The Reserve Bank may have heard the desperate plea from New Zealanders to begin dropping the official cash rate, but for business owners like Lisa Martin from The Floral Bar in Richmond, the mantra is ‘survive until 25’.
“It hasn’t been easy and I think a lot of retail businesses are struggling. We’ll try to survive till 2025; that’s my mission.”
The Reserve Bank dropped the OCR by 25 basis points to 5.25 per cent last week which is the first cut in four years. Though many banks are already dialling back interest rates, Lisa is not expecting customers to have more money to spend until next year.
While her business costs such as flowers have increased, customers are fewer, and when they do buy a bouquet, it’s more like $10 to $35 compared with about $50 in the past.
It’s the ball season now and last week she had sold just two corsages and buttonhole sets, while one family bought the materials to make their own.
“Some weeks you wonder if your rent is going to be going out,” she says. “The business is ticking along; surviving.”
It means she is not spending herself and essentials including pet food are the only items she is buying and she doesn’t expect that to change soon.
Nelson Tasman Chamber of Commerce Ali Boswijk says the Reserve Bank’s rate cut is a small step, but it’s a step in the right direction which gives people hope.
“People aren’t going to go out and spend. But I think what this does, it changes people’s mood and that is the biggest thing.
“Because I think people get into a real funk, particularly in the middle of winter, in a recession and a high cost of living – there’s a mood that pervades. Having one little glimmer, even as small as it is, is a real positive thing.”
Having the Governor of the Reserve Bank, Adrian Orr, talking positively about next year means people begin to think they can deal with their financial situation because there is an end in sight, she says.
For some it comes too late, and she says there have been businesses that are struggling and shutting up shop. Others will now have hope their business will survive.
“People work out ways to get through these difficult times. Maybe they have to shed some staff; maybe they have to change their model, maybe they have to do stuff, which is not ideal in any situation, but it keeps the business viable and going until such time that things pick up and then they can pick up again.
“People are pretty adaptable. It’s really important to have these positive things to look forward to or otherwise we’d all shut up shop and go home.
“Having things like an interest rate decrease is absolutely one of those signals that actually things do change. We know there is change on the horizon.”
In Nelson Tasman, she says, a wide variety of businesses including fishing, horticulture and technology helps to keep money going around because even when one area is affected, others may be doing better. Plus, the region has a high proportion of retired people and many without a mortgage with savings in the bank who continue to spend.
“Right now, in this time when we are not expecting great growth, if we can at least keep the money circulating and being spent locally, that’s a really positive thing.”
For those with mortgages though, Ali says there will be a lag before things get better, especially when some have had interest rates increase their mortgage payments by well over 100 per cent.
“A greater proportion of people are fixing on a six-month short term at the moment because they are hoping things are going to get better. So, there will probably be a six month to a year lag for the majority of mortgages at the moment.”
