This article examines recent trends in the New Zealand corporate sector by analysing data from various sources. The corporate sector has enjoyed increased pro?tability over the past few years on the back of strong economic growth. While the absolute level of debt has also been rising in the past few years, the overall balance sheet position has improved. The recent strong investment growth appears to have been funded out of retained earnings or equity raisings rather than via debt. This has allowed businesses to strengthen their balance sheets while investing for future growth at the same time. Margins started to come under pressure towards the end of 2004. Looking forward, rising input and labour costs, and higher cost for some capital items may lower pro?tability over the coming year. At this stage, it appears that businesses in the non-tradables sector are more likely to pass on increased costs on to customers. Businesses in the tradables sector have more limited pricing power.
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