What does the 2023-24 NZ budget mean for small businesses?

The New Zealand Government prepared us for a “no frills” 2023-24 New Zealand Budget, and as promised, there were few frills or surprises.

But the good news is, the outlook isn’t as gloomy as some predicted.

The budget aimed to help ease cost-of-living pressures, with the Prime Minister calling it a “wellbeing budget”. 

It’s also worth noting that the Government hasn’t got a lot of excess money to play with following the pandemic aftermath and extreme weather events, so the budget has been modest in its planned spending.

So, what does it mean for small businesses? 

What's the good news for business? 

For a start, the long-looming recession predictions may ease, with the Treasury now forecasting that New Zealand will avoid a recession.

More broadly, the budget announced cheaper childcare; the $5 prescription co-payment was scrapped, free public transport for under-13s and half-priced for under-25s, power bills reduced and 100,000 more insulation and heating retrofits. 

The Government has committed to reducing spending by 5%, allowing net debt to climb to 22% of GDP. 

The Treasury forecasts that this, coupled with the regrowth of tourism and an unexpected boom in migration, will keep the country out of recession.

Inflation is also predicted to fall rapidly over the next year to the Reserve Bank’s 1-3% target from 6.7%.

“The looming recession predictions may ease with the Treasury now forecasting that New Zealand will avoid a recession” 

What's the bad news for businesses? 

The Budget surplus is likely to be pushed out to 2025/26, with net debt as a percentage of GDP expected to peak in the coming financial year at 22%.

Businesses, already facing labour shortages, can expect unemployment to rise, reaching 5.3% next year, up from 3.4%, according to Treasury.

Property owners may also be unhappy, with Treasury predicting “higher-for-longer interest rates to continue driving house prices lower”, with prices declining a further 4.6% mid-2024. 

It’s tricky news for trustees, too, as the Government introduces a trustee tax that will increase the tax rate paid on trusts to 39%, in alignment with the top income tax rate.

So, what were some of the key announcements for businesses? 

While the news that New Zealand isn’t going into recession will give businesses optimism for the future, there were few business incentives announced.

But here are some of the business and industry-related announcements that may impact some small businesses: 

• New Zealand’s road and rail, telecommunications and electricity infrastructures damaged by weather events will be future-proofed through a $6 billion National Resilience Plan. This will provide opportunities – and protection - for many businesses.

• $451 million will be used to establish research and technology hubs in Wellington, the “Science City”, focusing on health and wellbeing, oceans, climate, and hazards, manufacturing, biotech, and energy. $55 million will fund research fellowships and doctorates, raising spending on research and development to 2% of GDP.

• The Government is reinstating the Training Incentive Allowance to incentivise sole parents, disabled people and their carers to study.

• Business owners in the building and trades industries may be pleased to hear the Government has committed to building 3,000 new state homes by June 2025. 

• There will be $75 million in funding for Industry Transformation Plans, including for horticulture, digital and tourism.
•  The Government will partner with the private sector to build electric vehicle chargers across the country at a cost of $120 million over four years.
  
  
• The growing local video game industry will receive $160 million for game developers as a 20% rebate to put them on par with overseas competition.

Key takeaways

While the budget didn’t include many announcements specifically for small businesses, this budget may ease some of the pressure Kiwis are experiencing with the cost-of-living increases.

And optimistic Treasury forecasts – of no recession, decreasing inflation and growing tourism – is a big win. 

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