The Productivity Commission has floated government-backed credit guarantees to improve finance access for businesses struggling to secure loans.
The Productivity Commission (PC), Australia’s independent economic advisory body, has floated government-backed credit guarantees to improve finance access for commercially viable businesses struggling to secure loans.
Its interim report, Unlocking business dynamism: removing barriers to entry, growth and exit, released on 5 November, called for investigation of a guarantee scheme alongside data-sharing reforms to streamline credit assessments.
The commission identified funding difficulties particularly among young firms, businesses with limited collateral, and those led by women or Aboriginal and Torres Strait Islander people.
Credit guarantees enter the financing debate
A credit guarantee scheme would see the government cover an agreed share of a lender’s losses if a borrower defaults, sharing lending risk rather than necessarily providing finance directly.
Such arrangements commonly target SMEs, start-ups and underserved borrowers, with the report pointing to growing evidence that well-designed schemes could improve debt access for viable businesses otherwise unable to obtain funding.
However, the proposal remains under investigation, and the PC is seeking evidence on which interventions address genuine financing barriers, whether benefits outweigh costs, and which approaches suit different businesses.
Its examination extends beyond guarantees to direct government finance, intermediary funding arrangements, investment-readiness support, broader recognition of business assets as collateral, and changes to lending and investment assessments.
The commission also stopped short of advocating a broader relaxation of prudential safeguards, explaining that its assessment had not established grounds to shift the existing policy balance.
“We also examined whether prudential settings unnecessarily constrain business lending, but do not currently see a case for changing the balance between access to finance and financial stability,” the report said.
Data reforms target lending bottlenecks
Alongside possible risk-sharing measures, the commission proposed changes to the Consumer Data Right (CDR) to make business information easier to obtain and share.
It supported continued movement towards “data access as default”, enabling businesses to share information held about them by banks and government agencies.
“These reforms would make credit assessments faster and help businesses access capital more quickly,” the report said.
One proposed change would give individuals already authorised on an online business account equivalent authority to consent to CDR data sharing.
The commission also recommended bringing additional government-held information, including ASIC and Australian Business Register data, into the framework.
It said sharing that information through the CDR would “help further streamline the processing of lending applications.”
On third-party disclosures, it recommended ensuring customers could share their information with any accredited third party they chose.
Start-up investment faces structural changes
The commission also examined equity funding, identifying “avoidable distortions” in venture capital programs that could restrict investment in start-ups.
The PC said its proposed changes would provide greater flexibility in investment structures and broaden participation by experienced investors.
“This includes allowing venture capital funds to make investments using existing government-registered limited partnerships outside the venture capital tax concession rules without establishing separate investment vehicles, and broadening pathways for experienced investors to participate in early-stage funding,” the report said.
The commission is also seeking feedback on whether commercially viable start-ups remain underserved by existing venture capital providers and whether additional intervention is justified.
Cutting through overlapping business obligations
While recognising regulation’s economic and social purposes, it warned that overlapping requirements could create “regulatory thickets”, making compliance unnecessarily difficult.
“Businesses can struggle to identify which obligations apply to them, where to find authoritative guidance and in what order regulatory requirements should be addressed,” the report said.
“Guidance is frequently scattered across agencies, levels of government and online portals, and businesses looking to enter a market may need to interact with multiple regulators or government departments before they can begin operating.”
The commission called for clearer regulatory guidance, delivered where businesses needed it, alongside measures reducing duplicated reporting.
“Guidance should be easier to find and navigate, available at key business touchpoints and should leverage business software tools and AI applications. Governments should also maintain a strong focus on tell-us-once reforms, so businesses avoid the unnecessary cost of providing the same information to government multiple times,” the PC said.
Inquiry exclusions draw industry criticism
The inquiry’s boundaries have also attracted criticism, with its government-set terms excluding tax settings, workplace relations and merger frameworks.
Australian Chamber of Commerce and Industry chief executive Andrew McKellar argued that the exclusions prevented a comprehensive assessment.
He likened examining business dynamism without tax and workplace relations to “a doctor being blocked from checking the heart or lungs”.
Submissions close on 11 December, public hearings are scheduled for 8–12 February 2027, and the final report is due to the government in May 2027.
[Related: Covered bond cap changes hailed as competitive pricing boost]
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