WEBVTT - Bite: The small business lending problem

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<v Speaker 1>You're listening to a shares these podcast. It feels like

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<v Speaker 1>housing has just dropped off the radar as a conversation

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<v Speaker 1>in my world anyway? Is that a feature of the

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<v Speaker 1>economy that we're in at the moment as well?

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<v Speaker 2>What we've seen in the housing markets, there's a period

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<v Speaker 2>where people may have looked around and gone, actually, I

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<v Speaker 2>might get better returns elsewhere. And that's a pretty big

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<v Speaker 2>change for a Kiwi mindset. But you know, we do

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<v Speaker 2>still love our bricks and mortar. The housing market has

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<v Speaker 2>been deliberately squashed by politicians and central bankers, and it's

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<v Speaker 2>gone sideways for you know, three or four years, which

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<v Speaker 2>is highly unusual. But what happened beforehand, with that forty

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<v Speaker 2>six percent gain in eighteen months and then a twenty

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<v Speaker 2>percent drop, that was quite extraordinary, and we're still kind

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<v Speaker 2>of flushing things out. The Reserve Bank was quite clear

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<v Speaker 2>and thereforecast that house prices only go up very gradually,

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<v Speaker 2>and the so called wealth effect that drives Kiwis, has

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<v Speaker 2>driven Kiwis for years, is not part of their forecast trajectory.

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<v Speaker 2>And I think that's quite interesting because Kiwis normally love

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<v Speaker 2>the fact that their house price goes up five ten percent.

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<v Speaker 2>They feel like they're, you know, fifty to one hundred

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<v Speaker 2>thousand dollars better off than they were last year.

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<v Speaker 1>Maybe that jet ski is looking like.

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<v Speaker 2>She's easily affordable now, you know, the.

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<v Speaker 1>New Ford Ranger or whatever it is. Yet all of basics,

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<v Speaker 1>so a lot of that is priced into how businesses

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<v Speaker 1>are expecting to come out of this. Surely then that's

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<v Speaker 1>been the behavior, but it's not there. So what does

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<v Speaker 1>that tell you about where this recovery goes?

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<v Speaker 2>Yeah, and do you know what when businesses come to us,

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<v Speaker 2>particularly the smaller ones, they go to the bank and

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<v Speaker 2>they say, I've got this fantastic idea, and we say, great,

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<v Speaker 2>how much do you want? Well, I want one hundred

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<v Speaker 2>thousand dollars. Okay, you can either just take the one

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<v Speaker 2>hundred thousand dollars and here's your interest rate, or you

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<v Speaker 2>can link your house to that loan and here's your

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<v Speaker 2>interest rate. People go, okay, I'll link my house. So

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<v Speaker 2>that wealth effect. That feeling is present in small business

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<v Speaker 2>owners as well. If their house price is going nowhere,

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<v Speaker 2>they feel nervous about the whole their whole situation, including

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<v Speaker 2>your business.

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<v Speaker 1>Maybe need a banking system that it's not so keen

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<v Speaker 1>to just lean against houses all the time.

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<v Speaker 2>Then you know what we need. We need lower risk

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<v Speaker 2>waitings on business lending. That's what we need. That's what

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<v Speaker 2>Anna Bremen's come from. In Sweden. The ris bank has

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<v Speaker 2>lower risk weightings than us, so you are lower them.

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<v Speaker 1>They basically go, we're prepared to accept potentially higher losses.

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<v Speaker 1>We're just going to lower the amount of capital that

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<v Speaker 1>a business bank, that a bank has to hold for

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<v Speaker 1>business lending. Wow.

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<v Speaker 2>Absolutely, and that means that that first Interestrida I talked

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<v Speaker 2>about is lower. It's not going to be as low

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<v Speaker 2>as linking it to a house, because we've got collateral

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<v Speaker 2>of a house right Whereas you know, linking to a

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<v Speaker 2>business it's high risk. But just lowering that get more

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<v Speaker 2>money into small to medium businesses is something this economy

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<v Speaker 2>really really lacks and does not do well.

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<v Speaker 1>Sounds like an Agreement's got a lot to think about it.

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<v Speaker 2>Investing involves the risk you might lose the money you

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<v Speaker 2>start with. We recommend talking to a licensed financial advisor.

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<v Speaker 2>We also recommend reading product disclosure documents before deciding to invest.