It’s fair to say that the expectations of the small-and-medium-sized enterprises (SMEs) heading into this year’s Budget were relatively flat, with the need to balance strategic investment with fiscal prudence being heavily reiterated by the Government in the weeks leading up to last Thursday.
Released in April, our 2025 Business Monitor showed small improvements in the financial performance of New Zealand’s SMEs over the past year. Similarly, our Bigger Picture Report from earlier this year showed mid-sized businesses were reporting growing pipelines and revenue. But on all sides of the business spectrum, cost pressures and regulation have continued to bite – impacting profitability and price margins, and hindering business’ ability to maximise their potential and invest in growth as the economy slowly recovers.
So, did this year’s Budget deliver enough to see businesses going for growth?
The wins
An Investment Boost to incentivise growth - The big news for business, Budget 2025 delivered an Investment Boost which sees New Zealand businesses able to immediately deduct 20% of the cost of a new asset, on top of depreciation, with no cap on the value of eligible investments. Worth an estimated $1.7bn annually, the Boost will apply to new assets purchased in New Zealand, as well as new and used assets bought from overseas. For assets under $1,000, these can continue to be fully expensed under the existing low-value asset write-off.
We know that embracing new technologies and investing in innovation is essential for business success and in turn, economic prosperity. Heading into 2025, just 25% of SMEs MYOB surveyed planned to increase their spend on improving their business operations, while 50% planned to keep their investment flat. This announcement will likely give more confidence to businesses across the country to review their investment plans and look for new opportunities to maximise productivity, grow revenue and unlock more potential.
A focus on international trade – Expanding efforts to shore up trade with new and existing international partners will also be a welcome announcement from this year’s Budget. The Government plans to invest a total of $83.75 million over the next four years to lift engagement, increase trade returns and double the value of exports – with India, Singapore and South East Asia being the focus.
If successful, this could bring a sizeable boost to both SMEs and mid-sized businesses in New Zealand, with positive flow on effects for the economy. Our Business Monitor showed that 25% of SMEs export, and these businesses experienced a stronger performance over the past year and likewise expected more revenue growth through 2025. Additionally, just over two-thirds of local mid-sized businesses (20-500 FTEs) export their goods and services overseas, and an overwhelming majority (71%) of these businesses we polled, said improving trade relations and delivering more Free Trade Agreements would have the biggest impact on their business success over the next five years.
Upskilling the next generation of workers – A skilled workforce regularly features in our discussions with and surveys of local businesses of all sizes, with deep recognition that people are at the heart of business success. When combined, skilled talent and the right tools and technology can supercharge business performance and shape new prospects for the future.
This year’s Budget saw $398m invested in tertiary education over the next four years, with $64million targeted at adding a 1.75% increase to tertiary education subsidies (degree level and above) for high demand Science, Technology, Engineering and Maths subjects. This takes the total tuition cost subsidy to 4.75% for these specialised subjects, as the Government aims to incentivise participation and increase New Zealand’s domestic pipeline of skilled workers.
The watchouts
With the exception of further investment to continue reforming the Resource Management Act (RMA), there was little in the way of further investment to tackle compliance and red tape that continue to cause headaches for business owners. That said, with a dedicated Ministry for Regulation now in place, leaders of local SMEs and mid-sized businesses will be hoping more action is on the way to address this.
The much-awaited announcements around KiwiSaver may also bring mixed feelings for business owners, with changes to increase the mandatory contribution from employers to 4% on the way, phased in from 2026 (up to 3.5%) before reaching 4% in 2028. Also announced, younger members of the workforce (16–17-year-olds) will become eligible to access KiwiSaver contributions from their employer and the Government. This could put more pressure on employing SMEs balancing their own budgets, as they juggle this cost with ongoing increases in overheads and other compliance charges.
With the numbers now revealed, we expect business owners and operators will be weighing up their plans for the financial year ahead, re-evaluating both their investment and employment strategies as they look to go for sustainable growth. Whether this growth is expanding into a new market, or expanding their premises, we will be closely monitoring the outcomes and backing them all the way.
ENDS
Published on The Post, The Press and Waikato Times - Wednesday 28 May