Slade Brockman (WA, Liberal Party) Share this | Hansard source

I too rise to speak on the Australian Business Growth Fund Bill 2019. This is legislation that authorises the Commonwealth government to participate in the formation of, the acquisition of shares in and the acquisition of debentures of the Australian Business Growth Fund. The bill appropriates $100 million for this purpose.

The Business Growth Fund comes out of some international experience in this area. In particular the UK business growth fund is a model which has shown some significant benefits in the UK economy about directing capital into small- and medium-sized enterprises that were otherwise finding it difficult to attract the capital that they needed to grow rapidly in environments where the ability to quickly scale up is very important, particularly when you are in highly competitive markets such as the technology sector. There's also some experience in Canada, where a company collectively owned by the financial institutions provides long-term capital and business guidance to small and medium sized enterprises.

This concept of patient capital is a very important one, particularly in small and medium sized enterprises. There are very good ideas out there, ideas that have the potential for relatively rapid growth, but they need patient capital to support them as they go through that growth phase. Patient capital is not always available to these businesses. This was a clear gap in the market that the Ombudsman identified and that the government is now responding to.

The government is a huge supporter of small and medium sized enterprises, and none more so in the government than Minister Cash, who is in the chamber. It's important to recognise that what we do for small and medium sized enterprises in this country flows through to the entire economy. Small and medium sized enterprises are the engine room of the economy; they are the engine room of growth; they are the engine room of employment and the jobs of the future.

The Australian Business Growth Fund will be offering growth opportunities to established entrepreneurs and established companies with patient capital and strategic support to assist them to reach their full potential. Businesses seeking support can come from across Australia. I would particularly encourage businesses in regional Australia to look at this fund as it is established and to see how they can utilise this fund. Often businesses in the bush, in regional and remote Australia, have even more challenges to face than those in the metropolitan regions. The choice and availability of capital to grow a business is somewhat limited, so this fund will be particularly attractive to businesses in regional Australia who see the opportunities for growth with the support of some patient capital and business advice.

Established Australian businesses will be eligible for long-term equity capital investments of between $5 million and $15 million where they can demonstrate three years of revenue growth and profitability and a clear growth vision. The investment stake will be between 10 and 40 per cent, allowing business owners to maintain control. That is very important, because the success of small and medium sized businesses comes from the fact that those business owners, the people who actually run and operate the businesses, have skin in the game and have the passion for the product or service that they are developing. So it's very important that we keep those business owners in the controlling interest position whilst providing that patient capital to allow them to achieve their full growth potential.

The initial capacity of the Business Growth Fund would be around 10 investments a year, aiming to increase to around 30 per year if and when additional capacity is made available. Obviously that will come as a result of the Business Growth Fund showing that it can successfully operate in the marketplace. To facilitate sufficient support for the small business market, using international precedent as a guide, the BFG's initial fund size is anticipated to be around $500 million, but it has the potential to grow. It is entirely possible to see that grow to around a billion dollars, but the size will be dependent on the participation of the banking industry and the amount they decide to invest. Obviously that will flow from their analysis of the market opportunity and demand.

Finally, I wish to go through some support for this bill, in particular the support of small business. Again, those on this side are very strong supporters of our small business community and it's good to see that the small business organisations of Australia, COSBOA, are very supportive of this bill. This is a letter that I'm sure many in this place have received from Mark McKenzie, the chair of the Council of Small Business Organisations of Australia. He writes:

I am writing to communicate our strong support for the expedient passing of new legislation for the establishment of the Australian Small Business Growth Fund (ASBGF).

The need for this fund has long been recognised in the small business community, owing to limitations in both the structure and nature of competition within Australia's private equity markets. COSBOA is firmly of the view that these limitations give the whip hand to private equity interests in Australia who currently price business development risk at an unsustainably high level.

The Council of Small Business Organisations of Australia sees, just as the ombudsman does, a gap in the market for this kind of patient capital to invest in the small and medium-sized businesses of Australia to give them the opportunity to grow and to compete on a world stage. We know Australian businesses can do it if they're given the opportunity. The Australian Business Growth Fund Bill 2019 will be a part of this government's overall response to the needs of small business and desire to support the small business community of Australia.