Chapter 33. New Zealand

Figure 33.1. Structure and performance of the SME sector in New Zealand
Figure 33.1. Structure and performance of the SME sector in New Zealand

Note: Chart A: Data exclude non-employers.

Sources: Chart A. C, D: OECD Structural and Demographic Business Statistics Database 2018, http://dx.doi.org/10.1787/sdbs-data-en; Chart B: OECD Timely Indicators of Entrepreneurship Database 2018; Chart E: OECD Structural and Demographic Business Statistics Database 2018, Employer Business demography dataset.

 StatLink http://dx.doi.org/10.1787/888933925426

SME business conditions and access to strategic resources

Institutional and regulatory framework

New Zealand presents a favourable environment for business creation, with relatively low start-up costs and administrative burdens on start-ups. As a response to the 2015 report of the government-appointed Small Business Development Group, in 2017 a set of tax simplification and compliance cost reduction measures were introduced, including simplification in provisional tax to increase certainty, modernisation of withholding rules and lessen impact of late tax payment penalties.

Market conditions

New Zealand’s SMEs are largely centred on domestic activities, with low participation to global value chains, and regulatory conditions on FDIs are relatively restrictive. Several government agencies implement measures to help exporters, including web-tools to navigate free trade agreements (FTAs) and compare tariff rates across different FTAs (Tariff Finder). The completed Trade Single Window, deployed in 2017 with e-functionalities, allows all border requirements for goods and craft to be met in one place. In 2016, the mandate and operational criteria of the Export Credit Office (NZECO) were reformed to support a wider range of SMEs and larger exporters, while enabling NZECO to diversify its risk portfolio.

Infrastructure

ICT investments in New Zealand are high by OECD standards and broadband penetration, both fixed and mobile, is above the OECD median. The Ultra Fast Broadband (UFB) programme aims at providing 80% of New Zealanders with fibre by 2019. Areas outside of the UFB scope have benefitted from the Rural Broadband Initiative (RBI), addressing the technical and financial difficulties originated from line distance and low population density. In addition, the government made the transformation of the land transport system a priority. In 2018, the NZ Transport Agency launched a NZD 16.9 billion programme of investment over three years with a view to connecting people and businesses and help the economy grow. The National Land Transport Programme (2018-21) is a partnership with local governments.

Access to finance

Over 2013-17, SME lending in New Zealand increased steadily, but SME borrowing has become relatively more expensive since the global financial crisis, compared to borrowing for larger firms. Also, tightened lending standards have led to higher loan rejection rates for SMEs. On the other hand, venture and growth capital for SMEs has been on an upward trend since 2012, also boosted by the New Zealand Venture Investment Fund (NZVIF) which catalyses private sector investment into young, innovative and primarily technology-based companies. Additionally, to open up financing opportunities for SMEs, the government introduced in 2014 a regulatory framework for equity crowdfunding.

Access to skills

New Zealand scores among the top OECD countries in terms of adult and student proficiency, while workplace training and learning are in line with the OECD median. The government is stepping up efforts on adapting the skill base to the digital economy and high-tech industries. The Digital Skills Forum, a focused coalition of industry associations and government organisations, identifies key issues and opportunities across ICT, high-tech and digital skills. To address skills shortages and attract international talents, Skilled Migrant Category visas are issued for migrants that fit Essential Skills in Demand Lists, compiled by the government, based also on suggestions from employers and trade unions.

Access to innovation assets

SME R&D intensity in New Zealand above the OECD median, but business engagement in innovation networks, particularly with research institutions, is below OECD standards. The Government has set the target of raising investment in R&D to more than 2% of GDP by 2027, and is introducing a new R&D Tax Incentive. The Government also provides support through R&D grants; technical, networking and acceleration services; the Commercialisation Partner Network; and the Pre-Seed Accelerator Fund.

The full country profile is available at https://doi.org/10.1787/34907e9c-en

References

Digital Skills Forum (n.d.), New Zealand Digital Skills Forum, https://www.digitalskillsforum.nz/.

New Zealand Trade and Enterprise (2016), Navigating Free Trade Agreements, https://www.nzte.govt.nz/about/news/news-and-features/navigating-free-trade-agreements.

New Zealand Transport Agency (2018), National Land Transport Programme.

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