Luke Hartsuyker (Cowper, National Party, Deputy Manager of Opposition Business in the House) Share this | Hansard source

I welcome the opportunity to address this matter of public importance on the damaging impact of rising interest rates on small business. We saw highlighted in the global financial crisis the importance of capital flows to the operation of the world economy and we saw the impact of a near breakdown of the world banking sector and what that meant to companies and businesses large and small. Credit is the lifeblood of commerce on a global scale and at a local level. If corporations cannot refinance their debt obligations, then the result is catastrophic. If the local hardware store cannot refinance its working capital needs, the result for that small business is much the same, albeit on a smaller scale.

There are two important elements to finance: availability and price. Whilst the availability of finance has improved, the price of that finance to small business has been rising rapidly. We see this government, through its spending decisions, putting upward pressure on interest rates. We see this government, through its inability to manage its budget position, being active in the market, competing with small business, competing with home owners and competing with consumers for available finance resources. It is a simple equation of supply and demand. The government, through its failure to manage its finances, is driving up interest rates to a level higher than they need to be, to the detriment of small business, to the detriment of home owners and to the detriment of consumers. The Governor of the Reserve Bank of Australia put it quite clearly when he said:

... a relatively rapid fiscal consolidation would help keep official interest rates down, lower the government debt burden and reduce the potential for crowding out of private investment normally associated with high fiscal deficits and upward pressure on interest rates.

The crowding-out effect is alive and well with Labor. Labor has reverted to type. Debt and deficit are back, and it is small business that is paying the price. Small business is being crowded out of the finance market by the $850 million cost blowout on the Solar Homes and Communities Plan—a program that was supposed to cost $150 million. But what did it cost? Is the cost now sitting at $300 million? No, it is not. Is it $500 million? No, it is not. It is $1 billion. Small business is being crowded out by the $4 billion Energy Efficient Homes scheme—$4 billion on a scheme that is out of control, that is a haven for shonky operators and a scheme that kills people.

But wait, there’s more! There is the big daddy of them all—the yet unfunded National Broadband Network. The government will be out in the market again competing with small business for a miserly $43 billion. There is no business plan, no detailed feasibility study, no detailed costings on the rollout and no detailed revenue projections. It is all blue sky, and it will be small business, home owners and consumers who will be paying the price through increased interest rates as the government tries to finance a scheme for which there is no guaranteed demand.

No-one in the private sector could make a more modest scheme stack up, but this government is going to risk vast sums of taxpayers’ money without a business plan. In corporate Australia management would be sacked for such reckless behaviour, but for the Labor Party this is just par for the course. This government thinks it is okay to go out and borrow a large amount of money and in doing so put pressure on the funds for small business. We have a government that cannot control its own spending when reducing that spending would take pressure off interest rates and would provide better credit conditions for small business. The federal government is spending at a rate faster than any government in this nation’s history. This government makes Whitlam looks like a miser.

This government has its policy levers working in opposite directions. We have the government with its foot flat to the floor, with its spending out of control, and then we have the Reserve Bank governor, Glenn Stevens, throwing out the anchors. He is pulling on the handbrake, but Kevin and the boys have the accelerator flat to the floor. The losers out of all this are going to be small business, homeowners and consumers on the street. This government is working against those people and those small businesses, because it cannot manage money. It is working against small businesses by driving up interest rates due to their out-of-control spending.

Making matters worse, we have seen rising interest rates for small business over and above the increases in the cash rate. Back in January 2008, small businesses were paying a margin of about 3.1 per cent over the Reserve Bank cash rate. That has since blown out. Towards the end of last year, it was running at around 4.95 per cent above the cash rate. So small businesses are being hit twice: firstly, by the rise in the cash rate and, secondly, by the rise in margins. This is largely because government spending is out of control. These dual factors are putting a great onus on the government to act prudently and responsibly in the interests of small business and the community generally. But what is this government doing to help small business? Is it reining in spending to take pressure off interest rates? No, it is not. What the government is about to introduce to help small business is a great big new tax on everything. It will help small business in a number of ways. It will help small businesses by making their electricity more expensive, by making gas more expensive and by making every import that small business buys more expensive. It is a great big new tax that will cost jobs and drive small businesses to the wall.

What will this new tax do to inflation? The government’s own estimates say that the impact on inflation could be in the order of 1.5 per cent. And what will higher inflation do to interest rates? I think it will do only one thing; it will—surprise, surprise!—drive interest rates up. What will that do to small business? Once again, small business will be carrying the can for the incompetence of this government.

We have a Prime Minister who has made many promises to the Australian people. He was going to fix our hospitals by 30 June 2009. He was going to end the blame game with the states. He was going to save the whales. He was going to massively increase the number of nurses and he was going to put a computer on the desk of every child from year 9 up. And—perhaps the biggest promise of them all—he was going to be a fiscal conservative. A fiscal conservative does not rack up a debt of over $120 billion in just two years. A fiscal conservative does not waste money on programs that are so badly administered they do not achieve their objectives. A fiscal conservative does not compete with small business in finance markets to drive up the cost of their money.

What a fiscal conservative does is ensure that both arms of policy—monetary and fiscal—are working in the same direction. What a fiscal conservative does is ensure that the budget is under control. A fiscal conservative does not allow cost blow-outs of the magnitude that we are seeing from this government. We have the Prime Minister with the accelerator flat to the floor, we have the Reserve Bank governor pulling on the handbrake as hard as he can, and there is only one loser in this farcical situation. That loser is small business—small business people who work hard to make their businesses pay, who work hard to provide jobs in many regional communities and cities alike, who work hard to provide good services to their customers and who put their houses on the line to keep their businesses going. Yet we have this government driving up the cost of interest rates with a disregard for the interests of small business.

In this House on 3 February I asked the Minister for Small Business, Independent Contractors and the Service Economy a question about the impact of increased electricity prices on one particular small business. Basically, the small business minister mocked the question. He showed a complete disregard for the interests of that small business in exactly the same way this government shows disregard for small business in the way it is managing its budget and the economy. This government stands condemned for the impact it is having in the marketplace on interest rates. It is going to drive small businesses to the wall and, as interest rates continue to rise, the situation is only going to worsen.

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