Josh Frydenberg (Kooyong, Liberal Party, Treasurer) Share this | Link to this | Hansard source

I move:

That this bill be now read a second time.

This bill introduces new legislation that authorises the Commonwealth government to participate in forming, and acquiring shares in or debentures of, the Australian Business Growth Fund (BGF), and appropriates $100 million for that purpose.

The Australian Business Growth Fund's purpose will be to offer growing, established companies and entrepreneurs patient capital and strategic support to assist them to reach their growth potential.

With better access to competitive finance, SME's will be able to grow, fulfil their potential and continue to underpin Australian economic growth and employment.

Small- and medium-sized enterprises (SMEs) are a key driver of activity and growth in the Australian economy. SMEs generate employment, drive innovation and boost competition in markets. In 2016-17, there were over 2.2 million SMEs (those employing up to 199 employees) in Australia, accounting for around 68 per cent of private sector employment. Furthermore, a culture of innovation in business is a key factor in boosting Australia's productivity over the medium to long term.

A challenge for SMEs seeking to grow can be access to capital. In 2018, the Reserve Bank of Australia released a report outlining the difficulties Australian SMEs face in accessing finance.

Australia currently lacks a patient capital market for SMEs. Patient capital can provide entrepreneurs the finance needed to expand without relinquishing control of their business. Patient capital equity funds established in the UK and Canada have shown that there is a demand for this type of finance and that patient capital investment can be profitable for investors.

The Australian BGF has been modelled on the established UK and Canadian equivalents where a company collectively owned by financial institutions provides long-term capital and business guidance to small- and medium-sized businesses.

The Australian BGF will provide long-term patient capital to a number of small- and medium-sized businesses each year. Small businesses will have to demonstrate three years of revenue growth and profitability and a clear growth vision in order to be eligible to receive capital from the BGF. Business seeking support can be from across Australia. Support offered will be both financial and non-financial.

Established Australian businesses will be eligible for long-term equity capital investments between $5 million and $15 million, where they can demonstrate three years of revenue growth and profitability and a clear growth vision.

The BGF's investment stake will be between 10 and 40 per cent, allowing small business owners to maintain controlling interest, while also allowing the BGF to have sufficient influence to encourage business growth.

To facilitate sufficient support for the small business market and using international precedent as a guide, the BGF's initial fund size is anticipated to be around $500 million, with potential to grow to around $1 billion. Its size however will be dependent on the number of financial institutions that participate and the amount they invest and will be subject to further analysis of market opportunity and demand.

Last week, I announced that the government had agreed key terms with NAB, CBA, Westpac and ANZ where each of us will invest $100 million and HSBC and Macquarie Group $20 million each. If the parliament passes this legislation, it will allow the government to invest in the Australian Business Growth Fund which will see $540 million invest in Australian small- and medium-sized businesses allowing these businesses to reach their full potential. I would like to acknowledge NAB for leading their work in leading the working group that has bought the parties to this point.

Full details of the measure are contained in the explanatory memorandum.

Debate adjourned.