New Zealand’s small business sector continues to grapple with economic headwinds, as revealed by the latest Xero Small Business Insights (XSBI) report for the June 2025 quarter.
According to the global small business platform Xero, small business sales in Aotearoa fell by 0.1% year-on-year (y/y) in the June quarter, marking a persistent trend of underperformance over the past 12 months.
This follows a modest 1.1% y/y rise in the March quarter and a 0.5% y/y decline in the December quarter, significantly trailing the long-term national average of 6.3% y/y growth from January 2017 to June 2025.
The data paints a picture of a challenging economic environment for Kiwi small businesses, with regional and sectoral disparities highlighting both struggles and pockets of resilience.
Bridget Snelling, Country Manager for Aotearoa New Zealand at Xero, noted that the subdued sales figures underscore ongoing difficulties for small businesses, despite consistent Official Cash Rate (OCR) cuts by the Reserve Bank of New Zealand since August 2024.
Snelling said:
“These subdued sales figures highlight an ongoing challenge for Kiwi small businesses. Despite consistent OCR cuts, we’re yet to see the expected boost to consumer and business activity.”
The lack of a significant uptick in spending suggests that broader economic uncertainties, including global trade tensions, continue to weigh heavily on consumer confidence and business performance.
The June quarter data revealed stark regional variations, with sales weakness concentrated in the North Island.
Northland experienced the steepest decline at -3.5% y/y, followed by Wellington at -3.1% y/y and Auckland at -1.3% y/y. In contrast, the South Island showed relative strength, with agriculture emerging as a standout performer.
The sector recorded a robust 10.9% y/y sales increase in the June quarter, following strong growth of 11.1% y/y in March and 14.9% y/y in December, reversing 18 months of sluggish performance.
This resilience in agriculture offers a glimmer of hope amid an otherwise muted economic landscape.
However, industries sensitive to discretionary spending and interest rates faced tougher conditions.
The construction sector saw a significant 6.4% y/y sales decline, a trend that began in late 2023.
Snelling highlighted the broader implications, stating:
“This is particularly concerning given construction’s multiplier effect across the economy, from retail to manufacturing.”
Retail sales, meanwhile, remained flat in June 2025 compared to June 2024, following four consecutive quarters of year-on-year declines.
Hospitality faced its fifth straight quarter of contraction, with sales down 2.1% y/y, reflecting cautious consumer spending in the face of ongoing cost-of-living pressures.
Despite these challenges, a bright spot emerged in the month of June, with national sales rising 4.4% y/y—the strongest monthly increase since April 2024.
This uptick suggests tentative signs of recovery, though Snelling cautioned that the overall picture remains subdued.
She said:
“While the pace of decline has eased in recent quarters, this moderation suggests only tentative signs of recovery.”
The disparity between New Zealand’s performance and Australia’s, where small business sales grew by 3.0% y/y in the same quarter, further underscores the relative weakness in the Kiwi market.
Snelling emphasized the importance of financial literacy and strategic planning in navigating these tough conditions.
Xero’s “Know Your Numbers” program, a free financial literacy initiative, aims to empower small businesses and non-profits—whether Xero customers or not—with tools to manage cash flow, monitor costs, and ensure timely payments.
Snelling noted:
“Planning is particularly difficult right now, with global economic uncertainty adding to the pressure. For anyone feeling the pinch, working with an accountant or bookkeeper to understand the ins and outs of your business can be monumentally helpful.”
As New Zealand’s small businesses navigate this challenging environment, the XSBI data highlights the need for resilience and adaptability.
While agriculture shines and certain regions show promise, the broader economic recovery remains elusive.
Small business owners are encouraged to leverage digital tools, stay vigilant about cash flow, and seek professional advice to weather the storm and position themselves for future growth.