Banks have recently been accused of depriving smaller firms of reasonably priced credit, with small business ombudsman Kate Carnell suggesting a taxpayer-backed bank, and Opposition Leader Bill Shorten flagging small business access to finance as a key concern.

Reserve Bank deputy governor Guy Debelle also last week said it was "extraordinary" that some successful small to medium enterprises could not access finance needed for growth from banks or venture capital funds.

Mr Lindberg said there could be a case for greater taxpayer support to help smaller start-ups access equity capital, but he said the bank's data did not support claims that small business lending was being held back.

Westpac's $50 billion small business loan book had expanded by 14 per cent in the past two years, he said, with a further $30 billion in pre-approved credit available.

Small business was currently the "engine room" of the economy's growth, he said, and the bank was expanding lending to small businesses at two to three times the pace of lending to larger firms.

"The lending by the banking system to small businesses has never been broader and has never been deeper. So in many respects, I'm not sure I've been convinced that there's a compelling need to augment the banking system's debt financing of small businesses," he said in an interview with BusinessDay.

The bank approved 93 per cent of loan requests from small business customers, he said.

"The idea that some requests for credit will be declined is probably an indication of an efficient allocation of capital."

The comments come after Ms Carnell, who has led an inquiry into bank lending to small business, last month said reasonably priced debt was "simply unavailable" for many smaller firms, and she pointed to the government's Clean Energy Finance Corporation as a model the government could adopt more widely.

However, Mr Lindberg said the key challenge facing many start-up firms was not access to debt, but equity finance. Small and medium businesses in Australia faced greater difficulties in getting equity finance than firms in China or the US, he said, and there could be a role for a "properly structured" government policy response.

"It's important not to confuse the role of debt financing, which is what a banking system generally provides, and equity financing, which is what private equity or government equity can provide," he said.

Bank lending to small business has also been in the political spotlight, with Mr Shorten saying in a speech last week that access to finance was one of the key challenges he heard about from businesses, especially manufacturers.

"There are thousands of small and medium enterprises being held back by a lack of available capital and the big banks' reluctance to back good ideas," Mr Shorten said.

Westpac says it has $6 billion in loans to manufacturers, and this has increased "modestly" in the past three years.

Although credit growth has been stronger in the services sector, Mr Lindberg said he was upbeat about domestic manufacturing's prospects. Increased use of robotics and artificial intelligence would mean Australia's relatively high labour costs would become less of a disadvantage, he said.