It was save jobs or do nothing - Rudd

THE Federal Government had to choose between doing nothing to save jobs or joining the big banks in a $4bn partnership to prop up the commercial property sector, Prime Minister Kevin Rudd says.

Mr Rudd confirmed the Government would join the four major Australian banks to set up a $4bn Australian Business Investment Partnership.

The banks will provide $2bn and the Federal government another $2bn to provide financial support for major commercial property projects including shopping centres, office towers and factories.

It would reduce the risk of Australian banks having to "fill the gap'' if foreign banks did not roll over their share of loans, Mr Rudd said at an Australia Day function in Perth.

"Our banks are strong and well capitalised and the (deposit) guarantee has enabled them to raise the funds they need to lend to Australian businesses,'' Mr Rudd said.

"But the Australian economy is global in nature and therefore affected by the health of foreign banks, as well as Australian banks.

"If banks do not allow clients to refinance as they would in normal conditions then companies can be forced to sell assets, often at low value.

"This endangers their financial health and that of the whole economy.''

Mr Rudd said lending by overseas banks represented half of the $285bn in syndicated loans issued to Australian businesses since 2006.

"Of those outstanding loans $75bn is set to fall due over the next two years,'' he said.

"If foreign banks do not roll over their share of these loans it would be difficult for Australia's four major banks to fill this gap on their own.

"The mathematics is fairly straightforward.''

Foreign banks carried more than $48bn or 28 per cent of lending to the Australian commercial property sector and were seeking to reduce their exposures, Mr Rudd said.

"That is why today the Government confirms that it will establish a $4bn Australian business investment partnership with the four major Australian banks.''

The move was a temporary contingency measure to provide liquidity support to viable major commercial property projects, the Prime Minister said.

The initial $4bn could be extended to up to $30bn of loanable capital through the issuing of government guaranteed debt, he said.

Mr Rudd said there was two options - to sit back and do nothing or act decisively.

"The alternative is to do nothing, the Government I lead will not embark upon that course of action,'' he said.

from: It was save jobs or do nothing - Rudd NEWS.com.au - 11 hours ago