ASB’s $1 billion jobs fund

February 25th, 2009 at 7:52 am by David Farrar

What a very smart move by . Their pledge to set aside $1 billion for cheap (5%) loans to small and medium businesses (and farmers), if it will save and create is inspired.

Yes, it will mean a dip in profits in the short term. But it will do wonders for their brand, which will be of greater value in the long term. Especially doing it at a time when people are very negative on banks.

The Herald reports:

The “concessionary” rate would affect ASB’s profitability, Mr Pink said, “but obviously we are still looking after our shareholders”.

“There is a balance between profitability and the needs of customers and the community. I guess we’ve just swung that balance towards the needs of customers and the community.”

ASB has moved to seize the moral high ground in the competitive banking business by announcing the fund days before the Government’s jobs summit on Friday.

Prime Minister welcomed the plan as “just the sort of creative private sector idea I have been seeking in the lead-up to this week’s jobs summit”.

The PM did say a number of times, that he expected banks to be socially responsible, in exchange for the government guarantees on their deposits. I suspect he’ll be pretty delighted with this as a response.

“As I’ve said many times, the summit is not only about what the Government can do. It will bring together people at the coalface of the economy who can make a real difference as we navigate these difficult economic times.”

Too many people think the Government can just wave a magic wand, and create jobs. It can’t. The Government can help create an environment which is job friendly, but it can not force consumers (both globally and domestically) to spend more money on NZ produced goods and services.

ASB is showing what the private sector can do.

Tags: , ,

16 Responses to “ASB’s $1 billion jobs fund”

  1. adamsmith1922 (724 comments) says:

    David

    I think it is a good idea, but as I cautioned in my own post on this issue – the lending needs to eventuate and ideally should be new lending. Announcements are all very well. Delivery is required

    Vote: Thumb up 0 Thumb down 0 You need to be logged in to vote
  2. tvb (4,553 comments) says:

    Yes the Labour Party was all about announcements but there was no beef behind the announcement i.e. no money allocated.

    Vote: Thumb up 0 Thumb down 0 You need to be logged in to vote
  3. wreck1080 (3,999 comments) says:

    Good on the ASB.

    I disagree that a government cannot force people to spend on nz goods and services.

    There are tons of government regulatory fees and rules. eg, government makes a rule about daylighting angles . So , I am forced to spend $1000 to a survey company on getting the angles checked.

    Easy for the government to make new rules, but they don’t want to pay for them do they.

    Vote: Thumb up 0 Thumb down 0 You need to be logged in to vote
  4. wikiriwhis business (4,189 comments) says:

    If only this had been an initiative from Kiwi bank or Taranaki savings bank.

    Look’s like Goldstein is the man!

    Vote: Thumb up 0 Thumb down 0 You need to be logged in to vote
  5. wynkie (86 comments) says:

    A good spin by ASB. Yet the reality (amount lent) could be dramatically less than $1B depending on the loan critera.

    Every little bit helps and let’s hope it incentives others to step up.

    Vote: Thumb up 0 Thumb down 0 You need to be logged in to vote
  6. JohnMacc (48 comments) says:

    A good PR move for ASB but otherwise meaningless. So they’re lending money to businesses – and to qualify, a company must demonstrate that its creating or preserving jobs. Big deal – the bank isn’t going to lend to a company that’s not engaging in some kind of economic activity, and pretty much any economic activity can be argued to create or preserve employment for someone. The only thing this seems to rule out is lending to someone who wants to invest in derivatives.

    Vote: Thumb up 0 Thumb down 0 You need to be logged in to vote
  7. PhilBest (4,757 comments) says:

    Any government with any clues at all at this time will look to the business and entrepreneurship sector to propel their country out of crisis. It is that sector that is going to do that, nothing else. It is merely a question of the political will whether to let it happen, to help it happen, or to hinder it from happening.

    We are in this crisis today precisely because this sector has already been strangled half to death; it has been starved of investment money in spite of unprecedented easy credit because its returns were so low compared to all the get-rich-quick schemes that were possible in the fiscal and monetary circumstances created in the same political environment.

    Finance is meant to be the handmaiden of industry. But when industry and development are regarded as evils that exist only on sufferance and as a cash cow to be milked by government and the unions, we are inviting the crash of our whole system. That crash has merely been delayed by a false boom that resulted from the same investment money that has been diverted away from productive business, going into a speculative house price bubble; which also would not have been possible without the same anti-development strangulation of housing supply.

    We desperately need to get this truth established in fair public debate.

    If we do not wind back the anti-development, anti-business regulatory burdens and cost burdens, not only are we perpetuating the reasons for our problems, our problems will continue to worsen regardless of everything that the conceits of politicians move them to do in the way of “solution”. The failure of every business and the loss of its employees jobs, is a tragedy. But bailouts of businesses are not the solution; those businesses should have been spared the government-imposed burdens that contributed to their downfall in the first place. Worse, every new business and every new entrepreneurial idea that has been strangled in its cradle, is an even bigger tragedy. Sir James Wattie would never have been able to start his cannery business in his garage today. If Silicone Valley had always been as strangled by regulations and cost burdens as it is today, there would never have been an IT industry there at all.

    George Soros’ old partner Jim Rogers is advising American and European entrepreneurs and technicians to move to Asia. Asia, he says, is where the entrepreneurial-driven phoenix is going to arise from the ashes of the world economy.

    NZ can choose to be part of that, or part of the passe’, failed, anti-business, anti-entrepreneurship, small-minded socialist West.

    Vote: Thumb up 0 Thumb down 0 You need to be logged in to vote
  8. PhilBest (4,757 comments) says:

    Oh, and by the way, “Atlas Shrugged”, by Ayn Rand, is apparently racing up the sales level list at Amazon. This is encouraging. There is nothing better for you to read right now, to get a handle on our problems. We could hardly do better than to distribute copies in their tens of thousands. A lot of people are going to have time to read it. Perhaps if they did, they would vote more intelligently than to keep the heirs of FDR in power prolonging everyone’s pain.

    Vote: Thumb up 0 Thumb down 0 You need to be logged in to vote
  9. s.russell (1,649 comments) says:

    Good on ASB! But I have to suspect that this is mostly smoke, mirrors and PR. As JohnMacc points out, most of the $1b is money ASB would be lending anyway. (Ahh, cynicism is such a curse). Nevertheless, it helps confidence. And that is important. As the poll reported yesterday says, many many Kiwis fear losing their jobs. That fear is stopping them from spending, which in turn is making the recession worse.

    Vote: Thumb up 0 Thumb down 0 You need to be logged in to vote
  10. CraigM (541 comments) says:

    The cynics are really out today. What has the ASB done wrong guys?

    Were they supposed to announce the policy retrospectively? um,. we have just lent 1 billion to SME’s in NZ……

    And maybe they would have lent the money anyway, but at the low interest rate? doubt it.

    Give them a break for doing something positive. If there are some SME owners out there who keep their doors open or keep their staff because a Bank finally took a positive step that has to be a good thing surely?

    Geez, a company does something positive in a time of doom and gloom and many want to lynch them.

    Doomsayers I tell you, doomsayers…in financial times like these, you do as much damage with words as with actions

    Vote: Thumb up 0 Thumb down 0 You need to be logged in to vote
  11. getstaffed (8,040 comments) says:

    Any government with any clues at all at this time will look to the business and entrepreneurship sector to propel their country out of crisis

    Don’t disagree… but the entrepreneurship [funding] sector is hanging on to its cash. NZ’s largest angel network received 750 applications in 2008. They funded just 8, 7 of which were for follow-on funding (ie they’d already invested and were managing their future exposure). So only 1 new business opportunity received funding from this network.

    This is something we must get right… if NZ is to capture value from innovation that generates foreign exchange earnings. And even then we need to find an alternative to having successful NZ businesses being completely hollowed out by foreign private equity concerns thereby denying us the benefit of future income growth.

    Vote: Thumb up 0 Thumb down 0 You need to be logged in to vote
  12. baxter (753 comments) says:

    I also congratulate the ASB. Contrary to the doubters I think they need to make it work in order to get full value from their inspired initiative.

    Vote: Thumb up 0 Thumb down 0 You need to be logged in to vote
  13. serge (108 comments) says:

    So, ASB has a billion in the kitty? Must be one of the only banks in the universe to have such funds available to lend to medium and small businesses, but as people are not spending, it would be like finding a turd in the punch and tossing it into the lemonade…..good spin I would say….besides would the parent company (commonwealth bank) really allow ASB to have such dosh to spare……..nah mate..they would take it home and lend it there………(it rhimes!!)

    Vote: Thumb up 0 Thumb down 0 You need to be logged in to vote
  14. OECD rank 22 kiwi (2,760 comments) says:

    New Zealand should really start to feel the pain of its deep recession at the end of Q2 this year. That’s when the unemployment figures will really start to kick in. ASB’s little marketing campaign won’t be able to stop that.

    Vote: Thumb up 0 Thumb down 0 You need to be logged in to vote
  15. adc (558 comments) says:

    the key here is the low interest rate. It’s about half what business loans have been recently. Even if you just refinance, that can save you a lot of money, which you can argue preserves jobs.

    I think the ASB has made a smart move. Now I’m just waiting for the bidding war to start with the other banks. Maybe we’ll get even lower.

    Vote: Thumb up 0 Thumb down 0 You need to be logged in to vote
  16. mavxp (483 comments) says:

    This is a great move by ASB. Yes they will get good PR from this, but it is also putting their balls out there.

    While the banks in the UK are killing 100’s of small businesses *every day* by pulling the credit rug out from underneath them (and holding on to Gordon Brown’s £50 Billion taxpayer injection), at least small businesses in NZ can get access to credit. This is excellent news, and hopefully other NZ banks will follow suit.

    It’s moves like this that will make the difference between a company surviving the recession and going under. And what goes around comes around – NZ will be that much quicker on the recovery, and profits will return to the banks more quickly too.

    Vote: Thumb up 0 Thumb down 0 You need to be logged in to vote