More firms blame constraints on finance

A quarterly survey of business opinion has recorded a jump in the proportion of firms citing finance as the single biggest constraint on increasing production or activity.

As always, the proportion citing sales as the biggest constraint (74 per cent) dwarfs other candidates. But there was a rise from 6 to 10 per cent in firms blaming finance, or the lack of it, a near-record high over the past 20 years.

"Firms reporting this increase were from a broad range of industries and regions. It isn't clear if it is related to cost or availability of credit," said NZ Institute of Economic Research economist Shamubeel Eaqub.

The survey echoes comments in the Treasury's summary of results of talks officials have had with businesses in the past month: "Credit conditions have eased recently but are still viewed as being much tighter than in the past.

"Credit is still seen as expensive, with lenders demanding high premiums for perceived risk, and also as reflecting the high cost of funds both offshore and retail, relative to the official cash rate."

Bank of New Zealand economist Craig Ebert said that with an OCR of 2.5 per cent, deposit rates would normally be expected to be around 2 per cent, whereas they are at least 4 per cent.

Treasury officials received "several reports of good quality, cash-flow-positive businesses being declined credit for what appeared to be sound business proposals".

These may have more to do with the supply of funding than the lender's willingness to take on risk, they suggest.