New Zealand businesses shift from survival to revival in 2degrees study - Cecilia Robinson

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Younger owners and new firms are far more optimistic than their older counterparts.

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The mood among younger business owners, especially, has shifted from endurance to momentum. Photo / 123rf

Something shifted in New Zealand business this year. You could feel it in the coverage from Fieldays. Farmers and business owners talking less about what was happening to them and more about what they were doing about it. New technology, better systems, productivity improvements, future opportunities. There was something in those conversations that felt different from the anxiety that has dominated much of the past few years.

That same shift comes through in the latest 2degrees Shaping Business Study, which surveys businesses across the country about their outlook, challenges and priorities. The picture it paints is of a business community that is realistic about the challenges it faces but increasingly confident in its ability to navigate them. Not confidence born from easy conditions. Confidence born from deciding to stop waiting for them.

The numbers are striking. Sixty-one per cent of businesses expect revenue growth over the next 12 months. Nearly 70% say growth remains a key objective, with profit growth the dominant ambition. Given the economic backdrop of the last few years, those numbers are remarkably resilient.

But the more interesting story lies beneath them. Twenty-seven per cent of businesses describe themselves as surviving. Forty-six per cent say they are reviving. Only one in five say they are thriving. That combination of ambition and realism tells us a lot about where New Zealand business actually is right now, not in denial, not defeated, but moving forward with clear eyes about what still needs to change.

Business sentiment is a strange and underappreciated thing. It is not simply a reflection of economic conditions, it is partly a cause of them. When businesses feel confident, they hire, invest and take risks. When they don’t, they contract, defer and protect. The psychology of a business community matters as much as the data, because sentiment shapes behaviour and behaviour shapes outcomes.

What makes the current moment interesting is that sentiment appears to be improving not because conditions have dramatically changed, but because the posture of business has. For several years the dominant mode was endurance, getting through, managing down, waiting it out. That made sense. The last few years delivered genuine shocks: a pandemic, supply chain disruption, rapid inflation, sharply higher interest rates and a cost of living squeeze that hit consumers and businesses simultaneously. Endurance was the rational response.

But endurance has a cost. Businesses that hunker down defer investment, slow hiring and miss opportunities. At some point, endurance has to give way to something more forward-looking, and the evidence suggests that transition is now happening across a meaningful portion of the New Zealand business community.

One of the most striking findings in this year’s data is generational. Businesses under five years old and owners under 35 are significantly more optimistic than their peers. Businesses that have been operating for more than a decade, and owners over 45, are significantly more likely to feel less optimistic than they were a year ago. That gap is new, and it is statistically significant.

It would be easy to read this as simply a function of experience, veterans who have seen cycles before, tempering expectations accordingly. But I think it points to something more fundamental. Newer businesses were built for the world as it is now. They did not have to unlearn old models or retrofit new technology on to legacy operations. They started with different assumptions about volatility, digital tools and flexible working. In a period where adaptability matters more than scale, that is a genuine competitive advantage.

Businesses are not ignoring the challenges. They are simply refusing to be defined by them.

Rising operating costs remain a significant pressure. More than 80% of businesses reported increased costs over the past year. Notably, the burden has shifted, utilities, insurance and leases have surged as cost pressures, overtaking labour as the fastest-rising input. Unlike wages, these costs are largely non-negotiable and outside day-to-day business control. That makes structural efficiency and redesigned operating models more important than ever.

Which brings me to the theme that matters most right now: productivity.

For decades New Zealand has struggled with a productivity gap. Our people are talented, entrepreneurial and hardworking, yet we continue to lag many comparable countries when it comes to output per hour worked. It is one of the most important and most persistently unresolved challenges in our economy and it deserves a more honest conversation than it usually gets.

Too often productivity is misunderstood. It is not about asking people to work longer hours or do more with less. Most New Zealanders already work incredibly hard. Productivity is about helping people achieve more with the time they already have. It is about removing friction, simplifying processes and making better use of the tools available. It is about redesigning work, not just intensifying it.

That distinction matters because it changes what the solution looks like. If productivity is about working harder, the answer is pressure. If it is about working smarter, the answer is investment – in technology, in systems, in better ways of organising how work gets done.

That is where technology and increasingly artificial intelligence comes in. But the data here is sobering as well as encouraging. AI adoption has reached an early ceiling among mainstream businesses. Large corporates are accelerating investment, but most SMEs have not followed at the same pace. Businesses no longer lack awareness or motivation, they lack the skills and capability to implement AI meaningfully. The conversation has shifted from whether to use AI to how to actually make it work. That is progress, but it also represents a real gap that needs to be closed.

The businesses that will close that gap fastest are not necessarily the biggest or the best resourced. They are the ones willing to experiment, to start small, to treat a failed implementation as a data point rather than a reason to stop. New Zealand has always punched above its weight when it comes to practical innovation, finding clever solutions with limited resources. That same instinct, applied to AI adoption, is exactly what the current moment requires. The technology is available. The opportunity is clear. What is needed now is the confidence to begin.

I work in healthcare, a sector facing many of the same pressures as the rest of the economy. The organisations making the most progress are not simply asking people to work harder. They are redesigning how care is delivered, removing friction and building systems that let clinicians spend more time with patients and less time on administration. The lesson generalises. Across every sector, the businesses pulling ahead are those that have stopped treating technology as an add-on and started treating it as a fundamental part of how they operate.

Part of what has enabled that broader shift, I think, is a change in the wider environment. The budget in May wasn’t designed to excite anyone. It wasn’t generous and it didn’t try to be. What it was, was honest. It acknowledged trade-offs, restrained itself from promises it couldn’t keep and treated New Zealanders as adults capable of understanding difficult choices. For the first time in a while, the signals from Government felt like they matched reality rather than trying to paper over it.

Businesses seem to have noticed. When the Government is straight with people about where things actually stand, it turns out that businesses find it easier to plan, to invest and to back themselves. Certainty, even uncomfortable certainty, is more useful to a business than optimism that doesn’t match the facts on the ground.

That is not an argument that everything is fine or that the work is done. Costs are still high. Workforce pressures remain real. Many New Zealanders are still doing it tough, and the businesses serving them feel that directly. The reviving majority are not yet thriving, and that matters.

But the direction feels right. The mood has shifted from endurance to momentum. From survival to building. The businesses best positioned for what comes next are those that started with fewer assumptions, embraced the tools available and stopped waiting for the world to return to something familiar.

New Zealand has always done its best work when it stopped waiting and started building. That moment feels like now.

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