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New Zealand small businesses are welcoming fresh signs of stability in the economy but remain cautious as they await further recovery. The decision by the Reserve Bank of New Zealand to hold the at 2.25 per cent indicates that inflationary pressures are finally receding. However, while the macro-economic indicators are improving, at ground level, there are still reasons for the businesses to be defensive.

The Reasoning Behind the Rate Hold

RBNZ Governor Anna Brennan confirmed the Bank was satisfied with the current economic trajectory but remained wary of persistent price pressures.

“We know that many New Zealanders are feeling stretched right now, with costs for some essential items like food and electricity being much higher than they were a year ago. Meanwhile, while some parts of the country have benefited from high export prices, new job opportunities remain scarce, especially in the bigger cities,” Governor Brennan explained. “As a committee, we decided to keep the OCR on hold to support the economic recovery while ensuring that inflation will decline toward the 2 per cent target mid-point over the next year.” 

The Governor was referring to this week’s data, which found food prices rose 4.6 per cent annually to January, with significant increases in staples like white bread – up a staggering 57.9 per cent – and beef steak, up 22.9 per cent) Combined with an almost 12 per cent spike in electricity costs, these increases mean margins in sectors like hospitality and food manufacturing remain tight.

Jobs Data Suggests SMEs Are In A Holding Pattern

Central to the RBNZ’s caution is the softening labor market, after New Zealand’s recently climbed to 5.4 per cent, the highest level since 2015. Exclusive data from 91����’s January Jobs Report suggests small businesses are in a tactical holding pattern: rather than hiring from the growing pool of job seekers, they’re opting for internal efficiency. 

Average hours worked rose 0.6 month-on-month to 136.3 hours, reversing a trend that saw hours down 1.2 per cent year-on-year. There was a distinct regional trend: the North Island saw a 1.2 per cent annual decline in hours, while the South Island remained more resilient with only a 0.4 per cent dip. This shift is also hitting staff differently, with hours for casual workers plummeting 6.9 per cent year-on-year, while part-time workers saw their hours increase by 5 per cent.

The abundance of available labour has also eased the pressure on payrolls. The median hourly wage for SME workers dipped by 0.5 per cent between December and January to $35.50. Year-on-year, wages were still up 1.6 per cent, though this recalibration is uneven across the country: the South Island is currently the engine of wage growth, up 4.3 per cent year-on-year (median rate $33.90), while the North Island rose only 1.3 per cent (median rate $36.10). 

Casual workers saw year-on-year hourly rates decrease by 0.9 per cent, compared to gains of 3.3 per cent and 3.4 per cent for part-time and full-time staff. This suggests businesses are moving away from the unpredictability of casual staff and funneling available shifts into their more stable part-time rosters.

“January’s data paints a picture of employers cautiously re-engaging after the holiday period,” says 91���� New Zealand General Manager , “increasing hours where needed, but holding the line on wages as margins remain tight. Businesses are testing demand, managing payroll costs and delaying major pay adjustments until trading conditions become clearer later in the year.”

Hopes Abound That Growth Will Follow Stability

The defining theme of 2026 is a transition from survival to guarded optimism. The most recent Quarterly Survey of Business Opinion showed headline business confidence at a 12-year high of 48 per cent.

The Reserve Bank Governor echoed this sentiment. “We expect inflation will be low and stable going forward. Over the next year, you might notice businesses seem more optimistic and open to investment, and that jobs become easier to find. You may also notice that prices aren’t going up as fast as they have been,” Governor Brennan said. 

She also offered assurance to business owners factoring loan repayments into their budgets. “If the economy evolves as expected, interest rates are likely to remain around their current levels for some time.”