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MEDIA •  24 MAY 2017 • 7 MIN READ

Practical solutions are top of mind for SMEs, ahead of Budget announcement

Printed budget

Small and medium-sized businesses are hungry for more resources to boost performance in tomorrow’s Budget, says an industry head.

Aside from wanting increased funding for infrastructure and additional measures to eliminate traffic congestion, many SMEs are hoping for changes that directly improve business operations.

“I don’t hear a clamour for tax cuts interestingly; I don’t think that’s what they want,” said Sue De Bievre, chief executive of accounting company Beany.

“They want practical support around relieving some of the issues they’ve got such as not being able to attract suitably skilled people, they want the traffic sorted out so they can get to work and get their people and goods to work… they want solutions to those practical issues everyone is experiencing, but impacting really heavily on business.”

De Bievre said she had seen an “increased hunger” this year from businesses wanting more resources in order to perform better.

“All of those business owners who may have been content for a number of years running their plumbing company or whatever small service business, now want to know more.

“I think it’s like a grass roots kind of feeling, they know they can’t be as productive and profitable as they could be so they are really reaching out for more information.”

According to an Auckland Chamber of Commerce survey of over 100 Auckland businesses, getting the right staff with suitable skills and transport infrastructure are the top issues businesses are currently facing.

More than 50 per cent said they were having difficulty getting the right talent.

“This is denying Auckland growth and opportunity which has an impact not just on Auckland but on New Zealand,” said Auckland Chamber of Commerce chief executive Michael Barnett.

“A solution to this would be a better defined immigration policy and the training of those that have been failed by the education system, but deserve the opportunity to participate in their community through work. It will take investment now to fix this issue – if we do not we will face successive generations of social welfare dependency and its cost.”

In Finance Minister Steven Joyce’s pre-Budget speech, he said it aimed to provide more opportunities for Kiwis to get ahead. A key element included fostering a strong landscape for small and medium-sized firms.

The Government has outlined $11 billion of extra capital spend, which will take the infrastructure capital spend to $23b over four years.

“That’s probably the biggest amount of money that has been spent on infrastructure in New Zealand’s recent history, but equally importantly what the Government has said is that they are willing to look at different types of funding mechanisms,” said Kirk Hope, BusinessNZ chief executive.

Hope said he expected to see a more considerable overall infrastructure spend over the next four years, from both private and public investment.

He would also like to see Government free up land for development and housing, particularly in Auckland and Queenstown.

“The thing for businesses is that workers need accommodation… There’s a real shortage of affordable accommodation so it makes it really hard to attract people to come and work here so it puts a lot of pressure on small businesses,” he said.

While the New Zealand economy is thriving, along with the small business economy, the country’s per capita income is declining.

Increased funding for infrastructure, innovation and business education could turn that around, De Bievre said.

“Government and business people should be thinking about raising the per capita income of New Zealand… as research suggests we’re actually doing poorly on that measure,” she said.

“As an economy we are doing really pretty well, growing probably a little bit ahead of most OECD countries, the actual size of the economy is doing pretty well but really high immigration actually means what we earn per person is declining, so I think that is what the Government should really be thinking about in terms of this Budget and business; is how can the Government stimulate increasing the productivity of New Zealand.

It comes down to productivity, she said.

“We have loads of great ideas, loads of hardworking Kiwis, but what we would like is for the infrastructure to be productive and investment in people’s skills and new thinking machinery, it’s that investment we need in innovation, education, and general investment in business to drive up average income per person.”

Support innovation

De Bievre hopes the Government will allocate funding to support further innovation.

“One of the defining characteristics of small and medium-sized enterprises in New Zealand is how innovative it is, and I think the Government could do more to support that,” she said. “There’s masses of research that indicates New Zealand is one of the most entrepreneurial countries in the world, certainly in the OECD, but sometimes we sort of fail to connect that to commerce, and actually making money for the country.

“We can unlock some of the potential by actually directing some attention, and funds, to innovation and education so that business owners really have the right level of skill to make the most of their ideas.”

BusinessNZ also wants to see investment in innovation.

“New Zealand companies will compete more effectively by innovating products, services and processes and through rapid commercialisation of new ideas,” it said.

“BusinessNZ supports Budget investment in support of business research and development through Callaghan Innovation co-funding arrangements.”

Craig Hudson, country manager of Xero New Zealand, said he wanted to see the Government come up with more ways to support small business success.

“Last year’s Budget was pretty ho-hum for small businesses, apart from the changes to provisional tax, which was welcome for sure, but there was nothing else that really stuck out as a win for entrepreneurs and smaller operators,” he said.

“We’ve seen a lot of discussion out of Australia recently on the issue of late payments to small businesses from big companies. It really hit a nerve for entrepreneurs and smaller operations that I’m sure many small businesses here could relate to. I expect the New Zealand Government has picked up on this sentiment so we will be watching closely to see what comes out of the Budget for small business.”

Additional infrastructure

Roading and infrastructure was impacting business productivity, Barnett said.

“With regard to roading and infrastructure this impacts on business in respects of productivity – the ease of moving around Auckland, of people getting to and from work ( quality of living ) of moving goods and services efficiently and at a reasonable cost. Local councils are claiming they have no money – there is only one other solution and that is the intervention by central government to intervene, make decisions and deliver,” he said.

“Auckland and New Zealand has had a gutsful of lists of urgent projects that we talk about but do not deliver. The cost to NZ of a continuing unproductive Auckland constantly in catch-up mode runs into billions of dollars each year.”

Increased tourism infrastructure ranked high among surveyed businesses.

“While this has been addressed in some way, most accept that if New Zealand is to maintain its drive to get numbers of tourists they’ll have to also accept there is a cost side to the revenue gains and that will require a more realistic share of revenue to regions or else face the fact that future generations will be burdened with the same catch up in infrastructure costs as Auckland faces now,” he said.

De Bievre said additional funding for infrastructure to support the sector would benefit tourism operators.

“What we’re really looking for, and this is from talking to quite a wide range of our clients, is two key areas. One is around infrastructure, and specifically infrastructure for tourism. By that I mean toilets on the Milford track, but also things like a decent road from the [Auckland] Airport…”

The road to and from Auckland Airport was not providing a good start for tourist experiences in New Zealand, she said.

BusinessNZ also supports investment for tourism infrastructure.

“The tourism sector currently delivers around $13 billion in export earnings and requires more investment to continue to deliver this level of earnings. BusinessNZ would like to see an action plan for regional investment in roading, carparks, walkways, cycleways, toilets and other tourist facilities, including investment in facilities that can be operated on a user-pays basis.”

De Bievre said the pre-Budget speech showed the Government was “in the right place”, but was curious as to how hard it would push funding.

Originally Published in the NZ Herald – 24 May 2017