Interpac Business and Migration Solutions Melbourne Australia

(September 15, 2010)

NERVOUS banks are suppressing growth by acting as if Australia remains gripped in the global financial crisis, an economic forecaster said. And, according to chief economist with business research and forecasting firm BIS Shrapnel, Frank Gelber, the problem is particularly acute among small businesses.

Dr Gelber told a forum in Melbourne that banks were hindering the country's recovery because "they're petrified" on several fronts. He said that many small and medium businesses that racked up bank debt to stay afloat during the crisis were struggling to repay it now. "They (the banks) let them keep running while it suited them," Dr Gelber said. "Just when they can start to see some money coming back, just when these guys are clawing themselves out they'll foreclose."

Dr Gelber said it was an unusual time because the financial community was still focused on the GFC."They're stress-testing a one-in-50-year event to make sure we don't repeat it," he said."The irony is by tightening everything up, so we don't have one tomorrow, they're going to delay any new investment coming through making sure we have one the day after." He said the banks had overreacted.

"While everyone else has been struggling with profitability, they've been increasing their profits by about a third a year," he said. "They have responsibility in all this and I think they're getting set to foreclose on a lot of people who have struggled through the credit squeeze."

Commonwealth Bank chief economist Craig James defended the banks' reaction to the global downturn, saying it was a two-way street and they had reacted "normally" to an "extraordinary" event.

Mr James said there were indications some businesses neither wanted nor needed finance and that, despite being cashed up, expansion plans were not on the agenda.

"I know the Commonwealth Bank is well and truly out there looking to lend, they're just finding it difficult to get people to come up to the plate," he said.

JP Morgan economist Helen Kevans agreed with Mr James but said there had been some concern in the market about banks not lending to small and medium businesses.

Westpac senior economist Huw McKay said the economy was "accelerating" and Dr Gelber's comments would have been specifically about the commercial property market where there were "sector specific" issues.

(Source: news.com.au)