New Zealand is not going to get wealthier selling goods and services to ourselves.
We need to be connected into the global economy.
With non-renewable sectors such as oil exploration under pressure and agriculture (dairying) sector facing various environmental and production challenges, and much of the agriculture sector facing a biological constraint, New Zealand will need to turn to alternate sectors to drive growth. Small businesses will need to be a key part of narrative.
Xero’s Small Business Insights provides key information on trends across businesses that are embracing the challenges and opportunities trading with the rest of world involves.
Export and import figures from month to month can be volatile. There are seasonal influences but also logistics to consider as often firms (especially small businesses) will send or receive orders in bulk. For the month of March exports and imports showed huge growth of 47.2% and 22.4% respectively.
Looking at export and import performance per organisation shows strong growth. The dollar value of exports per organisation is up 18% on a year ago. The dollar value of imports per organisation is up 8.4%.
Those firms that are trading in international markets are trading more and more.
Xero’s Small Business Insights data shows that small businesses who export do so more than the wider economy in Australian and US dollars (USD). These are well established markets so it’s natural to see small businesses focused on exporting in those currencies, especially to Australia.
Australia represents 16.4% of merchandise exports and 12% of merchandise import for the whole economy. Xero’s Small Business Insights data shows Australian dollar trade accounting for 30% of exports and 20.9% of imports.
This is not surprising. For many small businesses, trading with Australia is no different to sending goods between the north and the south island. Australia has been a well-established trading partner for decades.
Trading in USD dominates with 51.4% of exports and 59% of imports using the greenback. Obviously, the United States is a big market but a host of trade across Asia will be USD based.
The United Kingdom also appears to be a more important market for small businesses than what is shown by merchandise trade figures for the economy as a whole. So small firms can crack the challenge of distance. European export trade for small businesses is also stronger than for the economy as a whole (11.95% versus 10%).
Small businesses are underrepresented trading with Japan relative to the broader economy across both exports and imports. Japan a well-established market taking 6% of exports and 7% of imports. For small businesses, Japan (proxied by trading in the Japanese Yen) barely registers.
That’s to be expected to a degree. It’s tougher and more expensive for small businesses to crack new markets so they tend to focus on the really really big ones.
That said, Japan has been a large trading nation of New Zealand’s for a long time.
These sort of insights about small business representation in some markets and not in others should have policymakers thinking what assistance they could provide to help small businesses break into what are well established markets, but still represent a risk to small businesses.
This article, including the insights and analysis contained within it, was prepared by Economist, Cameron Bagrie with the support of Xero through Xero Small Business Insights data. All data used is anonymised and aggregated. 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.