Business fund slammed by Productivity Commission


“In general, though, Australia has relatively deep and liquid financial markets.

“The onus then is on proponents of taxpayer-funded financing of commercial projects to demonstrate how this would serve the public interest.”

Coalition and Labor governments have increasingly used “off-budget” financing vehicles to inject equity into special investments without the money worsening the federal budget bottom line.

The Rudd government deployed $29.5 billion of taxpayer equity into NBN Co.

Small business funds

More recently, the Morrison government introduced a $2 billion Australian Business Securitisation Fund to increase small business lending and a $1 billion expansion of the Export Finance and Insurance Corporation’s mandate to include lending for infrastructure in Pacific island nations.

Separately, Treasurer Josh Frydenberg in April pledged $100 million for a proposed Australian Business Growth Fund to inject equity into growing SMEs, but ANZ and Westpac have baulked at joining the planned joint public-private small business funding vehicle.

The commission said access to debt finance is not a problem for most SMEs that apply for it, with nearly 90 per cent of SMEs that applied for debt finance in 2015-16 successful.

“New businesses, which are typically small, do find it more difficult than established businesses to access debt finance,” it said.

Industry backing

The small business funding vehicles were backed by small business groups, the Australian Small Business and Family Enterprise Ombudsman and Christopher Joye, a fixed-income manager at Coolabah Capital and columnist for The Australian Financial Review.

Mr Joye, who advocated for the small business securitisation fund, said markets were the best long-term allocators of scarce resources, but the 2008 financial crisis showed they were prone to occasional failure.

“In the case of SME loans, Australian lenders have not yet figured out a way to sell these loans to global investors in large volumes,” he said.

“The government’s modest $2 billion investment into securitised portfolios of SME loans will help this market emulate the extraordinary success lenders have had selling home loan portfolios to global investors.

“This should enhance the funding available to SME lenders, which will reduce the interest rates small businesses pay.”

The commission also noted that Energy Minister Angus Taylor in December changed the Clean Energy Finance Corporation’s mandate to prioritise investments that support more-reliable, “24/7 power” rather than just renewables such as wind and solar.



Source link Finance News Australia

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