Small business should steel themselves for new financial pressures in the wake of the global financial crisis, including a squeeze on credit and higher taxes, according to Shadow Treasurer Joe Hockey.
Speaking at a business luncheon in Melbourne on October 14, Minister Hockey said he believed the Government’s stimulus package and rising interest rates would impact negatively on millions of enterprises.
“I believe the biggest challenge going forward is the cost of funds, particularly for small business,” he said, adding small to medium sized businesses were unable to raise money via the stock market.
“Their cost of funds is going to increase. They didn’t really get any significant benefit out of the decrease of the cash rate,” he said, adding “they will feel every movement up in interest.”.
The Reserve Bank raised its official cash rate by 25 basis points to 3.25 per cent in early October, triggering a potential interest rate rising cycle.
“Banks are going to take a much harder line on capital requirements, on credit requirements to small and medium-sized enterprises.”
“[…] let me tell you if small business starts to feel the pain of unaffordable credit or inaccessible credit, everyone will start to feel it in the cities.”
While Australia had done “very well facing the global financial crisis”, Minister Hockey said a budget deficit of $27 billion would have major consequences.
He criticised the size of the Government’s $42 billion stimulus package, claiming it was “wrong” to spend $16 billion on building new school halls.
It was likely the Government would have no choice but to raise taxes to recoup costs, creating an added burden for consumers and businesses, he said.