The survey also found the number of businesses expecting to raise prices dropped to 34 percent from 52 percent in 2024. (file image) Photo: RNZ / Rebekah Parsons-King
More than half of business leaders are feeling more optimistic about economic outlook over the next 12 months, despite a continuation of tough trading conditions.
A survey of 200 business leaders by consultancy firm Grant Thornton New Zealand found 2 percent were "very optimistic" about economic conditions, while 51 percent were slightly optimistic.
"It's really encouraging to see such high levels of optimism in a large number of businesses despite the current doom and gloom out there," Grant Thornton New Zealand business advisory partner Greg Thompson said.
"A change in government, some business-friendly policies, flatlining inflation and the Reserve Bank pushing pause on interest rate increases will have contributed to this increase in optimism."
However, demand for goods and services dropped, with 16 percent of businesses experiencing a shortage of orders compared to 9 percent in 2023.
The survey also found the number of businesses expecting to raise prices dropped to 34 percent from 52 percent in 2024.
"Last year's inflation levels presented a one-off chance to increase prices to maintain margins, more price hikes are unlikely in the current market given consumers are becoming increasingly conservative about their spending," Thompson said.
"Instead, business owners will be exercising good business practices to maintain profitability such as letting go of underperforming products and services, cutting D clients, creating efficiency and productivity gains, and upgrading legacy technology."
He said many businesses struggled to grow revenue over the past year, with half of the respondents seeing revenue growth of more than 5 percent, compared with 40 percent this year.
However, businesses were keeping a closer eye on cashflow and forecasting, with 16 percent finding access to capital a major barrier to growth as banks' appetite for risk fell.
He said some parts of the economy were more optimistic than others, with only certain sectors seeing large-scale redundancies in the workforce.
The survey found workforce woes were also inhibiting business growth, with nearly half (49 percent) of survey respondents stating the availability of skilled staff was a significant constraint to growing their businesses.
However, Thompson said it was unlikely to have a negative effect on salary and wage growth over the next 12 months, with little change in the number of businesses planning to increase salaries by more than the rate of inflation this year (10 percent) compared with last year (11 percent), though more were planning to provide increases in line with inflation (39 percent) compared with (33 percent) in 2023.
"Owners are responding with pragmatism by investing to retain the skilled talent they currently have in such a competitive labour market - another key indicator of the optimism out there at the moment," he said.
"Long term, they want to maintain their workforce so they're ready when the economy picks up again."
