Managing Capital for your business: RBA Event

If only there was a crystal ball for business owners to foresee obstacles in the future – forecasting, preparation and growth would be much simpler. A recent Rosebank Business Association event with Deputy Governor of the Reserve Bank of New Zealand speaking, had RBA members hoping for a glimmer of what the future may hold.

The RBA lunch: Managing capital for your business, was a huge success with 150 RBA members attending. The mood in the room was abuzz as members gathered to hear guest speakers Geoff Bascand and Leon Grandy.

Geoff Bascand is the Deputy Governor of the Reserve Bank of New Zealand and Leon Grandy is a Senior Fellow of the Financial Services Institute of Australasia (FINSIA) and NZ’s only Chartered Banker.

Following the recent housing announcements from the government on 23 March, many local business owners were keen to hear what both had to say on the current condition of the economic market. Many RBA members were hopeful they would grasp some foresight on where the economy is heading, too.

While the Reserve Bank does not have the capacity to engage with business associations frequently, Geoff says the opportunities to have conversations with SMEs and strengthen relationships with the RBA is valuable.

“We can’t make policy without speaking to people at the grass roots level,” says Geoff. “We appreciate the relationship and the opportunity to be here as well.”

Throughout the presentation, Geoff looked back at New Zealand’s economy since Covid-19 hit, just over one year ago. In Geoff’s role he leads the Reserve Bank’s Financial Stability Group,  overseeing policy and analysis and supervision, and providing support through data and statistics.

While the New Zealand economy has certainly rebounded stronger than the Reserve Bank could have foreseen, Geoff believes we are not out of the woods yet. The economy is doing well, and he argues this is partly because monetary and fiscal policy are supporting this.

For business owners wondering what risks are around the corner, the message from Geoff was positive, with a sailing analogy for the Auckland audience. Likening the economy to a sailing boat, Geoff said it was important to not pull the wind out from the sail too early.

While we are currently on a moderate growth path, Geoff says the economy celebrations need to hang on as we are not there yet.

“We won’t lift interest rates until we are really confident inflation, and the economy, is where it should be.”

Regarding housing, Geoff says there are some financial policy tools that could potentially be used and indeed dampen risky lending. In May, the Reserve Bank is set to give policy advice to the government on interest only loans.

Sophia Bristow, Eurotech Managing Director and RBA member was keen to hear Geoff and Leon speak for the expertise they each brought to the presentation.

“I think events like this are really important so I can stay current with the business issues from their perspective. I’ve been taking notes and already have some ideas as a result of these learnings,” says Sophia. “The speakers are stellar quality.”

As an importing company with products from America, Europe and Asia, Eurotech has been directly impacted by changes from the pandemic. Delays with the manufacturing scheduling and shipping has meant the company’s normal cycle to convert purchase orders into cash has at least doubled. This has meant the company needed to reassess the way it does things and be responsive to the changes very quickly.

“Policies made by the Reserve Bank affects New Zealand financial institutions and has a flow on impact to Eurotech as a SME business,” Sophia says.

Around the room, many other business owners were keen to hear how upcoming changes could potentially impact them.

In an uncertain world, Geoff said the Reserve Bank wants to remove barriers that do not need to be there, to create more certainty.

“If we (the Reserve Bank) can provide more information and be trusted to be stable, then this can give an anchor for them (SMEs),” he says.

Leon Grandy spoke with the audience about the bridge from banking to the boardroom. His informative talk covered growth through acquisition where he stressed the importance of getting real equity for your business and not using the equity of personal housing. He believes there is no lack of capital in New Zealand for businesses to do well thought through things with a proper plan.

Leon also spoke on executing governance within a business and understanding shareholders’ interests, including the importance of understanding all the stakeholders.

Following both presentations, RBA members were given the opportunity to take to the floor and ask questions. There was no holding back as members asked the hard questions of the Reserve Bank.

The event, hosted by the RBA and BNZ, was a huge success and was informative for all who attended. Thanks to local Rosebank Road bakery, eatery and deli, Piccolina for the catering and Encounter Christian Fellowship for the use of the venue.