New Zealand small and medium businesses are taking a cautious yet deliberate approach to growth as global factors put the brakes on the nation’s economic recovery.
Employment Hero’s May Jobs Report, drawn from payroll data from established SMEs, shows businesses are expanding, particularly in select industries, with a persistent shift towards flexible labour.
The data comes as the conflict in the Middle East forces economists to downgrade growth expectations, with higher petrol, electricity and food prices impacting household spending power.
“It’s still volatile out there with economic head winds a defining feature of the current environment,” says Neil Webster, Employment Hero General Manager NZ. “But businesses are adapting, growing where possible, and continuing to invest in their teams in a targeted way to support business success.”
Small Businesses Are Growing Slowly and Steadily
While the national unemployment rate sits at 5.3 per cent, the May Jobs Report shows employment in New Zealand’s SME ecosystem has grown by 0.5 per cent month-on-month, continuing a run of similar-sized increases. The string of slow-and-steady gains contribute to a positive longer-term trend, and suggest employers are backing themselves even as the broader economic outlook weakens.
Both regions are seeing employment growth in a subset of SMEs, although the South is outpacing the North. Rates of expansion vary across sectors, with the strongest year-on-year growth in agriculture, mining and accounting.
“The accounting category, which also includes HR and legal, is interesting because the increase defies all the talk about these industries losing jobs to AI,” says Neil Webster, Employment Hero General Manager NZ. “In fact, employers are continuing to hire and increasing headcount, which suggests AI is augmenting many roles rather than replacing them.”
Webster points to record crowds at Fieldays as a sign of positivity in the sector.
“Agriculture and horticulture are making hay during an incredibly buoyant period with farming businesses expanding to meet demand and ensuring they are positioned to capitalise on the current boom,” he says.
While Businesses Grow, Wages Have Flattened
But while small and medium businesses are finding ways to grow teams, they are limited in how much they can afford to pay their staff. “The SME ecosystem is slowly but surely increasing headcount which is a good sign for driving up employment, but wages remain flat,” Webster explains.
While monthly wage growth in May has crept up 0.5 per cent, a third consecutive gain, the longer-term picture is more stark, with zero year-on-year growth recorded. This figure is a 13-month low, down significantly from 4.0 per cent at this time last year.
When set against rising living costs, that means many employees are effectively going backwards in real terms. However, some sectors are faring better than others. SME wage growth is just keeping pace with inflation in agriculture, mining, science and technology, and manufacturing and logistics.
NZIER Forecasts Reveal a Slower Recovery Than Expected
Employees and employers seeking relief from rising fuel costs can take heart in Stats NZ figures confirming a downward trend. Petrol was 3.8 per cent cheaper in May than in April, while diesel was down 11.4 per cent. However, annual figures are a reminder that overall prices remain substantially higher than the same time last year, with petrol up 28.7 per cent and diesel up 76.8 per cent.
Lower fuel costs are also reflected in figures for transport and recreation, as domestic airfares fell 11.4 per cent, international airfares dropped 5.5 per cent, and domestic accommodation decreased by 7.3 per cent. But businesses are confronted with higher input costs in other areas, with food prices rising 1.0 per cent, driven by a 2.5 per cent increase in fruits and vegetables, and electricity costs up 1.4 per cent.
The New Zealand Institute of Economic Research (NZIER) predicts small and medium-sized businesses will continue to face the dual challenge of rising operational costs and softening customer demand for the remainder of 2026 and into 2027.
The NZIER’s latest report declares New Zealand’s economic recovery is slowing in the wake of the Middle East conflict and it has downgraded its forecast for GDP growth. It also expects household spending to contract as consumers rein in discretionary budgets, directly impacting SMEs.
But there are also positive takeaways in the document. Global demand for primary commodities, particularly dairy and meat, suggests exports should remain strong, while core medium-term inflation appears to have been contained.
