The federal government has backed down on draft legislation which proposed regulating small business credit after criticism it would make it harder for small business to get funding.
The draft legislation was published just before Christmas and proposed prohibiting people from “engaging in credit activities” in relation to a small business credit contract or a small business consumer lease unless they hold a permit.
However, the government has changed its tune after sustained criticism of the draft legislation, with Financial Services Minister Bill Shorten announcing the withdrawal of the draft legislation at a meeting with the Council of Small Business of Australia and the Commercial Asset Finance Brokers Association of Australia this week.
In a statement released yesterday, CAFBA said the government’s move to dump the draft legislation was a common sense result.
“CAFBA maintained staunch resistance to all aspects of the draft regulation and was unwilling to accept or compromise its position, as CAFBA fully understood the debilitating impact of the proposed regulation and the flow-on effects to every small business in Australia,”
CAFBA claimed its own self-regulation and high standards imposed upon members has removed the need for additional government regulation.
Shorten’s media spokesperson confirmed to SmartCompany this morning that the draft legislation had been abandoned but was unable to provide any further comment.
Opposition small business spokesperson Bruce Billson was critical of the draft legislation and says he is relieved the government had abandoned it as the legislation was ill-conceived from the beginning.
“Clearly this was an overreach and misguided frolic that was going to make access to small business finance more difficult and the only right thing for government to do is abandon it,” he says.
“The questions we have been asking they have not been able to answer; it was a solution looking for a problem and the government had been unable to point to a problem that required such intervention.”
CPA Australia also campaigned against the draft legislation and business policy adviser Gavan Ord says while he welcomes Minister Shorten stating the government places a low priority on the measure, “unfortunately the idea is not dead, buried and cremated.”
Ord is also critical of the way the government announced the withdrawal of the legislation.
“Minister Shorten should come clean on what he said in this private meeting as it is a matter of public interest,” he says.
“A statement that the small business credit legislation is a low priority affects many businesses, both large and small that were not represented at this private meeting.”
Ord says CPA Australia also questions why significant Treasury resources were committed to turning this policy idea into exposure draft legislation when there was no apparent problem and the issue was a low priority for government.
“At no time has Treasury been able to quantify the extent of any problem. This lack of evidence-based policy is a poor reflection on government and contrary to good regulatory design,” he says.
“There are many other policy announcements sitting within Treasury that we consider are of much higher priority that could have been progressed if it had the same resources devoted to it that this ‘low priority’ policy was given.”
Ord says if the government wants to reduce regulatory burden, it won’t be achieved by continually introducing new regulation.
“Regulation is not an end in itself,” he says.
“Ensuring the efficacy of introduced and proposed regulation is necessary to prevent regulation overload and the inefficiencies associated with it.”
Cara Waters is the editor of SmartCompany. Cara was previously a senior reporter at the Financial Times website FT Adviser in London and has also worked for The Sunday Times.
