Much of the
discussion about regulation in 2014 in Australia centres around the
banks, and in particular the Big Four.
With Basel III on the horizon, and the local advent of the new
Systemically Important Financial Institution status, the focus is on
the extent to which the new capital requirements will constrain the
banks from delivering special dividends to shareholders, and – perhaps
more importantly – lending to a business community which is showing,
at last, some new appetite for credit.
Stumping up another $8 billion in capital to satisfy the regulators
will have an inevitable impact on the Big Four, and of course the
wider economy.
Banks, of course, are not the only ones impacted by regulation in
2014. The new requirement for businesses with over $20 million annual
turnover is to move to lodging monthly, rather than quarterly,
Business Activity Statements (BAS).
For a Government whose public pronouncements are all about cutting red
tape for business, this might seem a curious development, and hardly a
reform.
So how is business feeling about the increased frequency of BAS
reporting? Is it a simple process, like spitting out another invoice,
or will it have a significant impact on cash flow and all important
sentiment?
In March, East & Partners conducted objective research on monthly BAS
reporting through our Business Banking Index research program.
A total of 445 Australian businesses were interviewed: 234 corporate
businesses turning over between $20 and $725 million a year, and 211
Institutional businesses turning over $725 million or more. |
The response was
overwhelmingly negative, with a total of 63.6 percent declaring
monthly reporting would have a negative effect on their business.
Only
4.3 percent said it would have a positive effect, 28.5 percent said No
Effect, while 3.6 percent had No View/Opinion.
The sentiment was significantly more negative among larger businesses,
with 70.6 percent of Institutional businesses and 57.3 percent of
Corporates responding negatively to monthly reporting.
All this adds to a situation where regulation, from two directions,
could stifle business growth. Regulation could constrain banks, and
limit their appetite and ability to lend, while business sentiment
itself is more uncertain.
In another East research program, our Spotlight series, 1,011
Australian businesses were asked what would get them to invest in
their business over 2014.
While 21 percent did not need any additional incentive, and better
debt costs and availability are also important, a significant 11.4
percent of businesses cited less government regulation and tax relief
as a factor which would encourage greater investment.
Regulation exists to make the world a safer place, both for banks and
businesses but ultimately the wider economy.
Given the acknowledged stability of Australia’s banking system
already, it is worth questioning whether the wave of new regulations
are not a safety net for a vulnerable system, but a brake on an
economy which wants to grow more if only it was not constrained by the
regulatory burden. |
