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

 

At The UN: Paris Climate Agreement Moves Closer To Entry Into Force

The Paris Agreement on climate change moved closer toward entering into force in 2016 as 31 more countries joined the agreement today at a special event hosted by United Nations Secretary-General Ban Ki-moon. More>>

ALSO:

ALSO:

Gordon Campbell: On The End Game In Spain (And Other World News)

The coverage of international news seems almost entirely dependent on a random selection of whatever some overseas news agency happens to be carrying overnight... Here are a few interesting international stories that have largely flown beneath the radar this past week. More>>

Amnesty/Human Rights Watch: Appalling Abuse, Neglect Of Refugees On Nauru

Refugees and asylum seekers on Nauru, most of whom have been held there for three years, routinely face neglect by health workers and other service providers who have been hired by the Australian government, as well as frequent unpunished assaults by local Nauruans. More>>

ALSO:

Other Australian Detention

Gordon Campbell: On The Censorship Havoc In South Africa’s State Broadcaster

Demands have included an order to staff that there should be no further negative news about the country’s President Jacob Zuma, and SABC camera operators responsible for choosing camera angles that have allegedly made the President ‘look shorter’ were to be retrained... More>>

ALSO:

Gordon Campbell: On A Bad Week For Malcolm Turnbull, And The Queen

Malcolm Turnbull’s immediate goal – mere survival – is still within his grasp... In every other respect though, this election has been a total disaster for the Liberals. More>>

ALSO:

Gordon Campbell: On Bidding Bye Bye To Boris

Boris Johnson’s exit from the contest for Conservative Party leadership supports the conspiracy theory that he never really expected the “Leave” option to win the referendum – and he has no intention now of picking up the poisoned chalice that managing the outcome will entail... More>>

ALSO:

Get More From Scoop

 
 
 
 
 
World
Search Scoop  
 
 
Powered by Vodafone
NZ independent news