Thursday, 04 July 2024 08:55

Ag's large fall in small business productivity

Written by  Bridget Snelling
Bridget Snelling, Xero attributes the drop to falling sales in the sector, paired with the strong jobs growth it experienced over 2023. Bridget Snelling, Xero attributes the drop to falling sales in the sector, paired with the strong jobs growth it experienced over 2023.

OPINION: The primary sector has faced many challenges over recent years, with environmental and regulatory factors pushing businesses to adapt to survive.

Despite all this talk of change, one subject rarely discussed is how the sector performs when it comes to productivity.

There's no denying New Zealand has a productivity issue. We rank behind both Australia and the UK in the latest OECD national level productivity, showing we're leagues behind our overseas counterparts.

Our recent Xero Small Business Insights (XSBI) report, Small business productivity: Industry and regional trends, also paints a concerning picture, revealing national and business productivity fell last year, with average productivity 6.1% lower than in 2022.

Although this decline was experienced by all industries across the country, it was agriculture (including agriculture, forestry and fishing) that experienced the largest fall (-12.1%). This drop was likely due to the combination of falling sales in the sector, paired with the strong jobs growth it experienced over 2023.

Even though agriculture had the largest fall in productivity last year, it still sits above the national average (106.10 compared to 102.40), and ranked ahead of four other industries last year.

But this doesn't mean its recent drop in productivity is something which can be overlooked and swept under the rug. Agriculture is New Zealand's biggest industry, with its gross domestic product (GDP) amounting to over $13.9 billion last year. This means if productivity for small agri businesses continues to decline, it could have a harrowing impact on our broader economy.

After all, improved productivity holds the potential for our small businesses to unlock incredible benefits. It not only enables them to lift profits, but it empowers them to pay higher wages to their staff and lower their prices. This makes it a win-win situation for both small businesses and consumers.

While improving productivity is no mean feat, if recent weather events and changing regulations have taught us anything, it's that our agri small businesses are resilient.

We know one action small businesses can take to improve productivity is to digitalise.

In fact, insights developed by the New Zealand Institute of Economic Research show us a 20% increase in the number of businesses adopting cloud-based business tools in the future could add up to $7.8 billion to Aotearoa's annual GDP through improved productivity.

Agri small businesses can start now by talking to their accountant about what digital tools could help their business. Beyond this, our government should play a crucial role to make it easier for small businesses by backing initiatives which support and incentivise digitalisation across every sector.

Other tactics to lift productivity also include buying better work tools and equipment to amplify the efforts of workers, developing smarter processes or methods of working, upskilling and training workers, as well as using entrepreneurship skills to ensure your business is operating at its full potential.

It's time for small businesses to work smarter, not harder.

This will not only ladder up to a stronger industry, but a stronger economy as well.

Bridget Snelling is Xero country manager.

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