Joe Hockey (North Sydney, Liberal Party, Treasurer) Share this | Hansard source

I thank the honourable member for his question. It is an issue that has been hotly discussed over the years—whether Australia goes down the path of having a chapter 11 equivalent to the United States. I well recall this from when I was Minister for Financial Services and Regulation. In the development of CLERP, the Corporate Law Economic Reform Program, we had a good look at it around 1998-99. One of the reasons we did not go down that path was that in Australia there are a number of options available such as the appointment of administrators—obviously the court can appoint administrators and so on. The most important thing we can do in relation to this is keep the door open for positive changes that will help small businesses in particular, as the honourable member said, to basically work their way out of difficulties should the opportunity arise and, importantly, not in any way create credit problems for banks that are primarily the lenders to those small businesses.

What we have seen over recent times—in fact, the last decade—is that a larger number of small businesses are using their homes as equity and security for credit. That has an upside and a downside. Obviously, there is a very significant cost to the individual and their family if the business fails. In relation to where there is unsecured lending to small business, the banks obviously charge much higher interest rates. We have commissioned a productivity report into this. The draft report from the Productivity Commission has been made available. That addresses a number of those issues. The government has not provided a final response yet.

But I would just say this: whenever you make credit more affordable, more accessible, you should only do so where you are sure that credit risk is preserved. There is a danger that it can undermine the quality of the risk book in financial institutions and, if you make it harder for the lenders to recover the money that is owed to them, make lending to small business far more expensive. We do not want any unintended consequences associated with any of the decisions. That is why the government is, in a measured way, considering the Productivity Commission report.

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