Two different economies, three months apart
The numbers looked genuinely good. Xero’s Small Business Insights for the December 2025 quarter showed sales up 4.8% year-on-year, the largest rise in three years. December alone delivered 9.8% growth, well above the long-term average of 6.2%. Jobs in small businesses turned positive for the first time since March 2024. Late payments fell to 4.5 days, the lowest since the series began in 2017.
That data covers a world that no longer exists. The US-Israel military conflict with Iran escalated in late February, disrupting the Strait of Hormuz and sending fuel prices surging. By March, ANZ Business Confidence had collapsed from 59.2 to 32.5. By April, NZIER’s QSBO showed only a net 1% of firms expecting better conditions, down from net 39% in December.
As Infometrics noted, “the rapid decline demonstrates how quickly geopolitical events translate into business and consumer psychology” – the damage arrived before any physical fuel shortage had even materialised.
Fuel is not a discretionary input
For small businesses, the war is not an abstract geopolitical concern. It is a cost line. MYOB’s pulse survey of 230-plus SME decision-makers found 61% say fuel is critical or very important to their ability to operate. More than half are already absorbing higher costs through supplier price increases, with 47% hit through fleet costs and 41% through courier and freight.
MYOB chief customer officer Dean Chadwick put it plainly: “Leading into 2026, sentiment and revenue were gradually lifting for more SMEs, but attention has now turned to assessing fuel supply and pricing impacts.”
For trades, logistics, agriculture, and food service, fuel is embedded in every transaction. There is no hedge available to a plumber running a van or a cafe receiving daily deliveries.
Survival mode is back
Research New Zealand’s State of Business Poll, surveying 433 owners and senior managers in late March, found 63% described the current economic situation as bad or very bad. A record 42% had hardly ever felt hopeful or optimistic in the prior two weeks. Investment has evaporated: 61% are not planning any investment in the next 12 months.
Tony Alexander’s MintHC survey shows firms pulling back on advertising, training, and new product development. Supply chain concerns jumped from 5% to 31% in two months. Revenue expectations halved.
The rate hike threat nobody wants to hear
The worst part is not the cost shock itself. It is what comes next. Westpac’s March analysis noted net 85% of firms expect costs to increase and net 60% intend to raise prices, the highest readings since early 2023. ASB’s reading of the QSBO shows pricing intentions consistent with inflation running closer to 4.5-5% over the year ahead, with headline CPI already at 3.1%.
NZIER pencils in a first 25-basis-point OCR hike in July 2026. For owners who spent 2023-2024 watching 5.5% rates crush demand, the prospect of tightening resuming mid-recovery is close to the worst possible outcome.
The real data versus the vibes
One important caveat. Victoria University Wellington research published this month found that National-led governments are associated with a 39.9% increase in business confidence after controlling for economic variables. Some of December’s net 39% optimism was always partly political, not commercial.
The Xero trading data, which measures actual transactions rather than sentiment, is the more reliable signal. That data showed genuine improvement. But the confidence surveys tell business owners what their peers are feeling and planning, and right now, peers are planning to cut staff (net 9% already have), defer investment, and raise prices.
The December recovery was real. The question is whether it can survive a fuel shock, an inflation re-acceleration, and the Reserve Bank reaching for the brake again. For most small business owners, the honest answer is that they cannot yet tell whether they are in a recovery that hit a speed bump or a recovery that just ended.
Sources
- Xero: New Zealand Small Business Insights – December 2025 Quarter (2026-02-26)
- NZIER QSBO – Business confidence shaken by the US-Israel war with Iran (2026-04-21)
- NZ SMEs brace for impact – fuel shocks driving concern and action (2026-04-14)
- Most NZ businesses remain in survival mode – report (2026-04-13)
- State of Business Poll shows business owners facing rising stress levels (2026-04-13)
- Business confidence sours, revenue hopes tumble (2026-04-17)
- Business confidence buckles as sticky inflation tests NZ borrowers (2026-04-21)
- Westpac: First Impressions – NZ business confidence, March 2026 (2026-03-31)
- Business confidence reflects reckons and vibes, not facts (2026-04-15)
- Infometrics: Conflict hits confidence, although ceasefire offers some reprieve (2026-04-09)