15 November 2019
Lending to small business crucial to economic growth
With interest rates at an all-time-low and the RBA Board minutes today confirming Australian economic growth has slowed to a decade low, it’s no wonder RBA Governor Philip Lowe is calling for our financial institutions to support small businesses.
After the official cash rate was cut to 0.75% earlier this month, Dr Lowe made several pertinent observations about the credit squeeze impacting the Australian small business sector and how that’s affecting the economy more broadly.
Most would agree with his comment that we will all be better off if businesses have the confidence to expand, invest, innovate and hire people.
Dr Lowe said lending standards have strengthened, but the ‘pendulum may have swung a bit too far’ in some areas.
Vitally, he made it clear that our financial institutions should support small businesses, stating ‘lenders should not be so scared of making a loan that goes bad that they don’t provide the credit the economy needs’.
The RBA Governor’s advice should be heeded.
The overwhelming feedback to my office from the small business community is that a lack of access to funding is their biggest barrier to growth.
The most recent SME Growth Index revealed one in five SMEs are experiencing cash flow problems due to business loans being rejected.
Even the Australian Banking Association has acknowledged that small business loan applications have fallen by 33% since 2014.
It’s time to sit up and listen to the RBA Governor. If our financial institutions change the way they do business with SMEs, it might just give small businesses the confidence boost they need to grow.
That would be a win, win for the small business sector and the Australian economy.