New Zealand small business productivity has declined and remains below the long-term average, according to newly released findings from Xero.
Xero said in the March quarter, labor productivity of small businesses averaged $74 per hour worked, up from $75.30 per hour in the December period.
It was broadly in line with the previous six months, but was below the long-term average of $76.30 per hour.
The data calculated the dollar amount produced per hour worked for a typical worker in a small business.
Bridget Snelling, national director at Xero, said the lack of significant improvements remained a concern.
“It’s disappointing that we’re not seeing the kind of necessary improvement to boost the small business economy,” he said.
Productivity per employee also declined, reaching an average of $9,168.90 per employee in the March period, down from $9,389.30 in the previous quarter, and was close to the long-term average of $9,137.00.
“For small business owners, improving productivity isn’t just an economic concept — it’s a practical way to increase profits and raise wages, regardless of overall conditions,” Snelling said.
“There are clear opportunities here. Companies that invest in the right processes, skills and digital tools are better able to free up time, focus on customers and drive growth.”
New Zealand also continued to lag behind Australia and the UK, which Xero said reinforced the scale of the challenge.
He said while performance between Australia and the UK has fluctuated in recent years, New Zealand has remained consistently behind both.
“Falling behind international peers like Australia and the UK is a reminder that increasing productivity must be a long-term priority,” Snelling said.
“What’s encouraging is that there are clear levers – from digital adoption to skills and process improvements – that can help close that gap over time. Our small businesses can’t afford to stand still, this must be a priority.”
Xero said productivity levels varied significantly between industries.
Manufacturing productivity led the trend at $123.50 per hour, real estate at $120.40 and construction at $103.70.
Hospitality trailed by a considerable margin, at $30.60.
Xero said regional productivity results were also mixed, with manufacturing-focused Hawke’s Bay recording the highest productivity levels, while tourism-heavy Otago lagged behind other regions.