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NZ SMEs deliver bulk of jobs growth over past year: economist

Monday 14th May 2018

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Small businesses employing just a third of New Zealand’s workforce have delivered more than two-thirds of the nations’ jobs growth over the past year, a leading economist says.

Former ANZ Bank New Zealand chief economist Cameron Bagrie, who now heads Bagrie Economics, today said small business employment rose at an annual pace of 8-10 percent in the past 12 months, outpacing the 3.1 percent growth in new jobs nationwide.

“It looks to me like already small to medium size enterprises are accounting for about two-thirds of the employment growth across New Zealand,” Bagrie said.

He was speaking at the launch of a new SME data tool by accounting software developer Xero, leveraging its 300,000 domestic SME subscribers, whose information populates its system. Bagrie was engaged to interpret the data.

New Zealand’s SMEs employ about a third of the nation’s 2.62 million-strong labour force while accounting for about a quarter of economic activity.

Small Business Minister Stuart Nash welcomed the new Xero tool, which provides real-time information, saying the data will make it easier to develop policy supporting what he described as “the backbone of the economy”.

SMEs “provide opportunities for entrepreneurship, productivity, and employment,” Nash said.

Xero’s ‘Small Business Insights’ provides a snapshot of New Zealand’s small business sector, covering cash flow, job creation, getting paid and overseas trading. That data showcases areas of concern and strength for SMEs.

Bagrie said the overseas trading figures show local SMEs exporting goods rely heavily on Australia: “It’s logical, if you’re in Dunedin there’s no difference exporting to Auckland versus exporting across the ditch to Sydney”.

On the flipside, SMEs are underrepresented in Japan, the world’s third-biggest economy, and haven’t managed to crack that market yet, he said.

“These are the exciting dynamics on how we can use this data to make more informed choices or policy-based decisions,” Bagrie said. 

Another major issue for small business was cash flow, with the data showing more than 56 percent of SMEs were cash flow positive in March, recovering from a low of about 39 percent in January.

The figures also showed the average time to pay a 30-day invoice in 12 months ended March 31 was 34.7 days, almost a full working week late.

Xero New Zealand country manager Craig Hudson said some small firms might not think that time frame was too bad. However, he said it had a “massive impact” on companies' ability to do business.

“If you don’t have the funds in the bank to pay wages, to be able to buy supplies to keep going with the jobs that you have on-going, or pay your own bills, it has a knock-on effect,” he said.

Nash said there is no reason at all why invoices can’t be paid within seven or 14 days.

“The Ministry of Business (Innovation, and Employment) pays 75 percent of their invoices within seven days and 95 percent within 14, I think if MBIE can do this, we can all do this,” he said.

(BusinessDesk)

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