By Paul McBeth
You might have noticed the unemployment headlines last week touting a 13-year high jobless rate. Less well-covered, though equally discouraging, were signs of a slump in the number of self-employed folk.
Government figures showed an annual decline of 8.1 percent in self-employment to some 225,800 in the year ended Sept. 30. That's about 10.2 percent of the labour force, down from 11 percent from a year earlier. People working for themselves are giving up faster than employees are losing their jobs.
Perhaps that shouldn't surprise anyone, but it is another slap in the face to economic recovery.
It was only last month when other government figures showed a third straight year of more new businesses failing than succeeding - or as Statistics New Zealand puts it, enterprise deaths exceeding enterprise births.
What's more, a day before the unemployment figures were published the Reserve Bank's six-monthly financial stability report flagged small and medium sized businesses were still struggling to secure bank funding.
Yet some well-heeled corporates can borrow more cheaply today than even a bank can.
The shiny new Reserve Bank governor, Graeme Wheeler, pointed out that in the major economies where governments had thrown cash hand over fist to shore up their financial systems, it had been an expectation, or at least a hope, that the stimulus would feed into smaller businesses.
The thinking is that SMEs keep things chugging along with their broad bases, particularly in employment. However, it appears that not enough government stimulus has trickled down.
Wheeler said the pace of bank lending to SMEs has been moderate at best.
"That's disappointing in many respects because a lot of the employment growth in an economy occurs in small and medium sized enterprises," he said.
What's more, unlike many other government agencies the Reserve Bank doesn't pick winners, meaning it can't go into bat for small businesses if banks aren't taking a punt on them.
As deputy governor Grant Spencer said: "The borrowers and lenders have to cut that deal themselves."
So even if the RBNZ lowers interest rates, as some economists are calling for, there's no guarantee that will filter down to small business owners either. Yet they account for about a third of the country's employment.
That might sound like a good thing when debt is being sold to the public as an inherently evil thing, but holds a very different meaning when you're trying to extend your overdraft to make sure you don't keep making payroll and paying the rent.
Given the hollowing out of the finance sector with the collapse of various dodgy property lenders over the past few years, it's not clear who's keen to fill the void.
Throw in a generally despairing SME sector and you have some real problems brewing.
MYOB's business monitor of small and medium sized firms shows things are looking grim.
The latest survey, conducted in May and compiled in June, showed small businesses were generally downgrading their sales expectations for the coming year, and things have only deteriorated since then.
So what does all this mean for the long-suffering business-owning kiwi battler?
If anything, it demands stronger balance sheets from smaller businesses, because finding bank funding isn't easy and even non-bank lenders are shrinking their small business loan books.
What's more, you can't rely on simply being in the black to get you over the line, with the Reserve Bank's report noting "anecdotal evidence suggests that this may be creating a gap in the market where profitable projects are not being funded."
So if banks won't lend on anything with a sniff of failure (barring residential property), and the few entities resembling the old finance companies are trimming their books, SME owners have to be ruthless in making sure the books are in order, that there's enough ready cashflow, and that the business is sustainable.
And that doesn't really bode well for the recovery if you've got a bundle of small businesses tightening the belts to survive, rather than thrive.