Business Performance

BDO Business Wellbeing Index

Business performance sentiment at its lowest level as New Zealand’s economy slows

New Zealand’s economic challenges are being felt strongly by leaders across the country, with business’ cash flow and financial performance struggling to keep pace with wider market conditions.  

Overall business performance sentiment is at its lowest ever level since our first survey in May 2022, with just 53% of business leaders saying they have felt positive about their business performance all or most of the time in the past two weeks. This downward trend is echoed when looking at business financial sentiment, where just 41% of leaders felt positive about their business financials in the two weeks prior to the survey. And while business leaders are expecting to see improved business performance in six months’ time compared to now, with 60% expecting to feel positive about overall business performance, this future sentiment is lower than what we’ve seen in previous survey waves.  

These business performance measures have contracted considerably since our October 2023 survey. Now, the reality of New Zealand’s tough operating environment continues to impact firms, who expect to see many of their business performance challenges remain in the coming six months.  

Business leaders least positive about economic conditions, financial measures, and political factors 

Looking at the key drivers of negative business performance sentiment, leaders are feeling least positive about external economic factors, with just 27% feeling positive about this measure all or most of the time in the past two weeks. This is unsurprising given New Zealand's negative quarterly GDP growth rate for three quarters of 2023, high interest rates, an ongoing inflation battle, and high cost of living.  

This economic pressure is likely trickling down to businesses’ cash flow and financial performance, both of which feature in the five business performance measures that leaders feel least positive about. And perhaps because of this financial pressure, workloads have come to the fore as a source of negative sentiment for New Zealand business leaders. With our survey showing less concern around labour supply and employee performance and motivation, financial concerns may be driving some businesses to take on more work with fewer resources in a bid to conserve costs, resulting in higher workloads.  

External political factors are also a cause for concern for business leaders, with just 40% of leaders feeling positive about this measure – which includes local and international elections, government policy direction, geopolitics and global trade wars, and an uncertain political environment. With the new coalition government’s first Budget to be unveiled on 30 May, plus ongoing geopolitical tensions, it’s clear leaders are feeling unsettled about the uncertain political outlook. 

AI and innovative technologies are not yet making their mark

Despite rapid technological advancement in the past six months, leaders appear to be unsure about how to implement artificial intelligence (AI) in their businesses. Just 46% of leaders have felt positive about leveraging and adapting to new technologies, including AI, in the past two weeks. This score is one of the lowest across current business performance sentiment and suggests leaders are not yet harnessing the power of AI in their organisations. However, looking ahead, 55% expect to feel positive about new technologies and AI in six months’ time, which may mean there are plans in place to get to grips with this significant technological change soon.

Interestingly, business leaders are currently feeling most positive about the performance of their systems and technology, with 62% saying they have felt positive about this measure all or most of the time in the last two weeks. Similarly, 57% of businesses are feeling positive about their cyber risk management profile, with this positivity growing further when looking to the future. 

This potentially indicates broader satisfaction among business leaders with their core systems and cyber risk profile – or alternatively that these aspects of their business are of lesser concern relative to the fundamentals of ensuring business viability day to day in the current economic climate.  However, with cyber crime one of the key risks identified in BDO New Zealand’s 2024 Risk Landscape Report,  businesses cannot afford to let their guard down when it comes to the threats posed by disruptive technologies. Similarly, when business is slow, smart businesses often keep an eye on the long term, ensuring their businesses is well set up with the technology and systems to take advantage of future market cycles.  

Future sentiment more positive 

As evidenced in our previous surveys, business leaders tend to be more confident about their future business performance than their current outlook. While just 53% of respondents have felt positive about their overall business performance in the two weeks prior to the survey, this positive sentiment jumps to 60% when looking ahead six months.  

The upcoming Budget may be driving this more positive future sentiment, with business leaders anticipating the delivery of pro-business policies that the Government campaigned on. However, positivity about external political factors remains low when looking to the future, showing business leaders remain cautious about the impact of politics – whether local or international - on their business operations. 

Looking ahead to six months’ time, business leaders are feeling most confident about their progress in meeting regulations and compliance, performance of systems and technology, and their general risk management profile. They expect to feel much more positive about workloads and financial measures than they do currently, suggesting hope may be on the horizon. 

Tips for business leaders

For practical tips to help navigate the big issues driving business performance sentiment among New Zealand business leaders, please refer to our tips section.