Australia records negative growth in loans to businesses
The study by international accounting and consultancy network, UHY, revealed that despite fairing well in the global financial crisis and having some of the world's strongest financial institutions, the value of loans to businesses in Australia decreased by six percent in the last three years.
The report examined Central Bank data on outstanding loans to businesses in 22 countries accross UHY's international network, including the G8, key emerging economies and the BRIC nations (Brazil, Russia, India and China).
According to the research, loans to businesses in Australia shrunk by a greater amount than many European countries with outstanding loans to Australian businesses down from US$690 billion in December 2008 to US $651 billion in 2011.
UHY Haines Norton Chairman, David Tomasi said while all BRIC nations experienced double-digit growth, the study revealed many different approaches to business lending amongst countries coping with the Eurozone crisis.
"Ireland has seen the largest reduction in the value of loans to businesses with outstanding loans to businesses collapsing by 42 percent since December 2008," Mr Tomasi said.
"But some heavily indebted countries - Italy and France - increases the value of loans to businesses, despite many of their anks being financially impaired by the Eurozone sovereign debt crisis.
"While our economy is performing well, relative to other industrialised countries, Australian banks have scaled back lending to small businesses causing some sectors of the economy such as the manufacturing sector - which is highly capital intensive - to be hard hit over the last few years.
"Lending to small businesses in particular, is a key barometer of economic prosperity as they are the engine of economic growth, and starved of credit it's difficult for them to expand and create jobs.
"Unlike larger corporates that can raise money through bonds or share issues, small businesses are hugely reliant on bank financing and the simple fact is that in a globalised world, if a small business cannot expand to fulfill an order, that order can be lost to better financed overseas competitors.
"Governments should reverse this negative trend in businesses funding by offering other forms of funding outside of the banking system such as tax breaks for private investors," Mr Tomasi Said.
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