Small to medium-sized businesses, those which employ the majority of New Zealanders, appear to be paying between 14% to 16% for money from their banks even as floating mortgages continue to fall to around 8.75%.
The 90-day bills, a usually reliable indicator of where floating mortgages are set by retail banks, fell below 5% on Monday and closed at 5pm last night at 4.91%.
The bills were last below 5% in February 2002.
In December, Reserve Bank governor Alan Bollard called for all New Zealanders to do their part to reduce inflation and keep interest rates falling as a way of helping the New Zealand economy to recover.
Banks should not be looking to maintain high profit margins in the current environment.
Since July, the Reserve Bank had cut the official cash rate (OCR) by 3.25%. Short-term mortgage rates had been cut, but not by as much.
It was hoped that banks would pass on interest rate cuts, Dr Bollard said.
The Reserve Bank website showed that in November, base rate lending to businesses was about 14%.
Berl director Kel Sanderson said from Wellington yesterday that research undertaken by Berl showed business lending was between 14% to 16%.
It took a great deal of persistence by a Berl staff member to extract the rates from the banks who were reluctant to release the information, he said.
Floating first mortgage rates had fallen from 11% to about 8.25%.
There was usually a premium of between 2.25% to 2.75% for business lending, implying that businesses should be now paying about 11% for their money rather than 14%.
Asked why he thought the retail banks continued to charge businesses such a high interest rate at a time when New Zealand was facing higher unemployment during a recession, Mr Sanderson replied: "Because they can. Taxpayers are carrying their risk."
It was generally accepted that the government deposit guarantee scheme covered about $160 billion of funds invested with banks and other complying investment houses.
However, that could rise to about $300 billion of money being covered by taxpayers, through the Government.
"So if the Government is taking their risk, why are banks so averse to lending to business at a reasonable rate? When things have got difficult, banks here, which are really Australian banks, have retreated to the highly-secured property mortgages.
"We need to have funds available to business so everyone is trucking on."
Otago-Southland Employers Association chief executive Duncan Simpson said the businesses were often told if they did not like the interest rate they should shop around.
"That's not easy to do these days, as they are more concerned about getting paid for the work they have done or finding new orders.
"Inertia sets in - they will look at it one day. I have to say, though, that is a generous margin above the 90-day rate."
Many of the Otago-Southland Association members had borrowed for their business against their homes and were watching mortgage rates.
But many of them had overdrafts or term loans and were being charged the higher rates.
Credit card interest rates had also not moved much and some businesses used credit cards to handle unforeseen situations, he said.
Mr Sanderson said the general rule was that floating mortgages were between 1.5% and 2% above 90-day bills.
Last night, that would have meant floating mortgages should have been between 6.41% and 6.91%.
Business rates should be between 2.25% and 2.75% above floating mortgage rates.
Ideally, now that the world central lending rate was about 1%, the 1.5% risk premium for a country like New Zealand would have this country's OCR at 2.5%.
That would mean floating mortgage rates of 4.5% and business lending at about 6.5%, he said.
"Reality is quite different."
Berl had forecast the 90-day bills to fall to 5% by February and 4.5% by the middle of the year.
The first barrier had come early, Mr Sanderson said.
