A growing number of New Zealand businesses are struggling to stay in the black, and economists warn the situation may worsen before it improves, RNZ reported.
Data from Inland Revenue, released under the Official Information Act, shows that in the 2023 tax year, 107,360 out of 475,010 companies recorded a current loss, while another 40,670 carried losses forward from previous years.
Preliminary figures for the latest tax year indicate 107,450 businesses with current losses, up from 99,500 in 2022 and 98,260 in 2016. Inland Revenue also reported that in 2024, 157,560 companies recorded no income, in some cases due to carrying forward past losses.
While the number of profitable businesses rose from 146,930 in 2021 to 164,670 in 2023, it slipped slightly to 162,300 in 2024.
According to RNZ, Infometrics chief forecaster Gareth Kiernan said that profitability gains between 2016 and 2022 were partly driven by fewer companies making losses, and partly by fewer businesses offsetting past losses against current profits. But he noted a concerning reversal in recent years.
“The increase in the ‘current loss’ share from 32.3 per cent to 34.6 per cent since 2022 is probably the most instructive figure,” Kiernan said. “The March 2023 year was still relatively good, but the worst of the recession won’t show up until the June and September quarters of 2024.”
The pressure is uneven across industries. More than 40 per cent of businesses in accommodation and food services reported losses in 2023/24, while only 25 per cent of arts and recreation services companies posted a profit.
According to ANZ senior economist Miles Workman, the economy was still expanding nominally, thanks to population growth, but business balance sheets were showing signs of strain. Reserve Bank data shows 1.2 per cent of total business loans are now non-performing – the highest level since 2016 – and business liquidations are increasing, as reported by RNZ.
Workman pointed to Statistics NZ figures showing modest year-on-year sales growth in most sectors, but declines in mining, construction, and media, with retail and accommodation barely up 1.3 per cent. Interest rate-sensitive sectors, tourism-reliant industries, and some agricultural businesses are facing the most pressure.
“Costs remain high and demand has diminished, making it harder to pass costs on without eroding profits,” Workman said. “Many businesses built up buffers during the pandemic thanks to government support, but the question is how long they can hold out.”
He also warned that some firms may be “labour hoarding”, retaining staff in anticipation of a recovery, but could be forced into layoffs if conditions do not improve soon.
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