Portfolio Media

The chickens of Labor’s wild spend-up coming home to roost:

16 October 2009

The hangover from the Rudd Labor Government’s wild spending party is about to hit small business with a vengeance, says Shadow Small Business Minister Steven Ciobo.

Mr Ciobo’s comments come in the wake of an upgrade in the probability of an interest rate rise next month and more rises in 2010, following comments yesterday by Reserve Bank governor Glenn Stevens.

Mr Ciobo said the news has come as a particularly cruel blow to small business which has been the whipping boy of the major banks under the period of lower interest rates.

“Small businesses have never received the full benefits of lower interest rates under the Rudd Labor Government and now they’re about to be whacked with interest rate increases, the undeniable result of Labor’s debt and deficits,” Mr Ciobo said.

“The Coalition has been warning for months Labor’s sledgehammer-to-crack-a-nut approach to economic stimulus would lead to higher interest rates and higher taxes. Now here we go,” Mr Ciobo said.

The margin between residential-secured loans for small business and regular mortgages has ballooned from 0.20 percentage points when Labor was elected, to 1.30 percentage points, according to latest RBA figures.

Mr Ciobo said Glenn Stevens himself earlier this year conceded small businesses had fared particularly badly from the most recent round of interest rate cuts.

Mr Stevens said in February in testimony to the House of Representatives Economics Committee: “In the case of business loan rates, they (the banks) have not brought those down as much and frankly they have not been under quite the same public pressure on those rates as they have been on housing rates.”

Mr Ciobo said Labor had failed to put enough pressure on the banks to pass on rate cuts to small business, and with many now using credit cards and overdrafts to finance their businesses, they’ll be hit particularly hard by the impending rises.

“Spending is in Labor’s DNA and it’s the nation’s 2.4 million small businesses who will pay the price.

“Labor’s massive debt can only lead to more interest rate hikes and higher taxes. Labor must choose between lower interest rates that will support small businesses or spending more borrowed money to promote themselves.”