Chamber fears more N.Z. bankruptcies

Press, 13 April 1984, Page 23

Chamber fears more N.Z. bankruptcies

PA Wellington Big finance companies that are ignoring Government guidelines and paying high interest could unwittingly force small businesses into bankruptcy, according to the New Zealand Chamber of Commerce. Finance companies not complying with the lending guidelines will add further stress to small businesses already facing a serious credit squeeze, the chamber believes. The chamber’s new monthly magazine, “Business Today,” said there was a serious credit squeeze which was fuelling rumour and speculation about business failure. The chamber’s director, Mr Peter Wakelin, said that Government intervention was inevitable because some finance companies were ignoring the guidelines.

If controls were applied,

he said, lending would become even more difficult. “The economic climate is starting to hurt many small businesses which are already struggling to keep their heads above water,” said Mr Wakelin.

He said that predictions by the Wellington brokers, Jarden and Company, that stronger interest-rate controls from the Government were inevitable were right. Banks were beginning to decline requests for new overdrafts and the Institute of Management had reported a growing inability by small businesses to pay their bills, said Mr Wakelin. “Business Today” said that bankruptcy rumours were sweeping away business confidence.

the Prime Minister, Sir Robert Muldoon, refused to comment on the Jarden prediction of stronger interestrate controls.

A spokesman for Sir Robert said that a news-

paper report of the company’s comments was “a speculative piece and he has nothing to say.” The report said that some major finance companies were paying interest rates of more than 15 per cent for big sums of money, well above the 11 per cent guideline agreed with the Prime Minister in February. Jarden and Company suggested that stricter controls were also likely because of “continual non-adherence to the Government’s 1 per cent a month lending growth guideline.”

The executive director of the Finance Houses’ Association, Mr Ken Baker, denied that his members were defying Government interest rate rules. Mr Baker said that stockbrokers could well be playing a key role in forcing up rates as they sought the best rates for their own customers and “played off’ financial institutions.