'Credit squeeze may prove fatal to small firms’

Press, 4 September 1982, Page 18

'Credit squeeze may prove fatal to small firms’

More businesses will go to the wall, and more opportunities for employment will be lost, as a result of the credit squeeze signalled by the Governor of the Reserve Bank, said the executive vice-president of the New Zealand Chambers of Commerce, Mr Alan Simm. “The statement by Mr Wilks that monetary and credit conditions are likely to become tighter and that some sectors of the economy may find things difficult will come like a shower of icy water to many businesses which are barely managing to survive as it is," Mr Simm said. “We appreciate that this is all supposed to be part of a strategy against inflation, and that such a strategy will inevitably entail some'difficulties. “But the difficulties are not being shared rationally or fairly. It is noteworthy that the sectors which are going to find things difficult are the productive areas of the economy — farming and business. “Meanwhile the Government, which holds the whip hand, continues to finance inflation and.its own expansion through a hostile tax regime. “Company tax levied on illusory profits, which are themselves only a figment of inflation, leave many enter-

prises drained of the funds needed to cope with inflation. "The position is particulary difficult for smaller businesses. "In many cases they need to borrow close to the limit of the assets they can pledge in order to survive. But now they are being told the money will not be there. "There can only be one result — the killing off of more and more enterprises, with a consequent loss of employment and wealthcreation for the community. “The evidence is already there in the form of liquidations. bankruptcies, mergers, and take-overs. “We are not short of factual evidence, only short on the willingness to recognise where our real interests lie. “The Chambers of Commerce, along with other organisations, have already impressed on the Government the critical need to ensure the availability of adequate funding for the productive sectors of the economy. Are we engaged in a dialogue of the deaf? “When funds are short this means we must insist on greater restraint in spending by the public sector and a better channelling of funds into investment in private sector activities which create prosperity for the whole community." said Mr Simm.