This afternoon I noticed that the Herald site is carrying a report on an initiative by the ASB to commit NZ$1 billion to loans to small businesses at alower interest rate provided the borrower meets normal criteria; plus demonstrates that new jobs will be created.
This seems to be a politically astute move. Especially as it is announced just prior to the Jobs Summit. I would not be surprised if the move was seen as a significant boost to market and business confidence.
Yet before we all come over warm and fuzzy, perhaps we should ask:-
Is this lending commitment in addition to other lending or is it simply a re-direction of funds. Does it in fact amount to a potential injection of new funds into the lending marketplace?
Will other banks follow suit?
A cynic might suggest that with the collapsed housing market the banks need to lend more to business to maintain their profitability.
However, any move to make more credit available to the business sector is to be welcomed. Provided of course that the loans are in fact made. It is easy to make an announcement, but it is the follow through that is critical.