Excuse my cynicism – but I’m relatively unimpressed with the piles of rhetoric coming out of the summit. In the latest update we hear:
Economic Development Minister Gerry Brownlee said there were two key messages coming out of the discussions he had been involved in at the summit today: the need to cut red-tape and the difficulty small and medium-sized businesses are facing in trying to raise capital in the current climate
Now if we asked businesses what is “restraining” their activity three years ago we would have gotten the same two responses – plus maybe a lack of skilled labour.
Businesses always want less constraints on their activities and cheaper, easier, capital. However, if the capital markets are pricing the risk associated with the firms, and the red tape is constrained to areas where there is a clearly identifiable market failure, we should stop. This isn’t a “stimulus/recession” issue – this is a structural issue.
Let’s hope that the politicians remember the other side of the debate here – it isn’t about trying to magically make credit cheaper, it is about trying to make sure that the cost of credit is appropriate to the risk businesses are taking on!! I hope the government doesn’t use the spectre of a recession to push through policies that are not welfare maximising (something that insider has suggested is happening).