Small business owners in New Zealand are scanning headlines and government signals ahead of the 22 May budget. The countdown to the government’s 22 May budget continues, and small enterprises across the country are rallying behind a familiar message: ease the tax pressure and simplify the rules. Unfortunately, despite vocal appeals, faith in concrete policy change is tempered by past experience.
Confidence Splits as Budget Day Approaches
According to the latest Prospa SME Sentiment Tracker, nearly half (49%) of small businesses say they lack confidence the budget will deliver the kind of support they need. Only 26% believe current government actions have actually helped them, painting a picture of tempered expectations ahead of Finance Minister Nicola Willis’s budget delivery.
“The upcoming budget is clearly important to small business owners and what we’re hearing from them is a desire for practical changes that would make a difference to their day-to-day operations,” said Adrienne Begbie, Managing Director of Prospa NZ.
Tax and Regulation Top the Wish List
When asked what changes would most improve their prospects, 39% of small business owners pointed to tax reform, while 25% called for the removal of bureaucratic red tape. Government-imposed taxes remain the single largest business cost for SMEs at 22%, surpassing staffing (15%) and inventory or materials (12%).
“SMEs are the backbone of our economy, and merit targeted support to continue thriving. By removing unnecessary barriers, SMEs can unlock growth and reinvest in their people and products,” Begbie said.
Healthy Outlook Masking Fragile Finances
While 57% of SMEs describe their business health as “good” or “very good”, the survey also revealed a fragile financial foundation.
A majority—59%—say they have three months or less in financial reserves. Alarmingly, nearly one in four (22%) have less than a month’s buffer.
Key pressures include dwindling consumer spending, an ongoing shortage of skilled workers, and intensified competition from large retailers and online platforms.
The said challenges have forced some businesses to reshuffle costs: marketing budgets have nearly doubled (from 5% to 9%), while fuel costs have decreased significantly (from 10% to 5%).
Uncertainty Lingers Despite Stable Outlook
Business owners appear cautiously steady about the road ahead. Forty-three percent expect their profits to remain stable over the coming year, while 35% anticipate growth. However, market unpredictability is creeping back into view, with 37% unsure about future conditions—up from 29% in the previous survey.
“The reality is that SMEs are doing a great job controlling what they can. Their internal confidence is strong, but like many Kiwis, they’re keeping a close eye on broader economic signals,” Begbie noted.
Turning to Funding as Conditions Tighten
Thirty percent of SMEs are planning to seek external funding within the next 12 months in response to the ongoing volatility. More than half—55%—now say they trust non-bank lenders like Prospa to provide flexible and tailored financing options.
“Small businesses are becoming increasingly savvy about their options. With the right funding, many are ready to take the next step in their growth journey,” Begbie said. “It’s encouraging to see this shift as it shows confidence and capability is still very much alive in the SME community.”
Economists Signal Caution
However, hopes for sweeping support may collide with fiscal reality. ASB Chief Economist Nick Tuffley warned that Budget 2025 is unlikely to offer significant stimulus or broad-based tax relief. Instead, the government is expected to take a more conservative path, emphasising cost containment and debt consolidation.
“Much of the focus on Budget 2025 will be on spending restraint as a means to consolidate the fiscal position,” Tuffley said.
Operational spending is forecast to shrink by NZ$1.1 billion, and public sector hiring freezes are expected to tighten economic conditions further. Tuffley suggested that while business-focused tax cuts may be off the table this year, discussions could resume in 2026—once the government has rebuilt its fiscal buffer.
New Zealand’s SMEs remain under pressure, managing tight margins and limited resources—a familiar challenge for the sector. Business owners are watching Wellington closely as Budget 2025 approaches. Any support must be timely and targeted to make a real impact.