Business lending boost in 2021?

Banks will be more willing to lend to businesses in the new year, driving New Zealand's economic recovery, according to economist Tony Alexander.

Alexander, in his latest market commentary, predicts lenders will become more willing to provide financing to companies in the year ahead.

"Banks have tightened up policies for lending to business borrowers, in recognition of economic weakness and uncertainty associated with the Covid-19 shock," the analyst says.

"But as the shock dissipates and confidence about economic conditions improves, banks will become more willing to finance business growth. The chances are good that their improved willingness to lend will coincide with the increased willingness of businesses to borrow and restart their capex plans."

He predicts a shift in bank lending policies as one of the factors supporting growth in 2020. 

Alexander also believes a wave of mortgage repricing will boost households in the year ahead, putting more money in people's pockets and stimulating spending.

"Over the coming year some $176 billion worth of fixed rate mortgages will come up for repricing. As perhaps half these people roll onto lower rates this lagged effect of earlier interest rate falls will support more consumer spending."

He also predicts rising household wealth for homeowners amid price inflation, and suggests this can stimulate more construction.

"Rising house prices also stimulate house construction and this sector accounts for around 6% of GDP and provides employment and business opportunities for thousands of people across a very wide range of activities."

A rise in migration once borders open, increased tourism, and term deposit holders shifting investments to property were also highlighted as growth drivers for 2021.

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