Bollard urges banks to free up credit to consumers

By Paul McBeth

Friday 27th February 2009

Reserve Bank of New Zealand Governor Alan Bollard urged banks to use the support mechanisms offered by government to free up access to credit for consumers and businesses to help revive the flagging economy.

Bollard told the government's jobs summit that New Zealand's banks have a key role in helping lift the global economy out of its slump, and need to continue lending to help stimulate the economy. The nation's banking sector, dominated by the four biggest Australian banks, enjoy the strongest credit ratings of any lenders worldwide.

"Our banking system is well-capitalised, plain vanilla, and mortgage lending is generally on good credit quality," Bollard said in notes of his power point presentation. Banks "have profited from good times in this economy, and we expect them to be there for the tough times too."

The economic slump was significantly worse than the troughs in the 1990s and 2000s, but the world was "nowhere near Depression-level economic condition," Bollard told the audience. The major loss in New Zealand's wealth had come from falling equity and house prices, he said.

Prime Minister John Key called the summit to investigate ways to minimise the impact of rising unemployment, which may exceed 7% this year. Politicians are meeting with leaders of business and industry to discuss the measures in an open forum.

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