What the OCR raise means for NZ small business
In this video, Grant Anderson, Head of Accounting at Xero accounting software, gives his take on the Official Cash Rate (OCR) raise of 2.5 percent and what it means for small business.
The OCR was previously 2.5% and now sits at 2.75%. Economists expect the OCR to be between 4% and 5% by the end of 2016, as the Reserve Bank tries to limit inflation by raising interest rates.
"For most small businesses in New Zealand, their business costs will rise as a result of this increase in the OCR," says Grant.
"Many small businesses have their finance secured against the owner's house. That means any time there's an increase in mortgage costs for the owner, the costs of the business rise.
"The other impact of putting up the OCR is that people in general have less discretionary spending. Consumer spending should reduce as a result of the OCR going up, which is what the Reserve Bank is trying to do -- they're putting the brakes on economic growth. So small businesses in New Zealand will see the effect from the top down, with less money coming in, and from the bottom up, with more expenses going out.
"Xero users are in a really unique position here, because their accountants have got access to real-time, up-to-date information, so they should be talking to their accountants and making the most of that resource."
For more information, check out the Xero blog.