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Tuesday, 5 July 2011
Page: 7689

Mr CRAIG KELLY (Hughes) (22:11): I rise tonight to raise an issue of great concern to the many small businesses not only in my electorate of Hughes but around the nation. It is an issue that threatens the very economic prosperity of our nation: the gouging of the small business sector by the big banks. Small businesses face three serious issues in connection with the banks today. The first is a reduction in funding available to small business, the second is the high rate of fees and charges the banks are levying on small business and the third is the excessive interest rates that small businesses are being slugged with.

Firstly, regarding the reduction in funding available to small businesses, since 2008 the major banks have reduced the amount of funds they loan to businesses by $56 billion. That is $56 billion worth of liquidity that is being sucked out of our economy, mainly for small and medium sized businesses. The removal of this liquidity is suppressing small business formation, it is suppressing innovation and it is killing off the expansion of existing businesses.

Secondly, on the issue of the fees and charges, the banks are milking from our small business sector, two weeks ago the RBA released data showing that between 2008 and 2010 the banks had increased fees they charge to businesses by a massive 25 per cent, an increase of over $1.3 billion. Does anyone know any other business that has been able to increase its charges by 25 per cent in the last two years? The Chief Executive of the Australian Chamber of Commerce and Industry, Peter Anderson, said of this increase:

This is proof the banks have been offsetting reductions in revenue from housing by slugging their business customers.

Thirdly, as for how the banks have been screwing small businesses on interest rate margins, the RBA published figures showing the interest rates the banks charge to both small businesses and large businesses. There should be very little difference in the rates the banks charge to a large businesses as compared to a small business when the loan is residentially secured. For the majority of the last 20 years there has been very little difference in these interest rates. But if you look at the RBA figures over the last several years, there has been a very disturbing blowout in the margin paid by small businesses. These RBA figures show that while large businesses are able to borrow from the banks at 1.95 per cent above the official cash rate—a margin that has remained steady for the last several years—in comparison, the margin paid by small businesses has grown and grown and grown and is now out to a scandalous 5.1 per cent above the official cash rate. This is the highest margin above the official cash rate that has ever been recorded by the RBA. This is evidence that the banks are gouging our small businesses on interest rates by around 300 basis points more than they would be paying in a competitive market. Doing some ballpark sums, small business are now paying approximately $9 billion extra annually in the interest they pay to our banking sector and an additional $1 billion in fees. That is more than $10 billion that the small business sector is paying to fatten the banks' profits—and this is at the very same time that the banks are reducing the finance that they loan to small business.

This should be a national scandal but we have not heard a peep from the Treasurer. That is because the Treasurer naively and foolishly allowed our banking sector to become even more dangerously concentrated when he approved the St George merger with Westpac, which saw St George being eliminated as an independent competitor in the market. On that note, I acknowledge in the gallery tonight Professor Frank Zumbo. Professor Zumbo was one of the very few commentators who warned that this is exactly what would happen following this merger, which should have been stopped.

The danger of all parasites is that if they suck the blood from the host they will eventually die themselves. Already, we have seen 300,000 jobs ripped out of the small business sector since Labor took office and since the banks have started this gouging of the small business sector. There is a real danger that if the banks are allowed to continue sucking the blood of the small business sector at their current rate they risk the small business sector collapsing. Who will the banks seek to gouge from then?