Business lending volumes bounce

Treasurer Frydenberg noted that among the key objectives of the government’s response plan has been to maintain the flow of credit in the economy, through both a $125-billion program of loans and guarantees.

“Credit is the lifeblood of an economy. Had it stopped flowing, it would have triggered an even more severe economic shock than the one we are experiencing,” he said.

The program has included the rollout of the second phase of the First Home Loan Deposit Scheme, the SME Guarantee Scheme, and the Reserve Bank of Australia’s term funding facility.

According to Mr Frydenberg, the SME Guarantee Scheme has helped facilitate the provision of approximately 16,000 loans worth $1.6 billion, adding that the government will extend and enhance the scheme to support a business-led recovery.

Mr Frydenberg also revealed that in the month of June, the four major banks increased their total lending to SMEs by over $2.2 billion.

“Taken together, our policy measures have been targeted, temporary and scalable,” he said.

“They have been effective and achieved what they were designed to do, kept businesses afloat, kept people in jobs, maintained financial system stability and the flow of credit.”

According to the Australian Banking Association (ABA), banks have collectively issued more than $258 billion in small-business loans.

ABA CEO Anna Bligh has claimed that the figures reflect an improvement in confidence in the economy among small business.  

“These figures show there are some green shoots emerging in our economy and that’s a positive sign,” she said.

“There’s a very long road, and plenty of hurdles to clear, but it’s encouraging to see small, medium family businesses slowly regaining some confidence.”

Ms Bligh added that banks were committed to cooperating with government to support a broader recovery.

“Banks are already showing they are prepared to lend to small and medium enterprises so they can get back on their feet,” Ms Bligh said.

“Our banks understand the key role they play in reopening our economy.”

The latest figures from the ABA also revealed that over 900,000 borrowers have deferred repayments on their loans since the onset of the COVID-19 crisis.

This equate to more than $250 billion in loans.

The ABA recently announced that banks would extend repayment holidays for up to four months for distressed borrowers unable to service their loan upon the expiry of their initial deferral periods (most of which expire in September).  

[Related: Treasurer details severity of COVID headwinds]