5 December 2008

Business lending rates must come down

Labour’s spokesperson for small business Ross Robertson is calling for a reduction by banks in the base business lending rate.

“The call by Dr Alan Bollard to reduce the official cash rate by 150 basis points has already seen the ASB cut their floating rate from 8.7 to 7.95 percent, and it is now time to pass on similar cuts to the small and medium-sized business sector,” said Ross Robertson.

“For the month of November the base lending rate was 13.59 percent, indicating a significant delay in adjusting the business base rate as compared to the variable first mortgage housing rate which stood at 8.75 percent for that month.

“To highlight the significance of the difference one only has to look at the rates for the same time last year,” said Ross Robertson.

“Reserve Bank figures indicate that in November 2007 the housing rate was 10.55 percent while the business rate was 13.39 percent. Since then the housing rate has dropped in keeping with general expectations, while the business lending rate has remained almost static.

“With our banking system now dominated by the Australians, New Zealand small business entrepreneurs are subsidising the inefficiencies of the banking system here and in Australia,” said Mr Robertson.

“It is important that the banks do not make make a killing of the small business sector. To do so would be avarice at its worst, and the New Zealand economy will suffer as a result.

“Especially in this time of economic uncertainty, interest rates must become more affordable for business. To date, business borrowers have not fared as well as homebuyers. The small business sector is the locomotive of growth, accounting for more than 90 percent of all jobs in New Zealand, and any benefits to the sector automatically feed into the New Zealand economy.

“A reduction in the business lending rate will see business loan affordability increase and help stimulate investment and employment. The small business sector is not asking for any favours. What it wants is a stable environment within which all firms, large and small, can compete on reasonably equal terms,” said Ross Robertson.

ENDS

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