CHRIS SMITH:
Treasurer, welcome to the program.
JOSH FRYDENBERG:
Good to be with you, Chris.
CHRIS SMITH:
Where did this idea come from?
JOSH FRYDENBERG:
Look, this is an idea that the Government has been working on for some time. Indeed, Scott Morrison in his previous role as Treasurer was working with key stakeholders on this when he was in that role and Australia's three million small businesses are the engine room of the Australian economy.
And for them to be strong, Chris, they need access to affordable finance. But as you say, a lot of them are struggling to get that finance today and when they do, they either having to put up their own home as collateral, or they're paying rates that are higher than if somebody was merely seeking a home loan.
CHRIS SMITH:
So, the dirty big banks have them over a barrel?
JOSH FRYDENBERG:
The banks certainly have this market cornered, with more than 80 per cent of the loans for small business for under $2 million.
CHRIS SMITH:
It's called the Australian Business Securitisation Fund, not the world's most exciting name, Josh.
JOSH FRYDENBERG:
Well, securitisation markets are quite complex. What this basically means is that after loans are made by small lenders, including banks that are outside of the big four, they are repackaged and sold on to investors to manage their risk. But that market is very immature and underdeveloped here in Australia and this is where the Government will be coming in.
It will be using the $2 billion to enter the securitisation market, Chris, which we did previously with residential mortgages in 2008…
CHRIS SMITH:
Labor did that, right?
JOSH FRYDENBERG:
…just after the GFC.
CHRIS SMITH:
Labor did that, right?
JOSH FRYDENBERG:
They did.
CHRIS SMITH:
Ok. Specifically, what sorts of differences are you expecting there to be in terms of the cost of money for small business?
JOSH FRYDENBERG:
Well, as you indicated, the Productivity Commission has identified a gap of up to four percentage points between the rates that are charged to small businesses with secured loans and the rates that are charged to people with home mortgages. We want to bring that four percentage points down, to narrow that gap, so it could make quite a significant difference to small businesses.
CHRIS SMITH:
Specifically, you want to bring it down to what?
JOSH FRYDENBERG:
Well, we want to bring it down as much as possible. I'd like there to be no gap between the loans that are made to small businesses and the loans that are made to home lenders.
CHRIS SMITH:
Where is the $2 billion coming from to finance this?
JOSH FRYDENBERG:
We are using the Australian Office of Financial Management which sits within Treasury that will use the Government's balance sheet to deploy this $2 billion over time.
CHRIS SMITH:
You wouldn't be throwing $2 billion into this if you didn't think it will work, because if it does work, you're going to find that small business goes to the next level in their sector, whatever that sector might be, that they'll employ more people, that you'll get plenty of taxable income revenue into the coffers, so that's what you're expecting, are you?
JOSH FRYDENBERG:
We're certainly expecting it to help strengthen the economy, because small business is just so important. You might remember, nearly 70, more than 70 years ago, Sir Robert Menzies spoke of the forgotten people, they were the shop keepers, the artisans, the farmers. He described them as the small business people that were the backbone of the economy.
That was as true more than 70 years ago as it is true today, and that's why the Coalition, under Scott Morrison, stands ready to help them in every single way we can, including the tax cuts which we recently go through the Parliament, which are worth more than $40 billion and will make a real difference to their bottom line.
CHRIS SMITH:
And you're right, people should not forget that. But, what about, once again, specifically, I can hear small business men and women saying right now as they listen to you, so what do I do, what's going to be involved in getting access to this money, am I going to have to jump through ten million hoops or fill in 50 different forms to get access?
JOSH FRYDENBERG:
Where they'll see the difference is when they're engaging with the lenders, the smaller banks that are not the big four and the smaller lenders.
Those operators will be able to offer lower rates of interest than they otherwise would, because the Commonwealth will have entered into the securitisation market. Now, we need legislation to make this happen, and we'll be introducing that into the Parliament and we hope to have bipartisan support.
CHRIS SMITH:
Okay, you've still got to watch your Ps and Qs in terms of ensuring people don't fritter away these loans and down the track can't pay them off. So, you've got to be careful, it's a fine edge here isn't it?
JOSH FRYDENBERG:
It's very important for your listeners to understand, the Government is not the body that is directly engaging with the small business to make the loan. The lenders and the smaller banks will still be the front of house with those small businesses. But what we will be doing is we will be in the securitisation market which will enable those lenders to offer more competitive rates of interest to these small businesses.
CHRIS SMITH:
Ok, the other question I can hear that is vibrating in my headphones is, when will this be up and running, when will it start, less talk more action.
JOSH FRYDENBERG:
Well, it will be up and running in the New Year. But I want to emphasise once again that this is just one of the measures that we have announced and are implementing to reduce the pressures on small business.
CHRIS SMITH:
What part of the New Year?
JOSH FRYDENBERG:
Well, we'll introduce it into the Parliament in the early sitting weeks of the New Year. And then its passage depends on getting the support of the Opposition or the cross benchers, whatever it may be in the Parliament.
But again, we recently legislated the tax cuts, that will make a difference, that's now law, we've announced changes to employee share ownership schemes to double those opportunities available to employees to share in the growth of the business, and the instant asset write-off, the $20,000 instant asset write-off, has already been taken up by more than 300,000 small businesses and again that's making a difference.
So, we have a suite of measures, Chris, that is backing small business because that is core business for Liberal and National Governments.
CHRIS SMITH:
Thank you for your time this morning.
JOSH FRYDENBERG:
Always good to be with you.