Industry calls for small business financing inquiry

By: Jason Whittaker


The General Council of the Australian Chamber of Commerce and Industry (ACCI) last week called on the Productivity Commission to

The General Council of the Australian Chamber of Commerce and Industry (ACCI) last week called on the Productivity Commission to conduct a study into the degree of competition in the provision of SME financing.

Concerns over finance were prompted by discussions at the ACCI’s Annual General Meeting held in Canberra last week.

Of particular interest was: the potential impact of fewer participants in lending markets, the implications of repricing the risk to business, international comparisons, and changes which have occurred in the cost of availability of finance to SMEs over time.

In commenting on this decision, ACCI Chief Executive Peter Anderson says the "meeting of 36 business organisations forged a strong consensus that small businesses are taking an unfair hit on restricted access to finance, and the growing relative cost of small business finance".

"Shedding light on the reasons why the gap between mortgage rates and small business rates has grown will be an important step towards a fairer deal for small business customers," Anderson says.

According to the Reserve Bank, while the cash rate was reduced by 425 basis points between August 2008 and May 2009, small business loans had fallen by only around 230 basis points.

Yet on the way up, recent rate rises were fully passed on.

As the engine room of the Australian economy, small business needs access to affordable credit for investment, working capital and job creation, according to the ACCI.

General Council also voiced strong support for ACCI’s plan, outlined late last month at an Austrade/CEDA conference in Sydney, to boost trade finance, in particular for:
  • More flexibility under the Basel II Requirements particularly as they relate to the one year maturity floor for trade finance
  • A more accommodating basis by which retail banks assess business risk for short term trade finance
  • A more expansionary vision by retail banks in our region, including the provision of offshore banking services for Australian exporters
  • A clearer role for business organisations in working with governments and the finance industry on trade finance

General Council authorised ACCI to pursue these issues with the Australian Prudential Regulation Authority as a matter of urgency.

General Council also considered it timely to now review the Australian Government’s ‘banking guarantee’ and the possibility it may now be restricting competition in the banking industry.

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