Unemployment in New Zealand has been steadily rising over the past two years. The unemployment rate has risen from 3.4% in Q1 of 2023, to 5.1% in Q4 of 2024.
The rate has remained static for Q1 of 2025, but this prolonged high rate of unemployment may be having a detrimental impact on the future of your small business.
Let’s look at the alignment between unemployment and your future growth.
1. Reduced consumer spending:
With more people out of work, consumers have less disposable income to play with.
This leads to customers tightening their belts and less consumer spending on non-essential goods and services. This can directly impact your sales and monthly revenue, forcing you into a corner where prices (and margins) must be decreased to encourage more sales.
2. Low morale and poor employee retention:
While a larger talent pool might seem beneficial, high unemployment can sometimes create a sense of job insecurity among your existing employees.
Unstable economic conditions can lead to decreased morale, higher stress levels, and a potential struggle to retain top talent, who may feel less secure in their current roles.
3. Difficulty securing loans and funding:
Banks become more risk-averse when there’s evidence of high unemployment, poor economic conditions and unpredictable market conditions.
The recent CPA Australia Asia-Pacific Small Business Survey found that only 26.4% of Kiwi businesses expect it to be easy to access finance. Reduced access to funding can lead to poor cashflow, slower growth and an increasing need to reduce costs.
4. Decline in overall business confidence:
The combined impact of poor economic conditions and high unemployment is significant.
This unpredictable and unstable outlook can have a major effect on business confidence. New Zealand’s ANZ Business Outlook Index fell sharply to 36.6 in May 2025 from 49.3 in the previous month. This may deter your small business from investing, innovating or expanding – all factors that could hinder your own long-term growth and stability.
Talk to us about getting your business through the tough times
High unemployment and tough economic forecasts make trading more difficult. But there are still ways to control your spending, drive growth and do your bit to provide employment.
Book a meeting with our team to look at strategies for making your business more agile and key tactics for overcoming these current external challenges.