Last week’s Budget announcement from the Government brought in a lot of new information. As always, there are some things for you to note, some opportunities to grab, and some things best left to us accountants to worry about. Here’s Oxford Edge’s run-down on the notable moments for your business.
The government has given a pretty strong indication it’s planning to decarbonise the New Zealand economy. You might want to read more on this if your business relies on burning a lot of fuel. There will be opportunities to be grabbed for companies willing to embrace and capitalise on green and electric technology – the government is keen to support initiatives that help it achieve its goals.
There will probably be increasing scrutiny on your business’ impact on the environment in the coming years as the government pushes ahead with its ERP. It’s not just about regulation, though – expect a shift in public perception as there is more focus on how businesses affect the environment and community.
Inflation is heading sharply uphill, and high cost of living is a big issue for a lot of voters, so naturally this is something the government is trying to tackle. Yep, that means interest rates are likely to rise to try and control inflation.
There’s a bit of a swing and a roundabout in the Budget, because the government has committed to giving money to low and middle income earners. That will help plug the cost of living issue, but it’s an indication the government is willing to spend, which in turn drives inflation. That means the Reserve Bank of New Zealand (RBNZ) will likely need to raise interest further.
If you’re carrying a lot of debt, it might be a good time to talk to your Oxford Edge advisor about whether you need to reduce, and how you can go about doing that while making sure your business has access to the funds it needs.
Treasury expect that things will chill out a bit on the inflation front as economic growth slows down in 2023 and 2024. We currently have a very, very low unemployment rate, but that’s likely to grow as the market cools. It follows that inflation should pull back to ordinary levels by the end of 2024, and we’d expect the RBNZ to drop interest rates and encourage growth.
Speaking of the unemployment rate, it’s forecast to rise from 3.2% to 4.8% by 2024. For now though, the labour market remains incredibly tight, and 4.8% still isn’t massive unemployment numbers. Finding good people continues to be a challenge facing many businesses we work with, and so it’s more important than ever to focus on your company’s culture to retain key staff.
The government has pledged to invest a total of $100 million in small-to-medium-sized businesses as a minority shareholder in its SME Business Growth Fund. As a minority shareholder, the government would play a role as an “active investor”, providing support and networking opportunities to those businesses invested in as part of the scheme.
The banks are going to play gatekeeper, selecting small businesses for funding. We’re still waiting on details from the banks about how they will choose, and we’ll let you know once we’ve got an update. Safe to say we expect competition to be pretty fierce.
We recommend keeping an eye on this if equity finance would be more appropriate than debt financing for your business. So, if you might struggle to meet interest and loan repayments in the short term but your business is viable in the longer term, this might be the fund for you.
The $200 million Regional Strategic Partnership Fund will continue, supporting projects outside of Christchurch, Wellington, and Auckland that align with the government’s objectives. What are those objectives? To create more productive, resilient, inclusive, sustainable, and Māori-enabling regional economies (PRISM).
To be eligible for this funding , you must demonstrate that your project will support this government objective, and that your it aligns with regional economic development priorities and broader government goals. Other funding must be available for the project – typically, 50% for commercial projects and 20% for non-commercial and Māori-enabling projects.
The government funding may come either through debt financing or equity (similar to the Business Growth Fund).
The borders are open, and the government is keen to give the tourism a kick-start to make sure we capitalise on the incoming visitors. The $54 million Innovation Programme for Tourism Recovery is designed to help stimulate a shift towards a regenerative, low carbon, productive and innovative tourism sector in the wake of the Covid-19 pandemic.
The programme aims to support the transition of the sector to a low carbon, high wage industry through a co-funding model. Funding is available for initiatives that deliver on one or more of the following outcomes:
The programme and eligibility criteria are still currently being designed with further information to come. Get in touch if you think your business might be eligible, and we’ll help you find the information needed and advise you on the process.
Additionally, the budget has apportioned funding to continue some initiatives to further support businesses.
The Apprenticeship Boost support has been extended beyond August 2022 to the end of 2023.
Cuts in the fuel excise tax and road user charges will continue for an additional two months.
There was a lot going on in this year’s Budget, and we’ve tried to summarise the bits SMEs need to be across, but this isn’t everything by a long shot. We’ve got our heads around the strategic side of things, so if you’re keen to know more about the Budget and how it affects your business, get in touch with your Oxford Edge advisor. We’re here to help!