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Encouraging investment (extract)

Australia’s company leaders have urged a regulatory reset and more tax breaks for capital spending to unlock the business investment recovery the Reserve Bank of Australia says is critical to sustaining the economic recovery from the pandemic.

RBA governor Philip Lowe referred to research done by the RBA that showed small business accounted for 32 percent of investment between 2002 and 2017, despite only accounting for 17 per cent of output.

Guy Saxelby, chief executive of Australian B2B fintech Earlytrade, said small businesses’ ability to borrow at lower rates for investment had benefited less from record-low rates than bigger business.

Mr Saxelby said that despite record-low rates decreasing the cost-of-capital for large businesses by 41.8 percent between July 2019 and December 2020, lenders’ rates available to small businesses decreased only 16.1 percent, less than half the improvement.

“Our analysis shows large businesses were able to effectively increase their leverage positions through the pandemic year whereas small businesses were not, barely increasing borrowing amounts by 0.4 percent.”

Read the full article on by Matthew Cranston, Economics correspondent for the Australian Financial Review


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