Yesterday’s announcement of the Coalition’s re-commitment to a new $1 Billion Business Growth Fund is good news for Australia’s two million small and medium-sized enterprises, according to the Australian Investment Council.
“We know that investing in the growth and expansion of Australia’s SME business sector is vitally important to our future economic prosperity. We need politicians across the spectrum to ensure they have the right policies in place to help create a more innovative and competitive business sector that can grow economic productivity and new employment opportunities,” said Australian Investment Council Chief Executive, Yasser El-Ansary.
“Both the ALP and Coalition understand how important it is that we transition our economy to be more competitive, more innovative and more productive over the years ahead – and much of that will happen as a direct result of our capacity to support the growth and expansion of Australian businesses within domestic, regional and international markets.
“We have been too slow at making progress in implementing the sort of reforms we need to make our economy more competitive through productivity gains and technological innovation. We don’t have any more time to waste in getting on with the hard work of building a more diversified economy that builds on the strength of our past,” El-Ansary added.
Over the past two decades, Australia has slipped down the list of diversified and agile economies, as measured through Harvard University’s Economic Complexity Index. In 2016 Australia ranked 86 for economic complexity with a score of -0.592, only just above Iran and below Senegal. Australia’s 2016 ranking is the lowest of any developed market economy and compares unfavourably with the equivalent ranking in 1996 when Australia was listed at number 57 on the index.
“One of the smartest strategies we can use to improve the competitiveness and productivity of our economy is to ensure we grow the pipeline of private capital investment into innovative Australian businesses across all sectors of the economy,” El-Ansary said.
As part of this year’s federal election campaign, the Australian Investment Council released a policy roadmap setting out 13 recommendations for reforms that will help to build a stronger Australian economy for the future. Investing for Growth – Policy Proposals for the incoming Federal Government details the important role that targeted policies, such as government co-investment programs including the proposed new Business Growth Fund, can play in key sectors of the market that haven’t traditionally attracted a depth of capital investment.
The announcement was also welcomed by Kate Carnell, Australian Small Business and Family Enterprise Ombudsman.
“Our report identified the need to address a critical funding gap for long-term, patient capital to enable our up-and-coming, high growth potential SMEs to flourish,” Ms Carnell said.
“We support government investment of $100 million into the Australian Business Growth Fund and a matching commitment by the Commonwealth Bank of Australia, National Australia Bank and HSBC Bank. However, we question the absence of commitment by Westpac, ANZ and Australia’s super funds.
“Importantly, the Fund will be managed by private sector expertise and will benefit SMEs with annual turnovers between $2 million to $50 million. Minority shareholding up to 40 per cent will enable these businesses to retain control of their company; a very different scenario from traditional private equity funding. Similar models in the UK and Canada are tried and tested; addressing barriers to accessing affordable capital for businesses that have gone on to demonstrate successful growth.”
And Trent Innes, DD Australia and Asia of Xero, said that “all champions of Australian small business will welcome the announcement”.
“At Xero, as a scale-up ourselves, and from our interaction with the small-business community and their advisors, we know first-hand that points of transition and growth are pivotal moments,” Innes said. “Our research shows that about 40 percent of SME owners are focused on growing their business long term. According to the Xero State of Lending Report, one in five small-business owners say access to capital is the greatest pain point or perceived threat to their long-term growth aspirations. A quarter of small businesses say they lack confidence in their ability to invest in their business.
“Policy settings, government initiatives, and economic certainty are crucial to fostering growth,” Innes added, “but equally important is courage, something that our Australian small businesses show every day.”