Treasurer Josh Frydenberg is planning to bypass the big banks to help small and medium sized businesses out. Picture: AAP/Stefan Postles
Treasurer Josh Frydenberg is planning to bypass the big banks to help small and medium sized businesses out. Picture: AAP/Stefan Postles

This government scheme is worse than WorkChoices

The last time a Coalition Government thought they could hand policy and commercial power to small business they ended up with WorkChoices more than a decade ago.

That ended well, didn't it?

It appears they are going to do it all over again, this time with a risky loan scheme for small and medium businesses who can't get money from regulated sources - think those big banks who have been pummelled for bad behaviour recently.

These businesses have to go to risky sources instead of paying a serious premium if they go to the major banks.

This is because the banks are behaving responsibly and prudentially - which is just what Royal Commissioner Ken Hayne was saying they should be doing.

Now the Government is going to soak up that risk, expose some of these SMEs to an even greater chance of failure and let the taxpayer pick up the tab to the tune of $2 billion.

No wonder The Australian's John Durie, one of the country's most trusted business commentators, said "the populist nonsense parading as economic policy from Treasurer Josh Frydenberg and Prime Minister Scott Morrison is reaching ludicrous levels".

Let's return to that deeply dark time when the WorkChoices policy did such electoral damage to the Liberals they haven't been willing to touch the "industrial relations reform" locked box ever since.

Handing policy and commercial power to small business rarely ends well. Picture: AAP/Joel Carrett
Handing policy and commercial power to small business rarely ends well. Picture: AAP/Joel Carrett

Then, many of the Coalition's smarter strategists said giving SMEs the power to "do over" workers on wages and conditions was electorally suicidal.

"These people are gouging a buck and an extra hour off their workers whenever they can," said one senior Brisbane lawyer and former Liberal grandee.

"You don't need to be very smart to work out the workers will revolt pretty quickly."

So it came to pass when Kevin Rudd swept to power and John Howard lost his own seat.

Just as WorkChoices was unwound by the Rudd government, this piece of heavy-handed market intervention will be unwound, although it's unlikely it will have done any actual damage by the time the election is held next late April or early May.

This is because it's not all that easy to put together a securisation market for SMEs in just six months.

More likely this is a thought bubble which the Government thought would burnish its small business credentials. This looks to have been successful with Small Business Ombudsman Kate Carnell leading the cheer squad following the proposal this past Wednesday.

Why wouldn't she? It was after all her idea.

The next in line to cheer were the non-bank lenders who see a chance to get access to government guaranteed loans. Christmas has come early for some and the enthusiasm from these fund managers should be enough to sound alarm bells in Treasury and the Reserve Bank.

Scott Morrison’s latest policy would give access to cheap money businesses that are too high risk to get bank loans. Picture: Justin Kennedy
Scott Morrison’s latest policy would give access to cheap money businesses that are too high risk to get bank loans. Picture: Justin Kennedy

The problem is those sober and clear headed analysts who've watched these markets for longer than Morrison or Frydenberg have been trainee treasurers say this is the last thing a sector like the SMEs need.

They have been denied access to loans because of the risk involved. If these businesses were on a sound enough footing they would get a loan today or yesterday.

Just on Thursday, RBA Governor Guy Debelle said there was no sign of a credit crunch in Australia while ministers, from Morrison and Frydenberg on down, says the economy has not been in such tip top shape for a decade.

Growth is the envy of other leaders, unemployment is at an historically low level and jobs growth is at a record.

What's to complain about except maybe some poorly managed small businesses want the rules bent in their favour so they can get cheap money.

If you weren't crying, you'd laugh.

Whichever way you cut this piece of pie in the sky, it looks like what it is: a government staring defeat in the face, panicking and willing to junk its own core beliefs to get traction for an idea which, in reality, is spiv policy for those who shouldn't be allowed to make us, the taxpayers, carry their unsustainable risk.

Dennis Atkins is The Courier-Mail's national affairs editor.



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