Urban centres lead decline in Aotearoa’s small business labour productivity

Wellington — 13 June, 2024 —Xero, the global small business platform, today released first-of-its-kind regional and industry data about small business labour productivity.

The Xero Small Business Insights (XSBI) report, Small business productivity: Industry and regional trends, is based on anonymised and aggregated data from more than 240,000 Xero small business customers in New Zealand, Australia and the UK. It builds on the XSBI labour productivity report (part one) released earlier this year.

Key finding: All New Zealand industries and regions contributed to a 6.1% national-level fall in annual productivity

National productivity fell in 2023, with average productivity 6.1% lower than in 2022. The data shows this decline was experienced by all industries, with the largest fall in agriculture (-12.1%), followed by hospitality (-9.2%).

Additionally, all regions experienced a decline in 2023 when compared to 2022. These ranged from a 7.9% decline in Waikato to a 3.2% fall in Otago.

Key finding: Major urban centres are leading a longer-term productivity decline post-pandemic

All major urban centres recorded negative labour productivity in the post-pandemic period: -1.2% for Auckland; -2.2% for Canterbury and -6.7% for Wellington.

Meanwhile, Northland is leading the pack in post-pandemic productivity growth at a rate of 5.8%, followed by Waikato at 4.5%, and Otago and Hawke’s Bay both recording 1.9%.

Key finding: Real estate services stand-out productivity performer, hospitality significantly lagging

Of the eight industries tracked by XSBI in New Zealand, five of them had productivity levels above the national average in 2023 ($102.40), led by real estate services (NZ$125.20/hour). The industry with the lowest productivity was hospitality, generating only NZ$14.30/hour.

The New Zealand hospitality industry had a larger decline in productivity in 2023 (-9.2%) than in the UK (-0.3%) and Australian (-5.1%) hospitality sectors. Indeed, the New Zealand hospitality sector has consistently had lower productivity than in the other two countries since this series began in January 2017.

Xero Country Manager NZ, Bridget Snelling, said the report’s key findings overall provide useful insight.

“Peeling back the layers on small business productivity for the first time like this gives us a better idea of where the biggest opportunities are for gains that will benefit both small businesses and our economy overall.

“Those interested in regional development should be paying attention to what’s going on in Northland as a case study that could benefit other regions. Meanwhile, we should pay particular attention to the productivity decline recorded in Auckland - our largest city. It accounts for 38% of the New Zealand economy, making it a concerning barometer for the country’s overall economic outlook.”

She also said that hospitality’s underperforming productivity is bleak news for the struggling industry. New Zealand’s hospitality workforce has a higher proportion (around 30%) of short-term and temporary migrant workers than Australia (around 15%) and the UK (around 16%).

“We can see there are country-specific dynamics that might be contributing to hospitality’s overall performance.”

Snelling said the report’s findings are a powerful tool that can be used to guide small businesses, their advisors, the government and others concerned with regional and industry economic growth.

“We’re all united in the understanding that improved productivity holds the potential to unlock incredible benefits for small businesses by helping them lift profits, empowering them to pay higher wages and lower their prices. The mantra has to be about working smarter not harder, and this means a focus on supporting businesses to digitalise to save time, rather than increasing staff hours to get more output.

“Small businesses can start now by speaking to their accountant about what digital tools could help their business, there are options across every sector. Our government can also play a crucial role to make it easier for small businesses by backing initiatives which support and incentivise digitalisation.”

ENDS

Further information

This new XSBI productivity data supports conversations on productivity due to its sole focus on small businesses, speed to market and monthly measurement cadence, and objective, anonymised, aggregated data. Other productivity data is generally broader, slower to be released and covers a longer period of time (e.g. quarterly or annual).

You can find a copy of the report here.

For tips on how small businesses can lift their own productivity, Xero has put together a guide. This includes four key areas for a small business and their advisors to think about:

• Buying better work tools (or capital) to amplify the efforts of workers
• Developing smarter processes or methods of working
• Upskilling workers
• Using entrepreneurship skills to not just start a business but also make sure it is operating at its full potential

Media contact

Natalie Weber-Benning | Xero Communications | +64 21 02619604 | natalie.weberbenning@xero.com

About Xero

Xero is a global small business platform with 4.2 million subscribers. Xero’s smart tools help small businesses and their advisors to manage core accounting functions like tax and bank reconciliation, and complete other important small business tasks like payroll and payments. Xero’s extensive ecosystem of connected apps and connections to banks and other financial institutions provide a range of solutions from within Xero’s open platform to help small businesses run their business and manage their finances more efficiently.