Chris Small: ABC Business Sales CEO on the impac of the OCR being cut to 2.5%

The biggest upshot of the latest OCR cut is likely to be the boost to consumer confidence. 

The Reserve Bank's slashed the cash rate by 50-basis-points to 2.5%. 

Major banks are responding by lowering floating and flexible rates after already lowering their fixed-term rates in recent days. 

ABC Business Sales Chief Executive Chris Small told Mike Hosking businesses will benefit more indirectly from increased consumer spending, than directly from falling interest rates. 

He says interest costs are only a small portion of a person's actual business costs, and businesses will always prefer for revenues to rise than for costs to fall. 

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Episode Transcript

Speaker 1 (00:00):
So fifty points.

Speaker 2 (00:00):
It was.

Speaker 1 (00:01):
The RB said it was a message or a signal
there could be more to come next month. Was yesterday
the circuit break of the economy needed. Chris Smaller's ABC
Business Sales CEO back well us, Chris, morning, Wriy, mikey
doing very well. Indeed you're walking a bit taller this morning.
Does the world seem like a different place to you?

Speaker 2 (00:16):
Yeah? Absolutely, I think that yesterday was a slight shot
considering how conservative that group of people have been historically.
So my sort of feedback from business owners was very positive.
And remembering that majority of you know, small and medium
sized businesses and do have bank loans, and the majority
of those was the business loans are actually on floating,
so that means those impact savings from that decline and

(00:39):
the OCO will be immediately felt, which can only.

Speaker 1 (00:42):
Be positive, fantastic. So how real has that been, because
that's been the political argument. You know, if you look
at the interest rates X number of months ago versus
interest rates now you're saving why number of dollars? If
that's real for a business owner. Has that helped during
this period?

Speaker 2 (00:56):
Yep? Look, it certainly helped. I think more important than
that so yet the cash cash benefit is important, but
the more important thing is the mental lift that gives
a business owner. So he not only feels better about
his own business he saving interest costs, but it's also
you know, if to consumers, they start to feel a
lot more confident about making investment decisions because that consumer

(01:18):
eventually is going to drop off a fixed rate, move
down to a four percent rate from a six percent rate,
more discretionary income. Suddenly they want to know some of
their discretionary income increases and they're going to spend more.
So it's it's meant it's the mental state that it
gives the business exactly.

Speaker 1 (01:31):
So how do you split those two things? Am I
feeling better because I'm paying less on my mortgage as
the business owner? Or was it really for me as
the business owner about the customer who feels better and
will come into my shop?

Speaker 2 (01:44):
Definitely the latter. I mean, when you think about a business,
interest costs are really owning a small portion of someone's
actual business costs, and you're definitely that they want people
coming to this. If you ask a business own, do
you want a decline and cost and an increase in revenue,
they've got to increase in revenue the week, So that's
really the most important thing.

Speaker 1 (02:02):
Does it make a lot of difference depending on whether
you export stuff or whether you're lying on a local.

Speaker 2 (02:08):
Yes, well obviously if you're exploring stuff, you're not. You
know that you're talking about an overseas consumer. Was really
it's it's going to really help the business that's more
focused on a domestic consumer, because either ones are going
to benefit from the decline of mortgage rates. Having said that, though,
the indirect indirect arm result of the sacram generals also

(02:28):
a lower keV dollar, so that's going to help ouric
waters through. So it's a double sword, which is great.

Speaker 1 (02:33):
Do you need more next month?

Speaker 2 (02:35):
The more we can get, the better. I mean. My
worry is in six months we're out of bullots. It's
so we go again. Next month, we're down to two
twenty five, we go on fee, we go down to two,
and then you and I are talking this time next
next year and we're still going, why is the economy flat?
That's when we're a real worrying point, because we really
will be out of bullots. But I don't think that
will happen. I think we get down to two twenty

(02:56):
five or two. Call that neutral and we should have
home rand rates in the threes. It's a great position
to be in for New Zealand.

Speaker 1 (03:03):
Merry Christmas Chris Small, whose ABC Business Sales CEO. For
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