The new Government has signalled a range of changes that will affect business. The impact of these changes is not yet known but what is certain, is that your business will be affected.
The lift in minimum wage from $15.75 to $16.50 next year will trigger inflationary pressure and will see increased costs passed on to the consumer. Your business will be paying more for the goods and services you buy. You will also be under similar wage pressure from your employees who will be seeing a 5% lift in minimum wage as a benchmark for themselves. Sensibly you will also need to consider how to maintain your margins so repricing is on the cards for you too.
While all that is happening, what impact will a lift in costs do to our interest rates? What will it do to the NZ dollar?
Think of 2018 as a period in which change will be constant while the new measures announced by the Government begin to take effect. You have to be ready for this and your budgets must include some scenario planning, for example:
- What if our costs go up by 5%?
- What if the interest rate on our loan goes up 1%?
- What if the foreign exchange rate drops below 65c?
Now is the time to build in the “what if” scenarios into next year’s budgets so you are well prepared for the changes that are coming.
To work through some scenario setting of your own, please contact your Crowe Horwath adviser.