Divya Pahwa
Partner, National Retail Sector Leader
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New Zealand’s retail sector continues to come under pressure, with its post-COVID recovery hampered by the country’s economic challenges. Our April 2024 BDO Business Wellbeing Index shows retail business leaders feel less positive about economic impacts and cash flow, with business financial concerns driving negative wellbeing for many in this sector.
Consumer confidence has fallen in recent months as inflation has remained high and the country entered a technical recession. Retailers’ costs – including wages, insurance and freight - have increased considerably and consumers have generally been spending less, resulting in tight margins for many retail businesses. Tax cuts will likely help to alleviate some of this pressure and provide more confidence for consumers to spend.
In addition to economic pressure, retailers have also been impacted by retail crime, which increased by nearly 20% in 2023 compared to 2022. Ahead of Budget 2024, Retail NZ Chief Executive Carolyn Young said investment in Police would be “critical to fight the current wave of retail crime”. In January, the Prime Minister confirmed the Government’s commitment to delivering 500 additional police officers in two years.
So how does Budget 2024 address the economic and security concerns felt by New Zealand’s retail leaders currently?
Budget 2024 delivers on the tax relief the National Party promised, with around 1.9m households set to benefit by $60 per fortnight on average. While it remains to be seen how people will use this additional money, the retail sector could benefit from a boost in discretionary spending and an uplift in consumer confidence. The Government has also confirmed the addition of 500 new frontline police officers, which may boost the presence of police in retail zones and help to address the recent rise in retail crime.
Budget 2024's infrastructure focus is relevant to the retail sector, particularly businesses located in the regions. $1.2bn has been invested into the Regional Infrastructure Fund to invest in resilience infrastructure and support regional growth, which may help to support supply chains and ensure business flows smoothly in New Zealand's regions.
“The tax bracket readjustment announced today will be welcomed by retail business leaders, who will hope this leads to a lift in consumer confidence and a loosening of purse strings. However, while the tax cuts may lead to more discretionary spending, retail leaders may have hoped for more from this Budget. Inflation, insurance costs and wage increases are creating strain on the sector, and it will take time for any improvement in the country’s economy to trickle down to retail. The investment in policing is good news for retail leaders. Retail crime costs $2.6bn a year, according to Retail NZ, and poses a significant health and safety threat to employees and customers. We all deserve to feel safe and secure when we go to work and retail leaders will hope to see an improvement in this area.” Divya Pahwa, National Retail Sector Leader |
For more business tips see our BDO Business Wellbeing Index here.
You can read more details on Budget 2024 at the Government Budget website here.
Economic factors are putting pressure on retail leaders, and the Government has indicated there will not be a quick fix to these conditions. In times like these, retail business leaders need to focus on the levers they can pull to support their businesses. Our BDO retail advisory team is here to help you navigate the current challenges and look to the future.
To talk about how any of today’s Budget announcements will affect your retail business and for help with cash flow, forecasting, scenario planning, or to simply talk to someone and bounce ideas off, get in touch with your local BDO office today.
For more on how New Zealand’s retail sector is faring currently, view the retail sector focus from our April BDO Business Wellbeing Index here.
Divya Pahwa