Businesses on Watch for OCR Change

Media release: 7 March 2012

Businesses on Watch for OCR Change

Despite expectations the Reserve Bank will hold the Official Cash Rate steady, small businesses throughout New Zealand are closely watching Thursday’s announcement, concerned that any change will have a significant impact on their business.

Leading business provider MYOB regularly surveys business owners throughout the country, and says over half of the country’s small and medium-sized businesses place significant importance on the OCR.

MYOB general manager Julian Smith says New Zealand businesses feel the pressure of rising interest rates in a range of ways, and look to the Reserve Bank’s announcements to provide some certainty about what to expect in the year ahead.

“For businesses, rising interest rates not only affect the cost of finance – a continuing pressure for many New Zealand business owners – but also have a strong influence on consumer confidence and demand,” says Julian Smith.

“With the property market starting to show some signs of life, any dampening effect of any increase in the cost of borrowing will likely flow into how much consumers have to spend in the local economy.”

“For almost a third of New Zealand businesses, too, their own home is a source of business investment capital – making any increasing interest rates an even greater pressure on these operations.”

“So for local businesses, a lift in the OCR represents a double, or even triple-whammy of pressures.”

Mr Smith says with this in mind, coupled with continuing uncertainty around the strength of the New Zealand economy, as well as ongoing concerns about Europe, small business is looking to the Reserve Bank for signs of where the economy is headed.

“While it’s widely expected there will be little change in tomorrow’s announcement, rising interest rates remain a real concern for local business owners, who are facing another difficult year ahead, with patchy growth and global uncertainty,” says Julian Smith.

“What we’d be really concerned about is an uncoupling of interest rate rises from the OCR to the degree we have seen in Australia. This would place real pressure on local businesses, and be a real concern for SME confidence.”

ENDS

© Scoop Media