Some banks have already passed on the full cut directly to consumers, and we would expect others to do the same. We are in extreme times, with thousands of businesses and individuals at risk of financial strain. Banks will want to be good corporate citizens at this time.
Businesses that trade in tourism, particularly New Zealand’s many small- and medium-sized operators, will be under intense pressure and banks are also likely to be working closely with these customers, finding ways to alleviate their financial pain. As is already happening overseas, banks are likely to be offering repayment holidays, increased overdraft facilities, emergency loans and other support.
The Reserve Bank Governor’s decision to push the time frame of another review out by 12 months gives some certainty at this time of flux. It will allow banks to direct their resources appropriately, ensuring consumers have confidence and the banks maintain stability.
With the world economy now already in likely recession, these measures will go some way to shoring up the health of our businesses. But the Reserve Bank’s intervention can only work in limited ways. A stimulus package from Government, expected to be revealed tomorrow, will need to be as significant as promised to make a difference.
On the flip side of this stimulus activity is, of course, the fading appeal of savings. This is a huge worry for those who rely most on income from savings and who are most vulnerable to COVID-19, particularly the elderly. We would hope some support will be provided to this sector of society.
It will be difficult, however, to address the important issue of encouraging savers. We know economic cycles will swing back, but the habits of savers may be broken by the time our economy begins to recover. And in the long term, that creates a whole new headache for the country.
At Canstar, we would encourage anyone impacted by the economic downturn to look carefully at all costs, to their households and to their businesses. Sometimes, a little research can make a big difference. And at times like this, we need all the help we can get.
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