Australia Is One of Four OECD Countries Without a Permanent Credit Guarantee Scheme. The Productivity Commission Hasn’t Recommended One — It Has Asked for Evidence by 11 December

On 5 November the Productivity Commission released the interim report of its inquiry into regulatory barriers to business dynamism, titled Unlocking business dynamism: removing barriers to entry, growth and exit. It is a long document about business entry, growth and exit, and most of it has nothing to do with mortgage broking. Chapter 2 has a great deal to do with it.

That chapter is about why commercially viable businesses cannot get finance. It identifies the cohorts that struggle, puts a dollar band on the product gap, declines to touch the prudential settings, and then — this is the part the headlines moved past — asks the market to supply evidence on what to do about it. The window for that evidence closes on 11 December 2026.

For a channel being told to diversify into commercial and asset finance, this is the process that decides whether the files you cannot place today become placeable later. It is worth reading what the Commission actually said rather than what it was reported to have said.

What the Commission released

The inquiry was referred by the Treasurer, with terms of reference received on 12 May 2026, and the Commission’s powers for this interim report were exercised by Commissioners Stephen King, Alison Roberts and Martin Stokie. The terms of reference carve out tax settings, workplace relations and the mergers framework — they are “not intended to be the focus of this inquiry” — which constrains what the final report can recommend.

An interim report is a consultation document, not a finding. It carries three kinds of material: reform directions (what the Commission currently thinks should happen), findings (what it treats as established) and information requests (what it does not yet know). Which bucket a proposal sits in tells you how far away it is.

Chapter 2, “Address barriers to business finance,” contains two reform directions and two information requests. The reform directions are about data sharing and venture capital. The credit guarantee scheme is in an information request.

The guarantee is a question, not a recommendation

A credit guarantee scheme is an arrangement where government covers an agreed share of a lender’s losses if a borrower defaults. It hands no money to the business; it moves part of the downside off the lender’s balance sheet so the lender can say yes to files it would otherwise decline.

Trade coverage of the interim report, including The Adviser on 10 November, framed the Commission as proposing that government investigate such a scheme. That is a fair reading of the direction of travel, but the precise status matters for anyone planning around it: in the report itself, the guarantee appears under Information request 2.1, “What are the most effective ways of overcoming barriers to accessing credit?” There is no reform direction recommending a scheme. The Commission’s own words are deliberately balanced:

There is growing evidence that well-designed credit guarantee schemes can improve access to credit for commercially viable businesses that would otherwise struggle to obtain finance. However, credit guarantee schemes also carry risks.Productivity Commission, Unlocking business dynamism, interim report, Information request 2.1

The Commission also sets a bar that is easy to miss and that brokers should internalise before writing anything to Canberra: “Difficulties in accessing finance do not, by themselves, justify government intervention.” A business may be declined because the expected return does not justify the risk. That is a market working, not a market failing. The Commission is asking for evidence of the second thing, and it says plainly that it prefers targeted interventions aimed at specific barriers over broad-based programs.

The band where your SME files die

The most useful single line in the chapter for a commercial or diversified broker is about product supply rather than policy. Businesses seeking to borrow without property security face both cost and availability problems: unsecured loans attract significantly higher interest rates than secured ones, and in some cases no suitable product exists at all. The report’s wording is specific — lenders “find it difficult to provide unsecured loans between $250,000 and $5 million, with due diligence costs being too high to justify offering loans of that size and risk profile.”

That is not an abstraction. It is the deal sitting in your pipeline: a profitable operating business, a few years of trading, a real expansion or acquisition need, a number too large for a fast unsecured facility and too small for the diligence a lender will fund unsecured. The owner has no investment property, or will not put the family home up. Either the deal gets restructured onto property security it did not want, or it is placed at a rate that kills the economics, or it does not happen.

The report ties that gap to two causes. The first is information asymmetry: owners know more about their business than lenders do, and the problem is acute for firms with limited trading history. The second is collateral, which can bridge that gap — but not every business has assets that serve the purpose. A case study drawn from NAB’s submission makes it concrete: a regional honey producer could not secure a line of credit to manage entirely predictable seasonal cash-flow swings, citing limited business history and an “overly invasive credit application process.” It held cash back for the off-season instead of investing in growth. Every broker working commercial files has a version of that story, and the Commission says it needs them.

Don’t expect prudential relief

If part of your working theory is that bank business lending appetite will loosen when APRA eases off, the interim report closes that door for now. It sets out that APRA aligned Australia’s risk weights with the Basel III standards in 2023, and that SME loans now carry risk weights of 75% for qualifying retail exposures and 85% for corporate exposures, with externally rated businesses attracting between 20% and 150% according to credit grade. Australia’s capital requirements sit slightly above international minimums, a legacy of the 2014 Financial System Inquiry’s view of concentration and household indebtedness risk.

The Commission’s conclusion is that easing prudential requirements would trade against financial stability, that submissions did not suggest current settings are a significant constraint on business lending, and that it “does not currently see a case for changing that balance.” Read that as a signal: the capacity relief that commercial brokers want is not coming from the prudential dial.

The same section is candid about the alternative. Non-bank business lenders and private credit providers are generally outside APRA’s prudential capital framework, and business lending carries fewer regulatory requirements than consumer lending. The Commission frames that as a trade-off: lighter settings increase competition and financing options while exposing investors to greater risk. It cites the collapse of residential developer Bathla Group, which entered voluntary administration in August 2026 with around 40 private credit funds and other lenders exposed to its projects, and notes that a higher incidence of failure is inherent to higher-risk lending markets. The practical reading for brokers is that the non-bank and private credit capacity you rely on is not about to be re-regulated into bank-like safety — and will not behave like a bank either.

What the overseas schemes actually delivered

The Commission is explicit that it has changed its mind on the evidence since 2015, when it cautioned against a guarantee scheme for business set-up because there was little conclusive evidence one would produce more loans. Australia had a temporary scheme during the pandemic — the Coronavirus SME Guarantee Scheme — and new applications ceased on 30 June 2021. Australia is now one of only four OECD countries without a permanent scheme, alongside New Zealand, Iceland and Sweden, which runs a direct lending program instead.

Additionality is the number that matters. In the UK scheme, 83% of borrowers would otherwise not have applied, not have succeeded, not have received enough to cover their cash-flow need, or would have borrowed less on worse terms. That is a scheme reaching files that were genuinely stuck.

The 45% displacement figure is the counterweight, and brokers should not skip it: almost half the lending was estimated to come at the expense of other businesses — capacity moved, not created. The Commission also flags the design risk that a guarantee can blunt a lender’s incentive to do diligence. The UK answer is to leave 30% of the risk with the bank, alongside participation fees and caps on claims. Any Australian scheme, the Commission says, should be narrow — targeted by borrower type, business age, or low levels of physical capital for collateral — rather than broad-based with lax eligibility.

There is already a domestic template at small scale. The report notes that Indigenous Business Australia has partnered with NAB to trial a 50% guarantee facility for loans up to $1 million.

The reform directions that were made: data, not dollars

Reform direction 2.1 is the one with a clear position behind it: “Improve lenders’ access to data from consenting individuals, businesses and the government.” The Commission wants the Consumer Data Right expanded toward “data access as default,” and makes three specific asks on top of the government’s existing Financial Innovation Strategy commitments:

• Individuals who already hold authority on an online business account should get equivalent authority to consent to CDR data sharing — which removes a practical blocker on company and trust files.
• Government data sharing should go beyond ATO data to include ASIC data, such as a company’s ownership and control structure, and Australian Business Register data, such as verified legal name, ABN and industry classification.
• Customers should be able to disclose their data to any accredited third party of their choosing.

It also wants the CDR’s bespoke privacy safeguards aligned with the Privacy Act 1988 to cut duplicated compliance for participants.

If that lands, the commercial fact-find changes shape. Verified entity details, ownership structure and tax position arrive from the source rather than from a client’s accountant three weeks later. The MFAA made that argument to this inquiry — its submission is cited in the chapter on reducing time spent manually collecting and providing information. Both the MFAA and the FBAA are on the inquiry’s submission list, so the channel is represented; the question is whether individual broker experience backs it up with specifics.

The cohorts the report names

The chapter identifies financing barriers affecting businesses with limited collateral, firms with short credit histories, Aboriginal and Torres Strait Islander-led businesses, and women-led businesses. Two of those get detailed treatment.

On women-led businesses, the report cites research from The Gender Index finding they progressed to medium size at about half the rate of male-led businesses — 6.71% against 13.68% — despite similar productivity. It records that some female small business owners reported being advised to add a male to their loan application for business finance to be approved, which the Commission calls “a clear signal that bias persists in parts of the system.” A submission from Women in Business (Mornington Peninsula and Frankston) adds the structural point: service businesses hold their value in people, knowledge and customer relationships, not property that can be pledged as security.

On Aboriginal and Torres Strait Islander-led businesses, First Australians Capital — drawing on work with more than 1,000 such businesses — put it this way in its submission:

First Nations entrepreneurs are asked to meet collateral requirements that were designed for a system from which they were deliberately excluded — and then assessed as ‘not finance-ready’ when they cannot comply.First Australians Capital, submission 29, quoted in the PC interim report

Alongside guarantees, the report canvasses direct government finance, government funding specialist lenders as an intermediary, investment-readiness support, voluntary industry commitments on lending practice, and broader recognition of business assets as collateral. That last one matters for brokers with innovation-heavy clients: Australian law already permits security over intellectual property, but Australia has no product that systematically values IP and lends against it. The report points to NatWest’s High Growth IP loan in the UK as the contrast.

Where this sits against your obligations

Nothing in this interim report changes a broker’s duties, and it is worth being precise about which duties are in play. The best interests obligation sits in Part 3-5A of the National Consumer Credit Protection Act 2009 — section 158LA, “Licensee must act in the best interests of the consumer” — in the subdivision dealing with licensees who provide credit assistance in relation to credit contracts. Pure business-purpose lending to a company generally sits outside the consumer credit framework, so what governs a commercial file is usually your licensee’s standards, your accreditation terms and general law rather than the Act’s consumer provisions.

In practice the diligence standard on a commercial file is set inside your own business. If an SME file is genuinely unplaceable, the record of why — which lenders, which policy line, which security gap — is good practice and, as it happens, exactly the evidence this inquiry says it lacks. Confirm how your obligations apply to any particular file with your licensee or compliance adviser; general commentary is no substitute for that.

What to review this week

1. Pull your declines from the last 12 months and sort them by reason. Separate “no security” from “not enough trading history” from “serviceability” from “no product at this size.” The Commission is asking which barrier is binding, and your CRM already answers it.
2. Count the files in the $250,000 to $5 million unsecured band. That is the band the report says lenders find difficult. If you have a stack of them, you have the most relevant dataset in the room.
3. Identify which declines you believe were commercially viable. Did the business keep trading? Did it grow? Did it get funded elsewhere at a materially worse rate? That is additionality evidence in the form the Commission can actually use.
4. Check your panel for the gap, not just the rate. If every option in that band requires property security, your diversification pitch has a ceiling you should know about before you build a marketing plan on it.
5. Decide whether you are putting something in. Submissions close 11 December 2026; brief comments are accepted at any time; public hearings run online from 8 to 12 February 2027. Information request 2.1 asks which interventions have worked and what design features would maximise additional lending while limiting fiscal cost and displacement. Information request 1.1 asks which industries carry the heaviest cumulative regulatory burden and invites participants to name the specific regulations — the Commission lists financial services among the sectors it has already heard about, and the MFAA’s submission is cited on brokers reporting a high count of requirements.
6. Brief your referral partners. Accountants and bookkeepers with SME books see the same declines from the other side. A joint submission carries more weight than a solo one, and the conversation itself is a referral conversation.