Anne Webster (Mallee, National Party) Share this | Hansard source

I rise to support the Australian Business Growth Fund Bill 2019, which will authorise the Commonwealth government to participate in forming and acquiring shares or debentures of the Australian Business Growth Fund, appropriating—

(Quorum formed) With more than three million small businesses employing seven million Australians—and in Mallee, 15,000 small to medium businesses—the government recognises that small and medium enterprises are a key driver of activity and growth in the Australian economy. Through strategic support and capital investment, the Nationals and Liberals in government support the Australian BGF, which will help these businesses reach their growth potential.

The Business Growth Fund is an investment model where a company owned collectively by financial institutions provides long-term patient equity capital investment and business guidance to small and medium businesses. The model was initially developed in the United Kingdom and has also been adopted in Canada. Since the UK's fund was established in 2011, it has invested $2.7 billion in a range of sectors across the economy, including health care, energy, manufacturing and technology.

In separate reports released in 2018, the Reserve Bank of Australia and the Australian Small Business and Family Enterprise Ombudsman identified that a long-term patient equity market for small and medium enterprises is absent in Australia. Venture capital and private equity are not filling this shortage. The Australian Business Growth Fund is therefore designed to fill this gap in Australia's equity finance market by opening a new pathway to investment for small and medium enterprises. The $100 million investment by the Morrison-McCormack government is being met by $400 million from the four big banks—NAB, CBA, ANZ and Westpac. The Macquarie Group have also invested $20 million each. As it stands, the initial capacity of the fund could support up to 10 investments per year. Given that this fund is one of the best opportunities that Australian banks will ever have to undertake equity investments in small and medium enterprises, there will be scope to increase the fund's size to $1 billion and with a capacity to support around 30 investments per year. I am aware that the government is in active discussions with other financial institutions, including superannuation funds, and I look forward to learning of any new developments in this regard.

The fund will invest between $5 million to $15 million in small and medium enterprises that have a turnover of between $2 million and $100 million, where they can demonstrate three years of revenue growth and a clear vision to expand. By selecting high-performing businesses which meet these requirements, the risks sometimes associated with investing will be mitigated. I would ask the Treasurer to monitor the performance of the fund once it is established to ensure that the risk to taxpayers remains low and so that we may see strong returns on the government's investment.

Another feature of the fund circumvents a problem often found with private equity investment. Private equity is not always an attractive option for small and medium-sized enterprises, due to the loss of management control of the enterprise. The equity position taken by the Business Growth Fund will be a minority stake of up to 40 per cent of the company in which it invests, meaning the existing owner can retain a controlling interest in the business. The Business Growth Fund will aim to hold a diverse portfolio, investing in a range of small and medium-sized businesses that will benefit from an equity injection to support their growth plans. There are thousands of businesses across the country that would benefit from accessing this fund, including 15,000 in my electorate of Mallee.

The horticultural industry in the northern part of my electorate continues to grow. However, the industry faces extreme difficulty with the rising cost of conducting business, due to increased input costs. I recently spoke to a local farmer, Rocky Lamattina—a carrot farmer operating out of Wemen and Kaniva, in my electorate. Rocky has been in business for almost 30 years and runs the business with his sons. He employs over 80 people and maintains an integrated transport service to deliver his produce around the country. He exports his carrots internationally but says his focus is on a more reliable domestic market. Rocky, like so many other innovative and passionate producers across Mallee, has an eye to the future. He has recently invested in on-farm and transport infrastructure upgrades and has plans to grow further to secure the ongoing viability of his business.

However, Rocky is concerned that small and medium-sized operators will not survive against large corporate entities that are increasing in size. He says that accessing finance and investment is an ongoing challenge for growers in the industry, which is adding to this problem. Some growers don't want to lose management control over their business to secure private equity. Many, like Rocky, want to keep the business in the family to secure the livelihood of their family for generations to come. Other growers have reached a ceiling in their borrowing capacity, having pledged all their assets as collateral to secure finance. This can lead to businesses stagnating as plans to expand are put on hold until finance can be secured.

Mr Lamattina was pleased to hear that this government is addressing these issues through the Business Growth Fund. Patient or long-term equity investment through the fund will allow growers to retain control of their businesses, and the capital injection received will be an attractive alternative to incurring debt. The Business Growth Fund will offer choice and flexibility to small and medium-sized enterprises, and will foster growth and expansion in this competitive industry.

This is an important bill that, as a Nationals member, I am happy to support. It will deliver positive outcomes for many businesses in the Mallee and across the country. I thank and applaud the Treasurer for the introduction of this bill, and I encourage other banks and superannuation funds to seriously consider this fantastic opportunity to invest in the future of small and medium-sized enterprises and the ongoing strength of the Australian economy.

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