6 Oct 2009

Credit shortage may deter economic recovery

8:00 pm on 6 October 2009

There are signs a shortage of credit may be undermining the economy's recovery.

The findings come from a key NZIER survey of business opinion which showed firms their most confident in a decade.

The NZIER survey indicates the economy could be growing at an annual rate of 4% in the next six months.

But the institute's principal economist Shamubeel Eaqub is treating this with caution.

He says the gap between firms' current situation and their outlook for the next three to six months is at record levels.

And they are still reluctant to take on staff and invest in their businesses.

But one reason may be a lack of credit, with the survey showing financial constraints on firms at a seven-year high.

Business New Zealand's Phil O'Reilly is worried a lack of credit could deter investment.

He says this would show up in lower economic growth and fewer jobs.