Given our size, proximity to others, and abundance of natural resources; New Zealand trade has always been critical to our economic well being. As the world continues to become more connected, more and more Kiwi small businesses are embracing the opportunity to broaden the reach of their goods and services.
According to Stats NZ, New Zealand exports totalled more than $76 billion in the year ending December 2017 and NZTE has our exports making up about 30 percent of GDP. Our top commodities including dairy, travel, meat and timber are making their way to Australia, China, the E.U, and U.S. in high numbers. This is a positive result for our country as the small size of our market means that Kiwi businesses need exports in order to thrive.
To create a snapshot of the amount of overseas trade conducted by New Zealand’s small businesses, we looked at anonymised, aggregated data from hundreds of thousands of small businesses that use our accounting platform in New Zealand. We focused on those which have traded in a foreign currency in a given month and then calculated the month-on-month percentage movement in the total value of foreign currency transactions resulting in an amount coming in or going out of a bank account.
Overall, from March 2017 to March 2018, imports decreased by 3.1 percent, while exports remained practically unchanged overall. A further examination of the year’s data illustrates some additional interesting findings. Both import spend and export invoicing saw the highest activity in March 2017, with a similar upward tick in March 2018. For February to March 2018, there has been a 34.3 percent change in the value of imports/exports. From July to December, export invoicing remained relatively level, while imports increased, especially in December. This could be attributed to the festive season and the desire or demand for international products.
According to economist, Cameron Bagrie, the data shows that small businesses who export do so more than the wider economy in Australian and US dollars.
“These are well established markets so it’s natural to see small businesses focused on exporting in those currencies, especially to Australia. Small businesses are under represented in trading with Japan and Europe relative to the broader economy. These are well established markets for New Zealand as a whole but less so for small businesses. That’s to be expected. It’s tougher and more expensive for small businesses to crack markets so they tend to focus on the really really big ones. This can help policymakers think about what assistance they could provide to help small businesses break into what are well established markets, but still represent a risk to small businesses.”
New Zealand small businesses are embracing new ways of commerce and are active in discovering new markets. With expanding networks, it’s essential to have comprehensive tools that enable multi-currency accounting. Xero’s platform is set up to give small businesses many of the same benefits that large enterprises enjoy in trading globally. The multi-currency function has exchange rates for more than 160 currencies that are updated every hour from XE.com and small businesses can set up accounts, run reports, invoice customers, and take payments in foreign currencies.
This article was prepared by Xero using Xero Small Business Insights data, for the purpose of informing and developing policies to promote small business in New Zealand. It contains general information only and should not be taken as taxation, financial, investment or legal advice. Xero recommends that readers always obtain specific and detailed professional advice about any business decisions.