With the Banking Royal Commission now behind us and its ultimate implementation uncertain, or years away, we approach a Federal election when Australian small-to-medium businesses need as much help as they can get from a government that genuinely understands what’s at stake.
Labor has styled itself as an ally of Australian small business. But unless Labor pledges to match (and hopefully exceed) the LNP’s $2 billion SME funding intervention, the party cannot claim to be any friend of Australia’s small businesses.
We find ourselves at a time when Australia is faced with a lack of competition. Interests rates are inflated and the cost of borrowing for small businesses is soaring. Part of the problem is that the four large banks dominate the lending market—and when I say dominate, I truly mean it.
Treasurer Josh Frydenberg got it right when he said, “Small businesses find it difficult to obtain finance other than on a secured basis, typically against real estate. Even when small businesses can access finance, funding costs are higher than they need to be”. This is the banks in a nutshell.
This reality, which we’ve dealt with for years, means that Australia is becoming less and less competitive on a domestic level and on the global stage. It’s also why I was excited when the Liberal Party announced this intervention. Finally, I said to myself, there would be a framework to support and foster Australian small enterprise. Entrepreneurs would have greater access to alternative funding that provides a cheaper, less burdensome option, making more innovation and growth a possibility.
Our stagnating market and high-interest rates have stung small enterprise the most, which is a huge shame since most of Australia’s jobs come from SMEs. But the Government’s proposed $2 billion funding injection is welcome. Under this scheme, not only would credit be cheaper and more accessible, government would work to establish an industry-backed Australian Business Growth Fund, with the banking regulator reviewing its capital requirement rules to enable banks to more easily invest passively in small businesses.
Although the intervention is not perfect, it is the right first step to addressing these problems. It is not perfect because a government injection of cash through poor lending platforms, for example, or initiatives can short-circuit prudential lending practices and standards that reduce risk and foster the right kind of economic growth. The ideal intervention will make use of the emerging SME lending channels which are transparent and fair in their terms and practices, and will not simply pass on government money, clipping the ticket with fees and added interest on the way.
But even this important first step could all die if Labor fails to match the commitment. With elections upon us, and with a very plausible win for Labor, it’s time for Shadow Treasurer Chris Bowen and the party in general to come to their senses, recognise the problems facing our country, and commit to matching this intervention. Small enterprise is the core of our economy and an engine for the kind of innovation that will bring renewed growth to our country. We should be passing policy that fosters and enables Australian SMEs, not stifles them.
If Labor really wants to be the friend of the Australian small enterprise, it will promise to match this intervention – not only match it but refine it by showing that Labor truly understands what business needs when it comes to lending. Without that pledge, the party has no claim to make about being the friend of SMEs. It’s as simple as that.
Leo Tyndall, Founder, Marketlend