New Zealand SMEs set to trump Australian counterparts in 2014 – what are they doing right?

New Zealand SMEs are set to outpace their Australian counterparts by a “considerable margin” in 2014, according to the inaugural MYOB Trans-Tasman Business Monitor report.

The comparative report found while Australian SMEs are more optimistic about growth for the current financial year compared to last year, their opportunities for growth are around six months to a year behind those of New Zealand business owners.

It found New Zealand SMEs expect to shine compared to Australians in the areas of business confidence, revenue expectations and sector-based growth.

MYOB chief executive Tim Reed said the results fall into the context of both countries having the prospect of improved economic conditions this year.

“In New Zealand, the effects of the Canterbury rebuild and growth in Auckland, combined with the rural sector’s performance, is underpinning what will likely be one of the most significant and sustained periods of growth in the country’s recent history.”

The report highlighted that Australian SMEs fell behind New Zealand in 2013. In the year to August 2013, 39% of Australian SMEs reported a fall in revenue, and 18% recorded a revenue increase. In comparison, 24% of New Zealand SMEs saw their revenues decline, while 30% reported a revenue rise in the period.

One quarter of Australian SMEs expect to see revenue improve in the year to August 2014, while 22% expect it to decline. In contrast, 43% of New Zealand SMEs forecast a revenue increase in 2014, while 10% expect a decline.

Reed said the difference was powerful when it came to sector-based expectations.

“New Zealand’s construction, retail, manufacturing and rural sectors are all expecting to outperform Australia’s. Here [in Australia], 17% of manufacturing and wholesale businesses, and 17% of construction and trades, expect to see a revenue increase in the year to August 2014. This compared to 59% and 44% in New Zealand.

“Only in Australia’s finance and insurance industry is revenue performance expected to slightly outstrip New Zealand’s: 36% of SMEs in this sector expect revenue to improve in 2014, compared to 35% in New Zealand.”

Crossmark Australia chairman and SME consultant Kevin Moore went on a small business and factory tour of New Zealand in October 2013, and is not surprised by the findings.

Moore says reasons for their buoyancy include a far lower tax rate and no capital gains tax, which provide greater incentive for people to start a company.

He also thinks that, internationally, New Zealand benefits from an image of “wholesomeness” and “beauty”, which appeals from a marketing perspective.

“There is a big demand for fresh New Zealand food produce in Asia,” he says.

Moore observed that SME factories were thriving, with many buying machinery from Australian manufacturers that have folded.

The lower currency in New Zealand has also been a bonus for exporting, Moore says.

“Retail (in New Zealand) is now starting to boom, as people are spending, they are more optimistic, their house prices are rising…it is a virtuous circle.”