New Zealand business optimism surges as firms embrace AI gains

Business optimism among New Zealand companies has reached its highest level since 2021, with a significant proportion of leaders expecting revenue growth in the coming year, according to the latest research from 2degrees.

The 2025 Shaping Business Study, carried out by insights and research agency Matter, surveyed over 500 business decision-makers across New Zealand between April and May 2025. Now in its sixth year, the study examines the central issues, trends, and opportunities facing business owners, CEOs, general managers, directors, and C-suite leaders.

The findings reveal an upswing in sentiment, with 45% of respondents expressing greater optimism about their business prospects compared with the previous year. This represents a 12-point increase over 2024, when 34% reported feeling optimistic.

Business leaders identified their improved outlook as being driven mainly by business growth (45%), increased customer demand (40%), and enhancements to products, services, or sites (38%).

"We haven't seen optimism this high in years, with business owners seeing opportunities to grow and introduce new products and services according to the latest 2degrees Shaping Business report," said Andrew Fairgray, Chief Business Officer of 2degrees.

Fairgray added, "Productivity is also on the rise. More Kiwi businesses are coming to terms with what recent technological advances like AI can and can't do, and they're starting to employ these tools to improve their businesses. This is saving time and money, which allows these businesses to reinvest in other areas.

"At 2degrees we've always been big believers in how technology can be used to improve businesses by freeing up time and giving business owners the opportunity to improve what they offer their customers."

Thriving businesses

The number of organisations describing themselves as 'Thriving' has increased to 19%, tracking alongside the resurgence in optimism following recent challenging years. More than two thirds of those surveyed agreed that growth is a key goal for 2025, with most focusing on increasing profit or revenue.

The growth-oriented outlook is particularly pronounced among larger firms, both in headcount and turnover, signifying a shift away from a cautious, maintenance-minded approach to a more assertive posture towards expansion.

Productivity growth

Productivity has also shown improvement, with 46% of businesses reporting they are more productive now than in 2024. The adoption of AI appears to play a substantial role, with one in four attributing their productivity gains to these technologies, indicating greater acceptance of digital tools within business operations.

There has also been a change in how productivity drivers are perceived, with fewer businesses (26%, down from 33% the previous year) now believing that hiring more skilled staff is the primary path to higher productivity. This points to a growing emphasis on leveraging technology over talent acquisition.

Andrew Fairgray says: "These findings should be seen as a positive signal - it's not about reducing headcount, but about empowering the talented people we already have. By embracing the latest technology, New Zealand businesses are unlocking new levels of productivity and enabling their teams to do their best work. This is an encouraging shift to see."

Cost pressures and price adjustments

Despite upbeat outlooks and productivity gains, challenges persist. Eight in ten businesses noted a rise in operating costs over the past twelve months, with the rate of increases higher than that seen in 2024. Reduced customer spending and input cost pressure were also frequently cited obstacles.

In response, approximately half of the surveyed businesses are planning to raise prices within the next twelve months. Alongside rising costs, the pace of price increases themselves is expected to outstrip that of the previous year.

On the competitive landscape, respondents were twice as likely to describe market competition as "healthy" rather than "poor", an assessment particularly prevalent among businesses with more than 51 employees.

Support needs

Businesses pinpointed a number of areas where support would be beneficial in the year ahead. Cashflow remains crucial for growth; however, improved technology and stronger digital skills are becoming increasingly valued.

When asked how government could assist the sector, tax incentives and breaks were most frequently suggested, with many also highlighting the containment of inflation and the cost of living as key priorities for economic stability.