Banks, super funds reject PM's $1b business growth fund

The growth fund would allow super funds and banks to contribute to a national funds pool which would then take an equity investment in small businesses, taking a long-term outlook on possible returns.

The fund would be modelled on a UK scheme which has invested more than $2.5 billion in British companies.

However, ANZ, Westpac, Macquarie Bank and the superannuation funds have declined to participate, casting doubt on the government’s forecast that the fund will grow to $1 billion.

Small business and family enterprise ombudsman Kate Carnell is disappointed some of the major banks and super funds will not participate in the fund. Credit:Louie Douvis

Really disappointing

Small business and family enterprise ombudsman Kate Carnell said the absence of these banks and the superannuation funds was “really disappointing”.

“We believe they should really have another look,  this is a very cost-effective and appropriate way for big super funds and banks to invest in small businesses in a way that is pretty low risk,” she said.

The government first flagged the fund in November last year and held a round table in December at which the Australian Prudential Regulation Authority signalled its support for the fund.

The round table was attended by Westpac and AustralianSuper but both the bank and the superannuation fund have failed to pledge funding.

Treasurer Josh Frydenberg and RBA Governor Dr Philip Lowe during a the Business Growth Fund round table at Parliament House in Canberra in December. Credit:Alex Ellinghausen

Ms Carnell said while the lack of support is disappointing she does not think it will hamper the Business Growth Fund.

“I would be surprised if a big super fund didn’t get on board, they have been criticised heavily for not investing in small businesses,” she said. “Investing as heavily as they do offshore and not in Australia is not a good look.”

Investing as heavily as they do offshore and not in Australia is not a good look.

Kate Carnell

A spokesperson for Westpac said the bank would look at the government’s policy, while a spokesperson for ANZ said the bank declined to participate given its focus is on providing small business customers with access to banking products, such as lending, rather than providing equity capital.

AustralianSuper spokesman Stephen McMahon said representatives of the super fund had attended meetings relating to the fund and continued to “closely monitor” its development.

“We would like to see more detail around the governance and investment decision-making process before making any final decision,” he said.

Macquarie failed to respond to a request for comment by deadline.

Election impact

Ms Carnell said she hoped the fund would go ahead whichever party won the upcoming election.

“We have briefed Labor on this at length and they have shown real interest so I hope there is support from all sides of the agenda,” she said.

Chris Bowen declined to comment on whether Labor would back the fund and instead highlighted Labor’s proposed Australian Investment Guarantee – targeted tax relief for businesses that invest in Australia and Australians.

“The Liberals are playing catch up when it comes to supporting businesses that want to invest and grow, and still haven’t matched our permanent AIG which supports all businesses investing in Australia,” he said.

Don’t leave startups behind

Startup investors and business leaders have warned the fund needs to consider its size and focus to ensure tech companies are also given opportunities for guidance and growth.

“Dedicating $100 million to the Australian version is not nearly enough, but it’s a step in the right direction. Australia needs significantly more investment in scale-ups that create jobs, not just small business, and those scale-ups are often technology companies that want smart money,” said chief revenue officer of innovation group Singularity University, Jeremy Liddle.

Chris Hare is the co-founder of QHR HR solutions.

Business founders Chris Hare and Alicia Roach have invested close to seven figures in their HR analytics startup QHR, having found private equity and bank funding was not the right fit for their $2 million business.

Loading

They recently increased investment to develop a software product and ended up reducing their headcount by one third to manage costs.

“If this program existed yesterday, it would be great, for us it would manifest in things like being able to bring more employees on,” Mr Hare said.