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Chair Bob Stanton, Deputy Chair Richard Brooks, Treasurer Judith van Unen, CEO Tony Steven, directors and members of COSBOA.
Last year, almost to the day, I attended this corresponding COSBOA dinner as Labor's newly appointed Shadow Minister for the Service Economy, Small Business and Independent Contractors.
On that occasion I indicated that Labor, under Kevin Rudd's leadership, would engage in fresh thinking to meet the challenges of the 21st Century. During the year, Labor released policies designed to secure Australia's long-term prosperity – policies aimed at boosting the nation's faltering productivity growth.
I also promised that the Labor Party would offer a fresh perspective on small business and independent contractors. I indicated that Labor supported reward for effort, risk-taking and entrepreneurship, acknowledging that small business owners and independent contractors take risks in going out on their own. They work hard to achieve commercial success and Labor wanted to give them every incentive to excel.
Small businesses make a huge contribution to our nation’s economy. Three quarters of a million Australian small businesses employ 4.1 million people. Then there's another 1.1 million non-employing small businesses – many of them independent contractors who are former employees and who eventually will expand to take on employees of their own.
The future success of small businesses will be built on the hard work, creativity, talent and persistence of their owners and employees working together. But governments can and must play a part too. National governments must pursue macroeconomic policies that support sustained strong growth and low inflation. And governments must remove unnecessary impediments to business success and strengthen the capacity of small businesses to compete on tough national and international markets.
MACROECONOMIC POLICY
The Government’s first responsibility to small businesses is to ensure a strong and stable economic environment in which small businesses can prosper.
A strongly-growing economy with low inflation is also a low interest rate economy. But the parting legacy of the previous Coalition Government was inflation at 16-year highs and the second-highest mortgage interest rates in the developed world. Inflation is the economic enemy of small business.
The Government is determined to tackle inflation as small business enemy number one.
The Prime Minister has already announced a five point plan to reduce inflationary pressures. It includes running a budget surplus of at least 1½ per cent of GDP in 2008-09.
To achieve this fiscal restraint, we must rein in the rampant government spending of the last few years. Figures released during the election showed Commonwealth spending growing at 4½ per cent in real terms this financial year – a consequence of a Coalition Government spending spree designed to buy another term in office.
REMOVING IMPEDIMENTS TO BUSINESS SUCCESS
Tax reform
At the same time as the Government cuts into extravagant government spending, it will implement genuine tax reform. An incentive-crushing tax system is incompatible with the Government's support for reward for effort, risk-taking and entrepreneurship.
In developing our tax plan, we recognised that tax reform cannot be achieved in a single budget or even in a single parliamentary term. That's why we set out a goal which would be reached as budgetary circumstances permitted.
Consistent with supporting reward for effort, risk-taking and entrepreneurship, we took the view that real tax reform lies in flattening the system by reducing the number of rates and reducing the remaining rates.
This set Labor apart from the previous Government's practice of jiggling thresholds close to elections, handing back some of the bracket creep it took from taxpayers during the parliamentary term.
Labor's Tax Plan for Australia’s Future sets a goal over six years, by 2013-14, for a personal income tax system with the following features:
- A reduction from four rates to three;
- A reduction of the current 45 cent rate to 40 cents; and
- A reduction of the current 40 cent rate to 30 cents.
Small business owners would be among the biggest winners from the Government's tax reform plan, since they typically earn incomes in the range $37,000 to $180,000. Over this wide range of income, small business owners would face a marginal tax rate no higher than 30 cents in the dollar.
Eliminating the gap between the personal rate for small business owners and the company tax rate would improve economic efficiency by removing the incentive for wasteful tax-minimising behaviour. Along the journey to the destination of abolishing the 40 cent rate altogether, the Government will reduce the 40 cent rate to 37 cents by 2010-11.
During the election campaign, the Coalition claimed Labor's tax plan was largely a replica of its own. On this claim I would make two observations. First, I could find no aspiration in the Coalition's package to abolish the 40 cent rate, so important to the financial fortunes of small businesses. Second, the Coalition's tax plan had its origins in the tax philosophy and the many specific tax proposals advanced over the last nine years by Labor MPs Kevin Rudd, Wayne Swan, Lindsay Tanner and me.
I won't go through each and every one of those contributions tonight. Suffice to say that I did so in a newspaper column published during the election campaign which to this day remains unrefuted by the Coalition.
Regulatory reform
Government regulation is proving to be a major impediment to business success in Australia. In his National Press Club speech of 17 April last year, Kevin Rudd set out a new regulatory reform program covering Commonwealth business regulation and Federal-State regulatory reform to be pursued through the Council of Australian Governments. As newly-elected Prime Minister, Kevin Rudd joined state and territory leaders in December, calling for a reenergised COAG reform agenda, including the reform of business regulation.
Finance Minister, Lindsay Tanner, and I have held the first meeting of the COAG Business Regulation and Competition Working Group established at the December COAG meeting.
The Commonwealth, states and territories are working on a large menu of possible reforms from which we will select priorities for urgent attention.
These will include regulatory hotspots identified by COAG back in 2006 and reaffirmed in April 2007.
In briefings by officials on the COAG regulatory hotspots, I have learned of a litany of missed opportunities by the previous Government. It seemed preoccupied with its own survival and paid scant attention to the undertakings it had given to the states and territories. In several cases, Ministerial Council meetings tasked with making progress on regulatory hotspots never actually met. Consequently, implementation dates for many reforms slipped and in some cases work had barely commenced.
We'll be presenting to next month's COAG meeting an implementation work plan to achieve real results that accelerate work on the regulatory hotspots and take on a new agenda of regulatory reforms.
Government departments and agencies can also be inflexible in their dealings with business. Fragmented procurement processes and onerous contractual obligations make it hard for small business to compete for government business.
The Government is comprehensively reviewing Commonwealth procurement policies and markets to deliver value for taxpayer money and improve service delivery. Contracts and procurement policies will be amended to ensure they are simpler and fit for purpose. This will help small businesses gain better access to the $26 billion government procurement business and to provide a genuine opportunity to compete.
The Government will also institute a late payments policy for Commonwealth agencies.
BUILDING CAPACITY IN SMALL BUSINESS
Skills development
Building capacity through investing in education, skills development and broadband is directed at raising productivity in Australian workplaces. It will also help ease inflationary pressures, taking the pressure off the Reserve Bank on interest rates.
Australia has a chronic need for skilled workers and the Federal Government’s own research shows we will need 240,000 more skilled workers by 2016 to ensure our economic future.
At the election we put forward our Skilling Australia for the Future policy, to help fund the delivery of 450,000 training places over the next 4 years, including 65,000 extra apprenticeships. In January the Prime Minister announced that the first 20,000 of the additional training places will be available by April this year.
The Government also announced before the election that it will establish Skills Australia as an independent statutory body to advise the government on skills shortage issues. Reflecting the urgent need to increase the supply of skilled labour, last week the Bill to establish Skills Australia was introduced as one of the first pieces of legislation to be dealt with by the Parliament.
The Government has also just announced that it will immediately lift the quota for skilled migrants this financial year by 6000 which will provide some relief for business from skills shortages.
Infrastructure development
Faster broadband has the potential to greatly assist small business by improving access to online services and applications, increasing business productivity, and reducing administration costs.
Australian small businesses need a national broadband network with a minimum speed of 12 megabits per second – 40 times faster than most current speeds – to access new applications that will increase workplace productivity, reduce business costs and boost competitiveness in a tough global trading environment. The Government will make sure Australian businesses have the fast broadband they need by facilitating the roll-out of a fibre to the node network through regulatory reforms and up to $4.7 billion in Commonwealth investment.
Better advice for small business
Small business owners have made it clear to the Government that they greatly value the idea of a one-stop advisory service so that they don’t have to go from one place to another seeking advice on how to establish and grow their businesses. An existing national network of Business Enterprise Centres provides such advisory services. These centres receive funding from state governments and local councils but receive no ongoing Commonwealth funding.
Tonight I can announce that the Government will provide ongoing funding of between $100,000 and $350,000 a year to 36 Business Enterprise Centres around Australia to allow them to expand their capacity to provide advisory services. Funding for this program was set aside during the election campaign and I made the individual announcements during the course of the campaign. But tonight I am taking the opportunity to unveil the full extent of the small business advisory network that the Government will be funding. It covers capital cities and regions and all states and territories.
I want to thank the executive of the Business Enterprise Centre network for their cooperation and advice, though I emphasise that the final decisions on which centres to fund were made by us. Arrangements are now being made with Business Enterprise Centres so that they can begin to provide this enhanced service from 1 July 2008.
With this extra assistance, these 36 Business Enterprise Centres will be better able to provide advice on such matters as how to set up a business, public liability insurance, accounting advice, how to do GST bookkeeping in preparing for lodging Business Activity Statements, legal advice and advice on marketing and sales promotion.
CONSULTATION WITH SMALL BUSINESS
The Government is determined to give small business a big voice in its policy development and implementation processes. Small business will have a central role in Labor policy development and implementation processes as we meet the challenges of the 21st century.
But if the Government is to engage small businesses on all the issues affecting them over the course of a parliamentary term, we will need more formalised consultative mechanisms.
I therefore announce tonight a small business consultation program that is more far-reaching and more intensive than that of any previous government. The program comprises:
- A National Small Business Forum which will be open to all small business representative organisations, to be held twice a year;
- Specific-purpose small business working groups to advise on such matters as the development of a Fair Dismissal Code and the revamping of government procurement contracts;
- A Small Business Advisory Committee to provide advice on regulatory proposals that have a significant impact on small business;
- Twice-yearly meetings with representatives of the Business Enterprise Centre network; and
- Meetings with representatives of COSBOA four times a year.
This consultation with small business groups gives small business the voice it deserves in Government policy making.
COSBOA will be given a central role in this consultation process. COSBOA has on several occasions clearly disagreed with Labor policy, notably on unfair dismissal. That's the strength of our great democracy. But COSBOA also said it would be willing to work with a Labor Government on the development of a Fair Dismissal Code.
Last November's election result gave the Government a mandate to implement its Forward with Fairness policy of industrial relations reforms that includes a Fair Dismissal Code for businesses with fewer than 15 employees.
The Government recognises that the overwhelming majority of small business owners value their staff highly and treat them fairly. But situations of unfair dismissal can and do arise. The Government wants to treat both small businesses and their employees fairly.
The Government’s unfair dismissal system will give small business owners a full 12 months to assess whether or not they have a good employee. During that time the employee will not be able to make an unfair dismissal claim.
Where a small business owner has suffered a downturn and needs to reduce staff, the dismissal will be a genuine redundancy and is not an unfair dismissal. If a small business needs fewer staff due to the use of new technologies, then this, too, is a genuine redundancy.
The Fair Dismissal Code is important because businesses that follow it will have protection under the law. Under the Code, if an employer refers an employee to the police for suspected theft or fraud or for violence at work, the dismissal will be fair. On the other hand, if an employer comes into work in a bad mood and dismisses an employee on the spot for no reason and with no explanation, completely ignoring the Fair Dismissal Code, the dismissal will be unfair.
Where a dispute arises the emphasis will be on mediation; there will be no go-away money. Reinstatement will not be ordered where it is not in the interests of the employee or the employer’s business.
The Government has committed to having small business at the table for the Code's development to provide practical feedback from a small business perspective. In the coming days the membership of the Small Business Working Group will be finalised, with the first meeting to occur before the end of the month. As one of the peak small business organisations, COSBOA will be a member of the Working Group. I am confident that with the input of the Working Group, we will develop a Code that meets the needs of small business owners for simplicity and certainty while providing small business employees with fair protections.
Beyond the Fair Dismissal Code, the rest of Labor's workplace relations system will also recognise the special circumstances of small business.
Last week the Government introduced the Transition Bill that provides certainty in the transition out of Australian Workplace Agreements by honouring all existing contracts and enabling businesses to use Individual Transitional Employment Agreements (ITEAs) in limited circumstances.
ITEAs will only be available to employers who employed an employee on an AWA as at 1 December 2007. These employers may use ITEAs to employ new employees or for existing employees who were employed on AWAs.
ITEAs will give these employers time to make the transition to the Government’s new workplace relations system.
The Transition Bill will enable the Workplace Authority to start properly dealing with the backlog of agreements that has piled up under the former Government’s so-called fairness test.
The Transition Bill was the product of a consultative process, reflecting this Government’s understanding that workplace relations laws need to work for those who use them.
On Thursday last week we released an exposure draft on the 10 National Employment Standards which contain the key minimum entitlements for all Australian employees to apply from 1 January 2010. The National Employment Standards are far less complex than the current Standard. The Government is inviting comment on the exposure draft by April this year and I encourage COSBOA and its members to participate in this consultation process.
The Government is committed to modernising and simplifying Australia’s award system, a task shirked by the previous Government for its entire term in office. Award modernisation will greatly simplify one of the key employment regulations affecting small business. In addition, all modern awards will include a special flexibility clause that will provide small businesses and their employees with much greater flexibility in negotiating and tailoring arrangements.
IN CLOSING
Time does not permit me tonight to cover all the policy issues of the Government that are relevant to small business: BAS Easy; the Superannuation Clearing House, reform of the Trade Practices Act, support for small business in developing family-friendly workplaces, the retention of secondary boycott sanctions in the Trade Practices Act, and right of entry rules, to name a few. These policies are in existing documents and I am happy to make them available to anyone who wants them.
But I did want to close with a few thoughts on the relationship between small businesses and the Government. There were times during the last 11½ years when the Labor Party did not present as well to small business owners as we could have. One consequence is that some small business owners found the Coalition to be a more attractive option than the Labor Party. But in the final period of Opposition, the idea of small business being the natural constituency of the Liberal and National Parties began to change.
Opinion polls of small business owners began to show Kevin Rudd and Labor as being increasingly competitive with the Coalition. Indeed, at the election, many small business owners and independent contractors voted Labor for the first time. For that we are thankful. But we are under no illusions about the task ahead in assuring the small business community that the Labor Party is the way to go for the future.
The Government will deliver for small business through its steadfast determination to take the pressure off inflation and interest rates through responsible fiscal policy, to restore incentive in the tax system, to ease the skills crisis, to roll out a high-speed national broadband network, to reduce the burden of business regulation, to boost small business advisory services and to implement a fair industrial relations system that recognises the special circumstances of small business.
As we do this, we will, for small business owners, their spouses, their children and their parents, bring about an education revolution, make child care more affordable, provide affordable, high-quality health care and aged care, tackle climate change, ensure our national security and help engender civility, decency and respect in our community.
The Government will meet the challenges of the 21st century for the nation and for the working families of Australia, including those who choose small business or contracting as a career path. Small business owners can be assured that, unlike the Coalition, Labor will never take them for granted.