Number of businesses

IBISWorld forecasts the number of businesses to increase by 1.8% during 2024-25, to total 620,370 businesses. Inflation in New Zealand continues to be elevated above the Reserve Bank of New Zealand's (Te Putea Matua) 1-3% target range. Inflation tends to drive growth in the number of businesses, as it results in more businesses reaching the $30,000 turnover inclusion threshold. In the later stages of 2024-25, the cash rate is expected to drop, based on RBNZ's expectations that inflation will be inside the target range. Cuts in the cash rate will promote greater household consumption expenditure. New business opportunities are likely to arise, with greater spending throughout the economy presenting opportunities for entrepreneurs to capitalise.

Several other factors influence the number of businesses in New Zealand, including the GDP and population growth. Short-term shocks to the economy, including interest rate variation and volatility in business confidence and consumer sentiment, can overwhelm these long-term growth factors. The number of businesses generally exhibits low volatility, as the exclusion threshold of $30,000 annual turnover minimises volatility from unsuccessful business ventures.

The number of New Zealand businesses has grown modestly over the past five years. GDP and population growth have supported rising total aggregate demand, increasing the number of business opportunities available. While the pandemic stunted the business growth rate during 2020-21, government support mechanisms greatly reduced the death rate of businesses, minimising volatility in business numbers. After witnessing high saving rates during the pandemic, 2021-22 saw spending increase dramatically, as many consumers exited the pandemic with high discretionary income. This fostered business creation, leading to a 5.3% increase in total business numbers in 2021-22 alone. In 2022-23 and 2023-24, inflation crippled the economy. High interest rates have made loans less affordable, which limited entrepreneurs' capacity to embark on new business ventures and stunted the growth of new enterprises. Despite this trend, business numbers have continued to grow, as GDP growth and growing household consumption expenditure have supported new business. Overall, IBISWorld forecasts the number of businesses to grow at a compound annual rate of 2.1% over the five years through 2024-25.