Gloomy week for New Zealand’s economy: Company collapses, drop in profits reflect lack of spending

New Zealand has battled a week of drab economic conditions with prominent corporations posting lower profits and notable businesses going into liquidation and receivership.

Infometrics chief forecaster Gareth Kiernan told the Herald the past week has been a reflection of difficult conditions and a lack of domestic spending.

“The sort of hopeful recovery that people were looking for this year, it’s clear it hasn’t really turned up. The mantra last year was very much ‘survive until ‘25′, and now we’re getting through 2025 and you’ve got a lot of businesses treading water.”

He said some businesses have tried hunkering down but have now come to a point where they have run out of cash and can no longer trade.

This week, premium kitchen and laundry appliance company Kitchen Things went into receivership, popular Palmerston North eatery Cafe Cuba went into liquidation, Fletcher Building posted a net loss of $419 million for the past year, SkyCity reported a 42% drop in profits, Sky TV reported a 59% drop, and a new report showed there were 16,000 fewer construction jobs in the past two years.

“You saw signs with the Reserve Bank statement earlier this week around cutting interest rates again ... It does help to sort of ease some of the cost-of-living pressures for households,” Kiernan said.

“But housing is still unaffordable, house prices are still relatively high, and rental yields don’t look great from an investor point of view. So it’s hard to see a lot of demand coming back into the housing market, and therefore the construction and residential construction industry, any time soon.

“But I think the key for me is, until you see the labour market starting to turn around, households are still going to be pretty cautious in terms of their spending – because that sort of job and income security isn’t in a great position.”

He said “survive until ‘25″ should now be updated to “stay in the mix until ‘26″.

“Part of it is a bit of a patience game. You’ve had people who’ve been highly leveraged and felt the effects of those interest rates, so it does take time for their financial positions to improve,” Kiernan said.

“And similarly, we are looking at a bit more of an old-fashioned New Zealand economic recovery being driven by good export prices and coming through from the provinces. And that’s all well and good, but we know that farmers can be pretty conservative or cautious around their spending in the first instance. They’ll be paying it down and shoring up their cash positions rather than running out and doing a lot of spending immediately.

“But I think if you give it another six months or so, you will start to see more of that filtering through and over time that will start to boost the broader economy in the urban areas as well.”

Raphael Franks is an Auckland-based reporter who covers business, breaking news and local stories from Tāmaki Makaurau. He joined the Herald as a Te Rito cadet in 2022.

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