Rudd Pledges A$4 Billion Fund for Commercial Property

By Gemma Daley and Rebecca Keenan

Jan. 24 (Bloomberg) -- Australian Prime Minister Kevin Rudd pledged A$4 billion ($2.6 billion) for a lending fund for commercial property companies should foreign banks fail to roll over as much as A$75 billion in business loans.

The Australian government will provide A$2 billion and the remainder will come from equal contributions from the nation’s four largest banks Commonwealth Bank of Australia, Australia & New Zealand Banking Group Ltd., Westpac Banking Corp., and National Australia Bank Ltd., according to a statement from Rudd. The fund could be accessed by March, the statement said.

A shortfall in credit could push Australia’s economy into its first recession since 1991, worsening a surge in job cuts at companies including BHP Billiton Ltd. following a drop in demand from China and waning consumer spending. Governments in the U.S. and Europe are bolstering measures to underwrite bank lending after recapitalization efforts failed to restore credit flow.

“I think we will see some withdrawals,” of foreign bank lending in Australia, Finance Minister Lindsay Tanner told journalists in Melbourne today. “Nobody can be certain how large that degree of withdrawal may be.”

Overseas banks accounted for more than half the A$285 billion in syndicated loans issued to Australian businesses since 2006, Rudd said this week, citing Merrill Lynch & Co. figures. Some A$75 billion is due to be rolled over in the next two years.

The new fund will only offer loans to companies on commercial terms when the Australian government and the banks agree the property assets and income would be economically viable, he said. It could be used to refinance existing syndicated loans if a member of the lending group withdraws.

Stimulus

The fund may also lend up to another $26 billion for commercial property projects by government guaranteed debt, he said. The commercial property sector employs about 150,000 jobs and one third of these could be lost without the additional lending.

Since October, Rudd and Treasurer Wayne Swan have announced almost A$45 billion in aid for families, pensioners, bond markets, home buyers, and extra spending on schools and roads to boost growth in the economy.

The spending boost came after credit markets froze following the bankruptcy of Lehman Brothers Holdings Inc. on Sept. 15, prompting governments and central banks around the world to bail out financial institutions and try to revive growth.

The British government on Jan. 19 announced a 50 billion pound ($69 billion) plan to stabilize the financial industry, following a 50 billion pound bank recapitalization in October.

To contact the reporters on this story: Gemma Daley in Canberra at gdaley@bloomberg.net; Rebecca Keenan in Melbourne at rkeenan5@bloomberg.net