New Zealand’s small businesses are not ignoring AI. They are using it to fix typos and write Instagram captions, then stopping there because nobody in government will tell them what happens next.
Applied AI researcher Athar Imtiaz of Massey University put it bluntly in March: “The depth of usage is pretty low here, it’s very shallow adoption.” Businesses are dabbling with chatbots for marketing copy while avoiding anything that touches customer data, recruitment decisions, or operational processes. That is not a technology failure. It is a rational response to a policy vacuum.
The 30-point gap Wellington should be embarrassed about
MBIE’s own AI strategy document, published in July 2024, contains the most damning number in this debate. 68% of NZ SMEs have no plans to evaluate or invest in AI. In Australia, the equivalent figure is just 38%. That is a 30-percentage-point gap with our nearest comparable market, and it is not closing.
The domestic divide is just as stark. In 2024, 67% of larger NZ businesses were using some form of AI, up from 48% the year before. Big firms have compliance teams, legal budgets, and the scale to absorb regulatory ambiguity. SMEs do not. They need clear rules, and they are not getting them.
MBIE’s Digital Capability Monitor reinforces the picture. 86% of NZ businesses identify at least one barrier to digital enablement, with cybersecurity and fraud concerns the single biggest blocker at 49%, up from 42% in 2022. These are not Luddites. They are business owners doing a risk calculation with incomplete information.
No AI Act, no commissioner, no plan
New Zealand in 2026 has no AI Act, no AI commissioner, and no body responsible for certifying, auditing, or standardising AI models. The Algorithm Charter for Aotearoa applies only to government agencies and is non-binding. MBIE’s strategy remains explicitly light-touch and principles-based.
The rest of the world has moved. Treasury’s August 2025 analysis documented the divergence: the EU’s binding AI Act came into force in March 2024, Australia began developing AI guardrails in January 2025, and the US adopted a regulator-based approach. Critically, Treasury noted that NZ businesses trading in the EU must already comply with the EU AI Act. NZ exporters are being regulated by Brussels whether Wellington acts or not.
Imtiaz recommends businesses align with the EU AI Act framework in the absence of domestic rules, and urges the government to develop a national AI framework. Without guardrails, he argues, businesses handling personally identifiable information will continue to choose limited exposure over expanded use.
Liability does not wait for legislation
The legal risk is not hypothetical. The Privacy Act already applies to AI-processed personal data. The EMA’s legal specialist Paul O’Neil has warned that businesses cannot outsource accountability to AI: “Legally, you’ll still be held accountable for the decisions you make as a business. It’s not going to be a response to your legal obligations to say, I used AI, it made decisions on my behalf.” He identified recruitment and restructuring as particular danger zones where AI bias could breach statutory obligations.
For an SME without in-house legal counsel, the safest response to that uncertainty is simply not to use AI for anything that matters. And that is exactly what is happening.
A $15,000 sticking plaster on a structural wound
The government’s most visible response has been a taxpayer-funded AI pilot offering SMEs subsidies of up to $15,000 for AI consultants, announced in February. The government has also invested $611 million in AI-related projects since 2019 via the R&D Tax Incentive.
Spending money is not the same as providing certainty. A subsidy helps a business afford a consultant. It does not tell that business what it is legally allowed to do with the output. Microsoft research cited in MBIE’s strategy estimates adopting generative AI could add $76 billion to the NZ economy by 2038, representing over 15% of GDP. But in August 2025, Treasury found no evidence of aggregate productivity growth yet, though it noted positive firm-level effects.
The gains are real for those who get the foundations right. Most NZ SMEs have not, and the government’s light-touch approach gives them no reason to start. With over 57% of NZ SME owners and managers aged over 55, the current ownership cohort is the least likely to push adoption without clear external direction.
The gap will keep widening
This is not a story about technology-shy small business owners. It is a story about a government that has chosen ambiguity over action while its trading partners write the rules. Every month Wellington delays a national AI framework, the adoption gap with Australia widens, the productivity prize stays theoretical, and SMEs rationally conclude that the safest thing to do with AI is use it to proofread an email and leave it at that.
Sources
- istart: Unclear rules leave NZ businesses AI-shy (2026-03-19)
- Treasury: Update on the Impact of Artificial Intelligence – an Economic Analysis (2025-08-05)
- BusinessDesk: Taxpayer-funded AI pilot for SMEs raises productivity questions (2026-02-02)
- BusinessDesk: We urgently need rules for AI, says legal expert