19 May 2010

Lack of credit could delay recovery - Reserve Bank

8:27 pm on 19 May 2010

The Reserve Bank of New Zealand says a lack of credit for companies could hold back the economic recovery.

In its biannual Financial Stability Report, the bank says business borrowing is weaker now than during the early 1990s recession.

It blames a lack of appetite from businesses for new borrowing and stricter lending criteria by banks.

The collapse of a number of finance companies over the past two years is also restricting lending to firms.

But Governor Alan Bollard expects the banks to ease lending criteria in an effort to boost business borrowing.

The Reserve Bank says the health of the country's financial sector is improving, but it warns New Zealand is vulnerable as global financial markets worry about high government debt levels in Europe.

While New Zealanders are saving more, Dr Bollard says, the country is still reliant on overseas funds.