How can we make it easier for Aussie businesses to thrive without relying on banks?
This is what three billionaires — Anthony Pratt, Lindsay Fox and Gina Rinehart — sat down to discuss. They considered replicating the US system — loans facilitated by insurance companies and other long-term investors.
That means super funds, starved of yield, would offer Aussie businesses long-term maturity loans.
Fox, the billionaire founder of transport group Linfox, said 20-year debt funding outside the banking system would be a game-changer for his company:
‘The scope for our business has never been better, and to have somebody who wants to come in and give us 20-year finance — that would change the ballgame completely.’
Rinehart agreed. Her Roy Hill mine in WA only became a reality after a gruelling process of equity investments and bank financing. With long-term financing outside the banking industry, Rinehart’s Roy Hill project would have been that much easier to start.
However, such activities could create liquidity problems for super funds. As The Australian Financial Review explains:
‘David Neal, CEO of the Future Fund, says every super fund has what he calls an “illiquid budget” or a limited amount of money that can be invested in illiquid assets.
‘In recent years the highest returning illiquid assets have been infrastructure, real estate and private equity. He says it is hard for loans to compete with that because the returns are too low.’
While no decisions have been made yet, you can be sure the discussions will continue.
Junior Analyst, Markets & Money
PS: Aussie property prices continue to defy gravity. Those who have tried to predict the top have been wrong thus far. That’s because property prices still have a long runway of growth ahead.
If you want to read more about a long-term booming property market, check out our special Markets & Money report, ‘Why Australian Property Is On The Verge Of A Decade Long Boom’, by clicking here.