What’s happening over the ditch
The Australian economy has been hit hard by Covid-19, with Australia recently entering its first recession for almost three decades. https://www.abc.net.au/news/2020-09-02/australian-recession-confirmed-as-economy-shrinks-in-june-qtr/12619950
Finance New Zealand is a member of the Commercial & Asset Finance Broker Association (CAFBA) in Australia. Close connections with our peers in Australia has enabled us to learn from what is a much longer developed broker/advisor market in AU. For instance, over half of AU businesses recognise the value of, and use, a broker/advisor for their asset finance, and that figure is over 70% for SME businesses (up to $20M turnover).
The New Zealand banking and financial sector is closely linked to the fortunes of Australia with our big four banks, and many of the Asset Finance funders based out of Australia, or using securitisation funding provided by the AU banks. What impacts these funders does ultimately have some impact on each individual lenders ability to fund on this side of the Tasman too.
Feedback from CAFBA paints a picture that the downturn in the AU economy has impacted the lending market more significantly than what we are seeing in New Zealand.
The significant issues seem to be:
- There has been a significant tightening of loan parameters – e.g. some lenders will not lend to businesses in Melbourne or Mitchell Shire.
- Businesses who have taken advantage of tax debt deferrals or loan deferrals were being prudent in the current environment and were not necessarily in distress, but are now struggling to obtain new funding for asset purchases or other business finance requirements.
- Regulatory requirements relating to responsible lending mean that the barrier to obtaining funding is very high in an environment of uncertainty.
- There is plenty of liquidity, but too much complexity and processing required for businesses to actually access finance. Significant red tape means that capital is not flowing to where it needs to. Even getting extensions to existing facilities can be difficult.
We have been fortunate so far that we have not been impacted to the same degree in New Zealand. Almost all of our Funding Partners are working to loan parameters that are similar to pre-Covid criteria and across our panel of Funding Partners we are able to assist our clients with competitive funding solutions.