Our new risk rating

Given that the Australian Government doesn’t want to intervene directly on the issue of small business funding – for example, by establishing a SME-focussed bank and providing special guarantees for SME loans – then our best hope for an end to the funding squeeze is increased competition in the banking sector.

For that to happen we need to see foreign banks re-enter the Australian market and battle our big four for a slice of the SME lending pie.

While this looks likely to take some time – the big banks of Europe and North American are hardly a picture of ruddy health right now – the arrival of these overseas banks looks like being delayed by the Government’s decision to introduce a Resources Super Profits Tax.

In an interview with Business Spectator today, David Murray, the former chief of the Commonwealth Bank and now the chairman of Australia’s Future Fund, has warned Australia’s sovereign risk rating among foreign investors is being reconsidered as a result of the tax.

As we pointed out yesterday, the huge level of debt held by governments around the world is forcing Governments to look at ways to get more tax revenue out of their big industries.

That’s got investors around the world worried, Murray told Business Spectator.

“Sovereign risk is coming back into the picture as a larger issue because of the massive issuance of sovereign debt around the world post-crisis – not just post, but before… during and after,” he said.

“And in addition to that, our starting point is as a country that needs foreign investment and, notwithstanding all of our success, we still have a… chronic current account deficit, we’re still spending on welfare and we still have a current account deficit. That would be, for future generations, a seriously bad outcome.”

Spot on, Mr Murray. Anything that threatens foreign investment in Australia isn’t just bad news for the mining sector – it’s a concern for all businesses that need funds to grow, and who want to see a more competitive finance sector.

We need this sorted out before the uncertainty gets much bigger.