Understanding Today’s Economic Challenges: A Shifting Landscape for NZ Businesses
As we move further into 2025, many New Zealand businesses are navigating a period of considerable change. Rising costs, global uncertainty, and evolving market dynamics are influencing everything from cashflow and borrowing costs to customer behaviour and workforce capacity. Understanding these pressures - and responding to them strategically - is key to staying on track in the months ahead.
Inflation and Interest Rates: Managing the Cost of Borrowing
The Reserve Bank’s ongoing efforts to control inflation have kept interest rates elevated, and this continues to affect both consumer spending and the cost of borrowing. For businesses with loans or plans to invest in growth, these changes can have an immediate impact on cashflow and financial planning.
What this means for you:
- Review your current lending arrangements to understand how interest rate movements are affecting your costs.
- Consider refinancing or debt restructuring options to manage long-term exposure.
- When planning investments or pricing, factor in borrowing costs to protect your margins.
Changing Consumer Behaviour: Adapting to Shifting Spending Patterns
With many households tightening their budgets, discretionary spending has softened. This is being felt across the retail, hospitality, and service sectors, often translating into slower sales and reduced customer engagement.
What this means for you:
- Monitor consumer trends and assess how they’re affecting demand for your products or services.
- Review your pricing strategy or consider introducing value-driven alternatives to remain competitive.
- When forecasting sales or planning promotions, factor in changing behaviours to avoid overcommitting resources.
Global Disruptions: Supply Chain and Market Volatility
Geopolitical tensions, climate-related events, and shifting trade conditions continue to disrupt international supply chains and export markets. For businesses reliant on overseas suppliers or customers, these factors can affect costs, delivery timeframes, and overall performance.
What this means for you:
- Regularly assess supply chain risks and develop contingency plans where possible.
- Consider diversifying suppliers or exploring alternative markets to reduce exposure.
Labour Market Pressures: Balancing Costs and Capacity
Attracting and retaining skilled people remains a challenge for many sectors. Wage growth, competition for talent, and limited availability in key industries are all placing pressure on operating costs and productivity.
What this means for you:
- Review staffing costs and workforce capacity regularly to ensure they align with your business goals.
- Explore options such as automation, outsourcing, or flexible staffing models to help manage workloads.
- Reflect labour costs accurately in your pricing structure to maintain profitability.
Foreign Currency Exposure: Managing the Hidden Risk
For businesses importing goods or services, currency movements can have a direct impact on margins and pricing. Even small shifts in the NZD against major currencies such as the USD or AUD can alter landed costs and profitability.
What this means for you:
- Keep a close eye on exchange rate trends and assess how they affect your cost base.
- Discuss hedging or forward contract options with your bank to help manage volatility.
- Factor potential currency fluctuations into your pricing to avoid erosion of margins.
If you’re unsure how to assess or manage your foreign exchange exposure, we’re happy to assist or work alongside your banking advisor to ensure its reflected accurately in your forecasts.
The Value of Up-to-Date Financial Information
In an environment like this, timely and accurate financial information is more important than ever. It’s not just about compliance - it’s about equipping yourself with the insight to make confident, informed decisions.
A practical budget and cashflow forecast are key tools to help achieve this. These documents should be reviewed regularly - ideally monthly - to reflect what’s actually happening in your business. Staying proactive allows you to respond quickly to changes, whether it’s a shift in revenue, an increase in costs, or an unexpected opportunity.
Why it matters:
- A current budget helps you stay on track and anticipate challenges.
- A live cashflow forecast provides visibility over upcoming pressure points.
- Regular reviews enable real-time, confident decision-making.
At DCH, we work alongside clients to develop forecasting tools that are not only practical but genuinely useful in guiding day-to-day and strategic decisions. If you’d like support in strengthening your planning process, our team is here to help.
Navigating Uncertainty with Confidence
New Zealand businesses continue to face a complex mix of challenges - rising costs, evolving consumer behaviours, supply chain pressures, labour shortages, and currency volatility. While these factors are testing resilience, they also create opportunities to refine strategy, strengthen systems, and build more adaptable business models.
Budgeting, cashflow forecasting, and scenario planning have become essential tools for operating with confidence in this environment.
At DCH, we’re working closely with clients to understand these challenges, plan proactively, and take advantage of opportunities where they arise. If you’d like to discuss how these issues may affect your business - or explore how we can support your planning - we’d welcome the conversation.
