaining existing customers, investment in new technologies and digitisation, plus presence on social media,” Alexander said.
Spending on advertising is becoming a bigger focus, “an early indicator of businesses backing their hopes of stronger economic activity and presumably customer flows through 2026.”
Recruitment and remuneration spending have edged higher, while staff training is receiving more attention. However, climate change initiatives remain well down the list of priorities.
Pricing intentions subdued
On pricing, businesses are holding back from raising costs.
“A net 13% of business respondents have said that they plan on cutting their selling prices or not raising them over the next 12 months,” Alexander said. “This is the same result as in July and firmly solidifies a pullback in pricing intentions which started in May.”
He explained that as optimism about 2025 faded, earlier plans to rebuild margins were stripped away. For now, this is a positive for inflation and interest rates, but Alexander warned pricing pressures could re-emerge if the economy improves next year.
Labour market stabilises
The survey also found signs that the easing trend in the labour market may have stalled.
“A net 9% of businesses have reported that good staff are getting easier to find,” Alexander said. “This result is broadly consistent with others in recent months, but it also suggests the easing trend in this measure since late-2024 may have ended for now.”
Staff morale is showing tentative signs of improvement, with a net 6% of businesses expecting morale to improve next year, the best result since March.
Outlook for advisers
For advisers, the survey underscores the pressures many small and medium businesses are under, particularly around profitability, finance access, and customer demand.
The latest RBNZ cut adds short-term borrowing relief but also highlights the depth of the slowdown, meaning advisers will need to help clients balance refinancing opportunities with caution about future economic risks.
For the full MintHC Business Insights Report with Tony Alexander, click here.
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