on sme policies and economic performance · to new zealand. the opportunity ahead for new...

MYOB Special RepORton SME Policies and Economic Performance

September 2014

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Small Business Election DebateSmall Business Election Debate

2 MYOB Special RepORt on SME Policy and Economic Performance

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Small Business Election Debate

We believe it is impossible to overstate the importance of the SME community to the country. Making up around 97% of all enterprises in New Zealand, employing 30% of the workforce and contributing nearly 30% of the country’s GDP1, the economic contribution of these businesses is significant.

At MYOB we are delighted to be able to bring you this report, which shows that New Zealand’s SMEs are enjoying some of the strongest levels of growth they have seen since the Global Financial Crisis in 2008. In particular, SMEs in the regions, which make up a large part of the local economic activity, are now seeing revenue rises previously only reported in Auckland and Christchurch.

What this is likely to mean is increased opportunity spread across the community, as the following report shows many SMEs are planning to hire more staff, and retain the team they already have by increasing wages.

The success of the country’s SME sector is clearly good for all of New Zealand.

To build this economic activity, create jobs and serve the needs of the community, SME business operators around the country invest considerable time and money, while taking on personal risk.

What they are asking for in return won’t cost the country a great deal – if anything. Ultimately, all they’d like to see is a commitment from every party to recognise their value to the local economy and community, an understanding of the pressures and challenges they face, and a regulatory framework that is both easy to understand and straight-forward to operate in.

Most importantly, New Zealand SME operators want to see simplicity from their policy makers. There are too many demands on their time to be further bound up in reporting and compliance.

Any party that makes a commitment to cutting red tape will win the support of New Zealand’s SMEs – and free them to make a still greater contribution to New Zealand.

the opportunity ahead for New Zealand’s SMEsSince establishing in New Zealand over 20 years ago, MYOB’s focus has been on ‘making business life easier’ for New Zealand SMEs.

1 The Small Business Sector Report 2014, Ministry of Business, Innovation and Employment

Adam Ferguson MYOB General Manager – Accountants Division MYOB New Zealand

http://linkedin.com/in/adamferguson


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In order to gauge how satisfied SME operators are with the support of the Government and which policies they feel would make the most difference to their business, the Monitor includes a regular series of political questions.

Satisfaction with the support of the Government has remained steady throughout 2014, according to the latest Business Monitor. Currently a third (33%) of SME operators are satisfied with the support of the Government, while less than a quarter (24%) are dissatisfied. The levels of both satisfaction and dissatisfaction are unchanged since the March survey.

Satisfaction levels have also remained stable around the country, with Christchurch showing the strongest satisfaction levels (36%). Dissatisfaction in the rebuilding city has also fallen somewhat from 18% in March to 16% in the current survey. Dissatisfaction with the support of the Government remains highest among Wellington SME operators at 29%, though falling one percentage point from March.

The Government plays a significant role in the life of any local SME. From creating the regulatory framework with which businesses have to comply, to controlling how easy it is to start up, trade, hire staff, and even export, the Government has an enormous influence over many aspects of an SME operator’s business.

SMes and political policy

Total satisfaction Total dissatisfaction

Christchurch 16%36%

Auckland 21%34%

Wellington 29%32%

Rest of NZ 27%32%

Main centres satisfaction with Government support

MYOB Business Monitor question: How satisfied are you with the Government’s level of support for businesses like yours, in terms of helping your business succeed?


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Among the business sectors, the finance and insurance industry is most satisfied with the support of the Government (53% satisfied). The resurgent manufacturing and wholesale sector has also improved its view of the Government’s support – now at 42% satisfaction, up from 38% in March.

Dissatisfaction is highest within the construction and trades industry (32% dissatisfied) and the retail and hospitality sector (29%).

Total satisfaction Total dissatisfaction

Transport, Postal & Warehousing 27%29%

Finance & Insurance 10%53%

Manufacturing & Wholesale 9%42%

Other 30%25%

Business, Professional & Property 23%38%

Retail & Hospitality 29%22%

Primary 25%30%

Construction & Trades 32%22%

Sector satisfaction with Government support


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preferred policy

The Business Monitor presents a range of existing and potential policies likely to affect the SME sector.

The most popular potential policy for any party among SME voters would be an initiative to reduce the cost of unlimited broadband. Over two thirds (69%) of SME operators would vote for this policy, while only 1% would oppose it.

A consistent theme for small business operators over the five years of the Business Monitor survey has been the support of policy that would simplify the compliance regime. Simplification would be especially popular in two key areas: Provisional Tax and PAYE.

In the latest survey, 67% of SME operators would vote for the simplification of Provisional Tax rules and processes to make it easier to accurately determine and meet tax obligations. 52% would vote for the simplification of PAYE rules and processes to make it easier to accurately pay employees.

A key Labour policy in this year’s campaign, which also features in New Zealand First’s and the Conservative’s campaign, has resonated strongly with SME voters. Tighter controls on foreign purchases of New Zealand land and infrastructure would receive support from 54% of SME operators, with only 10% likely to vote against.

Making KiwiSaver compulsory for every New Zealand employee would win the support of 39% of SME operators, with 23% opposed.

Top three policies for SME operators

Reduced prices for unlimited data broadband 69% for

Simplification of Provisional Tax rules 67% for

Tighter controls on foreign investment 54% for

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MYOB Business Monitor question: With this year’s general parliamentary election in New Zealand, which of the following initiatives or policies would get you to vote for or against the party that proposed them, or would that policy or initiative have no effect on your vote?


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The most unpopular policy within the SME sector is Labour’s current Capital Gains Tax policy. 60% of SME operators oppose introducing a Capital Gains Tax, while just 15% would vote for it. Only a quarter of SME voters say the policy would not affect their vote, reflecting the strong interest in the issue.

After receiving attention prior to the election campaign, raising the superannuation age has also seen opposition from SME operators. Increasing the superannuation age to 67 years would be unpopular with 43% of SME operators, with 21% in support.

Also unpopular would be any move to remove the 90-day trial period for new employees (39% against, 22% for) and imposing GST on online purchases from overseas retailers (36% against, 25% for).

Three most unpopular policies for SME operators

Introduction of Capital Gains Tax 60% against

Raising the superannuation age to 67 43% against

Remove 90 days trial period 39% against

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Policies that are unpopular with SME business operators have been very much part of the discussion in the build up to this year’s election.


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As their experience of the Global Financial Crisis reinforced, SMEs are extremely vulnerable to shifts in the economy. How political parties are likely to handle the economy over the coming term is therefore of significant concern to the SME community.

Handling the economy

With the 2014 General Election just weeks away, the Business Monitor asked 1023 SME operators which of the major political parties they trusted most to appropriately manage the economy.

The National Party enjoyed a dominant lead in this measure, with almost two thirds (63%) of SME operators trusting their economic management the most. The level of confidence in National’s economic management has grown over the last year, from 60% in September 2013.

The Labour Party enjoys the trust of 8% of SME operators, down from 10% in September 2013. The Green Party, New Zealand First and the Conservative Party are each trusted the most to manage the economy by 2% of SME operators.

A full 15% of SME operators don’t trust any one party more than the others to manage the economy.

OtherConservative Don’t know

8% 63% 2% 2%

1% * 1% *None of them

*2% 5% 15%

MYOB Business Monitor question: Which of the major political parties do you trust the most in terms of appropriate management of the economy?


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Trust in National’s handling of the economy is higher in the main centres than across the rest of New Zealand. Labour’s support is highest in Auckland and Wellington, while the Greens enjoy a higher level of confidence in their economic capabilities in both Wellington and Christchurch.

Region

Auckland

Wellington

Christchurch

Rest of NZ

1%

4%

4%

2%

2%

1%

1%

3%

Conservative

2%10%67%

2%9%68%

2%8%66%

3%7%58%

In terms of SME industry sectors, National enjoys the highest level of trust for its economic management in the finance and insurance sector (84%) and among manufacturers and wholesalers (72%). Retailers and hospitality business operators (52%) and construction and trade sector operators (55%) have the least confidence in National’s handling of the economy.

The retail and hospitality sector (13%) and other industries (12%) have the highest levels of trust in Labour’s economic management. Hospitality and retail business operators are also more confident in the economic management of the Green Party (5%). The Internet MANA Party see their highest level of trust for economic management among the finance and insurance sector (5%), New Zealand First from the transport and warehousing industry (5%) and the Conservative Party amongst manufacturers and wholesalers (5%).

the New Zealand SME economy

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Over the last 12 months, the performance of local SMEs has steadily improved. Local businesses are currently reporting the highest levels of revenue growth recorded in the five years of the Business Monitor survey, with the effects of growth becoming more widespread.

Revenue continues to improve

With the rebuild gathering pace, over half (51%) of SMEs in Christchurch reported improving revenue in the 12 months to August. In contrast to the view that the recovery has been confined to the main centres, SMEs around the regions are experiencing stronger growth (39%) than their counterparts in Auckland (38%).

Wellington SMEs continue to experienced mixed fortunes, with those businesses reporting revenue growth (28%) just ahead of those reporting falling revenue (27%) – though revenue has remained steady for 44% of respondents.

Christchurch

Rest of NZ

Auckland

Wellington

11%

16%

24%

27%

51%

39%

38%

28%

35%

40%

34%

44%

Region Past 12 months – revenue down

Past 12 months – revenue up

Past 12 months – revenue steady

According to the latest Business Monitor, 39% of SMEs saw revenue increase in the last 12 months, up from 35% reporting growth in March 2014, and 30% in September 2013. Fewer businesses also saw a fall in revenue, at 19% – down from 21% in March.


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Strong turnaround in key sectors

The past six months has also seen a significant turnaround in key sectors of the SME economy. The retail and hospitality sector, which in March 2014 reported revenue falls (33%) outweighing gains (30%), has experienced a major improvement. In the latest survey, 43% of retail and hospitality SME operators have seen revenue increase in the 12 months to August 2014, while just 23% report a fall.

Past 12 months –revenue down

Past 12 months – revenue up

Past 12 months – revenue steady

Finance & Insurance 18%55% 27%

Business, Professional & Property 18%38% 41%

Manufacturing & Wholesale 21%43% 32%

Construction & Trades 24%35% 34%

Retail & Hospitality 23%43% 30%

Other industry 21%34% 43%

Primary 13%41% 39%

Transport, Postal & Warehousing 25%24% 49%

The primary sector has also recorded an improved performance, with 41% of operators in the agriculture, forestry and fishing industry seeing a revenue rise in the past 12 months, up from 29% in March. The industry also has the lowest numbers reporting falling revenue over the period – just 13%.

The logistics sector has experienced the largest fall off in growth over the past six months, with 24% reporting an annual revenue increase, down from 36% in March. However, the industry is experiencing a high level of stability, with nearly half (49%) reporting steady revenue in the year to August 2014.

SECTOR


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In the September report, however, these regions are much closer to, and in the case of Bay of Plenty exceeding, the national average of 39% annual revenue growth. Other regions, such as Waikato and Hawkes Bay have also continued to perform well, while Otago/Southland has climbed from 30% revenue growth in March to 37% in September.

positive news for the regions

One of the key shifts in the latest Business Monitor data is the widespread growth in the regions. In the March report, a number of North Island areas, including Bay of Plenty (21%), Manawatu/Wanganui (24%) and Northland (27%), were well below the national revenue growth average of 35%.

Northland

Manawatu/Wanganui

Waikato

Canterbury

Bay of Plenty

Otago/Southland

Hawkes Bay

Year to August 14 –revenue down

10%

18%

11%

18%

18%

12%

22%

Year to August 14 – revenue up

44%

38%

51%

45%

37%

37%

35%

REGION


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Next 3 months – pipeline decrease

Next 3 months – pipeline increase

Next 3 months – pipeline steady

Christchurch 8%50% 39%

Rest of NZ 13%32% 53%

Auckland 16%40% 43%

Wellington 25%28% 47%

in the next three months, New Zealand’s SMes are reporting a steady rise in the volume of work in the pipeline. 36% of SMe operators report they have more sales or work booked in the coming quarter, while only 15% say they have less forward work or sales.

Growth in Christchurch continues to look strong, while Auckland SMEs are also expecting to finish the year positively.

lOOkiNg aHead: Pipeline work

CENTRE



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Christchurch

Auckland

Rest of NZ

Wellington

5%

12%

13%

13%

43%

43%

34%

33%

48%

38%

43%

52%

Next 12 months – revenue down

Next 12 months – revenue up

Next 12 months – revenue steady

lOOkiNg aHead: 12-month revenue

looking ahead to 2015, SMe operators are a little less bullish on their performance in the year to September 2015 than they have been in previous reports. they are, however, still expecting similar levels of growth to those they experienced this year, with 38% forecasting revenue to increase in the next 12 months, and 43% expecting steady revenue levels. Just 11% expect to see revenue fall in the next year. growth in christchurch continues to look strong, while auckland SMes are also expecting to finish the year positively.

Christchurch expects to come off the pace set this year, with more sustainable but still comparatively strong revenue. Auckland and Wellington SME operators expect revenue to improve on this year, while regional New Zealand is forecasting a slightly lower level of growth.

CENTRE


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Several of the regional economies that reported strong growth this year should see that trend continue, as SMes forecast high revenue levels for 2015. Northland and Manawatu/Wanganui in particular – regions that have often struggled somewhat through the five years of the Business Monitor survey – are expected the strongest levels of growth in 2015.

Otago/Southland

REGION Year to August 15 – revenue up

22%

Year to August 15 –revenue down

Waikato 39% 17%

Northland 45% 4%

Canterbury 43% 5%

Bay of Plenty 37% 16%

10%

Hawkes Bay 31% 20%

Manawatu/Wanganui 45% 10%

lOOkiNg aHead: Employment

the positive performance of SMes will translate into jobs in 2015, with 10% of the operators surveyed planning to increase the number of full-time staff they employ in the next year, and 13% planning to increase the number of part-time positions. it will also support wage growth across New Zealand, with 20% of SMe operators planning to increase wages and salaries in the coming 12 months.


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The MYOB Business Monitor researches business performance and attitudes across a range of areas, such as profitability, cash flow, pipeline work, technology usage and the government. The survey has been conducted across the country for five years, and is designed to help MYOB understand the challenges and opportunities in the current environment for local SME owners and operators. A parallel report is also run in Australia, which allows regular comparison between the two markets and provides important insights into the SME sector within the two trading nations.

The information contained in the survey is shared across a wide range of industry partners, government agencies, stakeholders, the business community and the media, in order to provide an up-to-date picture of New Zealand’s SME economy. The aim of publicising the material is to help promote an understanding of the sector and the areas in which professional support, advocacy and the regulatory framework may be shaped to help make business life easier for New Zealand’s SME operators.

This report presents a summary of the economic performance measures and political policy preferences from the MYOB Business Monitor comprising a national sample of 1,023 business owners, managers and directors (operators), conducted in July/August 2014. It is the second MYOB Business Monitor released in 2014 (the earlier survey was carried out in January/February). The businesses participating in the online survey were both non-employing and employing businesses. All data has been weighted by industry type, location and number of employees, which are in line with Statistics New Zealand (New Zealand Business Demography Statistics: At February 2010: ISSN 1174-1988).

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