Growing or hunkering: What are Kiwi SMEs thinking?

Ryan Boyd
Growing or hunkering: What are Kiwi SMEs thinking?

The latest Westpac Business Growth Monitor has been released, measuring the confidence of more than 500 SMEs (with less than $5m turnover) on the economy, their plans to grow, intentions to create jobs, and need for funding.

The results showed noticeable differences in outlook between industries, particularly primary sector vs. tourism and construction.

Westpac’s SME Lead Damian Sharkey spoke to Duncan Garner on RadioLive Drive Time to talk through the findings.

Listen to the audio of the interview, or read the transcription below.

 

Duncan Garner: The findings on the latest Westpac Business Growth Monitor are out. This is an ongoing survey of around 500 small and medium sized enterprises about their intentions going forward, and basically whether or not they are going to invest in their business, what their views are of the wider economy. This concerns me of course with the dairy slump, what are businesses thinking. 

Damian Sharkey, the head of all things small and medium sized at Westpac, Sharkey good to see you mate, nice to have you in the studio.

Damian Sharkey: Thanks Duncan.

DG: So what are the businesses telling you?

DS: They’re telling us 3 things. First thing is that some businesses, particularly those that are attached the primary sector, are starting to hunker down a little bit. But then on the other side what we’re also seeing is a bit of a 2 speed economy. So one side you got the primary sector, then on the other you’re seeing construction and tourism.

Duncan G Farm

Duncan Garner with a farmer during last year's Westpac Growth Grants roadshow

DG: So when you talk about these businesses linked to the primary production sector hunkering down, they’re not employing are they? I suppose the screws are going on, are they?

DS: Yeah the way to think about it is that they’re looking at discretionary expenses and going line by line, that’s probably what we mean by hunkering down.

The other thing is a lot of them are planning. There’s a lot of external things that are happening – the Chinese downturn, there’s uncertainty in Europe – so they’re saying “How do I get out of it?”

SEE ALSO: The dairy downturn: How long can banks stand behind farmers?

DG: The dairy price would have knocked their confidence too, wouldn’t it? Because to them it’s about where they invest in the future, and I suppose they’re a bit wobbly on it.

DS: The way to think about it is it’s not all about primary New Zealand. You’ve also got to think about tourism especially. So last year I was reading there was about 3 million visitors to New Zealand, and that was up 10%.

DG: Is good, isn’t it?

DS: It’s very good. So if you go to places like Queenstown you hear a lot of American accents particularly.

DG: With a lot of the people and businesses that you surveyed, were they in that construction and tourism sector, and how are they feeling? 

DS: That’s where the 2 speed bit comes in. I was talking to a friend of mine in Wellington today who’s an accountant, and he’s involved in the accommodation trade and his two clients there are actually looking for more facilities, more rooms. So that industry in particular is really at capacity, looking for more people.

DG: The thing about tourism is, and you were right there was about 3.1million tourists last year, and it’s growing and it’s growing and it’s growing. There’s some speculation that it could double in the next 10 years. These businesses better get ready for that because it’s coming, isn’t it?

DS: That’s right, and the good thing about tourism is that it means jobs in the regions. I’ll give you an example. There’s a business called Forgotten World Adventures, and they’re based out in Taumarunui. They’re very good and they’re on the railway tracks that were abandoned and there’s a place called Whangamomona where they took over a hotel.

DG: They’re on the railway tracks aren’t they, with the golf carts?

DS: That’s right.

DG: You need to get me on this.

DS: Ok. Look it’s very very good, and it means people in New Zealand spending, and again I think that’s very good. So that’s reflected in the survey when you delve into the numbers a little bit.

DG: So are these guys coming to you looking borrow more dough? Have you guys got more money for these businesses to expand?

DS: That’s the interesting thing. When you look at businesses that actually do want to grow, some are self-funding, but others are looking at refreshing equipment, so they are looking for money to do that. They are also looking at ways to fund their revenue streams. So with rates being as low as they are, it is entirely possibly to do that.

DG: Hey what about construction too? You’ve got businesses knocking on your door there? Construction companies, builders saying hey we’re expanding at a rate of knots?

DS: The reason there’s confidence in that sector is that’s there’s a forward pipeline of work, so when we looked at the survey that industry in particular was the most confident. We are a couple years out of the peak in Christchurch, and it is heading into other areas. 

SEE ALSO: The dairy downturn: How long can banks stand behind farmers?

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