GARETH PARKER:
Okay, we've got the Federal Treasurer. Josh Frydenberg, is on the line. Treasurer, good morning.
JOSH FRYDENBERG:
Nice to be with you Gareth.
GARETH PARKER:
First of all, this is the victory lap component of the GST debate. The deal is done.
JOSH FRYDENBERG:
It's great news for the people of Western Australia, indeed all Australians because every State and Territory will be better off as a result of this reform undertaken by the Liberal and National Government under Scott Morrison's Prime Ministership.
There were some members of the Labor Party who said pigs would fly before a new deal was done on the GST, but we've succeeded; we've got it through the Parliament; and in particular, Western Australians will be better off because the unfair situation which saw them only get 30 cents in the dollar cannot be repeated again.
GARETH PARKER:
It's not a perfect solution because it requires you to borrow more money to sort of compensate the other states and buy them off and buy their support. Does that trouble you at all? It's not the purest solution that the Productivity Commission would've wanted.
JOSH FRYDENBERG:
Gareth, I think this is a good solution because no State or Territory will be worse off and the GST pool will continue to grow over time. The Commonwealth is obviously putting more than $9 billion to work for the States and the Territories and we'll ensure a much more sustainable, fairer system overall.
It just wasn't fair to see Western Australia get less GST funds than Tasmania, even though Tasmania had one fifth of the population of Western Australia, or for the Northern Territory, with one tenth of the population of Western Australia, getting more money than Western Australia under the GST distribution system. That just wasn't fair and wasn't sustainable.
GARETH PARKER:
We've been talking this morning about who gets the credit and I think there's plenty to go around. But do you think Western Australian voters will give your Government credit when they go to the polls next year, is this going to be enough to save the seats of your colleagues Christian Porter or Ken Wyatt or Steve Irons or Andrew Hastie?
JOSH FRYDENBERG:
Well, I wouldn't seek to pre-empt how voters will react to an election next year and how they'll vote. That's a matter for them. But they do need to rest assured that the Liberal and National Government has absolutely undertaken a significant reform here which will see Western Australia as a big beneficiary.
GARETH PARKER:
Can I ask you about the other initiative that is, that you're out talking about today? This $2 billion boost for small business loans, how's it going to work? It's not the Government loaning money to small business, is it?
JOSH FRYDENBERG:
That's correct. What we are doing is, we're entering in what is called the securitisation market where small lenders and smaller banks, that are not the big four, make loans to small businesses; the butchers, the bakers, the grocers, the advance manufacturers, and then on-sell, if you like, that debt they have incurred to another party and that other party, in this case, can be the Federal Government.
We will do the appropriate due diligence on it. We will ensure that credit rating agencies are involved and as a result, we will encourage and facilitate more lending to small business by those smaller banks and non-bank lenders.
GARETH PARKER:
So, is the idea that you buy a package of small business loans?
JOSH FRYDENBERG:
That is what happens in the securitisation market. But one of the reasons why this intervention is needed is because Australia has a very underdeveloped securitisation market for small business; the securitisation market for residential mortgages is quite strong.
And indeed, the Federal Government, back in 2008 undertook a similar intervention, designed to get more credit to households through the residential mortgage securitisation market. This time, we're doing it in small business and I think it will make a real difference.
GARETH PARKER:
Okay, so from the small business' point of view, how will they access this? How will they know? What are you expecting the outcome to be, I guess at the coalface of an individual small business owner going to meet with their bank manager?
JOSH FRYDENBERG:
The Productivity Commission, Gareth, has said that for a small business seeking a secure loan, they pay up to four percentage points more in the interest rate charge then if they were a household simply getting a home loan.
As a result of this initiative, and the development of the securitisation market more generally, we want that four percentage point gap to dramatically narrow. That's what we'll be encouraging, and that is what we hope to achieve by this intervention.
Small businesses and their owners who are listening to this program will still need to engage with those smaller banks and non-bank lenders, as they would do, but they all know that those lenders will have more support from the Government when they are offering these loans.
GARETH PARKER:
Okay, so in theory there should be more availability of loans and there should be, potentially those loans at lower interest rates then they're currently getting – best case scenario?
JOSH FRYDENBERG:
That's well put.
GARETH PARKER:
The Treasurer is Josh Frydenberg. Just briefly, before I let you go, it does seem as though, since the Royal Commission, a range of parties, including the banks themselves are keen to tighten up on credit. The banks are doing it themselves because they're getting hit by new rules and they're worried about, and rightly so, about the exposure of their bad behaviour.
It seems that the Reserve Bank's a little bit worried about the level of household indebtedness. Is this a sensible idea to free up credit, at this particular moment of the national economy?
JOSH FRYDENBERG:
Well, it's certainly a sensible idea to ensure small businesses get access to more affordable finance and I have to point out that's not the only initiative we're announcing today.
We're also encouraging the establishment of a business growth fund, Gareth, which will see small businesses be able to sell equity stakes to other banks or to other lending institutions more readily than they can do at present and that could be of interest to a small business who would rather provide equity in their business than to take on more debt.
And we've seen similar funds established in the United Kingdom and Canada to good effect. So, that's what we will be doing here. But you are right, in the wake of the Royal Commission, we have seen some tighter lending by the banks and we continue to encourage the banks to keep their books over to recognise the public good in ensuring available finance and I certainly will be keeping access to finance top of mind when we receive the Royal Commissioner's final report, expected in February.
GARETH PARKER:
Okay, and just on the GST, as the Federal Treasurer, do you have a view on whether the Western Australian State Government should invest it's GST windfall in paying down debt or spending it on new infrastructure or other stuff?
JOSH FRYDENBERG:
Well, as you know, these are untied, you know, untied funds from the Commonwealth, so that will be a decision for Ben Wyatt and for Premier McGowan, but I'll leave that to them. But of course, we would always encourage States and Territories to use that money wisely, whichever way they seek to dispense it.
GARETH PARKER:
Okay, appreciate your time this morning, Treasurer.
JOSH FRYDENBERG:
Good to be with you.