The Credit Squeeze Commeth . . .

Last quarter the major banks accounted for 92% of all home lending business. This is indicative of the collapse of competition due to the GFC. A similar situation exists in motor vehicle and equipment finance.

What are the consequences of this going to be? Well we've seen the beginning of it – the banks are ignoring Reserve Bank official interest rate movements and thumbing their noses at the Government. They are setting their own agendas for fixed interest rates and commercial lending, and beginning to set higher and higher standards of lending.

Staff at the major lenders continue to be cut while service levels fall to rock-bottom. And what are you going to do about it? Go elsewhere? There is no elsewhere any more. Look at home lending – if you still fit the rigorous guidelines to actually be approved, that approval will take up to 3 weeks – as long as there are no queries, in which case it could take longer.

We are already in a situation where it is near impossible to borrow on unattractive equipment – for example, fit-outs and technical equipment – and it is only set to get worse.

Competition drives service in the finance industry – take competition away and you've got high interest rates, high costs, poor service and selective lending.

Firstly we've got do away with the Government's deposit guarantee. It has favoured the banks over the smaller players for far too long and destroyed their deposit base. Secondly we need to inject some real competition back into the industry. Because there is a problem coming – people will want to invest again, build houses, buy equipment, gear up to start really producing again, and the funds just won't be there.

The Investment Allowance

Extended to the 31st December. If you are a small business, you get an additional 50% tax deduction over and above normal depreciation rates for the purchase of new plant, equipment and motor vehicles. Buy a new car for say $40,000 – get a $20,000 tax deduction PLUS your normal $4,000 GST input credit PLUS your depreciation allowance. This is a great (and almost completely un-advertised) deal. Don't let it slip through your fingers. Speak to your accountant. Items must be new. (new cars are included) and goods must be depreciable under the Tax Assessment Act.

And Always Remember . . .

"If everything is going really well, you've overlooked something!"