Recovery to be knocked by reserve bank

Just as the elusive green shoots start appearing again, business is going to face even higher costs! It seems highly likely the interest rates will start to rise again in September. The Bank claims it needs to control inflation. Fair enough, but this inflation is being caused largely by already rising prices we have little control over – petrol, power, food. So we look likely to get higher interest costs as well.

Dun & Bradstreet's most recent Credit Expectations Survey claims 40% of us expect our finances to be negatively impacted by interest rate rises. Interestingly the figure in Wellington is 49% and in Christchurch 21% (probably can't get much worse for them). People applying for new credit is now at alarmingly low levels of merely 5% (2009 was 22%). Low credit appetite surely equals low growth.

The outlook seems rather bleak for some decent economic growth. If we are already struggling in a low interest rate environment, it is hard to see the green shoots growing from higher rates. Surely there has to be a better way to control inflation.

We cannot expect much of an export led recovery with our dollar at all time high levels!

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