Inquiry's interim report supports more investment into SMEs

Tuesday 15 July 2014

The release of the Financial System Inquiry's interim report today has been welcomed by the Australian Private Equity & Venture Capital Association Limited (AVCAL).

"The Inquiry has clearly identified that small and medium sized businesses in Australia need better access to growth capital funding, in particular venture capital and private equity," said AVCAL’s Chief Executive, Yasser El-Ansary.

The report points out that venture capital and private equity funds tend to finance more innovative and high-growth firms in our economy, and that "these firms are drivers of long-term productivity growth".

However, the report also noted that Australia’s venture capital and private equity markets are small, and there are barriers to generating significant investor interest.

AVCAL believes that Australian private equity and venture capital funds can play a more significant role in supporting investment into an additional 30,000 Australian businesses if current roadblocks to more efficient fundraising and investing are addressed as part of this review.

"Australian venture capital funds are currently invested in around only 200 startups and early stage ventures. Private equity funds are currently invested in fewer than 350 businesses in Australia. This means they presently have funding capacity to back less than two percent of the total investable pool of up to 30,000 businesses,” said Mr El-Ansary.

"There is substantial scope for the industry to play a greater role in building Australian businesses and creating new employment opportunities – especially in new high innovation industries of the future – if the Inquiry makes recommendations for changes to some existing policies and regulations later in the year."

“The Inquiry appears to be agreeing with our view that reform of the venture capital limited partnership tax rules is one very simple way that the Government could help drive greater private sector investment into Australian businesses,” said Mr El-Ansary.

In its submissions to the Inquiry, AVCAL recommended that the MySuper reforms introduced in the last few years should be reviewed in order to assess whether or not they were meeting their original policy objectives. “It’s positive that the Inquiry seems to be heading towards a similar conclusion,” said Mr El-Ansary.

Over coming months AVCAL will continue to participate in the next phases of the consultation process as part of this review.

View full copies of AVCAL’s submissions to the Inquiry:

Financial System Inquiry submission, March 2014

Financial System Inquiry supplementary submission, April 2014

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Gabriel McDowell
Res Publica
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