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Wednesday, 8 May 1985
Page: 1521

Senator FOREMAN —My question is directed to the Minister for Industry, Technology and Commerce. Is it likely that the recent removal of interest rate controls on small loans will free up funds which can be used as working capital by the small business sector? Will this specific advantage to the small business sector also prove to be of general benefit to the Australian economy?

Senator BUTTON —The Government's decision in this matter was announced by the Treasurer last week at a Press conference and elaborated on in a joint Press statement by the Treasurer and me. The answer to Senator Foreman's question is that the Government believes that the action taken by the Government will improve significantly the availability of finance for small business. In that respect it is in accordance with a number of earlier decisions made by the Government to promote a more efficient and dynamic financial sector.

The decision to free up interest rates on loans under $100,000 is in line with the recommendation of the report of the Review of the Australian Financial System, the Martin Committee, and it has also been proposed in a report presented to the Government by the Metal Trades Industry Association and similar submissions made to the Government by the Council of Small Business Organisations of Australia-COSBOA, as it is called-and the Government's Small Business Council, which is representative of a wide range of State and small business organisation interests.

In taking the decision the Government accepted the generally agreed view that interest rate ceilings have had the effect of discouraging bank lending to small businesses and have limited the availability of finance to small business. The result has been that small business has either had to seek finance elsewhere, generally at a higher cost, or to make do without finance. Given the need for growth in the small business sector, which is certainly happening, and the encouragement of that growth, we believe that in a sector which provides some 15 per cent of private sector employment it is important that that expansion and growth develop into viable and effective business units.

The removal of the ceilings is expected to improve, as I indicated, the availability of bank finance to small businesses and should also encourage the introduction of more innovative loan packages and the provision of better advisory services to small business-things which have been generally lacking at a comparable degree of international efficiency in the Australian business sector as a whole. The decision follows a number of other Government decisions in relation to deregulation of the financial sector and the admission of foreign banks which, in the longer term, we believe will have complementary effects to those effects which I have claimed in answer to this question flowing from the decision which was announced last week in regard to small business.