World Video | Defence | Foreign Affairs | Natural Events | Trade | NZ in World News | NZ National News Video | NZ Regional News | Search

 


RBA rate cut welcomed by business lender

RBA rate cut welcomed by business lender

Sydney, December 4, 2012 - The Reserve Bank of Australia (RBA)’s official cut in interest rates will help to underpin greater levels of business investment at a time when the economy needs more activity outside the mining sector, according to Bibby Financial Services Australia.

The RBA today dropped official interest rates to 3.0 per cent from 3.25 per cent. That decision came after official data revealed on Friday a drop in business credit of 0.3 per cent, reversing a rise of 0.3 per cent in September, leaving business credit broadly unchanged since June. This compares to a modest recovery in borrowing by households.

Gary Green, Director of Bibby Financial Services Australia, said borrowing activity by businesses, particularly small and medium-sized businesses (SMEs), has been held back by uncertain economic conditions and a lack of confidence about the future.

“A further cut in official interest rates will help boost business confidence and prompt greater levels of investment in all sectors of the economy, which the Australian economy needs,” Mr Green said.

“The RBA’s credit data suggests that the business sector is struggling and that borrowing costs remain too high. Our own research shows that SMEs fear their customers or suppliers could become insolvent in this uncertain economic environment, as revealed by our own Bibby Barometer Small Business Survey.

“With some SMEs struggling to meet make ends meet in this sluggish economic environment, our recommendation to all SMEs is to increase their focus on cash flow and working capital, particularly with the Christmas holidays almost upon us.”

While business credit for large businesses has recovered modestly since the GFC, business credit growth for small business has been stagnant. The outstanding value of bank loans that are larger than $2 million increased by 10.5 per cent from June 2011 to July 2012 after declining over the previous 2.5 years[1]. However, the outstanding value of loans valued at less than $2 million has remained largely unchanged since 2009.

Mr Green said to smooth out cash flows, SMEs have been taking advantage of debtor financing in recent times.

Over the year to September 2012, there was a 13.9 per cent rise in the level of debtor finance or factoring, while the number of businesses seeking such finance had grown by 3.8 per cent, according to data from the Institute of Factors and Discounters (IFD). In NSW alone, debtor financing jumped by 48.2 per cent from a year earlier.

“This indicates debtor financing is providing new levels of support to Australian businesses,” Mr Green said.

He also noted the increased average size of debtor finance facilities evident from the IFD statistics, suggesting that debtor finance is gaining acceptance amongst increasingly larger SMEs.

Debtor finance allows a business to quickly convert its unpaid invoices into cash, and is in effect a line of credit extended against the business' receivables, which is often one of the largest current assets on the balance sheet.


[1] RBA September 2012 Financial Stability Review.

ENDS

© Scoop Media

 
 
 
 
 
World Headlines

 

Ban Condemns Killing Of Former Lesotho Military Commander

United Nations Secretary-General today condemned the killing of Lt. Gen. Maaparankoe Mahao, former Commander of the Lesotho Defence Force, on 25 June, near Maseru. More>>

Ban Welcomes US Supreme Court Ruling On Same-Sex Marriage

Ban welcomes US Supreme Court ruling guaranteeing right to same-sex marriage Lesbian, Gay, Bisexual, Transgender and Intersex (LGBTI) pride march. Photo: OHCHR/Joseph Smida More>>

UN Agency Welcomes EU Measures On Refugee Arrivals

Afghan refugees in front of the abandoned hotel Captain Elias on Kos Island, Greece, where hundreds of refugees and migrants are waiting for their registration. Photo: UNHCR/J. Akkash More>>

Increase In Voluntary Blood Donors Can Save Millions Of Lives

Increase in voluntary blood donors can save millions of lives, UN health agency says on World Day More>>

Kenya: Funding Shortage Means Food Cut To 500,000 Refugees

Funding shortage forces UN agency to temporarily cut food aid to 500,000 refugees in Kenya More>>

UN Launches Education Appeal In Fight Against Child Labour

12 June 2015 – The United Nations has announced it is marking the 2015 edition of the World Day Against Child Labour with a call for the international community to invest in quality education as a key step in the fight against child employment ... More>>

Pope Francis & UN Agency On Sustainability Of Agriculture

Pope Francis (centre) with delegates to the 39th FAO Conference during a special audience at the Vatican. Photo: FAO More>>

South Sudan: Call For De-Escalation Of In-Country Conflict

Women and children have suffered devastating attacks in South Sudan’s Unity State. Photo: UNICEF/South Sudan/Sebastian Rich More>>

Burundi: Emergency Support To Refugees Fleeing Burundi Crisis

Burundians fleeing pre-election violence rest on the shores of Lake Tanganyika in the Democratic Republic of Congo after a gruelling 22-hour boat journey. More than 100,000 Burundians have fled over the past month, arriving in Tanzania, Rwanda and ... More>>

Afghanistan: Commitment To Advancing Women's Rights

While the outgoing senior United Nations rights official in Afghanistan said she expected the human rights advances made “will be sustained, will not be rolled back, and will not be sacrificed,” she lamented the high level of violence against ... More>>

Get More From Scoop

 
 
 
 
 
World
Search Scoop  
 
 
Powered by Vodafone
NZ independent news