Is there really a lack of small business lending in Australia? The RBA thinks so.

22 Apr, 2014 | Articles

The people at the Reserve Bank of Australia are a pretty conservative lot. After all their job is to manage the stability of the currency. They like order, no surprises and a calm and rationale approach.

They are also acutely aware of what their job is and isnt. Their job is not to comment on politics, regulations or really anything outside of their narrow remit except for when these factors have a meaningful impact on currency or price stability. For these reasons, when the Reserve Bank comes out and “suggests” the Federal government does something, we should all listen very carefully.

Well, they just made a pretty significant suggestion and its fallen on deaf ears.

The suggestion sounds dull enough – they have recommended that the inquiry into the financial system focus on small business lending.

But lets break that down for a second. There is an inquiry into the entire Australian financial system that is being dubbed a one in a 20 year objective review of the entire financial system. And the RBA is saying the FOCUS of the inquiry should be on small business lending. Not on mortgages, payments, financial advice, credit cards, student loans, BUT, small business lending.

That is significant and whilst the RBA has not provided any further commentary as to why the inqury should focus on small business lending, the only logical answer can be that they see the same lack of competition which leads to lack of supply of business credit as we do.

We agree wholeheartedly – review small business lending and get the banks lending to the most important segment of the economy.