Inflation is easing, rate cuts are on the horizon, and government incentives are in place - but business sentiment in New Zealand remains stubbornly low. In this episode we’re joined by Lighthouse Financial’s Managing Director, Matthew Harris, to explore why Kiwi businesses still feel stuck despite improving economic indicators.
While headline numbers suggest progress, the day-to-day reality for many businesses is anything but optimistic. The cost of capital remains high, supply chain issues persist, and access to funding continues to favour residential property over commercial growth.
Even as monetary conditions shift, confidence isn’t following — weighed down by uncertainty, slow policy implementation, and the cumulative fatigue of the last two years.
One factor holding businesses back is New Zealand’s structural productivity challenges. The business year kicks off slowly after the summer break, only to be interrupted by a string of public holidays that disrupt momentum. These short bursts of downtime can have an outsized impact when companies are already operating in a cautious environment.
It’s not about working harder – it’s about the system businesses are working within.
Beyond the economic fundamentals, mindset matters. Tall poppy syndrome continues to discourage ambition and risk-taking, particularly in contrast to countries where entrepreneurship and bold goals are celebrated. The result? Fewer Kiwis taking calculated risks and more businesses holding back from growth.
Layer in global uncertainty — from foreign policy to fluctuating trade conditions — and hesitation becomes the default.
Despite signs of increased liquidity, most bank lending is still going into property, not business. It’s estimated that up to 80% of lending is tied to housing, leaving small and medium-sized enterprises facing tighter restrictions and more hoops to jump through — even for modest capital needs.
In an economy built on SMEs, that imbalance limits our ability to innovate and expand.
While the Official Cash Rate is dropping, the impact isn’t flowing through fast enough. Banks are slow to pass on reductions — with delays of several weeks before any real changes hit mortgage or business loan rates. And while the OCR is moving in the right direction, it’s still in a range designed to restrict growth, not support it.
Until rate cuts are felt at the coalface, confidence will remain shaky.
Genuine recovery will likely require rates in the low 4s – or with a ‘3’ in front – before business owners start to feel the shift. Coupled with targeted government incentives like the 20% tax deduction for business investment, these changes could reignite momentum.
But the biggest challenge may be mindset: rediscovering New Zealand’s innovative spirit, encouraging growth, and backing those willing to take the leap.
Business confidence remains low despite improving economic indicators
Productivity is impacted by structural issues in the business calendar
Tall poppy syndrome limits ambition and growth
Lending still heavily favours property over business development
OCR cuts are slow to reach businesses and consumers
A meaningful recovery may not arrive until interest rates drop further
With interest rates shifting and new tax incentives in play, now is the time to reassess your financial strategy. Whether you’re looking to unlock capital, invest in your business, or take advantage of the 20% tax break, Lighthouse Financial can help you structure a plan that drives real growth.
Book a free consultation today.
Disclaimer:
The information in this article is general information only, is provided free of charge and does not constitute professional advice. We try to keep the information up to date. However, to the fullest extent permitted by law, we disclaim all warranties, express or implied, in relation to this article – including (without limitation) warranties as to accuracy, completeness and fitness for any particular purpose. Please seek independent advice before acting on any information in this article.
