NZ Engine

Source: Radio New Zealand

New Zealand firms appear to have become more cautious about investment in recent years, which could have a negative effect on future productivity and economic growth.

An Insight report by the Institute of Economic Research (NZIER) indicates there had been a shift in investment behaviour and risk appetite since the global financial crisis.

“Since the GFC, investment in productive assets (capital) has not kept pace with the workforce, raising questions about whether firms have become more cautious about long-term investment,” the report says.

“Since 2018, current assets have increased as a share of total assets across industries. This may indicate that firms are placing more weight on liquidity and short-term resilience, although the trend should be interpreted carefully,” the authors said.

The report indicates a shift to more current and liquid assets was a concern.

“When firms invest in new equipment, buildings, technology, and innovation, they increase the economy’s capacity to produce more goods and services. But when firms delay investment, capital renewal and productivity growth can slow over time.”

The report indicates the increase in current assets may also reflect inventory accumulation, receivables growth, or valuation effects, rather than a deliberate shift away from long-term investment.

At the same time, higher borrowing costs and tighter credit conditions had made it harder for businesses to take on investment debt.

“It may reflect rational risk management by businesses facing uncertain demand and higher financing costs,” the authors said.

“However, if weaker investment persists, it could slow the renewal of capital, delay innovation, and hold back productivity and wage growth over time.”

NZIER said it was important to understand the drivers behind the change.

“New Zealand’s future prosperity depends in part on firms being willing and able to invest. The challenge is to ensure that the policy and financing environment supports productive investment while recognising the uncertainty firms are facing,” authors said

“Business investment is critical to productivity, innovation, and long-term growth in living standards.”

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– Published by EveningReport.nz and AsiaPacificReport.nz, see: MIL OSI in partnership with Radio New Zealand

Source: Radio New Zealand

Afterpay in New Zealand is making almost $20 million a year in income from late fees, despite the service being provided interest-free.

When someone makes a purchase using Afterpay, they do not pay any charges provided they pay the debt off according to the schedule. The merchant accepting the payment pays a fee.

But when someone pays an instalment late, they are charged fees.

For orders up to $40, a one-time late fee of up to 25 percent of the total is charged. For orders over that amount, a $10 late fee is charged when a payment is missed. If it remains unpaid after seven days, another $7 is charged. This applies until a cap of 25 percent of the total borrowed or $68, whichever is lower, is reached.

Afterpay’s results for the year to December show it made $18.5 million in late fees in 2024, which rose to $19.7 million last year. It has been approached for comment.

Centrix data for April showed that for the sector as a whole, arrears improved to 8.8 percent, ended a ruining of monthly increases.

Consumer NZ spokesperson Gemma Rasmussen said buy-now-pay-later services had been under the Credit Contracts and Consumer Finance Act since September 2024, to strengthen consumer protection.

“As part of these changes, from November 2024, BNPL providers became exempt from section 41, which prohibits unreasonable fees, and section 44A, which requires default fees reflect actual costs.

“These exemptions mean that late fees no longer need to reflect the true cost incurred, multiple late fees can apply simultaneously across different purchases, and fee protections are weaker than those that apply to other consumer credit products.

“We believe this exemption significantly weakens consumer protection and reduces consistency within the CCCFA framework. Combined with ongoing cost-of-living pressures, these weaker safeguards could have contributed to an uptick in revenue from late fees.”

She pointed to earlier work by Consumer that found that the reforms had enhanced regulatory oversight and formally added buy-now-pay-later to the consumer credit framework but had failed to address key drivers of consumer harm.

“Over-commitment and financial hardship were the central pre-reform concerns and these still persist, with hardship cases involving BNPL continuing to rise. BNPL use for essentials and alcohol also remains widespread.

“Although consumers now receive stronger legal protection in principle, structural gaps in the framework mean the reforms have not effectively reduced unaffordable lending or the associated financial harm.”

Fincap spokesperson Jake Lilley said the regulations needed urgent attention.

“When someone ends up paying a late fee on already used essentials like petrol or food they end up even further behind trying to access essentials in the future. It risks a debt ‘treadmill’ that just keeps accelerating.

“Financial mentors continue to be frustrated, telling FinCap that difficulty paying back buy now pay later lenders is adding more pressure for so many of the whānau they support. These whānau are just trying to survive and keep food on the table.”

He said the research with Consumer had found that lenders offered practical options for people having trouble paying.

“The earlier someone lets these lenders know they are having trouble or alternatively, the earlier they contact free and confidential support via the MoneyTalks helpline, the greater the likelihood they can avoid debt collection issues or going without the essentials.

“We have been recommending work to licence debt collection as we see tricky buy now pay later debts head that way. Also for the regulations for these loans to be fixed soon after the current Financial Service Reforms get through Parliament.”

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– Published by EveningReport.nz and AsiaPacificReport.nz, see: MIL OSI in partnership with Radio New Zealand