Smith & Caughey closure highlights headwinds blowing at ‘growth’ Budget 2025

Thursday, 22 May 2025

Christmas 2024 was, in fact, the last Christmas that kids will be able to ogle the Smith & Caughey’s window display.

ANALYSIS: It is wrong to assume grandees of business in New Zealand are always politically centre-right leaning. In the case of the family behind the 145-year Smith & Caughey retailing empire, there is little beside wealth, Protestantism and the vague air of constancy and rectitude to unequivocally suggest it might be the case.

But in announcing the sudden and complete closure of the historic Smith & Caughey’s the night before Budget 2025, the business owners have cast a definite pall over the coalition Government’s big day, whether they wanted to or not. They’ve also underlined an undeniable diminution of the New Zealand economy in the past few years that will take only the most deft and innovative economic management to turn around.

It will be too late for Smith & Caughey’s, just the latest in a deluge of business closures the country has seen in the last 18 months or so. To take but one set of statistics, business liquidations hit a 10-year high in 2024, with 2500 companies going to the wall, a significant increase of nearly 700 from the previous year.

One imagined historic, iconic Smith & Caughey might buck the trend, especially given four months ago the company reduced its footprint by 60% and set itself a goal of boxing on through a soft retailing summer. The City, ostensibly, wanted Smith & Caughey, to judge by the outcry. But the business was up against not just the general economic gloom, but the travails of Queen Street itself, a double whammy that has also afflicted so many of its neighbouring stores.

Mid-town Queen Street- a tricky, but part of an enormously GDP generating, part of Auckland.

A limping Queen Street, even if some parts of it have revived and are thriving, is economically disastrous. The 4.3 square kilometre area comprising Auckland’s CBD generates 20% of Auckland’s GDP, which in turn is 40% of the country’s GDP; the area is the largest employment centre in the country and one of the most tightly packed with residents.

In May last year, Tony Caughey announced the possible closure of the 144-year old Queen St Smith and Caughey department store.

Smith & Caughey is sadly in the part of Queen Street that is full of empty stores, dollar shops, hugely disruptive roadworks to make way for the new City Rail Link, a constant stream of people who badly need help, and large, boxy apartment buildings that block out all light. It is very hard to offer a premium shopping experience in these surrounds, especially for a reduced retailing experience, and the well-heeled have duly stayed away from this part of the city.

The Council agencies and other bodies working in and around Auckland Central to make it better are doing their very best with fewer people and resources - those left that is, those that have not been cut or left from sheer demoralisation. Smarter cities than Auckland decide to plough more into their people and assets when times are tough, cogniscent of the importance of boosting a city’s economic engine. But Auckland Council instituted austerity even before the coalition Government, with lots of mayoral thundering about rates and bellyaching about road cones and cycling without any sense of vision or innovation for a CBD that has long needed lots of TLC.

All that is obviously not the only problem. As The Post has heard from businesses and business organisations as we have covered the hopes and aspirations for this year’s budget, people are simply not putting their hands in their pockets in the volumes that are needed to keep a truly diversified economy afloat. Confidence is deflated, both consumer and business, and the prevailing mood, set by the Government, is one of hunkering down and preserving broad beans for the air shelter as the world goes to hell in a handbasket. While, of course, keeping property speculators in clover.

In this mood, perhaps the fate of a high-end retailer harking back to more luxuriant times is of little official import. But in fact, the loss of such an icon of Auckland City is one more sign that a lack of confidence is not misplaced, and furthermore, that many people are paid so poorly that after mortgage/rent and groceries, they don’t have the dough for fripperies. And even if they do, they’re looking for bargains.

Business and consumer not just confidence, but also aspiration, will play an important part in returning economic health to New Zealand. Here’s hoping Budget 2025 will supply some.