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Australian small businesses are saving billions due to “record low” interest rates, according to the Australian Bankers’ Association.
Analysing data from the Reserve Bank of Australia (RBA), the ABA outlined that since 2011, small business interest rates have fallen from 8.40 per cent to 5.30 per cent, saving the sector a total of $9 billion.
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According to the data, interest rates for small businesses are the lowest they’ve been since the RBA began record keeping in 1993.
“The average interest rate paid on all current loans held by small businesses has fallen in the past six years from 8.40 per cent in 2011 to 5.30 per cent now. Based on a loan of $100,000, that equates to an interest saving of around $3,000 per year,” ABA chief economist Tony Pearson said.
“When you look at the bigger picture, the story is even more positive. As of September, there were a total of $282 billion in outstanding loans to small businesses in Australia, and based on the lower rates, they’re now paying almost $9 billion less a year in interest compared with the same time in 2011.”
Mr Pearson also noted that the latest data is good news for small businesses, which he said make a “significant” contribution to the Australian economy.
“With two million small businesses in Australia, employing nearly five million people, we need to ensure this sector continues to flourish,” Mr Pearson said.
Small business operator of ProActive Chartered Accountants Kevin Taylor noted that low interest rates have provided small businesses with a much-needed boost and have helped ease the burden of growing operating costs.
“Every dollar saved means extra profits or a chance to help the business grow by reinvesting in new equipment or hire more staff,” Mr Taylor said.
“Additional cash flow, through low interest rates, means you can pay down the loan sooner or put it away for a rainy day. Whatever you choose to do, it’s a positive for the business and the economy.
“While business interest rates are at record lows, electricity prices are at the other end of the scale. Higher electricity prices are a double negative for businesses, as they have to pay the bills and their clients have less money to spend on other things.”
Interest rates on loans issued to larger businesses have also fallen from 7.10 per cent in 2011 to 3.40 per cent, saving larger businesses a total of $27.6 billion.
“That’s a lot of extra money that can be invested into growing a business and creating jobs,” Mr Pearson said.
[Related: New banking code of practice could benefit small businesses]
