Facebook Twitter: @NeosKosmos Instagram The biggest financial news for most Australians in the past two years has been the falling cash rate and decreasing mortgage rates. They’ve come down so far that you can get a variable rate mortgage in the low 5 per cent range and some lenders have 2 or 3-year fixed rate mortgages as low as 4.99 per cent. But it’s been more complex for small and medium sized enterprises (SMEs). The Reserve Bank, in a recent report, said fees paid in household lending fell in 2012 to $4.1 billion, while bank fees in business lending rose 7 per cent to $7.3 billion. In another survey, banking analysts East & Partners found that 43 per cent of the SMEs surveyed experienced rate rises on their secured loans in the last six months. Just 0.8 per cent had a rate reduction and 56.1 per cent had no change in their rates. The average rate rise was 5.3 per cent. I support the workings of a free market, but we should be concerned when official interest rates drop to historic lows while businesses have rate rises. It’s easy to make this a fight between big corporations and small business, or between big banks and the ‘mums and dads’. But the problem could go deeper. Australia has so many small and medium sized enterprises (SMEs) – 99.7 per cent of all businesses – that making them pay more for debt than other borrowers will eventually hit the general economy. If a business pays more for secured debt than the going rate, one response is to raise prices to cover costs. If this reaction gains momentum among businesses, inflation rises. A business may not be able to raise its prices but it can cut overheads such as reducing employees or cutting back hours and overtime. Given that small and medium sized businesses employ 70 per cent of the private sector work force, this affects employment. Also, small businesses constrained by the cost of debt find it harder to grow, and then we lose a vital offset to the oligopoly power of corporations – an offset that we all profit from in consumer choice, service and prices. Here’s another problem: when a small business has cut as much fat as it can in the enterprise, then the owners tighten their belts in the family home. It’s a double effect because they don’t just contract as producers – they contract as consumers. The worrying aspect of this is that while slightly more than half of the East & Partners respondents said their rates hadn’t moved for six months, the RBA has tracked rising bank fees for business lending. Which means net increases for business owners. Overriding this issue is the traditional reluctance of SME owners to change banks. So, are businesses being squeezed by their banks with nowhere else to go? Or, is this a time to attend to the basics of business performance and seek out truly competitive lenders? Which way will Australian business go? I would love to know what you think. Talk to me on Twitter. * Mark Bouris is the Executive Chairman of Yellow Brick Road, a financial services company offering home loans, financial planning, accounting & tax and insurance. Email Mark [email protected] with any queries you may have or check www.ybr.com.au for your nearest branch.
Go back to the e-newsletter >This autumn, the restaurant of Swissôtel Métropole in Geneva changed its culinary identity with a new double formula: Gusto Restaurant and Gusto Atelier. Starring: The art of Italian cooking ‘L’arte della cucina Italiana’.Situated on the first floor, Gusto Restaurant offers a modern and stylish Italian cuisine whilst preserving the personal and elegant service of a five star hotel. Atelier Gusto, situated on the ground floor, welcomes guests as of midday with a selection of small dishes, fresh & light. Towards the evening, an Italian aperitif is served in a ‘Dolce Vita’ ambiance.Philippe Pourias, the Executive Chef who arrived at the beginning of the year, finds his inspiration in a transalpine cuisine and redesigns the Italian gastronomy in a modern way to fit any dining need, from a formal business lunch to a romantic dinner for two. Gusto brings guests the authentic flavors and the simplicity of fine quality produce, recipes revisited from an intuitive artist and in respect of the traditions of his Italian kitchen team.“Chef Philippe seduced me by his dynamism, his talent and his open mind. Philippe shares the values of Swissôtel Métropole and his main priority is the quality of the produce. With him on board, a new chapter opens in the history of the hotel”, comments Stefan Winistoerfer, General Manager of the only 5-star hotel situated on the left bank of Geneva.The menu offers a selection of fish and meat rigorously selected in Switzerland and France, and the desserts will delight the sweetest of tooth’s. The signature dessert is the ‘Babà’ made with home made jam of local mirabelles.Go back to the e-newsletter >