New Zealand’s small businesses had a weak sales performance in the June quarter, according to small business platform Xero.
Data from the latest Xero Small Business Insights (XSBI) released on Thursday shows "consistent underperformance over the past 12 months".
The report also found New Zealand small business sales have been falling by 0.1% year on year in the June quarter.
This recent fall, according to the report, follows a "modest" year on year rise of 1.1% in the March quarter and a 0.5% decline year on year in December.
Xero says this is “well behind” the long-term national average of 6.3% year on year and it’s a step behind Australia’s sales growth of 3% in the June quarter.
Xero uses anonymised and aggregated data to track how small businesses are going.
Sales weakness was really felt in the North Island - with Northland, Wellington and Auckland recording declines.
Northland had a 3.5% year on year decrease, Wellington dropped 3.1% year on year and Auckland has dipped by 1.3% year on year.
But centres in the South Island were the opposite - outperforming the national average and showing resilience, Xero says.
Otago saw a 3.9% year on year increase while Canterbury saw a 1.8% year on year bump.
"One of the few bright spots in the national data is a 4.4% year on year rise in sales in the month of June - the strongest monthly increase since April 2024."
Sales grow for agriculture sector
The agricultural sector is another bright spot, according to the report, as sales in the agricultural sector continue to see growth.
The sector saw sales grow 10.9% year on year in the June quarter. This follows 11.1% in March and 14.9% in December.
This reverses 18 months of “tepid performance” in the sector, Xero says.
But “industries more sensitive to discretionary spending and interest rates are facing tougher conditions", Xero points out.
The construction sector saw sales fall 6.4% year on year in the June quarter which is a decline that started in late 2023, according to Xero's data.
The report found hospitality sales fell 2.1% year on year in the June quarter “marking the fifth straight quarter of contraction for the sector”.
Retail sales in June this year were unchanged compared to June 2024, the report found, “following four consecutive quarters of year-on-year declines”.
Xero NZ’s country manager Bridget Snelling says the data on the construction sector was particularly concerning, given this sector's "multiplier effect across the economy" from retail to manufacturing.
"While the pace of decline has eased in recent quarters, this moderation suggests only tentative signs of recovery.”
Snelling says these subdued figures highlight an ongoing challenge for small businesses in New Zealand.
“Despite consistent OCR [Official Cash Rate] cuts by the Reserve Bank since August 2024, we’re yet to see the expected boost to consumer and business activity.
"While there are some bright spots like agriculture, the overall picture remains muted.”
21 Comments
Thw only thing that surprises me is that economists continue to be surprised.
Business owners have lives, families, car payments, and health issues, just like the rest. What they also have is a persistent state of burnout and exhaustion after 5 years of battling through COVID uncertainty, shortages, inflation, high interest rates, population decline, and recession. Now the Labour/Greens bloc is lining up for another crack, while the supposedly business-centric coalition fumbles the pass.
Most people are just tired of stumbling from one crisis to the next.
It's been too long since the last rug pull for people to factor in that your trading environment can and will turn on its head at any moment.
Many people run their business like their personal life, and their expenses seem to scale in parallel with their income. You don't want to be holding the baby if you're shedding millions of dollars of revenue.
Sadly, I think crisis has become the new norm.
Somewhat attributed to by sensationalism in media and social media. So much so that it is difficult to avoid, and many like readers here seek balanced reporting and objective analysis to get a break from all the hype elsewhere.
Rather telling reality check isn’t it. New Zealand depends overwhelmingly on primary production. Yet the sixth Labour government and pals policy towards it was punitive going on persecutory and from all accounts a seventh Labour government will just pick up again from where the last lot of them left off.
We seem to aspire to ascend in an international race we potentially don't even want to be in.
Correct, I said this ad nauseum FG, Labour's attack on the primary sector was treasonous. The decay in our rural towns is palpable.
Yes mostly but tell that to those innocents living through Gaza and Ukraine catastrophes.
A trans dude once said to me "you can drown in 100 feet of water, or 10 inches, it's still drowning".
As I said to the vile insurance people during our bare knuckled EQ claim - that new offer is no more use than if to a drowning man,, the water depth was reduced from 10 to 8ft
Yes mostly but tell that to those innocents living through Gaza and Ukraine catastrophes.
Just on Ukraine, the Western mafia has cut Zelensky off now. Anyone who dared suggest Zelensky is as corrupt as any other corrupt Ukrainian politician was denounced by the rules-based and "progressive" crowds in the West as a treasonous Kremlin stooge spreading dezinformatsiya.
The Western water cooler communities haven't give a rats about the innocents being dragged off the streets and forced to fight in a war they don't want to be part of.
The European Union (EU) informed Ukraine’s government on July 24, through diplomatic channels, that it was suspending all financial assistance to Ukraine until the independent powers of its anti-corruption institutions are restored
Warning: significant sarcasm follows.
Everything except agriculture?
Gee, what a surprise.
It's almost as if a sizeable chunk of our economy is based on a non productive, discretionary money-go-round.
ME: The current 'Govt chose to cut instead of investing or targeting inflation differently'. The government is happy with this approach and recently stated they want to 'double down' on spending cuts. What is there over arching strategy - if they are intentional on a continuing contraction in the NZ economy? How does this help us? Is there a long term benefit?
ChatGPT:
Excellent question — and one that goes to the heart of what kind of economic strategy the current New Zealand government is pursuing. Let’s unpack this carefully:
🧭 What is the Government's Overarching Strategy?
The current coalition government (National, ACT, NZ First) is pursuing what we might broadly describe as a fiscal consolidation strategy, guided by these core principles:
1. Reduce Government Spending
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Reversing previous spending increases (especially post-COVID and under Labour)
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Shrinking the size of the state — health, education, climate initiatives, welfare, and even some infrastructure spending are being pared back
2. Return to Surplus
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Finance Minister Nicola Willis has committed to returning to budget surplus by 2027, even amid weak growth
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This is framed as "responsible" — reducing government debt and restoring “fiscal discipline”
3. Enable Tax Cuts
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Planned income tax cuts are framed as “giving money back to hardworking New Zealanders”
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But to fund them, the government is cutting public services and investment
4. Rely on the Private Sector
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They believe private sector investment and productivity will rise once the government “gets out of the way”
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This includes deregulation, reduced compliance costs, and cuts to public-sector headcount
🧠 Why Are They Doing This? What’s the Logic or Long-Term Goal?
The government's thinking (based on orthodox economic theory and political ideology) likely goes something like this:
✳️ 1. “Short-term pain, long-term gain”
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Cut spending now → reduce inflation and debt → create room for private investment later
✳️ 2. “Government is the problem, not the solution”
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The belief is that a smaller government will allow the private sector to be more productive and dynamic
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This mirrors Reagan/Thatcher-era thinking — “let the market lead”
✳️ 3. “Signal discipline to markets and business”
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By showing fiscal restraint, the government hopes to increase business confidence, attract investment, and prevent pressure on interest rates
✳️ 4. “Restore balance after Labour’s ‘overspending’”
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Politically, this justifies reversing Labour’s COVID-era policies and positions the coalition as “cleaning up the mess”
❓But Will It Work? Is There a Long-Term Benefit?
This is where the strategy runs into serious challenges.
🚫 Potential Problems:
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Private sector may not step up: If demand is weak and consumer confidence is low, business investment will remain flat — no matter how low taxes or regulation are.
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Worsening inequality: Cuts to social services and targeted supports hit low-income households hardest — widening social and economic gaps.
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Missed opportunities: Investment in housing, green energy, and infrastructure could have long-term payoffs — cutting here is short-sighted.
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The debt panic is overstated: NZ’s public debt is low by international standards. Cutting spending to reduce it faster is more ideological than necessary.
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Self-reinforcing slump: If both government and households cut back, the economy can get stuck — low demand, low investment, low productivity.
✅ Are There Alternatives?
Yes — including:
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Targeted investment in housing, transport, green transition, skills — things that boost long-term productivity and jobs
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Maintaining a moderate deficit during a downturn — let the economy recover before tightening
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Supporting low- and middle-income households who are most likely to spend and keep the economy moving
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Reform the tax system to raise more revenue from wealth and high incomes, rather than cutting services
You probably need the AI to tell you the pitfalls of the alternatives also. Part of the reason we have an austerity government is we just had a spendy government running an extreme form of the rationale you're promoting that delivered cents on the dollar.
For the state's spending to deliver something of reasonable meaning, we would have to radically reform much of how the state operates. The nature of our politics requires an almost 100% level of certainty and accountability, at the expense of delivering value.
We would deliver more short term upside at long term expense. That's not to say the private sector does this well, but arguably not as bad.
Thanks Pa1nter. The phrase 'delivered cents on the dollar' caught my eye. Government delivers what the private sector can't - non-profitable services. Government spending and deficits are a 'gift' to the private sector. Every public sector worker is spending their income into the private sector, every government contract for construction and infrastructure is new money spent directly into the construction sector.
Why is that a bad thing? Is something economically a bad thing if it is paid for by government spending? What happens to the economies spare capacity when the government steps back and the private sector does the same?
Why is that a bad thing?
In the short term, its a "good thing", a little bit of stimulus flowing through the economy. Hoorah, we have kept the lights on another week.
In the longer term, if the state took on the role of producing/delivering something at a significantly higher cost than the private sector could produce, or for a nominal return, you'll invariably get less stuff with a higher liability.
As an abstract concept, government supplanting lack of private sector demand by doing its own spending sounds easy and lovely. Unfortunately I've been in the position of viewing exactly how bad the contrast can be.
We need both tax reform and structural reform
Tax more CG and wealth less income. Means test benefits, including super (cannot be turned on instantly but needs to be signaled to let people plan their move to Australia...).
Structural reform away from the capital gains of the Ponzi. Remove int deductability over 10 years, ban interest only loans on non-owner occupier.
Tax more CG and wealth less income
This does not resolve the labour capital imbalance. You may improve people's disposable incomes by shifting tax burden, but that would require sustained or increasing capital values.
How does the government keep the lights on if the amount they can tax capital decreases?
Add up how much property you own, at CV value, tax at 1/2 % per year ($5k per mil)
Give back by no tax on first $10k of income........
And you think that'd shift the needle much?
Taxes can be used as carrot and stick, but we can see other territories with more punitive taxes towards capital suffering the same sorts of pricing trends and de-industrializing that we experience.
We need something far more profound.
(cannot be turned on instantly but needs to be signaled to let people plan their move to Australia...)
Plan their move to Australia.....where pensions are means tested. Society really needs to be told the fact they wish to willfully ignore: That the lives of the current will not see the levels of wealth and support as those before them, and as such how should we structure our society to balance encouraging entrepreneurialism (which needs the possibility of success and wealth) with tax, and services we are able to provide for our country, all in a way that prevents an increasing, inequitable distribution of wealth. The wealthy see something as being taken from them for hard work, the poor see opportunity and the middle class are working with the dream of being part of the wealthy.
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