The selection of former World Bank managing director Graeme Wheeler as the new Reserve Bank governor could be an opportunity for the bank to take a new direction on interest rates, as research by MYOB suggests even small cuts in the official cash rate could have a significant impact on New Zealand’s businesses.
According to MYOB’s latest monthly panel interviews with business owners, 50% of businesses are affected either directly or indirectly by home loan rates. And a significant 79% of business owners said a fall in standard home loan interest rates of just 1% or less would have a positive impact on their business.
“Graeme Wheeler will be an excellent new governor. By picking someone from outside the Reserve Bank, there is a real opportunity for a new vision and a new approach, and MYOB’s research shows that even a minor course change on interest rates would go a long way towards stimulating the economy and making life easier for New Zealand’s small businesses,” said Julian Smith.
14% of businesses interviewed by MYOB said they are directly affected by the cost of home loan interest rates as they had a mortgage themselves. 17% of respondents said they are indirectly affected because their customers or clients had a home loan. A further 20% said they are affected both directly and indirectly.
Furthermore, 25% of small business owners use their personal home loan to finance their business. 35% of small businesses are financed through a business loan and a further 22% are financed through personal loans.
“As this research shows, interest rates are very important for small business, as many business owners finance their business through loans, or rely on customers who are themselves supporting a mortgage. Even a small change to the OCR would go a long way towards stimulating New Zealand’s economy and counteracting difficult international conditions that are damaging business confidence,” said Julian Smith