As inflation increases at the fastest rate in 30 years, the latest MYOB Consumer Snapshot – a survey of more than 1,000 New Zealand consumers – revealed that nearly three quarters (73%) of consumers are concerned about the current cost of living.
In terms of their biggest personal or household financial concerns, more than three quarters (76%) of consumers said the cost of food is their biggest concern at present, followed by the cost of fuel (71%), the cost of power (49%), and wages/salaries not keeping up with price increases of goods and services (46%).
As a result of creeping prices, many New Zealanders are already changing their shopping behaviours in ways that will have flow-on effects for local businesses. More than half (57%) of consumers polled said they are sticking to a tight/tighter budget due to the cost of living, 53% are spending less on unnecessary items to help save for the essentials, 52% are planning out what they want to buy, and 41% of consumers are shopping around for the best deals.
When it comes to this years’ Government Budget, introducing initiatives to address the cost of living is the top priority for consumers. The majority (58%) of consumers want a permanent reduction of the tax on petrol. Also high on consumers’ wish list is more action on housing affordability (46%), more financial support around mental health (35%), and stronger action on child poverty (30%). A quarter (25%) of consumers also said they would like to see an increase in personal government benefits (including childcare) announced.
MYOB Head of Go-to Market – Jo Tozer, says consumers’ key priorities revealed in the Snapshot underscore how much of a challenge the rising cost of living has become.
“This is also driving a change in consumer behaviours which could present a new problem for local small businesses who are already struggling with ballooning prices of goods, transportation and shipping costs. SMEs are going to have to work more creatively to attract and retain customers, and likewise, consumers will be on the look-out for the best bang for their buck. However, with spiralling inflation and uncertain economic conditions, there’s only so much both groups can do on their own – so many will be looking to the Government to offer solutions that will help offset rising costs on Budget Day.”
Tax changes top of list for SMEs
With 2021’s Wellbeing Budget aiming to improve living standards, SMEs saw fewer business-targeted initiatives last year. This year, the MYOB SME Snapshot – a survey of over 500 local SMEs – found that nearly two thirds (65%) of SMEs are not confident that this years’ Budget will deliver benefits for businesses like theirs, while more than a quarter (28%) of SMEs are confident.
“This SME survey caps off our recent research that showed confidence in both the economy and the Government was falling sharply amongst SMEs,” explains Jo. “While the Government has to manage a lot of other key spending priorities in the Budget, SMEs may already be feeling that they are low down on the list.”
According to the MYOB SME Snapshot, 43% of SMEs would most like to see a reduction of the company tax rate to 25% announced in the Budget this year. Additionally, 27% would like to see ongoing lower road user charges, nearly a quarter (23%) of SMEs would like tax incentives to work with local suppliers, and 22% would like to see the removal of all import tariffs to reduce the costs of goods.
“Given their experiences with the pandemic to date, and the range of ongoing business challenges in front of them - from skills shortages, to increased operational costs, to supply chain issues - SMEs will be hoping for more attention on the increasingly growing list of hurdles they’re facing. With actions that look to reduce costs sitting at the top of SMEs’ wish lists, including a focus on the range of taxes that have a direct impact on SME income, it’s clear that action which helps them cut costs where possible is without a doubt the most sought after when it comes to the Budget.”
Similar spending priorities seen in the mid-market
In addition to SMEs, earlier in the year MYOB surveyed 500 local mid-market businesses – those employing between between 20-500 employees – on their priorities for Budget 2022. Despite being more confident in the economy (71% believed the economy would improve in 2022), these larger medium businesses also had a clear view on where they would like to see increased Government investment.
While both SMEs and mid-market businesses support a focus on essential services like education and improving living standards, and see mental health as a key priority, the mid-market owners and managers surveyed also believe the Government needs to do more to support key industries.
The MYOB SME Snapshot and the MYOB Mid-Market Report asked businesses what areas or sectors they would like the Government to spend more on in Budget 2022:
MYOB SME SNAPSHOT
MYOB MID-MARKET REPORT
78% said healthcare
64% said construction
63% said education
62% said manufacturing
62% said mental health
61% said mental health
55% said living standards
58% said education
52% said infrastructure
57% said living standards
*Top 5 answers taken
“Businesses in the mid-market see the success of the construction and manufacturing sectors as key to the economy and the domestic recovery post-COVID,” says Jo. “With both industries experiencing significant impacts from the rising cost of goods and the disrupted supply chain, as well as being constrained by severe labour shortages, it’s not surprising mid-market businesses would like to see greater support for these sectors as part of Budget 2022.
“Overall however, looking through to Budget Day, there’s one clear theme evident from our latest research. SMEs, consumers and mid-market businesses will all be expecting initiatives that can help alleviate the current cost of living and in turn, the cost of doing business,” she adds.