23rd February 2017
Whatever New Zealand’s weather may bring from one day to the next, the forecast is indeed sunny for the economy as a whole. Proposed rule changes on tax collection, together with necessary adjustments to compensate for a slight decrease in overseas demand due to China’s economic slowdown, are a few areas to watch in an overall sunny outlook for New Zealand’s economic future.
Other potential areas of concern include the peaking of the housing market, debt within the dairy sector, as well as a potential global shift toward protectionism in the wake of victories for Brexit and Donald Trump. It is significant that these phenomena, together with noteworthy elections slated to take place in the Netherlands and France in upcoming months, represent a potential challenge to all the world’s economies.
With its fundamentals so securely in place, however, New Zealand seems especially well positioned to meet whatever difficulties may be on the horizon. The Asia Pacific Small Business Survey 2016, commissioned by CPA Australia, features widespread praise for New Zealand and represents its strongest ever performance.
According to the survey, 71% of NZ respondents expect their businesses to grow in 2017 – a much higher figure than other developed nations such as Singapore, Hong Kong and Australia. Moreover, nearly 20% of NZ businesses reported hiring new employees over the past year, compared to half that number in Australia.
New Zealand also performed better than all other countries surveyed in terms of the ease of small businesses securing external finance. The survey suggested optimism across the board within the world of small businesses, leading the chief executive Alex Malley of CPA Australia to laud NZ’s “rock-star economy”.
For larger businesses, the outlook is still strong for future performance, although the maturity of the established economy limits room for growth. The country’s recent booms in both tourism and population growth have spurred the construction industry forward, among other sectors.
At the same time, there appears to be room for the country to take fuller advantage of its role in international business. Revenue Minister Judith Collins has recently stated that foreign multinational companies operating in New Zealand have exploited tax loopholes, costing the government as much as $300 million in lost tax revenue. Facebook, Google and Apple have been singled out for criticism for recording their New Zealand profits in low-tax jurisdictions (or offshore), thereby sidestepping tax obligations through creative accounting methods.
Various fixes for such issues are under discussion within New Zealand, with many concerned that plugging the holes too effectively could drive some businesses away entirely. At the same time, others complain that the government is missing out on a necessary additional amendment that would require multinationals that sell their products within New Zealand to register for GST.
These issues and many others are likely to see debate over the coming months, and their resolution will certainly have their effect on the country’s economy. While addressing them, however, attention must also be paid to events taking place overseas, where fluctuating markets and economies can strengthen the ramifications from a potential move toward protectionism among the world’s larger markets.
To some degree, New Zealand’s economy will always be exposed to overseas events. For the time being, though, by all appearances the country is doing a fine job of managing the factors that it does control.
(primary source: http://www.scoop.co.nz/stories/BU1702/S00890/nz-small-business-underpin-rockstar-economy.htm)