More Money for Small Business

Banking Competition and Small Business

And with household incomes and small business profits still recovering, I'm as focused as ever on supporting smaller lenders to ensure the continued flow of credit at competitive interest rates. Competition in the mortgage market continues to be supported by our decision to direct the Australian Office of Financial Management (AOFM) to invest $16 billion in Triple-A rated residential mortgage-backed securities (RMBS). Sherman Ma, CEO of smaller lender Liberty Financial, recently wrote to me saying that "the RMBS purchase program … played a key role in stabilising … securitisation markets. As a result, Liberty Financial has been able to provide much needed competition in the bank-dominated mortgage market through companies such as BEAT Home Loans. BEAT Home Loans guarantees to beat the standard variable rate of any major bank, which has been possible due to the improved market conditions underpinned by the efforts of the AOFM."

Of course I also understand how tough conditions have been for small business. That's why I included the extra objective of supporting lending to small businesses in the Government's second $8 billion investment in the RMBS market. As a result, lenders who seek support under the RMBS program are asked to outline how active they are in lending to small business and to allocate part of the proceeds to these loans. It's expected that nearly 10 per cent of the funds raised by lenders so far during this second investment phase will be lent to small business.

Wayne Swan
Treasurer of Australia
Sunday 18 April 2010