Xero, the global small business platform, released a report with New Zealand Institute of Economic Research (NZIER) projecting the productivity gains Kiwi small and medium size enterprises (SMEs) stand to gain through accelerated digitalization.
Productivity is the biggest long-run “determinant of wages and living standards, according to the New Zealand Government.”
The report notes New Zealand’s productivity levels have “historically lagged behind other advanced economies (OECD 2022) and points to digitalization as a strategic opportunity for SMEs to overcome this issue.”
The report cites research showing when SMEs invest in digital tools they see productivity returns “ranging from $2.40 to $3.10 for every dollar spent, showing even modest digital upgrades can generate meaningful economic benefits.”
Based on inflation-adjusted modeling, this could result in “a potential $8.6 billion boost to Aotearoa New Zealand’s GDP in 2025.”
Digital adoption among New Zealand is “uneven and fragmented.”
While many SMEs use basic digital tools “like websites and email, fewer adopt advanced technologies such as cloud enterprise solutions, e-commerce platforms, or AI analytics (MBIE 2024).”
Xero Country Manager for Aotearoa New Zealand, Bridget Snelling, says the report reveals Kiwi small businesses “are falling behind the rest of the world, and swift action is required to remain competitive and improve productivity.”
Snelling said:
“Digitalization is not just a competitive advantage for small businesses – it’s a necessity. Embracing digital tools like AI, cloud computing, and data analytics enhances innovation, can expand market reach and strengthens resilience in times of uncertainty. Small business digitalization helps break down barriers of distance and market size, unlocking local and global opportunities and enhancing efficiency in an increasingly competitive world.”
The report summarizes what digitalized countries around the world have done to encourage digitalization to boost SME productivity and their economies:
- Finland has a focus on SME digital integration, underpinned by a strategy focused on infrastructure, skills development, and targeted support. Initiatives such as Business Finland’s Innovation Vouchers and Tempo Funding offer SMEs grants of up to €50,000 for piloting digital projects, focusing on cloud computing, cybersecurity, and AI.
- The Netherlands emphasizes financial incentives and sector-specific programs such as Mijn Digitale Zaak (My Digital Business).
Denmark integrates digitalisation with industrial strategies, offering financial and advisory support. - Canada’s ‘Canada Digital Adoption Program’ (CDAP) provides grants and loans for e-commerce and digital advice.
- Singapore uses structured guidance and financial incentives via programs like SMEs Go Digital.
- South Korea’s Digital New Deal invests in infrastructure, smart factories, and AI.
Snelling comments:
“Looking at our international counterparts, we see how they’ve encouraged and supported their small businesses to innovate and digitalize. The challenge we face here must be overcome through collaboration between industry and government to deliver for Kiwi small businesses.”
NZIER Principal Economist Michael Bealing adds:
“Digitalization is not just about awareness – it requires sustained, practical support. For New Zealand, accelerating digital ambition will ensure small businesses lead, not follow, in the digital economy – unlocking productivity, innovation, and long-term prosperity.”
Based on the report findings, Xero recommends the Government reform and formalize the Small Business Advisory Group (SBAG), “including expanding its membership to include industry and academia to deep dive into digitalization strategies for Kiwi small businesses to drive adoption and productivity.”
Snelling concludes:
“A useful precedent is the UK’s SME Digital Adoption Taskforce, a government–industry partnership that aims to identify barriers and co-design effective strategies to accelerate SME digitalisation and, in turn, boost national productivity.”