Allegra Spender (Wentworth, Independent) Share this | Hansard source

Tonight I want to put on the table an issue that is really important to Australian businesses, the Australian community and the Australian economy, and that is: access to small and medium business financing. It's not working in this country. It needs to be much better. This is an issue that we just have not been discussing enough in this chamber and I believe it needs serious attention from across the parliament.

Let's talk about why this matters. We know that small and medium businesses employ 42 per cent of the workforce in the private sector. There are 2.5 million small businesses in this country, and they contribute $500 billion to the economy. I know from my own community how important our small and medium businesses are, but the truth is that, when you talk to them—whether they be family shops that have been passed on between generations or innovative businesses that are going to be the next big or medium businesses—they are not having the access to capital that they need, and I think we, collectively, need to turn our minds to it. Now, I don't have all the answers. I want to put this issue on the agenda.

Let's start with bank lending. In the early or late nineties, around two-thirds of bank lending went to business; one-third went to mortgages. Forward through the few years to now and around two-thirds of bank lending goes to mortgages and only one-third to businesses. Australian businesses are struggling to access capital from our banks, who demand high securitisation and are more likely to ask you to put your house on the line if you're going to get a small business loan than those in other countries. What happens when small businesses can't access loans from the banks? They just go to other providers and have to be charged much higher rates.

So my question to this House is: Is this a good idea? Is it a good idea that our small businesses are not able to access capital so easily? Is it a good idea that, on aggregate, we've been seeing lending to medium and large firms growing around 30 per cent in the last five years, whilst for small business it hasn't even budged?

These are issues that face our economy. They are issues that I hear about constantly from people in Wentworth, including from people that I recently surveyed on this issue. And I think this is an issue that I want to see the economics committee address and investigate.

The second type of business I wanted to talk about, in terms of access to capital, is that of venture firms: those firms that are expected to grow fast and could be the big businesses of the future—those really super-innovative firms. What we have seen is that Australia is actually pretty good at building those firms. Actually, Australia has more unicorn companies—'unicorn' meaning having a billion-dollar valuation—per dollar invested than anywhere else in the world. But, despite our success at building these companies, we don't have a lot of capital that flows into this sector. We have around a third of the capital in the venture sector compared to the US, per capita. We have around half of the venture-sector capital of the UK.

What we are seeing in the big institutional areas of investment, like superannuation, is that they are reducing their allocation to venture, highly innovative, firms. The super funds have reduced their allocation to venture by around half in the last 10 years. I've heard from industry sources that no big super fund has invested in a new venture fund over the last five years. Basically, the door is closed.

I come back to this question of productivity and supporting our most exciting and innovative businesses. If they are struggling so much on finance, how can we be sure that we're backing all the businesses that we can for the future? I think we can be sure that we're not.

How do we investigate this? I held a round table recently with a bunch of venture firms, and I was grateful that the Minister for Industry and Innovation, Tim Ayres, also attended. There were really important discussions, I think, in terms of regulatory hurdles—things like RG 97 and Your Future, Your Super, and the structure of those two programs, which disincentives investment in venture firms.

Now, let's be really clear. This isn't about trying to give money from super funds to dud investments. Private equity and venture capital have had on average a 15 per cent return over the last 10 years compared to 10 per cent for the ASX, so if there is more responsible investing in those sectors we could actually expect to see increased retirement savings for Australians, which is what super should be all about.

As I said at the start, I don't have all the answers on this, but I know that there is a problem. I know that some of the super fund regulations play into that. But there's a much bigger question of how we can get access to capital to venture firms. That's why the economics committee and the government need to be pursuing this issue, and I'll be pursuing it.

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