If you’re running a business with five to twenty staff and turning over $500k or more, you don’t have a treasury team reading Reserve Bank statements for you. You’ve got a wage run and a decision about whether to take on the next job or the next hire.
This week brought a fresh interest rate call, updated economist forecasts, and new figures on business debt and liquidations. None of it, on its own, is enough to sink a healthy business. But that’s how this kind of pressure builds. It’s a bit like a game of Jenga — most businesses already have a few blocks pulled out by now: a tighter margin, a slower-paying customer, a bit more owed to IRD than last year. The tower’s still standing. It’s just got less room to absorb the next thing that goes wrong, and several “next things” are arriving close together.
Interest rates: it’s not moving the same way everywhere
The Reserve Bank raised the OCR to 2.75% on 2 September, the second rise since July. Most economists expect one more rise, to 3.00%, in October or December, then a long hold through 2027.
It’s not moving the same way everywhere, though. Floating and short-term rates are still likely to creep up a little further. Longer-term fixed rates (two years plus) are actually forecast to ease slightly, since wholesale markets look further ahead than the OCR does. So expect your overdraft to keep nudging up, but if you’re deciding whether to fix a term loan, don’t assume “wait for rates to fall” applies — for longer terms, now may already be close to as good as it gets. Get an actual quote from your bank rather than guessing.
Costs and prices: relief is coming, just not yet
Inflation hit 4.1% this year, driven largely by a fuel and import cost shock from the Middle East conflict. That shock hasn’t fully passed — oil prices were still elevated in early September, with the conflict now in its seventh month. Economists still expect annual inflation to ease from here, back under 3% by early 2027 and closer to 2% by the middle of that year, but mainly because this year’s spike drops out of the year-on-year comparison over time, not because costs are visibly falling yet. If oil stays elevated for longer, that easing could take longer too.
If you’ve been passing rising costs on to customers, that gets harder to justify once input costs genuinely stop rising. Plan for that shift in the first half of 2027, not immediately. The same applies in reverse: if your own suppliers added a surcharge over the past year to cover fuel or freight increases, next year is a reasonable time to ask them directly whether it’s still justified, rather than letting it sit on your invoices by default.
Staffing and demand: a soft market, not a shrinking one
Unemployment is at 5.6% — the highest it’s been in eleven years, last seen in September 2015 — and forecast to stay near that level through the rest of 2026, easing only gradually through next year. For hiring, that’s a genuine advantage: an easier market than two years ago, with wage pressure staying moderate.
If you sell directly to households — retail, hospitality, trades reliant on discretionary spend — plan for steady demand, not a rebound. Card spending growth has slowed from 6.1% to 4.1% over the past year. Budget the next two quarters on that basis, not on hope.
Is this combination of pressures actually unusual?
Worth asking, since it changes how much weight to put on any forecast. The 11-year-high unemployment rate isn’t itself extraordinary — NZ has been here before. What’s harder to find a clean precedent for is the Reserve Bank resuming rate hikes while unemployment is already elevated and business liquidations are rising, rather than cutting rates to support a weakening economy, which is the more usual response.
Every tightening cycle since the Reserve Bank introduced the Official Cash Rate in 1999 — 2004, 2014, and 2021–23 — happened while unemployment was low or falling and the domestic economy was running hot. This time the trigger is a supply shock landing on an already-soft labour market and record business debt, not strong demand. The closest real parallel is the global oil shocks of the 1970s and 80s, which predate this country’s current monetary policy framework entirely and played out under very different structural conditions.
Practically, that means the next six to twelve months are somewhat harder to forecast than a typical cycle.
Credit and debt: two very different groups of businesses
New Zealand business lending hit a record $143.1 billion this year, the fastest growth since records began in 1998. But it isn’t spread evenly: hospitality credit demand is up 22%, agriculture up 13%, while overall demand actually fell. At the same time, 3,275 businesses went into liquidation, up 13.5%, even as repayment among active borrowers improves.
What this tells you: banks are genuinely willing to lend to businesses with a solid trading story, and much less willing, or far more expensive, for those already showing strain. If your numbers are solid, this is a reasonable window to talk growth. If they’re not, waiting won’t make that conversation easier.
Tax debt and the funding squeeze specific to family businesses
IRD is owed $9.4 billion in overdue tax, 75% of it by businesses, and more than half of that is GST and PAYE — money collected on the Crown’s behalf, not the business’s own. Enforcement has genuinely tightened over the past two years, after a lighter-touch period through Covid.
If your family home sits behind your business lending, which is common at this size of business. Many owners cover a cash shortfall in the business by drawing on home equity — a mortgage top-up or revolving credit. That’s getting harder to use: house prices are forecast to fall through 2026, shrinking available equity, borrowing against it costs more, and banks scrutinise serviceability more closely for business use.
What this means for your next six months
If you’re relying on “the house” as a backup plan, test that with your bank today rather than assuming it’s still there. If you’re behind on GST or PAYE, deal with it directly with IRD now — it carried far less risk two years ago than it does today. If you’re hiring, conditions favour you, but budget wages on gradual movement. If you sell to households, plan on steady demand, not a rebound. If you’re considering growth or a new loan, an honest look at your own numbers matters more than the what’s happening in the market — credit is genuinely available for a strong trading story. And build your cash buffer deliberately now, while it’s still straightforward to do.
None of this points to alarm across the board — plenty of businesses this size are in genuinely good shape. But the Jenga image is worth holding onto. It’s rarely one big hit that tips a business over. It’s a rates rise on top of a slow month, on top of an IRD payment pushed back once too often, on top of a home equity buffer that quietly isn’t there anymore. If your tower already has a few blocks missing, this is the quarter for a direct, unhurried conversation about which pressures you can absorb — rather than finding out the hard way which block was load-bearing.
Frequently Asked Questions
What do rising interest rates mean for a small NZ business? Floating and short-term costs are likely to keep rising a little further, but longer-term fixed rates may already be close to their peak. Get current quotes across terms rather than assuming rates move the same way everywhere.
Is now a good time for a family business to hire or expand in NZ? The labour market should stay favourable to employers for the next six months, and credit is genuinely available for a solid trading story. The honest answer depends more on your own numbers than the general mood.
Why are business liquidations rising while business lending is at a record high? Different groups of businesses. Stronger companies are borrowing to grow, particularly in hospitality and agriculture, while those already under pressure are increasingly reaching liquidation. Both can be true at once.
Should I fix my business loan now or wait for rates to fall? It depends on the term. Short-term and floating rates are still forecast to rise a little further; longer fixed terms may already be near their peak. This is general commentary, not a recommendation for your specific loan.
How high is unemployment in New Zealand right now, and has it been this high before? Unemployment reached 5.6% in the June 2026 quarter, the highest level in eleven years — it was last this high in September 2015. The rate itself isn’t unprecedented, but the Reserve Bank raising interest rates while unemployment is already this elevated is unusual by recent standards, since past tightening cycles happened when the labour market was strong.
This article is for general information only and does not constitute legal, financial, or investment advice.
Suggested Internal Links
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