This is the second instalment of a four-part series in which Neil Slonim, an independent SME finance advocate from theBankDoctor.org, takes a closer look at which of the major parties are better for small business.
In government both parties have adopted the mantra that what is good for the economy will be good for small business. This was particularly evident in the two major financial crises in the past 15 years being the Global Financial Crisis of 2008 during Kevin Rudd’s first prime ministership, and COVID-19 in 2020 under the prime ministership of Scott Morrison.
In both cases, the government of the day’s primary economic weapon was monetary policy. Huge sums of money were spent on keeping the economy afloat and on each occasion there were numerous of examples where substantial funds were wasted.
In Rudd’s case two memorable ones were the home insulation scheme and the schools stimulus program. Malcolm Turnbull, the opposition leader at the time, claimed: “Labor just does not understand the concept of money” and that “the coalition is committed to protecting Australia’s future by stopping Labor’s reckless spending and reducing government waste”.
Turnbull’s successor Scott Morrison still persists with the Liberal dogma of “Labor can’t manage money”.
Fast forward to the COVID-19 crisis of 2020 when the Morrison government injected more than $90 billion into the economy via JobKeeper, $38 billion of which the Parliamentary Budget Office found went to companies, small and large, where turnover did not fall below the thresholds. And then many of these big corporate beneficiaries resisted calls to return taxpayer funds and instead passed on these ill-gotten gains to shareholders and executives.
During the pandemic, the Morrison government provided $34 billion in grants via the small business Cash Flow Boost Scheme.
It is not possible to say how many of the 800,000 small business recipients were truly worthy of receiving these grants but the idea, like JobKeeper, was to quickly throw a whole bunch of money at business owners and workers to avert an economic catastrophe.
In response to the economic impact of COVID-19, the Morrison government sought to shore up the strength of the banks, improve liquidity and ensure small businesses were able to access funds. In March 2020, it introduced the Term Funding Facility (TFF) which saw the banks draw down $188 billion at the dirt cheap rate of 0.25% per annum, and subsequently 0.10% per annum.
The TFF certainly was arguably more helpful to the banks than their small business customers. It certainly did not result in any increased lending to small businesses relative to medium and larger businesses.
Another mechanism the government used to boost access to credit by small businesses was the SME Guarantee Scheme, which had three iterations but ultimately only $7 billion of the $40 billion allocated found its way into the hands of small businesses, notwithstanding the government was prepared to wear up to 80% of the risk and provided the funds to the banks at concessional rates.
In establishing these schemes ostensibly to provide small businesses with improved access to finance, the Coalition has enabled banks to shore up their balance sheets and restore profitability to pre-pandemic levels.
Having said that, in recent years in particular, the Coalition government has introduced a number of initiatives that have been helpful to small businesses including:
The nature of being in opposition is such that outside of an election campaign no-one really takes much notice of the alternative government simply because it lacks the power to enact any plans.
Certainly Labor was prominent in its efforts to force the establishment of the Royal Commission into the banks, which the treasurer of the time Scott Morrison described as “a stunt”, “hot air” and a move that would “undermine confidence in the financial system”.
Whether Labor’s stance was motivated by a genuine desire to ensure bank customers were treated better or for other purposes is moot, but it would be fair to conclude that the Coalition is substantially more favourably disposed to the banks than Labor.
It is telling that after they lost office all four of the former prime ministers since 2010, Julia Gillard, Kevin Rudd, Tony Abbott and Malcolm Turnbull had a lot to say about their achievements but not one of them ever said anything like “I was proud of what we did for small businesses”.
In summary, because the Coalition has been in government for nine years now, it has had the opportunity to support the small business sector and while it has instituted a number of positive initiatives, it could have done much more.
In part three, to be published tomorrow, we will look forward to “what are small business owners likely to get from the next government and is this what they really need?”, before part four concludes with: “Which is the best party for small business or is it time to switch to the minor parties or the independents?”
Neil Slonim is an independent SME finance advocate from theBankDoctor.org, which is a not-for-profit small business advocate and commentator. This article was first published in his free newsletter, which you can sign up to receive here.
